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Thursday, November 3, 2016

Beyond the scope of the literal words of the law

Sunport remodeling audit shows holes in Albuquerque bid process
An internal audit of remodeling work at the Albuquerque airport shows the city skirted violating the letter of its own procurement rules, but raised questions about whether Sunport and administration officials brushed past the spirit of those guidelines.

The audit, completed October 26, said there’s no language in city code or bidding rules that prohibits a decision by the administration of Mayor Richard J. Berry to turn another planned construction project into a lucrative change order for Enterprise Builders Corporation.

The administration told the Albuquerque City Council that the project had been scheduled for a competitive bid. Making it a change order avoided that process and gave Enterprise the sole chance to price out the construction work. The administration began negotiating the cost of the change order before it awarded the contract for the initial work. The work covered by the change order was entirely separate from the original job.

“By treating additional work that nearly doubled the total project cost as a change order rather than a separate project,” the audit said, “the city has caused the overall integrity of the procurement process to be questioned by the appearance of a conflict of interest.”
There is a common law concept in contracting law, usually expressly mirrored in procurement regulations applicable to government contracting, that applies to a change of quantity or price or other essential term which goes "beyond the scope" of the contract or field of competition as unenforceable. In essence, it says to allow such a change is to hold that the original contract did not fully express the agreement of the parties to satisfy contract formation requirements, and/or is unenforceable to unilaterally change the contract under "illusory" contract principles.

This rule is expressed in the federal acquisition rules as well as the American Bar Association's Model Procurement Code and Regulations. New Mexico is, I believe, a state that has adopted the ABA MPC. It is also an accepted principle of government contracting expressed in many different legal and regulatory decisions.

The facts expressed in this article, which I accept at face value for the purpose of this case study, raise high vermilion flags of blatant disregard of the concept.

For another post that similarly highlighted excuses for skirting procurement laws, see See no evil:
In Wyoming, competitive bidding is required by law for major procurements exceeding $7,500 or $20,000 for an elected official. However, by obtaining a bid waiver, officials can skirt the requirement. And, as the records search showed, they often do. Regardless, officials maintain that there is nothing nefarious about how often the waiver loophole is utilized.

In a statement, Gov. Matt Mead said his administration follows “the spirit and letter” of the law and noted that the bid waivers are publicly posted online.
The spirit, and often the letter, of the procurement law might be found in the principle of limiting the scope of the contract, or field of competition when dealing with the solicitation process, if one were to look.

Sunday, October 30, 2016

It's sticking to "the letter and spirit of the evaluation procedures" that counts

These articles, which I've sliced and diced to my own ends, discuss the ramifications of looking at bid protests from a practical, not pendantic, view point. You can read the case discussed here; you should read the full stories at the links provided, lest my version taint your perspective.

OPINION: Contractors must recognise new US procurement rules
Nothing illuminates the essential characteristics of this new era better than the Government Accountability Office’s stinging and even humiliating rejection of Boeing’s protest at the US Air Force’s decision to award the long range strike-bomber (LRS-B) contract to Northrop Grumman a year ago; the GAO’s newly-released decision offers valuable instruction for competing in this new era.

The most surprising revelation in the report is how the USAF structured the LRS-B competition. It may be the first time it has acquired a combat aircraft based on a lowest-cost, technically compliant bid. Northrop heavily invested corporate funds in classified risk-reduction efforts, a fact the GAO says played a key role in reducing the USAF’s estimated price for its proposal. As bidders line up for a host of new USAF contracts, upfront investments by contractors are essential.

It is fair to say that Boeing did not like how the USAF evaluated both proposals on cost. Boeing quibbled over which historic programmes should be used as the baseline to forecast production costs on LRS-B. According to the GAO, Boeing submitted cost data based on derivative programmes, but the USAF preferred clean-sheet aircraft developments. Boeing sent the USAF a rebuttal, but apparently used inaccurate labour cost data, which, the GAO passive-aggressively notes, “did not enhance the credibility of Boeing’s estimate”.

Despite Boeing’s multiple objections, the GAO laid out a clear case that the USAF stuck to the letter and spirit of the evaluation procedures.
Game Over: GAO Protest Reveals Cost Was Deciding Factor in B-21 Contest
The Air Force in October 2015 awarded Northrop the contract to develop and produce its newest bomber, now designated the B-21 Raider. Northrop beat out a Boeing-Lockheed Martin team for the two-pronged contract that covers the engineering, manufacturing and development phase of the program as well as the first five low-rate initial production lots.

