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[Senate Report 114-270]
[From the U.S. Government Publishing Office]

                                                      Calendar No. 506
114th Congress     }                                    {       Report
                                 SENATE
 2d Session        }                                    {      114-270
_______________________________________________________________________

 

                        TO ENHANCE WHISTLEBLOWER

            PROTECTION FOR CONTRACTOR AND GRANTEE EMPLOYEES

                               __________

                              R E P O R T

                                 of the

                   COMMITTEE ON HOMELAND SECURITY AND

                          GOVERNMENTAL AFFAIRS

                          UNITED STATES SENATE

                              to accompany

                                 S. 795

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                  June 7, 2016.--Ordered to be printed
                  
                                    ______

                         U.S. GOVERNMENT PUBLISHING OFFICE 

59-010                         WASHINGTON : 2016                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
        COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS

                    RON JOHNSON, Wisconsin, Chairman
JOHN McCAIN, Arizona                 THOMAS R. CARPER, Delaware
ROB PORTMAN, Ohio                    CLAIRE McCASKILL, Missouri
RAND PAUL, Kentucky                  JON TESTER, Montana
JAMES LANKFORD, Oklahoma             TAMMY BALDWIN, Wisconsin
MICHAEL B. ENZI, Wyoming             HEIDI HEITKAMP, North Dakota
KELLY AYOTTE, New Hampshire          CORY A. BOOKER, New Jersey
JONI ERNST, Iowa                     GARY C. PETERS, Michigan
BEN SASSE, Nebraska

                  Christopher R. Hixon, Staff Director
                Gabrielle D'Adamo Singer, Chief Counsel
       Patrick J. Bailey, Chief Counsel for Governmental Affairs
              Gabrielle A. Batkin, Minority Staff Director
           John P. Kilvington, Minority Deputy Staff Director
               Mary Beth Schultz, Minority Chief Counsel
 Katherine C. Sybenga, Minority Chief Counsel for Governmental Affairs
                     Laura W. Kilbride, Chief Clerk
                     
                     
                     
                     
                     
                     
                     
                     
                                                      Calendar No. 506
114th Congress     }                                    {       Report
                                 SENATE
 2d Session        }                                    {      114-270
======================================================================
 
    TO ENHANCE WHISTLEBLOWER PROTECTION FOR CONTRACTOR AND GRANTEE 
                               EMPLOYEES

                                _______
                                

                  June 7, 2016.--Ordered to be printed

                                _______
                                

 Mr. Johnson, from the Committee on Homeland Security and Governmental 
                    Affairs, submitted the following

                              R E P O R T

                         [To accompany S. 795]

    The Committee on Homeland Security and Governmental 
Affairs, to which was referred the bill (S. 795) to enhance the 
whistleblower protection for contractor and grantee employees, 
reports favorably thereon with an amendment in the nature of a 
substitute and recommends that the bill, as amended, do pass.

                                CONTENTS

                                                                   Page
  I. Purpose and Summary..............................................1
 II. Background and Need for the Legislation..........................2
III. Legislative History..............................................5
 IV. Section-by-Section Analysis......................................6
  V. Evaluation of Regulatory Impact..................................6
 VI. Congressional Budget Office Cost Estimate........................6
VII. Changes in Existing Law Made by the Bill, as Reported............7

                         I. Purpose and Summary

    The purpose of S. 795 is to improve the whistleblower 
rights of Federal contractors working on Federal contracts, 
grants and other programs. The bill would put whistleblowing 
protections related to individuals working on Federal civilian 
contracts and grants on par with those already existing related 
to individuals working on Federal defense contracts and grants 
by making the temporary civilian whistleblowing program 
permanent and extending these protections to subgrantees. It 
would also extend these protections to personal services 
contractors working on both defense and civilian grant 
programs.

