Federal Register / Vol. 72, No. 219 / Wednesday, November 14, 2007 / Proposed Rules 64019 

DEPARTMENT OF DEFENSE 

GENERAL SERVICES 

ADMINISTRATION 

NATIONAL AERONAUTICS AND 

SPACE ADMINISTRATION 

48 CFR Parts 3, 9, 42, and 52 

[FAR Case 2007–006; Docket 2007–0001; 

Sequence 11] 

RIN: 9000–AK80 

Federal Acquisition Regulation; FAR 

Case 2007–006, Contractor 

Compliance Program and Integrity 

Reporting 

AGENCIES: Department of Defense (DoD), 

General Services Administration (GSA), 

and National Aeronautics and Space 

Administration (NASA). 

ACTION: Proposed rule. 

SUMMARY: The Civilian Agency 

Acquisition Council and the Defense 

Acquisition Regulations Council 

(Councils) are proposing to amend the 

Federal Acquisition Regulation (FAR), 

at the request of the Department of 

Justice (DoJ), in order to require 

contractors to have a code of ethics and 

business conduct, establish and 

maintain specific internal controls to 

detect and prevent improper conduct in 

connection with the award or 

performance of Government contracts or 

subcontracts, and to notify contracting 

officers without delay whenever they 

become aware of violations of Federal 

criminal law with regard to such 

contracts or subcontracts. 

DATES: Interested parties should submit 

written comments to the FAR 

Secretariat on or before January 14, 2008 

to be considered in the formulation of 

a final rule. 

ADDRESSES: Submit comments 

identified by FAR case 2007–006 by any 

of the following methods: 

• Federal eRulemaking Portal: http:// 

www.regulations.gov.To search for any 

document, first select under ‘‘Step 1,’’

‘‘Documents with an Open Comment 

Period’’ and select under ‘‘Optional Step 

2,’’ ‘‘Federal Acquisition Regulation’’ as 

the agency of choice. Under ‘‘Optional 

Step 3,’’ select ‘‘Proposed Rules’’. Under 

‘‘Optional Step 4,’’ from the drop down 

list, select ‘‘Document Title’’ and type 

the FAR case number ‘‘2007–006’’. Click 

the ‘‘Submit’’ button. Please include 

your name and company name (if any) 

inside the document. You may also 

search for any document by clicking on 

the ‘‘Search for Documents’’ tab at the 

top of the screen. Select from the agency 

field ‘‘Federal Acquisition Regulation’’, 

and type ‘‘2007–006’’ in the ‘‘Document 

Title’’ field. Select the ‘‘Submit’’ button. 

• Fax: 202–501–4067. 

• Mail: General Services 

Administration, Regulatory Secretariat 

(VIR), 1800 F Street, NW, Room 4035, 

ATTN: Laurieann Duarte, Washington, 

DC 20405. 

Instructions: Please submit comments 

only and cite FAR case 2007–006 in all 

correspondence related to this case. All 

comments received will be posted 

without change to http:// 

www.regulations.gov, including any 

personal and/or business confidential 

information provided. 

FOR FURTHER INFORMATION CONTACT: Mr. 

Ernest Woodson, Procurement Analyst, 

at (202) 501–3775 for clarification of 

content. For information pertaining to 

status or publication schedules, contact 

the FAR Secretariat at (202) 501–4755. 

Please cite FAR case 2007–006. 

SUPPLEMENTARY INFORMATION: 

A. Background 

On May 23, 2007, the Office of 

Federal Procurement Policy received a 

request from the Department of Justice 

to open a FAR case to require 

contractors to have a code of ethics and 

business conduct, establish and 

maintain specific internal controls to 

detect and prevent improper conduct in 

connection with the award or 

performance of Government contracts or 

subcontracts, and to notify contracting 

officers without delay whenever they 

become aware of violations of Federal 

criminal law with regard to Government 

contracts or subcontracts. 

The Councils published a proposed 

rule under FAR Case 2006–007, 

Contractor Code of Ethics and Business 

Conduct, 72 FR 7588, February 16, 

2007. That rule proposed creation of a 

new Subpart 3.10 to address the 

requirements for a contractor code of 

ethics and business conduct, and an 

associated clause at FAR 52.203–XX. 

The comment period on that proposed 

rule closed on April 17, 2007, and 27 

responses were received. It is still the 

intent of the Councils to issue a final 

rule under that case, based on analysis 

of the public comments received, except 

that the final rule will not address 

mandatory disclosure to the 

Government. 

