Builders and Contractors Exchange
Weekly Bulletin: 15 feb 2008
New Mandatory Ethics Requirements For Government Contractors
All Contractors who have Federal Government Contracts and sub contracts should be aware of a new Federal Acquisition Regulation (FAR Part 3.10) that became effective on December 24, 2007. This regulation will require any contractor who receives a government contract or subcontract that is valued at more than $5,000,000.00 and lasts more than 120 days to establish a Contractor Code of Business Ethics and Conduct. The contractor must establish a written code of ethics and business conduct within 30 days of award of the contract. Additionally, the regulation requires that the contractor must also establish an employee ethics and compliance training program and an internal control system "proportionate to the size of the company" within 90 days after contract award.
This will be a contractual requirement and will be implemented by a new FAR clause that will be contained in the solicitation and hence the final contract. The new clause will be at FAR 52.203-13, titled "Contractor Code of Business Ethics and Conduct". You should be very alert for the presence of this clause in any solicitation that will lead to a contract award after December 24, 2007. It is not clear at this time, whether the government will attempt to insert this requirement by modification of current contracts or task orders on indefinite delivery contracts. If the government elects this course of action, you should consider submitting a request for equitable adjustment to cover the cost of implementation.
This requirement for a Contractor Code of Business Ethics and Conduct will apply to ALL contractors including small businesses and also includes subcontracts. It is unclear at this time if the requirement will flow down below first tier subcontracts. However, the prudent course for contractors and subcontractors will be to flow down the requirement in lower tier subcontracts if they meet the value and duration criteria. The only portion of the regulation that will not apply to small businesses is the portion that requires an awareness program and an internal control system.
Accordingly, even small businesses must still develop a written Code of Business Ethics and Conduct and provide a copy of that code to each employee engaged in performance of the contract. Additionally, the "small business" exception only applies if the Contractor has represented itself as a small business concern pursuant to the award of the particular contract.
Vandeventer Black has long recommended to its clients that they have a Contractor Code of Business Ethics and Conduct and a compliance program in order to demonstrate that they are responsible contractors in the event of employee impropriety. This topic has been covered in a number of prior articles. We still maintain that all companies should have compliance programs for that purpose. However, now the government has mandated such compliance programs for certain contracts and subcontracts.
You should also note that there is a proposed regulation which will extend the requirement for compliance programs to all government contractors regardless of the value of the contract or the time of performance and that will also have explicit requirements on reporting any misconduct to contracting officers.
Vandeventer Black is prepared to assist you to ensure that your existing compliance program fully meets the requirements of the new FAR regulation and to develop a required compliance program if you do not already have one. Please contact Bill Dozier at 757-446-8686 for any assistance.
Questions?
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This article is meant to bring awareness to this topic and is not intended to be used as legal advice.