Verizon recently blew the whistle on itself in connection with its failure to ensure certain security requirements on one of its GSA contracts.  Why would a company call attention to its own failures?  First, each contractor needs to remember that they are covered by the Mandatory Disclosure rule.  That rule requires contractors to alert CO’s, and even IG officials, if they have “credible evidence” of a potential contract violation.  Continuing to bill once an issue is known constitutes a violation of the False Claims Act.  If the government finds a problem your company knew, or should have known, about the fines and penalties can be much more severe.  Second, by getting out in front of the issue, Verizon likely saved itself money not only on the fine, no small matter at $4 million, but significant legal fees and distractions as well.  Companies must keep in mind the indirect costs of defending themselves against adverse contract actions.  Attorneys, outside experts (the only group really deserving love and attention), accountants and others are all usually part of a defense team.  This team can stay in place for substantially longer than an NFL season, too.  Instead of paying for years of defense costs, Verizon likely cut it to months and also likely reduced the size of the defense team.  Third, Verizon looked at the larger picture of its government business and understood that it wasn’t worth risking larger future deals by failing to come clean on this one.  In addition to fines and penalties, contractors can also find themselves in front of suspension and debarment officials if they try to sweep issues under the rug, only to have an outside whistleblower call attention to a problem.  Similarly, competitors often use evidence of another company’s wrong-doing to advance their own business interests.  Either of these can damage, or end, a company’s government business.  Verizon almost certainly will not end up before a suspension or debarment official here and the ability of competitors to use the incident against them is blunted by the fact that they stepped forward on their own.  In the world outside of government contracting people are learning, often the hard way, that there are eyes and ears everywhere.  Few things escape notice.  Contractors should apply the same caution used to govern their “real world” actions to their government contract compliance.