If you’re like me, it’s the time of year when you clean out your garage and closets and do all those outside projects you delayed until the weather warmed up. If you are a government contractor, you should consider this to be the season to do some spring cleaning in terms of your government contract compliance programs and procedures. Not to be an alarmist, but there are numerous areas you can review now and, if you should find some compliance deficiencies, you still have ample time to get your house in order before an agency audit or the deadline for submission of certain government reports.
Set forth below is a list of areas you may want to clean up:
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- Code of Business Ethics and Conduct. If you are subjected to an audit by an agency office of inspector general, one of the first document requests you receive is to provide a copy of your company’s ethics policy or code of conduct. Is your policy or code compliant with FAR 52.203-13, Contractor Code of Business Ethics and Conduct?
Most government contractor policies are “paper” compliant, meaning they include the FAR clause language, but, in our experience, many contractors fail to conduct follow-up training or test their policies and procedures to see if they are being followed and are effective at uncovering improper practices. Thus, in accordance with FAR 52.203-13(c)(2)(C), you should make sure you have conducted “periodic reviews of company practices, procedures, policies, and internal controls for compliance” including the “[p]eriodic evaluation of effectiveness” of your programs and “[p]eriodic assessment of the risk of criminal conduct.” - SAM.gov Registration. Is your SAM.gov registration current and accurate? A company with an incorrect or inactive SAM.gov registration is ineligible for contract awards or may have its payments under an active contract suspended. See FAR 52.204-13.
- Suspended, Debarred, or Excluded Employment and Subcontracting. Do you have effective policies and procedures to ensure your company does not hire individuals or subcontract with companies that are suspended, debarred, or otherwise excluded from doing business with the government? See e.g., FAR 52.209-6.
- Small Business Subcontracting Plan. Is your company making “good faith” efforts to comply with its approved subcontracting plan? See FAR 52.219-16. Have you documented your “good faith” efforts to comply? For example, is your methodology for identifying potential small businesses for subcontracting opportunities memorialized and being followed? Have you documented your company’s attendance at conferences and workshops attempting to locate small business subcontractors? A contractor that cannot demonstrate that it has made “good faith” efforts to comply with its subcontracting plan could be subject to a variety of penalties including liquidated damages. Id.
- Flowdown Clauses. Are the clauses you flow down to subcontractors up to date? At a minimum, for commercial item subcontracts, are you flowing down the clauses identified in FAR 52.212.5(e)(1)?
- Service Contract Act. If your government contract involves providing services, are you paying applicable employees consistent with the applicable and current Wage Determination and Federal Minimum Wage? In addition to wages, are you complying with the fringe benefit requirements—vacation, holidays, and health and welfare benefits—set forth in the Wage Determination?
- Limitations on Subcontracting. Agencies are focused on meeting their small business subcontracting goals. As a result, more contracts are being set aside for award to small businesses or solicitations are providing evaluation credit to large businesses to encourage then to maximize subcontracting with small businesses. In the haste to establish prime-subcontractor, teaming, joint venture, and/or mentor-protégé arrangements between large and small business, contractors can overlook the limitations placed on the work a small business is required to perform or permitted to subcontract to a large business. If your company is performing a contract that was set aside for small businesses, regardless of whether you are the large or small business, you should confirm the small business is performing at least 50 percent of the cost of services or cost of manufacturing the supplies being provided to the government. See FAR 52.219-14.
- Country of Origin. Does your company have effective policies and procedures to ensure it and its subcontractors are supplying products to the government that are Buy American Act or Trade Agreements Act compliant? See e.g., FAR 52.225-2 and FAR 52.225-6. If requested by government investigators, do you have records showing your efforts to comply with these statutes and regulations?
- Changes and Contract Modifications. Government customers (and prime contractors) may request that you modify your contract performance. Some requests, initially thought to be minor, could become more important, extensive, or time consuming as performance continues. Have you memorialized these changes with a written contract modification signed by the Contracting Officer? Could you be entitled to additional compensation from the government under the applicable Changes clause in your contract? See e.g., FAR 52.243-1, Changes – Fixed Price.
- Government Reports. Has your company filed all required, annual government reports including, but not limited to, EEO-1 Form, VETS-4212 Report, and Individual Subcontracting Report (“ISR”) or Summary Subcontract Report (“SSR) in the electronic Subcontracting Reporting System (“eSRS”)? See FAR 52.219-9.
- Document Retention. Is your company following its document retention and destruction policies and are such policies consistent with applicable FAR requirements? See e.g., FAR Subpart 4.7 and FAR 52.215.2.
- Code of Business Ethics and Conduct. If you are subjected to an audit by an agency office of inspector general, one of the first document requests you receive is to provide a copy of your company’s ethics policy or code of conduct. Is your policy or code compliant with FAR 52.203-13, Contractor Code of Business Ethics and Conduct?
Compliance is a vague concept. It doesn’t generate revenue and you can’t quantify the revenue saved from being compliant. Further, compliance isn’t important until it becomes critically important in the context of an agency audit or investigation. Regardless, there are a couple of key takeaways for contractors. First, if your company thinks that it is protected by doing nothing more than creating a written business ethics and conduct policy, it is wrong. The only thing worse than not having written policies and procedures is having such policies and procedures and not following them. Thus, routine, periodic testing of the effectiveness of your business ethics and conduct policy is imperative. Second, for many of the compliance items identified above, it is crucial for contractors to memorialize their policies and procedures and maintain documentation evidencing their activities. While the above is not intended to be an exhaustive list of all government contracting compliance requirements, it is a good start so your company can demonstrate it takes its government contracting compliance obligations seriously and is a responsible government contractor.