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Proposed rule bars federal contractors from using confidentiality agreements to thwart whistleblowers

Federal agencies have proposed a rule that would bar the award of government contracts to companies that make employees sign confidentiality agreements that would preclude them from blowing the whistle on waste, fraud, or abuse. In a Federal Register notice issued January 22, the Department of Defense (DOD), General Services Administration (GSA), and NASA proposed to amend the Federal Acquisition Regulation (FAR) to implement the policy in accordance with the Consolidated and Further Continuing Appropriations Act of 2015 (and successor appropriations acts). That legislation prohibits the use of funds, appropriated or otherwise made available, for a contract with an entity that requires employees or subcontractors to sign an internal confidentiality agreement that would restrict them from lawfully reporting waste, fraud, or abuse to a designated government representative authorized to receive such information.

The proposed rule requires that in order to be eligible for a federal grant, an entity must represent that it does not require employees or subcontractors to sign or comply with such internal confidentiality agreements. The requirement must be included in all solicitations, except solicitations for personal services contracts with an individual if the services are to be performed entirely by the individual rather than by an employee of the contractor or a subcontractor. Contractors also must notify employees (through routine business communication channels such as email) that any such agreements in pre-existing confidentiality agreements are no longer in effect.

The provision would apply to all solicitations and resultant contracts funded with FY 2015 funds or subsequent FY funds (subject to the same prohibition). Given the purposes underlying the rule, the agencies have made the preliminary determination not to exclude acquisitions in 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).

To exclude these contracts would inhibit contractor employees and subcontractors subject to such internal confidentiality agreements from reporting waste, fraud, or abuse to the government, “thus allowing the perpetuation of such waste, fraud, or abuse,” according to the FR notice. The agencies have requested feedback on this determination, in particular. After receipt and analysis of public comments, the FAR Council and the Administrator for Federal Procurement Policy will determine whether to include this proposed applicability in the final rule.

Written comments are to be submitted on or before March 22, 2016 to be considered in the formation of the final rule. The FR notice provides instructions for on submitting comments.