FAR 52.203-3—Gratuities.
Plain-English Summary
FAR 52.203-3, Gratuities, is an anti-corruption contract clause that protects the integrity of federal procurement by prohibiting contractors from using gifts, entertainment, or other gratuities to influence government personnel. The clause covers the contractor, its agents, and other representatives; the conduct at issue; the required intent to obtain a contract or favorable treatment; the government’s enforcement process; judicial review of the underlying facts; and the government’s remedies if the clause is violated. It allows the Government to terminate the contractor’s right to proceed after notice and hearing if the agency head or designee finds a prohibited gratuity was offered or given with improper intent. It also authorizes the Government to pursue breach-type remedies and, in Department of Defense-funded contracts, exemplary damages tied to the cost of the gratuity. Finally, it makes clear that these remedies are cumulative, not exclusive, so other legal and contractual remedies may still apply. In practice, this clause puts contractors on notice that even relatively small gifts or hospitality can create serious contract consequences if they are intended to secure award or favorable treatment.
Key Rules
No gratuities to officials
The contractor, its agent, or another representative may not offer or give a gratuity—such as a gift or entertainment—to a Government officer, official, or employee when the purpose is to obtain a contract or favorable treatment under a contract.
Improper intent is required
The clause is triggered only when the gratuity is given with the intent to influence procurement outcomes or contract administration. Innocent social contact is not the focus; the prohibited conduct is a gift or benefit tied to an improper purpose.
Termination after notice and hearing
If the agency head or designee determines, after notice and hearing, that a prohibited gratuity was offered or given with the required intent, the Government may terminate the contractor’s right to proceed by written notice.
Court review is available
The facts supporting the agency’s determination may be reviewed by a court with lawful jurisdiction. This provides judicial oversight of the administrative finding.
Government may seek breach remedies
If the contract is terminated under the clause, the Government may pursue the same remedies it would have for breach of contract, in addition to any other remedies available under law.
DoD contracts may face exemplary damages
For contracts funded with Department of Defense appropriations, the Government may also recover exemplary damages of not less than 3 times and not more than 10 times the contractor’s cost of giving the gratuities, as determined by the agency head or designee.
Remedies are cumulative
The clause expressly states that the Government’s rights and remedies are not exclusive. Other statutory, regulatory, or contractual remedies may still be available.
Responsibilities
Contractor
Must ensure that neither the company nor its agents or representatives offer or give gifts, entertainment, or other gratuities to Government personnel for the purpose of obtaining a contract or favorable treatment. Must maintain internal controls, training, and oversight to prevent prohibited conduct and respond promptly if allegations arise.
Contractor's agents and representatives
Must not provide gratuities to Government officials or employees with the intent to influence procurement or contract administration. Their conduct can be attributed to the contractor for purposes of this clause.
Agency Head or Designee
Must provide notice and a hearing before making the determination that a prohibited gratuity was offered or given with improper intent. If the determination is made, may direct termination of the contractor’s right to proceed and determine exemplary damages where applicable.
Contracting Officer / Agency
Must administer the contract in accordance with the clause, support the notice-and-hearing process, and implement termination or other remedies if the required determination is made. Must also consider whether additional legal or contractual remedies are appropriate.
Court of Law
May review the facts supporting the agency’s determination if the matter is challenged in a court with lawful jurisdiction.
Practical Implications
Even small gifts, meals, entertainment, or favors can create major contract risk if they are tied to winning work or getting better treatment on an existing contract.
The clause reaches conduct by agents and other representatives, so contractors need strong ethics controls over subcontractors, consultants, lobbyists, and anyone acting on their behalf.
A violation can lead to termination of the right to proceed, not just a warning or administrative issue, and the Government may also seek breach-type damages.
For Department of Defense-funded contracts, the financial exposure can be much higher because exemplary damages may be 3 to 10 times the contractor’s gratuity cost.
Contractors should document ethics training, gift policies, and reporting procedures, and contracting officers should treat gratuity allegations as serious misconduct requiring proper process and coordination with legal counsel.
Official Regulatory Text
As prescribed in 3.202 , insert the following clause: Gratuities (Apr 1984) (a) The right of the Contractor to proceed may be terminated by written notice if, after notice and hearing, the agency head or a designee determines that the Contractor, its agent, or another representative- (1) Offered or gave a gratuity ( e.g., an entertainment or gift) to an officer, official, or employee of the Government; and (2) Intended, by the gratuity, to obtain a contract or favorable treatment under a contract. (b) The facts supporting this determination may be reviewed by any court having lawful jurisdiction. (c) If this contract is terminated under paragraph (a) of this clause, the Government is entitled- (1) To pursue the same remedies as in a breach of the contract; and (2) In addition to any other damages provided by law, to exemplary damages of not less than 3 nor more than 10 times the cost incurred by the Contractor in giving gratuities to the person concerned, as determined by the agency head or a designee. (This paragraph (c)(2) is applicable only if this contract uses money appropriated to the Department of Defense.) (d) The rights and remedies of the Government provided in this clause shall not be exclusive and are in addition to any other rights and remedies provided by law or under this contract. (End of clause)