According to the GAO decision, Boeing argued that the Air Force did not effectively measure the risk of Northrop’s bomber. The company contended that if the service had followed definitions set in the request for proposals, Northrop would not have met four out of seven unnamed technical capability subfactors. Boeing also stated that Northrop’s proposal was “inherently high risk” with regard to certain requirements in a way that should have rendered its offering unacceptable.

GAO shot down those claims, saying its review found the Air Force evaluated Northrop’s bid in a way that was “reasonable and consistent” with the RFP.

Boeing also alleged that the service overestimated the price of its own offering and relied too heavily on independent government estimates. Again, the GAO disagreed.

“We see no error in the Air Force’s rejection of supporting cost data presented in Boeing’s proposal, or its upward adjustment to Boeing’s proposed EMD costs,” it wrote.

The office noted that both Northrop’s total weighted price and total estimated price were lower than Boeing’s. Although Boeing calculated that its proposal price had been overestimated, the decision noted, even if Boeing’s proposal was adjusted by that figure, it would have not been enough to topple Northrop, which would have nabbed the contract on the basis of its lower total weighted price. Thus, GAO said Boeing could not demonstrate that the Air Force had demonstrated competitive prejudice — a situation where the company would have won the contract if not for the government mismanagement or wrongdoing.

the decision sheds light on many interesting aspects of the competition. After the companies submitted their proposals to the Air Force in 2014, the service found both offerings technically unacceptable and held eight rounds of discussions where the competitors worked through deficiencies, although the GAO noted that some risk still remained with each proposal.

Those discussions failed to resolve questions about ​both Boeing and Northrop’s cost estimates for the EMD phase of the program, which Air Force found to be overly optimistic when compared with its own independent government estimates. Even after eight rounds of talks, neither company was able to put forward a proposal that could be considered realistic with respect to the majority of the cost categories.

But while Northrop increased its own estimates, Boeing kept its own cost data at the same level, the GAO said. And, partially because Northrop offered to pay for certain expenses internally on its own dime, the company was able to keep EMD costs below Boeing’s throughout the duration of the discussion process.
How the Air Force's $55B bomber contract became an LPTA competition
Information on the bomber program is apparently a touchy subject for the Air Force, which has steadfastly refused to release the value of Northrop Grumman’s bid. The $55 billion price is based on price estimates prior to the competition.

U.S. Sen. John McCain, chairman of the Senate Armed Services Committee, has been especially vocal with his criticism that the contract is a cost-plus contract and subject to overruns that the government will be on the hook for. He has threatened to withhold funding for the bomber.

To be fair to the Air Force, initial development of the first 21 planes is cost-plus, but once the craft moves into full production of up to 100 planes the contract switches to fixed price.

In a footnote, GAO describes how Northrop’s engineering and manufacturing development costs were significantly lower than the Boeing-Lockheed proposal because of investments Northrop had made but did not pass on to the government. What those investments were is redacted from the decision and Northrop declined to comment.

Northrop also had lower labor rates and labor escalation rates. Northrop also declined to comment on how they made their labor rates lower.

Because of Northrop’s investments and lower labor rates, the independent government estimates of costs for Northrop’s proposal was lower than the Boeing-Lockheed proposal.

This is significant because both teams were deemed to be technically acceptable.
The solicitation’s selection criteria stipulated that if the higher bid was greater than 103 percent of the lower bid than the lower bid would be deemed best value. The bid by the Boeing-Lockheed team was more than 103 percent so the Air Force picked Northrop.

The argument is that this is best value because why should the Air Force pay a higher price if both proposals were found technically acceptable?

As GAO said, Northrop’s price “created a near-insurmountable obstacle to Boeing’s proposal achieving best value.”

Saturday, October 29, 2016

Good enough for government work

Pentagon Pleads With Contractors to Step Up Fight Against Industrial Espionage
It is a wide open secret that the Pentagon’s complex supplier base has become a huge target. The Pentagon’s nightmare scenario: An orchestrated campaign to not only sabotage U.S. weapon systems but also steal sensitive design data from American companies. “We see growing opportunities for bad people to get at our products,” said Undersecretary of Defense Frank Kendall, who oversees weapons acquisitions.

