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
ABSTRACT. The United States defense industry has had a long history of unethical and illegal business practices. Recent polls find that most Americans believe that their nation's weapon acquisition system is one of the worst managed activities in the public or private sectors and the defense industry is neither efficient nor honestly managed. Although the defense acquisition process has been the subject of many reform efforts, it is reasonable to ask whether these reform efforts have had any success. The Defense Industry Initiative on Business Ethics and Conduct, commonly known as DII, is the defense industry's self-governed program responding to the concern regarding ethical business practices in defense procurement. This study is to assess the Defense Industry Initiative on Business Ethics and Conduct in an attempt to find the perceived impact of this self-governed compliance program.
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. …