Prohibition on Contracting with Delinquent Taxpayers and Felons

Last December, the FAR Councils published an interim rule that prohibits the Federal Government from entering into a contract with any corporation having a delinquent Federal tax liability or a felony conviction under any Federal law, unless the agency has considered suspension or debarment of the corporation and has made a determination that this further action is not necessary to protect the interests of the Government. This prohibition was required to implement sections of the Consolidated and Further Continuing Appropriations Act of 2015.

Yesterday, the FAR Councils made the interim rule permanent, without change, even though there were a few public comments that opposed, objected, or raised concerns with aspects of the interim and now, final, rule. For example, someone noted that the FAR already includes Federal tax delinquency and criminal malfeasance as causes for debarment so a new (similar) rule is unnecessary. Be that as it may, the Councils' response was a reference back to the underlying statute that made the regulation necessary.

Corporations are now required to self-certify in the SAM (System for Award Management) "Representations and Certifications" section that it has no delinquent taxes or has been convicted for a felony criminal violation with the preceding 24 months. The precise wording follows:

The new regulation contains no provisions for false certifications. Presumably that would result in a terminated contract and debarment or suspension thereafter.

This new rule should not have much of an impact as DoD and many other agencies have already implemented similar provisions in their FAR supplements.

Unpaid Delinquent Tax Liabilities and Felony Convictions

If you are planning to enter into contracts with the Department of Defense or even bidding on such, you need to be aware of DoD's policy that prohibits funds to be used to enter into contracts with firms that are either delinquent in paying their Federal tax liabilities or have been convicted of a felony criminal violation under any Federal law within the past 24 months.

Specifically, this prohibition applies to corporations that:

• Has any unpaid Federal tax liability that has been assessed, for which all judicial and administrative remedies have been exhausted or have lapsed, and that is not being paid in a timely manner pursuant to an agreement with the authority responsible for collecting the tax liability, where the awarding agency is aware of the unpaid tax liability, unless the agency has considered suspension or debarment of the corporation and made a determination that this further action is not necessary to protect the interests of the Government; or
• Was convicted of a felony criminal violation under any Federal law within the preceding 24 months, where the awarding agency is aware of the conviction unless the agency has considered suspension or debarment of the corporation and made a determination that this further action is not necessary to protect the interest of the Government.

DoD contracting officers are now including a provision in all solicitations that require prospective contractors to "represent" that it has not unpaid Federal tax liabilities of the type described above and that it has not been convicted of a felony criminal violation under a Federal law within the preceding 24 months.

You can read more about these prohibitions by clicking here.