Embarrassed and outraged by recent headlines of allegations of contractor fraud—from Darlene Druyun to Duke Cunningham to the numerous cases related to the wars and reconstruction work in Afghanistan and Iraq—the Department of Justice (“DOJ”) and Congress have successfully pushed for sweeping regulatory changes within the Federal procurement system. The DOJ’s and Congress’s efforts have culminated in a final rule, issued on November 12, 2008, by the Civilian Agency Acquisition Council and the Defense Acquisition Regulations Council (“Councils”), amending the Federal Acquisition Regulation (“FAR”) to require contractors to self-disclose credible evidence of certain violations of law and significant overpayments in connection with the award or performance of a Federal contract or subcontract. As the Councils recognized, the new FAR mandatory disclosure rules are a “sea change” and “major departure” from the former carrot-andstick approach of voluntary disclosure. In moving closer to a stick-only approach, the government has largely ignored or discounted the great strides that contractors have made in voluntarily uncovering and disclosing wrongdoing. This article describes the new regulatory requirements, implementation issues that remain unclear, and changes to existing codes of conduct and internal control systems that contractors should consider.
