TITLE 41. PUBLIC CONTRACTS
CHAPTER 1. GENERAL PROVISIONS
41 USC § 51
This Act [41 USC § § 51 et seq.] may be cited as the “Anti-Kickback Act of 1986″.
“(a) Except as provided in subsection (b), the Anti-Kickback Act of 1986 [41 USC § § 51 et seq.] (as set out in
section 2(a)) shall take effect with respect to conduct described in section 3 of such Act [41 USC § 53] which occurs on
or after the date of the enactment of this Act.
“(b) Subsections (a) and (b) of section 7 of the Anti-Kickback Act of 1986 [41 USC § 57(a), (b)] (as set out in section
2(a)) shall take effect with respect to contract solicitations issued by an agency, department, or other establishment of
the Federal Government on or after the date which is 90 days after the date of the enactment of this Act.”.
§ 52. Definitions
As used in this Act [41 USC § § 51 et seq.]:
(1) The term “contracting agency”, when used with respect to a prime contractor, means any department, agency, or
establishment of the United States which enters into a prime contract with a prime contractor.
(2) The term “kickback” means any money, fee, commission, credit, gift, gratuity, thing of value, or compensation of
any kind which is provided, directly or indirectly, to any prime contractor, prime contractor employee, subcontractor, orsubcontractor employee for the purpose of improperly obtaining or rewarding favorable treatment in connection with aprime contract or in connection with a subcontract relating to a prime contract.
(3) The term “person” means a corporation, partnership, business association of any kind, trust, joint-stock company, or individual.
(4) The term “prime contract” means a contract or contractual action entered into by the United States for the purpose
of obtaining supplies, materials, equipment, or services of any kind.
(5) The term “prime contractor” means a person who has entered into a prime contract with the United States.
(6) The term “prime contractor employee” means any officer, partner, employee, or agent of a prime contractor.
(7) The term “subcontract” means a contract or contractual action entered into by a prime contractor or subcontractor
for the purpose of obtaining supplies, materials, equipment, or services of any kind under a prime contract.
(8) The term “subcontractor”–
(A) means any person, other than the prime contractor, who offers to furnish or furnishes any supplies, materials,
equipment, or services of any kind under a prime contract or a subcontract entered into in connection with such prime
contract; and
(B) includes any person who offers to furnish or furnishes general supplies to the prime contractor or a higher tier
subcontractor.
(9) The term “subcontractor employee” means any officer, partner, employee, or agent of a subcontractor.
§ 53. Prohibited conduct
It is prohibited for any person–
(1) to provide, attempt to provide, or offer to provide any kickback;
(2) to solicit, accept, or attempt to accept any kickback; or
(3) to include, directly or indirectly, the amount of any kickback prohibited by clause (1) or (2) in the contract price charged by a subcontractor to a prime contractor or a higher tier subcontractor or in the contract price charged by a prime contractor to the United States.
§ 54. Criminal penalties
Any person who knowingly and willfully engages in conduct prohibited by section 3 [41 USC § 53] shall be
imprisoned for not more than 10 years or shall be subject to a fine in accordance with title 18, United States Code, or both.
§ 55. Civil actions
(a) [Caution: For inflation-adjusted civil monetary penalties, see 28 CFR 85.3.]
(1) The United States may, in a civil action, recover a civil penalty from any person who knowingly engages in conduct prohibited by section 3 [41 USC § 53]. The amount of such civil penalty shall be–
(A) twice the amount of each kickback involved in the violation; and
(B) not more than $ 10,000 for each occurrence of prohibited conduct.
(2) The United States may, in a civil action, recover a civil penalty from any person whose employee, subcontractor or
subcontractor employee violates section 3 [41 USC § 53] by providing, accepting, or charging a kickback. The amount
of such civil penalty shall be the amount of that kickback.
(b) A civil action under this section shall be barred unless the action is commenced within 6 years after the later of (1)
the date on which the prohibited conduct establishing the cause of action occurred, and (2) the date on which the United
States first knew or should reasonably have known that the prohibited conduct had occurred.
§ 56. Administrative offsets
(a) Offset authority. A contracting officer of a contracting agency may offset the amount of a kickback provided,
accepted, or charged in violation of section 3 [41 USC § 53] against any moneys owed by the United States to the
prime contractor under the prime contract to which such kickback relates.
(b) Duties of prime contractor.
(1) Upon direction of a contracting officer of a contracting agency with respect to a prime contract, the prime
contractor shall withhold from any sums owed to a subcontractor under a subcontract of the prime contract the amount
of any kickback which was or may be offset against that prime contractor under subsection (a).
(2) Such contracting officer may order that sums withheld under paragraph (1)–
(A) be paid over to the contracting agency; or
(B) if the United States has already offset the amount of such sums against that prime contractor, be retained by the
prime contractor.
(3) The prime contractor shall notify the contracting officer when an amount is withheld and retained under paragraph
(2)(B).
