The Department of Defense (DoD), General Services Administration (GSA), and National Aeronautics and Space Administration (NASA) have issued a final rule adopting, with some changes, an interim rule that establishes when a federal defense contractor or subcontractor can recover the amount of legal costs incurred in successfully defending against an employee's whistleblower action. Specifically, the rule amends the Federal Acquisition Regulation (FAR) to implement the section of the National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2013 that addresses the allowability of such legal expenses. The interim rule was published on September 30, 2013.
During the notice-and-comment period, one respondent voiced concern that the interim rule "effectively prohibits settlement of whistleblower claims by making related legal costs entirely unallowable if the proceeding 'could have led' to an agency order for corrective action, with no apparent exceptions."
To address this concern, the final approved FAR amendment reads as follows:
In the event of disposition by consent or compromise of a proceeding brought by a whistleblower for alleged reprisal in accordance with 41 U.S.C. 4712 or 10 U.S.C. 2409, reasonable costs incurred by a contractor or subcontractor in connection with such a proceeding that are not otherwise unallowable by regulation or by agreement with the United States may be allowed if the contracting officer, in consultation with his or her legal advisor, determined that there was very little likelihood that the claimant would have been successful on the merits.
The final rule takes effect upon its scheduled July 25, 2014 publication in the Federal Register.