DoD Contractors Ethics

DoD Contractors Ethics
Aaron W. Arce
Embry-Riddle Aeronautical University
Business Ethics
325
Hal P. Henning
September 17, 2014

Abstract
Boeing is the number two major contractor for the Department of Defense and one of NASA's number one contractors, but in the early 2000's and recently Boeing has been found trying to maximize its profits at the cost of price inflation and bribing government officials to win government contracts. Offering a government and her family high paying jobs to give Boeing proprietary information from other government contract bidders, to ensure that they win the bid and get the contract.

DoD Contractors Ethics
The Department of Defense (DoD) makes a large quantity of acquisitions through federal business opportunity FEDBIZOPPS website. These vendors sometimes become exclusively DoD contractors. DoD even helps small disadvantaged business by giving them special privilege to contracts under $200,000.00 dollars. This advantage does not help the fact that the small businesses contractors with the government or even the large ones don't always practice great business ethics. Every company would like a slice of the government contracting pie, these acquisitions keep Americans at work and the small businesses into Medium Corporation and large businesses keeping their stock and stakeholders happy.
Boeing Aircraft Company is one of the DoD government contractors, and is the second largest contractor that the government has. Over the years Boeing has had many government contracts, this one in particularly was the contract solicitation for the upgrade of the Air Forces KC-135 fleet. This incident of poor business ethics involves Darleen Druyun. Darleen Druyun was a thirty year acquisition professional. Ms. Druyun had begun her career in acquisition in 1972 as a GS-5 Contracting intern at Warner Robins Air Logistics Center immediately after completing her degree from Chaminade University in the state of Hawaii. After almost ten years of working with the Air Force as a contracting specialist, Ms. Druyun again started working with the Air Force in 1991 as the Air Force's Principal Deputy assistant secretary of acquisition and management. While in office Ms. Druyun in 1993 was under investigation for the possibility of rushing the payment for the acquisition of the Air Forces C-17 from McDonnell Douglas Aircraft, but eventually Ms Druyun was dismissed of all charges (Larezos, 2008).
In 2003 the Air Force announced that instead of acquisition for one hundred KC-767 tankers to replace its aging fleet of its KC-135. The lease would be good for ten years and give the Air Force the option to buy the aircraft at the end of the lease. This raised a lot of questions throughout the government that the lease would cost more money than actually buying the airplanes outright. As the DoD was posed with this question of cost they decided to check into contract. The leasing of the 100 KC-767 aircraft would've totaled 37 billion dollars. Which in the end of the contract would cost 370 million per KC-767 tanker, where buying the tanker up front would cost only 150 million. Now, me being an acquisition professional for the government, and knowing how the solicitation process works and how much power Contracting Officers (CO's) have. A CO is a warranted person and the only person in the DoD that can bind the government into a contract, in a sense this means the government is bound by the contract forcing them to pay for services ("The Druyun study," 2014).
In late 2003 the Pentagon announced that it would freeze the project while they initiated investigation and what this investigation reviled that Ms. Druyun was intimately involved with the contract that Boeing got for the KC-767 leasing and in December of 2003 the Pentagon released facts that showed not only was she involved but she got herself a $250,000 job with Boeing and a $50,000 signing bonus. That was not the only perks that Ms. Druyun received she also got her Daughter and her daughter's fiancé a job at Boeing. Ms. Druyun confessed to her plot to fraud the government but also to the fact that she gave Boeings contracting team Airbus A330 MRTT bidding package. Michael M. Sears (Boeing CFO). And Phil Condit (Boeing former CEO), these people plus Ms. Druyun ran a scheme to cheat the federal selection process. Also when Ms. Druyun when she became a government official she took an oath of office, that basically states she would not engage in these types of unethical acts. Looking on Boeing's about us page it describes their mission vision and values ("The druyun study," 2014).

As written on Boeing's website ("Boeing culture & values," 2014, p. 1) The Boeing Vision is:
Our Vision
People working together as a global enterprise for aerospace industry leadership. How there?
Operate as One Boeing
Deliver customer value
Lead with innovation
Fuel growth through productivity
Leverage global strength
In order to realize our vision, we consider where we are today and where we would like to be tomorrow. The business imperatives on which Boeing places a very strong emphasis.
Detailed customer knowledge and focus
Technical and functional excellence
Large-scale system integration
Lifecycle solutions
Lean global enterprise
Our Values
At Boeing, we are committed to a set of core values that not only define who we are, but also serve as guideposts to help us become the company we would like to be. And we aspire to live these values every day.