That proposed rule covers some of the 

same areas requested by DoJ. However, 

several aspects of the DoJ request go 

beyond that proposed rule. The 

Councils therefore have decided to issue 

a new proposed rule under this FAR 

case 2007–006 to cover these new 

proposals. 

Public comments are requested on the 

new changes not included in prior FAR 

Case 2006–007. Comments are also 

requested on mandatory disclosure, and 

full cooperation, which were in FAR 

case 2006–007 as examples in the clause 

of an internal control system. Also note 

that some paragraphs in that rule, which 

were not necessary for this rule, were 

not repeated and will be part of that 

case’s final rule (hotline posters). 

The new changes in this rule include: 

Compliance program as part of 

contractor’s obligationto have ‘‘a 

satisfactory record of integrity and 

business ethics’’

As requested by DoJ, the Councils 

propose to amend the general standards 

of responsibility at FAR 9.104–1 to add 

a cross reference to Subpart 42.15, and 

to add at FAR 42.1501 ‘‘the contractor’s 

record of integrity and business ethics’’

as relevant information to be included 

in past performance information. FAR 

42.1501 already includes the 

requirement to report the contractor’s 

record of conforming to contract 

requirements, which will include any 

information that the contractor has not 

complied with the clause at FAR 

52.203–XX. For contractors that have 

had prior contracts subject to these new 

requirements, compliance as reflected in 

past performance rating will be an 

element for consideration in assessing 

whether a contractor meets the standard 

of having a satisfactory record of 

integrity and business ethics. 

Applicability to small business 

concerns 

The Councils propose that clause at 

FAR 52.203–XX be included in any 

contract that exceeds $5 million, but 

that the formal ethics awareness 

program and internal control system are 

not required if the contractor is a small 

business concern. This directly reduces 

the burden on small business concerns. 

U.S. Sentencing Guidelines 

The Councils propose to modify the 

clause at FAR 52.203–XX, Contractor 

Code of Ethics and Business Conduct, 

which was proposed under FAR Case 

2006–007, to more closely match the 

U.S. Sentencing Commission Guidelines 

Manual, Section 8B2.1 (available at 

http://www.ussc.gov/). Not only DoJ 

requests this, but also a number of 

respondents to the proposed FAR rule 

2006–007. The U.S. Sentencing 

Guidelines provide guidance on what 

the U.S. Sentencing Commission 

expects in the way of an effective 

compliance and ethics program from 

organizations convicted of a felony or 

Class A misdemeanor. DoJ and other 

respondents to the FAR Case 2006–007 

proposed rule considered that that 

proposed rule left out important 

elements that are covered in the U.S. 

Sentencing Guidelines and that this can 


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create confusion. Businesses (especially 

small businesses) may believe they have 

met all the compliance requirements of 

the U.S. Government by following the 

FAR; this will create a false sense of 

security. Therefore, this rule proposes 

the following changes to the clause at 

FAR 52.203–XX: 

• Add definitions of ‘‘agent,’’ and 

‘‘principals.’’ The definition of 

‘‘principals,’’ is the same as the 

definition used at FAR 52.209–5. This 

definition has the advantage that it is 

already included in the FAR, and 

includes all the personnel covered in 

the U.S. Sentencing Guidelines 

definitions of ‘‘governing authority’’

‘‘high-level personnel,’’ and ‘‘substantial 

authority personnel.’’

• Amplify the paragraph FAR 52.203–

XX(b)(2) requirement to promote 

compliance with the code of business 

ethics. 

• Provide more detail in paragraph 

FAR 52.203–XX(c)(1) with regard to the 

ongoing ethics and business conduct 

awareness and compliance program. 

• In paragraph FAR 52.203–XX(c)(2), 

make all the stated elements of the 

internal control system mandatory, 

rather than guidance. 

• Add a new paragraph FAR 52.203–

XX(c)(2)(ii)(A) requiring assignment of 

responsibility at a sufficiently high level 

of the organization and adequate 

resources to ensure effectiveness of the 

business ethics awareness and 

compliance program and internal 

control system. 

• Provide additional detail in 

paragraph FAR 52.203–XX(c)(2)(ii)(C) 

with regard to the requirement for 

periodic reviews. 

