Overview
This section prescribes the mandatory administrative procedures and potential penalties an agency must follow when a contractor is suspected of violating the Gratuities clause to influence the award or treatment of a federal contract. It ensures that contractors receive due process through a formal determination of "intent" before the government imposes sanctions.
Key Rules
- Mandatory Due Process: Before any action is taken, the agency head or a designee must provide the contractor with notice and a hearing conducted under agency-specific procedures.
- Two-Pronged Violation Test: To establish a violation, the agency must determine that:
- A gratuity (e.g., gift or entertainment) was offered or given to a government official.
- The action was intended to obtain a contract or favorable treatment (intent is typically inferred from the circumstances).
- Procedural Rights: Contractors are entitled to be represented by counsel, submit documentary evidence, present witnesses, and confront any persons presented by the agency.
- Available Remedies: Upon a confirmed violation, the government may terminate the contractor's right to proceed, initiate debarment or suspension, and, in the case of Department of Defense funds, assess exemplary damages.
Practical Implications
- The "inferred intent" standard means that even small gifts or social invitations timed near a contract award can trigger a high-stakes investigation.
- Because the penalties include debarment—effectively a "death penalty" for federal contractors—firms must maintain strict internal gift policies and robust compliance training to prevent even the appearance of impropriety.