FAR 3.703—Authority.
Plain-English Summary
FAR 3.703 explains the legal authority for rescinding or voiding certain federal contracts and related transactions when serious procurement-related misconduct has occurred. It covers two separate but related authorities: first, the authority under Public Law 87-849 and 18 U.S.C. 218, as implemented by Executive Order 12448, allowing the President or agency heads to declare contracts void and rescind them after a final conviction for bribery, conflict of interest, or another violation of 18 U.S.C. chapter 11; and second, the authority under 41 U.S.C. 2105(c) requiring an agency to consider rescission when it receives information that a contractor or person has violated 41 U.S.C. 2102. The section also identifies the two factual triggers for that second authority: a conviction for an offense punishable under 41 U.S.C. 2105(a), or an agency determination by a preponderance of the evidence that the contractor or someone acting for the contractor engaged in such conduct. In practice, this section is about the government’s power to unwind tainted contracts when corruption, conflicts of interest, or similar prohibited conduct undermines the integrity of the procurement. It matters because it can lead to contract termination-like consequences, financial recovery issues, and major reputational and compliance risks for contractors, while requiring agencies to evaluate whether rescission is appropriate once misconduct is known.
Key Rules
Authority to Void Contracts
The Act authorizes the President, and by delegation the heads of executive agencies, to declare certain contracts and transactions void and rescind them when there has been a final conviction for bribery, conflict of interest, or another violation of 18 U.S.C. chapter 11. This is a strong remedial authority aimed at transactions tainted by criminal misconduct.
Delegated Agency Power
Executive Order 12448 delegates the President’s authority under the Act to agency heads and military department heads. That means agencies do not need to wait for direct presidential action to use this rescission authority when the legal conditions are met.
Mandatory Consideration of Rescission
Under 41 U.S.C. 2105(c), once an agency receives information that a contractor or person has violated 41 U.S.C. 2102, the agency must consider whether to rescind the affected contract. The statute does not automatically require rescission in every case, but it does require the agency to evaluate that remedy.
Conviction-Based Trigger
One basis for considering rescission is a conviction for an offense punishable under 41 U.S.C. 2105(a). This provides a clear criminal-law trigger tied to misconduct connected with procurement integrity violations.
Administrative Finding Trigger
Rescission may also be considered when the agency head or designee determines, based on a preponderance of the evidence, that the contractor or someone acting for the contractor engaged in conduct constituting an offense under 41 U.S.C. 2105(a). This allows action even without a criminal conviction, using an administrative standard of proof.
Conduct by Agents Counts
The statute expressly reaches conduct by a contractor or by someone acting for the contractor. Agencies therefore must look beyond the corporate entity itself and consider whether employees, representatives, or other agents engaged in the prohibited conduct on the contractor’s behalf.
Responsibilities
President
Holds the original statutory authority under the Act to declare covered contracts and transactions void and rescind them, subject to the delegation described in Executive Order 12448.
Heads of Executive Agencies and Military Departments
Exercise the delegated authority to void and rescind contracts under the Act, and under 41 U.S.C. 2105(c) must consider rescission when they receive information indicating a violation of 41 U.S.C. 2102.
Agency Head or Designee
May make the administrative determination, based on a preponderance of the evidence, that the contractor or someone acting for the contractor engaged in conduct constituting an offense under 41 U.S.C. 2105(a).
Contracting Officials / Acquisition Personnel
Identify and elevate suspected violations, preserve the record, and ensure the agency considers whether rescission is appropriate when the statutory triggers are present.
Contractors
Avoid bribery, conflicts of interest, and procurement integrity violations; ensure employees and agents do not engage in prohibited conduct that could expose the contract to rescission or voiding.
Practical Implications
This section gives agencies a powerful remedy that can unwind a contract after serious misconduct, so contractors face more than suspension, debarment, or criminal exposure; the contract itself may be attacked.
A criminal conviction is not always required for agency action under 41 U.S.C. 2105(c); an administrative finding by a preponderance of the evidence can be enough to trigger rescission consideration.
Because conduct by someone acting for the contractor is covered, companies need strong internal controls over employees, consultants, subcontractors, and other representatives.
Agencies should document the information received, the basis for any determination, and the rationale for whether rescission is or is not pursued, since these decisions can be scrutinized later.
A common pitfall is treating rescission as automatic; the statute requires consideration, but the actual decision depends on the facts, the legal basis, and agency judgment under the applicable authority.
Official Regulatory Text
(a) Section 1(e) of Public Law 87-849, 18 U.S.C.218 ("the Act"), empowers the President or the heads of executive agencies acting under regulations prescribed by the President, to declare void and rescind contracts and other transactions enumerated in the Act, in relation to which there has been a final conviction for bribery, conflict of interest, or any other violation of Chapter 11 of Title 18 of the United States Code ( 18 U.S.C. 201 - 224 ). Executive Order 12448, November 4,1983, delegates the President’s authority under the Act to the heads of the executive agencies and military departments. (b) 41 U.S.C. 2105(c) requires a Federal agency, upon receiving information that a contractor or a person has violated 41 U.S.C. 2102 , to consider rescission of a contract with respect to which- (1) The contractor or someone acting for the contractor has been convicted for an offense punishable under 41 U.S.C. 2105(a) ; or (2) The head of the agency, or designee, has determined, based upon a preponderance of the evidence, that the contractor or someone acting for the contractor has engaged in conduct constituting such an offense.