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114th Congress    }                                 {    Rept. 114-836
                        HOUSE OF REPRESENTATIVES
 2d Session       }                                 {           Part 1

======================================================================



 
             WHISTLEBLOWER PROTECTIONS FOR CONTRACTORS ACT

                                _______
                                

 November 29, 2016.--Committed to the Committee of the Whole House on 
            the State of the Union and ordered to be printed

                                _______
                                

 Mr. Chaffetz, from the Committee on Oversight and Government Reform, 
                        submitted the following

                              R E P O R T

                        [To accompany H.R. 5920]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Oversight and Government Reform, to whom 
was referred the bill (H.R. 5920) to enhance whistleblower 
protection for contractor and grantee employees, having 
considered the same, report favorably thereon without amendment 
and recommend that the bill do pass.

                                CONTENTS

                                                                   Page
Committee Statement and Views....................................     2
Section-by-Section...............................................     3
Explanation of Amendments........................................     4
Committee Consideration..........................................     4
Roll Call Votes..................................................     4
Correspondence...................................................     5
Application of Law to the Legislative Branch.....................     7
Statement of Oversight Findings and Recommendations of the 
  Committee......................................................     7
Statement of General Performance Goals and Objectives............     7
Duplication of Federal Programs..................................     7
Disclosure of Directed Rule Makings..............................     7
Federal Advisory Committee Act...................................     7
Unfunded Mandate Statement.......................................     7
Earmark Identification...........................................     7
Committee Estimate...............................................     8
Budget Authority and Congressional Budget Office Cost Estimate...     8
Changes in Existing Law Made by the Bill, as Reported............     9

                     Committee Statement and Views


                          PURPOSE AND SUMMARY

    H.R. 5920, the Whistleblower Protections for Contractors 
Act, expands whistleblower protections to federal contractors 
by providing subgrantees and personal services contractors the 
same whistleblower protections currently afforded to 
contractors, direct grant recipients and subcontractors. H.R. 
5920 also prohibits reimbursement for legal fees in connection 
with any criminal, civil, or administrative proceedings that 
are accrued in defense against reprisal claims.

                  BACKGROUND AND NEED FOR LEGISLATION

    H.R. 5920 extends whistleblower protections to subgrantees 
and personal service contractors on both defense and civilian 
contracts and grant awards. The bill also makes permanent the 
current whistleblower protection pilot program for civilian 
contract and grant employees.
    Specifically, the bill extends to ``personal services 
contractors'' certain whistleblower protections. Under the 
Federal Acquisition Regulation (FAR), a personal services 
contract ``is characterized by the employer-employee 
relationship it creates between the Government and the 
contractor's personnel.''\1\ While such contractors are 
critical partners with the Federal Government and well-
positioned to identify waste, fraud, and abuse, this category 
of contractors is not currently afforded the same whistleblower 
protections as other categories of contractors.
---------------------------------------------------------------------------
    \1\Federal Acquisition Regulation, 37.104--Personal Services 
Contract, http://farsite.hill.af.mil/reghtml/regs/far2afmcfars/
fardfars/far/37.htm#P52_7302 (Last accessed 092616).
---------------------------------------------------------------------------
    Under H.R. 5920, whistleblower protections currently 
authorized for Department of Defense contractors, 
subcontractors, grantees, or subgrantees under 10 U.S.C. 
Sec. 2409, are extended to personal services contractors. 
Similarly, H.R. 5920 extends to subgrantees and personal 
services contractors the whistleblower protections currently 
authorized for contractors, subcontractors, and grantees under 
Section 4712(a)(1) of title 41, United States Code.
    H.R. 5920 also makes permanent protections which prohibit 
an employee of a contractor, subcontractor, or grantee, 
subgrantee, or personal services contractor from being 
discharged, demoted, or otherwise discriminated against as a 
reprisal for disclosing information that the employee 
reasonably believes is evidence of gross mismanagement of a 
federal contract or grant, a gross waste of federal funds, an 
abuse of authority relating to a federal contract or grant, a 
substantial and specific danger to public health or safety, or 
a violation of law, rule, or regulation related to a federal 
contract (including the competition for or negotiation of a 
contract) or grant.
    These protections were part of a pilot program passed as 
part of the National Defense Authorization Act for Fiscal Year 
2013 signed into law on January 2, 2013.\2\ The four-year pilot 
program authorized whistleblower protections for civilian grant 
and contract employees from July 1, 2013 through January 1, 
2017. The pilot program expanded the scope of protections 
implemented in the American Recovery and Reinvestment Act of 
2009, which included whistleblower protections for recipients 
of stimulus fund contracts.\3\
---------------------------------------------------------------------------
    \2\National Defense Authorization Act for Fiscal Year 2013, Pub. L. 
No. 112-239, Division A, Title VIII, Sec. 828 (2013).
    \3\American Recovery and Reinvestment Act of 2009, Pub. L. No. 111-
5, Division A, Title XV, Sec. 1553 (2009).
---------------------------------------------------------------------------
    Upon introducing H.R. 5920, the original sponsors discussed 
the need for the enhanced and expended whistleblower 
protections provided by this legislation. In a bipartisan joint 
press release, House sponsors stated, ``Whistleblowers are the 
front line of defense against waste, fraud, and abuse. The 
employees who work on federal contracts and grants see 
firsthand when taxpayer money is being wasted, and they must be 
protected against retaliation when they blow the whistle on 
wrongdoing. This bill makes such protections permanent and 
ensures more employees are covered.''\4\
---------------------------------------------------------------------------
    \4\Press release issued by Representatives Elijah E. Cummings, 
Jason Chaffetz, Tammy Duckworth, Hakeem Jeffries, John Conyers, Jr., 
and Stephen Lynch entitled, ``House Members Introduce Bipartisan 
Legislation to Expand Whistleblower Protections for Federal 
Contractors'' (July 22, 2016), https://conyers.house.gov/media-center/
press-releases/house-members-introduce-bipartisan-legislation-expand-
whistleblower (Last accessed 0925/16).
---------------------------------------------------------------------------
    H.R. 5920 also prohibits reimbursement for legal fees 
accrued in defense against whistleblower retaliation claims, 
and makes clear that, for contracts in existence at the time of 
the bill's enactment, when there is a major modification of the 
contract, the head of the contracting agency is required to add 
a clause applying the bill's amendments.

                          LEGISLATIVE HISTORY

    H.R. 5920 was introduced by Ranking Member Elijah E. 
Cummings (D-MD) on July 21, 2016 and referred to the Committee 
on Oversight and Government Reform. In addition, the bill was 
referred to the Committee on Armed Services. H.R. 5920 was 
favorably reported by the Committee on Oversight and Government 
Reform by unanimous consent on September 15, 2016, without 
amendment.
    Similar legislation, S. 795, was introduced in the Senate 
by Senator Claire McCaskill (D-MO) on March 18, 2015 and 
referred to the Senate Homeland Security and Governmental 
Affairs Committee (HSGAC), with HSGAC Chairman Ron Johnson (R-
WI) as an original cosponsor. On June 7, 2016, HSGAC ordered S. 
795 favorably reported, with an amendment. On June 23, 2016, S. 
795 was passed by unanimous consent in the Senate, with an 
amendment, and referred to the Committee on Oversight and 
Government Reform and the Committee on Armed Services in the 
House.

                           Section-by-Section


Section 1. Short title

    Designates the short title of the bill as the 
``Whistleblower Protections for Contractors Act.''

