Dr. J.P. London NCMA Keynote Speech, 11/21/08
Does every company understand the need for a strong corporate ethical culture? How important were these values to Lehman Brothers, Countrywide or other failed companies?
These concerns are at the core of keynote address given by CACI Chairman Dr. Jack London at the National Contract Management Association Meeting on November 21, 2008.
In his remarks, Dr. London explains that as all companies must be responsive to change in order to stay in business, the one thing they must never alter is their ethical values. Citing examples from CACI's 47-year history, including the company's response to being embroiled in the Abu Ghraib crisis, Dr. London establishes how solid values form the necessary foundation for weathering change and "doing the right thing." The company's Abu Ghraib experience, in particular, demonstrated how CACI successfully withstood a firestorm of misguided attacks from the media that could have destroyed its reputation and business, rigorously following the ethical standards that are deeply embedded in the CACI culture and emerging stronger than ever.
The text of Dr. London's speech is below accompanied by the presentation slides.
Thank you. I want to begin by saying that all comments here are mine and mine alone and not necessarily of CACI.
Many years ago, a famous American science fiction author once noted: "The universe never did make sense; I suspect it was built on government contract." I'm sure to most people outside of our industry government contracting is as easy to understand or navigate as the U.S. tax code… or Washington traffic.
And I can understand their confusion. I have seen many changes in government contracting in my nearly four decades with CACI. There was CICA – the Competition in Contracting Act – in the 1980s, the Federal Acquisition Streamlining Act (FASA) and the Federal Acquisition Reform Act (FARA) in the 1990s and the various strategic sourcing and competitive sourcing initiatives of the last eight years.
Today, we are seeing a number of initiatives and legislation aimed at improving the contracting process through an increased emphasis on accountability and transparency. And the new administration will likely bring other changes and new challenges for contractors and acquisitions workforce alike.
Despite all of these changes, selling goods and services to the government is as old as the country itself. In my family history I found that one of my patriot ancestors was a government supplier in Halifax Country, VA to the Continental Line (Army) during the American Revolution of at least "300 pounds of beef and four forages." I guess you might say I stayed in the family business!
In this business both CACI and I have also changed with the times. When CACI was founded in 1962 we were a small outfit in the nascent computer industry. We provided training and support for public domain software languages. Our original software product, SIMSCRIPT, a special purpose simulation language (modernized), is still in the marketplace. It is probably the longest lived proprietary software product in the world.
Then in 1963 CACI was awarded its first contract to research and simulate Navy inventory control operations for the grand sum of $17,330. Other contracts followed with the Commerce Department with the development of new CACI offerings.
In the 1970s CACI hit its stride. In 1972 CACI moved its headquarters from California to Washington, DC and I joined the company as a project manager. By the end of the decade CACI had grown to become a multi-million dollar company with offices in the U.S. and Europe.
Our technical expertise grew in the 1980s, but the changes in the federal contracts landscape required us to change how we did business. In 1984, just as I had assumed the role of CEO, Congress passed the Competition in Contracting Act (CICA). The act required government agencies to compete most contracts. At that time the majority of CACI's business came from single source (sole source) contracts. As a result of CICA, CACI's selling methods became obsolete. So we established a new business development group to change how we marketed our offerings. By 1986 competitive contract awards grew to the lion's share of our revenue. Today virtually all of our contracts are competitive awards.
By the way, from where I sat… as a small business in the '70s and early '80s… I saw "competition"… intense and cutthroat… with fewer and less defined "rules of engagement."
In the '90s CACI grew even faster. We recognized the shift from individual software applications to networks and enterprise-wide projects – the "network world" – and CACI became a major IT "solutions" provider. But we also faced new external realities: the end of the Cold War… the start of a recession… the budget cutbacks of that time. We also saw a different federal government emerging, which created more opportunities, yet serious competition for CACI.
Over the years we have watched the trends and the changes. And we have identified the most promising technologies and markets. We have acquired 42 companies in 16 years to augment our capabilities. Today CACI is a $2.5B professional services and IT solutions company. We field a force of approximately 12,400 employees across more than 120 offices around the world. Our clients are mostly in DoD, the Intelligence Community, DOJ, the Department of State and Homeland Security.So, in business – and our industry in particular – you have to be able to respond to change. However… and this is basic: whatever the nature of the changes – economic, political, social or technological – whether they are expected or unexpected… the one thing that you should never change is your values. Because solid values are the foundation upon which a company can successfully adjust to change.
Let's talk about culture, values and ethics!
