3.502
Subcontractor kickbacks
FAR 3.502 strictly prohibits kickbacks in federal subcontracting and requires contractors to implement controls and report violations to maintain procurement integrity.
Overview
FAR 3.502 addresses the prohibition of subcontractor kickbacks in federal contracting. Its purpose is to prevent improper payments or gratuities made by subcontractors to prime contractors or higher-tier subcontractors in exchange for favorable treatment in the award or performance of subcontracts. The regulation implements the Anti-Kickback Act of 1986 and establishes requirements for reporting, detection, and prevention of kickbacks in government contracts. It also mandates the inclusion of a specific contract clause to ensure compliance throughout the supply chain.
Key Rules
- Prohibition of Kickbacks
- Contractors and subcontractors are strictly prohibited from offering, soliciting, or accepting kickbacks in connection with the award or performance of subcontracts under government contracts.
- Mandatory Reporting
- Any suspected violations must be reported to the appropriate authorities, and contractors are required to cooperate with investigations.
- Contract Clause Requirement
- All government contracts exceeding $150,000 must include the Anti-Kickback clause (FAR 52.203-7), which flows down to all subcontracts.
Responsibilities
- Contracting Officers: Ensure the Anti-Kickback clause is included in applicable contracts and monitor compliance.
- Contractors: Implement procedures to prevent, detect, and report kickbacks; flow down the clause to all subcontracts.
- Agencies: Investigate reported violations and enforce compliance.
Practical Implications
- This regulation exists to maintain integrity in federal procurement and prevent corruption.
- Contractors must be vigilant in monitoring their supply chains for improper payments.
- Failure to comply can result in severe penalties, including contract termination and criminal prosecution.