Since the big rigging investigations of the '70s, the
integrity of highway contractors has been an important issue for government
officials. In the post-Enron era corporate integrity and business dealings are
coming under even greater scrutiny. The federal government in general, and the
U.S. Department of Transportation in particular, are focusing on contractor
compliance with applicable laws and standards for performance. For example:
In May 2002, the second National Fraud Conference on Highway
Construction and Public Transportation was held in Missouri. Sessions included
discussions on kickbacks, DBE violations, organized crime, product substitution
on federal-aid highway projects, procurement fraud, false claims and cost
mischarging. Various officials from the U.S. DOT made presentations.
On July 22, 2003, the U.S. DOT inspector general testified
before Congress on "Controlling Costs and Improving the Effectiveness of
Federal Highway Administration and Federal Transit Administration
Programs."
Neither the National Fraud Conference nor the inspector general's
testimony were in response to the Enron and Worldcom scandals. However, those
scandals certainly caused some government officials to believe corporations
(contractors) are not trustworthy. As a result, I believe contractors are at
greater risk today than in the last several years.
What you need to know
Contractor integrity in the public construction process is
critically important. The government will only do business with contractors who
are "presently responsible." Responsibility is a government contract
law term of art that includes not only the ability to complete a contract
successfully, but also with honesty and integrity. The government assesses
honesty and integrity through, among other things, the contractor's
certifications and representations.
Fraud on public construction projects can involve false
statements, false claims, corruption-bribery, gratuities, bid rigging and
conflicts of interest. Major fraud schemes on contracts include product
substitution, accounting frauds and DBE fraud. A contractor found guilty or
liable for contract fraud faces criminal, civil, contractual and/or
administrative penalties. Administrative penalties can include suspension and
debarment.
What you need to do
I have found many highway contractors have run themselves
into problems not out of dishonesty, but rather out of ignorance of their
obligations.
Contractors should consider adopting a formalized corporate
compliance program. An effective program should address the following elements:
* An analysis of the risk of noncompliance;
* The structure for the compliance program;
* Standards of conduct;
* Train/educate employees; and
* How performance will be monitored.
What are the areas of specific concern for highway
contractors? I believe the following are most important:
* False claims;
* Antitrust;
* EEO;
* OSHA/safety and health;
* DOT (trucking permits);
* DBE; and
* Environmental.
A detailed review of the law in all of the areas of the
compliance program is necessary in order to achieve actual compliance with the
current state of the law. Keeping current is obviously the chief concern.
How you should structure
There are no strict rules
governing how your program should be set up. Each contractor is unique. However,
irrespective of the size of your organization, an effective structure must
include: (1) education and training; and (2) management and monitoring
performance.
It is worse to have a compliance
program that is ignored than to have none at all. As a result, contractors need
to have executives make clear to all employees why the compliance program is an
important part of the company's culture. Hopefully, making compliance a part of
the company's culture will help avoid investigations and sanctions.
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