About two months ago, we told our readers that the San Antonio Office of Booz Allen Hamilton (BAH) had been suspended by the US Air Force and proposed for debarment. Suspension and debarment are significant penalties for any government contractor, since they prevent the contractor from receiving any new contract awards from the Federal government. In this case, the suspension and proposed debarment did not apply to the entire entity; the action was limited to the individual San Antonio Office.

About one month ago, we reported that yet another BAH office had received “contractor bid and source selection information” regarding a competition for a Navy support contract. At that time we had some harsh words for BAH, stating—

The BAH office in San Antonio was focused on proposing for work at an Air Force facility. Presumably, this is a BAH office in Maryland or Washington, D.C., proposing for work at a Naval facility. Yet despite differences in military services, geographic location, and in the type of work being solicited, there are some noticeable commonalities. Do you see them?

Yeah, it’s not hard to see that both of these groups of BAH employees shared a common ignorance of expected standards of legal conduct in the government procurement environment, a common ignorance of expected standards of ethical conduct within BAH, and/or a willful and intentional disregard of those standards of conduct.

Well, now we are learning that at least one of the two BAH offices has settled its problems. Federal Times reported that the US Air Force has lifted its suspension of BAH’s San Antonio office, as part of a “three-year administrative agreement.” According to the article—

During its suspension, Booz Allen Hamilton hired Affiliated Monitors Inc. to help improve the company's ethics program and Jenner & Block law firm to assess how the company conducts internal investigations and communicates with the government. The company must report the findings, its plan for improvement and progress reports to the Air Force over the next three years.

Booz Allen paid the Air Force $65,000 to cover the agency's costs to administer the agreement.

‘Overall, Booz Allen acknowledges that the proposed debarment and its resulting investigation have revealed ethical deficiencies and questionable business practices that may be systemic in nature,’ the agreement states.

Here’s a link to the official BAH press release that announced the agreement. It states—

In the Administrative Agreement, Booz Allen accepts responsibility for that incident and related matters and agrees to implement firm-wide enhancements to its ethics and compliance program, including future improvements identified by external advisors, to significantly mitigate the possibility of a re-occurrence of such issues. … Booz Allen has agreed, among other things, to file quarterly reports with the U.S. Air Force regarding the firm’s implementation of the remedial measures and also adhere to a number of provisions relating to enhanced disclosure of employee misconduct or violations of the firm’s ethics and compliance program. A copy of the Administrative Agreement will be filed with the Securities and Exchange Commission on Form 8-K.

We took the time to review BAH’s Form 8-K filing with the SEC, to see the exact language of the agreement. Here are some portions we found interesting—

Booz Allen represents that it has, among other things: a. Investigated fully and exhaustively the matter underlying the proposed debarments and provided full and complete disclosure to the Air Force, including several written submissions, interview summaries, and contemporaneous documentary evidence. Booz Allen also responded to the Air Force's questions and requests for additional information. b. Discovered and disclosed to the Air Force other instances of improper conduct by personnel, including additional improper actions to capture the follow-on Air Force contract in question, as well as improper actions concerning other government contract capture efforts at Booz Allen locations beyond San Antonio. Among other conduct, Booz Allen personnel have improperly obtained, handled, and used non-public information, including information that may be characterized as source-selection information, bid or proposal information, and/or competitor proprietary information. Additionally, Booz Allen personnel, in some instances, were aware of their colleagues' improper conduct and chose not to report such improper conduct. …

The initial [monitoring] report suggests that while Booz Allen has a comprehensive ethics program and that its senior leadership may embrace such beliefs, Booz Allen's ethics message may not be inculcated throughout the firm and specifically, beyond its headquarters location. …

Booz Allen acknowledges that although it had in place measures to educate its employees on ethical and compliant conduct and the restrictions on obtaining, handling, and using non-public information, those measures failed. 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. Overall, Booz Allen acknowledges that the proposed debarment and its resulting investigation have revealed ethical deficiencies and questionable business practices that may be systemic in nature. …

14. NOTIFICATION OF ALL EMPLOYEES. Within 30 days of the effective date of this Agreement, Booz Allen will notify all Booz Allen employees of the fact and substance of this Agreement, the nature of the conduct leading to this Agreement, including the description of events set forth in Paragraph 3 of the Preamble, and the importance of each employee's abiding by the terms of this Agreement, all requirements of law, regulations, Booz Allen policies and procedures, and U.S. government contracts held by Booz Allen. Booz Allen shall provide a copy of this notice to the Air Force within 30 days of the execution of this Agreement.

15. NOTIFICATION OF SUPPLIERS AND SUBCONTRACTORS. Within 30 days of the effective date of this Agreement, Booz Allen will send a letter to all significant suppliers, subcontractors, or prime contractors with whom it contracts emphasizing Booz Allen's commitment to ethics and compliance and asking suppliers/subcontractors to report to Booz Allen's Manager of Ethics and Compliance any unethical, improper, or illegal activity relating to Booz Allen. Booz Allen shall provide the Air Force with copies of such correspondence within 30 days of the execution of this Agreement

Well, here’s a tangible example of what happens when you run afoul of government regulatory compliance requirements. You get lots of free publicity (including three blog articles at Apogee Consulting, Inc.). You get to file special reports with the SEC. And you get a set of fairly onerous action items from your government customer. Not to mention lots and lots of legal fees.

Perhaps other government contractors will review BAH’s situation, and consider investing in some preventive employee awareness training. Or are we perhaps being naïve?