If you want to do business with the government, watch out – the federal government imposes a lot of strings when handing out business.  Compliance officers face a wide array of requirements which can quickly turn into headaches, government investigations, threats of debarment and suspension, and even criminal prosecutions.

Government contractors (and their subcontractors) are required to maintain comprehensive compliance programs and are subject to mandatory disclosure requirements.  Companies which do business with the government know this but sometimes fail to take proper steps to protect themselves.  In some cases, a compliance check up should be conducted – a quick and careful review of major compliance risks and actions which have been or need to be taken.

Last year, the government imposed a new requirement on government contractors – human trafficking compliance and certifications. 

President Obama signed an Executive Order on September 25, 2012 which requires federal contracts to take the following actions:

Compliance Programs: Contractors which have more than $500,000 in annual revenues derived from overseas activities are required to design and implement compliance programs.  (Contractors and subcontractors which provide commercially available off-the-shelf items are exempt from the compliance program requirement.)

The compliance plan shall be provided to the contracting officer upon request; posted on the contractor’s website; and must include the following minimum requirements:

 — Specific procedures to prevent subcontractors at any tier from engaging in trafficking in persons; 

— Employee training and awareness programs;

— Clear policies communicating the prohibition on human trafficking conduct;

— Procedures for employees to report violations

— Recruitment policies and plans to prevent recruitment companies from engaging in such conduct;

— Housing plans to make sure local housing and living condition standards are maintained; and

— Specific contractual representations and warranties which ensure that contractors and subcontractors will cooperate and provide reasonable access to government investigators and auditors; and

— Specific policies to prevent subcontractors from engaging in such practices. 

Self-Reporting:  Contractors are required to self-report any violations.  Contracting officers must notify, if appropriate, the agency inspector general, the debarment officer, or law enforcement of any trafficking-related activities that are illegal, violate regulations or are otherwise “inconsistent” with the Executive Order.

Annual Certifications: Contractors must file a certification each year confirming that they have not engaged in trafficking activities and, if any violations were discovered, they were handled appropriately;

Human trafficking is a horrible problem.  Over 20 million men, women and children are victims of trafficking each year.  President Obama emphasized that the government is taking a “zero tolerance” stand against human trafficking. 

The Federal Acquisition Regulatory Council (FAR) was directed to issue new regulations within 180 days to carry out the President’s Executive Order.  The deadline for these regulations is March 25, 2013. 

The FAR regulations are expected to prohibit contractors from:

— Engaging in misleading or fraudulent recruitment practices (e.g. material misrepresentations regarding terms and conditions of employment, including wages, location, living conditions;

— Charging employees recruitment fees

— Destroying, concealing or confiscating employee identity documents, such as passports or driver’s licenses;

—  Failing to pay certain return transportation costs upon the end of employment outside the United States.

Federal contractors and subcontractors need to prepare for the new compliance regime.  As always, a compliance program needs to begin with a risk assessment.  Once completed, a program needs to be designed in response to those risks.