DynCorp International And Bribery

United States defense contractors operate under a variety of laws, rules and regulations. Some of these are unique to the U.S. Government and some are common to other countries. One area where the United States has been cracking down on in the last decade is the use of bribes and bribery to gain work or operate. Obviously this is illegal when dealing with U.S. officials and employees but the United States extends this to their corporations when gaining foriegn contracts as well as non-U.S. companies operating in the United States.

In the last year the United States has levied fines on U.S. companies KBR (KBR) and Halliburton (HAL) for using bribes with contracts in Nigeria. They have also settled a case with the European conglomerate Siemens (SI) for paying bribes to foriegn customers. The English defense contractor BAE Systems (BA.L) is under investigation in its home country and the U.S. for bribes related to a Saudi aircraft buy.

The problem is not unique to just the United States and Europe. In India several major recent weapon deals had to be canceled and started over as the Indian procurement officials or military leaders received bribes. This has caused delays to some important programs such as a new helicopter for use by the Indian Army and Navy. Bribes not only hurt the taxpayers as they necessarily do not get the best product for the money but also call into question the whole procurement process where fairness has to be one of the key tenets when evaluating competing bids. Without this the chances for competition are limited again reducing the chance of the customer getting the best deal for his money.

DynCorp International (DCP) reported on itself yesterday to the U.S. Government that one of its sub-contractors may have been paid money and used it illegally. The company said the payments were related to securing visas and other work documents so that it might send workers overseas. DynCorp has several major contracts related to facility construction and support in Iraq and Afghanistan. The ability to quickly get permission for their workers to arrive in and function in these and other foriegn countries aids the company in its ability to meet contract goals and support the U.S. military.

The company’s self reporting may aid it in reducing the punishment it might receive from the Government. The worst possible case would be loss of the ability to bid on new work for a period of time but in many cases a fine is usually levied. Since it was a sub-contractor this may also limit it as well. DynCorp will have to wait and see what ultimately is handed down by the Departments of Justice and Defense.

The history of arms acquisition especially selling overseas is replete with tales of bribes to rulers and government officials at all levels. It is a good thing that the U.S. and other countries have been working hard over the last few decades to eliminate it as part of doing business. It protects the companies involved, the officials and the people of the countries doing the purchasing.