Under a new FAR rule, standard language in confidentiality agreements could lead to disqualification from contracting or False Claims Act liability.
In January, the FAR Council issued a final rule regulating confidentiality agreements between prime contractors and their employees and subcontractors. The rule implements Section 743 of the Consolidated and Further Continuing Appropriations Act of 2015, Pub. L. 113-235 (Dec. 6, 2014). As we previously reported, a proposed rule was issued in January of 2016 and a class deviation was issued by the Department of Defense late last year. The final rule largely adopts the proposed rule’s language and applies to all solicitations and resultant contracts that are funded with fiscal year (FY) 2015 funds. Contractor Employee Internal Confidentiality Agreements or Statements, 82 Fed. Reg. 4717 (Jan. 13, 2017).
In summary, the new FAR 52.203-19 bars contractors from requiring their employees or subcontractors to sign or comply with “internal confidentiality agreements or statements” that would prohibit them from reporting “waste, fraud, or abuse” on a federal contract. FAR 52.203-19(b). Contractors who disregard this rule are prohibited from receiving federal funds. FAR 3.909-1(a).
Because of the broad reach and significant consequences of non-compliance, the contracting community should take notice of this new rule’s requirements.