New Mandatory Disclosure Rules by pengxiuhui

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									    The Not-So-New
Mandatory Disclosure Rules

      Timothy M. Connelly

    Eckland & Blando LLP
     1020 Lumber Exchange Building
          10 South Fifth Street
         Minneapolis, MN 55402


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                 AGENDA
•   Background
•   ―New‖ Mandatory Disclosure Rules
•   FERA of 2009
•   Subcontractor relationships
•   Thinking about “de minimis” violations



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―[N]oncompetitive and cost reimbursement
contracts have been misused, resulting in
wasted taxpayer resources, poor
contractor perfromance, and inadequate
accountability for results.‖

Obama Memorandum on Procurement
Reform, 2009

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―Such waste must stop. . . . It is not
sufficient for those in charge . . . to render
lip service to the principles of economy . .
. . To make real progress they must
make examples of those contractors who
permit waste and inefficiencies.‖




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―Such waste must stop. . . . It is not
sufficient for those in charge . . . to render
lip service to the principles of economy . .
. . To make real progress they must
make examples of those contractors who
permit waste and inefficiencies.‖

            Harry Truman, 1942


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Background




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   FAR Changes Dec 12, 2008
• FAR 9.406-2 and 9.407-2:
   – Debarment & Suspension
• FAR 3.1001 and 3.1003:
   – Mandatory Disclosure Requirements
• FAR 2.201(b)(2):
   – Definition of ―Principal‖
• FAR 52.203-13:
   – New Contract Clause




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    Four Principle Obligations
1. All Contractors:
    Must Act Ethically, Should Have Code of Conduct
2. Large, Non-CI Contract Contractors:
    Mandatory Internal Control & Compliance Program

3. All Contractors:
    Suspension & Debarment for Failure to Disclose
4. Large Contract Contractors:
    Mandatory Disclosure



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            FAR § 3.1002 Policy
(a) Government contractors must conduct themselves with the highest
   degree of integrity and honesty.
(b) 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.

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              FAR § 52.203-13(c)
 Contractor Code of Business Ethics and Conduct
• Applies to
  – contracts over $5 million
  – longer than 120 days
• Does not Include:
  – small businesses
  – contracts performed overseas, and
  – commercial item contracts
• Must be included in subcontracts over $5 M
  with a performance period of more than 120
  days
• $5 million includes options & anticipated orders
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              FAR § 52.203-13(c)
 Contractor Code of Business Ethics and Conduct

• Business ethics & awareness program
  – Reasonable steps to communicate contractor
    standards through training
  – Including principals, employees, agents and
    subcontractors
• Internal Control System
  – Facilitate timely discovery of improper
    conduct
  – Ensure prompt corrective action

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                FAR § 52.203-13(c)
 Contractor Code of Business Ethics and Conduct
• Internal Control System Particular (USSG)
   – High-level responsibility
   – Screen principals for improper conduct
   – Periodic review of program & internal
     review/audits
   – Hotline
   – Discipline wrongdoers & failure to prevent
     wrongdoing
   – Mandatory disclosure on any government
     contract
   – Full cooperation in audits, investigations, etc.
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     Suspension & Debarment
• Knowing failure by a principal

• Until 3 years after final payment on any
  Government contract

• To timely disclose to the Government, in
  connection with the award, performance, or
  closeout of the contract or a subcontract,
  credible evidence of—



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   Suspension & Debarment
– Violation of Federal criminal law involving fraud,
  conflict of interest, bribery, or gratuity violations found
  in Title 18 of the United States Code;

– Violation of the civil False Claims Act; or

– Significant overpayments on the contract, other
  than overpayments resulting from contract financing
  payments as defined in 32.001




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       Suspension & Debarment
• Elements of a Violation:
   –   Knowing?
   –   Principal?
   –   Timely?
   –   Disclosure?
   –   Credible Evidence?
   –   Title 18 violations?
   –   False Claims Act violations? (2009 Amendments)
   –   Significant Overpayments?




