7588 Federal Register / Vol. 72, No. 32 / Friday, February 16, 2007 / Proposed Rules 

applicable law in accordance with 

601.1.7. Adult chickens, turkeys, guinea 

fowl, doves, pigeons, pheasants, 

partridges, and quail as well as ducks, 

geese, and swans are mailable as 

follows: 

a. The mailer must send adult fowl by 

Express Mail in secure containers 

approved by the manager of Mailing 

Standards (see 608.8.0 for address). 

b. The number of birds per parcel 

must follow the container manufacturer 

limits and each bird must weigh more 

than 6 ounces. 

c. Indemnity may be paid only for 

loss, damage, or rifling, and not for 

death of the birds in transit if there is 

no visible damage to the mailing 

container. 

[Delete 9.3.5, Adult Chickens, and 

renumber 9.3.6 through 9.3.13 as new 

9.3.5 through 9.3.12.] 

* * * * * 

We will publish an appropriate 

amendment to 39 CFR Part 111 to reflect 

these changes if our proposal is 

adopted. 

Neva R. Watson, 

Attorney, Legislative. 

[FR Doc. E7–2817 Filed 2–15–07; 8:45 am] 

BILLING CODE 7710–12–P 

DEPARTMENT OF DEFENSE 

GENERAL SERVICES 

ADMINISTRATION 

NATIONAL AERONAUTICS AND 

SPACE ADMINISTRATION 

48 CFR Parts 2, 3, and 52 

[FAR Case 2006–007; Docket 2007–0001; 

Sequence 1] 

RIN 9000–AK67 

Federal Acquisition Regulation; FAR 

Case 2006–007, Contractor Code of 

Ethics and Business Conduct 

AGENCIES: Department of Defense (DoD), 

General Services Administration (GSA), 

and National Aeronautics and Space 

Administration (NASA). 

ACTION: Proposed rule with request for 

comments. 

SUMMARY: The Civilian Agency 

Acquisition Council and the Defense 

Acquisition Regulations Council 

(Councils) are proposing to amend the 

Federal Acquisition Regulation (FAR) to 

address Contractor Code of Ethics and 

Business Conduct and the display of 

Federal agency Office of the Inspector 

General (OIG) Fraud Hotline Poster. 

DATES: Interested parties should submit 

written comments to the FAR 

Secretariat on or before April 17, 2007 

to be considered in the formulation of 

a final rule. 

ADDRESSES: Submit comments 

identified by FAR case 2006–007 by any 

of the following methods: 

• Federal eRulemaking Portal: http:// 

www.regulations.gov.Search for any 

document by first selecting the proper 

document types and selecting ‘‘Federal 

Acquisition Regulation’’ as the agency 

of choice. At the ‘‘Keyword’’ prompt, 

type in the FAR case number (for 

example, FAR Case 2006–007) and click 

on the ‘‘Submit’’ button. Please include 

any personal and/or business 

information inside the document.You 

may also search for any document by 

clicking on the ‘‘Advanced search/ 

document search’’ tab at the top of the 

screen, selecting from the agency field 

‘‘Federal Acquisition Regulation’’, and 

typing the FAR case number in the 

keyword 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 2006–007 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 2006–007. 

SUPPLEMENTARY INFORMATION: 

A. Background 

FAR Part 3 provides guidance on 

improper business practices and 

personal conflicts of interest, but it does 

not discuss the contractor’s 

responsibilities with regard to code of 

ethics and business conduct and the 

avoidance of improper business 

practices. Currently, three agencies (the 

Departments of Defense, Veterans 

Affairs, and the Environmental 

Protection Agency) maintain policy for 

contractor code of ethics and business 

conduct and the contractor’s 

responsibility to avoid improper 

business practices. With few exceptions, 

the agencies’ clauses and prescriptions 

are very similar to one another, in that 

they– establish agency policy and 

recommend contents of a contractor’s 

system of management and internal 

controls in connection with Government 

contracts; establish contract dollar 

thresholds for display of the agency 

Inspector General poster; provide 

instructions for obtaining the hotline 

posters; and provide exemptions to 

displaying posters. However, the 

agencies’ policies differ on the contract 

dollar thresholds and the address and 

phone number of the Office of the 

Inspector General (OIG) to obtain a 

fraud hotline poster. 