              II. Background and the Need for Legislation

    This Committee has made it a priority to examine the root 
and contributing causes of whistleblower retaliation through 
investigations, hearings, and other oversight, and to identify 
ways in which gaps or weaknesses in current law can be 
addressed through legislation.\1\
---------------------------------------------------------------------------
    \1\See, e.g., Blowing the Whistle on Retaliation: Accounts of 
Current and Former Federal Agency Whistleblowers: Hearing Before the 
Comm. on Homeland Security & Governmental Affairs, 114th Cong. (2015), 
available at http://www.hsgac.senate.gov/hearings/blowing-the-whistle-
on-retaliation-accounts-of-current-and-former-federal-agency-
whistleblowers; Improving VA Accountability: Examining First-Hand 
Accounts of Department of Veterans Affairs Whistleblowers: Hearing 
Before the Comm. on Homeland Security & Governmental Affairs, 114th 
Cong. (2015), available at http://www.hsgac.senate.gov/hearings/
improving-va-accountability-examining-first-hand-accounts-of-
department-of-veterans-affairs-whistleblowers; Pub. L. No. 112-199 
(112th Cong.) (2012); S. 2127, the Dr. Chris Kirkpatrick Whistleblower 
Protection Act of 2015 (114th Cong.).
---------------------------------------------------------------------------
    S. 795 addresses current gaps in whistleblower protections 
for the individuals that work on projects funded by the over $1 
trillion in contract and grant funding provided by the Federal 
Government each year.\2\ Much of this contract and grant 
funding flows through the prime contractors and grantees to 
subcontractors and subgrantees, but employees of these 
subcontractors and subgrantees do not enjoy the same 
whistleblower protections that those working for the prime 
contractors do.
---------------------------------------------------------------------------
    \2\Overview of Awards by FY 2008-2015 (last visited Mar. 7, 2016) 
(online at: https://www.usaspending.gov/Pages/
TextView.aspx?data=OverviewOfAwardsByFiscalYearTextView). the $438 
billion in contracts and $614 billion in grants provided by the Federal 
Government in fiscal year (FY) 2015 alone.
---------------------------------------------------------------------------
    Section 1553 of The American Recovery and Reinvestment Act 
of 2009 (ARRA) established whistleblower protections for all 
recipients of stimulus funds, including all state and local 
government employees and all contractors, including within the 
intelligence community (IC).\3\ During a December 6, 2011, 
hearing before the Senate Committee on Homeland Security and 
Governmental Affairs Subcommittee on Contracting Oversight, the 
Chair of the Legislation Committee of the Council of Inspectors 
General on Integrity and Efficiency (CIGIE) testified that:
---------------------------------------------------------------------------
    \3\Pub. L. No. 111-5 (111th Cong.) (2009).

        . . . investigations and reviews of the whistleblower 
        complaints had resulted in recovery of approximately 
        $1.85 million as of April [2011]. One of the key 
        provisions of ARRA is Section 1553 that gives the 
        authority of [Offices of Inspectors General (OIGs)] to 
        investigate reprisal complaints from non-Federal 
        employee whistleblowers. Of the surveyed [Inspectors 
        General (IGs)], 8 of the OIGs had received a total of 
        18 reprisal complaints, and 11 of those had been 
        accepted for investigation. The majority of IGs that 
        had received these complaints had not experienced any 
        problems or concerns with implementing Section 1553 or 
        in responding to the complainants' request to access 
        the completed investigation file.\4\
---------------------------------------------------------------------------
    \4\Whistleblower Protections for Government Contractors, Hearing 
Before the S. Homeland Sec. & Governmental Affairs Subcomm. On 
Contracting Oversight 6, 112th Cong. (2011) [hereinafter Whistleblower 
Protections] (testimony of the Honorable Peggy Gustafson, Inspector 
General, U.S. Small Business Administration/Chair of the Legislation 
Committee of CIGIE), available at https://www.gpo.gov/fdsys/pkg/CHRG-
112shrg72560/pdf/CHRG-112shrg72560.pdf.