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     Suspension & Debarment
• ―Knowing‖
  – Refers to ―failure to disclose‖
  – Actual knowledge required
• ―Principal‖ is defined at FAR 2.101(b)(2)
  – ―Principal means an officer, director, owner, partner,
    or person having primary management or supervisory
    responsibilities within a business entity (e.g., general
    manager; plant manager; head of a subsidiary,
    division, or business segment; and similar positions)
  – Preamble says this is broad - may include compliance
    officers, other positions of responsibility

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     Suspension & Debarment
• ―Timely‖

  – Disclosure requirements apply retroactively to
    contracts with final payment within the last 3 years.
  – Timeliness measured from the ―date of determination
    by the contractor that the evidence is credible‖
  – Contractor may take time to determine that evidence
    is credible before making disclosure - investigate
  – No exemptions for commercial items or overseas
    contracts



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     Suspension & Debarment
• ―Disclosure‖

  – Must be made ―to the Government‖

  – Disclosure to contracting officer is sufficient to meet
    the requirements of the suspension/debarment clause

  – Most agencies also require disclosure to IG

  – Of evidence, not legal analysis

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      Suspension & Debarment
• ―Credible Evidence‖ not defined
   – Higher standard than ―reasonable grounds to believe‖
• Continuum of proof:
   – Suspension: Upon adequate evidence
      • Reasonable grounds to believe?
   – Debarment: Preponderance of evidence
      • Credible evidence?
   – Conviction: Beyond reasonable doubt
• Mere filing of a qui tam action under civil FCA is
  not credible evidence of a violation
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      Suspension & Debarment
• Title 18 criminal violations reportable only if connected to
  government contract
   – Conflict of interest, bribery, gratuity:
       •   Bribery
       •   Gratuities
       •   Dual Compensation
       •   Revolving door restrictions
   – 80+ crimes involving fraud:
       •   §1001 - false statements
       •   §1031 - major fraud
       •   §1035 - health care fraud
       •   §1832 - theft of trade secrets
       •   §1516 - obstructing federal audit


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     Suspension & Debarment
• Civil False Claims Act Violations
  – Jurisdictions differ on the requirements of the
    civil FCA
  – Failure to disclose must be ―knowing.‖
     • Disputes over proper application of the civil FCA
       considered in evaluating whether the contractor
       knowingly failed to disclose a violation




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        Significant Overpayments
             Suspension & Debarment



• Routine contract financing payments are
  not governed by this section:
   – advance payments, performance based
     payments, progress payments
   – existing contract clauses require
     repayment in these cases, e.g., FAR
     52.232-25(d)


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         Significant Overpayments
              Suspension & Debarment


• What is significant ―depends on
  circumstances‖ . . . as well as the amount
  – Value of the contract
  – Frequency of the overpayment
  – Impact on the program
  – Root cause: Government error? Fraud?
  – Handling of similar prior payments
• FERA: withholding over payment = FC

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        Mandatory Disclosure
• FAR § 52.203-13:
  – contracts over $5 million
  – longer than 120 days
• Includes:
  – small businesses
  – contracts performed overseas, and
  – commercial item contracts (FAR § 52.212-5(e))
• Must be included in subcontracts over $5 M
  with a performance period of more than 120
  days
  – includes all options and anticipated orders

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          Mandatory Disclosure
 ―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 violation of the Federal criminal law involving fraud, conflict of
  interest, bribery, or gratuity violations found in Title 18 of the
  United States Code; or
– A violation of the civil False Claims Act.‖




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          Mandatory Disclosure
• ―Full cooperation with any Government agencies
  responsible for audits, investigations, or corrective
  actions‖ required as part of compliance program

• Full cooperation: ―disclosure to the Government of the
  information sufficient for law enforcement to identify the
  nature and extent of the offense and the individuals
  responsible for the conduct‖

• Contractors must mark disclosures ―confidential‖ or
  ―proprietary‖ to protect against release under FOIA



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        Mandatory Disclosure
• Does not include ―significant overpayments‖

• Includes providing timely and complete
  response to Government auditors’ and
  investigators’ request for documents and
  ―access to employees with information‖




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     Mandatory Disclosure Lite
• As a component of the ―business ethics and
  compliance program‖

• Contractors with large contracts (except CI and
  small businesses)

• Are required to disclose to the IG and KO
  credible evidence of violations under any
  government contract….