• Provide that disciplinary action 

shall be taken not only for improper 

conduct, but also for failing to take 

reasonable steps to prevent or detect 

improper conduct by others. 

Contractor Integrity Reporting 

The Councils propose to address the 

reporting of violations of Federal 

criminal law in connection with the 

award or performance of a Government 

contract or subcontract conduct as 

follows: 

• Add at FAR 3.1002 a cross-reference 

to FAR 9.406–2(b)(1)(v) and 9.407–

2(a)(7), that contractors may be 

suspended and debarred for knowing 

failure to timely disclose a violation of 

Federal criminal law in connection with 

the award or performance of any 

Government contract performed by the 

contractor or a subcontract awarded 

thereunder. 

• Modify the clause at FAR 52.203–

XX(b)(3), which applies to both large 

and small business concerns, to require 

notification to the agency Office of the 

Inspector General, with a copy to the 

contracting officer, whenever the 

contractor has reasonable grounds to 

believe that a violation of criminal law 

has been committed in connection with 

the award or performance of the 

contract or any subcontract thereunder. 

• Modify the clause at FAR 52.203–

XX(c), which does not apply to small 

business concerns, to mandate that the 

internal control system of the contractor 

shall also include this requirement to 

report violations of Federal criminal law 

in connection with the award or 

performance of any Government 

contract performed by the contractor or 

a subcontract awarded thereunder. 

According to DoJ, the requirement for 

mandatory disclosure is necessary 

because few companies have actually 

responded to the invitation of DoD that 

they report or voluntarily disclose 

suspected instance of violations of 

Federal criminal law relating to the 

contract or subcontract. 

The Councils invite comment as to 

whether there should be any 

appropriate limitation on the reporting 

requirement that accomplishes the 

objectives of this rule, such as the time 

period during which the violations to be 

reported occurred (look back). 

Use of clause in contracts for the 

acquisition of commercial items 

awarded under FAR Part 12 

The Councils do not recommend 

application of the clause to contracts for 

the acquisition of commercial items. 

Requiring commercial contractors to 

comply with the rule would not be 

consistent with Public Law 103–355 

that requires the acquisition of 

commercial items to resemble 

customarily commercial marketplace 

practices to the maximum extent 

practicable. Commercial practice 

encourages, but does not require, 

contractor codes of business ethics 

conduct. In particular, the intent of FAR 

Part 12 is to minimize the number of 

Government-unique provisions and 

clauses. The policy at FAR 3.1002 of the 

proposed rule does apply to commercial 

contracts. All Government contractors 

must conduct themselves with the 

highest degree of integrity and honesty. 

However, consistent with the intent of 

Pub. L. 103–355 and FAR Part 12, the 

clause mandating specific requirements 

contractor compliance program and 

integrity reporting is not required in 

commercial contracts. 

Causes for debarment or suspension 

As requested by DoJ, the Councils 

propose modification of FAR 9.406–2 

and 9.407–2 to include new cause for 

debarment or suspension: a knowing 

failure to timely disclose an 

overpayment on a Government contract 

or violation of Federal criminal law in 

connection with the award or 

performance of any Government 

contract performed by the contractor or 

any subcontract thereunder. 

Clause at FAR 52.203 

Consistent with the proposed rule 

under FAR case 2006–007, the Councils 

propose use of the clause FAR 52.203–

XX in solicitations and contracts 

expected to exceed $5 million if the 

performance period is 120 days or more, 

except for acquisitions under FAR Part 

12 or contracts to be performed outside 

the United States. 

Flowdown 

The Councils propose flowdown of 

the clause FAR 52.203–XX to 

subcontracts valued at over $5 million, 

consistent with the proposed rule under 

FAR case 2006–007. The Councils 

decided that the same rationale that 

supports a threshold of $5 million for 

prime contracts, is applicable to 

subcontracts as well. The other 

conditions of the proposed rule under 

FAR case 2006–007 are also still 

applicable, i.e., performance period of 

120 days or more, and the subcontract 

is not for acquisition of commercial 

items or to be performed outside the 

United States. 

Full cooperation 

In addition, the Councils have 

included in the proposed rule the 

requirements that an internal control 

system must require full cooperation 

with any Government agencies 

responsible for audit, investigation, or 

corrective actions. This requirement was 

originally derived from the Defense 

Federal Acquisition Regulation 

Supplement (DFARS) guidance at 

DFARS 203.7001(a)(7), with the 

addition of the word ‘‘audit’’ in 

response to a public comment under 

FAR case 2006–007. 

