Businesses new to federal government contracting understand that the government requires some type of background check on its leaders or others in the business.
Beyond that, their understanding gets a bit murky.
As a result, those new to federal government contracting worry about what will bubble up during the required background check.
There is reason not to worry too much unless the contractor is seeking security clearances for executives and employees for facility clearance to perform classified contracts.
If a business is pursuing federal contracts, here is what is required for background checks (Caveat: These are the requirements – for the most part… there are nuances – of course there are – it’s the FAR and it’s the law):
- In the System for Award Management (SAM), certification that the business and its principals:
- Are not debarred or suspended from federal government contracting;
- Are not proposed for debarment from federal government contracting;
- Are not declared ineligible from federal government contracting;
- Have not, within a three-year period preceding an offer to the federal government, been convicted of or had a civil judgment rendered against them for:
- Committing fraud;
- Committing a criminal offense in connection with obtaining, attempting to obtain, or performing a contract or subcontract with any governmental entity;
- Violating antitrust laws relating to submitting bids;
- Embezzlement, theft, forgery, bribery, falsifying or destroying records, making false statements, tax evasion, violating criminal tax laws, or receiving stolen property.
- Are not presently indicted for, or otherwise criminally or civilly charged by a governmental entity for allegedly committing any of the offenses listed above;
- Have not, within a three-year period preceding an offer to the federal government, been notified of delinquent federal taxes in the amount of $15,000 or more. This must be a final determination that the taxes are delinquent;
- Have not within a three-year period preceding an offer to the federal government, had one or more contracts terminated for default by any federal agency.
- For contracts over $10 million, within the last five years, has the business or the principals in connection with the award or performance of a federal government contract or grant, been the subject of a proceeding, at the Federal or State level that resulted in any of the following:
- A criminal conviction;
- A civil finding of fault or liability that resulted in fine, penalty, restitution, reimbursement, or damages of $5,000 or more;
- An administrative finding of fault and liability that results in paying a penalty of $5,000 or more or reimbursement, restitution, or damages over $100,000;
- In a criminal, civil, or administrative proceeding, a settlement or compromise that includes acknowledgement of fault that could have led to:
- A criminal conviction
- Administrative or civil fault and liability with fine over $5,000 or more;
- Some things to remember about this certification:
- It is made to the best information and belief of the business and the person submitting the certification;
- The knowledge and information are not required to exceed that which is normally possessed by a prudent person in the ordinary course of business dealings;
- It is considered a material term in any contract or subcontract so, failing to disclose such wrongdoing may result in accusations of False Claims Act violations or termination of a contract as well as suspension or debarment;
- It must be current, accurate and complete so… this means constant sweeps of what employees and the business have going on to alert to one of the reportable events listed above.
- Principals are defined in the FAR as: An officer, director, owner, partner, or a person having primary management or supervisory responsibilities within a business entity (g., general manager; plant manager; head of a division or business segment; and similar positions).
- Any of these wrongs, do not mean that the federal government will withhold award but, in making the decision to award a contract, it will take any wrongs as listed above into consideration when determining if the business is “responsible.” Click here for The Defense Salon summary on what the FAR says “responsible” means.
- Any disclosures are filed in FAPIIS. FAPIIS has two sections:
- The non-public segment where Government officials and the Contractor post information, which can only be viewed by Government persons and Contractor;
- The publicly available segment. All other data is automatically posted here after a waiting period of 14 calendar days.
- When a business makes these disclosures, the system notifies:
- The interested contracting officers who then must obtain further information from the contractor to determine if the contractor is responsible;
- The interested federal government agency’s suspension and debarment official if the disclosure is an indictment, charge, conviction, or civil judgment, or Federal tax delinquency in an amount that exceeds $10,000. The business needs to make this notification to the official as well.
ACTION ITEM: In the end, conducting background checks on principals and having a system for real-time updates on what principals have going on helps you stay ahead of any surprises before the government background checks even begin. Depending on the business, real time updates can either be a due diligence system that scans for information or a policy mandating principals immediately disclose.
The relevant FARS: 52.209-5; 52.209-7; 52.209-9; 9.104-5(a).
