On October 28, 2022, the Department of Defense (DoD) issued a final rule amending the Defense Federal Acquisition Regulation Supplement by prohibiting the award of any DoD contract to entities that require their employees to sign internal confidentiality agreements or statements that would restrict their employees from lawfully reporting waste, fraud, or abuse related to the performance of a DoD contract to a designated investigative or law enforcement representative who is authorized to receive such information. This prohibition now applies to contracts valued at or below the Simplified Acquisition Threshold, as well as to contracts for the acquisition of commercial services and products, including Commercially Available Off-the-Shelf items. The applicable prohibition is as follows:

(1) Prohibition. 10 U.S.C. 2409 prohibits contractors and subcontractors from discharging, demoting, or otherwise discriminating against an employee as a reprisal for disclosing, to any of the entities listed at paragraph (3) of this section, information that the employee reasonably believes is evidence of gross mismanagement of a DoD contract, a gross waste of DoD funds, an abuse of authority relating to a DoD contract, a violation of law, rule, or regulation related to a DoD contract (including the competition for or negotiation of a contract), or a substantial and specific danger to public health or safety. Such reprisal is prohibited even if it is undertaken at the request of an executive branch official, unless the request takes the form of a non-discretionary directive and is within the authority of the executive branch official making the request.

(2) Classified information. As provided in section 827(h) of the National Defense Authorization Act for Fiscal Year 2013, nothing in this subpart provides any rights to disclose classified information not otherwise provided by law.

(3) Entities to whom disclosure may be made:

(i) A Member of Congress or a representative of a committee of Congress.

(ii) An Inspector General that receives funding from or has oversight over contracts awarded for or on behalf of DoD.

(iii) The Government Accountability Office.

(iv) A DoD employee responsible for contract oversight or management.

(v) An authorized official of the Department of Justice or other law enforcement agency.

(vi) A court or grand jury.

(vii) A management official or other employee of the contractor or subcontractor who has the responsibility to investigate, discover, or address misconduct.

(4) Disclosure clarified. An employee who initiates or provides evidence of contractor or subcontractor misconduct in any judicial or administrative proceeding relating to waste, fraud, or abuse on a DoD contract shall be deemed to have made a disclosure.

(5) Contracting officer actions. A contracting officer who receives a complaint of reprisal of the type described in paragraph (1) of this section shall forward it to legal counsel or to the appropriate party in accordance with agency procedures.

In addition to the prohibition, the rule implements two additional requirements. First, entities must inform their employees of the limitations on confidentiality agreements or other statements and their whistleblower rights. Second, offerors must represent that they are compliant with the statutory restrictions in the System for Award Management (SAM) prior to submitting an offer or a quote.

Contractors registered in SAM as of January 12, 2021, are already compliant and likely do not need to take any further action. However, other contractors may be required to narrow the scope of their confidentiality agreements, include language about a confidentiality agreement’s limitations, and create SAM checklists. Where a contractor’s confidentiality agreement is too broad or lacking language on the limitations of confidentiality, or where a contractor fails to make appropriate representations in SAM, the result could be a missed opportunity to receive a DoD contract.

Contractors may want to review their confidentiality agreements and their internal processes to ensure compliance.

This article summarizes aspects of the law and does not constitute legal advice. For legal advice for your situation, you should contact an attorney.