Aronie: Contractors? thorny position

As you've probably heard, government officials have initiated a number of investigations into alleged procurement irregularities involving at least two defense contractors operating in Iraq.

Much of the government's focus is on the use of an Interior Department blanket purchase agreement issued under a General Services Administration multiple-award schedule information technology contract.

Consequently, the pages of newspapers and magazines are brimming with commentators bemoaning a procurement system gone awry. One commentator questioned how a military interrogation task order could have been placed under Smokey Bear.

Putting aside the fact that Smokey Bear works for the Agriculture Department, not Interior, the question is a fair one. The answer, however, is not easy.

For years, contractors have struggled with how to handle government buyers who aren't sticklers for the rules. These situations rarely involve clear-cut illegal conduct on the government's part. More often, it's just that the right answer is less than clear, and the buyer is willing to push the envelope to achieve the desired outcome.

The issue arises in several contexts, including the incorporation of open-market items into a schedule buy, the inappropriate bundling of goods and services, and, of course, the exceeding of the often unclear scope of a particular contract. The government's willingness to test the limits of the multiple-award schedule contract program puts contractors in a thorny position, especially because the regulations governing the schedule contracts legally obligate contractors to accept orders issued by executive branch agencies.

The question boils down to: Whose responsibility is it to police the government?

Although I concede that contractors have a responsibility to prevent obvious illegal activity

involving their contracts, it seems to me that contractors should be able to rely on the good faith of their government customers. After all, government officials are presumed to act in good faith in other areas.

The General Accounting Office and the Boards of Contract Appeals, for example, won't even consider the possibility that a government official might have acted in bad faith without irrefutable proof. Yet, the notion that a contractor should be able to trust its government customers does not appear to be a guiding principle of the government's investigations.

None of this is to say that contractors have no responsibility for the proper use of their contracts. Indeed, the recent events make it pretty clear that contractors do have such a responsibility. To the extent they have not already done so, contractors will have to develop procedures to ensure that federal purchases clearly fall within the scope of the relevant contract. Some policies may have to be rewritten and some personnel may have to be retrained.

The most significant change, however, will be more cultural. Contractors can no longer afford to presume that their federal customers are acting properly.

Aronie is a partner in the government contracts group of Sheppard, Mullin, Richter & Hampton in Washington, D.C. He can be reached at jaronie@sheppardmullin.com or (202) 218-0039.

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