Section 2. Enhancement of whistleblower protection for contractor and 
        grantee employees

    Subsection (a) expands whistleblower protections to 
employees of subgrantees with regard to civilian grants and to 
employees of personal services contractors with regard to both 
defense and civilian contracts. It also permanently extends the 
civilian pilot program of whistleblower protections in 41 
U.S.C. Sec. 4712, and makes necessary technical and conforming 
amendments.
    Subsection (b) prohibits reimbursement for legal fees in 
connection with any criminal, civil or administrative 
proceedings that are accrued in defense against reprisal 
claims.
    Subsection (c) requires that, for contracts in existence at 
the time of the bill's enactment, when there is a major 
modification of the contract, the head of the contracting 
agency add a clause applying the bill's amendments.

                       Explanation of Amendments

    No amendments to H.R. 5920 were offered or adopted during 
Full Committee consideration of the bill.

                        Committee Consideration

    On September 15, 2016 the Committee met in open session and 
ordered reported favorably the bill, H.R. 5920, by unanimous 
consent, a quorum being present.

                            Roll Call Votes

    No roll call votes were requested or conducted during Full 
Committee consideration of H.R. 5920.


              Application of Law to the Legislative Branch

    Section 102(b)(3) of Public Law 104-1 requires a 
description of the application of this bill to the legislative 
branch where the bill relates to the terms and conditions of 
employment or access to public services and accommodations. 
This bill enhances whistleblower protection for contractor and 
grantee employees. As such this bill does not relate to 
employment or access to public services and accommodations.

  Statement of Oversight Findings and Recommendations of the Committee

    In compliance with clause 3(c)(1) of rule XIII and clause 
(2)(b)(1) of rule X of the Rules of the House of 
Representatives, the Committee's oversight findings and 
recommendations are reflected in the descriptive portions of 
this report.

         Statement of General Performance Goals and Objectives

    In accordance with clause 3(c)(4) of rule XIII of the Rules 
of the House of Representatives, the Committee's performance 
goal and objective of the bill is to enhance whistleblower 
protection for contractor and grantee employees.

                    Duplication of Federal Programs

    No provision of this bill establishes or reauthorizes a 
program of the Federal Government known to be duplicative of 
another Federal program, a program that was included in any 
report from the Government Accountability Office to Congress 
pursuant to section 21 of Public Law 111-139, or a program 
related to a program identified in the most recent Catalog of 
Federal Domestic Assistance.

                  Disclosure of Directed Rule Makings

    The Committee estimates that enacting this bill does not 
direct the completion of any specific rule makings within the 
meaning of 5 U.S.C. 551.

                     Federal Advisory Committee Act

    The Committee finds that the legislation does not establish 
or authorize the establishment of an advisory committee within 
the definition of 5 U.S.C. App., Section 5(b).

                       Unfunded Mandate Statement

    Section 423 of the Congressional Budget and Impoundment 
Control Act (as amended by Section 101(a)(2) of the Unfunded 
Mandates Reform Act, P.L. 104-4) requires a statement as to 
whether the provisions of the reported include unfunded 
mandates. In compliance with this requirement the Committee has 
received a letter from the Congressional Budget Office included 
herein.

                         Earmark Identification

    This bill does not include any congressional earmarks, 
limited tax benefits, or limited tariff benefits as defined in 
clause 9 of rule XXI.

                           Committee Estimate

    Clause 3(d)(1) of rule XIII of the Rules of the House of 
Representatives requires an estimate and a comparison by the 
Committee of the costs that would be incurred in carrying out 
this bill. However, clause 3(d)(2)(B) of that rule provides 
that this requirement does not apply when the Committee has 
included in its report a timely submitted cost estimate of the 
bill prepared by the Director of the Congressional Budget 
Office under section 402 of the Congressional Budget Act of 
1974.

     Budget Authority and Congressional Budget Office Cost Estimate

    With respect to the requirements of clause 3(c)(2) of rule 
XIII of the Rules of the House of Representatives and section 
308(a) of the Congressional Budget Act of 1974 and with respect 
to requirements of clause (3)(c)(3) of rule XIII of the Rules 
of the House of Representatives and section 402 of the 
Congressional Budget Act of 1974, the Committee has received 
the following cost estimate for this bill from the Director of 
Congressional Budget Office:

                                                September 30, 2016.
Hon. Jason Chaffetz,
Chairman, Committee on Oversight and Government Reform,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 5920, the 
Whistleblower Protections for Contractors Act.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Matthew 
Pickford.
            Sincerely,
                                                       Keith Hall. 
    Enclosure.

H.R. 5920--Whistleblower Protections for Contractors Act

    H.R. 5920 would amend federal law to permanently extend 
legal protections to certain nonfederal employees (contractors, 
subcontractors, grantees, and others employed by entities that 
receive federal finds) who report waste, fraud, or abuse 
involving federal funds. Specifically, under the bill, anyone 
who reports the misuse of federal funds could not be demoted, 
discharged, or discriminated against because of the disclosure. 
The current four-year pilot program that extends those same 
protections ends in December 2016.
    The cost to implement H.R. 5920 would depend on the number 
of whistleblower claims made by those nonfederal employees. 
Evidence from the pilot program that currently protects certain 
nonfederal employees from such discrimination suggests that the 
number of such claims brought by such employees has totaled 
less than 20 for each of the 26 major federal agencies. CBO 
estimates that implementing H.R. 5920 would cost about $3,000 
to investigate each claim, or about $5 million over the 2017-
2021 period. Any such spending would be subject to the 
availability of appropriated funds. Enacting the bill could 
affect direct spending by agencies not funded through annual 
appropriations; therefore, pay-as-you-go procedures apply. CBO 
estimates, however, that any net increase in spending by those 
agencies would be negligible. Enacting H.R. 5920 would not 
affect revenues.
    CBO estimates that enacting H.R. 5920 would not increase 
net direct spending or on-budget deficits in any of the four 
consecutive 10-year periods beginning in 2027.
    H.R. 5920 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act and 
would not affect the budgets of state, local, or tribal 
governments.
    On May 27, 2016, CBO transmitted a cost estimate for S. 
795, a bill to enhance whistleblower protection for contractor 
and grantee employees, as ordered reported by the Senate 
Committee on Homeland Security and Governmental Affairs on 
February 10, 2016. The two pieces of legislation are similar 
and CBO's estimates of their budgetary effects are the same.
    The CBO staff contact for this estimate is Matthew 
Pickford. The estimate was approved by H. Samuel Papenfuss, 
Deputy Assistant Director for Budget Analysis.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, and existing law in which no 
change is proposed is shown in roman):

