Effective today, a new Anti-Trafficking rule will substantially change and increase federal contractors’ compliance and certification requirements. The Anti-Trafficking rule requires that all federal contractors take certain actions related to combating human trafficking and slavery in their supply and contracting chains. Human trafficking has been a high-profile issue in government contracting in recent years, drawing attention from Congress, President Obama, and groups such as the American Civil Liberties Union. It is estimated that forced labor in the private economy generates $150 billion in illegal profits each year.
With today’s far-reaching supply chains, and increasing numbers of businesses obtaining their goods from “high risk” countries, the importance and impact of human trafficking laws will only continue to grow.
The new rule amends the FAR to codify trafficking-related prohibitions involving federal contracts, including new compliance and certification requirements, and puts contractors on the hook for disclosing violations to the government. The new rule requires contractors to:
- Develop and maintain a detailed compliance plan for contracts for supplies (other than commercially available off the shelf items) acquired outside the U.S., or services to be performed outside the U.S., with an estimated value exceeding $500,000;
- Ensure that recruiters adhere to local labor laws;
- Cooperate with, and provide access to, enforcement agencies investigating compliance with anti-trafficking and forced labor laws;
- Ensure that workers are not being charged recruitment fees, which are common in many foreign countries;
- Notify agents and employees of the anti-trafficking policy;
- Provide return transportation for qualified workers;
- Disclose (or self-report) that an employee, subcontractor, or subcontractor’s employee is violating the rule; and
- Annually certify that, (1) it has implemented a compliance plan, and (2) after a due diligence inquiry, there are no violations by the prime contractor, its subcontractors or agents, or, if such a violation exists, it has taken remedial action.
The new rule also prohibits contractors from confiscating passports or other immigration documents, using deceptive recruitment practices, and providing housing that fails to meet local housing and safety standards.
These changes will have an immediate and significant impact on federal contractors. Most significant is the thorny position contractors are placed in by having to perform due diligence on their subcontractors (at every tier), and then continuing to monitor them for violations. This is particularly difficult, as trafficking activity is notoriously hard to detect. Adding to concerns is that ambiguity in the rule makes adherence more of an art than a science. Particularly, regarding compliance plans, the plan must be “appropriate” for the “size and complexity of the contract and to the nature and scope of the activities performed, including the risk that the contract will involve services or supplies susceptible to trafficking.” However, the rule provides contractors with little guidance as to what an “appropriate” plan should look like. Further, what is considered “appropriate” may vary widely across various federal agencies.
Finally, and obviously, all of this will come at an additional cost to contractors, many of whom will now be forced to play catch-up to ensure they are in compliance, or risk severe penalties including debarment, as well as criminal and civil sanctions. Given the uncertainties and costs of compliance, and severe penalties for non-compliance, it is imperative that government contractors fully appreciate and understand the import of this new rule and its requirements, and take appropriate steps to ensure compliance.
In a related effort to strengthen human trafficking protections, the House Foreign Affairs Committee approved a bill last Friday that would provide for a definition of the prohibited recruitment fees. Under the Trafficking Prevention in Foreign Affairs Contracting Act, H.R. 400, the secretary of state and the administrator of the U.S. Agency for International Development would be required to submit reports defining what constitutes a recruitment fee in order to promote better compliance with federal anti-trafficking law.
Please let us know if you have any questions or concerns.
Edward T. DeLisle is Co-Chair of the Federal Contracting Practice Group. Ed frequently advises contractors on federal contracting matters including bid protests, claims and appeals, procurement issues, small business issues and dispute resolution.