Why do small government contractors often fail to invest in ethics and compliance programs?

Over the past decade, the increase in global anti-corruption enforcement has profoundly impacted large, multinational corporations. Many of these companies have responded to the enforcement increase by investing heavily in sophisticated compliance programs designed to prevent or mitigate liability for anti-corruption violations.

The development of rigorous internal compliance programs has been particularly pronounced in the defense industry, especially among large, U.S. defense contractors. In comparison, small government contractors often fail to invest in ethics and compliance programs, leaving them at risk for compliance failures, fraud, and corruption.

This has created a critical gap in the defense industry supply chain, as many large contractors may partner with small companies that lack the sophistication and resources necessary to ensure compliance with myriad government procurement requirements.

I recently co-authored an article with Vijaya Surampurdi that offers a solution to this growing problem. In the article, “The Compliance Mentorship Program: Improving Ethics and Compliance in Small Government Contractors,” (published in the Winter 2020 issue of the Public Contract Law Journal), we propose that the government should incentivize large government contractors to help their small subcontractors develop compliance programs.

Specifically, we suggest that the U.S. “mentor-protégé” program provides a model that could be used to address compliance deficiencies in small businesses. Under the existing mentor-protégé” program, a larger, more experienced contractor serves as a “mentor” to a smaller contractor (the “protégé”). The mentor, among other things, guides the protégé through the complex procurement regime by sharing expertise and resources. In return, the mentor is provided with contractual opportunities and incentives by the U.S. Government.

We believe this model could be used in the compliance space by incentivizing large businesses to assist their small business partners with the development of internal ethics and compliance programs. Not only will this improve the anti-corruption programs of small companies, it will vastly improve the integrity of the government procurement system.

A copy of the article may be found here.