[Federal Register: November 23, 2007 (Volume 72, Number 225)]
[Rules and Regulations]
[Page 65873-65882]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr23no07-13]
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DEPARTMENT OF DEFENSE
GENERAL SERVICES ADMINISTRATION
NATIONAL AERONAUTICS AND SPACE ADMINISTRATION
48 CFR Parts 2, 3, and 52
[FAC 2005-22; FAR Case 2006-007; Item II; Docket 2007-0001; Sequence 1]
RIN 9000-AK67
Federal Acquisition Regulation; FAR Case 2006-007, Contractor
Code of Business Ethics and Conduct
AGENCIES: Department of Defense (DoD), General Services Administration
(GSA), and National Aeronautics and Space Administration (NASA).
ACTION: Final rule.
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SUMMARY: The Civilian Agency Acquisition Council and the Defense
Acquisition Regulations Council (Councils) have agreed on a final rule
amending the Federal Acquisition Regulation (FAR) to address the
requirements for a contractor code of business ethics and conduct and
the display of Federal agency Office of the Inspector General (OIG)
Fraud Hotline Posters.
DATES: Effective Date: December 24, 2007
FOR FURTHER INFORMATION CONTACT: Mr. Ernest Woodson, Procurement
Analyst, at (202) 501-3775 for clarification of content. For
information pertaining to status or publication schedules, contact the
FAR Secretariat at (202) 501-4755. Please cite FAC 2005-22, FAR case
2006-007.
SUPPLEMENTARY INFORMATION:
A. Background
DoD, GSA, and NASA published a proposed rule in the Federal
Register at 72 FR 7588, February 16, 2007, to address the requirements
for a contractor code of business ethics and conduct and the display of
Federal agency Office of the Inspector General (OIG) Fraud Hotline
Posters. The original comment period closed on April 17, 2007, but on
April 23, 2007, the comment period was reopened and extended to May 23,
2007. We received comments from 42 respondents plus an additional late
comment from one of the initial respondents. However, 15 of the
respondents were only requesting extension of the comment period. The
remaining 27 public comments are addressed in the following analysis.
The most significant changes, which will be addressed, are--
The clause requirement for a formal training program and
internal control system has been made inapplicable to small businesses
(see paragraph 5.c.v. and 11. of this section);
The contracting officer has been given authority to
increase the 30 day time period for preparation of a code of business
ethics and conduct and the 90 day time period for establishment of an
ethics awareness and compliance program and internal control system,
upon request of the contractor (see paragraph 6.c. of this section);
The requirements in the internal control system relating
to ``disclosure'' and ``full cooperation'' have been deleted, and moved
to FAR Case 2007-006 for further consideration (see paragraphs 2.e. and
6.d. of this section);
The clause 52.203-XX with 3 alternates has been separated
into 2 clauses, one to address the contractor code of business ethics
and conduct, and one to address the requirements for hotline posters
(see paragraphs 3.h. and 10.b. of this section); and
A contractor does not need to display Government fraud
hotline posters if it has established a mechanism by which employees
may
[[Page 65874]]
report suspected instances of improper conduct, and instructions that
encourage employees to make such reports (see paragraph 7.a. of this
section).
1. General support for the rule.
Comments: The majority of respondents expressed general support for
the rule. These included consultants, industry associations, a non-
profit contractor, a construction contractor, inspectors general and
interagency IG working groups, other Government agencies, and
individuals. Many respondents were laudatory of the rule in general.
For example, one respondent considered the proposed rule to be a ``good
attempt'' and another considered it to be ``an outstanding, well
thought-out and needed policy change.'' Others identified particular
benefits of the proposed rule, such as--
Reduce contract fraud;
Reduce waste, fraud, abuse and mismanagement of taxpayers'
resources;
Enhance integrity in the procurement system by
strengthening the requirements for corporate compliance systems; and
Promote clarity and Government-wide consistency in agency
requirements.
Response: None required.
2. General disagreement with the rule as a whole.
Although all respondents agree that contractors should conduct
themselves with the highest degree of integrity and honesty, not all
agree that the proposed rule is taking the right approach to achieve
that goal.
a. Ineffective.
Comment: One respondent considers that this rule will not
effectively correct the ethics and business conduct improprieties.
Other respondents note that a written code of ethics does not ensure a
commitment to compliance with its provisions.
Response: There is no law, regulation, or ethics code that ensures
compliance. Laws, regulations, and ethics codes provide a standard
against which to measure actions, and identify consequences upon
violation of the law, regulation, or ethics code.
b. Unnecessary or duplicative, potentially conflicting.
Comment: One respondent views the rule as unnecessary, because it
adds ``a further level of compliance and enforcement obligations where
contractors already are or may be contractually or statutorily obliged
to comply.'' Another respondent comments that the rule is duplicative
of other similar requirements. Furthermore, meeting multiple
requirements for the same purpose can cause conflicts.
Response: This rule is not duplicative of existing requirements
known to the Councils. The rule requires basic codes of ethics and
training for companies doing business with the Government. Although
many companies have voluntarily adopted codes of business ethics, there
is no current Government-wide regulatory requirement for such a code.
For DoD contracts, the Defense Federal Acquisition Regulation
Supplement (DFARS) recommends such a code, but does not make it
mandatory.
Legislation such as the Sarbanes-Oxley Act of 2002 (Pub. L. 107-
204), cited by some of the respondents, applies only to accounting
firms and publicly traded companies. Sarbanes-Oxley focuses on auditor
independence, corporate governance, internal control assessment, and
enhanced financial disclosure. Sarbanes-Oxley provides broad definition
of a ``code of ethics'' but does not specify every detail that should
be addressed. It only requires publicly-traded companies to either
adopt a code of ethics or disclose why they have not done so.
The respondents did not identify any specific points of conflict
between this rule and other existing requirements. Since this
requirement is broad and flexible, capturing the common essence of good
ethics and standards of conduct, the Councils consider that it should
reinforce or enhance any existing requirements rather than conflict
with them.
c. Negative effect on current compliance efforts.
Comment: According to one respondent, the rule may have a
``chilling effect'' on current compliance efforts and may create a
fragmented approach to standards of conduct.
Response: As stated in the prior response, this rule should enhance
current compliance efforts.
d. Vague and too broad.
Comment: Several respondents consider the rule too vague and broad,
so that it is open to different interpretations.
Response: The rule is intended to allow broad discretion. The
specific requirements of the rule will be further addressed under
paragraph 6. of this section.
e. Change in role of Government.
Comment: One respondent fears that the rule will ``fundamentally
change the Government's role in the design and implementation of
contractor codes and programs'' because it moves from ``the well-
established principles of self-governance and voluntary disclosure'' to
``contractual prescriptions and potentially mandatory disclosure.''
