Compliance and Ethics Requirements for Government Contractors

Doing business with the U.S. government can be quite different than when operating in the private sector. If you’re a government contractor, you must adhere to stringent regulations regarding compliance and ethical behavior. The failure to do so could result in the suspension of contracting privileges, or even debarment. All too often, it is the unethical or illegal actions of one rogue employee that results in serious consequences for an entire organization.

The Federal Acquisition Regulation outlines ethics and compliance standards

The Federal Acquisition Regulation (FAR) is the set of rules and laws that governs the procedures that federal government entities must abide by when purchasing goods and services from contractors. The FAR component that pertains to ethics and compliance is Subpart 3.10 – Contractor Code of Business Ethics and Conduct. In particular, this subsection directs the use of FAR clause 52.203-13 (also referred to as the Contractor Code of Business Ethics and Conduct) and FR.203-14 (Display of Hotline Posters).

Subpart 3.10 overview

In essence, Subpart 3.10 mandates that contractors (and any subcontractors they hire) must meet the following requirements whenever the contract value is expected to exceed $5 million and the performance period will be equal to or greater than 120 days:

  • Contractor must have a written code of business ethics and conduct in place, and implement a formal code awareness/education/training program.
  • Code must be made available to all employees involved in contract performance.
  • Contractor must exercise due diligence in regard to the detection and prevention of inappropriate conduct.
  • Contractor must take appropriate steps to promote a culture that encourages ethical conduct and compliance.
  • Contractor must provide timely written disclosure whenever it obtains credible evidence of an ethical violation.
  • Contractor must cooperate in full with any audit, investigation, or corrective action related to contract fraud.
  • Contractor must properly display as ethics/reporting hotline posters as described in FR.203-14.

Other relevant requirements

Additionally, all contractors that are not classified as small businesses are required to have a comprehensive business ethics awareness and compliance program in place. Key program elements should include:

  • Implementing reasonable steps for providing job function-specific ethics and compliance program training to employees, as well as agents, principals, and subcontractors
  • Creating and establishing a detailed internal controls system within 90 days of contract award. The system should include mechanisms to ensure the timely discovery of inappropriate conduct.
  • Establishing an internal system/mechanism for anonymous reporting of misconduct, such as an ethics hotline
  • Implementing systems for disciplining individuals who engage in inappropriate conduct, as well as for as incentivizing/rewarding compliant behavior
  • Timely disclosure of violations relating to the False Claims Act

Steps government contractors can take to ensure compliance

There are a number of steps your organization can take immediately to ensure compliance with the FAR rules:

  1. Conduct a risk assessment/gap analysis. This will help you identify those areas where your compliance efforts may be falling short.
  2. Appoint a dedicated compliance officer. Compliance with the numerous federal ethics regulations/requirements is a daunting challenge that may be beyond the scope of your HR department. Appointing a dedicated compliance offer can ensure that you avoid the missteps that could lead to unethical behavior and ultimately result in suspensions or disbarment.
  3. Craft a code. If you do not already have one in place, develop a well-crafted code of conduct that specifically addresses issues relevant to government contracting. Your compliance officer should bear the responsibility of code development, enforcement, and maintenance.
  4. Implement a confidential hotline reporting mechanism. Instituting an anonymous whistleblower hotline managed by an independent third party provides employees and others involved with contract execution with a means of reporting incidents of misconduct without fear of retaliation.
  5. Establish training programs. Have training programs in place for code of conduct education and all other pertinent ethics rules and regulations.
  6. Review your programs at least once a year and update them as necessary.

Getting help with meeting government contracting ethics and compliance requirements

As mentioned, creating a code of conduct is a necessity for just about any organization involved in government contracting. If you need assistance in crafting a code for your company, please refer to the Lighthouse Services white paper “Developing a Code of Conduct: A Step-by-Step Guide.” To learn more about our wide array of training services that can help you fulfill the FAR ethics and compliance training requirements, please click here.

Related Posts

Enter your keyword