Business Ethics for Government Contractors

The existence of business ethics is a significant aspect of any Company; however, it is increasingly important for government contractors due to the regulations promulgated in the Federal Acquisition Regulations (FAR).  FAR 52.203-13 dictates the regulations related to the “Contractor Code of Business Ethics and Conduct”.  According to the Regulations, “Within 30 days after the contract award, unless the Contracting Officer establishes a longer time period, the Contractor shall (i) have a written code of business ethics and conduct and (ii) make a copy of the code available to each employee engaged in performance of the contract.”  This means that there is a Federal Regulation stating that the Contractor must have a written code of ethics and it must be made available to both the Contracting Officer and the employees who are performing the services related to the contract.  The regulations do not specify exactly what must be in the policy, however, a strong ethics policy will state what is expected of the employees related to ethical behavior, the impact of unethical behavior on both the employee and the Company as a whole, and examples of what is considered to be unethical behavior.  Finally, the policy should contain detailed methods for reporting and correcting any unethical behavior or misconduct that has been noted by other employees.

The Federal Regulations concerning business ethics also discuss the need for effective internal controls throughout a Company.  The Contractor’s internal control system (per the Federal Regulations) should, “(1) establish standards and procedures to facilitate timely discovery of improper conduct in connection with Government contracts and (2) ensure corrective measures are promptly instituted and carried out.”  This means that the Contractor needs to establish/institute methods in their internal control system that support the importance of business ethics by having a corrective action plan for any discovery of unethical behavior.  Additionally, the Contractor should ensure that they have procedures in place throughout their internal control system that would prevent or detect any instances of unethical behavior within the Company.  This includes such things as having strong checks and balances throughout the control environment and ensuring that all employees are properly trained on the importance of following these procedures.

As a method for employees to anonymously communicate unethical behavior, many companies use a whistleblower hotline.  By establishing this hotline, the Company is giving the employees a method for reporting any unethical behavior that they may see within the Company.  The existence of the whistleblower hotline must be displayed for employees to see, so that they (1) know about the existence and (2) are aware of how to contact the hotline.  According to FAR 52.203-14, the regulations state that “during contract performance in the United States, the Contractor shall prominently display in common work areas within business segments performing work under this contract and at contract work sites.  Additionally, if the Contractor maintains a company website as a method of providing information to employees, the Contractor shall display an electronic version of the poster(s) at the website.”  By following these regulations, the Company is giving the employees an opportunity to report any such behavior, while also acting as a deterrent for any employees who may be thinking about engaging in unethical behavior.

Business ethics is an important aspect of any Company, therefore, it is very important to establish documented policies and procedures that promote the importance of business ethics and support the employee’s ability to discuss any unethical behavior that they may see within the Company.  Good business ethics starts at the top.  Top management should promote an organization that encourages ethical behavior and the importance of adhering to company policies.

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