This respondent states that the proposed rule is not just a minor
modification of existing policy. Rather, it ``would change far more
than the FAR Councils have acknowledged.''
Response: This rule does constitute a change. The Councils are
requiring that contractors establish minimum standards of conduct for
themselves. However, the rule still allows for flexibility and, where
appropriate, contractor discretion. The Councils have deleted any
clause requirement relating to mandatory disclosure but it will be
considered as part of the new FAR Case 2007-006 (72 FR 64019, November
14, 2007).
f. Unduly burdensome and expensive for contractors.
Comment: One respondent thinks that this rule imposes significant
new requirements on contractors. Other respondents consider the
requirement unduly burdensome for the contractors. They think the rule
will be a disincentive to doing business with the Government.
Response: Most companies already have some type of ethics code. The
mandatory aspects of this rule do not apply to commercial items, either
at the prime or subcontract level. The rule has been changed to lessen
the impact on small businesses (see paragraph 11. of this section).
g. Impact on small business.
Comment: Several respondents note the impact on small businesses.
Response: See detailed discussion of impact on small business at
paragraph 11. of this section and changes to the rule to lessen that
impact.
h. Difficult to administer for Government.
Comment: Several respondents consider the rule expensive and
impractical to administer for the Government. One respondent comments
on the further paperwork burdens on contracting officials, and that it
cannot be effectively administered.
Response: There are no particularly burdensome requirements imposed
on the Government by this rule. Review of contractors' compliance would
be incorporated into normal contract administration. The Government
will not be reviewing plans unless a problem arises.
i. Rule should be withdrawn or issue 2nd proposed rule.
Comment: One respondent requests that the rule be withdrawn.
Several respondents recommend significant redrafting of the proposed
rule and an opportunity to comment on a second proposed rule that makes
important revisions.
[[Page 65875]]
Response: Although the Councils have made significant revisions to
the proposed rule to address the concerns of the public, the revisions
do not go beyond what could be anticipated from the text of the
proposed rule and the preamble to the proposed rule. The changes are in
response to the public comments. They do not rise to the level of
needing republication under 41 U.S.C. 418b. However, the Councils
published a new proposed rule on mandatory disclosure under FAR case
2007-006.
3. Broad recommendations.
a. Should not cover ethics.
Comment: One respondent recommends not using the term ``ethics''
throughout the rule. Contractors can and should develop and train
employees on appropriate standards of business conduct and compliance
for its officers, employees and others doing (or seeking to do)
business with the Federal Government. However, contractors typically do
not teach ``ethics'' to their employees.
Response: The term ``ethics'' is a term currently used throughout
the FAR (reference FAR 3.104 and 9.104-1(d)) and is not considered to
be an unfamiliar term to the professional business world. However, the
Councils have modified the term to ``business ethics,'' consistent with
usage in other FAR parts.
b. 2005 Federal Sentencing Guidelines.
Comments: Several respondents comment that the requirements of an
internal control system should be like the United States Sentencing
Commission 2005 Federal Sentencing Guidelines (Ch. 8 section 8B2.1),
either by direct incorporation into the FAR or by reference. The
proposed rule already included 8B2.1(b)(2) and (b)(3). One respondent
is concerned that if they are not identical, businesses (especially
small businesses) will believe they have met the compliance
requirements of the U.S. Government by following the FAR; this will
create a false sense of security. This respondent believes that the FAR
requirements fall short when compared to the corporate sentencing
guidelines. The respondent also points out that there are no clauses
applying to smaller contracts, or to commercial item contracts,
although companies with these contracts are still subject to the
sentencing guidelines. Key requirements of the guidelines are omitted
from the rule, such as knowledgeable leadership, exclusion of risky
personnel, and individuals with day-to-day responsibility for
implementing compliance systems.
Several respondents ask for a specific reference to be made in the
rule to the U.S. Sentencing Guidelines.
First, in this area of corporate compliance, it could be
confusing if it appeared that the FAR was setting a different standard
than the Sentencing Commission and the Federal courts, which implement
the Guidelines.
Second, the Sentencing Guidelines are subject to routine
reexamination and revision by both the Sentencing Commission after
substantial study and public comment, and the Federal courts in
specific cases, allowing for adjustments to this proposed rule without
having to open a new FAR case.
Therefore, the respondent believes that the Guidelines should serve
as the baseline standard for a contractor's code of ethics and business
conduct. By referencing the Guidelines, we would be able to ensure that
the Federal Government speaks with one voice on corporate compliance.
Response: The initiators of the case asked that the FAR mirror the
DFARS. The DFARS provisions are very similar to the Sentencing
Guidelines and are adequate for this final rule. It would require
public comment to include additional requirements from the Sentencing
Guidelines as requirements in the FAR. The request to more closely
mirror the Sentencing Guidelines is being considered as part of a
separate case, FAR 2007-006.
c. Make pre-award requirement.
Comments: One respondent suggests making the rule a pre-award
requirement, to ensure that only contracts are awarded to firms
electing to conduct business in an ethical manner, consistent with FAR
Part 9. The respondent believes that once contractors choose to
implement the program with employees acknowledging the consequences of
violations, it becomes a self-perpetuating program, requiring no
additional actions by the contractor other than certification for new
awards.
Response: FAR Part 9 (9.104-1(d)) already provides that a
prospective contractor must have a satisfactory record in integrity and
business ethics as a standard for determining a prospective contractor
responsible as a pre-award requirement. The Councils believe that the
respondent's suggestion would encumber or circumvent new contract
awards which the Government wishes to encourage. Therefore, no change
to the rule has been made.
d. Hire certified management consultants (CMCs).
Comments: One respondent recommends that the rule be amended to
encourage Government agencies that are hiring consultants to hire
Certified Management Consultants or those who ascribe or commit to a
code of ethics from an acceptable professional organization such as the
Institute of Management Consultants for all Government contracts,
including consulting and/or advisory services.
Response: It is the contractors' responsibility to comply with the
rule and establish a code of business ethics. The Government cannot
endorse any particular business or organization as an appropriate
contractor. Therefore, the Councils have not changed the rule in
response to this comment.
e. Use quality assurance systems.
Comments: One respondent states that the rule does not lead to
future improvements in compliance methods. The respondent recommends
that, where possible, corporate compliance systems might be bolstered
by drawing on and meshing compliance with existing quality assurance
systems. Traditional quality assurance systems, used to capture errors,
may be applied to corporate compliance systems to catch and root out
ethical and legal failures.
