52.203-3, Gratuities

Fara Fasat said:

Should it be added to 212-5 to be consistent with the "all" prescription?

No.  See FAR 12 301(a) and (d).  See also 12.101(c).

How is 12.101 (c) applicable to this question?

ji20874 said:

No.  See FAR 12 301(a) and (d).  See also 12.101(c).

The questions appear to concern whether there is a FAR disconnect and should the FAR be corrected either to include the clause in contracts for commercial items or services or to correct the prescription to exclude the clause from contracts for commercial items or commercial services

I’m missing the points in your response, which appear to agree with Fara Fasat that 52.203-3 is not prescribed in Part 12 (nor included in the FAR clause matrix for Commercial Item contracts), which conflicts with the prescription for 52.203-3 to be included in all contracts over the Simplified Aquisition Threshold [except as noted below].

“So is 203-3 just another disconnect in the FAR? Should it be added to 212-5 to be consistent with the "all" prescription? Should the prescription say "except solicitations and contacts for commercial items?”

Here is the prescription at 3.202:

“3.202 Contract clause.

The contracting officer shall insert the clause at 52.203-3, Gratuities, in solicitations and contracts with a value exceeding the simplified acquisition threshold, except those for personal services and those between military departments or defense agencies and foreign governments that do not obligate any funds appropriated to the Department of Defense.”

FAR 12.301 (a), (b), and (c) prescribe the provisions and clauses that apply to contracts for commercial items. FAR 12.301(d) says: "Other required provisions and clauses. Notwithstanding prescriptions contained elsewhere in the FAR, when acquiring commercial items, contracting officers shall be required to use only those provisions and clauses prescribed in this part." Emphasis added.

What about that is hard to understand?

We've now been buying commercial items pursuant to FAR Part 12 since the mid-1990s, more than 20 years. There is no issue about the gratuities clause. It does not apply. It does not apply because it is not prescribed in FAR Part 12. There is no "disconnect" in this case, only cognitive dissonance.

I might understand the opening post if this were the For Beginners Only forum, but it's not.

Note that the current Gratuities clause at 52.203-3 has been in the FAR from the beginning in 1984.

 I couldn’t find discussion concerning why it would be excluded from commercial item contracts. 

The current prescription for the clause at 3.202 appears to read the same as in the 1998 FAR edition, which includes the exclusion for contracts below the SAT. My 1996 edition appears to use the original 1984 prescription language (can’t find my 1984 edition).

EDIT: Vern posted his above response while I was looking this up.

So, the FAR cleverly solves the disconnect problem with the general disclaimer at FAR 12.301(d): "(d) Other required provisions and clauses. Notwithstanding prescriptions contained elsewhere in the FAR,...”

The prescription in FAR 3.202  is irrelevant pursuant to FAR 12.301(d). If you're buying commercial items you shouldn't be reading FAR 3.202, because of FAR 12.301(d). The history of FAR 3.202 is also irrelevant pursuant to FAR 12.301(d).

There is nothing new about this. The statute that introduced commercial items policy was enacted in 1994. FAR Part 12 dates from slightly later. It's now 2021. Time to get with the program.

See DFARS 212.301(f)(1)(A), which requires inclusion of the gratuities clause in DOD solicitations and contracts for commercial items "to comply with 10 USC 2207," a law that applies only to the Department of Defense and that has to do with limitations on expenditure of appropriations. That is consistent with FAR 12.301(f), which states:

Quote

(f) Agencies may supplement the provisions and clauses prescribed in this part (to require use of additional provisions and clauses) only as necessary to reflect agency unique statutes applicable to the acquisition of commercial items or as may be approved by the agency senior procurement executive, or the individual responsible for representing the agency on the FAR Council, without power of delegation.

A check of the FAR system shows that no other agency has applied the gratuities clause to contracts for commercial items.

Vern Edwards said:

The prescription in FAR 3.202  is irrelevant pursuant to FAR 12.301(d). If you're buying commercial items you shouldn't be reading FAR 3.202, because of FAR 12.301(d). The history of FAR 3.202 is also irrelevant pursuant to FAR 12.301(d).

There is nothing new about this. The statute that introduced commercial items policy was enacted in 1994. FAR Part 12 dates from slightly later. It's now 2021. Time to get with the program.

