Federal officials ordering government contractors to follow heightened ethical standards will impact more than 350 companies in Maryland with more than $18 billion in contracts.
The U.S. General Services Administration proposed changes to the Federal Acquisition Regulation that affects companies with $5 million or more in government contracts, said Richard Cellini, vice president of Integrity Interactive, a Massachusetts-based firm specializing in corporate ethics and compliance programs. He said the GSA will approve the new regulations by November.
“This is not your grandfather?s ethics and compliance program,” Cellini said. “It?s clear the U.S. government wants to raise the bar on ethics and compliance controls.”
In Maryland, companies and institutions like Johns Hopkins University, Lockheed Martin and Bechtel National ? all with government contracts totaling hundreds of millions of dollars ? will have to abide by the new standards. Other smaller, private companies will follow the same rules.
The regulations will affect thousands of companies, both domestic and foreign, Cellini said.
Maryland ranks third in the United States in terms of number of companies with government contracts exceeding $5 million. The regulations will affect more than 40 companies in Baltimore City alone. (Click here to see the Maryland companies with contracts exceeding $5 million.)
“You can tell the U.S. government really cares about this issue,” Cellini said. “If you want to do business with the federal government, you have to have ethics controls in place.”
Among the new requirements, companies? ethics compliance programs must include a written code of ethics and business conduct, an employee ethics and compliance training program, and an internal system of compliance controls. The programs must be in place 30 to 90 days after the changes are adopted.
Spending on ethics compliance programs is expected to total $100,000 to $500,000 a year, depending on the company size, Cellini said.
Those costs allow companies with less than $5 million in government contracts to be exempt from the regulations.
The penalties for not complying with the new standards could include contract termination or even banishment from doing future business with the government.
“Being debarred is one of the severest penalties you can face,” Cellini said. “It?s a virtual death penalty.”
Word of the upcoming regulation changes is “definitely encouraging,” said Kerri Kelly, spokeswoman for the Better Business Bureau of Greater Baltimore.
“Marketplace ethics are integral to business success,” Kelly said. “In this day and age, consumers depend on a trustworthy marketplace.”
