DOJ Would Mandate Contractor Compliance Programs And Self-Reporting

At the request of DOJ, the FAR Secretariat today published for public comment a proposed Rule (72 FR 64019, Nov 14 2007) that would require federal contractors to adopt a corporate compliance program to include a requirement to notify the agency’s Office of Inspector General and the Contracting Officer whenever there is a “reasonable” basis to believe there has been a violation of federal criminal law in connection with a federal contract or subcontract. The proposed Rule also would make the “knowing” failure to disclose such violations a specific ground for suspension and debarment. All of these compliance program elements would be fair game for review as part of the government’s past performance evaluation and responsibility determination.

This DOJ-requested proposed rule, while similar in many respects to the proposed FAR Rule issued for public comment earlier in the year on Contractor Code of Ethics and Business Conduct (72 FR 7588, Feb 16 2007), in the words of the FAR Council will “go beyond that proposed rule.” The DOJ rule raises many issues including the impact of “mandatory” disclosure on proposed legislation protecting companies’ attorney-client privileges, how companies are supposed to determine if a crime has been committed, and the effect on employees’ willingness to raise issues to the corporate compliance officer in the wake of mandatory company-disclosure.

Key features include:

• A new FAR Subpart 3.1 and a contract clause in Part 52, Contractor Code of Business Ethics and Conduct, that mirror the Federal Sentencing Guidelines for Organizations’ features of an effective compliance program, stating that contractors “must” conduct themselves with the highest degree of integrity and honesty; “shall” promote an organizational culture that encourages ethical conduct; “should” have a written code of business ethics and conduct; “should” have ethics and compliance training and internal controls suitable to the size of the company and the extent of government contracting, which training and controls facilitate timely discovery of improper conduct related to government contracts and ensure corrective measures are promptly implemented; and “shall” report in writing to the OIG and Contracting Officer violations of criminal law in connection with the award or performance of the contract or related subcontract.
• A requirement that the government consider a contractor’s record of integrity and business ethics as part of the past performance evaluation under FAR 42.15 as well as a specific contractor responsibility factor under FAR 9.1.
• A new specific ground for suspension and debarment would be added to FAR 9.4 for “knowing failure” to timely disclose an overpayment on a government contract or violation of federal criminal law in connection with the award or performance of any government contract or subcontract.
• All contracts over $5 million and having a performance period of at least 120 days would be covered, except commercial item contracts and contracts for performance outside the United States.

Crowell & Moring will host a free webinar on Thursday afternoon, November 29th to discuss the DOJ proposal, as well as other legislative and administration proposals dealing with contractor compliance programs. Look for more information about our webinar.