The security gaps have widened over time, resulting from a combination of economic and technology trends — the globalization of electronics supplies and proliferation of counterfeits, the internet of things and the widespread use of software in military systems. The prospect of malicious tampering has become all too real, said Kendall. “What is my greatest fear? That we’ll find one day when we ask our systems to do something, they won’t work.”

These issues fall under the broad category of “supply chain security,” and they have put the Pentagon in a tight spot because it has limited visibility and control of the vast web of suppliers that design and produce equipment for the military. The security gaps have widened over time, resulting from a combination of economic and technology trends — the globalization of electronics supplies and proliferation of counterfeits, the internet of things and the widespread use of software in military systems. The prospect of malicious tampering has become all too real, said Kendall.

But only in recent years has the Pentagon seen substantial data and evidence of cyber attacks, tampering and other nefarious actions aimed at the defense industry. Without naming names, Kendall said there are mounting concerns about “things that are hidden in the things that we buy.” The Pentagon is taking steps such as increasing cybersecurity training for procurement officials and is trying to raise awareness of the risks, but the overwhelming responsibility for preventing and catching bad actors falls on contractors, simply because they are the first line of defense.

Dan Payne, director of the Defense Security Service, an agency that oversees industrial security, said suppliers are stepping up voluntary reporting on suspected spying. The defense industrial base is “facing a changing threat, one we’ve never faced before, a counterintelligence threat that is unprecedented in our history,” he insisted. “It’s bigger than anything we’ve ever seen.” And it’s all happening behind the scenes,” he said. “We’re in a knife fight and most people don’t know it.”

The DSS is rethinking its internal processes for dealing with industrial espionage. Many of the agency’s methods have not changed since the Cold War, said Payne. “We’re looking at prioritizing technology we truly need to protect, and looking at the companies that are producing those technologies,” he added. “Knowing how enemies are coming at us, we are working with industry on tailored security for each facility.”

In this frightening environment, Payne told executives at the Bloomberg forum, “We have to partner with industry. The nation’s top corporations can afford to spend a lot of resources vetting suppliers, but the majority of defense vendors lack such means. The U.S. government doesn’t have the resources to fight this battle alone.”

One way foreign actors can access U.S. defense industry products and data is by buying up companies. This is a “huge issue,” said Payne. “We’re never gong to be able to guarantee the supply chain 100 percent, it’s too vast.” As globalization has taken over the economy, foreign intelligence services are using businesses to get inside our supply chains to steal our secrets, our technology.”

With a globalized work force, there is a higher risk of “insider threats” that can be even harder to tackle than digital intrusions. “At no time have our adversaries ever had the access and the ability to come from different avenues as they do right now,” said Payne. “The Chinese are very good.” Having cornered 56 percent of the consumer microelectronics industry, the Chinese are in strong position to woo U.S. companies to partner with them. “This is tough one,” said Payne. “Never before have we seen the volume of joint ventures getting into our supply chain.”

The Pentagon admittedly has limited weapons to fight back, but it is slowly gearing up, said Kristen Baldwin, acting deputy assistant secretary of defense of systems engineering. “We understand security, but it’s not in our practices and processes to think about that,” she said. “We worry about quality and reliability.”

Defense program managers have to prepare to cope with counterfeit parts, malicious tampering, reverse engineering and infected software. And as much as the Pentagon needs contractors to share information about potential threats, she said, the government also needs to be more transparent with the industry.

Baldwin suggested the answer might be to rethink how weapon systems are designed so they are less vulnerable to single points of failure. “We should think about not only where the part comes from but also whether we need to design our systems so they are not completely degraded just because we don’t know what’s in that black box.” There is no way to guarantee the performance of every single component, she said.

The Pentagon funds a small number of “trusted foundries” that produce sensitive microelectronics for exclusive government use. But the majority of electronic components found in military systems come from commercial suppliers. “The fact is that we can’t afford to shut ourselves off the global supply chain nor do we want to,” Baldwin said. “That’s technology we need for our systems.”

Read more of the story at the link above.
I was interested in the comment, "The Pentagon funds a small number of “trusted foundries” that produce sensitive microelectronics for exclusive government use." It reminded me of the early years of government contracting in the United States, up to the early 20th century. My perspective of that was informed by the excellent book, "A History of Government Contracting" by the esteemed practitioner and professor, James F. Nagle. See a review of this book here.

