Ethics in Federal Government Contracting – Complex, But Also Childishly Simple!

Understanding the scope of ethical rules for Federal Government contracting can be complex–the subject draws upon several Federal Statutes, including (but not limited to) the False Claims Act, the Procurement Integrity Act, the Whistleblower Protection Act, and accompanying Federal Acquisition Regulations (FAR).

The applicable statutes and regulations provide the framework for the code of ethics that binds Federal Government contractors and addresses issues such as:

• Conflicts of Interest: Contractors are required to abstain from any real or imagined conflicts of interest that would jeopardize the fairness or objectivity of the procurement process. This includes reporting any connections or financial interests that might skew their judgment or affect their objectivity.
• Fair Competition: The idea of fair and open competition is the cornerstone of the government contracting process. Contractors must refrain from anti-competitive conduct that would limit competition or tamper with the procurement process, such as collusion or bid rigging.
• Procurement Integrity: During the procurement process, contractors and government representatives are required to protect the privacy and integrity of sensitive data. Non-public information shouldn’t be used or disclosed for their own benefit or to obtain an unfair advantage during the procurement process.
• Anti-Bribery and Anti-Corruption: It is against the law for contractors to offer, provide, or receive bribes, kickbacks, or other illicit payments in order to sway the decision to award or carry out a government contract. When the United States government contracts overseas, the Foreign Corrupt Practices Act (FCPA) and other anti-corruption statutes are applicable.
• Gifts and Gratuities: Contractors are generally forbidden from giving gifts or gratuities to government representatives if doing so could give the impression of impropriety or impact the procurement procedure. This rule has certain restrictions and exceptions, so it’s crucial to follow the applicable rules.

Knowledge and understanding of ethical issues in government contracting isn’t just recommended – it’s essential and, in some cases, required by law. Consider the provisions of FAR clause 52.203-13–Contractor Code of Business Ethics and Conduct. This clause, which is required to be inserted in any contract for which the value exceeds $6 million and the period of performance is expected to meet or exceed 120 days, creates the following requirements for the government contractor:

(1) Within 30 days after contract award, unless the Contracting Officer establishes a longer time period, the Contractor shall—

(i) Have a written code of business ethics and conduct; and

(ii) Make a copy of the code available to each employee engaged in performance of the contract.

(2) The Contractor shall—

(i) Exercise due diligence to prevent and detect criminal conduct; and

(ii) Otherwise promote an organizational culture that encourages ethical conduct and a commitment to compliance with the law.

(3) (i) The Contractor 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 that a principal, employee, agent, or subcontractor of the Contractor has committed-

(A) A violation of Federal criminal law involving fraud, conflict of interest, bribery, or gratuity violations found in Title 18 of the United States Code; or

(B) A violation of the civil False Claims Act ( 31 U.S.C. 3729-3733).

Further consider FAR clause 3.1002(b), which states:

Contractors should have a written code of business ethics and conduct. To promote compliance with such code of business ethics and conduct, contractors should have an employee business ethics and compliance training program and an internal control system that-

(1) Are suitable to the size of the company and extent of its involvement in Government contracting;

(2) Facilitate timely discovery and disclosure of improper conduct in connection with Government contracts; and

(3) Ensure corrective measures are promptly instituted and carried out.

You may note the use of the word “should” in the above clause. While these requirements may not be strictly required by law for contractors who fall below the prescribed threshold of a $6 million dollar contract and 120+ day performance period, it is highly recommended that ALL small businesses include ethics training as a part of their annual employee training plan (especially for those working and interacting with government contracts and government employees). You may also want to make it a part of your new employee training program.

As complex as this all may seem, Nicole Pottroff points out in her Govology webinar titled Ethics in Federal Government Contracting – 2023 Update that the core principles of ethics in government contracting relate to three simple rules our parents taught us when we were children:

1. Don’t lie;
2. Don’t cheat, and
3. Don’t steal.

Government contractors must, of course, be aware of the applicable statutes, rules, and regulations and seek clarification when necessary to avoid ethical violations. With that said, any government contractor that follows these three simple rules–and values the principles of honesty and integrity in its business dealings–will be well-positioned to comply with the complex laws and regulations that govern ethical considerations in government contracting.

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