far regulations for federal...

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FAR Regulations for Federal ContractorsFAR Regulations for Federal ContractorsMeeting the Mandatory Disclosure and Code of Conduct Requirements; Implementing Internal Controls

T d ’ f l f

1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific

THURSDAY, NOVEMBER 18, 2010

Today’s faculty features:

Dorn C. McGrath, III, Shareholder, Greenberg Traurig, Washington, D.C.

Rodney A. Grandon, Assistant Deputy General Counsel for Contractor Responsibility,

Department of the Air Force, Arlington, Va.

Sean M. Connolly, Assistant Counsel, Pratt & Whitney Military Engines, East Hartford, Conn.

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FAR Requirements:Business Ethics and Conduct

Dorn C. McGrathGreenberg Traurig LLPGreenberg Traurig, LLPNovember 18, 2010

thd@ tlmcgrathd@gtlaw.com202.530.8556

©2010. All rights reserved.

GREENBERG TRAURIG, LLP ATTORNEYS AT LAW WWW.GTLAW.COM 4

Key FAR Requirements

Code of Business Ethics and Conduct

Business Ethics Awareness and ComplianceBusiness Ethics Awareness and Compliance

Training Program to Support Code

I t l C t l S t d R ti Internal Control System and Reporting

Mandatory Disclosure Provisions

Implications for Subcontracts / Subcontractors

Non-Compliance, Suspension and Debarment

Promoting a Culture of Compliance

Recent Additions to FAR Requirements Recent Additions to FAR Requirements

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Code of Business Ethics and Conduct( AR 52 203 13(b))(FAR 52.203-13(b))

Prime and Subcontracts Over $5M / 120 Days

Applies to all Contractors, Including Small Businesses and Commercial Item Contracts

Withi 30 D Aft A d C t t M t Within 30 Days After Award, Contractor Must:□ Have Code of Business Ethics and Conduct

□ Make Code Available to Employees□ Make Code Available to Employees

□ Due Diligence to Detect/Prevent Criminal Conduct

□ Promote Compliance with Code

“Timely” Disclosure of “Credible Evidence” of “Violations”

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Business Ethics Awareness andC li P Compliance Program (FAR 52.203-13(c))

Applies to all Contractors, Except for Small B i d C i l It C t tBusinesses and Commercial Item Contracts

Within 90 Days After Contract Award Reasonable Steps to Communicate Periodically Reasonable Steps to Communicate Periodically

the Standards and Procedures Compliance Program Must Include “Effective p g

Training” Training Required for Contractor’s Principals

and Employeesand Employees Agents and Subcontractors May Require Training

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Internal Control System and Reporting

Assignment of Responsibility at Sufficiently High Level With Adequate Resources

bl ff l d d l Reasonable Efforts to Exclude Code Violators as Principals

Periodic Compliance ReviewsPeriodic Compliance Reviews□ Monitoring and Auditing to Detect Criminal Conduct□ Evaluation of Program Effectiveness

A t f Ri k f C i i l C d t□ Assessment of Risk of Criminal Conduct

Internal Reporting Mechanism/Hotline

Corrective Measures and Disciplinary Action Corrective Measures and Disciplinary Action

“Timely” Discovery/Disclosure of Violations

“Full Cooperation” With Govt Agencies Full Cooperation With Govt Agencies

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Mandatory Disclosure Provisions

“Timely Written Disclosure” to OIG and CO “Credible Evidence” Principal, Employee, Agent, or Subcontractor

Has Violated□ Federal Criminal Law involving Fraud COI Bribery □ Federal Criminal Law involving Fraud, COI, Bribery,

or Gratuity Violations in Title 18; or□ Civil False Claims Act

I C ti With A d P f In Connection With Award, Performance or Closeout of Prime or Subcontract

Until at Least 3 Years After Final PaymentUntil at Least 3 Years After Final Payment Applies to Small Businesses, Commercial Item

Contracts, and Outside United States Documentation of Findings and Decisions

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Implications for Subcontracts/ Subcontractors (FAR 52 203-13(d))Subcontractors (FAR 52.203-13(d))