                      TITLE 10, UNITED STATES CODE




           *       *       *       *       *       *       *
SUBTITLE A--GENERAL MILITARY LAW

           *       *       *       *       *       *       *


PART IV--SERVICE, SUPPLY, AND PROCUREMENT

           *       *       *       *       *       *       *


CHAPTER 137--PROCUREMENT GENERALLY

           *       *       *       *       *       *       *



Sec. 2324. Allowable costs under defense contracts

  (a) Indirect Cost That Violates a FAR Cost Principle.--The 
head of an agency shall require that a covered contract provide 
that if the contractor submits to the agency a proposal for 
settlement of indirect costs incurred by the contractor for any 
period after such costs have been accrued and if that proposal 
includes the submission of a cost which is unallowable because 
the cost violates a cost principle in the Federal Acquisition 
Regulation or applicable agency supplement to the Federal 
Acquisition Regulation, the cost shall be disallowed.
  (b) Penalty for Violation of Cost Principle.--(1) If the head 
of the agency determines that a cost submitted by a contractor 
in its proposal for settlement is expressly unallowable under a 
cost principle referred to in subsection (a) that defines the 
allowability of specific selected costs, the head of the agency 
shall assess a penalty against the contractor in an amount 
equal to--
          (A) the amount of the disallowed cost allocated to 
        covered contracts for which a proposal for settlement 
        of indirect costs has been submitted; plus
          (B) interest (to be computed based on provisions in 
        the Federal Acquisition Regulation) to compensate the 
        United States for the use of any funds which a 
        contractor has been paid in excess of the amount to 
        which the contractor was entitled.
  (2) If the head of the agency determines that a proposal for 
settlement of indirect costs submitted by a contractor includes 
a cost determined to be unallowable in the case of such 
contractor before the submission of such proposal, the head of 
the agency shall assess a penalty against the contractor in an 
amount equal to two times the amount of the disallowed cost 
allocated to covered contracts for which a proposal for 
settlement of indirect costs has been submitted.
  (c) Waiver of Penalty.--The Federal Acquisition Regulation 
shall provide for a penalty under subsection (b) to be waived 
in the case of a contractor's proposal for settlement of 
indirect costs when--
          (1) the contractor withdraws the proposal before the 
        formal initiation of an audit of the proposal by the 
        Federal Government and resubmits a revised proposal;
          (2) the amount of unallowable costs subject to the 
        penalty is insignificant; or
          (3) the contractor demonstrates, to the contracting 
        officer's satisfaction, that--
                  (A) it has established appropriate policies 
                and personnel training and an internal control 
                and review system that provide assurances that 
                unallowable costs subject to penalties are 
                precluded from being included in the 
                contractor's proposal for settlement of 
                indirect costs; and
                  (B) the unallowable costs subject to the 
                penalty were inadvertently incorporated into 
                the proposal.
  (d) Applicability of Contract Disputes Procedure to 
Disallowance of Cost and Assessment of Penalty.--An action of 
the head of an agency under subsection (a) or (b)--
          (1) shall be considered a final decision for the 
        purposes of section 7103 of title 41; and
          (2) is appealable in the manner provided in section 
        7104(a) of title 41.
  (e) Specific Costs Not Allowable.--(1) The following costs 
are not allowable under a covered contract:
          (A) Costs of entertainment, including amusement, 
        diversion, and social activities and any costs directly 
        associated with such costs (such as tickets to shows or 
        sports events, meals, lodging, rentals, transportation, 
        and gratuities).
          (B) Costs incurred to influence (directly or 
        indirectly) legislative action on any matter pending 
        before Congress, a State legislature, or a legislative 
        body of a political subdivision of a State.
          (C) Costs incurred in defense of any civil or 
        criminal fraud proceeding or similar proceeding 
        (including filing of any false certification) brought 
        by the United States where the contractor is found 
        liable or has pleaded nolo contendere to a charge of 
        fraud or similar proceeding (including filing of a 
        false certification).
          (D) Payments of fines and penalties resulting from 
        violations of, or failure to comply with, Federal, 
        State, local, or foreign laws and regulations, except 
        when incurred as a result of compliance with specific 
        terms and conditions of the contract or specific 
        written instructions from the contracting officer 
        authorizing in advance such payments in accordance with 
        applicable provisions of the Federal Acquisition 
        Regulation.
          (E) Costs of membership in any social, dining, or 
        country club or organization.
          (F) Costs of alcoholic beverages.
          (G) Contributions or donations, regardless of the 
        recipient.
          (H) Costs of advertising designed to promote the 
        contractor or its products.
          (I) Costs of promotional items and memorabilia, 
        including models, gifts, and souvenirs.
          (J) Costs for travel by commercial aircraft which 
        exceed the amount of the standard commercial fare.
          (K) Costs incurred in making any payment (commonly 
        known as a ``golden parachute payment'') which is--
                  (i) in an amount in excess of the normal 
                severance pay paid by the contractor to an 
                employee upon termination of employment; and
                  (ii) is paid to the employee contingent upon, 
                and following, a change in management control 
                over, or ownership of, the contractor or a 
                substantial portion of the contractor's assets.
          (L) Costs of commercial insurance that protects 
        against the costs of the contractor for correction of 
        the contractor's own defects in materials or 
        workmanship.
          (M) Costs of severance pay paid by the contractor to 
        foreign nationals employed by the contractor under a 
        service contract performed outside the United States, 
        to the extent that the amount of severance pay paid in 
        any case exceeds the amount paid in the industry 
        involved under the customary or prevailing practice for 
        firms in that industry providing similar services in 
        the United States, as determined under the Federal 
        Acquisition Regulation.
          (N) Costs of severance pay paid by the contractor to 
        a foreign national employed by the contractor under a 
        service contract performed in a foreign country if the 
        termination of the employment of the foreign national 
        is the result of the closing of, or the curtailment of 
        activities at, a United States military facility in 
        that country at the request of the government of that 
        country.
          (O) Costs incurred by a contractor in connection with 
        any criminal, civil, or administrative proceeding 
        commenced by the United States or a State, to the 
        extent provided in subsection (k).
          (P) Costs of compensation of any contractor employee 
        for a fiscal year, regardless of the contract funding 
        source, to the extent that such compensation exceeds 
        $625,000 adjusted annually for the U.S. Bureau of Labor 
        Statistics Employment Cost Index for total compensation 
        for private industry workers, by occupational and 
        industry group not seasonally adjusted, except that the 
        Secretary of Defense may establish exceptions for 
        positions in the science, technology, engineering, 
        mathematics, medical, and cybersecurity fields and 
        other fields requiring unique areas of expertise upon a 
        determination that such exceptions are needed to ensure 
        that the Department of Defense has continued access to 
        needed skills and capabilities.
          (P) Costs of compensation of contractor and 
        subcontractor employees for a fiscal year, regardless 
        of the contract funding source, to the extent that such 
