[Federal Register Volume 72, Number 32 (Friday, February 16, 2007)]
[Proposed Rules]
[Pages 7588-7590]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 07-698]
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DEPARTMENT OF DEFENSE
GENERAL SERVICES ADMINISTRATION
NATIONAL AERONAUTICS AND SPACE ADMINISTRATION
48 CFR Parts 2, 3, and 52
[FAR Case 2006-007; Docket 2007-0001; Sequence 1]
RIN 9000-AK67
Federal Acquisition Regulation; FAR Case 2006-007, Contractor
Code of Ethics and Business Conduct
AGENCIES: Department of Defense (DoD), General Services Administration
(GSA), and National Aeronautics and Space Administration (NASA).
ACTION: Proposed rule with request for comments.
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SUMMARY: The Civilian Agency Acquisition Council and the Defense
Acquisition Regulations Council (Councils) are proposing to amend the
Federal Acquisition Regulation (FAR) to address Contractor Code of
Ethics and Business Conduct and the display of Federal agency Office of
the Inspector General (OIG) Fraud Hotline Poster.
DATES: Interested parties should submit written comments to the FAR
Secretariat on or before April 17, 2007 to be considered in the
formulation of a final rule.
ADDRESSES: Submit comments identified by FAR case 2006-007 by any of
the following methods:
Federal eRulemaking Portal: http://www.regulations.gov.Search for any document by first selecting the
proper document types and selecting ``Federal Acquisition Regulation''
as the agency of choice. At the ``Keyword'' prompt, type in the FAR
case number (for example, FAR Case 2006-007) and click on the
``Submit'' button. Please include any personal and/or business
information inside the document.You may also search for any document by
clicking on the ``Advanced search/document search'' tab at the top of
the screen, selecting from the agency field ``Federal Acquisition
Regulation'', and typing the FAR case number in the keyword field.
Select the ``Submit'' button.
Fax: 202-501-4067.
Mail: General Services Administration, Regulatory
Secretariat (VIR), 1800 F Street, NW, Room 4035, ATTN: Laurieann
Duarte, Washington, DC 20405.
Instructions: Please submit comments only and cite FAR case 2006-
007 in all correspondence related to this case. All comments received
will be posted without change to http://www.regulations.gov, including
any personal and/or business confidential information provided.
FOR FURTHER INFORMATION CONTACT: Mr. Ernest Woodson, Procurement
Analyst, at (202) 501-3775 for clarification of content. For
information pertaining to status or publication schedules, contact the
FAR Secretariat at (202) 501-4755. Please cite FAR case 2006-007.
SUPPLEMENTARY INFORMATION:
A. Background
FAR Part 3 provides guidance on improper business practices and
personal conflicts of interest, but it does not discuss the
contractor's responsibilities with regard to code of ethics and
business conduct and the avoidance of improper business practices.
Currently, three agencies (the Departments of Defense, Veterans
Affairs, and the Environmental Protection Agency) maintain policy for
contractor code of ethics and business conduct and the contractor's
responsibility to avoid improper business practices. With few
exceptions, the agencies' clauses and prescriptions are very similar to
one another, in that they- establish agency policy and recommend
contents of a contractor's system of management and internal controls
in connection with Government contracts; establish contract dollar
thresholds for display of the agency Inspector General poster; provide
instructions for obtaining the hotline posters; and provide exemptions
to displaying posters. However, the agencies' policies differ on the
contract dollar thresholds and the address and phone number of the
Office of the Inspector General (OIG) to obtain a fraud hotline poster.
In view of the significant sums of Federal dollars spent by
agencies to acquire goods and services, this rule establishes a clear
and consistent policy regarding contractor code of ethics and business
conduct, responsibility to avoid improper business practices, and
procedures for displaying an agency OIG Fraud Hotline poster to
facilitate the reporting of wrongdoing in Federal contracting. This
rule also recognizes the need for agencies to cooperate with the
Department of Homeland Security to ensure that contracts funded with
disaster assistance funds require display of any event-specific fraud
hotline posters announcing ad hoc or other special hotline reporting
information applicable to the specific contract. This rule proposes
amending the FAR to add FAR Subpart 3.10, Contractor Code of Ethics and
Business Conduct, that will--
1. Define the ``United States'' to mean the 50 States, the District
of Columbia and outlying areas as used in FAR 25.003, and exclude
contracts performed outside the United States from the requirements of
the rule.