The Councils are not including this 

requirement in the final rule to be 

issued under FAR case 2006–007, in 

order to allow further public comment 

and analysis of the relationship to 

waiver of the attorney-client privilege. 

This is a significant regulatory action 

and, therefore, was not subject to review 

under Section 6(b) of Executive Order 

12866, Regulatory Planning and Review, 

dated September 30, 1993. This rule is 

not a major rule under 5 U.S.C. 804. 

B. Regulatory Flexibility Act 

The changes may have a significant 

economic impact on a substantial 

number of small entities within the 

meaning of the Regulatory Flexibility 

Act, 5 U.S.C. 601, et seq., because it 

requires the contractor (including small 

business concerns) to notify the agency 

inspector general and the contracting 


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officer in writing whenever the 

contractor has reasonable grounds to 

believe that a principal, employee, 

agent, or subcontractor of the contractor 

has committed a violation of Federal 

criminal law in connection with the 

award of performance of any 

Government contract or subcontract. 

Although the Councils do not expect 

this to be a significant burden on small 

businesses, because it only impacts 

those small businesses that need to 

report violations of Federal criminal law 

in connection with the award or 

performance of a Government contract, 

the Councils have prepared an Initial 

Regulatory Flexibility Analysis (IRFA) 

for public comment, that is summarized 

as follows: 

This Initial Regulatory Flexibility Analysis 

(IRFA) has been prepared consistent with 5 

U.S.C. 603. 

The objective of the rule is to emphasize 

the critical importance of integrity in 

contracting and reduce the occurrence of 

improper or criminal conduct in connection 

with the award and performance of Federal 

contracts and subcontracts. 

The rule imposes a clause that is 

applicable to contracts and subcontracts that 

exceed $5 million and with a performance 

period that exceeds 120 days. The clause 

does not apply to—

• Acquisition of commercial items, either 

at the prime or subcontract levels. 

• Contracts or subcontracts performed 

outside the United States. 

Although the clause requires all 

contractors to implement a code of business 

ethics, the clause requirements for a formal 

awareness/training program and internal 

control system will not apply to small 

business concerns. 

The clause imposes a mandatory 

requirement to notify the agency Office of the 

Inspector General, with a copy to the 

contracting officer, whenever the contractor 

has reasonable grounds to believe that a 

principal, employee, agent, or subcontractor 

of the contractor has committed a violation 

of Federal criminal law in connection with 

the award or performance of the contract or 

any subcontract thereunder. All contractors 

and subcontractors subject to the clause are 

required to report such violations. In 

addition, regardless of inclusion of the 

clause, a new cause for debarment and 

suspension has been added, for failure to 

timely report any such known violation of 

Federal criminal law. 

Based on Fiscal Year 2006 data collected 

from the Federal Procurement Data System, 

the Councils estimate that this clause will 

apply to 1800 prime contractors per year, of 

which 700 companies are small business 

concerns. The clause also flows down to 

subcontracts that exceed $5 million, and we 

estimate that approximately 700 additional 

small business concerns will meet these 

conditions. We calculate the number of small 

business concerns that will be required to 

submit the report of violation of Federal 

criminal law with regard to a Government 

contract or subcontracts as follows: 

700 contractors + 700 subcontractors = 

1,400×2% = 28. 

In addition, although there is no clause 

required, all contractors will be on notice 

that they may be suspended or debarred for 

failure to report known violations of Federal 

criminal law with regard to a Government 

contract or subcontract. In Fiscal Year 2006 

there were 144,854 small business concern 

listed in FPDS-NG with unique DUNS 

numbers. We estimate that of the listed small 

business concerns, approximately 116,000 

(80 percent) will receive contracts in a given 

fiscal year. Government small business 

experts guess that at least twice that number 

of small businesses (232,000) will receive 

subcontracts. However, the only small 

business concerns impacted by this cause for 

suspension or debarment are those small 

business concerns that are aware of violation 

of Federal criminal law with regard to their 

Government contracts or subcontracts. 

