MakingWaves Blog
  1. LRN Home
  2. About

Labor & Employment Issues: Whistleblowers and Workplace Bullying

Whistle While You Work

Read More

Topics: ECA Risk Forecast Report 2014

Labor & Employment: Supreme Court Rulings

Last term, the United States Supreme Court decided two cases in favor of employers. Under current precedent, if a supervisor who has sexually or racially harassed an employee takes an adverse action against that employee such as termination or demotion, the employer is held strictly liable for that action. For an employer to be held liable for co-worker harassment, however, the employer merely has to be negligent in failing to stop the behavior. In Vance v. Ball State, a case closely watched by the employer community last term, the Supreme Court rejected the Equal Employment Opportunity Commission’s position that co-workers could be deemed supervisors in harassment cases if they had the ability to direct the employee’s daily work activities. Instead, the Court found the EEOC’s standard too ambiguous and ruled that “the ability to direct another employee’s tasks is simply not sufficient” to deem someone a supervisor. Instead, the Court held that an employee is a “supervisor” under Title VII only if he is empowered by the employer to take tangible employment actions against the alleged victim. The dissent called for Congress to take action to remedy the perceived wrongs in the majority’s decision.

In another case, University of Texas Southwestern Medical Center v. Nassar, the Court made it clear that plaintiffs in retaliation cases have a higher burden than in traditional employment law cases, where employers can be held liable if wrongful discrimination is a motivating factor. Under Nassar, a plaintiff must now prove that retaliation was a determinative standard, not just a motivating factor in an adverse action. Justice Ginsburg, who wrote the dissent in Vance as well, also dissented in Nassar, arguing that the majority was “driven by a zeal to reduce the number of retaliation claims filed against employers.” She once again called for Congressional action similar to the Civil Rights Restoration Act of 1987, which overturned a number of controversial Supreme Court rulings from the 1980s. Compliance officers should watch these developments closely. If Congress does take up Justice Ginsburg’s challenge, employers may face an uptick in harassment and retaliation cases.

Read More

Topics: ECA Risk Forecast Report 2014

What Risk Mitigation Steps Can Government Contractors Take?

There are several proactive steps government contractors can take to mitigate the risk of inevitable budget and contracting cuts in 2014, improve their competitive posture, and survive the unpredictable environment that has become the “new normal” of government contracting:

  • Develop strategies for an increasingly competitive market. It is important for government contractors to consider new ways to make themselves attractive and differentiate themselves from their competitors. Strong ethics and compliance (E&C) programs, for example, have become a competitive differentiator on government contracts, as agencies can ill afford to deal with ethics and integrity problems in either the bidding or execution phases of mission-critical projects. Regular independent assessments of a contractor’s ethical culture and E&C programs can help make the case that a company deserves the public trust. In addition, proposals that incorporate ethics assessments, training, and education at the project level provide evidence of commitment to controls and accountability important to government agencies in this new environment.
  • Submit claims early. When a contractor has legitimate claims against the government, it makes sense to try to resolve them as early in the process as possible. This is especially true when the federal budget is tight; a contract with unresolved or unexplained cost overruns makes an easy target for budget watchdogs. If a contractor can establish— through a request for equitable adjustment or contract claim, for example—that the government bears responsibility for some or all of the cost growth, the agency may reconsider its plan to terminate a program. At minimum, a valid claim can reduce the likelihood that the government will terminate the contract for default rather than for convenience.
  • Pay attention to quality and performance. It bears repeating that in a tightening budget environment, the quality of contractor performance will be scrutinized, and there will be other companies claiming that they can do a better job. Contractors can help themselves by helping agencies document the results achieved, outcomes realized, and reasons why their activities are mission-essential. Contractors should review performance assessments and seek to promptly correct reports that unduly attribute blame to them for matters beyond their control. Adverse assessments not only affect future business, they can weaken arguments for maintaining current budget levels on existing programs. Contractors should understand the circumstances under which they may challenge performance assessments under the Contract Disputes Act.
  • Pay attention to subcontractors and team members. With potential partial terminations and deductive changes, prime contractors are apt to face disputes among subcontractors and team members over remaining work share. Contractors who anticipate these scenarios, and address them in teaming agreements and subcontracts, will be in a better position to resolve such matters favorably. In addition, contractors should be aware that agencies are paying attention to the activities of their subcontractors, vendors, and suppliers, and exercise effective third-party due diligence to ensure that these team members meet expectations.
  • Be ready for increased government oversight. Suspensions and debarments of contractors by government agencies reached an alltime high in 2012, with no signs of abating in 2013. It is likely that decreasing budgets and the increasing importance of contract integrity and performance will drive even more aggressive enforcement of Federal Acquisition Regulations in 2013. For its part, the Defense Contract Audit Agency (DCAA) has more tools than ever to collect monies from contractors, including the ability to withhold payments if the agency finds a significant deficiency in the contractor’s business systems. Contractors will need to guard against unsupportable payment withholds by DCAA. Finally, the political discourse in 2013 indicated that declining taxpayer tolerance for waste, fraud, and abuse of public funds will continue to drive prosecutorial priorities in 2014 and beyond.
  • Assess the opportunities and risks of international markets. With declining U.S. government budgets, many contractors are setting their sights overseas. While foreign governments and international markets present opportunities, contractors should be aware of potential pitfalls associated with international business, including the complexities of complying with export control laws and the Foreign Corrupt Practices Act, which both the DOJ and SEC (Securities and Exchange Commission) are vigorously enforcing.
  • Strengthen corporate ethics and compliance programs. The DOJ, SEC, and government suspension and debarment officials are placing increasing emphasis on corporate ethics and compliance programs as a critical factor in their decisions to resolve both criminal and civil cases involving contractor misconduct. Many deferred, non-prosecution, and settlement agreements will continue to contain ethics and compliance related provisions, including requirements for remediation in areas of values-based ethics, internal controls, and ethical culture. Companies that take a proactive stance in this area will be better positioned to face the challenges in government contracting during 2014 and beyond.
Read More