In view of the significant sums of 

Federal dollars spent by agencies to 

acquire goods and services, this rule 

establishes a clear and consistent policy 

regarding contractor code of ethics and 

business conduct, responsibility to 

avoid improper business practices, and 

procedures for displaying an agency 

OIG Fraud Hotline poster to facilitate 

the reporting of wrongdoing in Federal 

contracting. This rule also recognizes 

the need for agencies to cooperate with 

the Department of Homeland Security to 

ensure that contracts funded with 

disaster assistance funds require display 

of any event-specific fraud hotline 

posters announcing ad hoc or other 

special hotline reporting information 

applicable to the specific contract. This 

rule proposes amending the FAR to add 

FAR Subpart 3.10, Contractor Code of 

Ethics and Business Conduct, that 

will—

1. Define the ‘‘United States’’ to mean 

the 50 States, the District of Columbia 

and outlying areas as used in FAR 

25.003, and exclude contracts 

performed outside the United States 

from the requirements of the rule. 

2. Include policy stating that 

contractors ‘‘should’’ have a code of 

ethics and business conduct. 

3. Exclude commercial item contracts 

awardedpursuant to FAR Part 12 from 

the requirements of the rule, because the 

rule will not implement statute or 

executive order, and because ethics 

programs and hotline posters are not 

standard commercial practices as 

stipulated by the Federal Acquisition 

Streamlining Act. 

4. Provide that contractors receiving 

awards inexcess of $5,000,000 that have 

performance periods of 120 days or 

more, shall have a written code of ethics 

and business conduct within 30 days 

after contract award. Furthermore, the 

contractor shall promote compliance by 

establishing, within 90 days after 

contract award, an employee ethics and 

compliance training program and an 

internal control system proportionate to 

the size of the company and extent of its 

business with the Federal Government. 

5. Provide that contractors receiving 

awards inexcess of $5,000,000 shall 


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display the agency OIG fraud hotline 

poster and, when appropriate, any 

special disaster relief poster from 

Department of Homeland Security, at 

work locations in the United States and 

at the company website if the contractor 

has established a company website for 

the purposes of providing information 

to employees. 

6. Provide alternates to the basic 

clause to accommodate those agencies 

that do not have posters and to 

accommodate agencies that choose to 

require the display of a fraud hotline 

poster at contract award thresholds at or 

below $5,000,000. 

7. Include a flowdown provision that 

applies tosubcontracts at the same 

dollar level as the prime contract. 

8. Provide for remedies if the 

contractor fails to comply with the 

clause. 

This is not 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 Councils do not expect this 

proposed rule to 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 the 

rule does not require contractors to have 

a written code of ethics and business 

conduct, employee ethics and 

compliance training program, or 

internal control system for contracts 

valued at $5 million or less; and 

provides that when such programs are 

required, they shall be suitable to the 

size of the company and the extent of 

the company’s business with the 

Federal Government. Under the rule, 

contractors have the ability to determine 

the simplicity or complexity and cost of 

their programs. 

An Initial Regulatory Flexibility 

Analysis has, therefore, not been 

performed. We invite comments from 

small businesses and other interested 

parties. The Councils will consider 

comments from small entities 

concerning the affected FAR Parts 2, 3, 

and 52 in accordance with 5 U.S.C. 610. 

Interested parties must submit such 

comments separately and should cite 5 

U.S.C. 601, et seq. (FAR case 2006–007), 

in correspondence. 

C. Paperwork Reduction Act 

The Paperwork Reduction Act does 

not apply because the proposed changes 

to the FAR do not impose information 

collection requirements that require the 

approval of the Office of Management 

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

seq. 

List of Subjects in 48 CFR Parts 2, 3, 

and 52 

Government procurement. 

Dated:February 7, 2007. 

Ralph De Stefano, 

Director, Contract Policy Division. 

Therefore, DoD, GSA, and NASA 

propose amending 48 CFR parts 2, 3, 

and 52 as set forth below: 

1. The authority citation for 48 CFR 

parts 2, 3, 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 2 — DEFINITIONS OF WORDS 

AND TERMS 

2. Amend section 2.101 in paragraph 

(b), in the definition ‘‘United States,’’ by 

redesignating paragraphs (1) through (6) 

as paragraphs(2) through)(7), 

respectively, and adding a new 

paragraph (1) to read as follows: 

2.101 Definitions. 

* * * * * 

(b)* * *

‘‘United States,’’ when used in a 

geographic sense, means the 50 States 

and the District of Columbia, except as 

follows: 

(1) For use in Subpart 3.10, see the 

definition at 3.1001. 

