Analysis: Contractor self-disclosure rules raise questions

Federal contractors are facing a host of concerns related to new requirements to self-disclose past and current instances of fraud, violations and overpayments, according to government contracts attorney Claude P. Goddard Jr., chair of the government contracts practice at Akerman Senterfitt law firm.

Under new provisions of the Federal Acquisition Regulation that went into effect on Dec. 12, 2008, federal contractors must report their own violations of federal criminal law, fraudulent acts and receipt of overpayments. Failure to do may result in suspension or debarment from federal contracting.

“There are all sorts of unanswered questions,” Goddard told Washington Technology. “For one thing, the law requires contractors to report whenever there is credible evidence of a violation. What is ‘credible evidence’?

The term is not defined in the regulation, thus leaving leeway for interpretation, he said. To be on the safe side, contractors might want to report possible violations shortly after allegations are made, and possibly before internal investigations are completed, to reduce the risk of being accused of failure to report.

“There is not much guidance,” Goddard said. “I think the intent is to have contractors come in very soon after allegations of fraud….There will be pressure on contractors to report before they have all the facts and circumstances.”

One of the greatest areas of concern is how to report allegations that occurred before Dec. 12, 2008, and further back in time, Goddard said. In some interpretations of the FAR provisions, it can be argued that the government may want such reports from as far back as 10 years ago, he said.

With so many gray areas in the language of the new provisions, Goddard said contractors should be on guard.

“The advice we are giving is that if you know of something, you need to go and report it," Goddard said. "I think they will make an example of the first contractor who fails to report."

Contractors also need to set up ethics programs after signing a federal contract, Goddard said. Many large contractors already have such programs, but for those who are starting from scratch it can cost $150,000 or more to set one up.