Subpart 3.4
Contingent Fees
FAR Subpart 3.4 prohibits improper contingent fee arrangements in federal contracting and requires strict disclosure, contract clauses, and record-keeping to ensure ethical business practices.
Overview
FAR Subpart 3.4 addresses the use of contingent fees in government contracting, outlining the statutory prohibitions, definitions, applicability, required contract clauses, and procedures for handling violations. Its primary purpose is to prevent improper business practices by prohibiting contractors from paying contingent fees to secure government contracts, except under specific, allowable circumstances. The subpart establishes clear definitions, details statutory requirements, and mandates the inclusion of a "Covenant Against Contingent Fees" clause in most contracts. It also provides guidance on handling misrepresentations or violations and sets forth record-keeping obligations for both contractors and contracting officers.
Key Rules
- Prohibition on Contingent Fees
- Contractors are generally prohibited from paying fees contingent upon the award of a government contract, except to bona fide employees or established commercial selling agencies.
- Required Contract Clause
- Most contracts must include the "Covenant Against Contingent Fees" clause, which formalizes the prohibition and outlines remedies for violations.
- Handling Violations
- Procedures are established for investigating and addressing misrepresentations or violations, including potential contract annulment or recovery of fees.
- Record-Keeping
- Contractors and contracting officers must maintain records related to contingent fee representations and disclosures.
Responsibilities
- Contracting Officers: Ensure inclusion of the required clause, investigate potential violations, and maintain appropriate records.
- Contractors: Disclose any contingent fee arrangements, comply with prohibitions, and maintain accurate records.
- Agencies: Oversee compliance and enforce remedies for violations.
Practical Implications
- This subpart exists to deter unethical practices and ensure fair competition in federal contracting.
- Contractors must be vigilant about their business arrangements and avoid improper contingent fee agreements.
- Failure to comply can result in severe penalties, including contract annulment and financial recovery by the government.