United States: Interim Rule Prohibits Contracting With Delinquent Taxpayers And Criminal Convicts

The FAR Council has amended the FAR to prohibit the federal government from contracting with entities that have an unpaid tax liability or a federal felony conviction. The interim rule issued on December 4, 2015 requires offerors to specify whether they: (1) have been convicted of a felony under federal law; and (2) have an unpaid federal tax liability after exhausting all judicial and administrative remedies. Although an affirmative representation does not lead to automatic exclusion, the offeror cannot be awarded the contract until a suspension and debarment officer has considered suspending or debarring the offeror and concluded that such action is not necessary to protect the government's interests.

In addition to the amendments above, offerors for contracts with the Departments of Commerce, Justice, and NASA that are larger than $5 million must certify that they have filed all federal tax returns for the last three years, have not been convicted of a criminal offense under the tax code, and have not been notified of any unpaid tax liability in the past 90 days.

The interim rule is applicable to all contracts, including those for the acquisition of commercial items (including commercially available off-the-shelf items) and acquisitions below the simplified thresholds.

Public comments on the interim rule are due by February 2, 2016.  The rule will become final on February 26, 2016. In the interim, contractors should promptly address all unpaid federal tax liabilities. Contractors with any unpaid tax liabilities or felony convictions within the preceding 24 months should be prepared to present information demonstrating present responsibility to federal contracting and suspension and debarment officials.

The full notice is available here: https://federalregister.gov/a/2015-30456.

Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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