Regulation vs. Self-Governed Compliance in Government Procurement: The Perceived Impact of DII

By Penska, Kenneth; Thai, Khi, V | Journal of Public Budgeting, Accounting & Financial Management, October 1, 2000 | Go to article overview

Regulation vs. Self-Governed Compliance in Government Procurement: The Perceived Impact of DII


Penska, Kenneth, Thai, Khi, V, Journal of Public Budgeting, Accounting & Financial Management


INTRODUCTION

In the theory of policy-making and budgetary processes, after a program is authorized and appropriated, it is implemented and the implementation has been perceived as a simple phase. This perception about policy implementation was challenged in the 1970s. Since then, policy implementation has been of a great concern because due to bad implementation, many policies/programs failed. This is particularly true in government procurement. Indeed, getting a best bid and contract is only the first step in a sound government procurement process. Assuring that goods or services are delivered in accordance with contract specifications is not an easy task, particularly in defense procurement. In over 200 years of government contracting for national defense, the same problems that plagued defense procurement in the Revolution continue to plague it today. Kickbacks, profiteering, waste, and fraud are just as prevalent today as in colonial times. In an environment where large sums of government funding converge with contractors bidding for huge defense contracts, it is not surprising that scandals have been a major part of the history of defense procurement (Nagle, 1992).

The ineffectiveness of government regulatory policy regarding government defense procurement is clear. Legislation such as the Department of Defense Authorization Act of 1986, the False Claims Amendments Act of 1986, and the amendment to the Anti-Kickback Enforcement Act of 1986 appear to have had little effect on the defense industry's business practices (Dees, 1987). Also in 1986, a major initiative was adopted, known as the Defense Industry Initiative (DII) on Business Ethics and Conduct. This article will provide a brief history of defense procurement, and an overview of DII; and survey the perceptions of key administrators involved in DII about the program compliance.

BRIEF HISTORY OF MILITARY PROCUREMENT

In their procurement history, the U. S. armed forces, which have purchased a sizable amount of goods and services, have had persistent problems with the defense industry. In dealing with these problems, the defense procurement regulations have been needed, but also have become a debatable policy issue.

Developments of Regulations Dealing With Persistent Problems in Defense Procurement

During the Revolutionary War the Continental forces suffered gravely at the hands of suppliers who engaged in fraudulent practices. Axes were delivered without heads. Beef and flour delivered to the troops were spoiled and inedible. Blankets were only one-fourth their proper size. Shoes were too small or fell apart in a day or two because they were poorly made of cheap materials. Casks of meat contained stones and tree roots. Even gunpowder was debased and unusable. "The people at home," observed one Continental officer in 1778, "are destroying the Army by their Conduct much faster than Howe and all his army can possibly do by fighting us" (quoted in Carp, 1984: 65-66).

By the War of 1812, the inefficient, fraud-racked contract system constituted one of the gravest hindrances to military operation throughout the war. The system of having contractors assume responsibility for getting supplies to the troops failed miserably. In addition, this war marked the first time that women and children were used for making munitions. This was not due to a shortage of manpower, but rather that the labor of women and children was far less expensive than the labor of men (Kreidberg and Henry, 1955).

From 1815 to 1860 the military contracting process became more structured. Under congressional pressure, the military imposed formalized procedures to ensure accountability and reasonable prices. To achieve accountability, the military required detailed and multiple copies of all records and contracts. To achieve reasonable prices they required competition and advertisement, except under very limited circumstances. However, the improvements to the contracting processes to ensure accountability and competition did little to combat the unprecedented scandals of the Civil War. …

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