New USG Rules Issued on Trafficking and Private Security

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FAR DFAR Sup 2015On January 29th, the US government issued a final rule in the Federal Register / Vol. 80, No. 19, Ending Trafficking in Persons, amending the Federal Acquisition Regulation (FAR) to strengthen protections against trafficking in persons in federal contracts.

The Department of Defense also issued its final rules on January 29th in amending the Defense Federal Acquisition Regulation Supplement (DFARS) for further implementation of its trafficking in persons policy and for defense contractors performing private security functions.

These final rules are significant and US government contractors (and their subcontractors) are taking a close look at how these new provisions apply to their company operations conducted both overseas and in the United States and what must be done to comply with these new regulations. Companies (prime contractors) will also normally need to include the substance of these clauses in their subcontracts so that the same provisions apply to subcontractors. The DFARS final rules for Department of Defense (DoD) contractors went into effect immediately upon publication and the FAR final rule went into effect on March 2nd, 2015. The FAR rule applies to all new federal contracts and new Task Orders under existing ID/IQ contracts.

Companies Should Start with Due Diligence – Specifically Gap Analysis – To See How Current Policies and Processes Measure Up

Human Analytics believes that companies that contract with the federal government will want to analyze these new provisions carefully and then conduct the necessary corporate due diligence to ensure refinement and implementation of relevant internal policies and processes to ensure compliance. A recommend starting point is for company cross-functional teams to review and understand these new FAR and DFAR requirements and then conduct a gap analysis of how existing company policies and processes measure up. Given the contractual flow down requirements of these new provisions, companies will want to ensure similar due diligence and compliance policies and processes are in place with subcontractor firms.

By proactively taking a due diligence approach, companies subject to these provisions can account for and develop any new processes necessary to address and implement a compliance plan and annual certification. Under the FAR’s Ending Trafficking in Persons final rule, both actions are required for firms performing contracts outside the United States exceeding $500,000.

Companies subject to the DFARS final rule for defense contractors providing private security functions overseas should also conduct a gap analysis against the DFARS’ new provisions. Specifically, this DFARS final rule requires covered contractors to comply with ANSI/ASIS PSC.1-2012, American National Standard, Management System for Quality of Private Security Operations–Requirements with Guidance (PSC.1). Guidance for conducting a Gap Analysis is provided in Section A.4 of the Standard.

The DFARS final rule governing trafficking in persons requires hotline posters for combating trafficking and fraud as well as whistleblower protection hotline posters in English and in languages commonly spoken by the workforce to be displayed prominently in common work areas within business segments performing work under DoD contracts. If a company uses a website as a method of providing information to employees, the company must also display an electronic version of these required posters at the website.

The prime contractor must also include these provisions in all subcontracts that exceed $5 million (except when the subcontract is for a commercial item).

Additionally, by submitting a proposal offer the Offeror represents that it:

(a) Will not engage in any trafficking in persons or related activities, including but not limited to the use of forced labor, in the performance of this contract;

(b) Has hiring and subcontracting policies to protect the rights of its employees and the rights of subcontractor employees and will comply with those policies in the performance of this contract; and

(c) Has notified its employees and subcontractors of:

(1) The responsibility to report trafficking in persons violations by the Contractor, Contractor employees, or subcontractor employees, at any tier; and

(2) Employee protection under 10 U.S.C. 2409, as implemented in DFARS subpart 203.9, from reprisal for whistleblowing on trafficking in persons violations.

The DoD points out that this new coverage “is to ensure that employees of DoD contractors are fully aware of their labor rights and that they have a means of reporting suspected labor violations directly to the DoD Inspector General’s office.”

Managing Corporate Due Diligence Efforts Holistically Provides Companies With a Good Option For Ensuring Compliance With Different But Related Requirements

In cases where companies are subject to both the new FAR and DFAR requirements, for example, defense contractors that provide or subcontract security functions outside the United States, senior corporate management should consider conducting due diligence activities from an integrated practice approach with one designated champion and a functional stakeholder team to lead the effort across the enterprise. Gap analysis of current company policies and practices against the new FAR and DFAR requirements conducted concurrently, rather than in separate, piecemeal, efforts by different business or account groups can better facilitate the development of comprehensive policies and practices from the start, thus reducing duplication efforts and possibly costly (in terms of time and resources) revisions later. Private security companies, in particular, should consider obtaining certification to ANSI/ASIS PSC.1, the referenced standard for the DFARS final rule for defense contractors providing private security functions overseas, since it also has provisions regarding combating trafficking.