In February, the U.S. government published and called for public comment on a new proposed Federal Acquisition Regulation (FAR) that would require companies doing significant business with military or civilian agencies to establish and maintain ethics programs and training for company employees. The public comment period expired in late May, and the final FAR rule is expected at any time.
The new rule will require companies doing business with the federal government to (1) adopt a written code of ethics and business conduct; (2) establish an employee ethics and compliance training program; (3) implement an internal control system; and (4) display agency Office of Inspector General hotline posters in common work areas and on any website used to provide information to employees. The proposed rule is only applicable to companies holding at least one government contract or subcontract over $5 million in value and 120 days or more in duration. It also exempts “commercial item” contracts from the new requirements.
The new FAR rule includes a contract clause, “Contractor Code of Ethics and Business Conduct,” that provides the government with remedies for noncompliance that include the withholding of contract payments and the loss of contract award fees for the noncompliant period. It also requires the clause be flowed down to subcontracts in excess of $5 million.
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