Subcontracts That Meet Threshold Are Covered (>$5M / 120 Days)

Duties to Investigate and Disclose

Subcontractors May Report Violations to Government, not to Prime Contractor

Fl d P i i C S ifi Flowdown Provisions to Cover Specific Subcontracting Requirements

Flowdown Provisions to Cover Compliance Flowdown Provisions to Cover Compliance and Ethics

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Suspension and Debarment(FAR 9 406-2; 9 407-2)(FAR 9.406-2; 9.407-2)

Add’l Grounds for Suspension and Debarment

Applies to all Contractors, Including Small Businesses and Commercial Item Contracts

“Knowing Failure” by “Principal” to “Timely” Disclose “Credible Evidence” of:

Vi l ti f th D i t d F d l C i i l L□ Violation of the Designated Federal Criminal Laws

□ Violation of the Civil False Claims Act, or

Significant Overpayment on a Government Contract□ Significant Overpayment on a Government Contract

“Present Responsibility” Remains the Standard

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Headquarters U.S. Air ForceI n t e g r i t y - S e r v i c e - E x c e l l e n c e

Headquarters U.S. Air Force

Contractor Responsibility:C li & EthiCompliance & Ethics

Rodney A. Grandon, Assistant Deputy General Counsel(Contract Responsibility)(Contract Responsibility)703.588.0159Rodney.Grandon@pentagon.af.mil

November 18, 2010

FAR 9.406-1 Elements of Contractor ResponsibilityContractor Responsibility

Standards of Conduct/Internal Controls Timely Disclosure Internal Investigation/Disclosed to Government

C Full Cooperation Paid Costs/Restitution Employee Consequences/Discipline Employee Consequences/Discipline Implement Remedial Actions Ethics Training/Control Procedures Ethics Training/Control Procedures Management Recognition of Problems/Action to Prevent

Recurrence

I n t e g r i t y - S e r v i c e - E x c e l l e n c e 13

Compliance v. Ethics

Compliance Following the rulesCompliance – Following the rulesEthics –Doing the “right thing” in the absence of clear

authorityGoing beyond mere compliance – moving the

“game” to the middle of the fieldEncouraging all to recognize the difference

between that which each has the right to do, and that which is right to do

I n t e g r i t y - S e r v i c e - E x c e l l e n c e 14

and that which is right to do

Moving Beyond Compliance

Promoting an ethical culture is a business processprocess

Need for ownership and communication from the “top”the top

• Frequent meaningful ethics messages• Ensure appropriate resourcesEnsure appropriate resources

All employees must recognize that ethics is important to corporate leadership/managementp p p g

• Cascading training to all employees• Element of performance evaluation

I n t e g r i t y - S e r v i c e - E x c e l l e n c e 15

Empowered Ethics Officers

Seat at the business table – compliance Disclosures Management recognition of the problem

Seat at the business table businessSeat at the business table – business discussions

Company takes commitment to the next level in all aspects of Company takes commitment to the next level in all aspects of business decisions, not merely compliance

Design & oversee programs – “Best Practices” Provide advice & promote company standards of conduct Ethics training Investigations

I n t e g r i t y - S e r v i c e - E x c e l l e n c e 16

Investigations Direct access to CEO

Government’s PerspectivePerspective

Objective – working with industry toObjective – working with industry to promote best practicesCompliance as a baselineCompliance as a baselineValues-based ethics programs

C t & Sti kCarrot & StickReinforce positive behaviorPunish/address misconduct

I n t e g r i t y - S e r v i c e - E x c e l l e n c e 17

SEAN M. CONNOLLYASSISTANT COUNSEL

PRATT & WHITNEY MILITARY ENGINES860.557.0258

sean.connolly@pw.utc.com

November 18, 2010

FAPIISFederal Awardee Performance and Integrity Information System

October 2008: Congress required a Database of Specific Integrity and Performance Information on Covered Federal Agency Contractors (Pub L 110 417)Contractors (Pub. L. 110-417)

