FAR 52.203-7—Anti-Kickback Procedures.
Plain-English Summary
FAR 52.203-7, Anti-Kickback Procedures, implements the statutory anti-kickback rules in 41 U.S.C. chapter 87 and tells contractors how to prevent, detect, report, and respond to kickbacks in federal contracting. This clause defines the key terms used in the rule, including kickback, person, prime contract, prime contractor, prime contractor employee, subcontract, subcontractor, and subcontractor employee, so the prohibition reaches both prime and subcontract relationships and even general supplies furnished to the prime or higher-tier subcontractors. It prohibits offering, soliciting, accepting, attempting to offer or accept, and passing through kickback amounts in contract prices. It also requires contractors to maintain reasonable anti-kickback procedures, promptly report suspected violations in writing to the proper government authority, and fully cooperate with federal investigations. The clause gives the contracting officer specific remedies, including offsetting kickback amounts against amounts owed under the prime contract and directing withholding from subcontractor payments, with possible payment of withheld funds to the Government. Finally, it requires the prime contractor to flow the substance of the clause down to covered subcontracts above the applicable threshold, making this a practical compliance and supply-chain control requirement, not just a legal prohibition.
Key Rules
Broad definition of kickback
A kickback is any money, fee, commission, credit, gift, gratuity, thing of value, or compensation given to a prime contractor, its employees, subcontractors, or their employees to improperly obtain or reward favorable treatment. The definition is intentionally broad and covers both direct and indirect benefits.
Statutory prohibition applies broadly
41 U.S.C. chapter 87 prohibits offering, attempting to offer, soliciting, accepting, attempting to accept, or including kickback amounts in contract prices. The rule reaches both prime contracts with the United States and subcontracts connected to those prime contracts.
Reasonable prevention procedures required
The contractor must have and follow reasonable procedures designed to prevent and detect possible kickback violations in its own operations and direct business relationships. This is an affirmative compliance obligation, not just a passive duty to avoid misconduct.
Mandatory prompt reporting
If the contractor has reasonable grounds to believe a violation may have occurred, it must promptly report the possible violation in writing. Reports go to the agency inspector general, the agency head if there is no IG, or the Attorney General.
Full cooperation with investigations
The contractor must cooperate fully with any federal agency investigating a possible kickback violation. This includes providing information, access, and assistance as needed during the investigation.
Government offset and withholding remedies
The contracting officer may offset kickback amounts against money owed under the prime contract and may direct the prime contractor to withhold kickback amounts from sums owed to a subcontractor. Withheld funds may be ordered paid to the Government unless already offset.
Flowdown to covered subcontracts
The prime contractor must insert the substance of the clause into all subcontracts above the applicable FAR 3.502-2 threshold, except for the prevention-procedures paragraph. This ensures anti-kickback obligations extend through the subcontracting chain.
Responsibilities
Contractor
Maintain and follow reasonable procedures to prevent and detect kickback violations; promptly report suspected violations in writing; cooperate fully with federal investigations; and flow down the clause to covered subcontracts.
Prime Contractor
Ensure anti-kickback controls exist in its own operations and direct business relationships; notify the contracting officer when funds are withheld from a subcontractor; and incorporate the required clause substance into covered subcontracts.
Subcontractor
Refrain from offering, soliciting, accepting, or passing through kickbacks; comply with flowed-down anti-kickback requirements in covered subcontracts; and avoid including kickback amounts in subcontract pricing.
Prime Contractor Employee / Subcontractor Employee
Do not solicit, accept, offer, or receive kickbacks or other improper things of value in connection with prime contracts or related subcontracts.
Contracting Officer
May offset kickback amounts against monies owed under the prime contract and may direct withholding from subcontractor payments; may order withheld funds paid to the Government if not already offset.
Agency Inspector General / Agency Head / Attorney General
Receive written reports of possible violations and, as appropriate, investigate or coordinate investigation of suspected kickback activity.
Federal Agency Investigators
Investigate possible violations, and receive full cooperation from the contractor during the inquiry.
Practical Implications
This clause is a compliance-control requirement as much as an ethics rule: contractors should have written policies, training, reporting channels, and purchasing controls that can detect suspicious vendor gifts, commissions, or side payments.
The definition of kickback is broad enough to capture non-cash benefits and indirect arrangements, so contractors should scrutinize vendor entertainment, referral fees, rebates, credits, and “consulting” payments tied to award decisions.
A contractor that learns of a possible violation cannot wait for certainty; the trigger is reasonable grounds to believe a violation may have occurred, which means prompt internal escalation and written reporting are critical.
Payment remedies can affect cash flow quickly because the Government may offset amounts owed and the prime may be required to withhold subcontractor funds, so contract administrators should know how to document and execute withholding properly.
Flowdown is easy to miss: covered subcontracts must include the substance of the clause, so procurement teams should use standard templates and verify the applicable threshold at the time of subcontract award.
Official Regulatory Text
As prescribed in 3.502-3 , insert the following clause: Anti-Kickback Procedures (Jun 2020) (a) Definitions . Kickback , as used in this clause, means any money, fee, commission, credit, gift, gratuity, thing of value, or compensation of any kind which is provided 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 , as used in this clause, means a corporation, partnership, business association of any kind, trust, joint-stock company, or individual. Prime contract , as used in this clause, 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 as used in this clause, means a person who has entered into a prime contract with the United States. Prime Contractor employee , as used in this clause, means any officer, partner, employee, or agent of a prime Contractor. Subcontract , as used in this clause, 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 , as used in this clause, (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. Subcontractor employee , as used in this clause, means any officer, partner, employee, or agent of a subcontractor. (b) 41 U.S.C. chapter 87 , Kickbacks, prohibits any person from- (1) Providing or 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 prime Contractor to the United States or in the contract price charged by a subcontractor to a prime Contractor or higher tier subcontractor. (c) (1) The Contractor shall have in place and follow reasonable procedures designed to prevent and detect possible violations described in paragraph (b) of this clause in its own operations and direct business relationships. (2) When the Contractor has reasonable grounds to believe that a violation described in paragraph (b) of this clause may have occurred, the Contractor shall promptly report in writing the possible violation. Such reports shall be made 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 Attorney General. (3) The Contractor shall cooperate fully with any Federal agency investigating a possible violation described in paragraph (b) of this clause. (4) The Contracting Officer may (i) offset the amount of the kickback against any monies owed by the United States under the prime contract and/or (ii) direct that the Prime Contractor withhold from sums owed a subcontractor under the prime contract the amount of the kickback. The Contracting Officer may order that monies withheld under subdivision (c)(4)(ii) of this clause be paid over to the Government unless the Government has already offset those monies under subdivision (c)(4)(i) of this clause. In either case, the Prime Contractor shall notify the Contracting Officer when the monies are withheld. (5) The Contractor agrees to incorporate the substance of this clause, including this paragraph (c)(5) but excepting paragraph (c)(1) of this clause, in all subcontracts under this contract that exceed the threshold specified in Federal Acquisition Regulation 3.502-2 (i) on the date of subcontract award. (End of clause)