When Contractor Integrity Solutions (“CIS”) was formed in 2009 to provide monitor services as well as independent ethics program reviews, it adopted a professional business model with three important objectives: 1) wherever possible provide services on a fixed fee basis determined by the scope of the assignment; 2) provide those services with the direct and personal involvement of the CIS principals in each monitor assignment; and 3) while maintaining the required independence, perform the monitor oversight with a clear commitment to the type of transparency that allows the monitored company to know and understand the basis and rationale for any observations and recommendations. For ten years that model has served CIS well and has enabled numerous companies to exit the monitor experience not only in compliance with government requirements but also with improved ethics and compliance programs based on informed CIS observations and best practice recommendations.
CIS now enters a second decade of providing monitor services, as well as ethics and compliance assessments. Original CIS co-founder Mike Eberhardt has now teamed with Steve Shaw as a new principal since Dick Bednar’s retirement to build upon the original CIS fixed fee model, and apply that model in those circumstances that warrant its use. CIS and Steve have a combined 35 monitor assignments over the past ten years. And Steve managed over 100 monitorships on behalf of the Government during his 16-year term as the Air Force Debarring Official, and Air Force Deputy General Counsel.
The obvious benefit to any fixed fee arrangement, where it can be implemented, is that it provides cost predictability. But there is also an important qualitative element that complements this CIS fixed fee approach. CIS services are designed to ensure efficiency. Simply stated, the CIS principals are ‘hands-on” in their monitor assignments. When a company engages CIS as a monitor, it obtains the full personal services of one of the two CIS principals—not a group of staffers who are only generally supervised by Steve or Mike. The CIS principals have a long and wide range of accomplishments that allows them to readily and efficiently gauge what is required in each unique monitor assignment. For example, both CIS principals are former federal prosecutors, one has served in prominent positions in the Inspector General community and one served in two senior positions with the US Department of Justice, and as the Debarring Official for the Department of the Air Force. One has served as the General Counsel of a large Defense contractor overseeing an ethics and compliance program. And both have been members of prominent national government contracts law firms representing companies in a variety of civil and criminal fraud matters where there was a suspension and debarment component to the representation. In sum, because the CIS principals understand both the government expectations of monitors as well as Company needs, a distinct element of efficiency is enabled by their personal involvement in each monitor assignment.
This balanced experience, particularly coupled with the fixed fee approach, has been a meaningful discriminator for a number of companies considering monitor qualifications. Just as important has been the CIS achievements in providing transparency and collaboration. One CEO, whose company had engaged another monitor before CIS took responsibility, remarked that he was not appreciative of the “police state” mentality of the earlier monitor; rather, he benefitted from CIS as an independent monitor that was committed to constructive and open discussions concerning meaningful and realistic program improvements and internal controls. This was the same company where CIS found that the business was mired in too many internal controls — with no prioritization of those controls thereby resulting in inefficiencies and poor allocation of resources. We worked with this company, as well as others, on a collaborative basis to streamline controls so that the focus of controls matched the risk environment.
The CIS philosophy also adopts a long view; as Steve Shaw has noted over his long career in both overseeing monitors while serving as the Debarring Official for the Air Force and now as an active monitor, the objective is to look at the “end state”of ethics and compliance programs so that when the monitor period is over there is a clean transition to continued oversight, primarily by the company Compliance Officer and the General Counsel in the Legal Department. This “end state” objective requires, from the very outset of the monitor assignment, the close and ongoing collaboration with these individuals as well as management, and a focus on building a culture of compliance. Interactions by CIS with Internal Audit Departments and Boards of Directors are also typical in the constructive effort to build and improve programs. We think it is fair to state that in our prior monitor assignments, we have seen meaningful maturity on the part of the Compliance Officers with whom we have worked and a willingness to consider CIS “best practices” as part of the journey to the “end state.”
Back on the subject of the fixed fee approach, we are often asked how we develop the fee. With sufficient information, this is not generally too difficult and it is analogous to the same experience of many of the companies that we have monitored who themselves bid important government projects on a fixed fee basis. If we believe that the scope of work is well defined, it is easier to develop a fixed fee proposal. The maturity of the monitored company’s ethics and compliance programs, and the sufficiency of existing internal controls, are also factors that are relevant to a determination as to whether a fixed fee can be utilized. Other factors that bear on whether a fixed fee can be adopted relate to the frequency and nature of reporting under an Administrative Agreement and the frequency of required site visits by the monitor.
While Mike Eberhardt and Steve Shaw adopt the “hands-on” personal approach, the CIS bench for monitor assignments is certainly deeper and other resources are available as needed. For example, CIS has utilized accounting and procurement specialists where the nature of the monitor assignment required such. In another monitor assignment, we utilized a tax specialist where the monitored activity involved tax related controls. In another, a quality expert was utilized because the nature of the monitor assignment required such a capability.
CIS also offers its experience in assessing existing ethics and compliance programs in order to provide a fresh independent examination to determine compliance with the Sentencing Guidelines, FAR requirements and best practices. A fixed fee approach can also be implemented for such assessments where the scope is clearly defined.
In one recent case, a new General Counsel asked that we review the company’s ethics and compliance program even though CIS had been tasked five years earlier to perform the same kind of assessment. He was interested in our opinion as to whether earlier CIS recommendations had been fully adopted, and requested an updated review that could be reported to the Audit Committee of the Board. This was done on a fixed fee basis.
Two other companies for which CIS had served as the Government mandated monitor have recently voluntarily asked CIS to conduct follow-up reviews and to provide reports to their Boards on a continuing basis, following the termination of the monitorship.
Another company has retained CIS under a fixed fee to conduct a review in response to an inquiry from a debarment official who, in the aftermath of a civil False Claims Act settlement, required information as to the effectiveness of the company’s ethics and compliance programs.
Whether it be a monitor assignment or an ethics and compliance review, a number of companies over the past decade have benefitted from the extensive experiences of CIS in providing services on a fixed fee basis.