Anticipating Business Opportunities. Delivering Legal Solutions.

By Daniel S. Koch, Principal

The federal Government’s new contractor-related database, FAPIIS (Federal Awardee Performance and Integrity Information System) coins a new acronym, rhyming with “tape is,” as in where more red tape is. More importantly, it creates a new obligation for contractors and their principals to self-report violations of law or regulation. It continues the recent regulatory trend for Government contractors placing a premium on preventing violations.

FAPIIS is designed to encourage Contracting Officers (COs) to consider a broader range of ethics-related information about contractors when making responsibility determinations, and ultimately, when awarding contracts. It requires COs to consult FAPIIS when making a responsibility determination before award of any Government contract over the simplified acquisition threshold (currently $100,000), and to document the file as to how the information was considered. The CO must also forward to the appropriate debarment offices any information meriting their consideration.

This new database will integrate certain existing Government databases, and collect new information, including:

• debarment and suspension information, from the Excluded Parties List System;
• past performance data (detailing contractors’ performance on previous Government contracts) from the Past Performance Information Retrieval System (“PPIRS,” colloquially known as the “peepers” system);
• non-responsibility determinations from COs;
• contract terminations for default or cause, also from COs; and
• certain self-reported criminal convictions, civil findings of liability and adverse administrative actions.

The first two categories were already centralized systems that could be checked by COs prior to award. Non-responsibility and termination data are not presently available, and will now be sent by the Government to FAPIIS.

The last category creates the new self-reporting obligation for contractors. Civil proceedings that result in a penalty, fine, reimbursement or damages of $5,000 or more must now be reported. For administrative proceedings, the standard is a fine or penalty of $5,000 or more, or reimbursement or damages of $100,000 or more. Settlements of both federal and state-level proceedings that could have resulted in reportable dispositions must also be reported.

The most significant part of the self-reporting criteria is that it requires the new disclosures not just for the contractors, but also for “principals.” “Principals” is defined to mean not only owners and officers, but also persons having primary management or supervisory responsibility for a business segment, such as a division manager. Therefore, a contractor must report any such proceedings involving its “principals,” at least when “in connection with” award or performance of a federal contract or grant. This somewhat vague standard may afford contractors some discretion.

Disclosure must be made by any contractor holding $10 million or more in contracts and grants, at the time it submits a proposal valued at over $500,000. If successful in winning the award, that contractor must update the information semiannually to FAPIIS throughout the life of the resulting contract.

For purposes of the $10 million value, a contractor must treat all options as exercised. If a firm has multiple contracts subject to FAPIIS reporting, updates need to be submitted only twice per year. Reports will be made via entries to the Contractor Central Registration database at www.ccr.gov.

Contractors will be notified whenever the Government posts new information to their records, and will have a right to post responses to the database. Except for contractors reviewing their own records, only Government users are permitted access; however, legislation pending in Congress would require the General Services Administration, which maintains the database, to post all of the information, except past performance data, on a publicly accessible website.

FAPIIS became effective April 22, 2010, under a final rule published March 23, 2010. The rule amends the Federal Acquisition Regulation (FAR), and implements a directive issued by Congress (Section 872 of the Duncan Hunter National Defense Authorization Act) for FY2009. The new FAR clauses appear at 52.209-7 and 52.209-8.

The announcement suggests that future expansions of FAPIIS may lower the reporting threshold from $500,000 to the simplified acquisition threshold. It also states that it may collect information about other violations of law, in addition to procurement violations, and require reporting about state procurement violations. The expansions would enhance the Government’s ability to select “ethical,” or at least law-abiding, contractors.

FAPIIS is one more self-reporting obligation for contractors that ensures no misdeed will ever go unreported, whether major or minor, whether intentional or unintentional, even when contrary to company policy and subject to internal compliance regimes. It reaffirms our view that, in the modern federal contracting environment, the premium on preventing violations is, and will continue to be, higher than ever.