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Transcript of U.S. General Services Administration Richard P. Levi Counsel to the Inspector General General...
U.S. General Services Administration
Richard P. LeviCounsel to the Inspector GeneralGeneral Services Administration
Richard P. LeviCounsel to the Inspector GeneralGeneral Services Administration
May 6, 2010May 6, 2010
Federal Acquisition Regulation (FAR) Disclosure Requirements and the American
Recovery and Reinvestment Act (ARRA)
Federal Acquisition Regulation (FAR) Disclosure Requirements and the American
Recovery and Reinvestment Act (ARRA)
Office of Inspector General (OIG)
2
AGENDA
Value to the Customer
Understanding FAR mandatory disclosure rule
Applicability to Recovery Act
How to Work with the Office of Inspector General
3
FAR DISCLOSURE RULE ORIGINS
Mandatory disclosures in other areas
National Reconnaissance Office contract clause
Lack of voluntary disclosures
4
NEW SUSPENSION & DEBARMENT (S&D) PROVISIONS
FAR 9.406-2 and 9.407-2; 3.1003
“Knowing failure by a principal, until 3 years after final payment on any Government contract . . .
to timely disclose to the Government,
in connection with the award, performance, or closeout of the contact
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NEW SUSPENSION & DEBARMENT (S&D) PROVISIONS (cont.)
or a subcontract thereunder,
credible evidence of”: Significant overpayments (other than financing
payments) Civil False Claims Act violation Bribery, conflict of interest, gratuities, or fraud under Title
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6
NEW CONTRACT CLAUSE
FAR 3.1004 – Clause applies if value expected to exceed $5 million and 120 day performance period
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NEW CONTRACT CLAUSE (cont.)
Clause at FAR 52.203-13, Contractor Code of Business Ethics and Conduct
Required to “timely disclose, in writing, to the agency Office of Inspector General (OIG), with a copy to the Contracting Officer, whenever, in connection with the award, performance, or closeout of this contract, or any subcontract thereunder, the Contractor has credible evidence that principal, employee, agent, or subcontractor . . . has committed” a violation of:
Civil False Claims Act
Bribery, conflict of interest, gratuities, or fraud under Title 18
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S&D/CONTRACT CLAUSE DIFFERENCES
Disclosure to “the Government” versus to the Inspector General
Obligation falls on “principal” versus the contractor
Significant overpayments reporting requirement
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NEW CONTRACT CLAUSE
Business ethics awareness and compliance program (does not apply to small businesses and acquisition of commercial items) Training for principals, employees and, as
appropriate, agents and subcontractors Internal control system
– Monitoring and auditing to detect criminal conduct
– An internal reporting system such as a hotline
– Timely disclosure
– Full cooperation
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NEW CONTRACT CLAUSE (cont.)
Full cooperation (business ethics and awareness program) Disclosure of information sufficient for law
enforcement to identify the nature and extent of conduct and individuals responsible
Includes providing timely and complete response to Government auditors’ and investigators’ request for documents and access to employees with information
11
RECOVERY ACT (ARRA) OVERVIEW
Creates significant opportunities
Accompanied by additional obligations
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RECOVERY ACT OVERVIEW (cont.)
Transparency Contract performance
Job creation and retention
Oversight Whistleblower rights
GAO and IG audit access
13
RECOVERY ACT OVERVIEW (cont.) Three immediate goals:
Jobs
Spur economic activity/invest in long-term growth
Foster accountability and transparency
Makes $billions available for federal contracts, grants and loans
Recipients to report quarterly on how using money
All data is posted on Recovery.gov
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ARRA DISCLOSURE REQUIREMENT
OMB Guidance M-09-10 and M-09-15
Requires agencies for grants, loans, and loan guarantees to include requirement similar to FAR mandatory disclosure rule
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ARRA DISCLOSURE REQUIREMENTS (cont.)
Each grantee or sub-grantee awarded ARRA funds shall promptly refer to an appropriate inspector general:
Any credible evidence
That a principal, employee, agent, contractor, sub-grantee, subcontractor, or other person
Has submitted a false claim under the False Claims Act or
Has committed a criminal or civil violation of laws pertaining to fraud, conflict of interest, bribery, gratuity, or similar misconduct involving those funds.