2. Include policy stating that contractors ``should'' have a code
of ethics and business conduct.
3. Exclude commercial item contracts awardedpursuant to FAR Part 12
from the requirements of the rule, because the rule will not implement
statute or executive order, and because ethics programs and hotline
posters are not standard commercial practices as stipulated by the
Federal Acquisition Streamlining Act.
4. Provide that contractors receiving awards inexcess of $5,000,000
that have performance periods of 120 days or more, shall have a written
code of ethics and business conduct within 30 days after contract
award. Furthermore, the contractor shall promote compliance by
establishing, within 90 days after contract award, an employee ethics
and compliance training program and an internal control system
proportionate to the size of the company and extent of its business
with the Federal Government.
5. Provide that contractors receiving awards inexcess of $5,000,000
shall
[[Page 7589]]
display the agency OIG fraud hotline poster and, when appropriate, any
special disaster relief poster from Department of Homeland Security, at
work locations in the United States and at the company website if the
contractor has established a company website for the purposes of
providing information to employees.
6. Provide alternates to the basic clause to accommodate those
agencies that do not have posters and to accommodate agencies that
choose to require the display of a fraud hotline poster at contract
award thresholds at or below $5,000,000.
7. Include a flowdown provision that applies tosubcontracts at the
same dollar level as the prime contract.
8. Provide for remedies if the contractor fails to comply with the
clause.
This is not a significant regulatory action and, therefore, was not
subject to review under Section 6(b) of Executive Order 12866,
Regulatory Planning and Review, dated September 30, 1993. This rule is
not a major rule under 5 U.S.C. 804.
B. Regulatory Flexibility Act
The Councils do not expect this proposed rule to have a significant
economic impact on a substantial number of small entities within the
meaning of the Regulatory Flexibility Act, 5 U.S.C. 601, et seq.,
because the rule does not require contractors to have a written code of
ethics and business conduct, employee ethics and compliance training
program, or internal control system for contracts valued at $5 million
or less; and provides that when such programs are required, they shall
be suitable to the size of the company and the extent of the company's
business with the Federal Government. Under the rule, contractors have
the ability to determine the simplicity or complexity and cost of their
programs.
An Initial Regulatory Flexibility Analysis has, therefore, not been
performed. We invite comments from small businesses and other
interested parties. The Councils will consider comments from small
entities concerning the affected FAR Parts 2, 3, and 52 in accordance
with 5 U.S.C. 610. Interested parties must submit such comments
separately and should cite 5 U.S.C. 601, et seq. (FAR case 2006-007),
in correspondence.
C. Paperwork Reduction Act
The Paperwork Reduction Act does not apply because the proposed
changes to the FAR do not impose information collection requirements
that require the approval of the Office of Management and Budget under
44 U.S.C. 3501, et seq.
List of Subjects in 48 CFR Parts 2, 3, and 52
Government procurement.
Dated:February 7, 2007.
Ralph De Stefano,
Director, Contract Policy Division.
Therefore, DoD, GSA, and NASA propose amending 48 CFR parts 2, 3,
and 52 as set forth below:
1. The authority citation for 48 CFR parts 2, 3, and 52 continues
to read as follows:
Authority: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 42
U.S.C. 2473(c).
PART 2 -- DEFINITIONS OF WORDS AND TERMS
2. Amend section 2.101 in paragraph (b), in the definition ``United
States,'' by redesignating paragraphs (1) through (6) as paragraphs(2)
through)(7), respectively, and adding a new paragraph (1) to read as
follows:
2.101 Definitions.
* * * * *
(b)* * *
``United States,'' when used in a geographic sense, means the 50
States and the District of Columbia, except as follows:
(1) For use in Subpart 3.10, see the definition at 3.1001.
