Overview
This section establishes the legal basis for executive agency heads to void or rescind government contracts when those contracts are tainted by criminal conduct, specifically bribery, conflicts of interest, or procurement integrity violations.
Key Rules
- Delegated Presidential Authority: Under 18 U.S.C. 218 and Executive Order 12448, agency heads and military departments have the authority to void and rescind contracts following a final conviction for bribery or conflict of interest (18 U.S.C. Chapter 11).
- Mandatory Consideration: Agencies are required by 41 U.S.C. 2105(c) to consider contract rescission if a contractor violates procurement integrity laws.
- Standards of Proof:
- For general Chapter 11 violations, a final conviction is required.
- For procurement integrity violations (41 U.S.C. 2102), rescission can be triggered by either a conviction or an agency head's determination based on a preponderance of the evidence.
- Scope of Liability: The authority applies to conduct committed by the contractor or "someone acting for the contractor."
Practical Implications
- Contractors face extreme financial and reputational risk, as the government can administratively nullify a contract without following standard termination procedures if illegal acts are proven.
- Because some rescission decisions can be made based on a "preponderance of the evidence" rather than a criminal conviction, contractors may lose high-value awards through administrative agency findings even in the absence of a trial.