Lynne M. Halbrooks is a partner in Holland & Knight's Washington D.C. office
- In September 2017, the Office of the Inspector General for the U.S. Department of Defense (DoD) began offering voluntary alternative dispute resolution (ADR) in complaints filed by contractors, subcontractors, grantees, subgrantees and personal service contractors.
- DoD IG contractor reprisal investigations took on average 285 days in fiscal year 2015; the ADR program is designed to improve timeliness.
- Despite historically low substantiation rates in contractor reprisal investigations, participation in the ADR program should be given serious consideration by DoD contractors interested in speedy resolution of a reprisal complaint.
Background of Defense Contractor Reprisal Investigations
The DoD Office of Inspector General (DoD IG) is responsible for investigating all complaints of reprisal made by DoD contractors, subcontractors, grantees, subgrantees and personal service contractors under 10 U.S.C. § 2409. These investigations are conducted by its Whistleblower Reprisal Investigations Directorate (WRI) which also investigates reprisal complaints made by members of the Armed Forces, appropriated fund (civilian) employees of DoD (including members of the intelligence community), DoD employees with access to classified information and employees who are paid by nonappropriated funds, such as military clubs, bowling centers and golf courses.
The most recent SemiAnnual Report to the Congress published by DoD IG covering April 1, 2017 – Sept. 30, 2017, indicates that the DoD received 881 reprisal complaints during that time period. Seventy-four of those are classified as "Defense Contractor Reprisal" complaints that are filed by DoD contractors, subcontractors, grantees, subgrantees and personal service contractors that the DoD IG is obligated to investigate under 10 USC section 2049. Investigations are only conducted by WRI on a subset of these complaints when the alleged facts, if proven, would create an inference of reprisal.
The Alternative Dispute Resolution Program
Contractor reprisal complaints have increased the workload for the DoD IG, and investigations of those complaints can take quite a long time. While the statutory timeliness goal in 10 USC 2049 is 180 days, a 2017 GAO Report revealed that in 2015 DoD IG took on average 285 days to conduct an investigation. GAO Report, "Whistleblower Protection, Opportunities Exist for DoD to Improve the Timeliness and Quality of Civilian and Contractor Reprisal Investigations," GAO-17-506 ("2017 GAO Report"). In one case the investigation took 428 days, according to GAO. Additionally, if the DoD IG substantiates the complaint, the findings are referred to the Secretary of Defense for appropriate action against the contractor and to order the contractor to provide the complainant statutorily-entitled damages.
The DoD IG has taken many steps to address timeliness concerns, including increasing the WRI staff from 28 in fiscal year 2010 to 56 in authorized positions in 2017. In September 2017, the Acting Inspector General outlined a new alternative dispute resolution (ADR) program for reprisal cases. He stated in response to the 2017 GAO Report, "We expect that this new initiative will help reduce the cost and time for resolving civilian and contractor whistleblower cases and it will allow our limited investigative resources to be allocated to completing investigations in a timely manner."
In February 2018, the Acting Inspector General provided some information about the use of the ADR program in his statement for a hearing on "Senior Leader Misconduct: Prevention and Accountability" before the Subcommittee on Military Personnel of the House Armed Services Committee. He described the program that began in September 2017 as one in which parties use mediation or facilitated settlement negotiations to seek resolution of a complaint prior to an otherwise lengthy investigative process. Of the 81 cases that the ADR team considered, it was reported that 11 were resolved – a 14 percent settlement rate.
Considerations for Participating in the ADR Program
Under the new ADR program, contractors are contacted by attorneys assigned to WRI and asked to participate in ADR when a reprisal complaint has been filed against them. While initially this may not seem necessary given the low substantiation rate and the fact that most contractors have not engaged in reprisal, it is still worth considering. Some of the practical considerations to analyze are:
- Does the complaint involve a minor issue? At times complaints are filed as a result of a misunderstanding or minor grievance by a current or former employee. ADR gives the company a chance to address an employee's concerns informally and quickly.
- Is the complainant a current employee? If so, there could be an increased potential for negative impact on overall employee morale during the investigation. A company will want to resolve complaints by valued employees and ADR gives them a chance to do this. Any reprisal compliant by a current employee can be made worse if additional acts of reprisal are alleged to occur during the investigation. A confidential resolution early may better than a strained employment relationship during the pendency of an investigation that will likely involve others in the company or employees of the customer.
- What is the financial cost of an investigation to the company? While most reprisal complaints will not be deemed worth investigating by DoD IG, when the complaint, if proven, would raise an inference of reprisal, it is likely to be the subject of a full-blown WRI investigation. The fact that a contractor is contacted about ADR is an indication that the complaint meets this initial threshold and will be investigated if it's not resolved through ADR. A formal investigation can be time consuming and expensive. The contractor will need to respond to requests for documents, collect records, make management available for interviews, etc. Consider the cost not just of lawyers, but the cost of the time of others in the company. Especially if the key officials are part of senior management, an early settlement through ADR may make sense
- Will the existence of a long investigation negatively affect the company in other ways? If the company is preparing for a sale or merger, the WRI investigation could present a roadblock or at the least an avoidable distraction. Will it have to be disclosed in other corporate filings? As an investigation proceeds there is always potential for the complainant to involve congress or the press and generate negatively publicity for the company. If there is an upcoming contract solicitation or re-compete, could the pending investigation affect that? What if the information becomes public as a result of the DoD IG's proactive public release policy? The ADR process moves quickly and can avoid these risks.
- How will public knowledge of the matter affect the company? Effective June 1, 2016, the DoD IG's proactive release policy makes it highly likely a substantiated WRI investigation will result in a published report identifying the company. Even though DoD IG will not be a party to an ADR settlement, the possibility of its release of identifying information under that scenarios is substantially less.
- Is there merit to the underlying disclosure? If the complainant alleges reprisal for the disclosure of fraud, waste, abuse or serious misconduct, the company could be open to additional investigative exposure regardless of the status of the reprisal investigation. The resolution of the reprisal complaint will not affect the DoD IG's ability to pursue investigation of the underlying facts of the complainant's disclosure. Consideration should be given to whether the company benefits from early resolution of the reprisal claim under these circumstances.
Parties will be asked to sign an agreement to participate in ADR and establishing the parameters of the program, i.e, that the process is confidential and not legally binding. At this time, companies should ask the ADR attorney from WRI who initiates the process any questions they have. For example, it is important to try to find out how much information the company needs to provide about the facts relating to the allegation. If it is possible a settlement can be reached without a time-consuming exchange of documents and multiple rounds of discussions debating the merit (or lack of merit) of the complaint, that could save the company additional time and money.
A final consideration for participating in ADR is to ensure that the settlement that is negotiated includes all of the critical terms the company needs to completely resolve other potential, related employment claims under other federal statutes and state law. It is recommended that an employment lawyer with an expertise in government contracting review the settlement agreement.
As the DoD IG ADR program is still in its infancy, it is likely that its governing policies and procedures are still being fine-tuned and that additional information about the program will continue to become available.
While the substantiation rate in investigations against defense contractors is historically low, the cost and risk of an investigation may justify participating in DoD IG's new ADR program. This new program designed to free up investigative resources gives contractors an opportunity to quickly resolve these claims and avoid the financial, emotional and potential reputational toll of a lengthy government investigation.
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