I don’t disagree with the fact that the clause has been excluded since the FAR Part 12 was added in the 1990’s. However, due to the subject of the clause, I’m somewhat curious why something as fundamental as prohibiting offering or giving gratuities to a official, officer or employee of the Government with the intent to obtain a contract or favorable treatment under a contract would be excluded for contracts for commercial items or commercial services.

Was this a conscious exclusion?  

Inasmuch as the Federal Government policy is to acquire supplies and services as commercial  items whenever feasible, a large share of acquisitions exclude this prohibition. 

EDIT:  Vern’s reply above, while I was writing this post partly answers my question. Yay for DoD.

joel hoffman said:

...52.203-3 is not prescribed in Part 12 (nor included in the FAR clause matrix for Commercial Item contracts), which conflicts with the prescription for 52.203-3 to be included in all contracts over the Simplified Aquisition Threshold...

No.  Let me correct it for you...

• ...52.203-3 is not prescribed in Part 12 (nor included in the FAR clause matrix for Commercial Item contracts), which conflicts with [trumps, supersedes, overrides, and utterly squashes] the prescription for 52.203-3 to be included in all contracts over the Simplified Acquisition Threshold...

The clause at FAR 52.203-3 does not belong in contracts for commercial items.  Period.

joel hoffman said:

I don’t disagree with the fact that the clause has been excluded since the FAR Part 12 was added in the 1990’s. However, due to the subject of the clause, I’m somewhat curious why something as fundamental as prohibiting offering or giving gratuities to a official, officer or employee of the Government with the intent to obtain a contract or favorable treatment under a contract would be excluded for contracts for commercial items or commercial services.

Was this a conscious exclusion?

Who knows? I doubt that there is any readily accessible record of any deliberations that may have occurred in Congress, OFPP, the FAR Councils, or elsewhere.

A lot of FAR clauses are excluded from contracts for commercial items, but not enough. 

joel hoffman said:

Yay for DoD.

Why "Yay"? They only did what the law required. They didn't act out of special DOD moral or ethical righteousness.

ji20874 said:

The clause at FAR 52.203-3 does not belong in contracts for commercial items.  Period.

Well, apparently it does for DoD, due to DoD appropriations laws. Wonder why it is also prescribed for non-commercial, non-DoD contracts?
EDIT:  Why would government statutes and policy distinguish between commercial and non-commercial if prohibiting gratuities in federal contracting is fundamental policy and promoting maximum practical use of commercial contracting is   now fundamental acquisition policy?

When FAR Part 12 for Commercial Items was implemented in the FAR in the mid-1990s, the FAR councils made a conscious decision to make FAR Part 12 override everything else in the FAR -- that way, they could deal with commercial item prescriptions one time and in one place (FAR Part 12) and in one rule-making effort rather than having to make changes in every part of the FAR that has clause prescriptions.  I recall this because I was on a temporary assignment to support OFPP at this exact time, and I remember OFPP Administrator Steven Kelman verbalizing his thought.

So, it is what it is.  The plain text of FAR 12.102(c) and 12.301(d) is there for anyone to read.

The FAR councils were given the responsibility to consider commercial item application of new clauses and to keep FAR 52.212-5 up-to-date as needed.

If other federal statutes prohibit gratuities, the clause may be superfluous, I suppose.

DOD operates in a special acquisition environment because of the amount of money it spends. That's why Congress is obsessed with DOD acquisition and enacts so many Title VIII laws every year. That's why the goal of a single governmentwide procurement regulation has not been achieved. The FAR is 1,996 pages long in its pdf edition. The DFARS is 1,336 pages long, and that doesn't include all the class deviations and policies like the 60-page DOD source selection procedures. Absurd.

The regulators need to let DOD have its own regulation and apply the FAR to just the civilian agencies.

Vern Edwards said:

DOD operates in a special acquisition environment because of the amount of money it spends. That's why Congress is obsessed with DOD acquisition and enacts so many Title VIII laws every year. That's why the goal of a single governmentwide procurement regulations has not been achieved. The FAR is 1,996 pages long in its pdf edition. The DFARS is 1,336 pages long, and that doesn't include all the class deviations and policies like the 60-page DOD source selection procedures. Absurd.