Response: The cost of additional controls may or may not balance
with the benefit received and should be carefully considered prior to
implementation. While a contractor may elect to draw on existing
systems as an additional internal control, the Councils have left the
rule unchanged in this regard and do not specifically require use of
existing quality assurance systems.
f. Establish rewards rather than punishments.
Comments: One respondent states that the regulation offers an
opportunity to establish a regulation that rewards contractors who
behave appropriately, contradicting the Federal Government's ``. . .
mindset to penalize the wrong doer rather than rewarding the desired
behavior.''
Response: The Councils do not agree that this regulation should
include a special ``reward'' for contractors who behave ethically. The
Government ``rewards'' contractors who perform satisfactorily through
payment of profit on the contract, favorable past performance
evaluations, and the potential award of additional contracts.
g. Should not be mandatory - be more like the DFARS.
Comments: Several respondents expressed the view that the FAR rule
should be modeled on the DFARS rule at Subpart 203.70, which is
discretionary rather than mandatory. It states that contractors should
have standards of conduct and internal
[[Page 65876]]
control systems. One of these respondents believes that the proposal to
impose contractual mandates is misguided.
Response: The discretionary rule in the DFARS is no longer strong
enough in view of the trend (U.S. Sentencing Guidelines and the
Sarbanes-Oxley Act) to increase contractor compliance with ethical
rules of conduct. According to the Army Suspension and Debarment
Official, the majority of small businesses that he encounters in review
of Army contractor misconduct, have not implemented contractor
compliance programs, despite the discretionary DFARS rule.
However, with regard to the requirement for posters when the
contractor has established an adequate internal reporting mechanism,
see paragraph 7. of this section.
h. More logical sequence for procedures and clause, and delete
opening paragraph of procedures.
Comment: One respondent recommends that the proposed changes at
3.1003 be rewritten in a logical sequence. This respondent also
recommended that the clause paragraphs should be rewritten in logical
sequence with the alternate versions sequentially deleting the last
paragraphs instead of creating the delete and renumber provisions.
Another respondent recommends deletion of the opening paragraph at
3.1003 because following the procedures does not ensure that the
policies are implemented.
Response: The procedures section has been completely rewritten to
reduce redundancy and inconsistencies. The Councils have separated the
clause into two clauses, which makes the second point about logical
order in the clause moot. The opening paragraph at 3.1003 has been
deleted.
4. Policy.
a. ``Should'' vs. ``shall.''
Comment: At least four respondents comment on an inconsistency
between ``should'' in the policy and ``shall'' elsewhere. Section
3.1002, Policy, states that contractors ``should'' have a written code
of ethics, etc, while the Section 3.1003, Procedures, and the contract
clause at 52.203-13 makes the programs mandatory unless the contract
meets one of several exceptions.
Response: The inconsistency was deliberate. The policy applies to
all contractors but the specific mandatory requirements of the clause
apply only if the contract exceeds $5 million and meets certain other
criteria. Section 3.1003 has been rewritten as ``Mandatory
requirements'' to clearly distinguish it from the policy, which applies
to all Government contractors.
b. ``Suitable to'' vs. ``commensurate with.''
Comment: One respondent comments that the policy uses the phrase
``suitable to'' the size of the business whereas the clause uses the
term ``Commensurate with.''
Response: The phrase ``commensurate with'' has been deleted from
the clause.
5. Exceptions--general.
Comments: Two respondents commented on the exceptions to the rule
in general.
The rule be revised to list exceptions separately.
The key exceptions to the rule in subpart 3.1003(a) and
3.1004(a)(1) are not consistent. 3.1003(a) exempts contracts awarded
under FAR Part 12 from the required employee ethics and compliance-
training program and internal control system, or displaying the fraud
poster, but it does not list the exemption from having a written code
of business ethics. 3.1004(a)(1) clearly exempts contracts awarded
under FAR Part 12 from all of the clause requirements.
Response: The Councils partially concur with the respondents'
recommendations. The Councils have revised the final rule to--
Move the exceptions into the clause prescription; and
Delete the conflicting wording in the proposed rule at
3.1003(a).
a. Commercial items.
i. Concur with exception for commercial items.
Comment: Two respondents agree that the rule should exclude
contracts awarded under FAR Part 12. One respondent agrees with the
intent of the rule concerning consistent standards of ethics and
business conduct for Federal contracts, and the exclusion FAR 12.
Another respondent agrees that all contractors should have written
codes of conduct as a good business practice code of, but believes the
FAR Part 12 exemption should be from the full coverage of the rule,
including the written code of conduct requirement.
Response: The Councils note that the FAR Part 12 exemption does
include exemption from the requirement for a written code of conduct
(see introductory paragraph at beginning of this Section 5.)
ii. Disagree with exception for commercial items.
Comments: Three respondents comment that the rule should apply to
commercial contracts. They note that although other Federal agencies
currently maintain polices similar to the rule, none of the agencies
exclude contracts for commercial services. One respondent recommends
that the rule apply to commercial item contracts or require that such
contractors should have compliance systems in place, especially since
such firms fall under the Sentencing Commission's general expectation
that corporations will put appropriate compliance systems in place.
Another respondent is concerned that the ``errant behavior of
contractors'' will not stop at contracts awarded under FAR Part 12 and
by carving out a major segment of acquisitions to which the rule will
not apply, the rule sub-optimizes its intended effect of reducing
unethical behavior.
Response: The Councils do not agree the clause should be included
in contracts awarded under Part 12. Requiring commercial item
contractors to comply with the mandatory aspects of the rule would not
be consistent with Public Law 103-355 that requires the acquisition of
commercial items to resemble customarily commercial marketplace
practices to the maximum extent practicable. Commercial practice
encourages, but does not require, contractor codes of business ethics
and conduct. In particular, the intent of FAR Part 12 is to minimize
the number of Government-unique provisions and clauses. The policy at
3.1002 of the rule does apply to commercial contracts. All Government
contractors must conduct themselves with the highest degree of
integrity and honesty. However, consistent with the intent of Pub. L.
103-355 and FAR Part 12, the clause mandating specific requirements is
not required to be included in commercial contracts.
iii. Disagree with exception for commercial items if contract is
for advisory and assistance services.
Comment: One respondent believes that the rule should apply to all
advisory and assistance services, some of which are commercial items.
Response: The Councils have not agreed to make further distinctions
between the types of contracts to which the rule should apply. For the
same reasons stated in answer to the prior comment, the Councils do not
agree to application of this rule to advisory and assistance services
that are commercial items.
b. Outside U.S.
Comment: Two respondents comment on the exception for contracts to
be performed outside the United States, mostly from a definitional
perspective.
i. Supporting office in the U.S.
