A Review of FAR Compliance: Code of Business Ethics and Conduct

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Posted on August 22, 2014

Written by Kayla Dineen

rotator_paperbasedAs a government contractor, there are what seem like endless and ever changing requirements that you must comply with.  The Federal Acquisition Regulation (FAR) serves as a guidebook to government contractors and outlines the rules, regulations, and processes that must be followed by government contractors throughout the acquisition planning, contract formation, and contract administration processes when the government is purchasing (acquiring) goods and services. The FAR is easy to overlook as an HR professional as many of the regulations pertain to the contracts and finance departments within your organization; however, one aspect of the FAR that pertains to the Human Resource department of government contractors is the Contractor Code of Business Ethics and Conduct[1].

All Government Contractors

The FAR regulates that all contractors must maintain business practices with the highest level of integrity and honesty and are required to implement a written code of business ethics and conduct.  The FAR also suggests a training program and internal control system associated with the code of business ethics and conduct that is suitable to the size of your organization and involvement in government contracting, facilitates timely disclosure of improper conduct to the government client, and ensures that corrective measures are both in place and followed as needed.

Contracts Exceeding $5,000,000 and 120 Day Period of Performance

Government contracts that exceed $5,000,000 with period of performance of greater than 120 days have clearer guidelines on the language that must be incorporated into the contracts.  Once the language is in the contract, it the organization’s responsibility to carry out the terms and conditions of the contract.  FAR Clause 52.203-13 states that the following items be addressed by the contracting organization in the Code of Business Ethics and Conduct:

  • Have a written code of business ethics and conduct within 30 days of award and make the code available to all employees working on and/or with the contract
  • Promote an organization with ethical values and conduct that complies with the law and exercises due diligence to prevent criminal activity in the workplace
  • Timely disclose any violations of the law, conflict of interest, and other contract violations to the government client in accordance with their policies and processes
  • Establish a business ethics awareness and compliance program within 90 days of award that provides training to principals, employees, agents and subcontractors (as appropriate) on the organization’s standards, procedures, and other aspects of the code of ethics and compliance an internal control systems.
  • Establish internal control systems that clearly define standards and procedures for the timely disclosure of improper conduct, and ensure that those procedures are effectively carried out.  Internal controls should also include regular evaluation of the effectiveness of the organization’s code ethics program.
  • Establish an internal reporting mechanism that allows employees to anonymously and/or confidentially report suspect of improper conduct
  • Display Hotline Posters in accordance with DHS requirements and provides information on reporting suspected improper conduct

As a best practice, I encourage you to consider appointing an Ethics Officer to oversee the organization’s ethics program and ensure that each of these requirements is met on a consistent and thorough basis.  The ideal ethics officer is a senior member of the organization that is not directly tied to your contracts administration.

Reading the FAR can be a little overwhelming, but it’s important to ensure that your government contracting organization is in compliance.  Before implementing a code of business ethics and conduct that is in compliance with FAR, be sure to read the specific language in the FAR around the requirements (visit: 52.203-13), as this blog serves only as summary to help you understand what is required to establish and maintain as a government contractor.

[1] http://www.acquisition.gov/far/html/Subpart%203_10.html

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