Defense Federal Acquisition Regulation Supplement
{Part 203}--Improper Business Practices and Personal Conflicts of Interest
TABLE OF CONTENTS
SUBPART 203.1--SAFEGUARDS
203.103 Independent pricing.
203.103-2 Evaluating the certification.
203.104 Procurement integrity.
203.104-4 Definitions.
203.104-5 Disclosure of proprietary and source selection information.
203.170Statutory prohibitions on compensation to former DoD employees.
203.170-1 Policy.
203.170-2 Reporting requirements.
203.170-3 Penalties.
203.170-4 Contract clause.
SUBPART 203.2--CONTRACTOR GRATUITIES TO GOVERNMENT PERSONNEL
203.203 Reporting suspected violations of the Gratuities clause.
SUBPART 203.3--REPORTS OF SUSPECTED ANTITRUST VIOLATIONS
203.301 General.
SUBPART 203.4--CONTINGENT FEES
203.409 Misrepresentations or violations of the Covenant Against
Contingent Fees.
SUBPART 203.5--OTHER IMPROPER BUSINESS PRACTICES
203.502 Subcontractor kickbacks.
203.502-2 General.
203.570Employment prohibitions on persons convicted of fraud or other DoD contract related felonies.
203.570-1 Scope.
203.570-2 Policy.
203.570-3 Waiver.
203.570-4 Reporting.
203.570-5 Contract clause.
SUBPART 203.7--VOIDING AND RESCINDING CONTRACTS
203.703 Authority.
SUBPART 203.70--CONTRACTOR STANDARDS OF CONDUCT
203.7000 Policy.
203.7001 Procedures.
203.7002 Contract clause.
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203.7105 Procedures for investigating complaints.
203.7106 Procedures for adjudicating complaints.
203.7107 Procedures for review and enforcement of orders.
203.7108 Contract clause.
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PART 203 IMPROPER BUSINESS PRACTICES AND PERSONAL CONFLICTS
{203.103} Independent pricing.
{203.103-2} Evaluating the certification.
(b)(3)The contracting officer also shall report the matter in accordance with 209.406-3 and DoDD 7050.5, Coordination of Remedies for Fraud and Corruption Related to Procurement Activities.
{203.104} Procurement integrity.
{203.104-4} Definitions.
(c)(2)Each order under a basic ordering agreement is a separate procurement action.
{203.104-5} Disclosure of proprietary and source selection information.
(e)(4)For purposes of FAR 3.104-5(e)(4) only, DoD follows the notification procedures in FAR 27.404(h). However, the first sentence in FAR 27.404(h) does not apply to DoD.
{203.170} Statutory prohibitions on compensation to former DoD employees.
{203.170-1} Policy.
(a)10 U.S.C. 2397b prohibits DoD officials who left DoD service on or after April 16, 1987, and who, while serving with the DoD, performed acquisition related functions in connection with a major defense contractor, from accepting compensation from that contractor for a period of two years after the officials have left service with the DoD. Additional DoD implementation of the statute is in DoDD 5500.7, Standards of Conduct. (See the clause at 252.203-7000, Statutory Prohibition on Compensation to Former Department of Defense Employees, for definition of terms.) The prohibitions in 10 U.S.C. 2397b do not apply to contractors that supply only commercial items to DoD.
(b)Section 507 of the Ethics Reform Act of 1989 suspended the prohibitions of 10 U.S.C. 2397b from December 1, 1989, to November 30, 1990. Section 815 of the 1991 DoD Authorization Act (Pub. L. 101-510) continued the suspension from December 1, 1990, through May 31, 1991. During the period of the suspension, the clause which appeared at 252.203-7002, Statutory Compensation Prohibitions and Reporting Requirements Relating to Certain Former Department of Defense (DoD) Employees, was inserted in solicitations and contracts, but the provision of the clause that prohibited the offering of compensation to a person if the compensation would violate 10 U.S.C. 2397b, and the remedies for violating that provision, were not applied.
{203.170-2} Reporting requirements.
Paragraph (c) of the clause at 252.203-7000, Statutory Prohibitions onCompensation to Former Department of Defense Employees, requires major defense contractors to report on the employment of certain former DoD employees.
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{203.170-3} Penalties.
(a)Major defense contractors are subject to the following penalties for knowing failure to comply with the statute, the contractual prohibition, or the reporting requirements--
(1)Civil fines up to $500,000 for knowingly offering or providing compensation to another person with knowledge that acceptance of that compensation is or would be in violation of the statute.
(2)Liquidated damages in the amount of either $100,000 or three times the amount of compensation paid by the contractor to the former DoD official, whichever is greater, for failure to comply with the contract prohibition.
(3)An administrative penalty not to exceed $10,000 for failure to report as required by the statute and as implemented in the clause at 252.203-7000, Statutory Prohibitions on Compensation to Former Department of Defense Employees.
(b)Liquidated damages will be assessed in accordance with agency procedures in coordination with the Designated Agency Ethics Official.
{203.170-4} Contract clause.
Use the clause at 252.203-7000, Statutory Prohibitions on Compensation to Former Department of Defense Employees, in all solicitations and contracts expected to exceed $100,000 except solicitaitons and contracts for commercial items.
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SUBPART 203.2--CONTRACTOR GRATUITIES TO GOVERNMENT PERSONNEL
{203.203} Reporting suspected violations of the Gratuities clause.
