Anti-Kickback Act of 1986

The Anti-Kickback Act of 1986 was passed to deter subcontractors from making payments and contractors from accepting payments for the purpose of improperly obtaining or rewarding favorable treatment in connection with a prime contract or a subcontract relating to a prime contract. What had theretofore been considered merely improper or unethical, now carried potential criminal penalties.

The Act prohibits any person from (i) providing, attempting to provide, or offering to provide any kickback, (ii) soliciting, accepting, or attempting to accept any kickback; or (iii) including, directly or indirectly, the amount of any kickback in the contract price charged by a subcontractor to a prime contractor or a higher tier subcontractor or in the contract price charged by a prime contractor to the Government.

The Act imposes criminal penalties on any person who knowingly and willfully engages in such conduct and provides for the recovery of civil penalties from any person who knowingly engages in such prohibited conduct and from any person whose employee, subcontractor, or subcontractor employee provides, accepts, or charges a kickback.

The Act requires contractors and subcontractors to provide written notification to the Inspector General of the agency issuing the contractor whenever it has reasonable grounds to believe such violation may have occurred and requires that contractors and subcontractors give access to facilities and records to investigate such matters.

The Act has one other provision that contractors are often blissfully unaware of. The Act requires contractors and subcontractors (with negotiated contracts and subcontracts greater than $100 thousand) to have in place and follow reasonable procedures designed to prevent and detect violations of the Act. These include:

• company ethics rules prohibiting kickbacks by employees agents, or subcontractors
• education programs for new employees and subcontractors
• explaining policies about kickbacks, related company procedures and the consequences of detection
• procurement procedures to minimize the opportunity for kickbacks
• audit procedures designed to detect kickbacks to law enforcement officials
• annual declarations by employees of gifts or gratuities received from subcontractors
• annual employee declarations that have violated no company ethics rules
• personnel practices that document unethical or illegal behavior

Are you in compliance?

See FAR 3.5 for regulatory requirements.