Contractor  employees often work inside DOD facilities, alongside DOD employees, to  provide these services. Indications are, however, that  significant numbers of contractor employees are working side-by-side with  government employees in certain segments of the department, based in  part on information we obtained from 21 DOD offices we reviewed. As  shown in table 1, at 15 of these offices, contractor employees outnumber  DOD employees and the percentage of contractor employees in the  remaining offices ranges from 19 to 46 percent. Few Laws or DOD- Wide Policies Address Personal Conflicts of Interests among Contractor Employees

Contractor employees are not subject to the same laws and regulations  that are designed to prevent conflicts of interests among federal  employees. On the other hand, some program managers, realizing the risk from  potential personal conflicts of interest, have established their own  safeguards for particularly sensitive areas where contractor employees  provide support to decision processes. For example, all DOD offices we  reviewed that used contractor employees in the source selection process  use additional safeguard controls such as contract clauses designed to  prevent personal conflicts of interests. DOD’s review addressed FFRDC sponsoring  agreements, contracts, and internal policies and procedures. However, a number of program managers as well as  defense contractor company officials expressed concern that adding new  safeguards will increase costs for the government and are unnecessary since  government officials—not contractors—are the ones ultimately making the  decisions. Viewpoints of Ethics Officials and Senior Leaders

Senior officials within DOD responsible for ensuring integrity in employee  conduct and in the contracting function as well as the OGE told us that  they believed that there are risks associated with personal conflicts of  interests not just in program offices that involve contractors in source  selection, but those that use contractors in other ways to support spending  decisions. In developing its policy, DOD should include the following requirements  for defense contractor companies:   require a written code of business ethics and conduct applicable to  contractor personnel working on certain DOD mission-critical advisory  and assistance type services to:     prohibit contractor personnel from participating in a government  contract in which they have a personal conflict of interest;   require contractor personnel to avoid the appearance of loss of  impartiality in performing contracted duties for DOD;   require contractor personnel to disclose personal conflicts of interest  to their employer prior to beginning work on these contracts;  require the contractor to review and address any personal conflicts of  interest its employees might have before assigning them to deliver  contracted services;    prohibit contractor personnel from using non-public government  information obtained while performing work under the contract for  personal gain;     prohibit contractor employees providing procurement support services  from having future employment contact involving a bidder in an  ongoing procurement;   impose limits on the ability of contractors and their employees on  accepting gifts (defined as almost anything of monetary value, such as  cash, meals, trips, or services) in connection with contracted duties;  and     prohibit misuse of DOD contract duties to provide preferential  treatment to a private interest. Other specific objectives  were to assess (2) what safeguards there are to prevent conflict of interests  for contractor employees and (3) whether government and contractor  officials believe additional safeguards are necessary. To obtain similar  information from each of the 21 DOD offices, we interviewed these  officials to obtain their views and supporting documentation using a  structured set of questions covering several topics including (1) the types  of services being provided by contractor employees, (2) their concerns  about the integrity of the information and advice being provided by the  contractor employees with regard to personal conflicts of interest, and (3)  what safeguards such as contract clauses the offices are using to ensure  that the assistance and advice provided is not impaired due to contractor  employees conflicts of interest.
Why GAO Did This Study

Many defense contractor employees work side-by-side with federal employees in Department of Defense (DOD) facilities performing substantially the same tasks affecting billions in DOD spending. Given concerns with protecting the integrity of DOD operations, GAO was asked to assess (1) how many contractor employees work in DOD offices and what type of mission-critical contracted services they perform, (2) what safeguards there are to prevent personal conflicts of interest for contractor employees when performing DOD's tasks, and (3) whether government and defense contractor officials believe additional safeguards are necessary. GAO reviewed conflicts of interest laws and policies and interviewed ethics officials and senior leaders regarding applicability to DOD federal and contractor employees. GAO judgmentally selected and interviewed officials at 21 DOD offices with large contractor workforces, and 23 of their contractors.

What GAO Found

Indications are that significant numbers of defense contractor employees work alongside DOD employees in the 21 DOD offices GAO reviewed. At 15 offices, contractor employees outnumbered DOD employees and comprised up to 88 percent of the workforce. Contractor employees perform key tasks, including developing contract requirements and advising on award fees for other contractors. In contrast to federal employees, few government ethics laws and DOD-wide policies are in place to prevent personal conflicts of interest for defense contractor employees. Several laws and regulations address personal conflicts of interest, but just one applies to both federal and contractor employees. Some DOD offices and defense contractor companies are voluntarily adopting safeguards. For example, realizing the risk from personal conflicts of interest for particularly sensitive areas, the 19 DOD offices GAO reviewed that used contractor employees in the source selection process all use safeguards such as contract clauses that prohibit contractor employees' participation in a DOD procurement affecting a personal financial interest. In certain other tasks, only 3 of the 23 defense contractors GAO reviewed had safeguards requiring employees to identify potential conflicts of interest so they can be mitigated. In general, government officials believed that current requirements are inadequate to prevent conflicts from arising for certain contractor employees influencing DOD decisions, especially financial conflicts of interest and impaired impartiality. Some program managers and defense contractor officials expressed concern that adding new safeguards will increase costs. But ethics officials and senior leaders countered that, given the risk associated with personal conflicts of interest and the expanding roles that contractor employees play, such safeguards are necessary.