    The ARRA whistleblower provision, while significant, only 
extended to contracts funded by stimulus funds, which make up 
only a small portion of Federal Government contracts. During 
the 2011 subcommittee hearing, the Director of Public Policy at 
the Project On Government Oversight (POGO) testified on the 
need for extending whistleblower coverage to all Federal 
---------------------------------------------------------------------------
contractors:

          According to USAspending.gov, out of nearly $3.8 
        trillion in the federal budget in fiscal year 2011, 
        roughly half was spent on prime awards to contractors, 
        grantees, states and localities, and others. A recent 
        POGO report illustrates the imperative of protecting 
        whistleblowers in this growing workforce of federal 
        contractors. In fact, in some federal offices 
        contractor employees outnumber federal employees. Since 
        1999, the size of the federal employee workforce has 
        remained relatively constant at about 2 million, while 
        the contractor workforce has increased radically--from 
        an estimated 4.4 million to 7.6 million 2005. In other 
        words, the federal contractor workforce dwarfs the 
        federal employee workforce nearly four-fold.\5\
---------------------------------------------------------------------------
    \5\Whistleblower Protections 68-69 (statement of Angela Cantebury, 
Director of Public Policy, Project on Government Oversight).

    Senator Rob Portman added that ``whistleblower protections 
for non-Federal employees are nowhere more necessary and 
appropriate than in Federal contracting. We now spend over half 
a trillion dollars a year in contracts annually.''\6\ 
Similarly, Senator Claire McCaskill discussed the need for 
extending coverage to all Federal contractors noting that, ``if 
we are not including contractors in the protection of the 
whistleblower legislation, then we have a huge problem here. If 
the whistleblowers that work for contractors do not have the 
same protections as Federal employees, we are saying to 
contractors we do not think wrongdoing by you is that 
important.''\7\
---------------------------------------------------------------------------
    \6\Id. at 3 (opening statement of Senator Rob Portman).
    \7\Id. at 2 (opening statement of Senator Claire McCaskill).
---------------------------------------------------------------------------
    Dr. Walter Tamosaitis, a former Department of Energy (DOE) 
government contractor manager in the $13 billion Waste 
Treatment Plant (WTP) project in Hanford, Washington, testified 
before the subcommittee based on his own experience having been 
terminated as a result of disclosing extensive government 
contractor waste. Dr. Tamosaitis described the risks of failing 
to cover Federal contractors, stating:

          With no whistleblower protection, the contractors do 
        what they want. They actually make more money in DOE by 
        not doing it right the first time. They get paid to 
        build it, and then they get paid more to fix it, if it 
        will run at all. And this cost [sic] the taxpayers 
        billions at a time when our country's budget cannot 
        afford it. The original WTP cost was about $4.6 
        billion, and now it is at over $13 billion in 10 
        years.\8\
---------------------------------------------------------------------------
    \8\Id. at 19 (testimony of Dr. Walter Tamosaitis).

