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Home News Archive Mandatory Disclosure Program, Six Months Later

Mandatory Disclosure Program, Six Months Later

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In December 2008 the Federal Acquisition Regulation (FAR) was revised to require contractors to report to the GSA and/or DOD Inspectors General any "credible evidence" that an employee had violated statutes or regulations related to contract fraud, bribery, acceptance of gratuities, conflicts of interest, or submission of false claims.  Failure to report can lead to suspension or debarment from Federal contracting.  In addition, the new rule established requirements for contractor ethics programs and for controls related to investigations and reporting of wrongdoing.
 
On August 27, 2009 GovExec.com carried a report on the status of the new mandatory contractor disclosure rule.  The article stated that the DOD IG has received 56 reports from contractors, but fewer than 10 of those disclosures have been referred to investigative agencies--meaning that the vast majority of them have been resolved administratively, the same as they would have been before imposition of the new rules.
 
The article quotes Lynn McCormick (manager of the new disclosure program) as saying that most of the disclosures have been related to inaccurate labor charging.  The article quotes Ms. McCormick's supervisor as saying,

"The preponderance have been related to single employee misconduct, say where someone was found not to have shown up to work or to have erroneously billed to one contract instead of another or the employee was found surfing the Internet for three or four hours a day for the last three months, or something like that.  So they have to adjust the billing in order to credit the government back for that employee's labor time."

Because of the volume of the disclosures, the DOD IG has had to add staff in order to ensure that Government stakeholders, including Department of Justice Attorneys as well as the various DOD buying agencies and contract administration offices, are properly briefed and agree to the proposed disposition of each disclosure.

In sum, the first six months seem to indicate a trend where contractors are erring on the side of caution by disclosing every small transgression, even those that would normally be handled administratively.  The IGs are receiving the disclosures and adjudicating each one through coordination with numerous Government stakeholders.  The vast majority of disclosed matters is being handled administratively, just as they would have been before the new rule took effect.  The only difference is, now the contractors are spending more to disclose the issues and DOD IG is spending more to process them.  As is often the case, the only winners seem to be the attorneys involved in the process.

 

Newsflash

Effective January 1, 2019, Nick Sanders has been named as Editor of two reference books published by LexisNexis. The first book is Matthew Bender’s Accounting for Government Contracts: The Federal Acquisition Regulation. The second book is Matthew Bender’s Accounting for Government Contracts: The Cost Accounting Standards. Nick replaces Darrell Oyer, who has edited those books for many years.