The regulators need to let DOD have its own regulation and apply the FAR to just the civilian agencies.

Back to segregated acquisition regulations then.  They had lofty goal for uniformity across government which isn’t entirely possible but would seem to be an improvement over numerous previous practices.

I realize that there is a need to simplify contracting practices for commercial items and services. There may well be enough US laws against bribery, baksheesh, palm greasing, influence peddling, kickbacks, etc. that there is no practical need to even include a Gratuities clause in any federal contract, except where Congress specifically directed.

When Congress Barks, the regulators have to jump.

Don't worry, Joel. The policy people will never agree to going back to separate regulations. We're stuck with the FAR and the DFARS, which will just continue to grow.

Vern Edwards said:

Don't worry, Joel. They policy people will never agree to going back to separate regulations. We're stuck with the FAR and the DFARS, which will just continue to grow.

Yep. Thanks for your research and insights by the way!

Just now, joel hoffman said:

I realize that there is a need to simplify contracting practices for commercial items and services. There may well be enough US laws against bribery, backsheesh, palm greasing, influence peddling, kickbacks, etc. that there is no need to even include a Gratuities clause in any federal contract.

Exactly and why my recollection of the creation of commercial item contracting practices attempted to do exactly what you realize and Vern suggests.  In truth anyone  could offer gratuities all it wants to government employees, isn't it the government employee that violates ethics rules if they accept the gratuity.   Further should the gratuity issue involve a commercial contract is there not the termination clause of 52.212-4 if the contractor continues to attempt offering a gratuity and the government employee continues to refuse.  Something like unacceptable business practice.   And then there is paragraph "q" that basically provides the  ability for action should there be an issue of gratuity offered and accepted.

C Culham said:

In truth anyone  could offer gratuities all it wants to government employees, isn't it the government employee that violates ethics rules if they accept the gratuity.

That's not entirely correct. See the Gratuities clause, FAR 52.203-3:

Quote

Gratuities (Apr 1984)

      (a) The right of the Contractor to proceed may be terminated by written notice if, after notice and hearing, the agency head or a designee determines that the Contractor, its agent, or another representative-

           (1) Offered or gave a gratuity (e.g., an entertainment or gift) to an officer, official, or employee of the Government; and

           (2) Intended, by the gratuity, to obtain a contract or favorable treatment under a contract.

      (b) The facts supporting this determination may be reviewed by any court having lawful jurisdiction.

      (c) If this contract is terminated under paragraph (a) of this clause, the Government is entitled-

           (1) To pursue the same remedies as in a breach of the contract; and

           (2) In addition to any other damages provided by law, to exemplary damages of not less than 3 nor more than 10 times the cost incurred by the Contractor in giving gratuities to the person concerned, as determined by the agency head or a designee. (This paragraph (c)(2) is applicable only if this contract uses money appropriated to the Department of Defense.)

      (d) The rights and remedies of the Government provided in this clause shall not be exclusive and are in addition to any other rights and remedies provided by law or under this contract.

(End of clause)

The clause does not prohibit offering or giving gratuities (gifts) unless the contractor is seeking something in return. But if such an intent is just suspected or inferred, the offering could result in a costly hearing, contract termination, and demand for damages, depending on the circumstances.

Thank you for the response, 'beginners' comment notwithstanding. 12.301 trumps everything else. Fine, that's the answer. "All" doesn't mean "all." I'm not the only one who thought it might.

Makes me wonder whether there are any other general policy statements that override specific prescriptions.

Fara,

It happens all the time, even in the hallowed halls of Congress.  How many times has Congress passed a bill that says "Notwithstanding any other provision of law. . ." or similar?  This allows them to declare the new law without the tedious chore and argument of modifying all the pre-existing laws that might be stepped on by the new law.

Some other examples in the FAR...

• 52.242-1 Notice of Intent to Disallow Costs - (a) Notwithstanding any other clause of this...
• 52.227-22 Major System-Minimum Rights - Notwithstanding any other provision of this contract, the Government shall have...
• 52.236-11 Use and Possession Prior to Completion - ...notwithstanding the terms of the clause in this contract entitled Permits...
• 52.216-21 Requirements - Notwithstanding anything to the contrary stated in the contract...

The word "notwithstanding" is a very powerful word.  That is the word used in FAR 12.301(d).

