January 22, 2016

PROPOSED FAR WHISTLEBLOWER PROTECTIONS PROHIBIT RESTRICTIONS ON EMPLOYEE OR SUBCONTRACTOR REPORTING OF WASTE, FRAUD OR ABUSE

Today, the General Services Administration, the National Aeronautics and Space Administration, and the Department of Defense (collectively, the Federal Agencies), published a
proposed rule aimed at prohibiting government contractors from restricting the ability of subcontractors or employees to lawfully report waste, fraud, or abuse to appropriate federal government authorities.

Specifically, today’s proposed rule adds a new FAR section 3.909 that prohibits the federal government from contracting with entities that require employees or subcontractors to enter into internal confidentiality agreements that restrict employees or subcontractors from lawfully reporting waste, fraud, or abuse to a designated federal investigative or law enforcement representatives. FAR 3.909 also requires that each offeror represent by submission of its offer that it does not require employees or subcontractors to sign or comply with such internal confidentiality agreements. This representation is found in a new FAR clause – FAR 52.203-XX, Prohibition on Contracting with Entities that Require Certain Internal Confidentiality Agreements—Representation – that must be included in all solicitations, except solicitations for personal services contracts with an individual, using funds subject to the prohibition.  The clause must also be included in commercial item solicitations. The clause will not be inserted in solicitations for personal services contracts with an individual if the services are to be performed entirely by the individual, rather than by an employee of the contractor or a subcontractor.

Another new FAR clause – FAR 52.203-YY, Prohibition on Contracting with Entities that Require Certain Internal Confidentiality Agreements – must be included in all solicitations and resultant contracts, except for personal services contracts with individuals.  This FAR clause notifies the contractor of the prohibition on use of funds for the contract if the contractor is in noncompliance with the requirements of the clause. This clause also requires that contractors notify employees that any such agreements in pre-existing confidentiality agreements are no longer in effect.

If today’s proposed rule becomes a final rule, therefore, contractors will have to scrutinize the agreements they use with employees and subcontractors that might contain offending provisions such as confidentiality agreements, nondisclosure agreements, employment agreements, teaming agreements, and subcontract agreements and modify them accordingly.

Interested parties must submit comments to the Federal Agencies on or before March 22, 2016.