Comment: One respondent suggests that the meaning of ``work
currently performed outside the United States'' needs to be better
defined. The
[[Page 65877]]
proposed rule is unclear whether offices in the United States
supporting the foreign project would be required to comply.
Response: The term ``performed outside the United States'' is used
throughout the FAR several dozen times. There is never any explanation
regarding possible application to offices in the United States
supporting the foreign project. If part of a contract is performed in
the United States and part of it is performed outside the United
States, then the part performed in the United States is subject to
whatever conditions apply to work performed in the United States.
ii. Outlying areas.
Comments: One respondent specifically endorses the exception for
contracts performed outside the United States. However, the respondent
requests clarification of the term ``outlying areas.''
Response: This term is defined in FAR 2.101.
c. Dollar threshold.
Eight respondents commented on the rule's $5 million threshold.
i. Should not allow agencies to require posters below $5 million.
Comments: One respondent does not support the requirement at the
3.1003(c) that authorizes agencies to establish policies and procedures
for the display of the agency fraud hotline poster for contracts below
$5 million.
Response: Federal agency budgets and missions vary and are
distinct. Some agencies already require display of the hotline posters
below the $5 million threshold. For this reason, agencies that desire
to have contractors display the hotline poster should be allowed to
implement the program in a way that meets their needs. Therefore, the
Councils have not made any change to the rule in response to this
comment.
ii. There should be no threshold.
Comment: Three respondents suggest removing the $5 million
threshold and requiring all contractors to comply with the rule.
In addition, the late supplemental comment received from the U.S.
Government Office of Ethics expressed concern that a specific instance
of conflict of interest problems occurred with two contracts that would
not meet the $5 million threshold.
Response: The Councils do not agree with removal of the threshold.
Removing the $5 million dollar threshold and requiring all contractors
to comply with the rule is not practical. At lower dollar thresholds,
the costs may outweigh the benefits of enforcing a mandatory program.
Nevertheless, the policy at 3.1002 applies to all contractors.
The Councils note with regard to the OIG audit report ED-OIG/
A03F0022 of March 2007, that the contractor in question did not include
the required conflict of interest clauses in its subcontracts and
consulting agreements. This is the essence of the problem rather than
the lack of a contractor code of ethics and compliance and internal
control systems in contracts less than $5 million.
iii. How is application of the threshold determined?
Comment: One respondent is concerned that the rule fails to state
how the $5 million threshold for the application of the clause is to be
determined and questions if the threshold should apply to contracts
with multi-years as the option years for such contracts may not be
awarded, thereby impacting the total value of the contract award. The
respondent recommends that the threshold apply to contracts with one
term and only to the base year in contracts with options.
Response: FAR 1.108(c) provides uniform guidance for application of
thresholds throughout the FAR.
iv. $5 million threshold is too low.
Comments: One respondent is concerned that many companies have not
implemented programs that would adequately meet the rule and that the
$5 million threshold is too low. It will therefore serve as a
disincentive for many small and medium--sized companies who may not be
willing or able to comply with the requirement to implement training
and control systems.
Response: The $5 million threshold is consistent with the threshold
established by the U.S. Department of Defense (DoD) for contractor
ethics. DoD contracts with the largest number of Federal contractors.
Therefore, the Councils have not made any change to the threshold for
application of the clause. For revisions made to lessen the impact on
small business see paragraph 11. of this section.
v. Alternate standards.
Comment: One respondent recommends that the rule focus on the size
of the firm and its volume of Federal work over a more significant
period of time, and that SBA size standards and some proportion of the
work the contractor performs be used as determining factors.
Response: The Councils have revised the final rule to limit the
requirement for formal awareness programs and internal control systems
to large businesses, while retaining the $5 million threshold for
application of the clause. The clause needs to be included, because it
might flow down from a small business to a large business, from whom
full compliance would be required. Although the proposed rule allowed
contractors to determine the simplicity or complexity and cost of their
programs ``suitable to the size of the company and extent of its
involvement in Government contracting,'' this left many respondents
unsure as to what would be acceptable (see also paragraph 11. of this
section).
Comment: One respondent is concerned that the rule does not
adequately identify which contractors should be covered by the
requirements and suggests that the kind of work and responsibilities of
the contractor is a better indicator of the need for ethics rules than
the size of the contract award.
Response: As a practical matter, all contractors doing business
with the Government should have a satisfactory of integrity and
business ethics, irrespective of the work the contractor is performing
or the dollar amount of the contract. However, given the volume and
complexities of work contractors perform for the Government, it is not
practical to apply the rule on the basis of a contractor's work or
responsibilities. It is more realistic for the Government to establish
monetary thresholds and/or size standards to ensure its widest impact
and viability.
d. Performance period.
Comments: Five respondents commented on the 120-day performance
period, considering that 120 days is too short, because it takes longer
than that to implement a compliance program, including an internal
control system. Even if the compliance programs can be implemented in
the required timeframe, that leaves as little as 30 days between
implementation of the program and completion of the contract. The 120-
day performance period operates as a disincentive to small and medium
size companies. Some respondents recommend using a minimum of one year
for the period of performance.
Response: The Councils do not concur that 120 days is too short.
Although on an initial contract it may take some time to get the
program established, on follow-on contracts the program will already be
in operation. Many contracts responding to emergency situations are of
short duration, and are the very type of contract that needs to be
covered. The contracting officer is given leeway in the final rule to
expand the 90-day period (See paragraph 6.c. of this section).
e. Other exceptions.
Comment: Two respondents submitted comments suggesting an expansion
to the list of exceptions.
[[Page 65878]]
One respondent recommends two additional exceptions to the language
at 3.1003, to make it clear that the new subpart is only applicable for
new, open market, contract awards or agreements. Additional exceptions
would include ``delivery or task orders placed against GSA Federal
Supply Contracts, using Part 8 procedures,'' and ``orders placed
against task order and delivery order contracts entered into pursuant
to Subpart 16.5, Indefinite Delivery Contracts.''
Another respondent recommends that research and development
contracts issued to universities and other nonprofit organizations be
exempt from the rule. Research institutions uniformly have business
codes of conduct and internal controls to enable the reporting of
improper conduct as well as disciplinary mechanisms (reference OMB
Circular A-110). In addition, the National Science and Technology
Council's Committee on Science is currently developing voluntary
compliance guidelines for recipients of Federal research funding from
all agencies across the Federal Government, to help recipients address
the prudent management and stewardship of research funds and promote
common policies and procedures among the agencies.
Response: The rule is not applicable to existing contracts.
Therefore, an exception for delivery or task orders placed against GSA
Federal Supply Contracts or issued under existing Indefinite Delivery
Contracts is not necessary.