Some participants in the acquisition system have been ignoring or resisting this for over twenty years -- hopefully, through exchanges such as this, one at a time, we can help others learn correct principles.

Fara Fasat said:

"All" doesn't mean "all."

There is an exception to every rule, including the rule against homicide.

joel hoffman said:

However, due to the subject of the clause, I’m somewhat curious why something as fundamental as prohibiting offering or giving gratuities to a official, officer or employee of the Government with the intent to obtain a contract or favorable treatment under a contract would be excluded for contracts for commercial items or commercial services.

See, 18 U.S.C. 209.  In light of this statute maybe we don't need a gratuities clause at all.

Retreadfed said:

See, 18 U.S.C. 209.  In light of this statute maybe we don't need a gratuities clause at all.

Lots of loopholes in that citation...

18 U.S.C. § 201.

ji20874 said:

Fara,

It happens all the time, even in the hallowed halls of Congress.  How many times has Congress passed a bill that says "Notwithstanding any other provision of law. . ." or similar?  This allows them to declare the new law without the tedious chore and argument of modifying all the pre-existing laws that might be stepped on by the new law.

Some other examples in the FAR...

• 52.242-1 Notice of Intent to Disallow Costs - (a) Notwithstanding any other clause of this...
• 52.227-22 Major System-Minimum Rights - Notwithstanding any other provision of this contract, the Government shall have...
• 52.236-11 Use and Possession Prior to Completion - ...notwithstanding the terms of the clause in this contract entitled Permits...
• 52.216-21 Requirements - Notwithstanding anything to the contrary stated in the contract...

The word "notwithstanding" is a very powerful word.  That is the word used in FAR 12.301(d).

Some participants in the acquisition system have been ignoring or resisting this for over twenty years -- hopefully, through exchanges such as this, one at a time, we can help others learn correct principles.

Let's talk about The CARES Act:

Quote

SEC. 3610. FEDERAL CONTRACTOR AUTHORITY.

Notwithstanding any other provision of law, and subject to the availability of appropriations, funds made available to an agency by this Act or any other Act may be used by such agency to modify the terms and conditions of a contract, or other agreement, without consideration, to reimburse at the minimum applicable contract billing rates not to exceed an average of 40 hours per week any paid leave, including sick leave, a contractor provides to keep its employees or subcontractors in a ready state, including to protect the life and safety of Government and contractor personnel, but in no event beyond September 30, 2020. Such authority shall apply only to a contractor whose employees or subcontractors cannot perform work on a site that has been approved by the Federal Government, including a federally-owned or leased facility or site, due to facility closures or other restrictions, and who cannot telework because their job duties cannot be performed remotely during the public health emergency declared on January 31, 2020 for COVID–19: Provided, That the maximum reimbursement authorized by this section shall be reduced by the amount of credit a contractor is allowed pursuant to division G of Public Law 116–127 and any applicable credits a contractor is allowed under this Act.

As a contractor concerned about things such as (but not limited to) the Truthful Cost or Pricing Data Act or the Cost Accounting Standards, I really do appreciate those five words.

Vern Edwards said:

18 U.S.C. § 201.

Much better!

The life experience of living under an Honor Code with both Honor and Ethics training for four years at the Air Force Academy and continuing in the Air Force for five years,  between 1967-1976, instilled a strong awareness of honor and ethics that has remained important to me since.

I don’t know if anyone here has been  offered a bribe, gratuity or whatever you choose to call it. During my first year with the Army Corps of Engineers in 1980, I was project engineer for quality assurance and contract administration on a small $300,000 construction contract for the infrastructure for Air Force installation of a Solid State Instrument Landing System at Columbus AFB, MS.

The mechanical subcontractor was experiencing some quality control problems on a standby generator and its building. The clearly frustrated foreman asked me what it would take get the work to pass inspection. I quickly answered. “$600,000”. He was shocked and said that’s more than the whole contract!  I said yeah but I’d have to take of my family for the 20 years that we’d both spend in prison for bribery. He laughed and changed the subject...

Actually, I had earlier asked an old time construction management expert what he would do if offered a bribe. He said to cite a ridiculously high amount to shock, diffuse and make the offeror know up front that you can’t be bribed. He guaranteed that it would work. Bingo!