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ARRA V. FAR DISCLOSURE
“Promptly” instead of “timely”
To appropriate Inspector General only
Criminal or civil violation
Not limited to Title 18
Includes “similar misconduct involving those funds”
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IDENTIFYING REPORTABLE CONDUCTPractical considerations for ARRA funds
Have programs to identify any potentially criminal conduct
any potential false claims
any overpayments
Assess whether are reportable conduct as defined by FAR rule or ARRA reporting requirements
Consider erring on side of disclosure
18
FAR DISCLOSURE RULE ISSUES
“Sea change”
Articles/discussions/training
Numerous issues raised
Preamble best source of guidance
Applies to ARRA contracts
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Issue 1: What does in connection with the award, performance, or closeout of a contract mean?
In both S&D and contract clause“In connection with” generally broadly interpretedUnsuccessful bidderIndirect costsFixed price contractSupplier with no direct sales to GovernmentRecovery Act contracts
FAR DISCLOSURE RULE - 13 ISSUES
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Issue 2: What types of criminal conduct are covered? “Federal criminal law involving fraud, conflict of interest, bribery, or gratuities violations found in Title 18.”Fraud – false statements, major fraud, theft/conversion/probably over 100 referencesNon-title 18 statutes – consider conspiracy, mail/wire fraudSame statutes apply to Recovery Act projects
FAR DISCLOSURE RULE - 13 ISSUES (cont.)
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Issue 3: What constitutes a reportable violation of the False Claim Act (FCA)?
Consider FCA Amendments - May 20, 2009
Prior – Knowingly cause or present false claim to Government (3729(a)(1))Now – no longer has to be presented to Government; can be made to contractor, grantee or other recipient if money is spent on Government’s behalf or to further Government interest and Government provides any portion of money (3729(a)(1)(A))Consider Recovery Act projects
FAR DISCLOSURE RULE - 13 ISSUES (cont.)
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Prior - Make, use or cause to be used a false record or statement to get Government to pay a false claim (3729(a)(2)
Now – Make, use or cause to be used a false record or statement material to a false claim (retroactive to all claims pending on June 7, 2008) (3729(a)(1)(B))
Material defined as a natural tendency to influence of being capable of influencing
FAR DISCLOSURE RULE - 13 ISSUES (cont.)
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Noncompliance with law, rule or regulation
Probably depends on whether is “material” to payment
FAR DISCLOSURE RULE - 13 ISSUES (cont.)
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Prior – Used a false record to conceal, avoid, or decrease obligation to pay or transmit money or property to the United States (3729(a)(7)
New – Knowing conceal or avoid/decrease obligation to pay or transmit money to Government
“Obligation” – established duty, whether or not fixed, arising from retention of overpayment
May apply broadly to retention of overpayments in Recovery Act contracts
FAR DISCLOSURE RULE - 13 ISSUES (cont.)
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Prior – conspire to defraud the Government by getting a false claim allowed or paid (3729(a)(3))
New – conspires to commit a violation of the liability provisions of the False Claims Act (3729(a)(1)(C))
FAR DISCLOSURE RULE - 13 ISSUES (cont.)
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FAR DISCLOSURE RULE - 13 ISSUES (cont.)
Issue 4: What is a significant overpayment?FAR clauses require reporting/return of
overpayments (FAR 52.212-4(i)(5), 52.232-25(d), 52.232-26(c) & 52.232-27(l))
“Significant overpayment” not defined
Preamble states, “implies more than just dollar value and depends on the circumstances of the overpayment as well as the amount”
Consider relationship to False Claims Act
28
FAR DISCLOSURE RULE - 13 ISSUES (cont.)
Issue 5: What is credible evidence?
Both S&D and contract clause require reporting of “credible evidence”
Other contexts – “credible evidence” means worthy of belief based on circumstances
Allows for some evaluation time
Role of affirmative defenses
29
FAR DISCLOSURE RULE - 13 ISSUES (cont.)
Issue 6: Who is a principal? An “officer, director, owner, partner, or a person
having primary management or supervisory responsibilities within a business entity (e.g., general manager; plant manager; head of a subsidiary, division or business segment; and similar positions.” FAR 2.101(b)(2)
Preamble –interpret broadly; could include compliance officers, directors of internal audit, or other positions of responsibility.
30
Why definition of principal matters
Suspension/debarment and look-back apply to knowledge of “principal”
Internal control system includes reasonable efforts not to employ as “principal” those who due diligence would expose as engaged in conduct in conflict with ethics and conduct code
FAR DISCLOSURE RULE - 13 ISSUES (cont.)