While universities and other nonprofit organizations may have
existing guidelines, policies and procedures for business codes of
conduct, there are many benefits of including a clause in new
solicitations and contracts. The rule will strengthen the requirements
for corporate compliance systems and will promote a policy that is
consistent throughout the Government. Therefore, the Councils have not
made any changes to the rule in this regard, although the burden on
small businesses has been reduced (see 52.203-13(c)).
6. Contractor program requirement.
a. Lack of specific guidelines.
Comments: Various respondents express the view that the rule should
be more specific about the required programs.
Some provided examples of what should be included.
One was concerned that contractors have increased risk of
False Claims Act because when seeking payments under fixed-price
construction contracts, they would have to certify that they sought
compensation ``only for performance in accordance with the
specifications, terms, and conditions of the contract'', including the
new and highly subjective requirements in the proposed rule.
One recommended that the FAR rule should be held until GAO
finishes its study of contractor ethics at DoD.
Another recommended that the Councils should establish a
Government-industry panel to develop a minimum suggested code of ethics
and business conduct based upon the best practices many contractors
already employ.
Response: This rule gives businesses flexibility to design
programs. Many sample codes of business ethics are available on-line.
The specific issues that should be addressed may vary depending on the
type of business. To provide more specific requirements would require
public comment. The new FAR Case 2007-006 will propose the imposition
of a set of mandatory standards for an internal control system. The
Councils will welcome suggestions for further FAR revisions when the
GAO finishes its study.
b. Compliance.
Comment: Several respondents questions how the contracting officer
would verify compliance with the requirements. There is no requirement
for submission to the Government. The internal control system states
what should be included. Are these mandatory requirements or is it the
judgment of the contracting officer?
Response: The contracting officer is not required to verify
compliance, but may inquire at his or her discretion as part of
contract administrative duties. Review of contractors' compliance would
be incorporated into normal contract administration. The Government
will not be routinely reviewing plans unless a problem arises. The
Government does not need the code of ethics as a deliverable. What is
important is that the Contractor develops the code and promotes
compliance of its employees.
``Should'' provides guidance and examples, rather than a mandatory
requirement. The contracting officer does not judge the internal
control system, but only verifies its existence.
c. Time limits.
Various suggestions were made about the time allotted to develop a
code of ethics.
One respondent recommends 180 days for the code.
Another recommended an extension to 60 days after contract
award.
One respondent states that it takes significantly longer
than 30 days to put a written code of conduct in place. In order to be
successful, the process should include an analysis of what should be in
the code, drafting the code, stakeholder input, publication, and
communication of the resulting code. This is difficult to accomplish in
less than 6 months and usually requires at least a year to do well.
The same respondents also commented about whether 90 days is
sufficient to develop a training program and internal control systems.
For example, one respondent comments that compliance training programs
must be well designed and relevant to be effective. Establishing an
internal-control system also takes significantly more than 90 days.
According to the respondent, the rule would yield ``cookie-cutter''
compliance, devoid of any real commitment to ethics and compliance.
Response: Although the Councils consider that the specified time
periods are generally adequate, the Councils have revised the clause so
that companies needing more time can request an extension from the
contracting officer. The Councils also note that an initial code and
program can be subject to further development over time, as experience
with it suggests areas for improvement.
d. Internal Control Systems--mandatory disclosure and full
cooperation.
Comments: Six respondents consider the requirements for the
internal control system regarding disclosure to the Government and full
cooperation with the Government to be problematic. Reporting suspected
violations of law is troubling and requested more information on the
trigger to the requirement. One respondent expresses concern with
possible violations of constitutional rights associated with the
disclosures.
Other respondents are concerned that ``full cooperation'' can force
companies to relinquish or waive the attorney-client privilege. One
respondent requests that the preamble state that full cooperation does
not waive attorney-client privilege or attorney work product immunity.
Another respondent recommends expansion of the full cooperation
requirement to cover audits. Information received by the OIG may
precipitate an audit, rather than a criminal investigation.
Response: The Councils note that the most controversial paragraphs
(paragraphs (c)(2)(v) and (vi) in the proposed rule) were not
mandatory, but were listed as examples of what a contractor internal
control system should include. The mandatory
[[Page 65879]]
disclosure requirement in paragraph (c)(1)(i) of the proposed rule was
not clear about disclosure to whom. The Councils have removed the
disclosure requirement at paragraph (c)(1)(i) of the proposed clause
and the examples at (c)(2)(v) and (vi) from this final rule. These
issues were included for further consideration in the proposed rule
issued for public comment under FAR Case 2007-006.
7. Display of posters.
a. Agency posters.
i. Government posters are unnecessary, if the contractor has
internal reporting mechanisms.
Comments: Several respondents do not agree that Government hotline
posters should need to be displayed if the contractor has its own code
of ethics and business conduct policy and processes already in place to
conform to the DFARS rule.
One respondent cites DFARS 203.7001(b), which recognizes and
permits companies to post their own internal hotline poster, in lieu of
an agency Inspector General (IG) hotline poster, for employees to have
an outlet to raise any issues of concern. The respondent believes this
coverage is adequate and there is no need to impose an additional
requirement to display agency IG hotline posters.
Another respondent states that the rule that requires all Federal
contractors to post agency hotlines would deny such contractors the
opportunity to funnel problems through their internal control systems
and frustrate at least much of the purpose of establishing such
systems. One respondent states that companies want an opportunity to
learn about internal matters first and to be in the best position to
take corrective action.
Another states that while the agencies currently all mandate that
their contractors display a fraud hotline, none mandate that their
contractors display a Government hotline. DoD, Veterans Administration,
and Environmental Protection Agency currently require their contractors
to post their agency hotlines unless they have ``established a
mechanism, such as a hotline, by which employees may report suspected
instances of improper conduct, and instruction that encourage employees
to make such reports.'' Several other respondents recommend that the
FAR Councils take the same approach.
Response: Although the proposed rule did not prevent contractors
from posting their own hotline posters, the Councils have determined
that it will fulfill the objective of the case to mirror DFARS 252.203-
7002, Display of DoD Hotline Poster, i.e., display of the Government
posters is not required if the contractor has established an internal
reporting mechanism by which employees may report suspected instances
of improper conduct along with instructions that encourage employees to
make such reports.
ii. Too many posters are unnecessary and potentially confusing.
Comments: Several respondents believe that requiring all
contractors to display the hotlines for all Federal agencies for which
they are working--without regard to the number of such agencies, or the
contractors' own efforts to encourage their employees to report any
evidence of improper conduct--would have several negative and
unintended consequences. Rather than facilitate reporting, multiple
postings could confuse employees. To which agency should they report a
particular problem? Adding agency-specific requirements to existing
compliance programs dilutes the impact and message of the existing
program and will likely lead to confusion among professionals. A
bulletin board with myriad compliance references will be confusing at
best.