Subtracting out those contracts and 

subcontracts covered by the clause (700), we 

estimate this number as follows: (115,300 + 

231,300 = 346,600 x .5% = 1,733). We 

estimate a lower percentage than used for 

contracts and subcontracts that contain the 

clause, because these are lower dollar 

contracts and subcontracts, including 

commercial contracts, and there may be less 

visibility into violations of Federal criminal 

law. Because there is no contract clause, we 

estimate that only 1 percent of those 

contractors/ subcontractors that are aware of 

a violation of Federal criminal law in regard 

to the contractor or subcontract will 

voluntarily report such violation to the 

contracting officer. 

The rule requires contractors to report to 

the agency inspector general and the 

contracting officer of violations of Federal 

criminal law in connection with the award or 

performance of any Government contract or 

subcontract for contracts and subcontracts 

that exceed $5 million, excluding contracts/ 

subcontracts to be performed outside the 

United States or awarded under FAR Part 12. 

Such a report would probably be prepared by 

company management, and would probably 

involve legal assistance to prepare. 

The rule does not duplicate, overlap, or 

conflict with any other Federal rules. 

The Councils adopted the following 

alternatives in order to minimize the impact 

on small business concerns: 

•The requirement for formal training 

programs and internal control systems are 

inapplicable to small business concerns, 

rather than tying the requirement to a dollar 

threshold based on contract value, which 

might make the requirements applicable to 

some small business concerns. 

• The requirement for mandatory reporting 

is limited to violations of Federal criminal 

law in connection with performance or 

award of a Government contract or 

subcontract, rather than requiring report of 

any improper conduct, even that which is not 

a violation of Federal criminal law. 

The FAR Secretariat has submitted a 

copy of the IRFA to the Chief Counsel 

for Advocacy of the Small Business 

Administration. A copy of the IRFA may 

be obtained from the FAR Secretariat. 

The Councils will consider comments 

from small entities concerning the 

affected FAR Parts 3, 9, 42, and 52 in 

accordance with 5 U.S.C. 610. 

Comments must be submitted separately 

and should cite 5 U.S.C 601, et seq. 

(FAR case 2007–006), in 

correspondence. 

C. Paperwork Reduction Act 

The Paperwork Reduction Act (Pub. 

L. 104–13) applies because the proposed 

rule contains information collection 

requirements. Accordingly, the FAR 

Secretariat will submit a request for 

approval of a new information 

collection requirement concerning OMB 

Number 9000–00XX, Contractor 

Compliance Program and Integrity 

Reporting, to the Office of Management 

and Budget under 44 U.S.C. 3501, et 

seq. 

There will be an estimated 20 burden 

hours for the required reporting to the 

contracting officer of violations of 

Federal criminal law in connection with 

the award or performance of any 

Government contract or subcontract. 

Annual Reporting Burden: 

Public reporting burden for this 

collection of information is estimated 

based on review of Fiscal Year 2006 

contract awards as entered in the 

Federal Procurement Data System, the 

Councils estimate that 1400 contractors 

per year will be subject to the new 

clause FAR 52.203–XX (contracts 

greater than $5 million, not including 

contracts awarded under FAR Part 12). 

The Councils further estimate that of 

those 1400 contractors, 28 (2 percent) 

will report violations of Federal 

criminal law with regard to performance 

or award of a Government contract or 

subcontract. In addition, the Councils 

estimate that 17 contractors that do not 

have the clause at FAR 52.203–XX in 

the contract will also report such 

violations. 

The annual reporting burden is 

estimated as follows: 

Respondents: 45 

Responses per respondent: 1 

Total annual responses: 45 

Preparation hours per response: 3 

Total response burden hours: 135 

D. Request for Comments Regarding 

Paperwork Burden 

Submit comments, including 

suggestions for reducing this burden, 

not later than January 14, 2008 to: FAR 

Desk Officer, OMB, Room 10102, NEOB, 

Washington, DC 20503, and a copy to 

the General Services Administration, 

FAR Secretariat (VIR), 1800 F Street, 

NW, Room 4035, Washington, DC 

20405. Please cite OMB Control Number 

9000–00XX, Contractor Compliance 


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Program and Integrity Reporting, in all 

correspondence. 

Public comments are particularly 

invited on: whether this collection of 

information is necessary for the proper 

performance of functions of the FAR, 

and will have practical utility; whether 

our estimate of the public burden of this 

collection of information is accurate, 

and based on valid assumptions and 

methodology; ways to enhance the 

quality, utility, and clarity of the 

information to be collected; and ways in 

which we can minimize the burden of 

the collection of information on those 

who are to respond, through the use of 

appropriate technological collection 

techniques or other forms of information 

technology. 

