HHS Contractors May Have Additional Disclosure Obligations As Contractors
Earlier this week, I posted Part I which dealt specifically with the Guidance released by OIG-HHS on contractor disclosures and the relevant Sections included in the Guidance.
Today, I will focus on why OIG’s guidance is a bit, well, misguided. In issuing its guidance on disclosure on its site, OIG-HHS stated, in unambiguous terms, as follows:
The HHS OIG’s contractor self-disclosure program provides a means for contractors to self-disclose potential violations of the False Claims Act and various Federal criminal laws involving fraud, conflict of interest, bribery or gratuity. The Federal Acquisition Regulation (FAR) requires certain Federal contractors (those with contracts valued over $5,000,000) to disclose when they have credible evidence of one of these violations. These contractors are required to make their disclosures to the Office of Inspector General. HHS OIG accepts contractor self-disclosures regarding contracts awarded by any HHS Operating or Staff Division.
At first blush, someone reading this statement might believe that the disclosure requirement above only applies to contactors with contracts valued at more than $5 million. Technically, this is correct. The mandatory disclosure requirement mentioned above is set forth in 48 C.F.R. Section 52.203-13 (“Contracts Clause”), which applies to contracts with a value of more than $5 million.
Yet, in practice, it would be borderline reckless to advise a contractor client that disclosure may only be required when the contractor client has entered into a contract with HHS with a value of more than $5 million because a failure to timely disclose “credible evidence” of certain Title 18 criminal violations, a violation of the False Claims Act, or any “significant overpayments,” entitles HHS to suspend or debar the contractor. This is true regardless of the amount or value of the contract.
Indeed, pursuant to 48 C.F.R. Sections 9.406-2, 9.407-2, the debarring official may debar a contractor, based upon the preponderance of the evidence, for any of the following:
a knowing failure by a principal, until three years after final payment on any government contract awarded to the Contractor, to timely disclose to the Government, in connection with the award, performance, or close out of the contract or subcontract… credible evidence of a (i) violation of the False Claims Act, (ii) a violation of federal criminal law involving fraud, conflict of interest, bribery, or gratuity violations found in Title 18, or (iii) significant overpayments, other than overpayments resulting from contracting finance payments..
Accordingly, HHS contractors (and contractors, generally) should view disclosure more broadly.
Further, there are significant differences (e.g., to whom, when, what, and how a violation must or should be reported) between the suspension and debarment disclosure provisions found at 48 C.F.R. Sections 9.406-2, 9.407-2 and the mandatory disclosure provision or Contracts Clause found at 48 C.F.R. Section 52.203-13 as follows:
- Who Should Report. Pursuant to the suspension and debarment provision, a “principal” includes an owner, director, partners, or person having management or supervisory responsibilities within a business entity; head of a subsidiary, division, or business segment, and similar positions, whereas the affirmative disclosure requirement set forth in the Contracts Clause only applies to the “Contractor.”
- How to Report. Under the Contracts Clause, disclosure must be made in “writing” to OIG (so, the Guidance provided by OIG-HHS on this point is helpful), but the suspension and debarment clause states that disclosure is to be made to the “Government,” which, read literally, could be a phone call or a letter to the Contracting Officer. Furthermore, in this context, a failure to disclose is a ground for debarment. So, the contractor may want to disclose the violation to the Contracting Officer and may also prefer to disclose “credible evidence” of the violation and any steps that the contractor has taken to remediate the violation (internal investigation, discipline, etc) to the SDO and/or HHS debarment counsel. After all, the SDO decides whether to debar a contractor.
- When to Report. The Contracts Clause does not expressly provide a time limitation governing when a disclosure must be made, whereas the suspension and debarment provision contains a three year period governing disclosure. In fact, once a final payment on the government contract at issue has been made, the three year clock starts running on when a “principal” should disclose “credible evidence” of a violation in order to potentially avoid receiving a Notice of suspension and proposed debarment from HHS. As such, deciding when “final payment” on the contract occurs is a critical determination since it will determine when the 3 year clock begins running. Regardless of when the final payment occurs, contractors should not “sit on” their disclosure because, in practice, SDO’s may be less inclined to view such disclosures as “timely.”
Author: Andrew Feldman
Mr. Feldman represents professionals, corporations, health care providers, and health care marketers in government investigations and prosecutions throughout the United States. Mr. Feldman works tirelessly for his clients from the time an investigation begins until the time a jury renders a verdict.
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