* * * * * 

PART 3—IMPROPER BUSINESS 

PRACTICES AND PERSONAL 

CONFLICTS OF INTEREST 

3. Add Subpart 3.10 to read as 

follows: 

Sec. 

3.1000 Scope of subpart. 

3.1001 Definitions. 

3.1002 Policy. 

3.1003 Procedures. 

3.1004 Contract clause. 

Subpart 3.10—Contractor Code of 

Ethics and Business Conduct 

3.1000 Scope of subpart. 

This subpart prescribes policies and 

procedures for the establishment of 

contractor code of ethics and business 

conduct, and display of agency Office of 

Inspector General (OIG) fraud hotline 

posters. 

3.1001 Definitions. 

‘‘United States,’’as used in this 

subpart, means the 50 States, the 

District of Columbia, and outlying areas. 

3.1002 Policy. 

Government contractors must conduct 

themselves with the highest degree of 

integrity and honesty. Contractors 

should have a written code of ethics and 

business conduct. To promote 

compliance with such code of ethics 

and business conduct, contractors 

should have an employee ethics and 

compliance training program and an 

internal control system that–

(a) Are suitable to the size of the 

company and extent of its involvement 

in Government contracting; 

(b) Facilitate timely discovery and 

disclosure of improper conduct in 

connection with Government contracts; 

and 

(c) Ensure corrective measures are 

promptly instituted and carried out. 

3.1003 Procedures. 

Contracting officers shall ensure that 

the requirements of this subpart are 

implemented using the following 

procedures: 

(a) Exceptions. Commercial item 

contracts performed under Part 12 or 

performed outside the United States do 

not apply to this subpart and are not 

required to —

(1) Have an employee ethics and 

compliance training program and 

internal control systems; or 

(2) Have the contractor display the 

fraud poster. 

(b) Contracts exceeding $5,000,000. 

(1) Contracts exceeding $5,000,000 

shall require the contractor to—

(i) Display the agency OIG fraud 

hotline poster, unless the agency does 

not have a fraud hotline poster; and 

(ii) Display the Department of 

Homeland Security (DHS) disaster 

assistance poster in accordance with 

paragraph (d)(2) of this section. 

(2) In addition to the requirements of 

paragraph(b)(1) of this section, contracts 

exceeding $5,000,000 with performance 

periods of 120 days or more shall 

require the contractor to—

(i) Have a written code of ethics and 

business conduct; and 

(ii) Establish an employee ethics and 

compliance training program and 

internal control systems commensurate 

with the size of the company and its 

involvement in Government contracting. 

(c) Contracts valued at $5,000,000 or 

less. Agencies may establish policy and 

procedures for display of the agency 

OIG fraud hotline poster, without 

imposing the requirements of paragraph 

(b)(2) of this section, in contracts valued 

at $5,000,000 or less. 

(d) Fraud Hotline Poster. (1) Agencies 

are responsible for determining the need 

for, and content of, their respective 

agency OIG fraud hotline poster(s). 


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7590 Federal Register / Vol. 72, No. 32 / Friday, February 16, 2007 / Proposed Rules 

(2) When requested by the 

Department of Homeland Security 

(DHS), agencies shall ensure that 

contracts funded with disaster 

assistance funds require display of any 

event-specific fraud hotline poster 

applicable to the specific contract. As 

established by the agency, such posters 

may be displayed in lieu of, or in 

addition to, the agency’s standard 

poster. 

3.1004 Contract clause. 

(a)(1) Insert the clause at FAR 52.203–

XX, Contractor Code of Ethics and 

Business Conduct, in solicitations and 

contracts expected to exceed $5,000,000 

and the performance period is 120 days 

or more, except when the contract –

(i) Will be awarded pursuant to the 

procedures inFAR Part 12; or to address 

Contractor Code of Ethics and Business 

Conduct and the display of Federal 

agency Office of the Inspector General 

(OIG) Fraud Hotline Poster. 

(ii) Will be performed outside the 

United States. (2) The contracting officer 

shall insert the website link(s) or other 

contact information for obtaining the 

agency and/or DHS poster. 

(b) Insert the clause with its Alternate 

I–

(1) When the agency does not have a 

fraud hotline poster; and 

(2) When the requirements of 

3.1003(d)(2) do not apply. 

(c) Insert the clause with its Alternate 

II–

(1) When the contract performance 

period is less than 120 days; or 

(2) If the agency has established 

policies and procedures for display of 

the OIG fraud hotline poster at a lesser 

amount. The contracting officer shall 

insert the agency authorized lesser 

amount in paragraph (d) of this section. 

