• Increase font size
  • Default font size
  • Decrease font size
Home News Archive Industrial Espionage? It’s More Likely Than You Might Think

Industrial Espionage? It’s More Likely Than You Might Think

E-mail Print PDF

Espionage
Recently we were involved in protracted discussions with a contractor’s facility management team regarding where the centralized proposal preparation team should be located. Yes, we do get involved in some weird discussions.

Anyway the facility management team wanted to place the proposal prep team in a cubicle farm—which was fine, except the proposal prep cubicles would be adjacent to the outside IT service contractor’s cubicles. That wasn’t so great, in our view. It created the risk that any individual from the outside service contractor might come into possession of the contractor’s highly proprietary cost proposal information.

There would be meetings and conferences. There would be laptops left unattended and monitors left on showing spreadsheets. There would be conference calls. There would be draft proposals left on desktops. Nobody is perfect, we argued, and sooner or later something of proprietary value was inadvertently going to be made available to somebody from another company—who might or might not be disposed to make use of it to the detriment of the contractor.

On the other side, the facilities management team argued for space efficiency and the most economical use of the contractor’s facility. Might it be considered to be unreasonable, they wondered, not to make the best use of the facility space? What would DCAA think? In any case, they argued, it was both speculative and remote that any proprietary information would be taken. In essence, their position was that I was asking for an expensive solution to a low probability risk, and the cost outweighed the benefit.

Ultimately, we reached a compromise. The proposal prep team was housed in the cubicle farm that adjoined the outside service company—but the facilities team erected a wall between the two groups. The Apogee Consulting, Inc. team shrugged and moved on.

And then this article was published by the Denver Post.

It reported that Paragon Dynamics, of Aurora, Colorado, had agreed to settle allegations that it had violated the Procurement Integrity Act by “illegally obtaining” proposal information from The Raytheon Company. Paragon agreed to pay the Government $1.15 Million to settle the allegations. As the article notes, “liability has not been determined”—meaning that Paragon may well be on the hook to Raytheon for much more than their DOJ settlement amount.

What happened? As the Denver Post story reported it—

From February 2008 to August 2009, prosecutors say Raytheon was competing to win contracts from the National Reconnaissance Office, the federal agency that oversees U.S. intelligence satellites. During that time, a Paragon employee who had access to Raytheon's Aurora facility managed to steal drafts of Raytheon's proposals for two contracts, as well as other related information.

The employee was caught on a security camera faxing part of a proposal to Paragon's president, prosecutors said. The president then forwarded the information to another company that was working with Paragon on one of the NRO contract competitions. Investigators located the documents on another Paragon employee's computer system.

To sum up, an employee of an outside company had access to Raytheon’s facility and somehow obtained access to proprietary Raytheon proposal information, which he then took and faxed back to his company, who then provided that information to another company that was competing with Raytheon on the proposals.

We don’t know whether the Paragon employee was sent into the Raytheon facility with the mission of obtaining the proposal information, or whether he came across the information and took advantage of the opportunity. But we know the employee used the proposal information to the detriment of Raytheon’s interests.

We forwarded a copy of the Denver Post story to our client’s facilities management team, and we were (barely) able to hold-off on making any snarky comments. We don’t know whether or not our client is reconsidering the previous decision on where to place its proposal preparation team.

But we really hope that they will think hard about the likelihood of industrial espionage. As this story shows, it’s more likely than you might think.

 

Newsflash

Effective January 1, 2019, Nick Sanders has been named as Editor of two reference books published by LexisNexis. The first book is Matthew Bender’s Accounting for Government Contracts: The Federal Acquisition Regulation. The second book is Matthew Bender’s Accounting for Government Contracts: The Cost Accounting Standards. Nick replaces Darrell Oyer, who has edited those books for many years.