FAR 3.405—Misrepresentations or violations of the Covenant Against Contingent Fees.
Plain-English Summary
FAR 3.405 explains what happens when Government personnel suspect or find evidence of attempted or actual improper influence, a misrepresentation involving a contingent fee arrangement, or any other violation of the Covenant Against Contingent Fees. It establishes a reporting duty for Government personnel and a review-and-response process for the chief of the contracting office when there is specific evidence or a reasonable basis to suspect a violation. The section also identifies the main remedies and enforcement options: rejecting a bid or proposal before award, annulling the contract or recovering the fee after award, starting suspension or debarment proceedings, and referring suspected fraudulent or criminal conduct to the Department of Justice. In practice, this section is about protecting the integrity of federal procurement by ensuring that contingent-fee violations and related misconduct are escalated quickly and handled consistently. It matters because these issues can affect competition, contract validity, payment rights, and potential contractor responsibility determinations.
Key Rules
Prompt reporting required
Government personnel who suspect or have evidence of improper influence, a misrepresentation of a contingent fee arrangement, or another Covenant Against Contingent Fees violation must report it promptly to the contracting officer or higher authority under agency procedures. The rule is triggered by suspicion or evidence, not by a completed investigation.
Review by contracting office chief
When there is specific evidence or another reasonable basis to suspect a violation, the chief of the contracting office must review the facts. This review is meant to determine whether action is appropriate and what remedy or referral should follow.
Pre-award rejection option
If the issue is identified before award, the Government may reject the bid or proposal. This is a preventive remedy designed to stop an improper procurement from moving forward.
Post-award contract remedies
If the issue is identified after award, the Government may enforce its right to annul the contract or recover the fee. These remedies address the consequences of a tainted award or improper compensation arrangement.
Suspension or debarment referral
The Government may initiate suspension or debarment action under FAR subpart 9.4. This is a separate responsibility and can affect the contractor’s eligibility for future awards.
Fraud or crime referral
If the facts suggest fraud or criminal conduct, the matter may be referred to the Department of Justice in accordance with agency regulations. This ensures potentially criminal misconduct is handled through the appropriate enforcement channel.
Other appropriate actions allowed
The section is not limited to the listed remedies; the chief of the contracting office may take or direct other appropriate actions. This gives agencies flexibility to respond to the facts and the seriousness of the violation.
Responsibilities
Government personnel
Promptly report suspected or evidenced improper influence, contingent-fee misrepresentation, or other Covenant Against Contingent Fees violations to the contracting officer or higher authority following agency procedures.
Contracting Officer
Receive reports, elevate them as needed, and support the review and response process under agency procedures.
Chief of the Contracting Office
Review the facts when there is specific evidence or a reasonable basis to suspect a violation and decide whether to reject the bid or proposal, annul the contract, recover the fee, initiate suspension or debarment, refer the matter to DOJ, or take other appropriate action.
Agency
Maintain procedures for reporting and handling suspected violations, including escalation paths and coordination with suspension/debarment and legal authorities.
Department of Justice
Receive referrals of suspected fraudulent or criminal matters when the facts warrant criminal or fraud enforcement review.
Practical Implications
Contracting personnel should treat contingent-fee issues as an integrity problem, not just a paperwork issue, and report concerns immediately rather than waiting for proof beyond doubt.
Contractors should understand that misstatements about brokers, agents, or contingent compensation can jeopardize an award before it is made and can create serious remedies after award.
A reasonable basis to suspect a violation is enough to trigger review, so agencies do not need a completed investigation before taking protective action.
After award, the Government may pursue contract annulment or fee recovery, which can create major financial exposure even if performance has already started.
These issues can also lead to suspension/debarment or DOJ referral, so contractors should ensure their representations about contingent fees and third-party compensation are accurate and well documented.
Official Regulatory Text
(a) Government personnel who suspect or have evidence of attempted or actual exercise of improper influence, misrepresentation of a contingent fee arrangement, or other violation of the Covenant Against Contingent Fees shall report the matter promptly to the contracting officer or appropriate higher authority in accordance with agency procedures. (b) When there is specific evidence or other reasonable basis to suspect one or more of the violations in paragraph (a) of this section, the chief of the contracting office shall review the facts and, if appropriate, take or direct one or more of the following, or other, actions: (1) If before award, reject the bid or proposal. (2) If after award, enforce the Government’s right to annul the contract or to recover the fee. (3) Initiate suspension or debarment action under subpart 9.4 . (4) Refer suspected fraudulent or criminal matters to the Department of Justice, as prescribed in agency regulations.