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Even if you don't deal directly with federal, state or local governmental entities, you may still be a government contractor. If you provide goods or services to any federal, state or local government, or any of its contractors or subcontractors, or if you are a recipient of grant dollars funded by a governmental entity, you in fact may be bound by the intricate web of rules that apply to activities funded directly or indirectly by the government.

Why do you need to know if these rules apply to you? Recently, the rules that apply to government contractors have been beefed up,  with new ones added, making government contracts fraught with pitfalls for the unwary. Understand the requirements, or you may find you've signed up to become a government contractor, with added costs and serious risks that you did not anticipate when you priced and sold your products or services. If you find out that you have compliance issues, your profits that you are counting on may significantly diminish!

Examples of recent changes that might apply to you:

  • American Recovery and Reinvestment Act of 2009, Pub. L. No. 111-5 (ARRA). This contains "buy American" provisions that differ from the Buy American Act and Trade Agreements Act, and federal, state and local governments may interpret these ARRA provisions differently.
  • Mandatory Disclosure Rules. As of December 12, 2008, federal contractors and subcontractors must "timely disclose to the government, in connection with the award, performance, or closeout of a government contract performed by the contractor or a subcontract awarded thereunder, credible evidence of a violation of Federal criminal law involving fraud, conflict of interest, bribery, or gratuity violations found in Title 18 of the United States Code or a violation of the civil False Claims Act," or a significant overpayment (FAR 3.1003(a)(2) and (a)(3)). This rule includes a three-year claw back, which means you can be debarred or suspended for knowing failure to timely disclose within three years after final payment on a contract (Id.; FAR 9.406-2(b)(1)(vi) and 9.407-2(a)(8)).
  • Fraud Enforcement and Recovery Act of 2009, Pub. L. No. 111-21. Enacted in May 2009, this act amends the civil False Claims Act, 31 U.S.C. § 3729. Among other things, it expands the government's ability to investigate and prosecute false or fraudulent claims; subcontractors can be convicted of a civil false claim or reverse civil false claim though they never presented an invoice or bill directly to, or received an improper payment directly from, a government official.
Now what? Federal contractors and subcontractors need a suitable code of conduct and compliance program. Do you have one? Do you understand and comply with your statutory and contractual obligations? Do you have mechanisms in place to uncover problems and address them promptly? If you are a grantee, you should consider putting in a similar compliance program now. New rules for grants are on the horizon. Contact one of the members of our Government Contracts team if you have questions about these rules or want to find out what is needed to establish an effective compliance program.