FAR 3.502—Subcontractor kickbacks.

Definitions.

FAR 3.502-1 defines the core terms used in the FAR’s kickback prohibition and enforcement framework. It covers what counts as a “kickback,” who is a “person,” what a “prime contract” is, who qualifies as a “prime contractor” and a “prime contractor employee,” what a “subcontract” is, and who is a “subcontractor,” including suppliers of general supplies to the prime contractor or a higher-tier subcontractor. The purpose of these definitions is to establish the scope of conduct and relationships covered by the anti-kickback rules, so agencies can identify prohibited payments or favors and contractors can recognize when their supply chain relationships fall within the rule. In practice, these definitions are broad on purpose: they reach beyond direct cash payments to include gifts, credits, commissions, and other things of value, and they apply across both prime contracts and related subcontracts. This section matters because whether a transaction is a “kickback” or whether a party is a covered “prime contractor” or “subcontractor” determines whether the anti-kickback restrictions and related remedies may apply.

Subcontractor kickbacks.

FAR 3.502-2 explains the federal Anti-Kickback Act rules that apply to subcontractor kickbacks and related conduct in prime contract and subcontract relationships. It covers the core prohibitions on offering, soliciting, accepting, or attempting kickbacks; the ban on passing kickback amounts through contract pricing; criminal and civil penalties; government offset and withholding remedies; claim treatment under the Contract Disputes statute; payment disposition of withheld funds; mandatory reporting of suspected violations; audit and inspection access for the Government Accountability Office and agency inspectors general; and required contractor internal controls and cooperation duties for covered prime contracts over $200,000 that are not for commercial products or commercial services. In practice, this section is designed to prevent hidden payments or favors from distorting subcontract awards, pricing, and performance decisions. It gives the Government tools to recover money, investigate suspected misconduct, and require contractors to maintain anti-kickback compliance systems. For contractors, it means kickback risk must be managed not only in direct dealings with the Government, but throughout the supply chain and internal procurement process. For contracting officers, it creates both a compliance requirement to include the clause in covered contracts and enforcement tools if a kickback is discovered.

Contract clause.

FAR 3.502-3 is a narrow but important prescription that tells contracting officers when they must include the Anti-Kickback Procedures clause at FAR 52.203-7. It covers three core topics: the mandatory use of the clause, the dollar threshold for coverage, and the commercial products/commercial services exception referenced in FAR part 12. In practice, this section ensures that solicitations and contracts over $200,000 contain the contractual language needed to deter, detect, and address kickbacks in federal procurement. It matters because the clause creates enforceable obligations and remedies tied to anti-kickback compliance, and its omission can weaken the Government’s ability to police improper payments or gratuities in the supply chain. For contractors, it signals that anti-kickback compliance requirements will apply on covered noncommercial awards and should be flowed through and managed accordingly. For contracting officers, it is a straightforward but mandatory clause-insertion rule that must be applied consistently whenever the threshold and scope conditions are met.