September 2009: FAR Councils Proposed FAR Amendments toSeptember 2009: FAR Councils Proposed FAR Amendments to Implement the Database Requirement of the Clean Contracting Act of 2008

March 2010: FAR Councils Issued Final Rules Implementing FAPIIS (75 FR 14059)

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FAPIISExpands the Range of Information Sources for COs’ Evaluation of Contractor Integrity and Performance“One-Stop” Shopping for Contracting Officers

• Excluded Parties List Systems (EPLS) (FAR 9.404)• Past Performance Information Retrieval System (PPIRS)

(FAR 42.1503(c) and (e))• Contracting Officers’ Determinations

• Non-Responsibility (FAR 9.105-2(b)(2))C t t T i ti (FAR 42 1503(f)(1)(iii))• Contract Terminations (FAR 42.1503(f)(1)(iii))

• Agency Defective Pricing Determinations (FAR 42.1503(f)(1)(i)• Administrative Agreements with SDOs (FAR 9.406-3(f) and 9.407-3(e))• Contractors’ Self-Reported Information (CCR) (FAR 52.209-7

and 52.209-8)• Criminal Proceedings

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• Civil Proceedings• Administrative Proceedings

FAPIISContracting Officers’ DeterminationsNon-Responsibility (FAR 9.105-2(b)(2))

(i) The contracting officer shall document the determination of nonresponsibility in FAPIIS (available at www.cpars.csd.disa.mil, then select FAPIIS) if—

(A) The contract is valued at more than the simplified acquisition threshold; ( ) p q ;

(B) The determination of nonresponsibility is based on lack of satisfactory performance record or satisfactory record of integrity and business ethics;

Contract Terminations and Defective Pricing Determinations (FAR 42.1503)

(1) Agencies shall ensure information is reported in the FAPIIS module of PPIRS ithi 3 ki d ft t ti ffiwithin 3 working days after a contracting officer—

(i) Issues a final determination that a contractor has submitted defective cost or pricing data; …

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(iii) Issues a final termination for cause or default notice; or …

FAPIIS

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FAPIIS Data Entry Menu for Contracting Officers

FAPIISFAPIIS Data Entry Screen

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FAPIISAdministrative Agreements with SDOsFAR 9.406-3 (f)(1) If the contractor enters into an administrative agreement with the Government(f)(1) If the contractor enters into an administrative agreement with the Government in order to resolve a debarment proceeding, the debarring official shall access the website (available at www.cpars.csd.disa.mil, then select FAPIIS) and enter the requested information.

(2) The debarring official is responsible for the timely submission, within 3 working days, and accuracy of the documentation regarding the administrative agreement.

FAR 9 407-3FAR 9.407 3(e)(1) If the contractor enters into an administrative agreement with the Government in order to resolve a suspension proceeding, the suspending official shall access the website (available at www.cpars.csd.disa.mil, then select FAPIIS) and enter the requested information.

(2) The suspending official is responsible for the timely submission, within 3 working days, and accuracy of the documentation regarding the administrative agreement.

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FAPIISContractors’ Self-Reported InformationReporting Obligations (FAR 52.209-7)

• Federal Contracts and Grants Totaling Over $10M

• Offeror or its Principals Subject to Federal or State Proceedings

• Criminal Proceedings: Convictions

• Civil Proceedings: Findings of Fault and Liability Resulting in fine, penalty, reimbursement, restitution, or damages of $5K or more

• Administrative Proceedings: Findings of Fault and Liability Resultingin a fine or penalty of $5K or More or Reimbursement, Restitutionp yor Damages Over $100K

• Any Criminal, Civil, or Administrative Proceeding Settled by Consent orCompromise Whereby the Offeror or Principal Acknowledges Fault and

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Compromise Whereby the Offeror or Principal Acknowledges Fault andthe Proceedings Could have led to one of the Outcomes Above

FAPIISCCR Contractor Reporting – Proceedings

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FAPIISCCR Contractor Reporting – Proceedings Detail

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FAPIISContractors’ Self-Reported Information• Updating Reports (FAR 52.209-8)

