Proposed FAR Rule Would Restrict Confidentiality Agreements between Contractors and Their Employees

Construction and Procurement Law News, Q1 2016

Client Alert

Recently, the Federal Acquisition Regulation Council published a proposed rule that, if implemented, would impose a government-wide prohibition on contracting with companies “that require 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.” 81 Fed. Reg. 3763 (Jan. 22, 2016). The proposed rule – which is aimed at providing protections for potential whistleblowers – imposes significant consequences for non-compliance, and therefore, it is important that all contractors which bid on federal work be aware of the rule’s key features:

  • The proposed rule requires “that each offeror, in order to be eligible for award, represent, by submission of its offer, that it does not require employees or subcontractors to sign or comply with such internal confidentiality agreements.” Notably, this language does not require an affirmative representation of compliance; rather, such a representation is implied “by submission” of the offer.
  • The proposed rule requires contractors to “notify employees that any such agreements in pre-existing confidentiality agreements are no longer in effect.” Of note, the proposed rule states that “[t]his notice could be accomplished through normal business communication channels, such as email.”
  • The rule, as proposed, applies “to all solicitations and resultant contracts that are funded with FY 2015 funds or subsequent FY funds that are subject to the same prohibition on confidentiality agreements, including contracts and subcontracts for acquisitions in the amounts not greater than the simplified acquisition threshold, and contracts and subcontracts for the acquisition of commercial items, (including commercially available off-the-shelf items).” In other words, the proposed rule applies to most federal contracts.

Public comments on the proposed rule currently are due on or before March 22, 2016. We will continue to monitor this noteworthy development.