        compensation exceeds $487,000 per year, adjusted 
        annually to reflect the change in the Employment Cost 
        Index for all workers, as calculated by the Bureau of 
        Labor Statistics, except that the head of an executive 
        agency may establish one or more narrowly targeted 
        exceptions for scientists, engineers, or other 
        specialists upon a determination that such exceptions 
        are needed to ensure that the executive agency has 
        continued access to needed skills and capabilities.
          (Q) Costs incurred by a contractor in connection with 
        a congressional investigation or inquiry into an issue 
        that is the subject matter of a proceeding resulting in 
        a disposition as described in subsection (k)(2).
  (2)(A) The Secretary of Defense may provide in a military 
banking contract that the provisions of paragraphs (1)(M) and 
(1)(N) shall not apply to costs incurred under the contract by 
the contractor for payment of mandated foreign national 
severance pay. The Secretary may include such a provision in a 
military banking contract only if the Secretary determines, 
with respect to that contract, that the contractor has taken 
(or has established plans to take) appropriate actions within 
the contractor's control to minimize the amount and number of 
incidents of the payment of severance pay by the contractor to 
employees under the contract who are foreign nationals.
  (B) In subparagraph (A):
          (i) The term ``military banking contract'' means a 
        contract between the Secretary and a financial 
        institution under which the financial institution 
        operates a military banking facility outside the United 
        States for use by members of the armed forces stationed 
        or deployed outside the United States and other 
        authorized personnel.
          (ii) The term ``mandated foreign national severance 
        pay'' means severance pay paid by a contractor to a 
        foreign national employee the payment of which by the 
        contractor is required in order to comply with a law 
        that is generally applicable to a significant number of 
        businesses in the country in which the foreign national 
        receiving the payment performed services under the 
        contract.
  (C) Subparagraph (A) does not apply to a contract with a 
financial institution that is owned or controlled by citizens 
or nationals of a foreign country, as determined by the 
Secretary of Defense. Such a determination shall be made in 
accordance with the criteria set out in paragraph (1) of 
section 4(g) of the Buy American Act (as added by section 
7002(2) of the Omnibus Trade and Competitiveness Act of 1988) 
and the policy guidance referred to in paragraph (2)(A) of that 
section.
  (3)(A) Pursuant to the Federal Acquisition Regulation and 
subject to the availability of appropriations, the head of an 
agency awarding a covered contract (other than a contract to 
which paragraph (2) applies) may waive the application of the 
provisions of paragraphs (1)(M) and (1)(N) to that contract if 
the head of the agency determines that--
          (i) the application of such provisions to the 
        contract would adversely affect the continuation of a 
        program, project, or activity that provides significant 
        support services for members of the armed forces 
        stationed or deployed outside the United States;
          (ii) the contractor has taken (or has established 
        plans to take) appropriate actions within the 
        contractor's control to minimize the amount and number 
        of incidents of the payment of severance pay by the 
        contractor to employees under the contract who are 
        foreign nationals; and
          (iii) the payment of severance pay is necessary in 
        order to comply with a law that is generally applicable 
        to a significant number of businesses in the country in 
        which the foreign national receiving the payment 
        performed services under the contract or is necessary 
        to comply with a collective bargaining agreement.
  (B) The head of an agency shall include in the solicitation 
for a covered contract a statement indicating--
          (i) that a waiver has been granted under subparagraph 
        (A) for the contract; or
          (ii) whether the head of the agency will consider 
        granting such a waiver, and, if the agency head will 
        consider granting a waiver, the criteria to be used in 
        granting the waiver.
  (C) The head of an agency shall make the final determination 
regarding whether to grant a waiver under subparagraph (A) with 
respect to a covered contract before award of the contract.
  (4) The provisions of the Federal Acquisition Regulation 
implementing this section may establish appropriate 
definitions, exclusions, limitations, and qualifications.
  (f) Required Regulations.--(1) The Federal Acquisition 
Regulation shall contain provisions on the allowability of 
contractor costs. Such provisions shall define in detail and in 
specific terms those costs which are unallowable, in whole or 
in part, under covered contracts. The regulations shall, at a 
minimum, clarify the cost principles applicable to contractor 
costs of the following:
          (A) Air shows.
          (B) Membership in civic, community, and professional 
        organizations.
          (C) Recruitment.
          (D) Employee morale and welfare.
          (E) Actions to influence (directly or indirectly) 
        executive branch action on regulatory and contract 
        matters (other than costs incurred in regard to 
        contract proposals pursuant to solicited or unsolicited 
        bids).
          (F) Community relations.
          (G) Dining facilities.
          (H) Professional and consulting services, including 
        legal services.
          (I) Compensation.
          (J) Selling and marketing.
          (K) Travel.
          (L) Public relations.
          (M) Hotel and meal expenses.
          (N) Expense of corporate aircraft.
          (O) Company-furnished automobiles.
          (P) Advertising.
          (Q) Conventions.
  (2) The Federal Acquisition Regulation shall require that a 
contracting officer not resolve any questioned costs until he 
has obtained--
          (A) adequate documentation with respect to such 
        costs; and
          (B) the opinion of the contract auditor on the 
        allowability of such costs.
  (3) The Federal Acquisition Regulation shall provide that, to 
the maximum extent practicable, the contract auditor be present 
at any negotiation or meeting with the contractor regarding a 
determination of the allowability of indirect costs of the 
contractor.
  (4) The Federal Acquisition Regulation shall require that all 
categories of costs designated in the report of the contract 
auditor as questioned with respect to a proposal for settlement 
be resolved in such a manner that the amount of the individual 
questioned costs that are paid will be reflected in the 
settlement.
  (g) Applicability of Regulations to Subcontractors.--The 
regulations referred to in subsections (e) and (f)(1) shall 
require prime contractors of a covered contract, to the maximum 
extent practicable, to apply the provisions of such regulations 
to all subcontractors of the covered contract.
  (h) Contractor Certification Required.--(1) A proposal for 
settlement of indirect costs applicable to a covered contract 
shall include a certification by an official of the contractor 
that, to the best of the certifying official's knowledge and 
belief, all indirect costs included in the proposal are 
allowable. Any such certification shall be in a form prescribed 
in the Federal Acquisition Regulation.
  (2) The head of the agency or the Secretary of the military 
department concerned may, in an exceptional case, waive the 
requirement for certification under paragraph (1) in the case 
of any contract if the head of the agency or the Secretary--
          (A) determines in such case that it would be in the 
        interest of the United States to waive such 
        certification; and
          (B) states in writing the reasons for that 
        determination and makes such determination available to 
        the public.
  (i) Penalties for Submission of Cost Known as Not 
Allowable.--The submission to an agency of a proposal for 
settlement of costs for any period after such costs have been 
accrued that includes a cost that is expressly specified by 
statute or regulation as being unallowable, with the knowledge 
that such cost is unallowable, shall be subject to the 
provisions of section 287 of title 18 and section 3729 of title 
31.
  (j) Contractor To Have Burden of Proof.--In a proceeding 
