Dark days may be in store for many government contractors, who face increasingly numerous and complex investigations as well as steep cuts in government spending and potential contract terminations.
That was the message from lawyers from Crowell & Moring during the firm's annual "Ounce of Prevention" seminar on government contracting today.
“We can expect that most programs will be affected in some way,” said Partner J. Chris Haile. Agencies “are uncertain of the cuts they will have to make. They are struggling not only with tough choices among their priorities, but struggling with the priorities of the politics around them.”
Associate Grant Book predicted that some contracts will inevitably be cut. “Money is running low. There’s not going to be enough to go around,” he said. The government “is going to have to terminate some contracts….The cheaper way to do that is termination for default, so we expect these to increase over the coming years.”
For contractors, the watchword is vigilance, the lawyers said, stressing that companies must be alert to any sign of dissatisfaction with their performance.
The government is also cracking down on contractor waste, fraud and abuse. “All agencies are under a tremendous amount of pressure by Congress to get their numbers up, to suspend and debar more contractors,” said partner Andy Liu, who noted that the Air Force is on track to more than double the number of such cases this year. “The importance of getting on top of an investigation, getting it right, is paramount,” he said.
Partner Philip Inglima stressed that an investigation is not “just to find out if it's true or not. You’re trying to eliminate any misconduct that has occurred.”
He continued, “We’ve seen in many investigations the post-mortem [where what] the government is doing is basically to figure out, ‘Was this an effort to suppress the issue or was it an effort to identify and discover the dimensions of it and figure out how many levels of fix were needed?... How pervasive was the problem?’ ”
Another question to consider up front: Who will the investigators report to? Company management? The board of directors? A special committee? “It is hard in mid-stream to change horses in this regard…. You’ll have made at the very first step a record you have to live with for better or worse.”
He added, “It’s worth having some perspective from outside. I know that sounds good for us. It happens to be prudent to have some perspective.”