    To address this gap in law, Senators Claire McCaskill (D-
MO), Jon Tester (D-MT) and Jim Webb (D-MT) introduced 
legislation in the 112th Congress that would have created 
permanent whistleblower rights for all Federal Government 
contractors, subcontractors, and grantees, including those 
within the IC.\9\ Although the bill was not signed into law, 
the concept was included in the National Defense Authorization 
Act for Fiscal Year 2013, but as a four-year pilot program that 
excluded IC contractors.\10\ In sum, the pilot program 
prohibits employees of a ``contractor, subcontractor, or 
grantee'' from being retaliated against for blowing the whistle 
on waste, mismanagement, and abuse occurring in relation to a 
Federal contract or grant, and provides employees with a 
mechanism for submitting complaints of such conduct to the 
inspector general of the relevant agency.\11\ The pilot program 
is set to expire in 2017.\12\
---------------------------------------------------------------------------
    \9\S. 241, the Non-Federal Employee Whistleblower Protection Act of 
2012 (112th Cong.).
    \10\Pub. L. No. 112-239, 828 (112th Cong.) (2013), codified at 41 
U.S.C. Sec. 4712.
    \11\Id.
    \12\Id.
---------------------------------------------------------------------------
    Importantly, Congress extended the whistleblower 
protections only to the extent the private individual is making 
a disclosure that is related to ``gross mismanagement'' ``an 
abuse of authority,'' ``a substantial and specific danger to 
public health or safety,'' ``or a violation of law, rule, or 
regulation'' that is ``related to a Federal contract or grant'' 
or ``a gross waste of Federal funds.''\13\ A private individual 
blowing the whistle on conduct occurring in relation to a 
private company that is not related to a Federal project must 
seek the protection of other laws that apply to private 
citizens.
---------------------------------------------------------------------------
    \13\Id. (emphasis supplied).
---------------------------------------------------------------------------
    Similar rights have existed for Department of Defense (DoD) 
contractors working on DoD Federal grants for decades.\14\ In 
the years since the protections were first added, Congress 
expanded the DoD whistleblower protections to also cover 
grants,\15\ subcontractors,\16\ and finally, in 2014, grantees 
and subgrantees.\17\
---------------------------------------------------------------------------
    \14\Pub. L. No. 99-500 (99th Cong.) (1986).
    \15\Pub. L. No. 110-181 (110th Cong.) (2008).
    \16\Pub. L. No. 112-239 (113th Cong.) (2013).
    \17\Pub. L. No. 113-291 (113th Cong.) (2014), codified at 10 USC 
Sec. 2409.
---------------------------------------------------------------------------
    Unlike the temporary, four-year program for civilian 
contracts, the rights of whistleblowers working on Federal 
defense contracts are not time-limited. S. 795 would remedy 
this unbalanced treatment by ensuring that contractors, 
subcontractors, grantees, and subgrantees of civilian Federal 
contracts and grants have the same rights as those working on 
defense contracts and grants.
    Additionally, S. 795 would add another category of contract 
employees who would be protected from retaliation against 
whistleblowing: personal services contractors. Personal 
services contractors are contractors that contract their 
services directly with the Government, instead of as an 
employee of a private contracting company, but they are not 
currently covered under defense protections or the civilian 
pilot program.
    One notable example of the need to include personal 
services contractors is the story of Mr. Leonard Cooper, a 
mechanical engineering expert who worked as a personal services 
contractor on embassy security for the State Department.\18\ 
Mr. Cooper alleged to the Office of Special Counsel that he 
believes he was retaliated againstafter he disclosed to 
superiors that the Environmental Safety Protection Systems 
(ESPS) for embassies worldwide lack the instruments necessary 
to sense and account for the impact of constantly-changing wind 
conditions or wind that leaks into the building.\19\ This 
creates global vulnerability to exposure by chemical, 
biological, and radiological (CBR) attacks.\20\ Mr. Cooper also 
disclosed that the design of new stand-alone safe haven 
facilities, called Compound Emergency Sanctuaries (CES), in the 
United States Embassy Compound in Tripoli, Libya does not 
protect occupants against arson or fire as a weapon, leading to 
their guaranteed death against that type of attack.\21\ 
Although the United States Office of Special Counsel found a 
substantial likelihood that Mr. Cooper is correct and ordered a 
State Department investigation, his contract was not 
renewed.\22\ As a personal services contractor, he arguably has 
no recourse under current law.
---------------------------------------------------------------------------
    \18\Briefing by Government Accountability Project to Comm. staff 
(March 2016).
    \19\Letter from the U.S. Office of Special Counsel to Mr. Leonard 
Y. Cooper (Mar. 21, 2014) (on file with Comm. staff).
    \20\Briefing by Government Accountability Project to Comm. staff 
(March 2016).
    \21\Id.
    \22\Letter from the U.S. Office of Special Counsel to Mr. Leonard 
Y. Cooper (Mar. 21, 2014) (on file with Comm. staff).
---------------------------------------------------------------------------
    S. 795 would extend to subcontractors the existing laws 
prohibiting the Federal Government from reimbursing certain 
litigation or defense costs for contractors, including in their 
defense against retaliation claims by whistleblowers.\23\ 
Federal taxpayers should not foot the legal bills for 
contractors who retaliate against employees that report waste, 
fraud and abuse of taxpayer dollars.
---------------------------------------------------------------------------
    \23\10 U.S.C. Sec. 2324(k), 41 U.S.C. Sec. 4310.
---------------------------------------------------------------------------
    Current law does not require contracts signed before the 
effective date of the National Defense Authorization Act for 
Fiscal Year 2013 to be revised so as to include the new 
whistleblower protections.\24\ This bill, however, would 
require companies to use best efforts to include these 
protections if there is a major modification to any contract 
that is currently grand-fathered in.
---------------------------------------------------------------------------
    \24\See 10 U.S.C. Sec. 2324 (note); 41 U.S.C. Sec. 4712 (note).
---------------------------------------------------------------------------
    S. 795 would make the rights of civilian contractors 
permanent and make responsible corrections to existing 
protections for civilian and defense contractors to ensure that 
Federal Government contractors can safely report government 
waste, fraud, abuse and public health and safety threats.

