3.402 Statutory requirements
Source: FAR 3.402 on acquisition.gov
Contractors must warrant against paying contingent fees to secure government contracts, except for bona fide employees or agencies, or risk contract annulment and financial penalties.
Overview
FAR 3.402 outlines the statutory requirements regarding contingent fees in government contracting. The section reinforces the longstanding public policy against contractors paying contingent fees to secure government contracts, as such practices can lead to improper influence. However, it recognizes exceptions for arrangements with bona fide employees or agencies. The regulation mandates that every negotiated contract must include a warranty from the contractor affirming that no prohibited contingent fees have been or will be paid. If this warranty is breached, the government has the authority to annul the contract without liability or recover the full amount of the contingent fee from the contractor.
Key Rules
- Warranty Against Contingent Fees
- Every negotiated contract must include a contractor warranty stating that no contingent fees have been paid, except as allowed by law.
- Permitted Exceptions
- Contingent fee arrangements are allowed only with bona fide employees or bona fide agencies.
- Remedies for Breach
- If the contractor breaches the warranty, the government may annul the contract or recover the full amount of the contingent fee.
Responsibilities
- Contracting Officers: Ensure inclusion of the required warranty in all negotiated contracts and enforce remedies if a breach occurs.
- Contractors: Must not pay prohibited contingent fees and must provide the required warranty; ensure any contingent fee arrangements are only with bona fide employees or agencies.
- Agencies: Oversee compliance and take corrective action in case of violations.
Practical Implications
- This regulation exists to prevent corruption and undue influence in government contracting.
- Contractors must carefully vet their fee arrangements and relationships to avoid violations.
- Breaching the warranty can result in severe penalties, including contract annulment or financial recovery by the government.
Contractors’ arrangements to pay contingent fees for soliciting or obtaining Government contracts have long been considered contrary to public policy because such arrangements may lead to attempted or actual exercise of improper influence. In https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title10-section3321&num=0&edition=prelim" target="_blank">10 U.S.C. 3321(b) and http://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title41-section3901&num=0&edition=prelim" target="_blank">41 U.S.C.3901, Congress affirmed this public policy but permitted certain exceptions. These statutes-
(a) Require in every negotiated contract a warranty by the contractor against contingent fees;
(b) Permit, as an exception to the warranty, contingent fee arrangements between contractors and bona fide employees or bona fide agencies; and
(c) Provide that, for breach or violation of the warranty by the contractor, the Government may annul the contract without liability or deduct from the contract price or consideration, or otherwise recover, the full amount of the contingent fee.