Topics: ECA Risk Forecast Report 2014

The Impact of 2014 Budget Reductions on Existing Government Contracts

Government contractors should continue to consider several possible impacts of budget reductions on the government procurement process:
  • Existing Contracts: During 2013, we have already seen agencies reduce the scope and quantity of products or services purchased on existing contracts. Agencies may continue to “de-scope” the quantity, capability, or breadth of contract performance through change orders, as well as partial, or even complete, contract terminations for convenience. Depending on the budget pressures from the Hill, contractors should expect agencies to propose restructuring existing contracts to defer costs to the future. Such restructuring may result in more term contracts, extensions of contract schedules to match funding, and requests for waiver of existing contractor claims. Contractors may see their option periods waived, forcing them to negotiate new contracts at lower prices, and face increasingly pricesensitive competition.
  • New Contracts: During 2013, government contractors saw a decrease in the number of new contracts awarded, and we expect to see this continue. Types of contracts may also change, with agencies moving away from contract vehicles that place cost and performance risk on the government. For example, agencies are less likely to use costreimbursement and labor-hour contracts (previously favorites in the government services arena), instead favoring fixed-price contracts for a greater degree of cost certainty and lower risk. Indefinite Delivery/ Indefinite Quantity contracts will also become more attractive for the government because they allow agencies to negotiate at the task order level. In addition, government contractors are already seeing a trend away from “best value” procurements toward lowest price, technically acceptable sources.
  • Bid Protests: Stiffer competition for contracts will likely bring an increase in bid protest litigation, particularly from incumbents seeking to extend their performance on contracts, and offerors who need the awards to remain viable players in the government contracting space.
  • Procurement Integrity Violations: Intensified competition for fewer contracting opportunities can create a high-risk environment within companies, making them susceptible to employee misconduct, particularly with regard to following the rules of the competitive contracting process. In an effort to win contracts and curb layoffs and staff reductions, employees (particularly those in the contract “capture” process) may feel motivated to ignore or marginalize their company ethics and compliance programs and use whatever information is at their disposal—even prohibited government or competitor acquisition data—to give them an edge in the bidding process. Such ill-advised actions will lead to government investigations, prosecutions, suspensions, and debarments, and increase the risk for contracting officials who might be entirely unaware of such behaviors within their companies.
  • Small Business Contracting: The number of firms allowed to compete for federal small-business contracts has been increasing. Since 2010, the Small Business Administration (SBA) has raised the size limits for firms in hundreds of industries competing as small business contractors. For example, in July 2013, the agency raised the annual revenue limit for firms in the transaction processing industry from $7 million to $35.5 million to be eligible for small business contracts. This move made it possible for more than 7,400 additional firms to begin competing for contracts as small firms.9 This increased competition will, as a result, drive down prices.
Read More

Topics: ECA Risk Forecast Report 2014

Will 2014 Continue to Be a Budget Rollercoaster for Government Contractors?

Although the world as we know it did not end with the sequestration in 2012, for government contractors, the 2013 government shutdown was like a tornado ravaging a town after an earthquake. Many contractors had to lay off staff assigned to affected government agencies and programs, further straining their already anemic bottom lines. One large government contractor reported that the shutdown cost the government about $30 million, while others reported profit declines by more than 25%. Contractors that provide services to the government reported declining sales, and many warned that 2014 could be even worse. The few contractors who are improving their profits are doing so not by boosting their sales, but by managing their costs. That means declining employment, freezing or reductions to salaries and benefits, and an overall shrinking in contractor capability. As one contractor recently told the Wall Street Journal, “[d]oing business with the government is not for sissies.”

