Overview
This section implements the Anti-Kickback Act of 1986, prohibiting the offering, soliciting, or accepting of anything of value to improperly obtain or reward favorable treatment in connection with federal prime contracts or subcontracts. It establishes strict reporting requirements, audit rights for the government, and mandatory internal control procedures for contractors to prevent and detect illegal kickback activity.
Key Rules
- Broad Definition of Kickback: Includes any money, fee, gift, credit, or compensation of any kind provided to a contractor or employee to improperly influence a contract award or treatment.
- Strict Prohibitions: All persons are prohibited from providing, soliciting, or attempting to provide/accept kickbacks, as well as including the cost of a kickback in any contract price charged to the government or a higher-tier contractor.
- Mandatory Reporting: Contractors and subcontractors must report suspected violations in writing to the agency’s Inspector General or the Department of Justice if they have reasonable grounds to believe a violation occurred.
- Government Recovery & Offsets: Contracting officers may offset the amount of a kickback against money owed to the prime contractor or direct a prime contractor to withhold funds from a subcontractor.
- Internal Procedures: For non-commercial contracts exceeding $200,000, prime contractors must implement formal procedures to prevent and detect kickbacks, such as employee training, audit procedures, and annual ethics declarations.
- Audit Rights: The GAO and the Inspector General are granted full access to the facilities, books, and records of both prime contractors and subcontractors to investigate potential violations.
Practical Implications
- Prime contractors act as a front-line regulatory arm for the government, as they are legally required to self-report suspected violations and may be held financially liable for the kickback activities of their subcontractors.
- The $200,000 threshold for non-commercial contracts necessitates that firms maintain a comprehensive compliance infrastructure, including documented ethics policies and "whistleblower" mechanisms, to avoid criminal and civil penalties.