1. Supplier Ethics: Program Checklist

2. Guidelines for Program Requirements
Federal Sentencing Guidelines (FSG)
Last amended 2010
Effective Compliance and Ethics Program (Chapter 8, Part B, Section 2)
Due diligence to prevent and detect criminal conduct
Promote organizational culture encouraging ethical conduct and compliance with law
Defense Industry Initiative on Business Ethics and Conduct (DII)
Creating and Maintaining an Effective Ethics and Business Conduct Program
Suggestions for each element of an effective program
Good resource for possible additions / enhancements

3. Guidelines for Program Requirements (cont’d)
FAR Clause “Contractor Code of Business Ethics and Conduct”
Requires government contractors to:
Exercise due diligence to prevent and detect criminal conduct
Promote an organizational culture that encourages ethics and compliance
Submit mandatory disclosures to the government
Mandates:
Code of Business Ethics and Conduct
Business Ethics Awareness and Compliance Program
Internal Control System
Subcontract Flowdown
FAR (2008)

4. Checklist
Checklist maps requirements of FSG and FAR, as well as DII recommendations, against program elements
Reviewers should refer to the source documents for more detail
Links to Source Documents
Federal Sentencing Guidelines §8B2
FAR Clause “Contractor Code of Business Ethics and Conduct”
DII Creating and Maintaining an Effective Ethics and Business Conduct Program
Note both potential gaps and highlights/best practices

5. Ethics & Business Conduct Program
Sentencing Guideline Requirement
Ethics & Business Conduct Program
Standards and procedures
Code of Conduct
Distribution/Access
Internal Control Procedures
Corporate Policy Statements: _______________________________ _______________________________ _______________________________
FAR Requirement*
Code of Conduct made available to each employee working on the contract
Internal Control System
Defense Industry Initiative
Written policy signed by top official providing for key elements of program
Code of Conduct, including potential content
*for contracts of more than $5M and period of performance > 120 days
Note: Bold text indicates minimum program requirement

6. Ethics & Business Conduct Program
Sentencing Guideline Requirement
Ethics & Business Conduct Program
Board knowledge and oversight
Certifications of training
Frequency of reports to Board:
Quarterly
Bi-yearly
Yearly
Other: _____________
Oral report to Board
Written report to Board

7. Ethics & Business Conduct Program
Sentencing Guideline Requirement
Ethics & Business Conduct Program
High-level person responsible for program
Report to executives and Board
Resources, authority and access
Access to company resources
Budget
Staff
Level of person responsible for ethics__________________________
Report to CEO
Hard line
Dotted line
Report to Board of Directors
Steering Committee
FAR Requirement
Assignment of responsibility at sufficiently high level with adequate resources to ensure effectiveness of program (ICS)
Defense Industry Initiative
Defined organizational structure

8. Ethics & Business Conduct Program
Sentencing Guideline Requirement
Ethics & Business Conduct Program
Due diligence for substantial authority positions
Sources of information:
Background Checks
Ethics database check
HR hiring processes
Frequency of checks once in position:
Upon offer only
Once a year
Other _____________________
FAR Requirement
Reasonable efforts not to include individual as a principal, whom due diligence would have exposed conduct in conflict with Code (ICS)

9. Ethics & Business Conduct Program
Sentencing Guideline Requirement
Ethics & Business Conduct Program
Communication and training
Board of Directors training
Employee training
Code of Conduct (or general ethics) Training
Compliance Training
Training for agents and subcontractors
Ethics staff training
Employee communications
Ethics messages integrated
Standalone ethics communications
FAR Requirement
Ongoing ethics awareness and compliance program
Reasonable steps to communicate periodically and in practical manner Contractor’s standards and procedures by
conducting effective training programs
otherwise disseminating information appropriate to individual’s respective roles and responsibilities
Training for contractor’s principals and employees and, as appropriate, contractor’s agents and subcontractors
Defense Industry Initiative
Rules-based compliance training based on risk assessment
Ethics awareness training and discussion
Comprehensive communication plan

10. Ethics & Business Conduct Program
Sentencing Guideline Requirement
Ethics & Business Conduct Program
Monitoring, auditing, and periodic evaluation
Annual internal controls audit
Employee survey
Ethics program assessment
Frequency:
Once a year
Every other year
Other __________________
External benchmarking
Ethics metrics review
Monthly
Quarterly
Bi-Yearly
Yearly
General internal and external audits
FAR Requirement
Periodic reviews of business practices, procedures and internal controls (ICS)
Defense Industry Initiative
Regular program assessments, employee survey, metrics reporting, internal and external audits

11. Ethics & Business Conduct Program
Sentencing Guideline Requirement
Ethics & Business Conduct Program
System for reporting misconduct or seeking guidance, without fear of retaliation
Anonymous reporting
Ethics Officers
Help/hotline
Other _________________________
Protection against retaliation
System to report
System to seek guidance
System for tracking contacts
FAR Requirement
Standards and procedures to facilitate timely discovery of improper conduct (internal controls)
Internal reporting mechanism, such as hotlines, to report suspected misconduct and instructions that encourage employees to make reports (ICS)
Defense Industry Initiative
Place for employees, suppliers, customers and business relations to raise concerns / ask questions

12. Ethics & Business Conduct Program
Sentencing Guideline Requirement
Ethics & Business Conduct Program
Consistent enforcement
Disciplinary process for violations
Discipline review committees
Internal investigations
FAR Requirement
Disciplinary actions for improper conduct or failing to take reasonable steps to prevent or detect improper conduct (ICS)

13. Ethics & Business Conduct Program
Sentencing Guideline Requirement
Ethics & Business Conduct Program
Response to criminal activity
Audits
Corrective action analysis
Discipline
Internal investigations
Mandatory Disclosure policy
Voluntary Disclosure policy
FAR Requirement
Corrective measures are promptly instituted and carried out (internal controls)

14. Ethics & Business Conduct Program
Sentencing Guideline Requirement
Ethics & Business Conduct Program
NEW (as of 2010): Obligation to communicate directly with the Board or a sub-group of the Board
Periodic reports (oral and written) to Board committee: _______________________________
Frequency of reports to Board:
Quarterly
Bi-yearly
Yearly
Other: _____________
Communication with board documented in company policy/procedure: _______________________________

15. Ethics & Business Conduct Program
FAR Requirement
Ethics & Business Conduct Program
Disclosures of violations of the civil False Claims Act or Federal criminal law shall be directed to the agency Inspector General, with a copy to the Contracting Officer
Timely disclosure to the agency Inspector General of certain violations of law by principal, employee, agent or subcontractor
Full cooperation with government agencies for audits, investigations and actions
Process for making disclosures
Policy stating expectations for full cooperation

16. Ethics & Business Conduct Program
Defense Industry initiative
Ethics & Business Conduct Program
Leadership Commitment
Tone at the top
Engaged middle management
Reinforcing messages