As I recall what he wrote, in the earliest days of manufacturing, the US government took to making its own things because there was no defense industry, as such, to speak of, and what industry there was had not mastered the process of making and assembling interchangeable parts. 

Nagle expressed the observation that the government's products, made in its own "trusted foundries", were widely admired and sought around the world. Today, we take the phrase, "good enough for government work", as a cynical statement that government cannot make anything worth its salt. But, back then, when the phrase was first used, it was an admirable statement of the gold standard. If a private supplier could lay claim to have products or services "good enough for government work", he or she could proudly peddle products any where in the world.

In a day when government is intent on outsourcing everything to private contractors, who very often have foreign ownership or other influence, we might find it useful to more often rethink the gold standard. 

Friday, September 23, 2016

Sole searching in Oakland, CA?

Courthouse News Service, which is a nationwide news service for lawyers and the news media, filed the following story. This shortened version is intended to alert you to the item and tease you to go to the sourced link and read it in full. Especially since I cut, paste, omit, edit, rearrange and paraphrase to suit the educational content and intent of this blawg; so you must read the original and not take my version of it as true, complete or accurate.

Oakland Playing Fast & Loose With Contracts, Bidders Say
Competitive bidding is meant to secure the lowest price for a project by creating competition and ensuring contracts don't go to pre-selected firms. So when an agency wants to sole-source a contract, it must justify the move internally and get it approved. If that doesn't happen, officials can use sole-sourcing to steer contracts to favored firms and exclude cheaper bidders — raising project costs that taxpayers ultimately pay.

"They're trying to convert the process from a shield-bidding process to a negotiation process and at the federal level, it's not appropriate," said Steve Sorret, an attorney with Kutak Rock in Washington and a former curriculum director for The George Washington University Law School's government contracts program. "What they're doing here certainly goes against the grain of a typical public contracting process."

In a city known for awarding fraudulent contracts, routinely sole-sourcing its projects signals entrenched problems in the way Oakland does business, and in how that affects residents. The City Council currently faces findings by the Alameda County Grand Jury that it improperly awarded a $1.5 billion trash collection contract to an unqualified recycler. The 2014 deal sent garbage collection fees skyrocketing, prompting a group of Oakland landlords to sue the city earlier this year.

And in a 2013 report, the city auditor blasted councilmembers Desley Brooks and Larry Reid for breaking the law by steering part of a $2 million contract for demolition work at the former Oakland Army Base to a friend's company after the city had already begun negotiating with another contractor. Those initial negotiations, too, were illegitimate since municipal law requires the contract to go up for competitive bids first. Brooks also negotiated three separate contracts for a teen center in East Oakland, something only the city administrator can do.

Emboldened by high-ranking officials willing to look the other way when councilmembers break the law, the Oakland City Council routinely waives its legally mandated competitive bid requirement for awarding construction contracts worth more than $50,000 and negotiates the contracts directly with firms of its choice, according to a report by the city auditor.

The council simply relies on a statute allowing it to reject bids it deems invalid — or "nonresponsive." And at a City Council meeting on Tuesday, it blessed another competitive bid waiver, this time for the $400,000 renovation of the Dimond Branch library in East Oakland. Instead, the city will approach construction firms and negotiate with them one-on-one in a process known as sole-source contracting.

But falling short of small business goals and bidding over the project price don't render a bid nonresponsive. If a bidder fulfills all of the requirements for submitting the bid, they are by definition responsive and both Greentech and Wickman satisfied those requirements.

Jonathan Wickman says the city violated its own laws in deeming his firm's proposal nonresponsive so it could justify moving to direct negotiations. "That doesn't seem legal to me," Wickman said. "They should rebid it or find more money and rebid with more money in the budget. It's not like they're left with no avenue."

Thursday, September 1, 2016

For-proift out of state company beats non-profit in state organizations to fountain of youth services funding

Youth services providers protest bidding process
Two Arkansas companies that operate seven Youth Services Division facilities submitted protests Friday to the state’s intention to award a contract to run the facilities to an out-of-state company that has said it will charge the state more than the current operators charge. Bidders have 14 days to submit a protest after learning of an alleged flaw in the process.

