The Rise of the Independent Monitor

Builders and Contractors Exchange
Weekly Bulletin: 12 july 2010

“The Rise of the Independent Monitor”
By: Brad Embree

Federal contractors should note that an emerging trend over the past several years involves increased insistence on the part of the federal government that some contractors appoint independent monitors to keep an eye on corporate activities. The increased use of independent monitors generally applies to federal contractors that have previously violated criminal or civil fraud statutes. In these cases, the federal government often encourages the use of independent monitors as a condition to avoid criminal prosecution. In addition, monitors may also be utilized so that a federal contractor remains qualified for future contracts and grants.

In the eyes of the federal government, a previous statutory violation signals a need for increased oversight. Previously, a federal contractor forced to engage an independent monitor could get by simply by requiring basic monitoring and no real oversight.

However, the expectations of the federal government have changed. Federal contractors obligated to engage independent monitors may see increased requirements as to who qualifies as a monitor. In addition, the government could require a monitor to have increased investigatory discretion. Further, contractors may have to incur new expenses to provide monitors with increased resources. The federal government could also condition its contracts upon a showing of increased meetings, communications, and/or reporting requirements between the contractor and the monitor.

The increased use of independent monitors could also provide benefits to those contractors who have previously violated criminal or civil fraud statutes. A federal contractor that can demonstrate compliance with more stringent monitoring requirements implicitly signals that such contractor is responsible and willing to be held accountable for its actions. Further, the use of an independent third party monitor can reduce the risk of a repeat violation of previous misconduct. An additional set of eyes and ears thus has practical benefits that can assist federal contractors looking to contract with the government, along with those contractors looking to continue an already-established federal relationship.