I spent four years in the late 80’s as a USACE contract administrator and negotiator on large construction contracts in Saudi Arabia. All of our contractors were Korean or Middle East firms. Years later, one of my best friends and fellow administrator and I were recollecting our times together in Riyadh. I said that I was surprised that I’ was never approached by any of our contractors, since we had negotiated some really large changes and had handled big claims. He told me that the contractors told him that I was so “squeaky clean” that they knew it would be futile to try. That was pretty gratifying. 😁

Honestly, I was always amazed at how much trust was placed upon USACE ACO’s and contract administrators over my career.

joel hoffman said:

Much better!

Yes....I spent some time this morning just surfing.   A few things struck me.....

"Gratuities Statute" as it seems to be called for DOD dates back to 1962.

In a 1996 Fed Reg notice where the SAT threshold was established for the clause it was stated that.... "FAR Subpart 3.2, Contractor Gratuities to Government Personnel, implements 10 U.S.C. 2207 and applies to all executive agencies except for that portion concerning exemplary damages, which applies only to DOD."

The above seems to support that  10 USC 2207 carries with it the additional  "costly" implication that Vern mentioned.

And this (see below) which to me was odd where it was located but still seems to be in part another "why" as to commercial items solicitation/contracts do not include the Gratuities Clause as a separate term and condition in 52.212-4.   Brought me back to the catch all "q" paragraph of the 52.212-4 clause where contractors are to comply with all laws, etc.   

"3.104-2 General....

  (b) Agency officials are reminded that there are other statutes and regulations that deal with the same or related prohibited conduct, for example-

           (1) The offer or acceptance of a bribe or gratuity is prohibited by 18 U.S.C. 201 and 10 U.S.C. 2207. The acceptance of a gift, under certain circumstances, is prohibited by 5 U.S.C. 7353 and 5 CFR Part 2635;..."

Not confused but feeling like the FAR could do a little better job on this subject.

C Culham said:

Yes....I spent some time this morning just surfing.   A few things struck me.....

"Gratuities Statute" as it seems to be called for DOD dates back to 1962.

In a 1996 Fed Reg notice where the SAT threshold was established for the clause it was stated that.... "FAR Subpart 3.2, Contractor Gratuities to Government Personnel, implements 10 U.S.C. 2207 and applies to all executive agencies except for that portion concerning exemplary damages, which applies only to DOD."

The above seems to support that  10 USC 2207 carries with it the additional  "costly" implication that Vern mentioned.

And this (see below) which to me was odd where it was located but still seems to be in part another "why" as to commercial items solicitation/contracts do not include the Gratuities Clause as a separate term and condition in 52.212-4.   Brought me back to the catch all "q" paragraph of the 52.212-4 clause where contractors are to comply with all laws, etc.   

"3.104-2 General....

  (b) Agency officials are reminded that there are other statutes and regulations that deal with the same or related prohibited conduct, for example-

           (1) The offer or acceptance of a bribe or gratuity is prohibited by 18 U.S.C. 201 and 10 U.S.C. 2207. The acceptance of a gift, under certain circumstances, is prohibited by 5 U.S.C. 7353 and 5 CFR Part 2635;..."

Not confused but feeling like the FAR could do a little better job on this subject.

Thanks, Carl. Yes the FAR could be better collated/correlated/cross referenced to provide a better perspective.

Actually, 3.104 deals with procurement integrity, which is more specific than the broader topic of gratuities.

Gratuities could also or alternatively occur before the procurement or after after award.

Ive been involved in all three phases over the years and am aware of instances that have allegedly occurred during each phase.

@joel hoffman $600,000 would have taken care of your family for 20 years?

Vern Edwards said:

Vern Edwards said:

@joel hoffman $600,000 would have taken care of your family for 20 years?

That was back when I was making $22,000 as a fresh new GS11 employee.  At any rate, it was twice the amount of the entire prime contract.

Yeah, but 20 years?

Speaking of gratuities, how about Fat Leonard?

Vern Edwards said:

Speaking of gratuities, how about Fat Leonard?

He may be the king.  He was definitely the King pin of an influence ring!

EDIT: for those wondering who Fat Leonard is...

https://en.m.wikipedia.org/wiki/Fat_Leonard_scandal

Dude, he was a deputy CNO!