Requester may obtain a copy of the 

justification from the General Services 

Administration, FAR Secretariat (VIR), 

Room 4035, Washington, DC 20405, 

telephone (202) 501–4755. Please cite 

OMB Control Number 9000–00XX, 

Contractor Compliance Program and 

Integrity Reporting, in all 

correspondence. 

List of Subjects in 48 CFR Parts 3, 9, 42, 

and 52 

Government procurement. 

Dated: November 7, 2007 

Al Matera, 

Director, Office of Acquisition Policy. 

Therefore, DoD, GSA, and NASA 

propose amending 48 CFR parts 3, 9, 42, 

and 52 as set forth below: 

1. The authority citation for 48 CFR 

parts 3, 9, 42, and 52 continues to read 

as follows: 

Authority: 40 U.S.C. 121(c); 10 U.S.C. 

chapter 137; and 42 U.S.C. 2473(c). 

PART 3—IMPROPER BUSINESS 

PRACTICES AND PERSONAL 

CONFLICTS OF INTEREST 

2. Add Subpart 3.10 to read as 

follows: 

Subpart 3.10—Contractor Code of 

Business Ethics and Conduct 

Sec. 

3.1000 Scope of subpart. 

3.1001 [Reserved] 

3.1002 Policy. 

3.1003 Mandatory requirements. 

3.1004 Contract clauses. 

3.1000 Scope of subpart. 

This subpart prescribes policies and 

procedures for theestablishment of 

contractor codes of business ethics and 

conduct. 

3.1001 [Reserved] 

3.1002 Policy. 

(a) Government contractors must 

conduct themselves with the highest 

degree of integrity and honesty. 

(b) Contractors should have a written 

code of business ethics and conduct. To 

promote compliance with such a code of 

business ethics and conduct, contractors 

should have an employee business 

ethics and compliance training program 

and an internal control system that—

(1) Are suitable to the size of the 

company and extent of its involvement 

in Government contracting; 

(2) Facilitate timely discovery of 

improper conduct in connection with 

Government contracts; and 

(3) Ensure corrective measures are 

promptly instituted and carried out. 

(c) A contractor may be suspended 

and/or debarred for knowing failure to 

timely disclose a violation of Federal 

criminal law in connection with the 

award or performance of any 

Government contract performed by the 

contractor or a subcontract awarded 

thereunder (see 9.406–2(b)(1)(v) and 

9.407–2(a)(7)). 

3.1003 Mandatory requirements. 

Although the policy in section 3.1002 

applies as guidance to all Government 

contractors, the contractual 

requirements set forth in the clauses at 

52.203–XX, Contractor Code of Business 

Ethics and Conduct are mandatory if the 

contracts meet the conditions specified 

in the clause prescriptions at 3.1004. 

3.1004 Contract clauses. 

Insert the clause at FAR 52.203–XX, 

Contractor Code of Business Ethics and 

Conduct, in solicitations and contracts if 

the value of the contract is expected to 

exceed $5,000,000 and the performance 

period is 120 days or more, except when 

the contract—

(a) Will be for the acquisition of a 

commercial item awarded under FAR 

Part 12; or 

(b) Will be performed entirely outside 

the United States. 

PART 9—CONTRACTOR 

QUALIFICATIONS 

3. Amend section 9.104–1 by revising 

paragraph (d) to read as follows: 

9.104–1 General standards. 

* * * * * 

(d) Have a satisfactory record of 

integrity and business ethics (for 

example, see Subpart 42.15); 

* * * * * 

4. Amend section 9.406–2 by revising 

paragraph (b)(1) introductory text and 

adding paragraph (b)(1)(v) to read as 

follows: 

9.406–2 Causes for debarment. 

* * * * * 

(b)(1) A contractor, based upon a 

preponderance of the evidence, for any 

of the following—

* * * * * 

(v) Knowing failure to timely 

disclose—

(A) An overpayment on a Government 

contract; or 

(B) Violation of Federal criminal law 

in connection with the award or 

performance of any Government 

contract or subcontract. 

* * * * * 

5. Amend section 9.407–2 by 

redesignating paragraph (a)(7) as (a)(8) 

and adding a new paragraph (a)(7) to 

read as follows: 

9.407–2 Causes for suspension. 