before the Armed Services Board of Contract Appeals, the United 
States Court of Federal Claims, or any other Federal court in 
which the reasonableness of indirect costs for which a 
contractor seeks reimbursement from the Department of Defense 
is in issue, the burden of proof shall be upon the contractor 
to establish that those costs are reasonable.
  (k) Proceeding Costs Not Allowable.--(1) Except as otherwise 
provided in this subsection, costs incurred by a contractor or 
subcontractor, or personal services contractor in connection 
with any criminal, civil, or administrative proceeding 
commenced by the United States, by a State, or by a contractor 
or subcontractor, or personal services contractor employee 
submitting a complaint under section 2409 of this title are not 
allowable as reimbursable costs under a covered contract, 
subcontract, or personal services contract if the proceeding 
(A) relates to a violation of, or failure to comply with, a 
Federal or State statute or regulation or to any other activity 
described in subparagraphs (A) through (C) of section 
2409(a)(1) of this title, and (B) results in a disposition 
described in paragraph (2).
  (2) A disposition referred to in paragraph (1)(B) is any of 
the following:
          (A) In the case of a criminal proceeding, a 
        conviction (including a conviction pursuant to a plea 
        of nolo contendere) by reason of the violation or 
        failure referred to in paragraph (1).
          (B) In the case of a civil or administrative 
        proceeding involving an allegation of fraud or similar 
        misconduct, a determination of contractor or 
        subcontractor, or personal services contractor 
        liability on the basis of the violation or failure 
        referred to in paragraph (1).
          (C) In the case of any civil or administrative 
        proceeding, the imposition of a monetary penalty or an 
        order to take corrective action under section 2409 of 
        this title by reason of the violation or failure 
        referred to in paragraph (1).
          (D) A final decision--
                  (i) to debar or suspend the contractor or 
                subcontractor, or personal services contractor;
                  (ii) to rescind or void the contract, 
                subcontract, or personal services contract; or
                  (iii) to terminate the contract, subcontract, 
                or personal services contract for default;
        by reason of the violation or failure referred to in 
        paragraph (1).
          (E) A disposition of the proceeding by consent or 
        compromise if such action could have resulted in a 
        disposition described in subparagraph (A), (B), (C), or 
        (D).
  (3) In the case of a proceeding referred to in paragraph (1) 
that is commenced by the United States and is resolved by 
consent or compromise pursuant to an agreement entered into by 
a contractor or subcontractor, or personal services contractor 
and the United States, the costs incurred by the contractor or 
subcontractor, or personal services contractor in connection 
with such proceeding that are otherwise not allowable as 
reimbursable costs under such paragraph may be allowed to the 
extent specifically provided in such agreement.
  (4) In the case of a proceeding referred to in paragraph (1) 
that is commenced by a State, the head of the agency or 
Secretary of the military department concerned that awarded the 
covered contract, subcontract, or personal services contract 
involved in the proceeding may allow the costs incurred by the 
contractor or subcontractor, or personal services contractor in 
connection with such proceeding as reimbursable costs if the 
agency head or Secretary determines, in accordance with the 
Federal Acquisition Regulation, that the costs were incurred as 
a result of (A) a specific term or condition of the contract, 
subcontract, or personal services contract, or (B) specific 
written instructions of the agency or military department.
  (5)(A) Except as provided in subparagraph (C), costs incurred 
by a contractor or subcontractor, or personal services 
contractor in connection with a criminal, civil, or 
administrative proceeding commenced by the United States or a 
State in connection with a covered contract, subcontract, or 
personal services contract may be allowed as reimbursable costs 
under the contract, subcontract, or personal services contract 
if such costs are not disallowable under paragraph (1), but 
only to the extent provided in subparagraph (B).
  (B)(i) The amount of the costs allowable under subparagraph 
(A) in any case may not exceed the amount equal to 80 percent 
of the amount of the costs incurred, to the extent that such 
costs are determined to be otherwise allowable and allocable 
under the Federal Acquisition Regulation.
  (ii) Regulations issued for the purpose of clause (i) shall 
provide for appropriate consideration of the complexity of 
procurement litigation, generally accepted principles governing 
the award of legal fees in civil actions involving the United 
States as a party, and such other factors as may be 
appropriate.
  (C) In the case of a proceeding referred to in subparagraph 
(A), contractor or subcontractor, or personal services 
contractor costs otherwise allowable as reimbursable costs 
under this paragraph are not allowable if (i) such proceeding 
involves the same contractor or subcontractor, or personal 
services contractor misconduct alleged as the basis of another 
criminal, civil, or administrative proceeding, and (ii) the 
costs of such other proceeding are not allowable under 
paragraph (1).
  (6) In this subsection:
          (A) The term ``proceeding'' includes an 
        investigation.
          (B) The term ``costs'', with respect to a 
        proceeding--
                  (i) means all costs incurred by a contractor 
                or subcontractor, or personal services 
                contractor, whether before or after the 
                commencement of any such proceeding; and
                  (ii) includes--
                          (I) administrative and clerical 
                        expenses;
                          (II) the cost of legal services, 
                        including legal services performed by 
                        an employee of the contractor or 
                        subcontractor, or personal services 
                        contractor;
                          (III) the cost of the services of 
                        accountants and consultants retained by 
                        the contractor or subcontractor, or 
                        personal services contractor; and
                          (IV) the pay of directors, officers, 
                        and employees of the contractor or 
                        subcontractor, or personal services 
                        contractor for time devoted by such 
                        directors, officers, and employees to 
                        such proceeding.
          (C) The term ``penalty'' does not include 
        restitution, reimbursement, or compensatory damages.
  (l) Definitions.--In this section:
          (1)(A) The term ``covered contract'' means a contract 
        for an amount in excess of $500,000 that is entered 
        into by the head of an agency, except that such term 
        does not include a fixed-price contract without cost 
        incentives or any firm fixed-price contract for the 
        purchase of commercial items.
          (B) Effective on October 1 of each year that is 
        divisible by five, the amount set forth in subparagraph 
        (A) shall be adjusted to the equivalent amount in 
        constant fiscal year 1994 dollars. An amount, as so 
        adjusted, that is not evenly divisible by $50,000 shall 
        be rounded to the nearest multiple of $50,000. In the 
        case of an amount that is evenly divisible by $25,000 
        but is not evenly divisible by $50,000, the amount 
        shall be rounded to the next higher multiple of 
        $50,000.
          (2) The term ``head of the agency'' or ``agency 
        head'' does not include the Secretary of a military 
        department.
          (3) The term ``agency'' means the Department of 
        Defense, the Coast Guard, and the National Aeronautics 
        and Space Administration.
          (4) The term ``compensation'', for a year, means the 
        total amount of wages, salary, bonuses and deferred 
        compensation for the year, whether paid, earned, or 
        otherwise accruing, as recorded in an employer's cost 
        accounting records for the year.
          (6) The term ``fiscal year'' means a fiscal year 
        established by a contractor for accounting purposes.

