This Type of Whistle-Blower Protection Just Isn’t Needed

By Marilyn Della-Badia

Jill Aitoro of the Washington Business Journal reported on Jan. 25, 2013, that there’s some concern in the government procurement community that a new law to protect defense contractor employees who blow the whistle on their own companies for procurement fraud doesn’t go far enough. The concern is that contractors don’t receive whistle-blower protection when their employees report possible fraud by government employees. In these cases, it’s said that the government would be free to retaliate with impunity against the contractor.

The new protection for contractor employees is part of the 2013 National Defense Contractor Act, which President Barack Obama signed into law on Jan. 2, 2013.

Although I can understand why there is an interest in affording maximum protection to whistle-blowers, I don’t believe that the federal government should extend whistle-blower protection to defense contractors who “blow the whistle” on the government. As someone who worked on procurement fraud cases for the government for many years, I am not pretending that no government employees are involved in fraudulent schemes. Nor am I suggesting that no government employees are willing to engage in retaliation. But if what the contractor really fears is retaliation by the government in the form of “blackballing,” such conduct is already illegal and prohibited as a constructive or de facto debarment.

A de facto debarment occurs when an agency precludes a contractor from competing for government contracts for a certain period of time without following the applicable FAR debarment procedures. The agency can create this preclusion either by statements or conduct. TLT Construction Corp. v. United States, 50 Fed. Cl. 212 (2001). A party claiming de facto debarment must show a systematic effort by the procuring activity to reject all the firm’s offers, both present and future. CRC Marine Services, Inc. v. United States, 41 Fed. Cl. 67 (1998). If a de facto debarment is proved, an aggrieved contractor may seek a preliminary injunction to stop this illegal conduct.

The new law affords whistle-blower protection to a contractor employee who reports wrongdoing at his or her company, and fears retaliation in the form of job loss. Similar protection also applies to a government employee who reports wrongdoing in his or her agency and fears retaliation by his or her superior. If the goal is to protect the individual whistle-blower, why would the government extend “whistle-blower” protection by forbidding retaliation against a corporation?

Think of it this way: the distance between an employee’s report of wrongdoing and his trip to the unemployment line is a relatively short one. Assuming that there are no other reasons for his or her termination, one can presume that it is a result of the reporting. The same cannot be said about the distance between a contractor employee’s report of a government employee’s misconduct and presumptive retaliation against the corporation. There could be a whole host of reasons for the government’s actions against the corporation. It is not fair to suggest that the whistle-blower’s laudable conduct should be rewarded by offering protections not to him or her, but to his or her employer. If what the author is really suggesting is that there should be stronger laws that deter the government from engaging in de facto debarments, then I am all for it. I simply think that the extension of whistle-blower protections is a misplaced concept.

Marilyn Della-Badia is of counsel at the O’Riordan Bethel Law Firm. She has a comprehensive background in government contracts, litigation, acquisition fraud, and government contracts compliance, including 15 years with the Department of the Navy, Office of General Counsel, eight years of which were in offices that investigated or litigated allegations of fraud in government contracts and promoted integrity.

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