This post was written by Lorraine M. Campos and Keith D. Coleman.
On September 15, 2010, the House unanimously passed H.R. 5366, referred to as the “Overseas Contractor Reform Act (the “Act”)”. The Act would amend federal law to require that any individual, partnership, or corporation found to be in violation of the Foreign Corrupt Practices Act of 1977 (“FCPA”) be proposed for debarment from any federal contract or grant within 30 days after final judgment of such violation. The FCPA is a law that prohibits bribery of foreign officials by U.S. or related companies. The Act declares that it is the policy of the U.S. Government that no contract or grant should be awarded to individuals or companies that violate the FCPA. Promulgation of the Act is said to be in reaction to media reports last year that a private security contractor allegedly authorized illegal payments to Iraqi officials to prevent Iraq from revoking the company’s license to operate in the country. In analyzing the Act, one must first consider whether the provisions of the Act are necessary. The current regulations provide that conviction of a criminal offense, like the FCPA, is cause for debarment. See FAR 9.406-2(a)(1). Moreover, a separate cause for debarment exists for firms and individuals who are convicted of committing bribery. See FAR 9.406-2(a)(3). Therefore, the Act does not grant the Government with any additional authority. However, because FCPA actions are oftentimes resolved by execution of a non-prosecution agreement (“NPA”) or deferred prosecution agreement (“DPA”), contractors must be aware of the consequences of the Act when negotiating such agreements. Specifically, contractors must ensure that the negotiated NPA or DPA does not expressly required the company to admit to violating the FCPA or committing bribery. The Act is currently being considered by the Senate. Reed Smith will continue to keep you posted on the progress of this legislation.