31
FAR DISCLOSURE RULE - 13 ISSUES (cont.)
Issue 7: What are requirements regarding subcontractors? Subcontract – any contract entered into by a subcontractor to furnish supplies or services for performance of a prime contract or subcontract. Under S&D provision, must disclose credible evidence of violation regarding contract or a “subcontract awarded thereunder.”Contract clause - must disclose credible evidence that a “principal, agent, employee, or subcontractor” has committed violation regarding contract or a “subcontract awarded thereunder.”
32
FAR DISCLOSURE RULE - 13 ISSUES (cont.)
For others than small businesses or contracts for acquisition of commercial items, maintain business ethics awareness and compliance program that includes: Training that is provided as appropriate to contractor’s
agents and subcontractors
Internal compliance program that reports credible evidence of violation by subcontractor
Flow down if subcontract over $5 million and 120 days
33
FAR DISCLOSURE RULE - 13 ISSUES (cont.)
Issue 8: What is a “timely” disclosure?
All the disclosure provisions require “timely” disclosure
Reasonable time for internal investigation
No specific definition
Consider early reporting
Do Recovery Act timeframes mean timely needs to be sooner
34
FAR DISCLOSURE RULE - 13 ISSUES (cont.)
Issue 9: What are the “look back” requirements?
S&D provisions apply for 3 years after final payment on any contract
Business ethics and awareness program requires disclosure on any Government contract for 3 years after final payment
35
FAR DISCLOSURE RULE - 13 ISSUES (cont.)
Issue 10: What should be the form and content of disclosures?
In writing
Recommend some immediate reports
Electronic forms available
Consider definition of “full cooperation” – information sufficient to identify nature and extent of offense and individuals responsible
36
FAR DISCLOSURE RULE - 13 ISSUES (cont.)
Issue 11: Who should disclosures be made to?
To respective OIG for crimes and False Claims Act (FCA), with copy to contracting officer (CO)
To CO for only overpayments (CO should notify OIG)
If relates to more than one contract, to OIG with higher contract value
If relates to procurement instrument used by multiple agencies, notify OIGs of ordering agency and agency responsible for basic contract, and agencies’ COs
37
FAR DISCLOSURE RULE - 13 ISSUES (cont.)
Issue 12: Are there still voluntary disclosures? Yes
Reasons for voluntary disclosures include
Belief that will not constitute an admission
More protection from disclosure under FOIA
Caution
Applies to Recovery Act contracts as well
38
FAR DISCLOSURE RULE - 13 ISSUES (cont.)
Issue 13: How to preserve confidential and privileged information?
Government will safeguard disclosures to extent permitted by law and regulation
Label any proprietary information
Disclose facts
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WORKING WITH THE OIG
Statutory role of OIG
Detect and prevent fraud, waste, and abuse
Promote economy and efficiency
41
WORKING WITH THE OIG (cont.)
Overpayment notices
To contracting officer
– Should advise OIG
– Many go directly to OIG as well
Credible evidence of violations
To OIG
With copy to contracting officer
All parties need to work together
42
WORKING WITH THE OIG (cont.)
Each disclosure evaluated by OIG team
Provide contracting officer a copy
Inform Department of Justice
Generally meet with contractor, invite contracting officer and Department of Justice
43
WORKING WITH THE OIG (cont.)
Majority of disclosures to date characterized as overpayments
Contractors identified over $11 million in potential overcharges
Generally try to work with contractor
Advise contractor when matter closed
44
CONTRACTOR COOPERATION WITH OIG
ARRA and FAR Rule comparisonFAR disclosure rule – full cooperation
Disclosure of information sufficient for law enforcement to identify the nature and extent of conduct and individuals responsible
Includes providing timely and complete response to Government auditors’ and investigators’ request for documents and access to employees with information
45
CONTRACTOR COOPERATION WITH OIG (cont.)
Recovery Act - OIG authorized
To examine any records of the contractor or grantee, any of its subcontractors or subgrantees, or any State or local agency administering such contract, that pertain to, and involve transactions relating to, the contract, subcontract, grant, or subgrant;
To interview any officer or employee of the contractor, grantee, subgrantee, or agency regarding such transactions.
46
OIG AND CONTRACTING OFFICERS
Need to work together
Share information
Disclosure is only start of process
47
Questions?