DoD, GSA and NASA yesterday issued their final rule amending the FAR to amplify the requirements for a contractor code of business ethics and conduct, an internal control system, and disclosure to the Government of certain violations of criminal law, violations of the civil False Claims Act, or significant overpayments. Most notably, the final rule now requires mandatory disclosure of violations and overpayments rather than voluntary disclosure.
FAR 52.203-13 is the FAR clause most affected by these changes. As modified, the contractor is obligated to (a) exercise due diligence to prevent and detect criminal activity, and (b) timely disclose to the Government certain violations of criminal law or the civil False Claims Act. In connection with these requirements, the Contractor's internal control system shall (a) establish standards and procedures to facilitate timely discovery of improper conduct, and (b) ensure corrective measures are promptly instituted and carried out.
Among other minimum requirements are that such system provide for timely disclosure of the above described violations. The disclosure obligation on each contract continues for 3 years after final payment on the contract. Furthermore, the Contractor is obligated to fully cooperate with any Government agencies responsible for audits, investigations or corrective actions. Full cooperation includes providing timely and complete response to Government auditors' and investigators' request for documents or access to employees with information.
Knowing failure to report (a) certain violations of federal criminal law, violations of the civil False Claims Act or significant overpayments on a Government contract is now a cause for debarment pursuant to FAR 9.406-2 or suspension pursuant to FAR 9.407-2. FAR 3.1003 specifically references FAR Payment clauses for the reporting obligation relating to overpayment.
The commentary associated with this final rule noted "There is no doubt that mandatory disclosure is a ‘sea change' and ‘major departure' from voluntary disclosure, but DoJ and the OIG point out that the policy of voluntary disclosure has been largely ignored by contractors for the past 10 years."
As always, if you need assistance in this matter or answering any of your other questions regarding federal contracting, please contact Oles Morrison Rinker & Baker LLP at (206) 623-3427 (Phone); (206) 682-6234 (Fax); 701 Pike Street, Suite 1700, Seattle, Washington 98101; www.oles.com, or our Alaska office, 745 West Fourth Avenue, Suite 502, Anchorage, Alaska 99501-2136, (907) 258-0106 (Phone); (907) 258-5519 (Fax).