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CHAPTER 141--MISCELLANEOUS PROCUREMENT PROVISIONS

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Sec. 2409. Contractor employees: protection from reprisal for 
                    disclosure of certain information

  (a) Prohibition of Reprisals.--(1) An employee of a 
contractor, subcontractor, grantee, or subgrantee or personal 
services contractor may not be discharged, demoted, or 
otherwise discriminated against as a reprisal for disclosing to 
a person or body described in paragraph (2) information that 
the employee reasonably believes is evidence of the following:
          (A) Gross mismanagement of a Department of Defense 
        contract or grant, a gross waste of Department funds, 
        an abuse of authority relating to a Department contract 
        or grant, or a violation of law, rule, or regulation 
        related to a Department contract (including the 
        competition for or negotiation of a contract) or grant.
          (B) Gross mismanagement of a National Aeronautics and 
        Space Administration contract or grant, a gross waste 
        of Administration funds, an abuse of authority relating 
        to an Administration contract or grant, or a violation 
        of law, rule, or regulation related to an 
        Administration contract (including the competition for 
        or negotiation of a contract) or grant.
          (C) A substantial and specific danger to public 
        health or safety.
  (2) The persons and bodies described in this paragraph are 
the persons and bodies as follows:
          (A) A Member of Congress or a representative of a 
        committee of Congress.
          (B) An Inspector General.
          (C) The Government Accountability Office.
          (D) An employee of the Department of Defense or the 
        National Aeronautics and Space Administration, as 
        applicable, responsible for contract oversight or 
        management.
          (E) An authorized official of the Department of 
        Justice or other law enforcement agency.
          (F) A court or grand jury.
          (G) A management official or other employee of the 
        contractor or subcontractor who has the responsibility 
        to investigate, discover, or address misconduct.
  (3) For the purposes of paragraph (1)--
          (A) an employee who initiates or provides evidence of 
        contractor or subcontractor misconduct in any judicial 
        or administrative proceeding relating to waste, fraud, 
        or abuse on a Department of Defense or National 
        Aeronautics and Space Administration contract or grant 
        shall be deemed to have made a disclosure covered by 
        such paragraph; and
          (B) a reprisal described in paragraph (1) is 
        prohibited even if it is undertaken at the request of a 
        Department or Administration official, unless the 
        request takes the form of a nondiscretionary directive 
        and is within the authority of the Department or 
        Administration official making the request.
  (b) Investigation of Complaints.--(1) A person who believes 
that the person has been subjected to a reprisal prohibited by 
subsection (a) may submit a complaint to the Inspector General 
of the Department of Defense, or the Inspector General of the 
National Aeronautics and Space Administration in the case of a 
complaint regarding the National Aeronautics and Space 
Administration. Unless the Inspector General determines that 
the complaint is frivolous, fails to allege a violation of the 
prohibition in subsection (a), or has previously been addressed 
in another Federal or State judicial or administrative 
proceeding initiated by the complainant, the Inspector General 
shall investigate the complaint and, upon completion of such 
investigation, submit a report of the findings of the 
investigation to the person, the contractor concerned, and the 
head of the agency.
  (2)(A) Except as provided under subparagraph (B), the 
Inspector General shall make a determination that a complaint 
is frivolous, fails to allege a violation of the prohibition in 
subsection (a), or has previously been addressed in another 
Federal or State judicial or administrative proceeding 
initiated by the complainant or submit a report under paragraph 
(1) within 180 days after receiving the complaint.
  (B) If the Inspector General is unable to complete an 
investigation in time to submit a report within the 180-day 
period specified in subparagraph (A) and the person submitting 
the complaint agrees to an extension of time, the Inspector 
General shall submit a report under paragraph (1) within such 
additional period of time, up to 180 days, as shall be agreed 
upon between the Inspector General and the person submitting 
the complaint.
  (3) The Inspector General may not respond to any inquiry or 
disclose any information from or about any person alleging the 
reprisal, except to the extent that such response or disclosure 
is--
          (A) made with the consent of the person alleging the 
        reprisal;
          (B) made in accordance with the provisions of section 
        552a of title 5 or as required by any other applicable 
        Federal law; or
          (C) necessary to conduct an investigation of the 
        alleged reprisal.
  (4) A complaint may not be brought under this subsection more 
than three years after the date on which the alleged reprisal 
took place.
  (c) Remedy and Enforcement Authority.--(1) Not later than 30 
days after receiving an Inspector General report pursuant to 
subsection (b), the head of the agency concerned shall 
determine whether there is sufficient basis to conclude that 
the contractor concerned has subjected the complainant to a 
reprisal prohibited by subsection (a) and shall either issue an 
order denying relief or shall take one or more of the following 
actions:
          (A) Order the contractor to take affirmative action 
        to abate the reprisal.
          (B) Order the contractor to reinstate the person to 
        the position that the person held before the reprisal, 
        together with compensatory damages (including back 
        pay), employment benefits, and other terms and 
        conditions of employment that would apply to the person 
        in that position if the reprisal had not been taken.
          (C) Order the contractor to pay the complainant an 
        amount equal to the aggregate amount of all costs and 
        expenses (including attorneys' fees and expert 
        witnesses' fees) that were reasonably incurred by the 
        complainant for, or in connection with, bringing the 
        complaint regarding the reprisal, as determined by the 
        head of the agency.
  (2) If the head of an executive agency issues an order 
denying relief under paragraph (1) or has not issued an order 
within 210 days after the submission of a complaint under 
subsection (b), or in the case of an extension of time under 
paragraph (b)(2)(B), not later than 30 days after the 
expiration of the extension of time, and there is no showing 
that such delay is due to the bad faith of the complainant, the 
complainant shall be deemed to have exhausted all 
administrative remedies with respect to the complaint, and the 
complainant may bring a de novo action at law or equity against 
the contractor to seek compensatory damages and other relief 
available under this section in the appropriate district court 
of the United States, which shall have jurisdiction over such 
an action without regard to the amount in controversy. Such an 
action shall, at the request of either party to the action, be 
tried by the court with a jury. An action under this paragraph 
may not be brought more than two years after the date on which 
remedies are deemed to have been exhausted.
  (3) An Inspector General determination and an agency head 
order denying relief under paragraph (2) shall be admissible in 
evidence in any de novo action at law or equity brought 
pursuant to this subsection.
  (4) Whenever a person fails to comply with an order issued 
under paragraph (1), the head of the agency shall file an 
action for enforcement of such order in the United States 
district court for a district in which the reprisal was found 
to have occurred. In any action brought under this paragraph, 
the court may grant appropriate relief, including injunctive 
relief, compensatory and exemplary damages, and reasonable 
attorney fees and costs. The person upon whose behalf an order 
was issued may also file such an action or join in an action 
filed by the head of the agency.
  (5) Any person adversely affected or aggrieved by an order 
issued under paragraph (1) may obtain review of the order's 
conformance with this subsection, and any regulations issued to 
carry out this section, in the United States court of appeals 
for a circuit in which the reprisal is alleged in the order to 
have occurred. No petition seeking such review may be filed 
more than 60 days after issuance of the order by the head of 
the agency. Review shall conform to chapter 7 of title 5. 
Filing such an appeal shall not act to stay the enforcement of 
the order of the head of an agency, unless a stay is 
specifically entered by the court.
  (6) The legal burdens of proof specified in section 1221(e) 
of title 5 shall be controlling for the purposes of any 
investigation conducted by an Inspector General, decision by 
the head of an agency, or judicial or administrative proceeding 
to determine whether discrimination prohibited under this 
section has occurred.
  (7) The rights and remedies provided for in this section may 
not be waived by any agreement, policy, form, or condition of 
employment.
  (d) Notification of Employees.--The Secretary of Defense and 
the Administrator of the National Aeronautics and Space 
Administration shall ensure that contractors and subcontractors 
of the Department of Defense and the National Aeronautics and 
Space Administration, as applicable, inform their employees in 
writing of the rights and remedies provided under this section, 
in the predominant native language of the workforce.
  (e) Exceptions.--(1) This section shall not apply to any 
element of the intelligence community, as defined in section 
3(4) of the National Security Act of 1947 (50 U.S.C. 3003(4)).
  (2) This section shall not apply to any disclosure made by an 
employee of a contractor, subcontractor, or grantee of an 
element of the intelligence community if such disclosure--
          (A) relates to an activity of an element of the 
        intelligence community; or
          (B) was discovered during contract, subcontract, or 
        grantee services provided to an element of the 
        intelligence community.
  (f) Construction.--Nothing in this section may be construed 
to authorize the discharge of, demotion of, or discrimination 
against an employee for a disclosure other than a disclosure 
protected by subsection (a) or to modify or derogate from a 
right or remedy otherwise available to the employee.
  (g) Definitions.--In this section:
          (1) The term ``agency'' means an agency named in 
        section 2303 of this title.
          (2) The term ``head of an agency'' has the meaning 
        provided by section 2302(1) of this title.
          (3) The term ``contract'' means a contract awarded by 
        the head of an agency.
          (4) The term ``contractor'' means a person awarded a 
        contract with an agency.
          (5) The term ``Inspector General'' means an Inspector 
        General appointed under the Inspector General Act of 
        1978 and any Inspector General that receives funding 
        from, or has oversight over contracts awarded for or on 
        behalf of, the Secretary of Defense.
          (6) The term ``abuse of authority'' means the 
        following:
                  (A) An arbitrary and capricious exercise of 
                authority that is inconsistent with the mission 
                of the Department of Defense or the successful 
                performance of a Department contract or grant.
                  (B) An arbitrary and capricious exercise of 
                authority that is inconsistent with the mission 
                of the National Aeronautics and Space 
                Administration or the successful performance of 
                an Administration contract or grant.
          (7) The term ``grantee'' means a person awarded a 
        grant with an agency.