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                   Comparison
    Suspension/Debarment             Mandatory Disclosure


•   Knowledge of ―principal‖     • Applies to conduct -
                                   agents & subcontractors
•   Disclose to ―government‖
                                 • Disclosure to IG and KO
•   Includes overpayments        • Only Title 18 and cFCA
•   Writing not required         • Must be written
•   Applies to ALL contracts     • Applies to large contracts
•   3 year ―look back‖           • Contracts after 12 Dec 08



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  Fraud Enforcement and Recovery Act (FERA)

• Allison Engine v. US, ex. rel. Sanders, 128
  S. Ct. 2123 (2008)
  – Navy contract to build destroyer in Bath
    Shipyard
  – Second-tier subcontractor falsely certified to
    customer (not government) that generator
    material met specifications
  – No evidence of false claim submitted to
    government
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  Fraud Enforcement and Recovery Act (FERA)

• Allison Engine v. US, ex. rel. Sanders, 128
  S. Ct. 2123 (2008)
  – Subcontractor did not ―present‖ claim to US
  – Subcontractor did not use false statement ―to
    get‖ claim paid by the government - no intent
  – Fact that money may have ultimately come
    from treasury was not sufficient
  – Resolved disagreement in lower courts

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  Fraud Enforcement and Recovery Act (FERA)


• Pre-FERA FCA: ―knowingly presents or cause to
  be presented to an officer or employee of the
  United States . . .‖
• Post-FERA FCA: may be presented to US or a
  contractor if US provides the money or will
  reimburse the money -- no ―presentment‖
  required



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  Fraud Enforcement and Recovery Act (FERA)


• Pre-FERA FCA: ―knowingly makes, uses, . . . a
  false record or statement to get a false . . .
  Claim paid by the Government‖
• Post-FERA FCA: ―knowingly makes, uses, or
  causes to be made or used, a false record or
  statement material to a false or fraudulent
  claim‖



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  Fraud Enforcement and Recovery Act (FERA)


• Materiality:
  – Could the statement possibly impact the payment
  – Having a ―but for‖ impact in the particular case
• FERA defined ―Materiality‖:
  ―having a natural tendency to influence, or capable of
  influencing, the payment of money or receipt of
  property‖



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   Subcontractor Relationships
• FAR § 52.203-13 is a mandatory flow down for
  subcontracts valued at over $5 million and 120+
  days of performance
• Commercial item subcontractors and SBs:
   – §§ 52.212-5(e) and 52.244-6 include FAR §
     52.203-13
   – No requirement for business ethics
     awareness & compliance program
   – No requirement for internal control system
   – BUT, mandatory disclosure rules apply
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           Subcontractors
• New MDR and FERA have the potential to
  alter the traditional relationship between
  prime contractors and subcontractors
• Subcontractors, supplier, agents, etc.




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   Subcontractor Relationships
• There is no requirement to verify subcontractor
  ethics code or internal control system
• Prime contractors have an incentive to impose
  certification requirements on subcontractors
• Commercial item subcontractors may be
  unfamiliar with FAR and MDRs
• Compliance can be costly and legitimate reason
  for increase in subcontract price

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   Subcontractor Relationships
• ―The training conducted under this program shall be
  provided to the contractor’s . . . agents and
  subcontractors (as appropriate)‖
• One size fits all training?
   – Commercial item contractors are different from others
   – Do ―agents‖ get the same training as subcontractors?
• Which subcontractors?
   – Small subcontractors may need it more that large subcontractors
   – Large subcontractors handle more money and work
   – How to ―impose‖ training on subcontractors?
• Rule provides no guidance - but document offer and
  rejection/acceptance

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    Subcontractor Relationships
• FERA redefines FCA liability of subcontractors
   – ―Material‖ to a false claim
   – No presentment requirement
• Mandatory disclosure extends to improper conduct by
  subcontractors
   – Subcontractors have an incentive to establish internal controls
   – Primes may be debarred for failure to disclose subcontractor
• How will prime contractor investigate suspected improper conduct of
  a subcontractor?
   – Subcontractor not required to cooperate
   – Make credible evidence determination on limited evidence?


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    “De Minimis” FCA Violations
• Examples: Failure to extend correct discount
  terms resulting in $.69 ―overcharge
• March 15, 2010 GSA IG report
  – MAS vendors routinely use wrong PPD
  – Government routinely claims ―Net 30‖
  – Results in lost contract savings
• No exception in MDRs for ―de minimis‖ violations



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   “De Minimis” FCA Violations
• March 15, 2010 Report of GSA IG
• Government has lost PPD savings because:
  – MAS vendors routinely submit invoices with incorrect
    payment terms
  – Government not using correct PPD terms
  – GSA Industrial Operations Specialists not always
    aware of correct PPD terms & miss errors on CAVs
  – Some agencies ―negotiate‖ PPDs without authority