• Contractors Must Update FAPIIS Information semiannually throughoutthe life of the contract

• Contractors will Receive a Notification if the Government PostsNew Information to their Record and May Provide Comments in Response

• Contractors’ Comments will be Retained with the Associate InformationContractors Comments will be Retained with the Associate Information

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FAPIISCOs’ Use of FAPIIS Information• COs Must Review FAPIIS Prior to Awarding a Contract Above

th Si lifi d A i iti Th h ld (FAR 9 104 6( ))the Simplified Acquisition Threshold (FAR 9.104-6(a))

• COs Must Consider FAPIIS and Other Past Performance Informationin Making a Responsibility Determination (FAR 9.104-6(b) and 9.105-1(c))

• COs Must Obtain Sufficient Information to be Satisfied that aOfferor is Responsible (FAR 9.105-1(a))

• COs Should use Sources Outside of FAPIIS, EPLS, PPIRS,including (FAR 9.105-1(c)):

• Preaward Survey ReportsPreaward Survey Reports• Publications• Knowledge of Government Contracting and Audit Personnel

• Supplemental Appropriations Act for Fiscal Year 2010,

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Supplemental Appropriations Act for Fiscal Year 2010,Pub. L. No. 111-212, § 3010, 124 Stat. 2302, 2340 (July 29, 2010)(except for performance reviews, FAPIIS data to be publically available?)

Executive Compensation

September 2006: Congress Required OMB to Establisha Free Website with Certain Information for each Contracta Free Website with Certain Information for each Contract Award

J 2008 C A d d th W b it R i tJune 2008: Congress Amended the Website Requirementto Include Total Compensation for the Contract Awardees Five Most Highly Paid Officersg y

July 2010: FAR Councils Issued Interim Rule Mandating Executive Compensation Reporting (75 FR 39414)Executive Compensation Reporting (75 FR 39414)

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Executive CompensationPrime Contractors

FAR 52 204-10 Requires Prime Contractors to Report theFAR 52.204-10 Requires Prime Contractors to Report the Executive Compensation for the Five Most Highly Compensated Executives if:

• At Least 80% of Annual Gross Revenues fromFederal Contracts/Subcontracts;

• At Least $25M in Annual Gross Revenues; and

• Public Does Not Already Have Executive CompensationInformation Under SEC or IRC Reporting

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Executive CompensationCCR Contractor Reporting -Executive Compensation

Executive CompensationSubcontractorsFAR 52.204-10 Requires Prime Contractors to Report S b t t I f ti f ll Fi t Ti S b t t f tSubcontract Information for all First-Tier Subcontracts of at Least $25K, including:

• DUNS for Subcontractor and Subcontractor’s Parent;• DUNS for Subcontractor and Subcontractor s Parent; • Subcontractor Name and Address• Amount of Subcontract Award• Date of Award• Product or Service Description for Subcontract• Subcontract No.• Prime Contract No.• Awarding/Funding Agency

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• Awarding/Funding Agency• Applicable NAICS

Executive CompensationSubcontractorsFAR 52.204-10 Requires Prime Contractors to Report E ti C ti f S b t t ’ Fi M tExecutive Compensation of Subcontractors’ Five Most Highly Compensated Executives for all First-Tier Subcontracts of at Least $25K if:

• At Least 80% of Annual Gross Revenues fromFederal Contracts/Subcontracts;

• At Least $25M in Annual Gross Revenues; and

• Public Does Not Already Have Executive Compensationy pInformation Under SEC or IRC Reporting

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Executive CompensationSubcontractors

FAR 52.204-10 Provides Phase-In for Subcontracts Reporting of $25K or More:

• July through September 2010: FAR RequiredS b t t R ti l h P i C t t A dSubcontract Reporting only when Prime Contract Awardwas $20M or More;

• October 2010 through February 2011: FAR Requires• October 2010 through February 2011: FAR RequiresSubcontract Reporting only when Prime ContractAwards are $550K or More; and

• March 1, 2011: FAR Requires Subcontract Reportingwhen Prime Contracts are $25K or More

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