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                              ----------                              


                      TITLE 41, UNITED STATES CODE




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SUBTITLE I--FEDERAL PROCUREMENT POLICY

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CHAPTER 43--ALLOWABLE COSTS

           *       *       *       *       *       *       *



Sec. 4304. Specific costs not allowable

  (a) Specific Costs.--The following costs are not allowable 
under a covered contract:
          (1) Costs of entertainment, including amusement, 
        diversion, and social activities, and any costs 
        directly associated with those costs (such as tickets 
        to shows or sports events, meals, lodging, rentals, 
        transportation, and gratuities).
          (2) Costs incurred to influence (directly or 
        indirectly) legislative action on any matter pending 
        before Congress, a State legislature, or a legislative 
        body of a political subdivision of a State.
          (3) Costs incurred in defense of any civil or 
        criminal fraud proceeding or similar proceeding 
        (including filing of any false certification) brought 
        by the Federal Government where the contractor is found 
        liable or had pleaded nolo contendere to a charge of 
        fraud or similar proceeding (including filing of a 
        false certification).
          (4) Payments of fines and penalties resulting from 
        violations of, or failure to comply with, Federal, 
        State, local, or foreign laws and regulations, except 
        when incurred as a result of compliance with specific 
        terms and conditions of the contract or specific 
        written instructions from the contracting officer 
        authorizing in advance those payments in accordance 
        with applicable provisions of the Federal Acquisition 
        Regulation.
          (5) Costs of membership in any social, dining, or 
        country club or organization.
          (6) Costs of alcoholic beverages.
          (7) Contributions or donations, regardless of the 
        recipient.
          (8) Costs of advertising designed to promote the 
        contractor or its products.
          (9) Costs of promotional items and memorabilia, 
        including models, gifts, and souvenirs.
          (10) Costs for travel by commercial aircraft that 
        exceed the amount of the standard commercial fare.
          (11) Costs incurred in making any payment (commonly 
        known as a ``golden parachute payment'') that is--
                  (A) in an amount in excess of the normal 
                severance pay paid by the contractor to an 
                employee on termination of employment; and
                  (B) paid to the employee contingent on, and 
                following, a change in management control over, 
                or ownership of, the contractor or a 
                substantial portion of the contractor's assets.
          (12) Costs of commercial insurance that protects 
        against the costs of the contractor for correction of 
        the contractor's own defects in materials or 
        workmanship.
          (13) Costs of severance pay paid by the contractor to 
        foreign nationals employed by the contractor under a 
        service contract performed outside the United States, 
        to the extent that the amount of severance pay paid in 
        any case exceeds the amount paid in the industry 
        involved under the customary or prevailing practice for 
        firms in that industry providing similar services in 
        the United States, as determined under the Federal 
        Acquisition Regulation.
          (14) Costs of severance pay paid by the contractor to 
        a foreign national employed by the contractor under a 
        service contract performed in a foreign country if the 
        termination of the employment of the foreign national 
        is the result of the closing of, or the curtailment of 
        activities at, a Federal Government facility in that 
        country at the request of the government of that 
        country.
          (15) Costs incurred by a contractor or subcontractor, 
        or personal service contractor in connection with any 
        criminal, civil, or administrative proceeding commenced 
        by the Federal Government or a State, to the extent 
        provided in section 4310 of this title.
          (16) Costs of compensation of senior executives of 
        contractors for a fiscal year, regardless of the 
        contract funding source, to the extent that the 
        compensation exceeds the benchmark compensation amount 
        determined applicable for the fiscal year by the 
        Administrator under section 1127 of this title.
  (b) Waiver of Severance Pay Restrictions for Foreign 
Nationals.--
          (1) Executive agency determination.--Pursuant to the 
        Federal Acquisition Regulation and subject to the 
        availability of appropriations, an executive agency, in 
        awarding a covered contract, may waive the application 
        of paragraphs (13) and (14) of subsection (a) to that 
        contract if the executive agency determines that--
                  (A) the application of those provisions to 
                that contract would adversely affect the 
                continuation of a program, project, or activity 
                that provides significant support services for 
                employees of the executive agency posted 
                outside the United States;
                  (B) the contractor has taken (or has 
                established plans to take) appropriate actions 
                within the contractor's control to minimize the 
                amount and number of incidents of the payment 
                of severance pay by the contractor to employees 
                under the contract who are foreign nationals; 
                and
                  (C) the payment of severance pay is necessary 
                to comply with a law that is generally 
                applicable to a significant number of 
                businesses in the country in which the foreign 
                national receiving the payment performed 
                services under the contract or is necessary to 
                comply with a collective bargaining agreement.
          (2) Solicitation to include statement about waiver.--
        An executive agency shall include in the solicitation 
        for a covered contract a statement indicating--
                  (A) that a waiver has been granted under 
                paragraph (1) for the contract; or
                  (B) whether the executive agency will 
                consider granting a waiver and, if the 
                executive agency will consider granting a 
                waiver, the criteria to be used in granting the 
                waiver.
          (3) Determination to be made before contract 
        awarded.--An executive agency shall make the final 
        determination whether to grant a waiver under paragraph 
        (1) with respect to a covered contract before award of 
        the contract.
  (c) Establishment of Definitions, Exclusions, Limitations, 
and Qualifications.--The provisions of the Federal Acquisition 
Regulation implementing this chapter may establish appropriate 
definitions, exclusions, limitations, and qualifications. A 
submission by a contractor of costs that are incurred by the 
contractor and that are claimed to be allowable under 
Department of Energy management and operating contracts shall 
be considered a proposal for settlement of indirect costs 
incurred by the contractor for any period after those costs 
have been accrued.

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Sec. 4310. Proceeding costs not allowable