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   “De Minimis” FCA Violations
• Potential Savings in tens of millions
• Offenders identified:
   – IBM: $4.5 million
   – Lockheed Martin GS: $$806,000
   – Lockheed Martin: $505,000
• 28 total vendors examined
• Total specific savings lost: $9.2 million


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  “De Minimis” FCA Violations
• GSA IG Recommendations:
  –   Reinforce contractual requirement to extend PPD
  –   Seek recoveries from vendors who cite incorrect PPD
  –   Change default terms from ―Net 30‖ in ITSS
  –   Ensure GSA Forms 300 show correct terms
  –   Train IOAs on OK PPDs for CAVs and take CA
  –   Clarify whether ordering agencies and or cannot
      negotiate away PPD terms



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    “De Minimis” FCA Violations
• Reasonable interpretation of rule is that truly
  de minimis FCA violations need not be reported
  – MDRs intended to promote efficiency and economy in
    government contracting
  – Severe sanction of S&D not appropriate
  – S&D Rule limited to ―significant‖ overpayments
• NO FEDERAL AGENCY has publicly
  acknowledged this interpretation
• What is truly ―de minimis‖?

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    “De Minimis” FCA Violations
• United States v. Halper,490 U.S. 435 (1989)
  – 65 false claims of $9 each led to two years and
    a fine of $16,000
  – US later brought cFCA action to recover
    $130,000 civil ―penalty‖ ($2,000 x 65)
• Supreme Court found that cFCA penalty
  violated the double jeopardy clause in this
  case


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    “De Minimis” FCA Violations
  1. Fully investigate and disclose
  2. Investigate and disclose
  3. Investigate and not disclose
• In all cases:
  – Repay IAW contract requirements
  – Take corrective action
• Consider:
  – Who decides?
  – Where do you draw the line?
  – Impact on corporate culture

                      EcklandBlando.com
        Questions?
Timothy M. Connelly – (612) 236-0165


        Eckland & Blando LLP
         1020 Lumber Exchange Building
              10 South Fifth Street
             Minneapolis, MN 55402



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    Four Principle Obligations
1. All Contractors:
     Policy to act ethically
2. Large, Non-CI Contract Contractors:
     Mandatory Internal Control & Compliance Program


3. All Contractors:
     Suspension & Debarment for Failure to Disclose
4. Large Contract Contractors:
     Mandatory Disclosure




                           EcklandBlando.com
    Four Principle Obligations
1. All Contractors:
     Policy to act ethically
2. Large, Non-CI Contract Contractors:
     Mandatory Internal Control & Compliance Program


3. All Contractors:
     Suspension & Debarment for Failure to Disclose
4. Large Contract Contractors:
     Mandatory Disclosure




                           EcklandBlando.com
    Four Principle Obligations
1. All Contractors:
    Must Act Ethically, Should Have Code of Conduct
2. Large, Non-CI Contract Contractors:
    Mandatory Internal Control & Compliance Program

3. All Contractors:
    Suspension & Debarment for Failure to Disclose
4. Large Contract Contractors:
    Mandatory Disclosure


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                 ARRA of 2009
18 Feb 09 OMB Implementation Memo:
 Include the requirement that each grantee or sub-grantee
  awarded funds made available under the Recovery Act
  shall promptly refer to an appropriate inspector general
  any credible evidence that a principal, employee, agent,
  contractor, sub-grantee, subcontractor, or other person
  has submitted a false claim under the False Claims Act or
  has committed a criminal or civil violation of laws
  pertaining to fraud, conflict of interest, bribery, gratuity, or
  similar misconduct involving those funds.

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             FAR § 52.203-13(c)
Contractor Code of Business Ethics and Conduct
• Should all contractors have a ICS?




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    Four Principle Obligations
1. All Contractors:
     Policy to act ethically
2. Large, Non-CI Contract Contractors:
     Mandatory Internal Control & Compliance Program


3. All Contractors:
     Suspension & Debarment for Failure to Disclose
4. Large Contract Contractors:
     Mandatory Disclosure




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• Federal government awarded more than $500 billion in
  contract for supplies and services to more than 160,000
  contractors in 2008
• ―[N]oncompetitive and cost reimbursement contracts
  have been misused, resulting in wasted taxpayer
  resources, poor contractor performance, and inadequate
  accountability for results.‖