Over the past 47 years CACI has grown based on a strong corporate culture and a steadfast commitment to "doing the right thing." CACI's culture is who we are as a company, what our core values are and what we believe is the most honorable way to do business. It provides a shared sense of business ethics that enhances value, reduces risk, promotes respect and makes it easier for our people at the front to do their jobs.
That includes CACI's respected contract professionals, some of whom are in attendance today. They, like all CACI employees, are committed to working with integrity and excellence. They also know the importance of following the rules, and knowing when the rules change, even when the rules are changing frequently.
Part of CACI's culture is a long standing ethics and compliance program. CACI was one of the first IT contractors to establish standards of ethics and business conduct. CACI's ethics and compliance program was firmly in place some ten years before the FAR required contractors to do so earlier this year. And our ethics and values program has been publicly documented since the mid-1980s when I became CEO.
In fact, this past summer, the independent Ethisphere Institute ranked CACI "highly" as having one of the "Best Overall Government Contractor Ethics Programs" from more than 1000 contractors reviewed. CACI even ranked first in the categories of "Best Internal Control Systems" and "Best Ethics Training and Communications Programs."
More than any audience I've ever spoken to, I know that as contracting and acquisition professionals, you understand and appreciate the need for a strong corporate ethical culture. And I wonder where companies like WorldCom and Enron would be now if they understood? How important were these values to Lehman Brothers? Countrywide? Or any of the other recently failed companies? Where were their culture, values and ethical frameworks?
So, what is the relevance to our world of contracting? To answer that, I refer to an article in the Summer 2008 issue of the Journal of Contract Management.
And I couldn't agree more! But it is leadership that puts such programs in place and insists on their adherence!
The importance of our culture became evident in 2004 with Abu Ghraib… Every organization will likely face a time when "who they are" and "everything they have accomplished" are tested. Our time was surely Abu Ghraib.
In April 2004 an illegally leaked army report given to Seymour Hersh of the New Yorker magazine, thrust CACI into the international spotlight. How? By casting "suspicion" on one of our employees for being "either directly or indirectly responsible" for the mistreatment of detainees at Abu Ghraib prison. At the same time, pictures from the dismal and overcrowded prison depicting the abuses were shown on national television by CBS and tarnished anyone associated with Abu Ghraib - including CACI. And overnight the whole world knew about it too!
What ensued was a "feeding frenzy" rarely seen by any company in recent decades. A rampaging, out-of-bounds media twisted the unsupported allegations into a guilty verdict without regard for the facts or the truth, creating a damning public perception of CACI at the time. We faced wide ranging government investigations and scrutiny by shareholders. Abu Ghraib also made CACI a target for misplaced anger and politically driven criticism that put our company's dedicated employees and excellent reputation – even our future – at risk.
CACI had two choices. We could either step back and try to quietly manage the crisis, or we could stand up for ourselves and take charge of our fate. CACI has never backed down from a wrongful challenge and we weren't going to do so when so much was at stake.
But we never had so much at stake before. How would we know what to do? Or where to start? It turned out the answer was simple – our culture and our values! We had always relied on our values to guide us to "do the right thing," and this time it provided the "moral compass" we needed to navigate through the crisis. If you look at the record, CACI has had very few contractor performance issues in our 47-year history – a fact our people are quite proud of, I might add.
For example, the first of our Ten Business Values is "Place integrity and honesty above all else." So, we quickly resolved to acknowledge the Abu Ghraib allegations, but we would not comment on anything that wasn't fact. Our responsibility was to protect and sustain the livelihoods of our then 10,000 employees, the investments of our shareholders, and most importantly, the vital work we performed for our valued military and government clients. We also made it very clear that we would not condone or tolerate illegal or inappropriate behavior by any employee engaged on any CACI business. Period! If someone was shown to have broken the law, we would respond accordingly to "do the right thing." In other words, we believe in accountability and we were ready to be held accountable. But we just wanted that accountability to be based on facts and a fair and open process.
Our challenge was two-fold:1) Respond to the allegations, and 2) keep daily operations going with minimal impact from the crisis. In 2004 I was the company's CEO and took the lead on the first front – the "allegations," while our President of U.S. Operations took the lead on the second front – our "ongoing business."
Beyond the illegally leaked army report and abuse photographs there was surprisingly little information and even fewer facts about Abu Ghraib and the allegations about CACI. In fact, one of our biggest challenges and frustrations was the difficulty we had getting the facts and information. The media piled up unverifiable assumptions and speculations which worsened the situation. Their repetition of wrongful speculation and distortion of facts was like a relentless propaganda barrage. I have no hesitation in saying that the media was mostly out of control and seemed to have little interest in the "rule of law."
