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FAR Council Issues Final Rule Prohibiting Contractors From Using Confidentiality Agreements That Restrict Disclosure of Fraud or Abuse

January 13, 2017

WHAT: The FAR Council has published a final rule that prohibits the federal government from using fiscal year 2015 and subsequent fiscal year funds for a contract with an entity that requires employees or subcontractors of such entity seeking to report waste, fraud, or abuse to sign internal confidentiality agreements or statements prohibiting or otherwise restricting such employees or subcontractors from lawfully reporting such waste, fraud, or abuse to a designated investigative or law enforcement representative of a federal department or agency authorized to receive such information (e.g., agency Office of the Inspector General). 

WHEN: The final rule was published in the Federal Register on January 13, 2017 and will become effective on January 19, 2017. It applies to solicitations and contracts using fiscal year 2015 or subsequent fiscal year funds that do not already contain a comparable provision or clause. This includes contracts and subcontracts below the simplified acquisition threshold and for the acquisition of commercial items, including commercially available off-the-shelf items.  

WHAT DOES IT MEAN FOR INDUSTRY: Contractors should review current confidentiality agreements for compliance. If confidentiality agreements prohibit or otherwise restrict employees or subcontractors from reporting waste, fraud, or abuse to a designated investigative or law enforcement representative of a federal department or agency authorized to receive such information, contractors should consider how to revise those agreements for use going forward and provide notice to employees that those clauses in preexisting agreements are no longer in effect.