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                Background

Doing business with the government is different….
• Contract – withholding payments, termination,
affirmative claims
• Administrative – suspension and debarment
• Civil – monetary (triple) damages & fines
• Criminal – time & money under sentencing guidelines,
prison for individuals
 – False claims and wire fraud…


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        Suspension & Debarment
•   FAR §9.406-2: Basis for Suspension
     – ―to disqualify a contractor temporarily from Government contracting and
       Government-approved subcontracting . . . ―

•   FAR §9.406-2: Basis for Debarment
     – ―to exclude a contractor from Government contracting and Government-
       approved subcontracting for a reasonable, specified period . . .‖

• No exemptions for commercial items or overseas contracts

     – ―Whether the contractor had effective standards of conduct and internal
       control systems in place at the time of the activity which constitutes
       cause for debarment or had adopted such procedures prior to any
       Government investigation of the activity cited as a cause for
       debarment.―


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     Suspension & Debarment
• Knowing failure by a principal
• Until 3 years after final payment on any
  Government contract
• To timely disclose to the Government,
• In connection with the award, performance, or
  closeout of the contract or a subcontract,
• Credible evidence of—



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   Suspension & Debarment
– Violation of Federal criminal law involving fraud,
  conflict of interest, bribery, or gratuity violations found
  in Title 18 of the United States Code;

– Violation of the civil False Claims Act; or

– Significant overpayments on the contract, other
  than overpayments resulting from contract financing
  payments as defined in 32.001




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     Suspension & Debarment
• ―Knowing‖
  – Refers to ―failure to disclose‖
  – Actual knowledge required
• ―Principal‖ is defined at FAR 2.101(b)(2)
  – ―Principal means an officer, director, owner, partner,
    or person having primary management or supervisory
    responsibilities within a business entity (e.g., general
    manager; plant manager; head of a subsidiary,
    division, or business segment; and similar positions)
  – Interpreted broadly; may include compliance officers,
    other positions of responsibility

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     Suspension & Debarment
• ―Timely‖

  – Disclosure requirements apply retroactively to
    contracts with final payment within the last 3 years.
  – Timeliness measured from the ―date of determination
    by the contractor that the evidence is credible‖
  – Contractor may take time to determine that evidence
    is credible before making disclosure - investigate




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     Suspension & Debarment
• ―Disclosure‖
  – Must be made ―to the Government‖
  – Disclosure to contracting officer is sufficient to meet
    the requirements of the suspension/debarment clause

• ―Credible Evidence‖ not defined
  – Indicates a higher standard than ―reasonable grounds
    to believe‖
  – How much higher?



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       Suspension & Debarment
• Title 18 violations criminal violations reportable only
  when there is a connection to a government contract:

   –   Bribery
   –   Gratuities
   –   Dual Compensation
   –   Fraud & False Statements
   –   Revolving Door Restrictions




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    Suspension & Debarment
• Failure to disclose must be ―knowing.‖

  – Disputes over proper application of the civil
    FCA considered in evaluating whether the
    contractor knowingly failed to disclose a
    violation

  – Mere filing of a qui tam action under civil FCA
    is not conclusive of whether the contractor
    has credible evidence of a violation

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     Suspension & Debarment
• Significant Overpayments
  – What is significant ―depends on
    circumstances‖ . . . as well as the amount
  – Routine contract financing payments are not
    governed by this section
     • advance payments
     • performance based payments
     • progress payments based on cost or
       percentage/stage completion


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          Mandatory Disclosure
• FAR § 52.203-13:
   – contracts over $5 million
   – longer than 120 days
• Includes:
   – small businesses
   – contracts to be performed overseas, and
   – commercial item contracts
• Must be included in subcontracts over $5 M with a
  performance period of more than 120 days




                           EcklandBlando.com
          Mandatory Disclosure
 ―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 violation of the Federal criminal law involving fraud, conflict of
  interest, bribery, or gratuity violations found in Title 18 of the
  United States Code; or
– A violation of the civil False Claims Act.‖




                            EcklandBlando.com
          Mandatory Disclosure
• ―Full cooperation with any Government agencies
  responsible for audits, investigations, or corrective
  actions‖ required as part of compliance program

• Full cooperation: ―disclosure to the Government of the
  information sufficient for law enforcement to identify the
  nature and extent of the offense and the individuals
  responsible for the conduct‖

• Contractors must mark disclosures ―confidential‖ or
  ―proprietary‖ to protect against release under FOIA



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        Mandatory Disclosure
• Includes providing timely and complete
  response to Government auditors’ and
  investigators’ request for documents and
  ―access to employees with information‖

• Does NOT require
  – waiver of attorney-client privilege
  – waiver of the work product doctrine
  – officers, directors, owners, or employees of the
    contractor to waive attorney-client privilege or 5th
    Amendment rights


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  Mandatory Disclosure Lite
As a component of the ―business ethics and
compliance program‖ contractors with large
contracts (except CI and small businesses) are
required to disclose to the IG and KO credible
evidence of violations under any government
contract….