Integrity
We take the high road by practicing the highest ethical standards and honoring our commitments. We take personal responsibility for our own actions.
Quality
We strive for first-time quality and continuous improvement in all that we do to meet or exceed the standards of excellence stakeholders expect of us.
Safety
We value human life and health above all else and take action accordingly to maintain the safety of our workplaces, products and services. We are personally accountable for our own safety and collectively responsible for each other's safety. In meeting our goals for quality, cost and schedule, we do not compromise safety.
Diversity & Inclusion
We value the skills, strengths and perspectives of our diverse team. We foster a collaborative workplace that engages all employees in finding solutions for our customers that advance our common business objectives.
Trust & Respect
We act with integrity, consistency, and honesty in all that we do. We value a culture of openness and inclusion in which everyone is treated fairly and where everyone has an opportunity to contribute.
Corporate Citizenship
We are a responsible partner, neighbor and citizen to the diverse communities and customers we serve. We promote the health and wellbeing of Boeing people, their families and our communities. We protect the environment. We volunteer and financially support education and other worthy causes.
Stakeholder Success
By operating profitably and with integrity, we provide customers with best-value innovation and a competitive edge in their own markets; enable employees to work in a safe, ethical environment, with a highly attractive and competitive mix of pay and benefits, and the ability to further share in the company's success; reward investors with increasing shareholder value; conduct business lawfully and ethically with our suppliers; and help ("Boeing culture & values," 2014).
All the statements on Boeing's about us page state that they have the integrity and take personal responsibility for their own actions, but is this really true? The government had to take Boeing to court for the actions and acts that occurred between Ms. Druyun and Boeing officials. This corruption does not line up with Boeing's about us statement, was this a show of Business Power or Iron Law of Responsibility? I am sure that the internal and external stakeholders had some kind of say in this corruption since the Chief Financial Officer (CFO) Michael M. Sears was fired and Chief Executive Officer (CEO) Phil Condit had resigned. In the court case against Boeing brought on by the U.S Attorney's Office. The court ruled in the favor of the government by giving Mrs. Druyun 9 months in a federal prison, a $5,000 dollar fine, 3 years supervised release and one hundred and fifty hour community service. The CFO Michael Sears was given a prison sentence of 4 months and Boeing was fined $615 million dollars (Larezos, 2008).
I wish this was the last case of fraud between the government and Boeing, but it is not. In audits conducted since 2008 by the Pentagon's Inspector General found that Boeing Company was found guilty of collecting excessive or unjustified funds on government contracts. This time it was the Army's contract for supplying parts for their CH-47 Chinook helicopters. The overall price for this contract was around 4.4 billion dollar multi-year contract that started in 2008 (Capaccio, 2013).
Boeing had over prices a number of different parts. The Pentagon's Inspector General (IG) found that for the first year option of the contract Boeing had over stated the cost of over 21 different parts. These parts were not the standard nuts, bolts and washers, their high dollar figure parts. With this the IG figured that the overages totaled somewhere around $7.4-$16.6 million. The IG also found some in consistencies with the second year option totals. This was due to the overcharging of about eight high dollar helicopter parts, costing an overage of about $10.6-$19.1 million in cost ("Inspector general Report," 2006).
This was not only the fault of Boeing but the IG also found the flaws in the U.S Army's Government Online Data (GOLD) system. What the GOLD system does is keep accountability of the Army's CH-46 Chinook parts and what the IG found was that the system did not have a baseline value for the parts, and this allowed Boeing. The IG put in its report that the Army should reevaluate GOLD as well as its contract management system. With the flaws found in the IG's 4 audits conducted on Boeing and also made the recommendation that the Army get a cost/price analysis group. This kind of behavior from Boeing does not show good Global Corporate Citizenship, which states that a multinational Corporation (MCN) are expected to be responsible corporate citizens in the country they are doing business in. This kind of behavior not only affects the internal stakeholders but the external stakeholders who invest in the company. The people who have faith and believe that Boeing would do things the wrong way and not jeopardize the money they invested into Boeing with the high expectation that Boeing would grow honestly. As an individual tax pay this makes me upset because not only is Boeing stealing from the government, but they are stealing from me as well. I have a stake in this case because I am a tax payer whose taxed income is going to fund these government contracts paying these contractors ("Inspector general Report," 2006).
As the number two leader in Department of Defense contractors, I think Boeing should have and take an ethical stand point on what they are doing to the government and all the stakeholders alike. Trying to keep the profit shares up is a good thing, but they are affecting and showing other companies that they can fraud the government increasing taxes on all even those involved with making the decisions at Boeing placing more financial taxes on all. This is not the utilitarianism that should be expected from a major MCN company (Carroll & Buchholtz, 2012).


References
About us. (2014). Retrieved from http://www.boeing.com/boeing/aboutus/culture/index.page
Boeing caught selling used parts as new to pentagon. (2013). Retrieved September 18, 2014 , from http://rt.com/usa/boeing-caught-selling-used-parts-237/
Boeing subcontractor pleads guilty to federal fraud charges. (2014). Retrieved from http://www.fbi.gov/stlouis/press-releases/2014/boeing-subcontractor-pleads-guilty-to-federal-fraud-charges
Capaccio, T. (2013). Boeing's pentagon charges questioned in audits four times. Retrieved from http://www.bloomberg.com/news/2013-10-14/boeing-charges-u-s-for-new-copter-parts-uses-old-ones.html
Carroll, A. B., & Buchholtz, A. K. (2012). Business & soiciety ethics, sustainability, and stakeholder management (8th ed.). Mason, OH: South-Western Cenegage Learning.
IG report. (2006). Retrieved from http://www.dodig.mil/audit/reports/FY06/06-104.txt
Larezos, M. C. (2008). Leaders can learn from druyun's ethical lapses and their consequences. Retrieved from http://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&uact=8&ved=0CB4QFjAA&url=http%3A%2F%2Fhandle.dtic.mil%2F100.2%2FADA479019&ei=WHMdVPDnBojwgwSC-YL4BA&usg=AFQjCNG27KNF4AEanPEuvr97jquFINLthA&sig2=qa-Yl8ofuq7LhV6kFuZggw&bvm=bv.75775273,d.eXY
The druyun study. (2014). Retrieved from http://www.dod.mil/pubs/foi/logistics_material_readiness/acq_bud_fin/DruyunStudy.pdf


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