Federal Contractor Alert: The Coming "Sea Change" for Federal Contractors and Subcontractors


Federal Acquisition Regulation to Impose Contractor Disclosure Obligation upon Credible Evidence of a Violation of Law or Contract

Effective December 12, 2008, contractors and subcontractors working on federal contracts will be required to disclose to the U.S. government credible evidence of fraud or misconduct in connection with the award, performance, or closeout of such federal contracts. Failure to disclose known violations of federal law involving the contract may result in suspension or debarment of the contractor or its principals from contracting with federal agencies.

A final rule amending the Federal Acquisition Regulation (FAR) was published on November 12, 2008. It amplifies last year’s FAR requirement that contractors or subcontractors working on federal contracts valued at over $5 million or to be performed over more than 120 days create a written code of business ethics and institute compliance training programs.1 Beginning December 12, 2008, contractors and subcontractors performing federal contracts—irrespective of monetary value or duration—will be legally obligated to disclose to the relevant federal agency’s Office of Inspector General (OIG) credible evidence of:

*federal criminal law violations involving fraud, conflict of interest, bribery or gratuities;

*violations of the civil False Claims Act;

*or significant overpayment on the contract.

Contractors who do not discover credible evidence of such wrongdoing until three years after final payment on the government contract, or later, are excused from the new disclosure rule.

Please see full alert for more information.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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