Steven A. Shaw*

U.S. Department of the Air Force

Deputy General Counsel for Contractor Responsibility Air Force Debarment and Suspending Official

January 2006 

Steve Shaw was appointed U.S. Air Force Deputy General Counsel for Contractor Responsibility in 1996. His mission is to ensure that the U.S. Air Force deals only with honest and responsible contractors. Shaw notes “contractors who are less than honest and competent compromise flight safety, erode public confidence in the procurement process and cause losses to the taxpayer. The U.S. Air Force takes the issue of contractor responsibility very seriously.”

* Mr. Shaw agreed to be interviewed with the understanding that the views he expresses here are his own, and not necessarily those of the U.S. Department of the Air Force, or the Department of Defense.

The suspension and debarment process is set out in the government-wide Federal Acquisition Regulation. “If the evidence establishes that the contractor committed one of the types of misconduct set out in the regulation, and if I determine that there is sufficient evidence showing that the contractor committed the misconduct then the contractor is notified that they are being considered for possible suspension or debarment from government contracting.  This information is immediately posted on a publicly accessible internet site. Every government contracting officer in the United States is required to check this website to confirm that the contractor is not listed before issuing an award. The effect of initiating the debarment or suspension process is to immediately make contractors ineligible for new contracts throughout the federal government.”

How can contractors mitigate sanctions? In the case of a contractor who does not dispute the facts Shaw first examines whether the company took any steps to prevent the misconduct. Shaw notes “firms should do everything they can beforehand to prevent misconduct from happening, as well as being completely candid after the misconduct is discovered.” For example, according to Shaw, in order to demonstrate a commitment to conducting business ethically a company can establish an ethics programme, and top management can communicate their commitment to employees. Shaw’s second step is to consider what the company has done since discovering the misconduct.   In particular, Shaw considers “whether they admit to the act, recognise there is a problem, accept responsibility for their actions, create or improve their ethics programme, discipline the employee who committed the wrong-doing, and change their systems and business practices.” These factors largely determine whether or not they will avoid the severe sanction of suspension or debarment.

Most cases of suspension or debarment in the last ten years have involved smaller defence firms. However, in 2003, Shaw suspended three Boeing divisions for 22 months (seven contractual awards worth $1 billion were terminated and Boeing was unable to compete for other awards). He received “full support from [Defense Department] leadership.” The debarment of large and strategically important companies has never been an empty threat during Shaw’s tenure. He notes that “you don’t have to debar or suspend the whole company. Indeed, the larger the company, the more narrow your focus can and should be.”

However, if the misconduct is widespread throughout the company, “the entire entity may be debarred as necessary”. But this doesn’t mean that the government is completely prohibited from doing business with the company: “if what the company is making is necessary for national security, there is a provision in the law in the U.S. which allows for continuing to do business with that firm. If the head of a U.S. government agency determines there is a compelling need to deal with a debarred company, the agency may continue to deal with them. Although some people criticise this, I think this provision is terrific – it enables me to do what is right.”

Shaw’s interest in the behaviour of non-U.S. companies outside the U.S. is growing. He notes that “more non-U.S. companies are involved in Department of Defense (DoD) contracting than in the past.” Firms seeking access to the U.S. market “must recognise where the bar is set in terms of ethical conduct and practices, and must comply with these standards”.

Areas of concern include sole-source contracting, which is “intuitively more vulnerable to corruption,” as well as offsets, which Shaw senses “could create problems.” Shaw notes a statute that was recently passed that requires the DoD to report to Congress on sole-source contracting for reconstruction in Iraq, implying “some concern or belief by Congress that single-source contracting may be more vulnerable to if not corruption, at least to waste or fraud.” Regarding offsets, he states “when transparency is compromised… this adds to the risk of corruption.” Shaw notes “we are engaged in a dialogue with one large contractor relating to their handling of offsets”.

On the proposed creation of a Consortium of International Defence Companies against Corruption, Shaw states that “having seen in the U.S. how effective the Defence Industry Initiative has been, and in light of the increased consolidation and globalisation of the defence industry, as well as the increased importance of non-U.S. defence contractors to the U.S. DoD, it is intuitive to me that an international organisation of defence contractors would be most useful and significant, in particular for sharing best practises and agreeing on certain standards of conduct. I am very supportive of that and of the leading role being taken by Transparency International UK in this initiative.”