July 23, 2008

FAR Case 2007-006, Contractor Compliance Program and Integrity Reporting – 2nd Proposed Rule

Holland & Knight Alert
Steven D. Gordon | Christopher A. Myers
Holland & Knight partners in the Government Contracts and Compliance Services practice groups submitted comments to the General Services Administration (GSA) and FAR Councils in response to the proposed rule set forth in FAR Case 2007-006, “Contractor Compliance Program and Integrity Reporting – 2nd Proposed Rule.” The Proposed Rule would add new requirements to the recent final rule in FAR Case 2006-007, Contractor Code of Business Ethics and Conduct, 72 Fed. Reg. 65873
(Nov. 23, 2007) (the “Code of Ethics Rule”).
 
The Code of Ethics Rule requires many government contractors to develop and adopt a Code of Ethics, internal controls to promote compliance with the Code of Ethics and training programs to help implement the code. The Proposed Rule would mandate self-reporting of overpayments, criminal violations and civil False Claims Act violations, and would make a failure to self-report a cause for suspension or debarment from government contracting.
 
Holland & Knight’s comments identify a number of significant concerns with the Proposed Rule as currently structured and highlight certain unintended and adverse consequences of the Proposed Rule. One especially troubling consequence is that the Proposed Rule will likely generate large numbers of “defensive” self-disclosures of minor or non-existent issues, which will then have to be investigated by the government. We believe that the Proposed Rule will prove to be very costly and counter-productive to the government’s interest in promoting honest, efficient and cost-effective contracting procedures.

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