Less than two weeks after the story broke – even before the matter been thoroughly investigated – one major news network and pundits were already discussing how to prosecute and punish CACI for the Abu Ghraib abuses. The American concept of being "innocent until proven guilty" apparently meant nothing. This type of irresponsible conjecture left a damaging impression on the public who, like the media, lacked even a basic understanding about government contracting. And there were plenty of political opportunists and government critics who wanted to make CACI an example and a scapegoat.
But we could not be so reckless. We had an obligation to inform our clients, employees and our investors about what was happening. So getting the facts – as best as we could – and setting the record straight was paramount. We used the lessons learned from the Tylenol poisoning crisis in 1982 to guide our actions. In this medicine bottle tampering crisis where seven people were killed, one of Johnson & Johnson's corporate guidelines was to "put people first." They cooperated with authorities and kept the public informed. And this is what CACI did too.
We developed an overall hypercrisis management strategy that addressed the various challenges and stakeholders in the crisis.
We first reached out to our employees and clients. Our employees needed to be reassured that we were on the case. Moreover, CACI employees needed to be equipped with the facts so they could brief our clients as needed.
We also assigned key CACI executives to talk individually to some 100 clients with major contracts. We wanted to keep them updated on our crisis response efforts, and to answers questions about any potential impact on their projects.
It was also important to reach out to our Army clients in Iraq so we could get the facts from the people familiar with the Abu Ghraib events. CACI had been contracted to fill an emergency wartime need when the Army found itself without the necessary intelligence and interrogation resources. If CACI employees had done anything wrong, surely the Army would have told us. But our Army client on the ground in Iraq had always praised our work. In fact, one of the first people we went to was our Contracting Officer's Representative in Baghdad, who flat out said that we weren't the problem. An early finding also showed us that none of our people appeared in any of the notorious abuse pictures.
Our strategy also included keeping our investors and industry analysts up to date, pushing back against the errors and misinformation in the media. We launched an aggressive response campaign, and brought in crisis response specialists to augment our efforts in areas where we did the experience. We put out many news releases. We set up a FAQ section on our website. And we sent email clarifications to all the reporters who were getting their facts wrong.
CACI was included in numerous government investigations related to Abu Ghraib: the original Army report by Major General Antonio Taguba, the investigations of Generals Fay/Jones/Kern, former Secretary of Defense Schlesinger, Admiral Church's DoD Inspector General report, the General Services Administration (GSA), the Defense Contracting Audit Agency (DCAA), the DOI Inspector General, the Army Inspector General and the Government Accountability Office (GAO). Nine probing investigations in all.
Our response policy was simple – cooperate, cooperate and cooperate. CACI had absolutely nothing whatsoever to hide and we were as eager to get to the truth as were the government investigators. We also tasked our outside legal counsel with conducting a vigorous internal investigation. And we kept our Board of Directors fully informed.
Our #1 business value of "honesty and integrity" became prominent yet again. Our "Standards of Ethics" policies were also crafted with these principles in mind. In fact, one section of CACI's standards specifically says:
Contracting with the U.S. government imposes requirements not traditionally associated with purely commercial business transactions. We are committed to compliance with the letter and spirit of the laws and regulations governing U.S. government contracting."
So what was the result of all this? None of the government investigations found CACI or any of its employees culpable for the terrible abuses that had occurred at Abu Ghraib. And this was supported over and over again with sworn testimony before Congress. Furthermore, CACI was never even implicated as a contributor during the courts-martial of the Army soldiers who were found guilty of committing the abuses. In fact, four and a half years later, not one current or former CACI employee has ever been charged by the U.S. government with any wrongdoing.
As for the business side, we lost one minor contract in the UK. Our stock price fell some at first, but soon rebounded. We continued with our strategic and technology initiatives and have become twice the size we were in 2004.
CACI's long standing culture provided the moral compass that guided us through this crisis. Our commitment to providing quality service to our clients… with honesty, accountability and reliability – and remembering our clients' trust in us – were always at the core of our decisions.
While we were successful in pushing back against the heinous Abu Ghraib allegations, it was the anecdotal evidence that proved the most rewarding. CACI employees would tell senior leadership how members of the military and other civilian government employees at client sites, industry conferences and other events around the country would approach people with CACI badges and offer their gratitude for the company's work in Iraq and praised the company's fortitude during the scandal. I was even approached by industry colleagues as well as government executives who told me privately that they had doubted the media allegations because of CACI's long standing excellent reputation. Such feedback let us know that we had "done the right thing."
