In December, 2007, FAR regulations were enacted that require a written code of business ethics in many government contracts. The regulations stipulate that all federal contracts of more than $5 million must require the contractors to have ethics policies in place, as well as the internal protocols to communicate and enforce them, within 90 days of the contract award. The only exceptions are contracts for commercial items and those that will be performed outside of the United States.

The regulations also apply to subcontracts that are for over $5 million and that have a performance period of 120 days or longer. Before the enactment of these regulations, the government was unable to act on any perceived misconduct by contractors as long as the contract was technically still being fulfilled. State and local agencies may also build ethics clauses into their solicitations as well, although it's not required. As a contract manager, it's your job to take great care in complying with these standards. Failure to instate and enforce a business code of ethics at your company could cost you the contract award.

What to Include in Your Business Code of Ethics

The FAR is vague about what should be included in a contractor's code of ethics and its ongoing awareness programs, but it stipulates that each employee be provided with a written copy of the code. Policies for ethics in government service should address such breaches as fraud, theft and misappropriation of funds as well as violation of government regulations on labor and conduct standards. From Subpart 52.203-13 of the FAR: "(i). The Contractor's internal control system shall—

  1. Facilitate timely discovery of improper conduct in connection with Government contracts; and
  2. Ensure corrective measures are promptly instituted and carried out.

(ii) For example, the Contractor's internal control system should provide for—

  1. Periodic reviews of company business practices, procedures, policies, and internal controls for compliance with the Contractor's code of business ethics and conduct and the special requirements of Government contracting;
  2. An internal reporting mechanism, such as a hotline, by which employees may report suspected instances of improper conduct, and instructions that encourage employees to make such reports;
  3. Internal and/or external audits, as appropriate; and
  4. Disciplinary action for improper conduct."

Hotline Posters

Be sure to read the contract language regarding hotline posters carefully. A contract may require you to post a hotline number with which employees can report possible violations of your business code of ethics. Each agency decides whether or not it will require a hotline poster and what information that poster will contain.