* * * * *
PART 3--IMPROPER BUSINESS PRACTICES AND PERSONAL CONFLICTS OF
INTEREST
3. Add Subpart 3.10 to read as follows:
Sec.
3.1000 Scope of subpart.
3.1001 Definitions.
3.1002 Policy.
3.1003 Procedures.
3.1004 Contract clause.
Subpart 3.10--Contractor Code of Ethics and Business Conduct
3.1000 Scope of subpart.
This subpart prescribes policies and procedures for the
establishment of contractor code of ethics and business conduct, and
display of agency Office of Inspector General (OIG) fraud hotline
posters.
3.1001 Definitions.
``United States,''as used in this subpart, means the 50 States, the
District of Columbia, and outlying areas.
3.1002 Policy.
Government contractors must conduct themselves with the highest
degree of integrity and honesty. Contractors should have a written code
of ethics and business conduct. To promote compliance with such code of
ethics and business conduct, contractors should have an employee ethics
and compliance training program and an internal control system that-
(a) Are suitable to the size of the company and extent of its
involvement in Government contracting;
(b) Facilitate timely discovery and disclosure of improper conduct
in connection with Government contracts; and
(c) Ensure corrective measures are promptly instituted and carried
out.
3.1003 Procedures.
Contracting officers shall ensure that the requirements of this
subpart are implemented using the following procedures:
(a) Exceptions. Commercial item contracts performed under Part 12
or performed outside the United States do not apply to this subpart and
are not required to --
(1) Have an employee ethics and compliance training program and
internal control systems; or
(2) Have the contractor display the fraud poster.
(b) Contracts exceeding $5,000,000.
(1) Contracts exceeding $5,000,000 shall require the contractor
to--
(i) Display the agency OIG fraud hotline poster, unless the agency
does not have a fraud hotline poster; and
(ii) Display the Department of Homeland Security (DHS) disaster
assistance poster in accordance with paragraph (d)(2) of this section.
(2) In addition to the requirements of paragraph(b)(1) of this
section, contracts exceeding $5,000,000 with performance periods of 120
days or more shall require the contractor to--
(i) Have a written code of ethics and business conduct; and
(ii) Establish an employee ethics and compliance training program
and internal control systems commensurate with the size of the company
and its involvement in Government contracting.
(c) Contracts valued at $5,000,000 or less. Agencies may establish
policy and procedures for display of the agency OIG fraud hotline
poster, without imposing the requirements of paragraph (b)(2) of this
section, in contracts valued at $5,000,000 or less.
(d) Fraud Hotline Poster. (1) Agencies are responsible for
determining the need for, and content of, their respective agency OIG
fraud hotline poster(s).
[[Page 7590]]
(2) When requested by the Department of Homeland Security (DHS),
agencies shall ensure that contracts funded with disaster assistance
funds require display of any event-specific fraud hotline poster
applicable to the specific contract. As established by the agency, such
posters may be displayed in lieu of, or in addition to, the agency's
standard poster.
3.1004 Contract clause.
(a)(1) Insert the clause at FAR 52.203-XX, Contractor Code of
Ethics and Business Conduct, in solicitations and contracts expected to
exceed $5,000,000 and the performance period is 120 days or more,
except when the contract -
(i) Will be awarded pursuant to the procedures inFAR Part 12; or to
address Contractor Code of Ethics and Business Conduct and the display
of Federal agency Office of the Inspector General (OIG) Fraud Hotline
Poster.
(ii) Will be performed outside the United States. (2) The
contracting officer shall insert the website link(s) or other contact
information for obtaining the agency and/or DHS poster.
(b) Insert the clause with its Alternate I-
(1) When the agency does not have a fraud hotline poster; and
(2) When the requirements of 3.1003(d)(2) do not apply.
(c) Insert the clause with its Alternate II-
(1) When the contract performance period is less than 120 days; or
(2) If the agency has established policies and procedures for
display of the OIG fraud hotline poster at a lesser amount. The
contracting officer shall insert the agency authorized lesser amount in
paragraph (d) of this section.
PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES
4. Add section 52.203-XX to read as follows:
52.203-XX Contractor Code of Ethics and Business Conduct.
As prescribed in 3.1004(a), insert the following clause:
CONTRACTOR CODE OF ETHICS AND BUSINESS CONDUCT (DATE)
(a) Definition.
``United States,'' as used in this clause, means the 50 States,
the District of Columbia, and outlying areas.
(b) Code of ethics and business conduct. (1) Within 30 days
after contract award, the Contractor shall have a written code of
ethics and business conduct.
(2) (i) The Contractor shall promote compliance with its code of
ethics and business conduct. Within 90 days after contract award,
the Contractor shall establish--
(A) An employee ethics and compliance training program; and
(B) An internal control system.
(ii) Such program and system shall be suitable to the size of
the company and its involvement in Government contracting.
(c) Internal control system.(1) The Contractor's internal
control system shall--
(i) Facilitate timely discovery and disclosure of improper
conduct in connection with Government contracts; and
(ii) Ensure corrective measures are promptly instituted and
carried out.
(2) For example, the Contractor's internal control system should
provide for--
(i) Periodic reviews of company business practices, procedures,
policies, and internal controls for compliance with the Contractor's
code of ethics and business conduct and the special requirements of
Government contracting;
(ii) An 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;
(iii) Internal and/or external audits, as appropriate;
(iv) Disciplinary action for improper conduct;
(v) Timely reporting to appropriate Government officials of any
suspected violations of law in connection with Government contracts
or any other irregularities in connection with such contracts; and
(vi) Full cooperation with any Government agencies responsible
for either investigation or corrective actions.
(d) Display of fraud hotline poster(s). (1) During contract
performance, the Contractor shall prominently display the ----------
-------- (Contracting Officer shall insert (i) appropriate agency
name(s) and/or (ii) title of applicable DHS event-specific fraud
hotline poster) fraud hotline poster(s) in common work areas within
business segments performing work under this contract and at
contract work sites. The Contractor is not required to display the
poster(s) in common work areas and contract sites outside the United
States.
(2) Additionally, if the Contractor maintains a company website
as a method of providing information to employees, the Contractor
shall display an electronic version of the poster(s) at the website.
(3) The -------------- poster(s) may be obtained from ----------
----. (Contracting Officer shall insert the website(s) or other
contact information for obtaining the poster(s).)
(e) Remedies. In addition to the other remedies available to the
Government, the Contractor's failure to comply with the requirements
of this clause may render the Contractor subject to--
(1) Withholding of contract payments; or
(2) Loss of award fee, consistent with the award fee plan, for
the performance period in which the Government determined Contractor
non-compliance.
(f) Subcontracts. (1) The Contractor shall include the substance
of this clause, including this paragraph (f), in all subcontracts
that exceed $5,000,000, except when the subcontract--
(i) Is for the acquisition of a commercial item; or
(ii) Is performed outside the United States.
(2) The Contractor is not required to include the requirements
of paragraphs (b) and (c) of this clause in subcontracts that have
performance periods of less than 120 days.
(End of clause)
Alternate I (DATE). As prescribed in 3.1004(b), delete paragraph
(d), and redesignate paragraphs (e) and (f) as paragraphs (d) and (e).
Alternate II (DATE). As prescribed in 3.1004(c), delete paragraphs
(b), (c) and (f) from the basic clause, redesignate paragraphs (d) and
(e) as paragraphs (b) and (c) and insert the following paragraph (d):
(d) Subcontracts. The Contractor shall include the substance of
this clause, including this paragraph (d), in all subcontracts that
exceed $-------------- (Contracting Officer shall insert $5,000,000 or
the amount authorized by agency procedures), except when the
subcontract--
(1) Is for the acquisition of a commercial item; or
(2) Is performed outside the United States.
[FR Doc. 07-698 Filed 2-15-07; 8:45 am]
BILLING CODE 6820-EP-S