Complying with the FAR’s Code of Ethics Requirement
All federal government prime contractors and subcontractors should strongly consider adopting formal codes of ethics. A comprehensive ethics code serves multiple important purposes, such as educating employees, helping set expectations, and demonstrating to customers that the contractor takes ethics seriously.
For many government contractors, however, a code of ethics isn’t optional–it’s mandatory. When a federal prime contract is valued at more than $7.5 million and the period of performance is expected to exceed 120 days, the resulting contract typically must include the clause at FAR 52.203-13 (Contractor Code of Business Ethics and Conduct). Here are a few of the most important things government contractors and subcontractors should know about this clause.
1. Mandatory Adoption & Availability of Ethics Code
FAR 52.203-13(b)(1) says that the contractor “shall” have a code of ethics in place within 30 days of contract award, unless the Contracting Officer grants an extension. Additionally, the contractor must make the code of ethics available to “each employee engaged in performance of the contract.”
2. Mandatory Disclosure Requirement
FAR 52.203-13(b)(3) requires the contractor to “shall timely disclose, in writing, to the agency Office of the Inspector General (OIG), with a copy to the Contracting Officer, whenever, in connection with the award, performance, or closeout of this contract or any subcontract thereunder, the Contractor has credible evidence” of certain violations of federal law or of the Civil False Claims Act. Contractors should consult with their legal counsel or compliance advisor about how best to address the mandatory disclosure requirement in the contractor’s Code of Ethics and other internal policy documents.
3. Business Ethics Awareness & Compliance Program and Internal Control System
FAR 52.203-13(c) requires certain contractors to adopt a robust business ethics awareness and compliance program and internal control system meeting criteria identified in the clause. This requirement, however, does not apply to a company that self-certified as a small business for purposes of the contract, nor does it apply to a contract for the acquisition of a commercial product or commercial service. Even if a contractor is not subject to these requirements, it may be worth reviewing this portion of FAR 52.203-13 to determine whether some of the concepts may be worth including in the contractor’s Code of Ethics or other policy documents.
4. Subcontractor Flowdowns
The reach of FAR 52.203-13 is not limited to prime contractors. When the clause appears in the prime contract, the prime contractor must flow down the clause to any subcontracts that meet the threshold specified in FAR 3.1004: $7.5 million or more and an anticipated period of performance of 120 days or more.
In Conclusion
It is always a good idea for a federal contractor or subcontractor to have a robust ethics and compliance program. When the contractor is subject to FAR 52.203-13, it’s not just a good idea–it’s required. As always, when addressing compliance matters, contractors would be wise to consult with their attorneys or compliance experts about how best to address these requirements.
Disclaimer:
Nothing contained in this article is to be considered as the rendering of legal advice for specific cases, and readers are responsible for obtaining such advice from their own legal counsel. This article is intended for educational and information purposes only. Although the author strives to present accurate information, the information provided in this article is not guaranteed to be accurate, complete, or up-to-date. Reading this article does not establish an attorney-client relationship with the author.