                        III. Legislative History

    Senator Claire McCaskill (D-MO.) introduced S. 795 on March 
18, 2015. The bill was referred to the Committee on Homeland 
Security and Governmental Affairs. Senator Ron Johnson (R-WI.) 
joined as a cosponsor on February 9, 2016.
    The Committee considered S. 795 at a business meeting on 
February 10, 2016. During the business meeting, a substitute 
amendment was offered by Senator McCaskill. The bill, as 
amended by the McCaskill substitute amendment, was ordered 
reported favorably by voice vote en bloc. Senators Johnson, 
McCain, Portman, Paul, Lankford, Ayotte, Ernst, Sasse, Carper, 
McCaskill, Tester, Baldwin, Heitkamp, Booker, and Peters were 
present for the vote.
    Consistent with the Committee's order on technical and 
conforming changes at the meeting, the Committee reports the 
bill with a technical amendment by mutual agreement of the full 
Committee majority and minority staff.

        IV. Section-by-Section Analysis of the Bill, as Reported

Section 1. Enhancement of whistleblower protection for contractor and 
        grantee employees

    Subsection (a) adds ``personal services contractor'' to the 
list of protected individuals working on defense contracts or 
grants for the Federal Government. It also makes permanent the 
four-year pilot program that provides whistleblower protections 
to certain individuals working on civilian contracts, and adds 
``personal services contractor'' and ``subgrantee'' to the list 
of those protected individuals.
    Subsection (b) prohibits reimbursement of legal fees 
accrued by a contractor, subcontractor, or personal services 
contractor in defense of reprisal claims brought by the Federal 
Government, a state, or by a contractor or grantee employee 
arising under the authority of the Federal whistleblower 
protections established for civilian and defense contracts.
    Subsection (c) requires the head of each contracting agency 
to, at the time of any major contract modification, make best 
efforts to include the protections established under this bill 
and the National Defense Authorization Act for Fiscal Year 2013 
in any contract awarded prior to the date of enactment of this 
bill.

                   V. Evaluation of Regulatory Impact

    Pursuant to the requirements of paragraph 11(b) of rule 
XXVI of the Standing Rules of the Senate, the Committee has 
considered the regulatory impact of this bill and determined 
that the bill will have no regulatory impact within the meaning 
of the rules. The Committee agrees with the Congressional 
Budget Office's statement that the bill contains no 
intergovernmental or private-sector mandates as defined in the 
Unfunded Mandates Reform Act (UMRA) and would impose no costs 
on state, local, or tribal governments.

             VI. Congressional Budget Office Cost Estimate

                                                      May 27, 2016.
Hon. Ron Johnson, Chairman,
Committee on Homeland Security and Governmental Affairs,
U.S. Senate, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for S. 795, a bill to 
enhance whistleblower protection for contractor and grantee 
employees.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Matthew 
Pickford.
            Sincerely,
                                                        Keith Hall.
    Enclosure.

S. 795--A bill to enhance whistleblower protection for contractor and 
        grantee employees

    S. 795 would amend federal law to permanently extend legal 
protections to certain nonfederal employees (contractors, 
subcontractors, grantees, and others employed by entities that 
receive federal funds) who report waste, fraud, or abuse 
involving federal funds. Specifically, under the bill, anyone 
who reports the misuse of federal funds could not be demoted, 
discharged, or discriminated against because of the disclosure. 
The current four-year pilot program that extends those same 
protections ends in December 2016.
    The cost to implement S. 795 would depend on the number of 
whistleblower claims made by those nonfederal employees. 
Evidence from the pilot program that currently protects certain 
non-federal employees from such discrimination suggests that 
the number of such claims brought by nonfederal employees has 
totaled less than 20 for each of the 26 major federal agencies. 
CBO estimates that implementing S. 795 would cost about $3,000 
to investigate each claim, or about $5 million over the 2017-
2021 period. Any such spending would be subject to the 
availability of appropriated funds. Enacting the bill could 
affect direct spending by agencies not funded through annual 
appropriations; therefore, pay-as-you-go procedures apply. CBO 
estimates, however, that any net increase in spending by those 
agencies would be negligible. Enacting S. 795 would not affect 
revenues.
    CBO estimates that enacting S. 795 would not increase net 
direct spending or on-budget deficits in any of the four 
consecutive 10-year periods beginning in 2027.
    S. 795 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act and 
would not affect the budgets of state, local, or tribal 
governments.
    The CBO staff contact for this estimate is Matthew 
Pickford. The estimate was approved by H. Samuel Papenfuss, 
Deputy Assistant Director for Budget Analysis.