Every seven years, the state is required to seek proposals from organizations interested in operating the juvenile treatment and juvenile offender facilities. Department of Human Services spokeswoman Amy Webb said it has been eight years since bids were taken because of a previous one-year extension. Youth Opportunity Investments of Carmel, Ind., proposed charging the state $232 per bed per day, up from the $147 the state pays now per day for each of the 249 beds in the facilities.

Sen. Terry Rice, R-Waldron, whose district includes the Mansfield facilities, said Friday he has “a great deal of concern” about the plan to switch to an out-of-state provider at greater cost to the state. The current operators “have not received a dime’s increase in three years,” he said.

Sen. Stephanie Flowers, D-Pine Bluff, chairman of the Senate Children and Youth Committee, also said she has questions. “A lot of the intake providers have been asking for more money for years and we haven’t given it to them. It seems quite odd to have an out-of-state contract and offer them more money,” she said.
2 protest youth services contract; ‘robbed’ of fair shot, current operator’s letter to state says
Two nonprofits running seven Arkansas juvenile treatment and detention centers say state officials failed to document why a for-profit, out-of-state company will replace them, even though the new company's bid was more expensive.

Both Consolidated Youth Services Inc. and South Arkansas Youth Services, which have operated the centers for more than a decade, are challenging the decision. The operators are mostly concerned with how their proposals and Youth Opportunity's were reviewed and the quality of the new company's youth services program.

"They robbed the entire bidding process of equity," state Sen. Jeremy Hutchinson* wrote in a protest letter on behalf of South Arkansas Youth Services. The director of the Department of Human Services is currently drafting a "formal written response" to both organizations, Amy Webb, a department spokesman, said Monday.

In its protest letter, Consolidated Youth Services stated it held "no assurances" that the selection process was consistent. The state agencies did not provide individual score sheets used by evaluators to show how they weighed the proposals in each technical category and only a cumulative score was available, according to both nonprofits' letters. Evaluators appeared to have little experience in the youth services field, and there was no proof they attended training beforehand, the letters said.

Consolidated Youth Services' letter, written by attorney Debby Thetford Nye, called for a new evaluation -- one "untainted by significant procedural deficiencies and bias."

Both nonprofits said that Youth Services Division officials held post-bid discussions with Youth Opportunities Investments, even though post-bid conversations can disqualify vendors competing for a contract. The new company was also permitted to change its proposal and circumvent the criteria laid out in the state's request for services, the current contractors said.

Leaders of the Arkansas-based organizations say their programs cost less, strengthen communities and do not slash services. "We are a community program," said Jerry Walsh, chief executive officer of Magnolia-based South Arkansas Youth Services. His organization runs the Dermott Juvenile Correctional Facility and juvenile treatment centers in Dermott and Mansfield. "We know how to approach the community and how to work with them and to get them to support the program."

Youth Opportunities Investments plans to hire subcontractors from Louisiana and Nashville, Tenn., to carry out services, according to its proposal. The Youth Opportunities plan appears to dedicate fewer staff members to special education, GED and technical-vocational coursework and relies more on online learning, Walsh said.

"There is nothing in their proposal to suggest they would enhance the program," said Bonnie Boon, executive director of Jonesboro-based Consolidated Youth Services. Boon also said that she found the state's ability to find the extra dollars for the increase under the new company "curious."

Youth-services advocates have asked for additional funds for years, which Boon and Walsh said has been frustrating.

"It says a lot about their financial management and not funding youth services. Now all of a sudden you're throwing tons of money in this? Unbelievable," Walsh said.

An irresponsible determination of nonresponsibility?

Baltimore painting company sues Delaware River Port Authority over Commodore Barry Bridge bid contract
A Baltimore company has initiated legal action in a New Jersey federal court, claiming they were passed over by the Delaware River Port Authority of Pennsylvania and New Jersey (DRPA) as the lowest bidder for a $17 million contract to paint the Commodore Barry Bridge. According to a lawsuit filed by The Alpha Painting & Construction Company, Inc., DRPA “wrongfully deemed the lowest bidder ‘not responsible’ and is in the process of awarding the [bridge painting] contract to a higher bidder.”

On May 5, the DRPA first put out invitations for bids to paint the Pennsylvania Approach Spans of the Commodore Barry Bridge, which allows for travel over the Delaware River from Bridgeport, N.J. to Chester, Penn. Alpha submitted a bid for this project on June 16 in the amount of $17,886,000, which conformed to the project’s bid specifications and rendered it the lowest bidder for the project, according to the lawsuit. DRPA decided to award the bid contract to Corcon, Inc. – whose original bid clocked in at a price roughly $10.2 million more than Alpha’s.

