Overview
FAR Subpart 3.7 establishes the policies and procedures for the Government to exercise discretionary authority to declare contracts void and rescind them when they are tainted by misconduct. This applies specifically to situations involving final convictions for bribery, conflicts of interest, or the illegal exchange of source selection information for competitive advantage.
Key Rules
- Triggering Events: Rescission is considered if there is a final conviction (where a sentence has been imposed) for violations of 18 U.S.C. 201-224 (bribery/conflicts) or an agency head determination of illegal disclosure of contractor bid/proposal information.
- Discretionary Authority: The government is not required to rescind every contract involving misconduct but must consider the facts and determine if rescission is appropriate.
- Financial Recovery: When a contract is voided, the government seeks to recover all amounts expended and property transferred under that contract.
- Tangible Benefits Clause: Any final decision to rescind must reflect the "fair value" of any tangible benefits the agency received and retained from the contractor.
- Exclusion from CDA: Actions taken under this subpart are specifically excluded from the Contract Disputes Act (41 U.S.C. chapter 71). This means the standard Contracting Officer's final decision and claim procedures do not apply.
- Due Process: Agencies must provide a written notice of proposed action via certified mail and allow the contractor 30 calendar days to submit information or request a hearing.
Responsibilities
- Agency Head (or Designee):
- Decides whether to declare a contract void and rescind it.
- Notifies the Civil Division of the Department of Justice when rescission is being considered.
- Issues the final written decision and ensures it is sent via certified mail.
- Head of the Contracting Activity (HCA):
- Responsible for considering rescission and recommending suspension or debarment proceedings specifically in cases involving violations of 41 U.S.C. 2105.
- Contracting Personnel/Agency Staff:
- Must promptly report facts concerning final convictions or misconduct relating to agency contracts to the agency head.
- Department of Justice (Civil Division):
- Receives notification from agencies when they are considering voiding or rescinding a contract under this subpart.
Practical Implications
- The "Nuclear Option": Voiding and rescission are extreme remedies used to protect the integrity of the procurement system. Unlike a Termination for Default, which ends the contract from a certain point forward, voiding the contract treats it as if it never legally existed, often leading to a demand for a full refund of all payments made.
- Parallel Proceedings: A final conviction usually triggers two separate but related administrative tracks: the rescission process (to recover funds from the specific tainted contract) and debarment/suspension (to prevent the contractor from doing business with the government entirely).
- Complexity of "Fair Value": In real-world scenarios, calculating the "fair value of tangible benefits received" can be highly contentious. If a contractor built half a bridge before being convicted of bribery, the agency must determine the actual value of that partial bridge before demanding a total refund.
- Limited Recourse: Because these actions fall outside the Contract Disputes Act, contractors have fewer avenues for administrative appeal compared to standard contract disputes, emphasizing the importance of the 30-day response window and the hearing request.