       VI. Changes in Existing Law Made by the Bill, as Reported

    In compliance with paragraph 12 of rule XXVI of the 
Standing Rules of the Senate, changes in existing law made by 
the bill, as reported, are shown as follows: (existing law 
proposed to be omitted is enclosed in brackets, new matter is 
printed in italic, and existing law in which no change is 
proposed is shown in roman):

UNITED STATES CODE

           *       *       *       *       *       *       *

TITLE 10--ARMED FORCES

           *       *       *       *       *       *       *

PART IV--SERVICE, SUPPLY, AND PROCUREMENT

           *       *       *       *       *       *       *

CHAPTER 137--PROCUREMENT GENERALLY

           *       *       *       *       *       *       *

SEC. 2324. ALLOWABLE COSTS UNDER DEFENSE CONTRACTS

    (a) * * *

           *       *       *       *       *       *       *

    (k) Proceeding Costs Not Allowable.
          (1) Except as otherwise provided in this subsection, 
        costs incurred by a contractor, subcontractor, or 
        personal services contractor in connection with any 
        criminal, civil, or administrative proceeding commenced 
        by the United States, by a State, or by a contractor, 
        subcontractor, or personal services contractor employee 
        submitting a complaint under section 2409 of this title 
        are not allowable as reimbursable costs under a covered 
        contract, subcontract, or personal services contract if 
        the proceeding
                  (A) relates to a violation of, or failure to 
                comply with, a Federal or State statute or 
                regulation or to any other activity described 
                in subparagraphs (A) through (C) of section 
                2409(a)(1) of this title, and
                  (B) results in a disposition described in 
                paragraph (2).
          (2) A disposition referred to in paragraph (1)(B) is 
        any of the following:
                  (A) In the case of a criminal proceeding, a 
                conviction (including a conviction pursuant to 
                a plea of nolo contendere) by reason of the 
                violation or failure referred to in paragraph 
                (1).
                  (B) In the case of a civil or administrative 
                proceeding involving an allegation of fraud or 
                similar misconduct, a determination of 
                contractor, subcontractor, or personal services 
                contractor liability on the basis of the 
                violation or failure referred to in paragraph 
                (1).
                  (C) In the case of any civil or 
                administrative proceeding, the imposition of a 
                monetary penalty or an order to take corrective 
                action under section 2409 of this title by 
                reason of the violation or failure referred to 
                in paragraph (1).
                  (D) A final decision--
                          (i) to debar or suspend the 
                        contractor, subcontractor, or personal 
                        services contractor;
                          (ii) to rescind or void the contract, 
                        subcontract, or personal services 
                        contract; or
                          (iii) to terminate the contract, 
                        subcontract, or personal services 
                        contract for default;

           *       *       *       *       *       *       *

CHAPTER 141--MISCELLANEOUS PROCUREMENT PROVISIONS

           *       *       *       *       *       *       *

SEC. 2409. CONTRACTOR EMPLOYEES: PROTECTION FROM REPRISAL FOR 
                    DISCLOSURE OF CERTAIN INFORMATION

    (a) Prohibition of Reprisals.
          (1) An employee of a contractor, subcontractor, 
        grantee, or subgrantee or personal services contractor 
        may not be discharged, demoted, or otherwise 
        discriminated against as a reprisal for disclosing to a 
        person or body described in paragraph (2) information 
        that the employee reasonably believes is evidence of 
        the following:

           *       *       *       *       *       *       *

TITLE 41--PUBLIC CONTRACTS

           *       *       *       *       *       *       *

Subtitle I--Federal Procurement Policy

           *       *       *       *       *       *       *

DIVISION C--PROCUREMENT

           *       *       *       *       *       *       *

TITLE 41--PUBLIC CONTRACTS

           *       *       *       *       *       *       *

Subtitle I--Federal Procurement Policy

           *       *       *       *       *       *       *

DIVISION C--PROCUREMENT

           *       *       *       *       *       *       *

CHAPTER 43--ALLOWABLE COSTS

           *       *       *       *       *       *       *

SEC. 4304. SPECIFIC COSTS NOT ALLOWABLE

    (a) Specific Costs.--The following costs are not allowable 
under a covered contract:
          (1) * * *

           *       *       *       *       *       *       *

          (15) Costs incurred by a contractor, subcontractor, 
        or personal services contractor in connection with any 
        criminal, civil, or administrative proceeding commenced 
        by the Federal Government or a State, to the extent 
        provided in section 4310 of this title.

           *       *       *       *       *       *       *

SEC. 4310. PROCEEDING COSTS NOT ALLOWABLE

    (a) Definitions.--
          (1) Costs.--The term ``costs'', with respect to a 
        proceeding, means all costs incurred by a contractor, 
        subcontractor, or personal services contractor, whether 
        before or after the commencement of the proceeding, 
        including--
                  (A) administrative and clerical expenses;
                  (B) the cost of legal services, including 
                legal services performed by an employee of the 
                contractor, subcontractor, or personal services 
                contractor;
                  (C) the cost of the services of accountants 
                and consultants retained by the contractor, 
                subcontractor, or personal services contractor; 
                and
                  (D) the pay of directors, officers, and 
                employees of the contractor, subcontractor, or 
                personal services contractor for time devoted 
                by those directors, officers, and employees to 
                the proceeding.
          (2) Penalty.--The term ``penalty'' does not include 
        restitution, reimbursement, or compensatory damages.
          (3) Proceeding.--The term ``proceeding'' includes an 
        investigation.
    (b) In General.--Except as otherwise provided in this 
section, costs incurred by a contractor, subcontractor, or 
personal services contractor in connection with a criminal, 
civil, or administrative proceeding commenced by the Federal 
Government, by a State, or by a contractor, subcontractor, or 
personal services contractor or grantee employee submitting a 
complaint under section 4712 of this title are not allowable as 
reimbursable costs under a covered contract, subcontract, or 
personal services contract if the proceeding--
          (1) relates to a violation of, or failure to comply 
        with, a Federal or State statute or regulation or to 
        any other activity described in section 4712(a)(1) of 
        this title; and
          (2) results in a disposition described in subsection 
        (c).
    (c) Covered Dispositions.--A disposition referred to in 
subsection (b)(2) is any of the following:
          (1) In a criminal proceeding, a conviction (including 
        a conviction pursuant to a plea of nolo contendere) by 
        reason of the violation or failure referred to in 
        subsection (b).
          (2) In a civil or administrative proceeding involving 
        an allegation of fraud or similar misconduct, a 
        determination of contractor, subcontractor, or personal 
        services contractor liability on the basis of the 
        violation or failure referred to in subsection (b).
          (3) In any civil or administrative proceeding, the 
        imposition of a monetary penalty or an order to take 
        corrective action under section 4712 of this title by 
        reason of the violation or failure referred to in 
        subsection (b).
          (4) A final decision to do any of the following, by 
        reason of the violation or failure referred to in 
        subsection (b):
                  (A) Debar or suspend the contractor, 
                subcontractor, or personal services contractor.
                  (B) Rescind or void the contract, 
                subcontract, or personal services contract.
                  (C) Terminate the contract, subcontract, or 
                personal services contract for default.
          (5) A disposition of the proceeding by consent or 
        compromise if the disposition could have resulted in a 
        disposition described in paragraph (1), (2), (3), or 
        (4).
    (d) Costs Allowed by Settlement Agreement in Proceeding 
Commenced by Federal Government.--In the case of a proceeding 
referred to in subsection (b) that is commenced by the Federal 
Government and is resolved by consent or compromise pursuant to 
an agreement entered into by a contractor, subcontractor, or 
personal services contractor and the Federal Government, the 
costs incurred by the contractor, subcontractor, or personal 
services contractor in connection with the proceeding that are 
otherwise not allowable as reimbursable costs under subsection 
(b) may be allowed to the extent specifically provided in that 
agreement.
    (e) Costs Specifically Authorized by Executive Agency in 
Proceeding Commenced by State.--In the case of a proceeding 
referred to in subsection (b) that is commenced by a State, the 
executive agency that awarded the covered contract, 
subcontract, or personal services contract involved in the 
proceeding may allow the costs incurred by the contractor, 
subcontractor, or personal services contractor in connection 
with the proceeding as reimbursable costs if the executive 
agency determines, in accordance with the Federal Acquisition 
Regulation, that the costs were incurred as a result of--
          (1) a specific term or condition of the contract, 
        subcontract, or personal services contract; or
          (2) specific written instructions of the executive 
        agency.
    (f) Other Allowable Costs.--
          (1) In General.--Except as provided in paragraph (3), 
        costs incurred by a contractor, subcontractor, or 
        personal services contractor in connection with a 
        criminal, civil, or administrative proceeding commenced 
        by the Federal Government or a State in connection with 
        a covered contract, subcontract, or personal services 
        contract may be allowed as reimbursable costs under the 
        contract, subcontract, or personal services contract if 
        the costs are not disallowable under subsection (b), 
        but only to the extent provided in paragraph (2).
          (2) Amount of Allowable Costs.--
                  (A) Maximum amount allowed.--The amount of 
                the costs allowable under paragraph (1) in any 
                case may not exceed the amount equal to 80 
                percent of the amount of the costs incurred, to 
                the extent that the costs are determined to be 
                otherwise allowable and allocable under the 
                Federal Acquisition Regulation.
                  (B) Content of regulations.--Regulations 
                issued for the purpose of subparagraph (A) 
                shall provide for appropriate consideration of 
                the complexity of procurement litigation, 
                generally accepted principles governing the 
                award of legal fees in civil actions involving 
                the Federal Government as a party, and other 
                factors as may be appropriate.
          (3) When otherwise allowable costs are not 
        allowable.--In the case of a proceeding referred to in 
        paragraph (1), contractor, subcontractor, or personal 
        services contractor costs otherwise allowable as 
        reimbursable costs under this subsection are not 
        allowable if--
                  (A) the proceeding involves the same 
                contractor, subcontractor, or personal services 
                contractor misconduct alleged as the basis of 
                another criminal, civil, or administrative 
                proceeding; and
                  (B) the costs of the other proceeding are not 
                allowable under subsection (b).