PART 52—SOLICITATION PROVISIONS 

AND CONTRACT CLAUSES 

4. Add section 52.203–XX to read as 

follows: 

52.203–XX Contractor Code of Ethics and 

Business Conduct. 

As prescribed in 3.1004(a), insert the 

following clause: 

CONTRACTOR CODE OF ETHICS AND 

BUSINESS CONDUCT (DATE) 

(a) Definition. 

‘‘United States,’’ as used in this clause, 

means the 50 States, the District of Columbia, 

and outlying areas. 

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

Within 30 days after contract award, the 

Contractor shall have a written code of ethics 

and business conduct. 

(2) (i) The Contractor shall promote 

compliance with its code of ethics and 

business conduct. Within 90 days after 

contract award, the Contractor shall 

establish—

(A) An employee ethics and compliance 

training program; and 

(B) An internal control system. 

(ii) Such program and system shall be 

suitable to the size of the company and its 

involvement in Government contracting. 

(c) Internal control system.(1) The 

Contractor’s internal control system shall—

(i) Facilitate timely discovery and 

disclosure of improper conduct in 

connection with Government contracts; and 

(ii) Ensure corrective measures are 

promptly instituted and carried out. 

(2) For example, the Contractor’s internal 

control system should provide for—

(i) Periodic reviews of company business 

practices, procedures, policies, and internal 

controls for compliance with the Contractor’s 

code of ethics and business conduct and the 

special requirements of Government 

contracting; 

(ii) An internal reporting mechanism, such 

as a hotline, by which employees may report 

suspected instances of improper conduct, 

and instructions that encourage employees to 

make such reports; 

(iii) Internal and/or external audits, as 

appropriate; 

(iv) Disciplinary action for improper 

conduct; 

(v) Timely reporting to appropriate 

Government officials of any suspected 

violations of law in connection with 

Government contracts or any other 

irregularities in connection with such 

contracts; and 

(vi) Full cooperation with any Government 

agencies responsible for either investigation 

or corrective actions. 

(d) Display of fraud hotline poster(s). (1) 

During contract performance, the Contractor 

shall prominently display the _________ 

(Contracting Officer shall insert (i) 

appropriate agency name(s) and/or (ii) title 

of applicable DHS event-specific fraud 

hotline poster) fraud hotline poster(s) in 

common work areas within business 

segments performing work under this 

contract and at contract work sites. The 

Contractor is not required to display the 

poster(s) in common work areas and contract 

sites outside the United States. 

(2) Additionally, if the Contractor 

maintains a company website as a method of 

providing information to employees, the 

Contractor shall display an electronic version 

of the poster(s) at the website. 

(3) The _______ poster(s) may be obtained 

from _______. (Contracting Officer shall insert 

the website(s) or other contact information 

for obtaining the poster(s).) 

(e) Remedies. In addition to the other 

remedies available to the Government, the 

Contractor’s failure to comply with the 

requirements of this clause may render the 

Contractor subject to—

(1) Withholding of contract payments; or 

(2) Loss of award fee, consistent with the 

award fee plan, for the performance period in 

which the Government determined 

Contractor non-compliance. 

(f) Subcontracts. (1) The Contractor shall 

include the substance of this clause, 

including this paragraph (f), in all 

subcontracts that exceed $5,000,000, except 

when the subcontract—

(i) Is for the acquisition of a commercial 

item; or 

(ii) Is performed outside the United States. 

(2) The Contractor is not required to 

include the requirements of paragraphs (b) 

and (c) of this clause in subcontracts that 

have performance periods of less than 120 

days. 

(End of clause) 

Alternate I (DATE). As prescribed in 

3.1004(b), delete paragraph (d), and 

redesignate paragraphs (e) and (f) as 

paragraphs (d) and (e). 

Alternate II (DATE). As prescribed in 

3.1004(c), delete paragraphs (b), (c) and 

(f) from the basic clause, redesignate 

paragraphs (d) and (e) as paragraphs (b) 

and (c) and insert the following 

paragraph (d): 

(d) Subcontracts. The Contractor shall 

include the substance of this clause, 

including this paragraph (d), in all 

subcontracts that exceed 

$lllllll (Contracting Officer 

shall insert $5,000,000 or the amount 

authorized by agency procedures), 

except when the subcontract—

(1) Is for the acquisition of a 

commercial item; or 

(2) Is performed outside the United 

States. 

[FR Doc. 07–698 Filed 2–15–07; 8:45 am] 

BILLING CODE 6820–EP–S 


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