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Final Rule Regarding Contractor Business Ethics Program Takes Effect

September 28, 2011 Written by: Written by Kevin Frankovich, CGR Associates

A final rule providing guidance regarding the responsibility to ensure that contractors have implemented the mandatory contractor business ethics program requirements of FAR 52.203-13 to the list of contract administration functions at FAR 42.302 took effect June 30, 2011.

However federal prime contracts that exceed $5 million and have a period of performance of 120 days, and all subcontracts of the same dollar amount or duration, contain a clause which requires contractors to have a written Contractor Code of Business Ethics and Conduct.  This Code must be made available to each employee working on the contract.

Whether clause 52.203-13 applies or not, contractors may be suspended and/or debarred if a principal fails to timely disclose to the government, in connection with the award, performance, or closeout of a government contract performed by the contractor or a subcontractor, credible evidence of a violation of Federal criminal law involving fraud, conflict of interest, bribery or gratuity violations found in Title 18 of the United States Code or a violation of the civil False claims Act. Knowingly failing to timely disclose credible evidence of any of these violations is cause for suspension and/or debarment until three years after final payment on a contract.

If applicable,  contractors must also have an ongoing business ethics awareness and compliance program, which must be established within 90 days of a contract award. In general, this program must periodically communicate the standards and procedures of the contractor’s business ethics program to the contractors principals, employees, and its agents and subcontractors when appropriate.

Federal auditors have been charged with “vigorously verifying contractor compliance programs”.  Contractors should be aware that it’s likely they will be asked to produce evidence of compliance with the requirement to have a written code of Business Ethics and Conduct and, if applicable, to have an ongoing business ethics awareness and compliance program.