Vern Edwards said:

Yeah, but 20 years?

I didn’t live life in the fast lane. The point was really that it was twice the prime contract amount to get his attention. The prison remark was a joke, meant to disarm him and lighten the mood. We both laughed and he changed the subject. I think his initial remark was meant as a test to feel me out.

I remembered the tactic that my sage buddy taught me - it’s a spur of the moment reaction. One doesn’t sit down and calculate pay and job growth before responding to a possible bribe.

Next time, show some imagination!

(Quite a pair, laughing at the idea of prison.)

That was a relatively easy situation. It was a hell of a lot more serious when someone I worked with and thought I knew  tried to recruit me for the Mafia, 46 years ago when I was an young Air Force officer. Totally unexpected and terrifying experience...can’t go into detail.

You might have been in a Scorsese movie! With DeNiro and Pesci!

I’m a guy that wouldn’t let my contractor friend on my first AF construction project 50 years ago buy me a 10 cent cup of coffee at the BX cafe.  We started taking daily coffee breaks to discuss the job.  He would teach me all about concrete and asphalt paving - I made him first agree that we would trade off days paying for coffee (free refills - shows how much coffee cost back then) because I was afraid that it would be improper, based upon my Academy training. Of course, you can probably remember how much Air Force lower ranked personnel made back then. At least enlisted personnel could go to the Dining hall and drink free coffee. 😁

On 2/11/2021 at 9:06 AM, C Culham said:

In truth anyone  could offer gratuities all it wants to government employees, isn't it the government employee that violates ethics rules if they accept the gratuity.

I'm not sure what ethics rules you are referring to, but if you are talking about the Government-wide Ethics Regulation put out by the Office of Government Ethics or the DoD Joint Ethics Regulation, those regulations apply to government officers and employees.  For purposes of this discussion see 5 CFR 2635.205.  However, there are criminal statutes and contract clauses such as FAR 52.203-3 that apply to contractors.  The criminal statutes also apply to government officers and employees.

Retreadfed said:

I'm not sure what ethics rules you are referring to, but if you are talking about the Government-wide Ethics Regulation put out by the Office of Government Ethics or the DoD Joint Ethics Regulation, those regulations apply to government officers and employees.  For purposes of this discussion see 5 CFR 2635.205.  However, there are criminal statutes and contract clauses such as FAR 52.203-3 that apply to contractors.  The criminal statutes also apply to government officers and employees.

Yes probably a hastily prepared statement.   I agree especially with regard to the 18 USC stuff.   Not trying to wiggle out but my view would be the hearsay of somebody said a contractor offered them a bundle to do such and such would still require details being added to make it qualify for the 18 USC penalties.   But again the clarification is acknowledged and appreciated.  Thanks

The dust has settled now, and I have completed my review of the applicability of clauses to CI contracts (larger project, not relevant here), so  have a couple observations:

1. I missed the 'notwithstanding' in 12.301. I knew it from way back, but got too wrapped up in the 'all contracts' language. My fault.

2. There can be some honest debates over whether some clauses should or should not apply to CI contracts, as evidenced by the discussion over the gratuities clause. For example, the "Brand Name or Equal" clause, 52.211-6, is not listed in 12.301 and therefore not required in CI solicitations or contracts. And yet commercial items are more likely to be identified by a brand name than a non-commercial item, so why not? Maybe there's a good reason for this clause, but there are a whole lot more that make you wonder why they wouldn't be required.

3. The 'notwithstanding' rule was presented earlier in this discussion as so all-encompassing and so easy to understand and apply, that any question deserved to be in the beginner's forum. Yet as with most things in the FAR, it's not so simple. There are some clauses that are nowhere to be found in Part 12 or 52.212-5, yet definitely belong in CI contracts. 

For example, 52.216-31, "Time-And-Materials/Labor-Hour Proposal Requirements -- Commercial Item Acquisition", is nowhere in Part 12 or 52.212-5. By 12.301(d), we should exclude it, yet the only reason for its existence is a CI contract. Its prescription is at 16.601(f)(3). The FAR matrix doesn't list it in the CI column, although the DAU matrix caught it. There are a couple others like this. The point is, there are some holes in 'notwithstanding,' and it's not easy to find them.