52.203-3
Gratuities
Offering or giving gratuities to government officials to influence contract actions can result in contract termination and severe penalties, including exemplary damages for DoD contracts.
Overview
FAR 52.203-3, Gratuities, prohibits contractors from offering or giving gratuities—such as gifts or entertainment—to government officials or employees with the intent to obtain a contract or favorable treatment. If a contractor or its representatives are found to have violated this prohibition, the government may terminate the contract after notice and a hearing. The clause also allows for judicial review of the facts and provides for significant penalties, including exemplary damages (especially for Department of Defense contracts), in addition to standard breach remedies. The government’s rights under this clause are cumulative and do not exclude other legal remedies.
Key Rules
- Prohibition on Gratuities
- Contractors, their agents, or representatives must not offer or give gratuities to government personnel to influence contract awards or treatment.
- Termination for Cause
- The government may terminate the contractor’s right to proceed if gratuities are given with improper intent, following notice and a hearing.
- Remedies and Damages
- The government may seek breach remedies and, for DoD contracts, exemplary damages of 3 to 10 times the cost of the gratuity.
- Judicial Review
- Contractors may have the determination reviewed by a court with jurisdiction.
- Non-Exclusivity of Remedies
- Government remedies under this clause are in addition to other legal or contractual remedies.
Responsibilities
- Contracting Officers: Must include this clause in applicable contracts and enforce its provisions.
- Contractors: Must ensure no gratuities are offered or given to government officials to influence contract actions.
- Agencies: Must investigate alleged violations, provide notice and hearing, and determine appropriate remedies.
Practical Implications
- This clause exists to prevent bribery and undue influence in federal contracting.
- Violations can result in severe penalties, including contract termination and substantial financial damages, especially for DoD contracts.
- Contractors must train employees and agents on compliance and monitor for improper conduct to avoid inadvertent violations.