The influential Council of Defense and Space Industry Associations (CODSIA) is calling for the withdrawal of a recently proposed FAR Council rule to have contractors establish in writing a “code of ethics and business conduct.”  The proposed rule was a legislative initiative by the new Congress in response to recent scandals.  It would require contractors and subcontractors having non-commercial item awards in excess of $5 million with a performance period exceeding 120 days to have in place a written code of ethics and business conduct within 30 days of contract award followed by an employee ethics and compliance training program within 90 days.  Failure to comply can result in withholding of payments or loss of award fee. Though it endorses the goal of having consistent standards of ethics and business conduct, CODSIA states the proposed rule in its current form is “overreaching” and “duplicative of similar requirements” where the impact would be to provide a strong disincentive for contractors to sell to the government, especially small and median sized businesses.  It expressed great concern over the penalty remedies and stated it should not be a flow down requirement to subcontractors because prime contractors should not be responsible for oversight of its subcontractors.  CODSIA believes most contractors’ voluntary adherence to the Defense Industry Initiative on Business Ethics and Conduct (DII) provides sufficient ethics guidelines and that if the FAR Council wants to add such standards it should incorporate DOD’s DFARS Subpart 203.70, “Contractor Standards of Conduct.”

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