(c) Claim of Government. An offset under subsection (a) or a direction or order of a contracting officer under
subsection (b) is a claim by the Government for the purposes of the Contract Disputes Act of 1978.
(d) “Contracting officer” defined. As used in this section, the term “contracting officer” has the meaning given that term
for the purposes of the Contract Disputes Act of 1978.
§ 57. Contractor responsibilities
(a) Procedural requirements for prevention and detection of violations. Each contracting agency shall include in each
prime contract awarded by such agency a requirement that the prime contractor shall have in place and follow
reasonable procedures designed to prevent and detect violations of section 3 [41 USC § 53] in its own operations and
direct business relationships.
(b) Cooperation in investigations requirement. Each contracting agency shall include in each prime contract awarded by
such agency a requirement that the prime contractor shall cooperate fully with any Federal Government agency
investigating a violation of section 3 [41 USC § 53].
(c) Reporting requirement; supplying information as favorable evidence of responsibility.
(1) (A) Whenever a prime contractor or subcontractor has reasonable grounds to believe that a violation of section 3
[41 USC § 53] may have occurred, the prime contractor or subcontractor shall promptly report the possible violation in writing.
(B) A contractor shall make the reports required by sub-paragraph (A) to the inspector general of the contracting
agency, the head of the contracting agency if the agency does not have an inspector general, or the Department of Justice.
(2) In the case of an administrative or contractual action to suspend or debar any person who is eligible to enter into
contracts with the Federal Government, evidence that such person has supplied information to the United States
pursuant to paragraph (1) shall be favorable evidence of such person’s responsibility for the purposes of Federal
procurement laws and regulations.
(d) Partial inapplicability to small contracts. Subsections (a) and (b) do not apply to a prime contract that is not greater
than $ 100,000 or to a prime contract for the acquisition of commercial items (as defined in section 4(12) of the Office
of Federal Procurement Policy Act (41 U.S.C. 403(12))).
(e) Cooperation in investigations regardless of contract amount. Notwithstanding subsection (d), a prime contractor
shall cooperate fully with any Federal Government agency investigating a violation of section 3 [41 USC § 53].
§ 58. Inspection authority
For the purpose of ascertaining whether there has been a violation of section 3 [41 USC § 53] with respect to any prime
contract, the General Accounting Office [Government Accountability Office] and the inspector general of the
contracting agency, or a representative of such contracting agency designated by the head of such agency if the agency
does not have an inspector general, shall have access to and may inspect the facilities and audit the books and records,
including any electronic data or records, of any prime contractor or subcontractor under a prime contract awarded by
such agency. This section does not apply with respect to a prime contract for the acquisition of commercial items (as
defined in section 4(12) of the Office of Federal Procurement Policy Act (41 U.S.C. 403(12))).
Subpart 3.5—Other Improper Business Practices
3.501 Buying-in.
“Buying-in,” as used in this section, means submitting an offer below anticipated costs, expecting to—
(1) Increase the contract amount after award (e.g., through unnecessary or excessively priced change orders); or
(2) Receive follow-on contracts at artificially high prices to recover losses incurred on the buy-in contract.
3.501-2 General.
(a) Buying-in may decrease competition or result in poor contract performance. The contracting officer must take appropriate action to ensure buying-in losses are not recovered by the contractor through the pricing of—
(1) Change orders; or
(2) Follow-on contracts subject to cost analysis.
(b) The Government should minimize the opportunity for buying-in by seeking a price commitment covering as much of the entire program concerned as is practical by using—
(1) Multiyear contracting, with a requirement in the solicitation that a price be submitted only for the total multiyear quantity; or
(2) Priced options for additional quantities that, together with the firm contract quantity, equal the program requirements (see Subpart 17.2).
(c) Other safeguards are available to the contracting officer to preclude recovery of buying-in losses (e.g., amortization of nonrecurring costs (see 15.408, Table 15-2, paragraph A, column (2) under “Formats for Submission of Line Item Summaries”) and treatment of unreasonable price quotations (see 15.405).
3.502 Subcontractor kickbacks.
3.502-1 Definitions.
As used in this section—
“Kickback” means any money, fee, commission, credit, gift, gratuity, thing of value, or compensation of any kind which is provided, directly or indirectly, to any prime contractor, prime contractor employee, subcontractor, or subcontractor employee for the purpose of improperly obtaining or rewarding favorable treatment in connection with a prime contract or in connection with a subcontract relating to a prime contract.
“Person” means a corporation, partnership, business association of any kind, trust, joint-stock company, or individual.
“Prime contract” means a contract or contractual action entered into by the United States for the purpose of obtaining supplies, materials, equipment, or services of any kind.
“Prime Contractor” means a person who has entered into a prime contract with the United States.
“Prime Contractor employee” means any officer, partner, employee, or agent of a prime contractor.
“Subcontract” means a contract or contractual action entered into by a prime contractor or subcontractor for the purpose of obtaining supplies, materials, equipment, or services of any kind under a prime contract.