Unfortunately, the worst may be yet to come. Several federal agencies found extra funds that helped them survive the automatic budget cuts in FY 2013, allowing them to minimize draconian terminations of contracts. For example, the Pentagon used more than $5 billion in unspent money from previous years to ease its $39 billion budget cut. The Department of Justice (DOJ) found more than $500 million in similar money. Agencies that have thus far withstood the harshest effects of the 2013 cuts are preparing for a second round in 2014 that will likely be worse than the first. Senate Appropriations Committee Chair Barbara Mikulski (D-MD) said that agency budget chiefs “squeezed everything to get through the first year thinking we would come to our senses.” Unfortunately, that didn’t happen. Most of those accounting maneuvers were one-time steps. The automatic spending cuts in 2014 promise to be far more painful to both federal agencies and the contractors that support them. It is more important than ever for sub-contractors to establish themselves as critical to a project, and for potential buyers to assess just how necessary they are given these external budget pressures.

Read More

Topics: ECA Risk Forecast Report 2014

Government Contracting: Sequestration Isn't Over Yet

In previous LRN Risk Forecast Reports, I noted that government contracting requires a sharp calculation of risks versus rewards. Typically, that calculation has come out in favor of companies expending the necessary time and effort to maneuver a minefield of often complex and frustrating regulations in order to reap the financial benefits and stability associated with government contracting. For 2014, some companies might be recalculating their analysis and reconsidering whether the benefits still outweigh the risks of government contracting.
Read More

Topics: ECA Risk Forecast Report 2014

Top 5 Strategies for Developing an Effective Blended Learning Program

1. Develop a broad set of operating principles.

Read More

Topics: ECA Risk Forecast Report 2014

Trends in Ethics and Compliance Training: Blended Learning

All too often, ethics education is a dull and monotonous activity, and many employees find little connection between the annual compliance education program and the core business issues that are relevant at a local level. However, when an organization’s leadership commits to shaping an ethical culture, there is an opportunity to foster powerful peer-learning experiences. Designing a blended learning strategy enables an organization to employ a range of delivery formats (e.g., online, mobile, live), instructional strategies (e.g., scenario- and game-based learning), and communication tools to build knowledge, develop skills, and change behaviors. By delivering E&C content more frequently through a variety of channels, blended learning addresses different employee learning styles and combats training fatigue. Blended learning offers a more relevant, engaging, and social approach to E&C learning, and it prepares leaders at all levels to set the right tone.

Compounding the convergence of multiple generations and preferences in learning and communication styles, today’s organizations are operating in a global landscape with a diversity of employee and partner situations that require a deeper understanding of cultural preferences. Not only are there the more traditional calls for a blend of visual, auditory, or kinesthetic stimulations, but calls for the framing and context to be more culturally adaptive are mission-critical. While framing the topic of anti-bribery and corruption, the learning simulation for a shop floor employee in Taiwan must be framed in a different situational context than when presenting the same issue to a corporate executive team in Washington, D.C. or a vendor agent in Nigeria. When presenting the issue of speaking up and non-retaliation, the learning interaction presented to a team of claims adjusters in Cleveland, Ohio should be different than the problem-solving simulation developed for a manufacturing team in Santiago, Chile. Taking these diverse learning styles and cultural sensitivities into consideration when designing your education and communications strategy and program can enable greater knowledge “stickiness” and promote more adoption of the concepts of the program. The learning simulations should engage and challenge your workforce to consider the ethical quandaries of their roles and responsibilities, but framing the content with regional or cultural context adds an important dimension of impact and relevance. This strategy can shift the learning from passive participation to active learning and melt the typical barriers of global perception or “lost in translation” typical of many ethics and compliance programs.

Read More

Topics: ECA Risk Forecast Report 2014

Trends in Ethics and Compliance Training

Generation Effect

Read More

Topics: ECA Risk Forecast Report 2014

Ethics and Compliance Program Education: Top Challenges

One of the critical success factors for any ethics and compliance program is education. LRN’s 2013 Ethics and Compliance Leadership Survey Report found that 75% of ethics and compliance officers considered the creation of an education program a top priority, with 45% reporting that “keeping it relevant” was an important goal for their program.

Education and communication are critical components in transforming corporate cultures worldwide. Advancing ethical corporate cultures starts with designing effective education programs that promote awareness, impart knowledge, and breed an organizational sense of ownership and responsibility around business conduct. With today’s business paradigm requiring not only legal compliance but also ethical behavior, education leaders are finding the need to shift their learning strategies to adapt to the new business drivers and evolving audience requirements. Designing effective compliance and ethics education programs that reach diverse audiences across multiple time zones, in a progressive and innovative manner, is emerging as the new necessity. This is reinforced by research from LRN’s 2013 Ethics and Compliance Leadership Survey Report, in which the data shows convincingly that the most effective programs are delivered in a blended suite of modalities, addressing the various learning styles and attention spans of the evolving workforce.

Read More

Topics: ECA Risk Forecast Report 2014

About this blog

Tackling compliance and ethics issues from around the world.

Subscribe to Email Updates