12-02-2025
They called her the “The Dragon Lady.” The story of Darleen Druyun, a former Air Force official convicted in 2004 for inflating contract prices to benefit herself and her future employer, Boeing, often serves as a cautionary tale about the revolving door between government and industry.
However, a recent paper, “Exposing the Revolving Door in Executive Branch Agencies” by Mara Faccio, Tom and Patty Hefner Chair in Finance at the Daniels School, and her co-author Logan P. Emery (a former Purdue PhD student now at the Rotterdam School of Management) reveals a truth that is more mundane — and often encouraging — for today’s executives navigating federal government contracting and hiring former government regulators.
Faccio and Emery’s comprehensive study of more than 420,000 individuals in top corporate roles across 12,869 firms highlights how the revolving door is a prevalent phenomenon. More than half of these firms employ at least one former executive branch regulator, often appointed within two years of leaving government, transitions they refer to as “direct transitions.” These direct transitions of former regulators offer substantial value when done with the right intentions and safeguards in place.
Contrary to popular fears of corruption, Faccio and Emery’s research supports the “knowledge hypothesis.” Former regulators bring expertise and connections that help firms better navigate a complex and often opaque government bureaucracy. This expertise allows them to understand procedural nuances such as contract requirements, acceptable subcontractors and pathways for expediting approvals. This results in firms being 74-87% more likely to win federal contracts after hiring these professionals.
Faccio notes that this is not about undue influence or quid pro quo arrangements, but rather practical advantages gained from insider knowledge. “The quid pro quo hypothesis,” where regulators grant favors in exchange for future jobs, requires both incentives and power while still employed — a showing that her research finds overwhelmingly unlikely. Transparency and good governance remain critical to maintaining these ethical boundaries.
The study find that contracts awarded post-transition tend to be renegotiated more frequently and for higher amounts. Over two decades, this added cost to taxpayers totals approximately $30 billion — about $1.5 billion annually. Notably, renegotiations occur most often in simpler contracts, not the complex ones where renegotiations might be expected.
This raises questions for executives about balancing expertise-driven contract wins with potential perceptions of excessive costs or poor contract management. Faccio describes this as a “scar” on the revolving door practice — an area where firms must exercise caution and implement rigorous contract oversight to avoid wasted government spending and reputational risks.
Faccio underscores that while illegal behavior is rare according to her data, especially among high-powered presidential appointees, maintaining rigorous internal governance is essential. Firms should:
Ultimately, Faccio warns against overly restrictive “cooling-off” periods, which might discourage talented government professionals from investing in human capital if career mobility is limited.
For executives in industries heavily regulated or reliant on federal contracts, hiring former government regulators offers clear advantages in expertise and connections. Yet, firms must balance these benefits with careful governance, ethical safeguards and transparency to mitigate concerns about undue influence or bloated contract costs.
By embracing the knowledge hypothesis and implementing best practices for governance and ethics, firms can responsibly leverage the revolving door to secure contracts and execute them efficiently, while safeguarding taxpayer interests and corporate reputations.
In the wake of Druyun’s conviction, the Air Force responded, creating layers of approval for acquisitions and contracts, an appropriate response to one of the rare occasions of illegal behavior.
