A proposed amendment to the FAR was published in the Federal Register on February 16, 2007 to address Contractor Code of Ethics and Business Conduct.   FAR 3.101, Standards of Conduct, provides that “Government business shall be conducted in a manner above reproach and, except as authorized by statute or regulation, with complete impartiality and with preferential treatment for none. Transactions relating to the expenditure of public funds require the highest degree of public trust and an impeccable standard of conduct.  The general rule is to avoid strictly any conflict of interest or even the appearance of a conflict of interest in Government-contractor relationships.” 

The Federal Register notice points out that FAR Part 3 provides guidance on improper business practices and personal conflicts of interest, but it does not discuss the contractor’s responsibilities with regard to code of ethics and business conduct and the avoidance of improper business practices.  The proposed new regulation will provide that contractors receiving awards in excess of $5,000,000 that have performance periods of 120 days or more, shall have a written code of ethics and business conduct within 30 days after contract award.  Furthermore, the contractor will be required to promote compliance by establishing, within 90 days after contract award, an employee ethics and compliance training program and an internal control system proportionate to the size of the company and extent of its business with the Federal Government.

Contractors who currently compete for contracts in excess of $5 million, with performance periods in excess of 120 days, and do not currently have a Code of Ethics or an internal training program, would be well-advised to start planning to take steps in anticipation of the new regulation. In fact, implementation of these requirements is a good idea even if the proposed regulation is not ultimately approved. Comments on the proposal are due no later than April 17, 2007.