“Subcontractor” (1) means any person, other than the prime contractor, who offers to furnish or furnishes any supplies, materials, equipment, or services of any kind under a prime contract or a subcontract entered into in connection with such prime contract; and (2) includes any person who offers to furnish or furnishes general supplies to the prime contractor or a higher tier subcontractor.
3.502-2 Subcontractor kickbacks.
The Anti-Kickback Act of 1986 (41 U.S.C. 51-58) was passed to deter subcontractors from making payments and contractors from accepting payments for the purpose of improperly obtaining or rewarding favorable treatment in connection with a prime contract or a subcontract relating to a prime contract. The Act—
(a) Prohibits any person from—
(1) Providing, attempting to provide, or offering to provide any kickback;
(2) Soliciting, accepting, or attempting to accept any kickback; or
(3) Including, directly or indirectly, the amount of any kickback in the contract price charged by a subcontractor to a prime contractor or a higher tier subcontractor or in the contract price charged by a prime contractor to the United States.
(b) Imposes criminal penalties on any person who knowingly and willfully engages in the prohibited conduct addressed in paragraph (a) of this subsection.
(c) Provides for the recovery of civil penalties by the United States from any person who knowingly engages in such prohibited conduct and from any person whose employee, subcontractor, or subcontractor employee provides, accepts, or charges a kickback.
(d) Provides that—
(1) The contracting officer may offset the amount of a kickback against monies owed by the United States to the prime contractor under the prime contract to which such kickback relates;
(2) The contracting officer may direct a prime contractor to withhold from any sums owed to a subcontractor under a subcontract of the prime contract the amount of any kickback which was or may be offset against the prime contractor under paragraph (d)(1) of this subsection; and
(3) An offset under paragraph (d)(1) or a direction under paragraph (d)(2) of this subsection is a claim by the Government for the purposes of the Contract Disputes Act of 1978.
(e) Authorizes contracting officers to order that sums withheld under paragraph (d)(2) of this subsection be paid to the contracting agency, or if the sum has already been offset against the prime contractor, that it be retained by the prime contractor.
(f) Requires the prime contractor to notify the contracting officer when the withholding under paragraph (d)(2) of this subsection has been accomplished unless the amount withheld has been paid to the Government.
(g) Requires a prime contractor or subcontractor to report in writing to the inspector general of the contracting agency, the head of the contracting agency if the agency does not have an inspector general, or the Department of Justice any possible violation of the Act when the prime contractor or subcontractor has reasonable grounds to believe such violation may have occurred.
(h) Provides that, for the purpose of ascertaining whether there has been a violation of the Act with respect to any prime contract, the Government Accountability Office and the inspector general of the contracting agency, or a representative of such contracting agency designated by the head of the agency if the agency does not have an inspector general, shall have access to and may inspect the facilities and audit the books and records, including any electronic data or records, of any prime contractor or subcontractor under a prime contract awarded by such agency.
(i) Requires each contracting agency to include in each prime contract exceeding $100,000 for other than commercial items (see Part 12), a requirement that the prime contractor shall—
(1) Have in place and follow reasonable procedures designed to prevent and detect violations of the Act in its own operations and direct business relationships (e.g., company ethics rules prohibiting kickbacks by employees, agents, or subcontractors; education programs for new employees and subcontractors, explaining policies about kickbacks, related company procedures and the consequences of detection; procurement procedures to minimize the opportunity for kickbacks; audit procedures designed to detect kickbacks; periodic surveys of subcontractors to elicit information about kickbacks; procedures to report kickbacks to law enforcement officials; annual declarations by employees of gifts or gratuities received from subcontractors; annual employee declarations that they have violated no company ethics rules; personnel practices that document unethical or illegal behavior and make such information available to prospective employers); and
(2) Cooperate fully with any Federal agency investigating a possible violation of the Act.
(j) Notwithstanding paragraph (i) of this subsection, a prime contractor shall cooperate fully with any Federal government agency investigating a violation of Section 3 of the Anti-Kickback Act of 1986 (41 U.S.C. 51-58).
3.502-3 Contract clause.
The contracting officer shall insert the clause at 52.203-7, Anti-Kickback Procedures, in solicitations and contracts exceeding the simplified acquisition threshold, other than those for commercial items (see Part 12).
3.503 Unreasonable restrictions on subcontractor sales.
3.503-1 Policy.
10 U.S.C. 2402 and 41 U.S.C. 253g require that subcontractors not be unreasonably precluded from making direct sales to the Government of any supplies or services made or furnished under a contract. However, this does not preclude contractors from asserting rights that are otherwise authorized by law or regulation.
3.503-2 Contract clause.
The contracting officer shall insert the clause at 52.203-6, Restrictions on Subcontractor Sales to the Government, in solicitations and contracts exceeding the simplified acquisition threshold. For the acquisition of commercial items, the contracting officer shall use the clause with its Alternate I.
