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Air Force Lifts Booz Allen Suspension, Contractor Admits to "Broader Systemic Ethical Deficiencies" and "Additional Improper Actions"

On Friday, Booz Allen Hamilton announced that its San Antonio office was removed from the Excluded Parties List System (EPLS) and regained full eligibility to compete for new federal contracts. Booz Allen entered into a three-year administrative agreement with the U.S. Air Force. We strongly encourage you to read the agreement, which contains several astonishing admissions about the company’s ethics environment and business practices.

POGO blog readers may remember that Booz Allen’s San Antonio office was proposed for debarment in February because, in April 2011, an employee at the office disseminated protected, non-public procurement information in apparent violation of the Procurement Integrity Act. On his first day of work, retired Air Force Lieutenant Colonel Joselito Meneses shared with his co-workers sensitive pricing data he had obtained while at the Air Force that gave Booz Allen an unfair competitive advantage in an upcoming procurement. Meneses and four of the co-workers with whom he shared the data were also proposed for debarment. (A search of the EPLS today reveals that Meneses and two co-workers are still proposed for debarment. The other two employees’ suspensions were lifted in March.)

Booz Allen accepted responsibility for the incident and agreed to implement company-wide ethics reforms and other remedial measures. Booz Allen also agreed to pay the Air Force $65,000.

According to the facts outlined in the administrative agreement’s preamble, Booz Allen’s law department learned of the improper disclosure approximately six weeks after it occurred:

However, upon learning of the matter, the Law Department narrowly focused its internal investigation on Mr. Meneses’ disclosure and, consequently, overlooked other culpable parties, including principals, and evidence of additional misconduct within the San Antonio office. As a result, at that time, Booz Allen did not uncover indications and signals of broader systemic ethical issues within the firm.

The agreement notes that, upon learning of the misconduct, Booz Allen withdrew from the contract competition and fired Mr. Meneses; however, the company did not see fit to disclose the incident to the Department of Defense Inspector General or to the Air Force’s debarring authority:

Instead, Booz Allen disclosed the matter informally and without adequate Booz Allen Law Department oversight or engagement through a Booz Allen contracts director through a series of voice mails and e-mails to Air Force contracting personnel….These events caused the Air Force to have serious concerns regarding the responsibility of Booz Allen, specifically, its San Antonio office, including its business integrity and honesty, compliance with government contracting requirements, and the adequacy of its ethics program.

Booz Allen revealed that it subsequently discovered and reported to the Air Force other instances of improper conduct by employees, including the improper use of non-public information, both at the San Antonio office and at other Booz Allen offices. While the company claims it has a “comprehensive” ethics program, it admitted “Booz Allen’s ethics message may not be inculcated throughout the firm and specifically, beyond its headquarters location.”

Finally, the company admitted it needs to do a better job policing the revolving door:

Booz Allen further acknowledges that these events have revealed significant issues concerning the methods by which it captures business and human assets, including former government personnel, and its handling, dissemination, and use of non-public information.

From now on, Booz Allen will require all new hires to certify they do not possess non-public or proprietary information from a past employer and that they have not brought, nor intend to bring, such information to Booz Allen, which exceeds current DoD revolving door requirements. Joselito Meneses, as you might recall, had left the Air Force almost three years before he began working for Booz Allen—that’s at least one year past the “cooling-off” period required of most former government employees.

POGO sees one potential problem with the agreement. Except for a brief mention about the importance of training employees to report perceived misconduct “promptly to the correct contact point within Booz Allen,” the agreement is silent on how the company will address the issue of blowing the whistle outside the company’s chain of command. Given Booz Allen’s admission about keeping the government in the dark about the San Antonio incident, this would seem to be an area deserving special attention. Booz Allen’s promise to revamp mandatory disclosure procedures is a positive step, but not if employees are left in the dark about their whistleblower rights.

In light of these revelations, Booz Allen’s hiring of former top Pentagon watchdog Gordon Heddell in December now makes perfect sense. At the time, POGO credited the hiring to “higher principle.” But now it looks more like the company was just trying to save its skin.

UPDATE (4/17/2012): Unethical behavior brought on by the revolving door created problems for Booz Allen, but now the revolving door may have come to the rescue. The Vice President of the San Antonio office, Del Eulberg, also passed through the revolving door. According to Booz Allen's website, Eulberg leads Air Force infrastructure programs in the San Antonio office. Prior to joining Booz Allen, Eulberg served as the Chief Engineer in the Air Force, retiring as a Major General. Eulberg has been with Booz Allen since 2009. Neither Eulberg nor Booz Allen would comment to POGO on Eulberg’s involvement with the proposed debarment, but it couldn’t hurt having a senior manager who is former Air Force. Booz Allen is likely exhaling a sigh of relief as it has received billions of dollars in Air Force contracts over the years.