(a) * * * 

(7) Knowing failure to timely 

disclose—

(i) An overpayment on a Government 

contract; or 

(ii) Violation of Federal criminal law 

in connection with the award or 

performance of any Government 

contract or subcontract; or 

* * * * * 

PART 42—CONTRACT 

ADMINISTRATION AND AUDIT 

SERVICES 

6. Amend section 42.1501 by revising 

the last sentence to read as follows: 

42.1501 General. 

* * * It includes, for example, the 

contractor’s record of conforming to 

contract requirements and to standards 

of good workmanship; the contractor’s 

record of forecasting and controlling 

costs; the contractor’s adherence to 

contract schedules, including the 

administrative aspects of performance; 

the contractor’s history of reasonable 

and cooperative behavior and 

commitment to customer satisfaction; 

the contractor’s record of integrity and 

business ethics, and generally, the 

contractor’s business-like concern for 

the interest of the customer. 

PART 52—SOLICITATION PROVISIONS 

AND CONTRACT CLAUSES 

7. Add section 52.203–XX to read as 

follows: 

52.203–XX Contractor Code of Business 

Ethics and Conduct. 

As prescribed in 3.1004, insert the 

following clause: 

CONTRACTOR CODE OF BUSINESS 

ETHICS AND CONDUCT (DATE) 

(a) Definitions. As used in this clause—

Agent means any individual, including a 

director, an officer, an employee, or an 


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independent contractor, authorized to act on 

behalf of the organization. 

Principals means officers, directors, 

owners, partners, and, persons having 

primary management or supervisory 

responsibilities within a business entity (e.g., 

general manager; plant manager; head of a 

subsidiary, division, or business segment, 

and similar positions). 

United States means the 50 States, the 

District of Columbia, and outlying areas. 

(b) Code of business ethics and conduct. (1) 

Within 30 days after contract award, unless 

the contracting officer establishes a longer 

time period, the Contractor shall—

(i) Have a written code of business ethics 

and conduct; and 

(ii) Provide a copy of the code to each 

employee engaged in performance of the 

contract. 

(2) The Contractor shall—

(i) Exercise due diligence to prevent and 

detect criminal conduct; and 

(ii) Otherwise promote an organizational 

culture that encourages ethical conduct and 

a commitment to compliance with the law. 

(3) The Contractor shall notify, in writing, 

the agency Office of the Inspector General, 

with a copy to the Contracting Officer, 

whenever the Contractor has reasonable 

grounds to believe that a principal, 

employee, agent, or subcontractor of the 

Contractor has committed a violation of 

Federal criminal law in connection with the 

award or performance of this contract or any 

subcontract thereunder. 

(c) Business ethics awareness and 

compliance program and internal control 

system for other than small businesses. This 

paragraph (c) does not apply if the Contractor 

has represented itself as a small business 

concern pursuant to the award of this 

contract. The Contractor shall establish the 

following within 90 days after contract 

award, unless the contracting officer 

establishes a longer time period—

(1) An ongoing business ethics and 

conduct awareness and compliance program. 

(i) This program shall include reasonable 

steps to communicate periodically and in a 

practical manner the Contractor’s standards 

and procedures and other aspects of the 

Contractor’s business ethics awareness and 

compliance program and internal control 

system, by conducting effective training 

programs and otherwise disseminating 

information appropriate to an individual’s 

respective roles and responsibilities. 

(ii) The training conducted under this 

program shall be provided to the Contractor’s 

principals and employees, and as 

appropriate, the Contractor’s agents and 

subcontractors. 

(2) An internal control system. 

(i) The Contractor’s internal control system 

shall—

(A) Establish standards and procedures to 

facilitate timely discovery of improper 

conduct in connection with Government 

contracts; and 

(B) Ensure corrective measures are 

promptly instituted and carried out. 

(ii) At a minimum, the Contractor’s 

internal control system shall provide for the 

following: 

(A) Assignment of responsibility at a 

sufficiently high level of the organization and 

adequate resources to ensure effectiveness of 

the business ethics awareness and 

compliance program and internal control 

system. 

(B) Reasonable efforts not to include within 

the organization principals whom due 

diligence would have exposed as having 

engaged in conduct that is illegal or 

otherwise in conflict with the Contractor’s 

code of business ethics and conduct. 

