Construction Law

Two important new rules governing contractors’ business ethics and conduct

By John P. Ahlers

As previously advised on April 2, 2008, the ethics of companies doing business with the government and their compliance with standard government contracting requirements has been daily fair in the media.  Two new and related federal acquisition regulation rules, one final and one proposed, are the most recent manifestations of this new focus on contractor ethics. 

The first is a recently published final rule requiring contractors to maintain a written code of business ethics and conduct a sound practice for any business (whether or not it sells to the government).  See A+C Blog Date April 2, 2008

The second and more significant is a proposed rule that would require contractors to maintain a compliance program that moves beyond the final rule and includes specific integrity reporting requirements converting actions that in the past were purely voluntarily to contractual obligations, and thereby raising significant practical and even constitutional concerns.  The proposed rule is a response to current congressional and Department of Justice concerns regarding the integrity of the procurement process.  The Contractor Code of Business Ethics and Conduct can be found at 72 Fed. Reg. 65873 and the proposed rule concerning contractor Compliance Program and integrity reporting can be found at 72 Fed. Reg. 64019. 

Clearly, well thought out codes of business ethics and conduct and training to explain and reinforce those requirements are good business.  The proposed rule, however, goes beyond the traditional approach that has allowed contractors to run their businesses - including establishment of ethics and compliance programs, in a way that makes sense in their particular circumstances.  Mandating morality as a contract requirement moves the government into a new and questionable procurement role. 

Full post as published by Construction Law Blog on May 19, 2008 (boomark / email).