Response: Each agency's IG may require specific requirements and
information for posters. There is no central telephone number or
website that serves as the hotline for all agency IGs. However, under
the final rule, if the company has its own internal reporting mechanism
by which employees may report suspected instances of improper conduct
along with instructions that encourage employees to make such reports,
there is no need to hang multiple agency posters.
iii. Responsibility for determining the need for displaying an
agency IG Fraud Hotline Poster?
Comment: Several respondents note that the Inspector General Act of
1978 gives the agency's IG (not the agency) the responsibility for
determining the need for, and the contents of, the fraud hotline
poster.
Response: The Councils agree that it is not the agency that decides
the need for the poster, but the agency IG. The Councils have made the
requested change at FAR 3.1003(b).
b. Department of Homeland Security (DHS) Posters.
i. Only when requested by DHS?
Comment: One respondent states that in the Federal Register
background and in the proposed language at 3.1003(d)(2) the guidance
seems to imply that the display of the DHS poster is required for
contracts funded with disaster assistance funds, when and only when so
requested by DHS.
Response: This interpretation is correct. The final rule clarifies
that it is the DHS Inspector General that requests use of the posters.
ii. Different poster for each event is not best approach.
Comment: One respondent believes that the contractor's own hotline,
if one exists, is better suited to providing a mechanism for employees
to report concerns than a different poster for each event.
Response: DHS Inspector General must determine whether to use
event-specific or broad posters to cover multiple events. However, the
Councils have revised the final rule to permit use of the Contractor's
own hotline poster if the contractor has an adequate internal control
system.
8. Remedies.
Comments: Four comments concerning proposed remedies were received.
In general, two of the respondents questioned consistency in
application, consistency, and due process, and two were generally
opposed to the remedies.
One respondent asks whether there ``should be remedies for
non-compliance when the contractor is not required to affirm or
otherwise prove compliance, and when there is no adequate guidance for
the CO regarding a determination of compliance?'' Without guidance,
contracting officers in different agencies may make different
assessments of the same contractor.
One respondent ``cannot find any rational relationship
between the proposed ``remedies'' and any damages or other losses that
the Government might suffer from any breach of the new contractual
requirements ethics codes and compliance programs.'' This respondent
strongly recommends that the contractual remedies be limited to such
equitable measures as may be necessary to bring the contractor into
compliance with its contract obligations to implement certain
procedures, and omit any monetary penalties.
One respondent expressed a similar concern that the
remedies ``are improper, excessive and unwarranted.''
One respondent requests provision of due process with a
proposal to include the following text; ``Prior to taking action as
described in this clause, the Contracting Officer will notify the
Contractor and offer an opportunity to respond.''
Response: The Councils have decided that remedies should not be
specified in the clause. The FAR already provides sufficient remedies
for breach of contract requirements.
9. Flowdown.
[[Page 65880]]
a. Objections to rule also apply to flowdown.
Naturally, those respondents that oppose the rule in general or in
particular, will also oppose its flowdown in general or in particular.
For example,
Comment: One respondent recommends exempting this
requirement for subcontracts less than one year in length, rather than
120 days.
Response: See discussion in paragraph 5.d. of this section.
Comment: Another respondent states that this requirement
will negatively impact universities, especially given the flow-down
requirements for prime contracts. This respondent recommends that
research and development contracts issued to universities and other
nonprofit organizations should be exempt from this proposed rule.
Response: See discussion at paragraph 5.e. of this section.
Comment: Another respondent states that the rule has not
estimated the number of small business subcontractors that will be
adversely impacted by this requirement.
Response: See discussion at paragraph 11. of this section.
b. Rationale for the flowdown.
Comment: One respondent states that there is no rationale provided
for this troubling and perplexing flowdown requirement and would like
it to be deleted from the rule. None of the agencies currently require
any flowdown to subcontractors.
Response: The same rationale that supports application of the rule
to prime contractors, supports application to subcontractors. Meeting
minimum ethical standards is a requirement of doing business with the
Government, whether dealing directly or indirectly with the Government.
The rule does not apply to contracts/subcontracts less than $5 million,
exempts all commercial contracts/subcontracts, and the final rule
reduces the burden on small business, whether prime or subcontractor.
c. Implementation.
Comment: One respondent has questions about the implementation of
the flowdown. What is a subcontract--does it include purchase orders?
The Government and the construction industry have a different concept
of ``subcontract.'' They are concerned that the meaning of
``subcontract'' is therefore far from clear to general construction
contractors and their subcontractors. Are prime contractors expected to
distinguish subcontracts for commercial items from subcontracts for
other goods and services?
Response: This issue is not specific to this case. Sometimes
construction firms think that ``subcontract'' does not include purchase
orders. The FAR does not make this distinction. The intent is that the
flowdown applies to all subcontracts, including purchase orders. Prime
contractors are expected to distinguish subcontracts for commercial
items from subcontractors for other goods and services, not only for
this rule but for many other FAR requirements (see FAR clause 52.244-6,
Subcontracts for Commercial Items, which is included in all
solicitation and contracts other than those for commercial items).
d. Enforcement.
Comment: Several respondents are concerned with how the flowdown
requirement will be enforced. One respondent is concerned that prime
contractors should not be responsible for subcontractors' compliance
with this requirement. Monitoring of subcontracts would impose a
significant new cost on prime contractors. Another respondent requests
that the rule be revised to clarify that primes are not responsible for
monitoring subcontractor compliance. This respondent is particularly
concerned about the impracticality of a small or medium-sized business
supervising the compliance of major subcontractors.
Response: The contractor is not required to judge or monitor the
ethics awareness program and internal control systems of the
subcontractors--just check for existence. The difficulty of a small
business concern monitoring a large business subcontractor is true with
regard to many contract requirements, not just this one. The Councils
plan to further address the issue of disclosure by the subcontractor
under the new FAR Case 2007-006.
10. Clause prescriptions.
a. Extraneous phrase.
Comment: Several respondents note that something is wrong with the
following phrase in 3.1004(a)(1)(i): `` ...or to address Contractor
Code of Ethics and Business Conduct and the display of Federal agency
Office of the Inspector General (OIG) Fraud Hotline Poster''.
Response: The extraneous phrase has been removed from the final
rule.
b. Alternates.
Comment: One respondent says that what ``triggers the insertion of
Alternate I or II clause language is ambiguous in the text of the
Policy and Procedures sections of the rule and the confusion is
compounded when read with the language used in the clause.''