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Past relationships and performance matters
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Contractor Code of Ethics
      and Conduct




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        Contractor Code of Ethics
              and Conduct
What should the Code actually contain?
 - Keep in mind that focus is on Contractor
 Honesty and Integrity,
 - Code is also a business code, and should
 address legitimate business concerns, and
 - New rules were not intended to be overly
 burdensome, but to be flexible and business
 specific

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Compliance Program/Internal Controls
• Contracts over $5 million with a performance period
  more than 120 days, except:
   – small businesses, or
   – commercial item contracts
• Must include a clause requiring a business ethics
  awareness and compliance program and internal control
  system
• Based on USSG - very specific
• Must be in place within 90 days of contract award,
  unless longer period approved by CO



                         EcklandBlando.com
       Contractor Code of Ethics
             and Conduct

The Ethics and Compliance program should
 consider more than criminal conduct.

 - Should cover desired business practices

 - Should cover contract performance



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Reasons for adopting a compliance program




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             Why Have a Program?
Trends towards oversight & transparency – may be required in future

Helps business perform and meet all requirements for inherently complex contracts

Projects a sophisticated, competent image

A mitigating factor if things go wrong (Sent. Guide)
orders Ethics and Compliance program will improve business performance by reducing
   contractual violations and misconduct…

…leading to higher ratings from contracting officers…

…which will aid the business in getting future contracts.




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         Why Have a Program?
Subcontractors:
 - Shows Prime Contractors business
    sophistication and familiarity with
    Prime’s responsibilities
 - Knows issues, and will likely perform
 - Gives Prime confidence that less
    oversight is needed


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  Creating a Compliance Program
Identify High-Risk Areas:
 ―Country of Origin‖ Certifications
 Most favored customer pricing
    FSS/GSA Contracts
    Subcontracts too
 Inspections and testing
 Time card charging
 Use of new material
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  Creating a Compliance Program
Steps to a successful compliance program
(1) Analyze current and likely future government contracts
    - Consider applicable contract, regulatory and legal
        requirements
(2) Determine applicable standards and criteria to satisfy
   contracting requirements
(3) Establish processes and procedures necessary to meet
    the standards and criteria
    - Assign responsibility for the processes and procedures
    - Modify employee handbooks, etc. as necessary
(4) Conduct meaningful ongoing review of successes and
    failures to improve the compliance program
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    Creating a Compliance Program
•    Seven key elements:
    1. Establish standards and procedures to prevent and
       detect criminal conduct
    2. Oversight by high-level personnel
    3. Exclude individuals from leadership whom the
       organization knew, or should have known, has
       engaged in illegal activities or other conduct
       inconsistent with effective compliance program
    4. Conduct effective training programs and
       disseminate information appropriate to duties

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  Creating a Compliance Program
• Seven key criteria continued:
  5. Reasonable steps to ensure that the compliance and
     ethics program is followed

  6. Promotion and enforcement through appropriate
     incentives and disciplinary measures

  7. Reasonable steps to respond appropriately to, and
     prevent, criminal conduct and making required
     modifications to compliance and ethics program


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  Fraud Enforcement and Recovery Act (FERA)


• ―Reverse False Claims‖ extended to:
  – Making a false record or statement to decrease an
    obligation to pay money or transmit property

  – ―Obligation‖ means an ―established duty‖ from a
    contract, grant, license, or a statute or regulations, or
    from the retention of overpayments.




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      Fraud Enforcement and Recovery Act
                   Ethics & Compliance


• FERA Expands Conspiracy

  – Conspiracy extended to any person who conspires to
    commit any FCA violation

  – FCA No requirement for false claim to be paid or
    approved




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  Fraud Enforcement and Recovery Act (FERA)

• Mainly mortgage and security fraud
  changes
• Easier to get/share Civil Investigative
  Demand
• Increased funding for FCA
  enforcement

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