Compliance Programs

Overview

An effective compliance program is good business practice, and is required to do business with the US Government.

The primary purpose of a compliance program is the:

Prevention of fraud and fraud allegations,
Ensuring compliance with applicable laws and regulations,
Ensuring contract compliance,
Ensuring employees are properly trained in the areas of laws and regulations, and
Reduces misconduct
Required and Expected
Protects the Organization and Management
Prudent Business Practice

"Contractor Business Systems and Internal Controls are the first line of defense against waste, fraud, and abuse."^[1]

"Weak control systems increase the risk of unallowable and unreasonable costs on government contracts, unnecessarily draining limited DoD resources at the taxpayers expense.^[2]

Best Practices

Personnel Related

Clearly identify in job descriptions that employees are responsible for identifying and addressing potential fraud and regulatory violations.
Develop a clear chain of command and mechanism for reporting potential violations.
Document disputes concerning compliance and their resolution.
Where appropriate, obtain input from outside counsel on disputed legal and compliance issues.
Approach discipline, demotions and terminations with caution, including privileged review of any compliance concerns raised by an employee.

Requirements

FAR 52.203-13 - Contractor Code of Business Ethics and Conduct

If you have been awarded a contract whose value exceeds $5M and performance period is 120 days or more, you should have FAR 52.203-13 - Contractor Code of Business Ethics and Conduct in your contract. That clause requirements are as follows:

(1) Within 30 days after contract award, unless the Contracting Officer establishes a longer time period, the Contractor shall—

• (i) Have a written code of business ethics and conduct; and

• (ii) Make a copy of the code available to each employee engaged in performance of the contract.

(2) The Contractor shall—

• (i) Exercise due diligence to prevent and detect criminal conduct; and

• (ii) Otherwise promote an organizational culture that encourages ethical conduct and a commitment to compliance with the law.

US Sentencing Guidelines

The U.S. Sentencing Guidelines for Organizational Defendants went into effect on November 1, 1991, as Chapter 8 of the Federal Sentencing Guidelines Manual. They prescribe a sentencing framework for corporations based on the seriousness of the offense.

Contractors are not required to follow sentencing guidelines, however, the guidelines give corporations the ability to substantially reduce fine levels based upon steps taken by corporations "to prevent an offense" as well as the response by the corporation after it becomes aware of an offense. The guideline requirements focus on details of an effective program to prevent and detect violations of law which address managing and avoiding future violations of law.

Non-Compliance

Fraud, or fraud allegations can have severe consequences to contractors. Those consequences range from suspension, to outright debarment, and Non-compliance with applicable laws and regulations and contract compliance can have severe consequences in possible exclusion from government programs by debarment, avoidance of criminal charging and conviction, having questioned costs, and paying penalties for non-compliance. If you are debarred or suspended you will be placed on the "'''Excluded Parties List System (EPLS).''' Thus it is essential to an effective compliance program to ensure employees are properly trained, and regulary conduct training to keep employees current with laws and regulations.