This support also led me to conclude that CACI needed to speak out one more time. In April 2008 CACI published a book about our experiences. It's entitled Our Good Name, A Company's Fight to Defend its Honor and Get the Truth Told About Abu Ghraib. Using evidence from official investigations, sworn testimony and other thoroughly vetted facts, we detailed and documented every challenge the company had faced. And we proved how the severe media driven allegations (and yes, lies) made against us were simply not true.Just as in the past and through our biggest test, CACI will continue to use its culture as a guide for the future. And we are all aware that the contracting landscape is going to keep changing.
In fact, we seem to be entering a new era in contracting. It appears relationships will be redefined. New standards will be set. And there will be opportunities to improve how the government's business is conducted.
One key issue is that of oversight. We at CACI have always endeavored to work in compliance and have cooperated with all oversight efforts. But there are changes which we have been following and to which we will need to adjust. In the past few years we have seen legislation aimed at improving oversight and accountability in government contracting.
In the last year we saw the "Contractors and Federal Spending Accountability Act," the "Government Contractor Accountability Act," the "Close the Contractor Fraud Loophole Act" and the "Accountability in Government Contracting Act."
And there seems to be no slowing down either. A recent example is the National Defense Authorization Act for FY2009, parts of which directly address accountability issues for DoD and related defense activities. And one of the important issues being addressed is the concept of "inherently governmental work."
There has also been much attention paid to the issue of "organizational and personal conflict of interests." Section 841 aims to set a standard policy on contractor conflicts of interest and require contractors to have similar safeguards. I am proud to say that CACI has had a conflict of interest clause in our Standards of Ethics and Business Conduct for years. It is also addressed in our employee agreements and our annual compliance training. CACI certainly understands the importance of this issue for government contracts.
Another issue addressed in Section 870 of the new NDA Act is the establishment of a government-wide Contingency Contracting Corps. The Corps would be designed to respond to both domestic and foreign emergencies and contingency operations. I know from our experience in Iraq how stretched contract administrators were at the beginning of Operation Iraqi Freedom. Analogous issues surrounded Hurricane Katrina. We certainly understand this issue.
While there have been contractor databases that monitor contractor performance, both governmental and third-party, we hear about the development of a new database that contracting officials will have to consult as part of their award process. Section 872 of the NDA Act calls on the Office of Management and Budget to establish and maintain a database of information on the integrity and performance of contractors with over $500,000 in annual federal contracts. This will bring a new dimension that both sides will need to monitor.
We also recognize that companies are being asked to be more responsible for oversight efforts. For example, Section 854 of the new NDA Act requires contractors to report offenses alleged to have been committed by, or against, contractor personnel in Iraq and Afghanistan. The accuracy of database information and its potential for misunderstanding or misuse are issues of concern for these important requirements.
While it is the government who sets contracting regulations and policies, I believe that contractors could help improve the contracting process by addressing these issues as well. For example, I have wondered if contractors could develop their own standards and best practices, just like the Software Engineering Institute's Capabilities Maturity Model Integration does for development process improvement. Such a complementary approach would not only help adherence to the law, but it would help contractors continuously improve business conduct standards. Procurements might require certification or give credit for such publicly determined standards. I believe in the importance of "role models."
But accountability is not merely about setting and following rules. It is not just the responsibility of a few. Accountability is also not just invoked for when things go wrong. Accountability and responsibility are tied to the concept of "trust." And "trust" is what establishes a "partnership" between the providers and their clients… and that's what's needed to get the best job done for the government, the taxpayers and the American people.
Your colleagues, your clients or your contractors must be able to trust you to fulfill your responsibilities, perform quality work and resolve issues throughout the contract. Therefore, accountability must be part of all levels and functions in an organization. It is, in fact, a Quality Control concept.
And, ladies and gentlemen, as I see it, accountability and responsibility… and the ethical values of integrity, trust and "doing the right thing"… must be reflected in the behavior of an organization's leadership.
And, as stated in a June 2006 article in Contract Management magazine:
Strive to "always do right" - with this paradigm, sound ethical conduct will likely become second nature. And that's the message of my talk!
Doing the right thing should be the driving value standard of any organization. Leaders should set the policies as well as set an example for ethical behavior and accountability, so it becomes part of the organization's culture. And that culture then becomes the moral compass for all activities and employees. It also becomes the organization's "persona," which clients and colleagues can trust.
And if you ever have to question what accountability really means, just follow the example of President Harry S. Truman, who said, "The buck stops here!" And so does my time with you today.