Tougher Rules: Mandatory Disclosure Regime Raises Stakes for Contractors

By Laufman, David H. | National Defense, February 2009 | Go to article overview

Tougher Rules: Mandatory Disclosure Regime Raises Stakes for Contractors


Laufman, David H., National Defense


[ILLUSTRATION OMITTED]

A new regulatory enforcement regime has now commenced that underscores the Department of Justice's aggressive approach to procurement fraud and dramatically increases the compliance and disclosure obligations of defense contractors.

On Dec. 12, 2008, an amendment to the Federal Acquisition Regulation (FAR) took effect that requires all contractors to timely disclose certain violations of law and overpayments to the government on penalty of suspension and debarment. The new disclosure requirement comes approximately one year after another ethics regulation took effect that requires contractors in certain procurements to establish and implement a code of business ethics and conduct, as well as an extensive internal control system.

Defense contractors also face additional disclosure requirements stemming from the Defense Authorization Act for fiscal year 2009, which will soon require many of them to submit semi-annual reports to the Defense Department that contain specified information for inclusion in an electronic database regarding prior adverse actions or findings of contractor misconduct.

All contractors, regardless of their size or the value of the procurement, must now make a "timely" written disclosure to the office of inspector general at the agency that awarded the contract--with a copy to the contracting officer--whenever, in connection with an award, performance, or closeout of a contract or subcontract, the contractor has "credible evidence" that a principal, employee, agent, or subcontractor has committed a violation of federal criminal law involving fraud, conflict of interest, bribery, or illegal gratuities; or a violation of the civil False Claims Act. Contractors are already obligated to report overpayments under pre-existing payments provisions in the FAR.

[ILLUSTRATION OMITTED]

The mandatory disclosure requirement applies both to acquisitions of commercial items and to contracts performed outside of the United States. In addition, it applies to subcontractors as well as prime contractors.

The regulation contains a daunting enforcement mechanism for non-compliance with the new disclosure requirement. Specifically, any contractor or subcontractor may be suspended or debarred upon the "knowing" failure by a "principal" to timely disclose to the government "credible evidence" of the following: a violation of federal criminal law involving fraud, conflict of interest, bribery, or illegal gratuities; a violation of the civil False Claims Act; or "significant overpayments" on a contract. Debarment in the event of non-disclosure is not a certainty, however. The 10 mitigating factors set forth in FAR 9.406-1(a) will continue to apply to determine whether debarment should occur.

The disclosure obligation continues until three years after final payment on a contract. In addition, contractors must disclose known violations relating to an ongoing contract even if they occurred prior to Dec. 12, 2008, the effective date of the regulation. The knowing failure to disclose specified violations remains a cause of action for suspension and debarment for three years after final payment on a contract.

These are the FAR Councils' definition of key terms:

Principal. A "principal" is broadly defined in the regulation to include "an officer, director, owner, partner, or a person having primary management or supervisory responsibilities within a business entity," such as a general manager, plant manager, or the head of a subsidiary, division, or business segment. The FAR Councils stressed that the "definition should be interpreted broadly, and could include compliance officers or directors of internal audit, as well as other positions of responsibility."

Credible Evidence. The FAR Councils expressly noted that until the contractor has determined the evidence to be credible, there can be no "knowing failure to timely disclose. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Tougher Rules: Mandatory Disclosure Regime Raises Stakes for Contractors
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.