On January 29, 2015, the FAR Council published a final rule amending the Federal Acquisition Regulation (FAR) to strengthen existing regulations against trafficking in persons. The new rule, which will be effective March 2, 2015, includes a variety of new compliance provisions that will impact government contractors of all shapes and sizes. The agencies first published a proposed rule on September 26, 2013, implementing Executive Order 13627 and the National Defense Authorization Act for Fiscal Year 2013, to strengthen the government’s zero-tolerance policy regarding contractors engaging in prohibited trafficking activities. The proposed rule enhanced the existing FAR clause in all government contracts (which prohibits trafficking in persons, procuring commercial sex acts, and using forced labor) by adding mandatory notification of possible violations, reporting channels for employees, investigation mechanisms, and subcontractor monitoring and flow down requirements, among other requirements.
The proposed rule left contractors with many lingering questions regarding their compliance obligations and, while the final rule answered some questions, many questions remain. One thing is clear – contractors should pay attention and determine whether, and to what extent, this final rule will impact them.
As of March 2, 2015, the government must include these new requirements in all government contracts and subcontracts (although some requirements do not apply to contracts for COTS items), and the final rule directs contracting officers to modify existing indefinite-delivery/indefinite-quantity (IDIQ) contracts, so that these requirements apply to future task orders.
The final rule prohibits a number of practices; most notably:
• destroying, concealing, confiscating or otherwise denying access by an employee to his or her identity and immigration documents;
• using recruiters who do not comply with local labor laws where the recruiting takes place;
• charging employees recruitment fees;
• failing to provide return transportation to an employee when his or her employment ends; and
• providing housing that fails the host country’s safety standards, among other requirements.
As indicated in the proposed rule, contractors must “immediately” disclose to the contracting officer and agency Inspector General (IG) any “credible information” it receives from any source that “alleges” a contractor or subcontractor has violated the rule and actions taken against such individuals. Contractors must disclose sufficient information to identify the nature and extent of the offense and responsible individuals. The FAR Council did not define “credible information.” Though the rule’s text seems to allow a contractor the ability to conduct an internal investigation before reporting, its requirement for “immediate” disclosure can lead to questions about the timing of these disclosures.
Once a contractor self-reports, the contracting officer will notify the agency IG and the agency suspending and debarring official of the alleged violation. If the IG substantiates the allegations in its report, a new administrative proceeding detailed in the final rule gives the contractor a chance to respond. If the administrative proceeding results in a final determination that the allegations are substantiated, the finding will be publicly available in the Federal Awardee Performance and Integrity Information System (FAPIIS). Notably, the final rule clarifies that any substantiated allegations about a subcontractor will also be posted to the record of the prime contractor.
Requirement for Compliance Plan
The proposed rule required certain contractors to develop compliance plans and certify compliance with the rule. Now finalized, if any portion of the contract involves supplies acquired overseas or services performed overseas exceeding $500,000, contractors must develop and maintain compliance plans and certify their compliance with the rule – only commercial-off-the-shelf items are exempt from these compliance plan and certification requirements. This complex requirement is discussed in more detail here.
Flow-Down and Interview Requirements
Contractors must flow down the new clause in all subcontracts and contracts with agents. However, the compliance plan and certification requirements apply only to subcontracts that are for supplies (other than COTS items) acquired overseas, or services performed overseas, and have an estimated value exceeding $500,000. Subcontractors subject to the rule’s certification requirement must certify prior to receiving the contract and annually thereafter.
While the proposed rule required contractors to interview employees suspected of being witnesses to or victims of trafficking, the final rule removed this provision because it is not required by the authorizing Executive Order or statute.
Contractual and Administrative Enforcement Risks
After a final determination that there was a violation, contractors could face a number of severe remedies, including termination of an employee, termination of the contract or a subcontract, temporary suspension of payment, and suspension or debarment.