On December 4, the Federal Register published an interim rule that will prohibit the government from entering into a contract with any corporation having a delinquent federal tax liability or a felony conviction under any federal law.  This interim rule amends the Federal Acquisition Regulation (“FAR”) to implement sections 744 and 745 of Division E of the Consolidated and Further Continuing Appropriations Act, 2015 (Pub. L. 113-235) and section 523 of Division B of the same act.  The effective date of the interim rule is February 26, 2016 and agencies most impacted by the new regulation include the Department of Defense (“DoD”), General Services Administration (“GSA”) and National Aeronautics and Space Administration (“NASA”). 

Under the interim rule, government contractors will be required to affirm as part of their applications whether they have had any felony convictions in the last two years and whether they have delinquent federal tax liability that is unpaid and not under appeal.  Based on current data with regard to active registrants in the System for Award Management (SAM), the rule will apply to approximately 65,000 small business concerns, which are required to complete the annual representations and certifications at least once per year in order to keep their registration in SAM current.

According to the government, the information collection requirement imposed by this rule is minimal—it is a brief representation, and in some cases also a certification.  Contractors who do not certify their felony and tax status will be given an opportunity to update their application to include the certification.  However, if the certification regarding tax matters is applicable, the government will not award contracts greater than $5 million, unless the contractor has affirmatively certified in its bid to all the required certifications regarding tax matters in FAR Clause 52.209-12(b).  Contractors who do not certify their felony and tax status will be removed from consideration. 

The rule instructs the DoD, GSA and NASA not to issue awards to contractors who disclose a felony conviction or federal tax liability unless the agency has considered suspension or debarment of the corporation and has made a determination that this further action is not necessary to protect the interests of the government. Government contractors who have had felony convictions or delinquent tax matters should take proactive steps now to make their case for consideration to suspension and debarment officials before making certifications.