Report suspected violations of the Gratuities clause in accordance with 209.406-3 and DoDD 7050.5, Coordination of Remedies for Fraud and Corruption Related to Procurement Activities.
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SUBPART 203.3--REPORTS OF SUSPECTED ANTITRUST VIOLATIONS
{203.301} General.
(b)Report suspected antitrust violations in accordance with 209.406-3 and DoDD 7050.5, Coordination of Remedies for Fraud and Corruption Related to Procurement Activities.
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SUBPART 203.4--CONTINGENT FEES
{203.409} Misrepresentations or violations of the Covenant Against Contingent Fees.
(b)Report suspected fraud or other criminal conduct in accordance with 209.406-3 and DoDD 7050.5, Coordination of Remedies for Fraud and Corruption Related to Procurement Activities.
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SUBPART 203.5--OTHER IMPROPER BUSINESS PRACTICES
{203.502} Subcontractor kickbacks.
Report suspected violations of the Anti-Kickback Act in accordance with 209.406-3 and DoDD 7050.5, Coordination of Remedies for Fraud and Corruption Related to Procurement Activities.
{203.502-2} General.
(h)The DoD Inspector General has designated Special Agents of the following investigative organizations as representatives for conducting inspections and audits under the Anti-Kickback Act of 1986:
(i) U.S. Army Criminal Investigation Command.
(ii) Naval Criminal Investigative Service.
(iii) Air Force Office of Special Investigations.
(iv) Defense Criminal Investigative Service.
{203.570} Employment prohibitions on persons convicted of fraud or other DoD contract-related felonies.
{203.570-1} Scope.
This subpart prescribes policies and procedures to implement 10 U.S.C. 2408.
{203.570-2} Policy.
(a)Contractors or subcontractors shall not knowingly allow a person, convicted after September 29, 1988, of fraud or any other felony arising out of a contract with the DoD, to serve--
(1)In a management or supervisory capacity on any DoD contract or first-tier subcontract; or,
(2) On its board of directors; or
(3) As a consultant, agent, or representative.
(b)The period covered by the prohibition in paragraph (a) of this subsection is for five years from the date of conviction unless waived in the interest of national security by the agency head or designee.
{203.570-3} Waiver.
(a) The contracting officer shall--
(1) Review any request for waiver; and
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(2)Deny the request if the contracting officer decides the waiver is not required in the interests of national security; or
(3)Forward the request to the head of the agency or designee for approval if the contracting officer decides the waiver may be in the interest of national security.
(b)The head of the agency or designee shall report all waivers granted, and the reasons for granting the waiver, to the Under Secretary of Defense (Acquisition & Technology), who will forward the report to Congress as required by 10 U.S.C. 2408(a)(3).
{203.570-4} Reporting.
When a defense contractor or first-tier subcontractor is found in violation of the prohibition in 203.570-2, the contracting officer shall report the matter in accordance with 209.406-3 and DoDD 7050.5, Coordination of Remedies for Fraud and Corruption Related to Procurement Activities.
{203.570-5} Contract clause.
Use the clause at 252.203-7001, Special Prohibition on Employment, in all solicitations and contracts exceeding the simplified acquisition threshold in FAR Part 13, except solicitations and contracts for commercial items.
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SUBPART 203.7--VOIDING AND RESCINDING CONTRACTS
{203.703} Authority.
The authority to act for the agency head under this subpart is limited to a level no lower than an official who is appointed by and with the advice of the Senate, without power of redelegation. For the defense agencies, for purposes of this subpart, the agency head designee is the Under Secretary of Defense (Acquisition & Technology).
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SUBPART 203.70--CONTRACTOR STANDARDS OF CONDUCT
{203.7000} Policy.
Government contractors must conduct themselves with the highest degree of integrity and honesty. Contractors should have standards of conduct and internal control systems that--
(1)Are suitable to the size of the company and the extent of their involvement in Government contracting,
(2) Promote such standards,
(3)Facilitate timely discovery and disclosure of improper conduct in connection with Government contracts, and
(4)Ensure corrective measures are promptly instituted and carried out.
{203.7001} Procedures.
(a) A contractor's system of management controls should provide for--
(1)A written code of business ethics and conduct and an ethics training program for all employees;
(2)Periodic reviews of company business practices, procedures, policies, and internal controls for compliance with standards of conduct and the special requirements of Government contracting;
(3)A mechanism, such as a hotline, by which employees may report suspected instances of improper conduct, and instructions that encourage employees to make such reports;
(4) Internal and/or external audits, as appropriate;
(5) Disciplinary action for improper conduct;
(6)Timely reporting to appropriate Government officials of any suspected or possible violation of law in connection with Government contracts or any other irregularities in connection with such contracts; and
(7)Full cooperation with any Government agencies responsible for either investigation or corrective actions.
(b)Contractors who are awarded a DoD contract of $5 million or more must display DoD Hotline Posters prepared by the DoD Office of the Inspector General unless--
(1) The contract will be performed in a foreign country; or
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(2)The contractor has established an internal reporting mechanism and program, as described in paragraph (a) of this section.
{203.7002} Contract clause.
Use the clause at 252.203-7002, Display of DoD Hotline Poster, in solicitations and contracts expected to exceed $5 million, except when performance will take place in a foreign country.
203.70-2 1991 EDITION
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