Business relationships in federal contracting operate under rules that can surprise companies coming from the commercial world. Practices that are routine in private business, such as buying a client lunch or hiring someone who worked on a customer’s team, may be restricted when the customer is the government. Understanding the basics protects your company, your employees and the government employees you work with.
This article is general information, not legal advice. Ethics rules are detailed and consequences can be serious, so consult a qualified attorney about specific situations.
Gifts to federal employees
Federal employees are subject to government-wide standards of ethical conduct issued by the Office of Government Ethics, along with agency-specific rules. These standards generally restrict employees from accepting gifts from sources that do business with or seek business from their agency. There are limited exceptions, such as for items of modest value and certain widely attended events, but the rules are strict and apply even to small gestures.
A practical approach for contractors is to avoid offering gifts, meals or entertainment to federal employees unless you have confirmed they are permitted. When in doubt, do not offer. Respect a government employee’s decision to decline or to pay their own way.
Procurement integrity
The Procurement Integrity Act places restrictions on the handling of sensitive procurement information. In general terms, it prohibits knowingly obtaining or disclosing contractor bid or proposal information and source selection information before award, except as authorized. It also includes requirements for certain officials who are contacted about non-federal employment and restrictions on some former officials accepting compensation from contractors.
For contractors, the practical lessons include:
- Never seek or accept nonpublic source selection information or a competitor’s proposal information.
- If you receive information you should not have, stop, do not use it and seek legal advice promptly.
- Before discussing employment with a current or former government official, check the restrictions that may apply.
Codes of conduct and internal controls
The FAR requires many contractors, generally those with contracts above certain value and duration thresholds, to have a written code of business ethics and conduct and to make it available to employees. Larger contractors may also need an ongoing ethics awareness program and an internal control system, with exceptions for small businesses and commercial contracts in some areas.
The FAR also includes a mandatory disclosure rule. Contractors may be required to timely disclose to the government credible evidence of certain violations of federal criminal law, violations of the civil False Claims Act and significant overpayments in connection with a contract. Failure to disclose can be a cause for suspension or debarment.
Building a culture of integrity
Even when a formal program is not required, a short written code and regular conversations about ethics help employees make good decisions. Useful elements include clear guidance on gifts and hospitality, how to report concerns without retaliation, how to handle sensitive information and who to call with questions.
Integrity is also a competitive advantage. Agencies want partners they can trust, and a reputation for doing things the right way is built over many years and can be lost quickly. The current FAR text is available on acquisition.gov.