Fraud Reporting

On January 22, 2016, the FAR Council published a proposed rule that, if adopted, would impose a government-wide prohibition on contracting with companies that limit the ability of employees or subcontractors to lawfully report fraud, waste, and abuse to the government.  Given the proposed rule’s near-universal application and potentially devastating consequences for violators, contractors would be wise to take a hard look at their confidentiality policies and procedures to ensure that they will not run afoul of the proposed rule’s restrictions.

Proposed Rule

The proposed rule implements Section 743 of the Consolidated and Further Continuing Appropriations Act, 2015 (Pub. L. 113-235) (hereinafter, “Section 743”) and successor provisions in subsequent appropriations acts and continuing resolutions.  Section 743 prohibits the federal government from using appropriated funds to enter into contract “with an entity that requires employees or subcontractors of such entity . . . to sign internal confidentiality agreements or statements prohibiting or otherwise restricting such employees or contactors from lawfully reporting such waste, fraud, or abuse” to the government.

The new proposed rule aims to implement this prohibition on a government-wide basis.[1]  Given its wide application and significant potential consequences, it is particularly important for contractors to understand the rule’s key components:
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