           *       *       *       *       *       *       *

CHAPTER 47--MISCELLANEOUS

           *       *       *       *       *       *       *

Table of sections
Sec.
4701. Determinations and decisions.
     * * * * * * *
[4712. Pilot program for enhancement of contractor protection from 
          reprisal for disclosure of certain information.]
4712. Enhancement of contractor protection from reprisal for disclosure 
          of certain information.
     * * * * * * *

SEC. 4712. [PILOT PROGRAM FOR ENHANCEMENT] ENHANCEMENT OF CONTRACTOR 
                    PROTECTION FROM REPRISAL FOR DISCLOSURE OF CERTAIN 
                    INFORMATION

    (a) Prohibition of Reprisals.--
          (1) In general.--An employee of a contractor, 
        subcontractor, [or grantee] grantee, or subgrantee or 
        personal services contractor, may not be discharged, 
        demoted, or otherwise discriminated against as a 
        reprisal for disclosing to a person or body described 
        in paragraph (2) information that the employee 
        reasonably believes is evidence of gross mismanagement 
        of a Federal contract or grant, a gross waste of 
        Federal funds, an abuse of authority relating to a 
        Federal contract or grant, a substantial and specific 
        danger to public health or safety, or a violation of 
        law, rule, or regulation related to a Federal contract 
        (including the competition for or negotiation of a 
        contract) or grant.

           *       *       *       *       *       *       *

    [(i) Duration of Section.--This section shall be in effect 
for the four-year period beginning on the date of that is 180 
days after the date the enactment of this section.]

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