One respondent comments that if the contract period of performance
is less than 120 days and the agency has not established a requirement
for posting at a lower dollar level, there is no requirement to include
the clause; in this case Alternate II is never invoked. Another
respondent recommends at 3.1004(c)(2) changing ``at a lesser amount''
to ``for contracts valued at $5 million or less''.
Response: The Councils have decided to use two separate clauses,
rather than one clause with alternates. The conditions for use of the
alternates were so diverse, that it was impossible to comply with the
FAR drafting conventions that the prescription for the clause should
include both the requirements for the basic clause and any alternates.
Although the Councils do not agree with the respondent (because the
conditions are connected by ``or'' rather than ``and''), any ambiguity
in the prescription for Alternate II has been eliminated by the use of
two clauses. The language at 3.1004(c)(2)(now 3.1004(b)(3)(ii)) has
been clarified.
11. Regulatory Flexibility Analysis.
a. Impact on small business requires regulatory flexibility
analysis.
Comment: Several respondents note that the rule will have a
substantial impact on small business. The SBA Chief Counsel for
Advocacy commented that the Councils should therefore publish an
Initial Regulatory Flexibility Analysis. The SBA Chief Counsel for
Advocacy points out that the minimal set-up cost for the ethics program
and internal control system would be $10,000, according to one
established professional organization; there would be further costs for
maintaining the system, periodic training, and other compliance costs.
Another respondent asks how the finding that ``ethics programs and
hotline posters are not standard commercial practice'' squares with the
claim that the proposed rule ``will not have a significant impact on a
substantial number of small entities''. The respondent notes the
absence of any cost estimate, or impact on competition for contracts
and subcontracts. Mid-sized and small construction contractors would
find the cost and complexity of restructuring their internal systems,
and continuously providing the necessary training to employees
scattered across multiple sites, to be very substantial, and might well
exceed benefits of pursuing Federal work. (Another respondent echoes
this.) The respondent recommends the Councils undertake a fresh data-
driven analysis of how severely such mandates are likely to impact
small businesses, including the level of small business participation
in Federal work.
[[Page 65881]]
Another respondent comments that the rule may have an unduly
burdensome impact on Government contractors, particularly smaller
contractors. It may deter small and minority owned businesses from
entering the Federal marketplace and from competing for certain
contracts.
b. Alternatives. Several alternatives were presented for small
business compliance with the regulation.
Since small business size standards for the construction
industry are well over $5 million in annual revenue, the exclusion of
contracts under $5 million is not likely to insulate small business
from the cost of compliance. Federal construction contracts typically
exceed $5 million, and small construction contractors regularly perform
them. Instead of $5 million, the requirements should be linked to the
size standards the SBA established, and some proportion of the work
that the contractor performs for the Federal Government. The
construction industry size standard for general contractors is $31
million in average annual revenue. The requirements should be imposed
on only the firms that both exceed the standard and derive a large
proportion of their revenue from Federal contracts.
Delay the flow down requirement to small business
subcontractors, pending review of data on impact on small business
subcontractors (SBA Chief Counsel for Advocacy).
Provide additional guidance for small businesses on a code
of ethics commensurate with their size.
Response:
Exclusion of commercial items. The original Regulatory Flexibility
Act statement as published did not identify the rule's exclusion for
commercial items. The burdens of the clauses will not be imposed on
Part 12 acquisitions of commercial items. This is of great benefit to
small businesses.
Reduced burden for small businesses. The Councils acknowledge the
difficulty and great expense for a small business to have a formal
training program, and formal internal controls. The Councils also
acknowledge that the public was confused about the proposed rule's
flexible language for small business: ``Such program shall be suitable
to the size of the company.''
The Councils have maintained the clause requirement for small
businesses to have a business code of ethics and provide copies of this
code to each employee. There are many available sources to obtain
sample codes of ethics.
However, the Councils have made the clause requirements for a
formal training program and internal control system inapplicable to
small businesses (see also paragraph 5.c.v. of this section).
Because the clause 52.203-13 is still included in the contract with
small businesses, the requirements for formal training program and
internal control systems will flow down to large business
subcontractors, but not apply to small businesses.
The Councils note that if a small business subsequently finds
itself in trouble ethically, the need for a training program and
internal controls will likely be addressed by the Federal Government at
that time, during a criminal or civil lawsuit or debarment or
suspension.
This is not a significant regulatory action and, therefore, was not
subject to review under Section 6(b) of Executive Order 12866,
Regulatory Planning and Review, dated September 30, 1993. This rule is
not a major rule under 5 U.S.C. 804.
B. Regulatory Flexibility Act
The Department of Defense, the General Services Administration, and
the National Aeronautics and Space Administration certify that this
final rule will not have a significant economic impact on a substantial
number of small entities within the meaning of the Regulatory
Flexibility Act, 5 U.S.C. 601, et seq., because the rule does not
require use of the clause requiring contractors to have a written code
of business ethics and conduct if the contract is--
Valued at $5 million or less;
Has a performance period less than 120 days;
Was awarded under Part 12; or
Will be performed outside the United States.
Furthermore, after discussions with the Small Business
Administration (SBA) Office of Advocacy, the Councils have made
inapplicable to small businesses the clause requirement for a formal
compliance awareness program and internal control system.
C. Paperwork Reduction Act
The Paperwork Reduction Act does not apply because the changes to
the FAR do not impose information collection requirements that require
the approval of the Office of Management and Budget under 44 U.S.C.
3501, et seq.
List of Subjects in 48 CFR Parts 2, 3, and 52
Government procurement.
Dated: November 16, 2007.
Al Matera,
Director, Office of Acquisition Policy.
0
Therefore, DoD, GSA, and NASA amend 48 CFR parts 2, 3, and 52 as set
forth below:
0
1. The authority citation for 48 CFR parts 2, 3, and 52 continues to
read as follows:
Authority: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 42
U.S.C. 2473(c).
PART 2--DEFINITIONS OF WORDS AND TERMS
0
2. Amend section 2.101 in paragraph (b), in the definition ``United
States'' by redesignating paragraphs (1) through (7) as paragraphs (2)
through (8), respectively, and adding a new paragraph (1) to read as
follows:
2.101 Definitions.
(b) * * *
United States * * *
(1) For use in Subpart 3.10, see the definition at 3.1001.
* * * * *
PART 3--IMPROPER BUSINESS PRACTICES AND PERSONAL CONFLICTS OF
INTEREST
0
3. Add Subpart 3.10 to read as follows:
Subpart 3.10--Contractor Code of Business Ethics and Conduct
Sec.
