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Proposed FAR Amendment Would Change Confidentiality Agreements

The Department of Defense, General Services Administration, and National Aeronautics & Space Administration have proposed a rule to amend the Federal Acquisition Regulation (FAR) to implement a section of the Consolidated and Further Continuing Appropriations Act of 2015, which would prohibit the use of funds, appropriated or otherwise made available, for a contract with an entity that requires employees or subcontractors to sign an internal confidentiality agreement that restricts such employees or subcontractors from lawfully reporting waste, fraud, or abuse to a designated government representative authorized to receive such information.

The proposed rule would add a new FAR section at 3.909, Prohibition, which implements Section 743 of Division E, Title VII, of the Consolidated and Further Continuing Appropriations Act, 2015. In addition, a new provision would be added at FAR 52.203-XX, Prohibition on Contracting with Entities that Require Certain Internal Confidentiality Agreements. There will also be conforming changes at FAR sections 3.900, 4.1202, 52.204-8 and 52.212-5.

The proposed rule would apply to all solicitations and resultant contracts that are funded with fiscal year (FY) 2015 funds or subsequent FY funds that are subject to the same prohibition on confidentiality agreements, including contracts and subcontracts for acquisitions in amounts not greater than the simplified acquisition threshold, and contracts and subcontracts for the acquisition of commercial items.

The proposed language is not clear as to the definition of “prohibition” or “restriction” but it is assumed that any type of agreement that imposes a limitation on a contractor from reporting waste, fraud, or abuse would be subject to revision by this FAR amendment. It is believed that this proposed change is stemming from recent investigations, such as the Securities and Exchange Commission’s investigation into KBR Inc., who threatened employees with discipline or termination if they reported violations to the government without pre-approval from the company.

The proposed language requires contractors with previously executed agreements to notify employees that the agreements are no longer in effect if they don’t comply with the new amendment. Contractors should plan to evaluate their confidentiality and non-disclosure agreements for compliance purposes.

Comments on this proposed amendment are due to the Regulatory Secretariat on or before March 22, 2016.

If you have any questions on the proposed changes, please do not hesitate to contact us.

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