The Department of Defense (DoD) has issued a final rule requiring defense contractors bidding for contracts to represent that certain former DoD officials employed by the contractor are in compliance with post-employment restrictions, known as federal revolving-door laws. The final rule, issued on November 18, 2011, creates Defense Federal Acquisition Regulation Supplement (DFARS) 252.203-7005, which contains an affirmative representation that must now be included in all contract bids made on or after that date. See 76 Fed. Reg. 71,826 (Nov. 18, 2011).
The revolving-door laws at issue — primarily 18 U.S.C. § 207 (criminal restrictions on post-employment conflicts of interest), 41 U.S.C. § 2104 (restrictions on former officials’ acceptance of compensation from contractors) and DFARS 203.171-3 (requiring former officials to have received or requested an ethics opinion on post-government employment restrictions) — have been in place for some time, but the new rule now puts the onus on contractors to monitor and ensure their employees’ compliance. Violations of the rule can result in not just rejected invoices and cancelled contracts, but also potential False Claims Act suits, bid protests and suspension or debarment proceedings.
The New Representation — DFARS 252.203- 7005
The final rule is based on a proposed rule issued by DoD in June 2011, which was developed in response to a 2008 GAO report finding that “major defense contractors are not currently ensuring that former DoD senior officials and acquisition executives working on contracts are complying with post-employment restrictions” and that greater transparency is needed to ensure compliance with post-employment restrictions.
DoD implemented the recommendations of the GAO report and included much of the proposed rule in the final rule, which now requires offerors to complete and provide a new representation as part of each contract proposal certifying that all of the offeror’s employees who are former DoD officials are in compliance with the post-employment restrictions. Importantly, the new representation need only be made once at the time of the initial offer and applies only to certain former DoD officials that the contractor expects to perform work on the contract.
The representation specifically states:
By submission of this offer, the offeror represents, to the best of its knowledge and belief, that all covered DoD officials employed by or otherwise receiving compensation from the offeror, and who are expected to undertake activities on behalf of the offeror for any resulting contract, are presently in compliance with all postemployment restrictions covered by 18 U.S.C. § 207, 41 U.S.C. §§ 2101-2107, and 5 CFR parts 2637 and 2641, including Federal Acquisition Regulation 3.104.2.
See DFARS 252.203-7005.
“Covered DoD Officials”
By its terms, the new representation applies only to “covered DoD officials” “who are expected to undertake activities on behalf of the offeror for any resulting contract.” “Covered DoD officials” are those officials who left DoD service on or after January 28, 2008, and either (1) participated personally and substantially in an acquisition for more than $10 million while serving in an Executive Schedule position, in the Senior Executive Service or in a general or flag officer position; or (2) served as a program or deputy program manager, contracting officer, source selection authority, source selection evaluation board member or chief of a financial or technical evaluation team for a contract of more than $10 million. See DFARS 252.203-7000.
“To the Best of Its Knowledge and Belief”
The final rule further requires that the representation be made by the contractor “to the best of its knowledge and belief.” The rule fails to define this phrase, stating in response to the public comments on the proposed rule only that it “is a recognized legal term of art, and one that has been used in numerous statutes over the decades.” Because of the lack of clear guidance, it is unclear whether this phrase will be interpreted only to require that contractors not willfully ignore information in their possession or whether contractors will have an affirmative duty to investigate compliance before making the representation.
The DoD’s responses to the public comments, however, tend to indicate that the latter interpretation will apply and that contractors will have an affirmative duty to monitor and confirm their employees’ compliance. See 76 Fed. Reg. 71,826, at 71,826–827 (“[C]ontractors, as employers of covered officials, have an affirmative compliance responsibility regarding employees’ post-Government employment restrictions.”); (“Hiring contractors have a duty to interview their new hires who formerly worked for DoD and screen their work experiences for relevant particular matters.”); (“Contractors should know on what particular matters covered officials worked and already ensure employees are not assigned to work on those matters because there are current requirements to maintain and track this information.”); (“Contractors need to seek clarification with job applicants and employees as to whether the applicant meets the DFARS definition in order to ensure employees are in compliance with DoD post-employment restrictions.”).
Applicable to All Solicitations
The DoD also made clear in the final rule that the new representation applies to all DoD solicitations, “including solicitations for task and delivery orders” as well as “commercial item acquisitions.” Thus, no contractor, regardless of the size or subject matter of the contract, can avoid complying with the new representation.
The Revolving-Door Laws
Generally, the revolving-door laws covered by the new representation are designed to limit conflicts of interest that can arise when DoD officials work on matters involving contractors they may eventually work for in the private sector and when former DoD officials use their government contacts after leaving DoD.
The revolving-door laws at issue are as follows:
- 18 U.S.C. § 207 prohibits individuals from representing contractors to their former agencies on certain matters they handled for defined cooling-off periods.
- 41 U.S.C. §§ 2101–2107, specifically 41 U.S.C. § 2104, prohibits former officials from receiving compensation from contractors during a one-year cooling-off period if the official worked on contracts, held or bid on by the contractors, valued at more than $10 million.1
- Although not specifically referenced in the language of the new representation, one of the post-employment restrictions covered by 41 U.S.C. §§ 2101-2107 is DFARS 252.203-7000, Requirements Relating to Compensation of Former DoD Officials, which prohibits contractors from providing compensation to covered DoD officials within two years of leaving the DoD, without first determining that the official has received, or has asked for and not received within 30 days, a written ethics opinion from DoD regarding applicable postemployment restrictions.
Potential Consequences and Recommendations
DoD’s new representation is now mandatory for all solicitations submitted by contractors on or after November 18, 2011. Given the arsenal of enforcement mechanisms DoD has at its disposal, noncompliance has the potential to result in unpaid invoices, cancelled contracts, bid protests, debarment proceedings and False Claims Act suits. Any question of whether the employee bears sole responsibility for compliance with post-employment restrictions has been answered with a resounding “No.” Rather, DoD’s final rule appears to place the lion’s share of responsibility on the contractor for monitoring and ensuring their employees’ compliance with federal revolving-door laws.
- Because of the significant consequences of noncompliance, contractors should assess whether their current compliance systems need improvement:
- Are all applicable post-government restrictions accounted for under the current compliance system?
- Are proper determinations made as to whether job applicants and employees fall within the definition of “Covered DoD Officials”?
- Are work experiences of new hires and existing employees being properly identified and monitored?
- Are employees adequately trained in the details necessary for their own compliance?
- Have required cooling-off periods been correctly calculated and monitored?
- And, perhaps most importantly, is the current compliance system defendable in a potential bid protest, False Claims Act lawsuit or debarment proceeding?
These are difficult questions to face when you are focused on running your business. We are always available to assist you in decoding these complex rules and regulations to ensure your compliance systems protect you, your employees and your company.