Amy L. Ash, Acting Manager of Contract Administration for DRPA, declared that DRPA had conducted an ‘investigation’ of Alpha’s bid and found that Alpha had ‘not submitted an OSHA Form 300 or otherwise detailed workplace incidents over the past three years and the applicable Experience Modification Factors,” according to Alpha’s lawsuit.

Alpha claimed DRPA “willfully ignored the merits of the low bidder’s protest, and refused to hold a hearing on the disputed factual issues regarding this procurement, despite multiple requests to conduct such a hearing.” Alpha alleged DRPA declared Alpha ‘not responsible’ for failure to supply the documents, and rejected Alpha’s bid. The Aug. 4 Denial Letter noted that through the course of DRPA’s ‘investigation,’ it had allegedly ‘contacted Alpha’s insurance broker, Beverly Annunziatta of HMS Insurance Associates, Inc., on July 8, 2016’ and ‘offered Ms. Annunziatta an opportunity to supplement the accident experience information attached to Alpha’s bid submission, but she did not do so,” per the lawsuit.

Alpha disagreed with this contention, saying it had provided said information and pointed out DRPA never revealed what constituted its “investigation” of the bid, nor contacted it regarding any such investigation in the first place. When Alpha protested this result, the company says DRPA “denied it a hearing to resolve the outstanding factual discrepancies. DRPA contended, “DRPA was not required to make its responsibility determination within 10 business days, nor is DRPA required to hold a hearing in the event of a protest of that determination. Accordingly, Alpha’s request for a hearing is denied.”
Now, I have taken these bits and pieces from the article, paraphrased and probably distorted them to create a hypothetical case for consideration of how one might view this situation from the standpoint of Guam's procurement law, which is heavily filtered through the provisions of the ABA Model Procurement Code.

In this context: Would Alpha have the right to protest the rejection of the bid on the ground that the bidder was determined to be non-responsible? Clearly, yes.

The ABA Model Code allows any bidder who may be aggrieved to file a protest, and that protest, if not resolved mutually before adversarial processes begin, would be entitled to a hearing administratively, followed by judicial review as a matter of right. (See for starters ABA MPC §9-101, Guam 5 GCA § 5425)

But was Alpha properly determined to be non-responsible? That is a question of judgment, ultimately, and the person making that judgment is generally give a lot of latitude in making the judgment call. That said, the process of coming to that judgment must be fair and equitable under basic principles of procurement. (See ABA MPC § 1-101 and Guam 5 GCA § 5001, as well as 5 GCA § 5003: "This Chapter requires all parties involved in the negotiation, performance, or administration of territorial contracts to act in good faith.")

Under the ABA MPC and Guam's version of it, a determination of responsibility contemplates that the contract officer will conduct an inquiry. "The unreasonable failure of a bidder or offeror to promptly supply information in connection with an inquiry with respect to responsibility may be grounds for a determination of nonresponsibility...." Also the implementing regulations of both codes describe one of the many standards of responsibility as whether the prospective bidder has "supplied all necessary information in connection with the inquiry concerning responsibility".

Recognizing that the article above likely is not a true and completely accurate statement of facts in this case, but sticking to the hypothetical theme here, the only inquiry conducted was not with the bidder, but rather with a third party, and the question asked of that third party hardly fully answered the question whether Alpha's "satisfactory record of performance" was adequate.  Particularly when it is understood that even if there were some OSHA claims made as confirmed by the insurance broker, there is no indication of the severity, quantity or other circumstances of the claims. Thus, it would appear that the judgment of nonresponsibility was made without any reasonable basis or any effective inquiry.

If you have any interest in the real story and the other issues raised in it, read it at the link above.

Monday, August 29, 2016

Transparency? You can't handle the transparency!

 NOTE: As usual, I have have changed the articles reported below, leaving material out, rearranging, and paraphrasing, to suit the purposes of this blawg. The obvious purpose here is the need to have adequate and effective transparency regimes in order to have and maintain good governance, in procurement as well as other aspects of government. You must read the full articles at the links to get the accurate version of the story.

