Mandatory Disclosure: A Case Study in How Anti-Corruption Measures Can Affect Competition in Defense Markets

“Ethical Dilemmas in the Global Defense Industry Conference,” Center for Ethics and the Rule of Law, University of Pennsylvania Law School, April 2015, Forthcoming

GWU Legal Studies Research Paper No. 2015-14

GWU Law School Public Law Research Paper No. 2015-14

18 Pages Posted: 3 May 2015 Last revised: 1 Jul 2017

See all articles by Christopher R. Yukins

Christopher R. Yukins

George Washington University - Law School

Date Written: April 16, 2015

Abstract

In the U.S. defense procurement market, regulators require contractors to make “mandatory disclosures” if principals at those firms determine, after due review, that there is credible evidence that the firms engaged in certain crimes (fraud, bribery or gratuities), civil fraud, or significant overpayment by the government. Failure to make such a mandatory disclosure, required by clause and by regulation, can lead to (among other things) the debarment of the contractor -- a potentially devastating result. Mandatory disclosure is a natural extension of a separate requirement, that contractors maintain effective corporate compliance and ethics systems, and the Defense Department’s largest prime contractors, with sophisticated compliance systems in place, have been able to accommodate the mandatory disclosure requirement. This paper asks whether this disclosure requirement in effect favors those largest contractors, and decreases competition in a already highly concentrated defense market, either by creating substantial legal risks for firms too small or inexperienced to institute effective compliance and disclosure systems, or by discouraging competition from other companies in the commercial sector. The paper concludes that the mandatory disclosure rule can impair competition in defense procurement, and recommends that regulators carefully shape any disclosure requirements, and perhaps reconsider relying on voluntary disclosure, mindful of the need to reduce costs and enhance competition in defense procurement markets.

JEL Classification: D43, H57, K23, L43

Suggested Citation

Yukins, Christopher R., Mandatory Disclosure: A Case Study in How Anti-Corruption Measures Can Affect Competition in Defense Markets (April 16, 2015). “Ethical Dilemmas in the Global Defense Industry Conference,” Center for Ethics and the Rule of Law, University of Pennsylvania Law School, April 2015, Forthcoming, GWU Legal Studies Research Paper No. 2015-14, GWU Law School Public Law Research Paper No. 2015-14, Available at SSRN: https://ssrn.com/abstract=2600676 or http://dx.doi.org/10.2139/ssrn.2600676

Christopher R. Yukins (Contact Author)

George Washington University - Law School ( email )

2000 H Street, N.W.
Washington, DC 20052
United States
202-994-9992 (Phone)

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