Self-reporting rule for contractors takes effect

The controversial new Federal Acquisition Regulation rule requiring contractors to disclose government overpayments and their own criminal contracting violations went into effect Dec. 12 at 9 a.m.

Under the new FAR rule, company executives must disclose to the inspector general of the agency with which they have a contract as soon as there is "credible evidence" that the company or one of its employees has violated contracting regulations related to fraud, bribery, conflicts of interest, false claims or gratuity.

While contractors and their attorneys continue to argue that there are significant ambiguities in the rule and its enforcement, agency inspectors general are trying to provide resources to clear up any confusion. The General Services Administration's Office of Inspector General has created a Web site with a standardized online disclosure form to centralize the receipt of these reports from GSA contractors.

The Defense Department's Office of Inspector General also created a Web site that explains the new program, with a sample disclosure form and contact information for submitting reports by mail or e-mail.

Contractors who knowingly fail to divulge violations and overpayments in a timely manner are subject to debarment and suspension. Under the rule, companies must establish internal control systems to facilitate timely disclosure of improper conduct and cooperate fully with government agencies responsible for audit, investigation and corrective actions.

Despite the fact that the rule is in effect, procurement observers said it is likely to take shape gradually as companies begin to disclose and inspectors general decide how to respond.

"How this works out in practice we won't know until someone gets pinged on this," said Colleen Preston, executive vice president for policy and operations at the Professional Services Council, a contractor association.