Americans pay millions to whistleblower at BHP; we hound them out of their jobs
In Australia, those who flag corruption inside companies receive limited or no protection and are often sacked or mistreated, while in the United States, which paid for evidence that exposed alleged bribery by BHP Billiton, whistleblowers are encouraged to come forward. The calls for reform are being made as Fairfax Media can reveal new details of another whistleblower case that suggests serious ethical failings by a top Australian businesswoman and ABC board member, Kirstin Ferguson.

A Fair Work Commission complaint filed by the whistleblower alleges he was "victimised as a result of the disclosures" he made to Dr Ferguson about alleged corruption at mining services giant Thiess. Dr Ferguson is a director at Thiess' parent company, Leighton Holdings (now named CIMIC), and is responsible for company ethics as ethics committee chairwoman. Dr Ferguson declined to comment on detailed questions sent to her by Fairfax Media.

Key MPs Nick Xenophon, Jacqui Lambie and Andrew Wilkie, as well as the Greens and shadow attorney-general Mark Dreyfus have all said they will push in Parliament for stronger whistleblower laws to encourage reporting of corporate corruption.

In May, the US corporate watchdog, the Securities and Exchange Commission, revealed it would pay a bounty "to a company employee whose tip bolstered an ongoing investigation with additional evidence of wrongdoing". Legal sources have confirmed that the whistleblower was a BHP Billiton insider, paid US$3.75 million (about $4.96 million). The former employee provided detailed information to US investigators about the mining firm's activities overseas several years ago. The allegations remain the subject of an active Australian Federal Police bribery investigation.

It is the first time an employee of an Australian company has received a US whistleblower bounty. Under the US Sarbanes-Oxley Act, the SEC can reward whistleblowers by giving them a cut of a fine extracted from a company, with payouts often reaching many millions of dollars.

In May 2015, BHP Billiton agreed to pay $US25 million to the SEC to settle an inquiry into trips to the Beijing Olympics that the company gave to government officials. The officials represented countries where the miner was operating, and where it was sometimes seeking government permits. BHP Billiton said in a statement that, during that inquiry, the SEC had made no findings of bribery or corrupt intent against the company, and that the US Department of Justice had investigated but took no action. The company said it was not aware of the involvement of any whistleblower as part of either investigation. "We respect and fully support protections for all whistleblowers, and the importance of providing confidential avenues for reporting," the statement said.

Senator Lambie, who has taken up the cause of a Defence Department whistleblower, said she wanted "world's best practice" whistleblower laws which would "strengthen our democracy, prevent and uncover official corruption, decrease government waste, save lives, money and prevent damage to our environment".

Shadow attorney-general Mark Dreyfus said private sector employees should enjoy the same whistleblower protection as people in the public sector because their information is "just as valuable to our community, and they should not be treated differently under the law".

"Recently a string of brave private sector whistleblowers have come forward with valuable information, including those who have exposed wrongdoing in our banking sector. They deserve our protection," Mr Dreyfus said.

Mr Day says there was merit in compensating whistleblowers, although he cautioned against aspects of the US scheme. Senator Nick Xenophon has told Fairfax Media that "whistleblowers in the US get rewarded and protected, but here they get punished and ruined". Andrew Wilkie, who was recently elected as an independent MP in Tasmania, said Australia had a cultural problem in which whistleblowers were scorned as untrustworthy dobbers, or unhinged: "In the US whistleblowers are celebrated, but in Australia they're often vilified," he said.

"Greater whistleblower protection is one of the building blocks of a healthy democracy and ... of a healthy corporate culture."

ASIC executive Warren Day believes new whistleblowing laws could provide far greater clarity and protection for employees who wanted to report a range of misconduct, spanning financial crime and environmental or health and safety breaches although he cautioned against aspects of the US scheme. Minister for Financial Services Kelly O'Dwyer said the government was looking at strengthening Australia's corporate whistleblower regime. Minister O'Dwyer said that, as it looked to strengthen legislation, the government would "follow usual process, and will consult publicly".
The 'naively noble' man who could not get his voice heard
The words, coming from the chairwoman of the board's ethics committee, were intended to be reassuring: "I'm really glad to have you in that role. I really am," she said. Dr Kirstin Ferguson was speaking to "David" (not his real name) who for more than two years had been working to stamp out alleged corruption and misconduct within his company. David was suffering stress and anxiety because he feared - with good reason - that his boss was cutting him loose.