(C) Periodic reviews of company business 

practices, procedures, policies, and internal 

controls for compliance with the Contractor’s 

code of business ethics and conduct and the 

special requirements of Government 

contracting, including—

(1) Monitoring and auditing to detect 

criminal conduct; 

(2) Periodic evaluation of the effectiveness 

of the organization’s business ethics 

awareness and compliance program and 

internal control system, especially if criminal 

conduct has been detected; and 

(3) Periodic assessment of the risk of 

criminal conduct, with appropriate steps to 

design, implement, or modify the business 

ethics awareness and compliance program 

and the internal control system as necessary 

to reduce the risk of criminal conduct 

identified through this process. 

(D) An internal reporting mechanism, such 

as a hotline, which allows for anonymity or 

confidentiality, by which employees may 

report suspected instances of improper 

conduct, and instructions that encourage 

employees to make such reports. 

(E) Disciplinary action for improper 

conduct or for failing to take reasonable steps 

to prevent or detect improper conduct. 

(F) Timely reporting, in writing, to the 

agency Office of the Inspector General, with 

a copy to the Contracting Officer, whenever 

the Contractor has reasonable grounds to 

believe that a principal, employee, agent, or 

subcontractor of the Contractor has 

committed a violation of Federal criminal 

law in connection with the award or 

performance of any Government contract 

performed by the Contractor or a subcontract 

thereunder; and 

(G) Full cooperation with any Government 

agencies responsible for audit, investigation, 

or corrective actions. 

(d) Subcontracts. (1) The Contractor shall 

include the substance of this clause, 

including this paragraph (d), in subcontracts 

that have a value in excess of $5,000,000 and 

a performance period of more than 120 days, 

except when the subcontract—

(i) Is for the acquisition of a commercial 

item; or 

(ii) Is performed outside the United States. 

(2) In altering this clause to identify the 

appropriate parties, all reports of violation of 

Federal criminal law shall be directed to the 

agency Office of the Inspector General, with 

a copy to the Contracting Officer. 

(End of clause) 

[FR Doc. 07–5670 Filed 11–9–07; 11:21 am] 

BILLING CODE 6820–EP–S 

DEPARTMENT OF COMMERCE 

National Oceanic and Atmospheric 

Administration 

50 CFR Part 648 

[Docket No. 071030625–7626–01] 

RIN 0648–XC84 

Fisheries of the Northeastern United 

States; Summer Flounder, Scup, and 

Black Sea Bass Fisheries; 2008 

Summer Flounder, Scup, and Black 

Sea Bass Specifications; 2008 

Research Set-Aside Projects 

AGENCY: National Marine Fisheries 

Service (NMFS), National Oceanic and 

Atmospheric Administration (NOAA), 

Commerce. 

ACTION: Proposed specifications; request 

for comments. 

SUMMARY: NMFS proposes specifications 

for the 2008 summer flounder, scup, 

and black sea bass fisheries and 

provides notice of three conditionally 

approved projects that will be 

requesting Exempted Fishing Permits 

(EFPs) as part of the Mid-Atlantic 

Fishery Management Council’s 

(Council) Research Set-Aside (RSA) 

program. The implementing regulations 

for the Summer Flounder, Scup, and 

Black Sea Bass Fishery Management 

Plan (FMP) require NMFS to publish 

specifications for the upcoming fishing 

year for each of these species and to 

provide an opportunity for public 

comment. Furthermore, regulations 

under the Magnuson-Stevens Fishery 

Conservation and Management Act 

(Magnuson-Stevens Act) require a notice 

to be published to provide interested 

parties the opportunity to comment on 

applications for EFPs. The intent of this 

action is to establish harvest levels that 

assure that the target fishing mortality 

rates (F) or exploitation rates specified 

for these species in the FMP are not 

exceeded and to allow for rebuilding of 

the stocks as well as to provide notice 

of EFP requests, all in accordance with 

the Magnuson-Stevens Act. 

DATES: Comments must be received on 

or before December 3, 2007. 

ADDRESSES: You may submit comments, 

identified by RIN 0648–XC84, by any 

one of the following methods: 

• Electronic Submissions: Submit all 

electronic public comments via the 

Federal eRulemaking Portal http:// 

www.regulations.gov. 

• Mail and hand delivery: Patricia A. 

Kurkul, Regional Administrator, NMFS, 

Northeast Regional Office, One 

Blackburn Drive, Gloucester, MA 01930. 

Mark the outside of the envelope: 


pwalker on PROD1PC71 with PROPOSALS