New rules for federal contracts.

• Jurisdiction: United States
• Date: 01 April 2008
• Author: McGrath, Dorn C.,Connolly, Sean M.
• Published date: 01 April 2008
• Author: McGrath, Dorn C.

The Defense Department expects contractors to adhere to the highest degree of integrity and honesty. Effective Dec. 24, 2007, the government-wide federal acquisition regulation (FAR) mandates a written code of ethics for almost all government contractors.

Specifically, for contracts projected to exceed $5 million and 120 days or more of performance, a new standard contract clause, "Contractor Code of Business Ethics and Conduct," mandates a code within 30 days of contract award. The FAR requires contractors to provide a copy of the company's code to each employee, and the contractor must promote overall compliance as part of its ethics program.

This includes timely discovery of government contract-related improper conduct, and effective corrective measures. Other suggestions for internal controls include periodic reviews, internal reporting mechanisms, audits, and disciplinary action for improper conduct. Unless a contractor qualifies as a small business, an "awareness program" and an "internal control system" are both required within 90 days of contract award. Only contracts performed entirely outside the United States or for commercial items are exempted from the new ethics program requirements.

The FAR adds a second new standard contract clause, "Display of Hotline Poster(s),"...