3.704 Policy
Source: FAR 3.704 on acquisition.gov
A final conviction for certain criminal offenses related to government contracts can result in contract rescission, recovery of funds, and debarment or suspension of the contractor.
Overview
FAR 3.704 establishes the policy for handling contracts when there is a final conviction for violations of certain federal criminal statutes (18 U.S.C. 201-224 or 41 U.S.C. 2105) related to government contracts. The regulation empowers agency heads or their designees to void and rescind contracts, recover funds or property, and consider debarment or suspension of contractors involved in such violations. The policy ensures that agencies take appropriate remedial actions to protect government interests and maintain integrity in the procurement process.
Key Rules
- Void and Rescind Contracts
- If there is a final conviction for specified criminal violations, the agency may declare contracts void, rescind them, and recover expended funds or transferred property.
- Consider Debarment or Suspension
- Agencies should consider initiating debarment or suspension proceedings if a contractor is convicted of relevant offenses and is not already debarred or suspended.
- Additional Penalties for 41 U.S.C. 2105 Violations
- For offenses under 41 U.S.C. 2105, agencies must consider both voiding/rescinding contracts and recommending suspension or debarment, even if a conviction is not present but evidence supports the offense.
Responsibilities
- Contracting Officers: Must be aware of convictions or evidence of offenses and initiate appropriate actions, including contract rescission and recommending debarment or suspension.
- Contractors: Must avoid conduct that could lead to criminal convictions or agency findings of misconduct; risk contract loss and debarment if violations occur.
- Agencies: Must review facts, apply procedures for voiding/rescinding contracts, recover government property/funds, and initiate debarment or suspension as warranted.
Practical Implications
- This policy exists to deter fraud, bribery, and other criminal conduct in government contracting.
- Contractors face severe consequences—including contract loss and exclusion from future contracts—if found guilty of specified offenses.
- Agencies must act decisively to protect government interests and uphold procurement integrity, making compliance and ethical conduct critical for contractors.
(a) In cases in which there is a final conviction for any violation of http://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title18-section201&num=0&edition=prelim" target="_blank">18 U.S.C. 201-http://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title18-section224&num=0&edition=prelim" target="_blank">224 involving or relating to contracts awarded by an agency, the agency head or designee, shall consider the facts available and, if appropriate, may declare void and rescind contracts, and recover the amounts expended and property transferred by the agency in accordance with the policies and procedures of this subpart.
(b) Since a final conviction under http://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title18-section201&num=0&edition=prelim" target="_blank">18 U.S.C. 201-http://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title18-section224&num=0&edition=prelim" target="_blank">224 relating to a contract also may justify the conclusion that the party involved is not presently responsible, the agency should consider initiating debarment proceedings in accordance with subpart 9.4, Debarment, Suspension, and Ineligibility, if debarment has not been initiated, or is not in effect at the time the final conviction is entered.
(c) If there is a final conviction for an offense punishable under http://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title41-section2105&num=0&edition=prelim" target="_blank">41 U.S.C. 2105, or if the head of the agency, or designee, has determined, based upon a preponderance of the evidence, that the contractor or someone acting for the contractor has engaged in conduct constituting such an offense, then the head of the contracting activity shall consider, in addition to any other penalty prescribed by law or regulation-
(1) Declaring void and rescinding contracts, as appropriate, and recovering the amounts expended under the contracts by using the procedures at 3.705 (see 3.104-7); and
(2) Recommending the initiation of suspension or debarment proceedings in accordance with subpart 9.4.