David's faith in his company was first shaken in November 2011. As one of Thiess' more senior figures, David came across a document, signed by his boss Bruce Munro more than three years earlier, as part of the company's 2008 tender for a $5.5 billion mining concession in India.

It quickly became clear that the deal might have had at its heart a corrupt arrangement. Documents and key emails suggested that Thiess' business partner in India would be paying $12 million to powerful Indian government officials - an apparently illegal payment under Australian law.

But two weeks after speaking to her, Ferguson's reassurances meant nothing. David was given three months' notice and told to go immediately on "garden leave".

The company was Thiess, part of Leighton group, which has been implicated in among the most serious foreign bribery and corruption cases in recent Australian history. David's boss was then Thiess managing director Bruce Munro, who later left the company under a cloud.

As for the ethics committee chairwoman, Dr Ferguson: she is still there, and still in the top integrity role at the firm, since renamed CIMIC. She has since scored one of the most high-profile jobs in Australia - she was appointed by the Coalition government as a director of the ABC board, where she is a member of its audit and risk committee, the body in charge of overseeing ethical behaviour.

David declined to speak to Fairfax Media, but his full story can now be told for the first time through documents held by Thiess and CIMIC, and leaked by a source close to both firms.

In the United States, someone who came forward with information about corporate malfeasance might be paid millions of dollars. In Australia, speaking out is a shortcut to dismissal, despair and unemployment. And so far in this country, whistleblowers cannot even console themselves that the bad guys will be held to account for the deeds exposed, given the difficulty often facing police or the corporate regulator in investigating, prosecuting and punishing large companies.

Inside Leighton, some were concerned the company might have a deep ethical problem. So a new confidential internal review, Project Mango, was ordered into whether Leighton might be exposed to corruption issues elsewhere. It turned up about 100 payments made by Thiess employees in Indonesia to the country's government, military and policing officials. Not everyone appreciated the revelation.

David's boss was then Thiess managing director Bruce Munro, who later left the company under a cloud. Munro was concerned that risk and compliance activities were cramping the style of those whose job it was to win contracts in difficult markets.

"I want you to ... have a look and tell them [senior management] that there is nothing to see here ... We are tying people up in paperwork. Our processes have gone too far".

In court documents linked to the whistleblower's case, it's alleged that Munro explained to the whistleblower that the sticklers for good process inside the firm would have "never let me sign it [a deal with the Indian partner]". Alarmed at what he had seen, David escalated the emails and Leighton senior management ordered an external investigation. It was codenamed "Project Orange."

When the Project Orange investigation was completed, it suggested Leighton may need to inform the Australian Stock Exchange of a foreign bribery matter. Munro had breached the company's code of ethics and internal policies, the report found. However, there was not yet enough evidence for criminal charges.

n March 2014, as Project Mango was underway, Leighton was taken over by a Spanish group and eventually renamed CIMIC. But if anyone hoped the change of management would lead to a more open culture, those hopes were quickly snuffed. The senior executives who had commissioned Project Mango were sacked and the new bosses wanted it shut down. The story about the payments to Indonesian soldiers was reported, via a leak, in Fairfax Media. But instead of performing a mea culpa, an internal witch hunt for the leakers began.

After that, precisely nothing happened. The market was not informed. Munro kept his job.

In July 2014, Dr Kirstin Ferguson, a former flight lieutenant in the air force, an expert in safety, a lawyer, a PhD in corporate governance and a professional company director, became the head of CIMIC's ethics committee.

Two weeks after her appointment, David rang her. He wanted to meet for coffee. He asked if she knew about what had happened in India, if she was aware of Project Orange. "If I were in your position, I would want to know this," he said of the "biggest ethical issue the company has and would be the biggest ever in Australia."

"I do. I really do," she replied, adding reassuringly: "I'm really glad that we have you in that role."

But a fortnight later, David received a call from the "manager of people" at CIMIC. He was told he "hasn't made it in the restructure". He'd lost his job, and was sent immediately on three months gardening leave.

Two days later, Dr Ferguson sent David a text. To a person humiliated, isolated and sacked for trying to report wrongdoing in front of him, the message rubbed salt into his wounds.

"Hi - just wanted to let you know I have been following up on your call and will be sure to call you when done," Dr Ferguson wrote. It might take another couple of weeks, she said.

David's lawyers later argued his conversation with Ferguson should have been a "protected disclosure" under Australia's flawed whistleblower regime.