FAR Ethics Requirements
As of December, organizations that serve the federal government must meet new ethics program federal acquisition regulation (FAR) rules.
We recommend that those with government contracts consult with their legal counsel regarding the new FAR ethics rules. Your legal firm (or Ethical Advocate) can help you in determining if your organization is meeting the letter of the regulation.
If you don’t have legal representation specializing in this area, the following law firms are on the ball related to this ruling. They have all written about the new ethics policy, ethics training, and employee hotline rules. Below are links from each of the leading firms and quotes that give an overview of the FAR ethics requirements:
“That rule requires… companies receiving awards of government contracts and subcontracts expected to exceed $5 million and with performance period of 120 days or more to:
- Have a code of business ethics and conduct within 30 days of award;
- Implement a formal ‘awareness’ or training program on the code within 90 days of award;
- Develop internal controls to support the code, also within 90 days of award; and
- Display a hotline poster.”
– Holland + Knight – Construction Accounting and Taxation; “New FAR Rule on Compliance Programs and Ethics” – January/February 2009
“According to FAR Subpart 3.10, an effective internal control system must facilitate timely discovery of improper conduct in connection with the government contract, ensure prompt corrective action and include… (a)n 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.” – Squire Sanders, “Ethics and Compliance Program for Government Contractors”
One of the 16 published checklist items from a recent seminar on how to meet the new FAR requirements is “Establish procedures to detect overpayment and report (via a hotline or the equivalent) any potential violations” – Reed Smith, “Federal Forecaster”, Winter 2009
“(T)he contractor must have an internal reporting mechanism, such as a hotline, which allows anonymity or confidentiality, by which employees may report suspected instances of improper conduct, and instructions that encourage such reports. While the regulations indicate that contractors can use a government hotline and informational poster to meet this requirement, abdicating such an important element of the program to the government is generally not the most effective way for a contractor to establish an ongoing effective program.” – Pepper Hamilton – “A Roadmap of Requirements for Codes of Business Ethics and Conduct“, January 9, 2009
“(The) final rule imposes new requirements for mandatory disclosure when a contractor has ‘credible evidence’ that a principal, employee, agent, or subcontractor has violated the civil False Claims Act (FCA) or has committed certain violations of federal criminal law.” – Arnold + Porter – “Client Advisory“, November 2008
“Contractors who knowingly fail to report these violations or overpayments when a principal officer or employee has ‘credible evidence’ may face suspension or debarment.” – Wiley Rein, “The Dawn of Mandatory Disclosures”, November 8, 2008