52.203-7 Anti-Kickback Procedures
Source: FAR 52.203-7 on acquisition.gov
FAR 52.203-7 requires contractors to actively prevent, detect, and report kickbacks, and to flow down anti-kickback requirements to qualifying subcontracts, ensuring integrity throughout the federal contracting process.
Overview
FAR 52.203-7, Anti-Kickback Procedures, establishes strict prohibitions and requirements to prevent and address kickbacks in federal contracting. It defines key terms related to kickbacks, outlines prohibited conduct under 41 U.S.C. chapter 87, and mandates that contractors implement procedures to detect and prevent kickbacks. Contractors must report suspected violations, cooperate with investigations, and may face financial offsets or withholdings if kickbacks are discovered. The clause also requires flow-down of its substance to subcontracts exceeding the threshold in FAR 3.502-2(i), ensuring anti-kickback protections throughout the supply chain.
Key Rules
- Prohibition of Kickbacks
- No person may provide, solicit, accept, or attempt to include kickbacks in contract pricing.
- Contractor Procedures
- Contractors must have reasonable procedures to prevent and detect kickbacks in their operations and direct business relationships.
- Mandatory Reporting
- Contractors must promptly report suspected kickback violations in writing to the agency inspector general, agency head, or Attorney General.
- Cooperation with Investigations
- Full cooperation with federal investigations into possible kickback violations is required.
- Financial Remedies
- The Contracting Officer may offset or direct withholding of kickback amounts from contract payments.
- Flow-Down Requirement
- The clause (except for the procedures requirement) must be included in all subcontracts exceeding the specified threshold.
Responsibilities
- Contracting Officers: Enforce compliance, order offsets/withholdings, and ensure clause flow-down.
- Contractors: Implement anti-kickback procedures, report violations, cooperate with investigations, and flow down the clause to qualifying subcontracts.
- Agencies: Investigate reported violations and oversee compliance.
Practical Implications
- This clause exists to deter and address corruption in federal contracting, protecting the integrity of the procurement process.
- Contractors must be proactive in compliance, as failure to prevent, detect, or report kickbacks can result in financial penalties and reputational harm.
- Common pitfalls include inadequate internal controls, failure to report, or not properly flowing down the clause to subcontracts.
As prescribed in 3.502-3 , insert the following clause:
Anti-Kickback Procedures (Jun 2020)
(a) Definitions.
Kickback, as used in this clause, means any money, fee, commission, credit, gift, gratuity, thing of value, or compensation of any kind which is provided to any prime Contractor, prime Contractor employee, subcontractor, or subcontractor employee for the purpose of improperly obtaining or rewarding favorable treatment in connection with a prime contract or in connection with a subcontract relating to a prime contract.
Person, as used in this clause, means a corporation, partnership, business association of any kind, trust, joint-stock company, or individual.
Prime contract, as used in this clause, means a contract or contractual action entered into by the United States for the purpose of obtaining supplies, materials, equipment, or services of any kind.
Prime Contractor as used in this clause, means a person who has entered into a prime contract with the United States.
Prime Contractor employee, as used in this clause, means any officer, partner, employee, or agent of a prime Contractor.
Subcontract, as used in this clause, means a contract or contractual action entered into by a prime Contractor or subcontractor for the purpose of obtaining supplies, materials, equipment, or services of any kind under a prime contract.
Subcontractor, as used in this clause, (1) means any person, other than the prime Contractor, who offers to furnish or furnishes any supplies, materials, equipment, or services of any kind under a prime contract or a subcontract entered into in connection with such prime contract, and (2) includes any person who offers to furnish or furnishes general supplies to the prime Contractor or a higher tier subcontractor.
Subcontractor employee, as used in this clause, means any officer, partner, employee, or agent of a subcontractor.
(b) http://uscode.house.gov/view.xhtml?req=granuleid%3AUSC-prelim-title41-chapter87&saved=%7CZ3JhbnVsZWlkOlVTQy1wcmVsaW0tdGl0bGU0MC1jaGFwdGVyMzctZnJvbnQ%3D%7C%7C%7C0%7Cfalse%7Cprelim&edition=prelim" target="_blank">41 U.S.C. chapter 87, Kickbacks, prohibits any person from-
(1) Providing or attempting to provide or offering to provide any kickback;
(2) Soliciting, accepting, or attempting to accept any kickback; or
(3) Including, directly or indirectly, the amount of any kickback in the contract price charged by a prime Contractor to the United States or in the contract price charged by a subcontractor to a prime Contractor or higher tier subcontractor.
(c)
(1) The Contractor shall have in place and follow reasonable procedures designed to prevent and detect possible violations described in paragraph (b) of this clause in its own operations and direct business relationships.
(2) When the Contractor has reasonable grounds to believe that a violation described in paragraph (b) of this clause may have occurred, the Contractor shall promptly report in writing the possible violation. Such reports shall be made to the inspector general of the contracting agency, the head of the contracting agency if the agency does not have an inspector general, or the Attorney General.
(3) The Contractor shall cooperate fully with any Federal agency investigating a possible violation described in paragraph (b) of this clause.
(4) The Contracting Officer may (i) offset the amount of the kickback against any monies owed by the United States under the prime contract and/or (ii) direct that the Prime Contractor withhold from sums owed a subcontractor under the prime contract the amount of the kickback. The Contracting Officer may order that monies withheld under subdivision (c)(4)(ii) of this clause be paid over to the Government unless the Government has already offset those monies under subdivision (c)(4)(i) of this clause. In either case, the Prime Contractor shall notify the Contracting Officer when the monies are withheld.
(5) The Contractor agrees to incorporate the substance of this clause, including this paragraph (c)(5) but excepting paragraph (c)(1) of this clause, in all subcontracts under this contract that exceed the threshold specified in Federal Acquisition Regulation 3.502-2(i) on the date of subcontract award.
(End of clause)