3.1000 Scope of subpart.
3.1001 Definitions.
3.1002 Policy.
3.1003 Mandatory requirements.
3.1004 Contract clauses.
Subpart 3.10--Contractor Code of Business Ethics and Conduct
3.1000 Scope of subpart.
This subpart prescribes policies and procedures for the
establishment of contractor codes of business ethics and conduct, and
display of agency Office of Inspector General (OIG) fraud hotline
posters.
3.1001 Definitions.
United States, as used in this subpart, means the 50 States, the
District of Columbia, and outlying areas.
3.1002 Policy.
(a) Government contractors must conduct themselves with the highest
degree of integrity and honesty.
(b) Contractors should have a written code of business ethics and
conduct. To promote compliance with such code of business ethics and
conduct, contractors should have an employee business
[[Page 65882]]
ethics and compliance training program and an internal control system
that--
(1) Are suitable to the size of the company and extent of its
involvement in Government contracting;
(2) Facilitate timely discovery and disclosure of improper conduct
in connection with Government contracts; and
(3) Ensure corrective measures are promptly instituted and carried
out.
3.1003 Mandatory requirements.
(a) Requirements. Although the policy in section 3.1002 applies as
guidance to all Government contractors, the contractual requirements
set forth in the clauses at 52.203-13, Code of Business Ethics and
Conduct, and 52.203-14, Display of Hotline Poster(s), are mandatory if
the contracts meet the conditions specified in the clause prescriptions
at 3.1004.
(b) Fraud Hotline Poster. (1) Agency OIGs are responsible for
determining the need for, and content of, their respective agency OIG
fraud hotline poster(s).
(2) When requested by the Department of Homeland Security, agencies
shall ensure that contracts funded with disaster assistance funds
require display of any fraud hotline poster applicable to the specific
contract. As established by the agency OIG, such posters may be
displayed in lieu of, or in addition to, the agency's standard poster.
3.1004 Contract clauses.
Unless the contract is for the acquisition of a commercial item
under part 12 or will be performed entirely outside the United States--
(a) Insert the clause at FAR 52.203-13, Contractor Code of Business
Ethics and Conduct, in solicitations and contracts if the value of the
contract is expected to exceed $5,000,000 and the performance period is
120 days or more.
(b)(1) Insert the clause at FAR 52.203-14, Display of Hotline
Poster(s), if--
(i) The contract exceeds $5,000,000 or a lesser amount established
by the agency; and
(ii)(A) The agency has a fraud hotline poster; or
(B) The contract is funded with disaster assistance funds.
(2) In paragraph (b)(3) of the clause, the contracting officer
shall--
(i) Identify the applicable posters; and
(ii) Insert the website link(s) or other contact information for
obtaining the agency and/or Department of Homeland Security poster.
(3) In paragraph (d) of the clause, if the agency has established
policies and procedures for display of the OIG fraud hotline poster at
a lesser amount, the contracting officer shall replace ``$5,000,000''
with the lesser amount that the agency has established.
PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES
0
4. Add sections 52.203-13 and 52.203-14 to read as follows:
52.203-13 Contractor Code of Business Ethics and Conduct.
As prescribed in 3.1004(a), insert the following clause:
CONTRACTOR CODE OF BUSINESS ETHICS AND CONDUCT (DEC 2007)
(a) Definition.
United States, as used in this clause, means the 50 States, the
District of Columbia, and outlying areas.
(b) Code of business ethics and conduct. (1) Within 30 days
after contract award, unless the Contracting Officer establishes a
longer time period, the Contractor shall--
(i) Have a written code of business ethics and conduct; and
(ii) Provide a copy of the code to each employee engaged in
performance of the contract.
(2) The Contractor shall promote compliance with its code of
business ethics and conduct.
(c) Awareness program and internal control system for other than
small businesses. This paragraph (c) does not apply if the
Contractor has represented itself as a small business concern
pursuant to the award of this contract. The Contractor shall
establish within 90 days after contract award, unless the
Contracting Officer establishes a longer time period--
(1) An ongoing business ethics and business conduct awareness
program; and
(2) An internal control system.
(i) The Contractor's internal control system shall--
(A) Facilitate timely discovery of improper conduct in
connection with Government contracts; and
(B) Ensure corrective measures are promptly instituted and
carried out.
(ii) For example, the Contractor's internal control system
should provide for--
(A) Periodic reviews of company business practices, procedures,
policies, and internal controls for compliance with the Contractor's
code of business ethics and conduct and the special requirements of
Government contracting;
(B) An internal reporting mechanism, such as a hotline, by which
employees may report suspected instances of improper conduct, and
instructions that encourage employees to make such reports;
(C) Internal and/or external audits, as appropriate; and
(D) Disciplinary action for improper conduct.
(d) Subcontracts. The Contractor shall include the substance of
this clause, including this paragraph (d), in subcontracts that have
a value in excess of $5,000,000 and a performance period of more
than 120 days, except when the subcontract--
(1) Is for the acquisition of a commercial item; or
(2) Is performed entirely outside the United States.
(End of clause)
52.203-14 Display of Hotline Poster(s).
As prescribed in 3.1004(b), insert the following clause:
DISPLAY OF HOTLINE POSTER(S) (DEC 2007)
(a) Definition.
United States, as used in this clause, means the 50 States, the
District of Columbia, and outlying areas.
(b) Display of fraud hotline poster(s). Except as provided in
paragraph (c)--
(1) During contract performance in the United States, the
Contractor shall prominently display in common work areas within
business segments performing work under this contract and at
contract work sites--
(i) Any agency fraud hotline poster or Department of Homeland
Security (DHS) fraud hotline poster identified in paragraph (b)(3)
of this clause; and
(ii) Any DHS fraud hotline poster subsequently identified by the
Contracting Officer.
(2) Additionally, if the Contractor maintains a company website
as a method of providing information to employees, the Contractor
shall display an electronic version of the poster(s) at the website.
(3) Any required posters may be obtained as follows:
Poster(s) Obtain from
------------------ ------------------
------------------ ------------------
(Contracting Officer shall insert-- (i) Appropriate agency
name(s) and/or title of applicable Department of Homeland Security
fraud hotline poster); and
(ii) The website(s) or other contact information for obtaining
the poster(s).)
(c) If the Contractor has implemented a business ethics and
conduct awareness program, including a reporting mechanism, such as
a hotline poster, then the Contractor need not display any agency
fraud hotline posters as required in paragraph (b) of this clause,
other than any required DHS posters.
(d) Subcontracts. The Contractor shall include the substance of
this clause, including this paragraph (d), in all subcontracts that
exceed $5,000,000, except when the subcontract--
(1) Is for the acquisition of a commercial item; or
(2) Is performed entirely outside the United States.
(End of clause)
[FR Doc. 07-5800 Filed 11-21-07; 8:45 am]
BILLING CODE 6820-EP-S