  (a) Definitions.--In this section:
          (1) Costs.--The term ``costs'', with respect to a 
        proceeding, means all costs incurred by a contractor, 
        subcontractor, or personal services contractor, whether 
        before or after the commencement of the proceeding, 
        including--
                  (A) administrative and clerical expenses;
                  (B) the cost of legal services, including 
                legal services performed by an employee of the 
                contractor, subcontractor, or personal services 
                contractor;
                  (C) the cost of the services of accountants 
                and consultants retained by the contractor, 
                subcontractor, or personal services contractor; 
                and
                  (D) the pay of directors, officers, and 
                employees of the contractor, subcontractor, or 
                personal services contractor for time devoted 
                by those directors, officers, and employees to 
                the proceeding.
          (2) Penalty.--The term ``penalty'' does not include 
        restitution, reimbursement, or compensatory damages.
          (3) Proceeding.--The term ``proceeding'' includes an 
        investigation.
  (b) In General.--Except as otherwise provided in this 
section, costs incurred by a contractor, subcontractor, or 
personal services contractor in connection with a criminal, 
civil, or administrative proceeding commenced by the Federal 
Government or a State are not allowable as reimbursable costs 
under a covered contract, subcontract, or personal services 
contract if the proceeding--
          (1) relates to a violation of, or failure to comply 
        with, a Federal or State statute or regulation or to 
        any other activity described in section 4712(a)(1) of 
        this title; and
          (2) results in a disposition described in subsection 
        (c).
  (c) Covered Dispositions.--A disposition referred to in 
subsection (b)(2) is any of the following:
          (1) In a criminal proceeding, a conviction (including 
        a conviction pursuant to a plea of nolo contendere) by 
        reason of the violation or failure referred to in 
        subsection (b).
          (2) In a civil or administrative proceeding involving 
        an allegation of fraud or similar misconduct, a 
        determination of contractor, subcontractor, or personal 
        services contractor liability on the basis of the 
        violation or failure referred to in subsection (b).
          (3) In any civil or administrative proceeding, the 
        imposition of a monetary penalty by reason of the 
        violation or failure referred to in subsection (b).
          (4) A final decision to do any of the following, by 
        reason of the violation or failure referred to in 
        subsection (b):
                  (A) Debar or suspend the contractor, 
                subcontractor, or personal services contractor.
                  (B) Rescind or void the contract, 
                subcontract, or personal services contract.
                  (C) Terminate the contract, subcontract, or 
                personal services contract for default.
          (5) A disposition of the proceeding by consent or 
        compromise if the disposition could have resulted in a 
        disposition described in paragraph (1), (2), (3), or 
        (4).
  (d) Costs Allowed by Settlement Agreement in Proceeding 
Commenced by Federal Government.--In the case of a proceeding 
referred to in subsection (b) that is commenced by the Federal 
Government and is resolved by consent or compromise pursuant to 
an agreement entered into by a contractor, subcontractor, or 
personal services contractor and the Federal Government, the 
costs incurred by the contractor, subcontractor, or personal 
services contractor in connection with the proceeding that are 
otherwise not allowable as reimbursable costs under subsection 
(b) may be allowed to the extent specifically provided in that 
agreement.
  (e) Costs Specifically Authorized by Executive Agency in 
Proceeding Commenced by State.--In the case of a proceeding 
referred to in subsection (b) that is commenced by a State, the 
executive agency that awarded the covered contract, 
subcontract, or personal services contract involved in the 
proceeding may allow the costs incurred by the contractor, 
subcontractor, or personal services contractor in connection 
with the proceeding as reimbursable costs if the executive 
agency determines, in accordance with the Federal Acquisition 
Regulation, that the costs were incurred as a result of--
          (1) a specific term or condition of the contract, 
        subcontract, or personal services contract; or
          (2) specific written instructions of the executive 
        agency.
  (f) Other Allowable Costs.--
          (1) In general.--Except as provided in paragraph (3), 
        costs incurred by a contractor, subcontractor, or 
        personal services contractor in connection with a 
        criminal, civil, or administrative proceeding commenced 
        by the Federal Government or a State in connection with 
        a covered contract, subcontract, or personal services 
        contract may be allowed as reimbursable costs under the 
        contract, subcontract, or personal services contract if 
        the costs are not disallowable under subsection (b), 
        but only to the extent provided in paragraph (2).
          (2) Amount of allowable costs.--
                  (A) Maximum amount allowed.--The amount of 
                the costs allowable under paragraph (1) in any 
                case may not exceed the amount equal to 80 
                percent of the amount of the costs incurred, to 
                the extent that the costs are determined to be 
                otherwise allowable and allocable under the 
                Federal Acquisition Regulation.
                  (B) Content of regulations.--Regulations 
                issued for the purpose of subparagraph (A) 
                shall provide for appropriate consideration of 
                the complexity of procurement litigation, 
                generally accepted principles governing the 
                award of legal fees in civil actions involving 
                the Federal Government as a party, and other 
                factors as may be appropriate.
          (3) When otherwise allowable costs are not 
        allowable.--In the case of a proceeding referred to in 
        paragraph (1), contractor, subcontractor, or personal 
        services contractor costs otherwise allowable as 
        reimbursable costs under this subsection are not 
        allowable if--
                  (A) the proceeding involves the same 
                contractor, subcontractor, or personal services 
                contractor misconduct alleged as the basis of 
                another criminal, civil, or administrative 
                proceeding; and
                  (B) the costs of the other proceeding are not 
                allowable under subsection (b).

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                       CHAPTER 47--MISCELLANEOUS


Sec
4701. Determinations and decisions.
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[4712. Pilot program for enhancement of contractor protection from 
          reprisal for disclosure of certain information.]
4712. Enhancement of contractor protection from reprisal for disclosure 
          of certain information.

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Sec. 4712. [Pilot program for enhancement]  Enhancement of contractor 
                    protection from reprisal for disclosure of certain 
                    information

  (a) Prohibition of Reprisals.--
          (1) In general.--An employee of a contractor, 
        subcontractor, [or grantee] grantee, or subgrantee or 
        personal services contractor may not be discharged, 
        demoted, or otherwise discriminated against as a 
        reprisal for disclosing to a person or body described 
        in paragraph (2) information that the employee 
        reasonably believes is evidence of gross mismanagement 
        of a Federal contract or grant, a gross waste of 
        Federal funds, an abuse of authority relating to a 
        Federal contract or grant, a substantial and specific 
        danger to public health or safety, or a violation of 
        law, rule, or regulation related to a Federal contract 
        (including the competition for or negotiation of a 
        contract) or grant.
          (2) Persons and bodies covered.--The persons and 
        bodies described in this paragraph are the persons and 
        bodies as follows:
                  (A) A Member of Congress or a representative 
                of a committee of Congress.
                  (B) An Inspector General.
                  (C) The Government Accountability Office.
                  (D) A Federal employee responsible for 
                contract or grant oversight or management at 
                the relevant agency.
                  (E) An authorized official of the Department 
                of Justice or other law enforcement agency.
                  (F) A court or grand jury.
                  (G) A management official or other employee 
                of the contractor, subcontractor, or grantee 
                who has the responsibility to investigate, 
                discover, or address misconduct.
          (3) Rules of construction.--For the purposes of 
        paragraph (1)--
                  (A) an employee who initiates or provides 
                evidence of contractor, subcontractor, or 
                grantee misconduct in any judicial or 
                administrative proceeding relating to waste, 
                fraud, or abuse on a Federal contract or grant 
                shall be deemed to have made a disclosure 
                covered by such paragraph; and
                  (B) a reprisal described in paragraph (1) is 
                prohibited even if it is undertaken at the 
                request of an executive branch official, unless 
                the request takes the form of a non-
                discretionary directive and is within the 
                authority of the executive branch official 
                making the request.
  (b) Investigation of Complaints.--
          (1) Submission of complaint.--A person who believes 
        that the person has been subjected to a reprisal 
        prohibited by subsection (a) may submit a complaint to 
        the Inspector General of the executive agency involved. 
        Unless the Inspector General determines that the 
        complaint is frivolous, fails to allege a violation of 
        the prohibition in subsection (a), or has previously 
        been addressed in another Federal or State judicial or 
        administrative proceeding initiated by the complainant, 
        the Inspector General shall investigate the complaint 
        and, upon completion of such investigation, submit a 
        report of the findings of the investigation to the 
        person, the contractor or grantee concerned, and the 
        head of the agency.
          (2) Inspector General action.--
                  (A) Determination or submission of report on 
                findings.--Except as provided under 
                subparagraph (B), the Inspector General shall 
                make a determination that a complaint is 
                frivolous, fails to allege a violation of the 
                prohibition in subsection (a), or has 
                previously been addressed in another Federal or 
                State judicial or administrative proceeding 
                initiated by the complainant or submit a report 
                under paragraph (1) within 180 days after 
                receiving the complaint.
                  (B) Extension of time.--If the Inspector 
                General is unable to complete an investigation 
                in time to submit a report within the 180-day 
                period specified in subparagraph (A) and the 
                person submitting the complaint agrees to an 
                extension of time, the Inspector General shall 
                submit a report under paragraph (1) within such 
                additional period of time, up to 180 days, as 
                shall be agreed upon between the Inspector 
                General and the person submitting the 
                complaint.
          (3) Prohibition on disclosure.--The Inspector General 
        may not respond to any inquiry or disclose any 
        information from or about any person alleging the 
        reprisal, except to the extent that such response or 
        disclosure is--
                  (A) made with the consent of the person 
                alleging the reprisal;
                  (B) made in accordance with the provisions of 
                section 552a of title 5 or as required by any 
                other applicable Federal law; or
                  (C) necessary to conduct an investigation of 
                the alleged reprisal.
          (4) Time limitation.--A complaint may not be brought 
        under this subsection more than three years after the 
        date on which the alleged reprisal took place.
  (c) Remedy and Enforcement Authority.--
          (1) In general.--Not later than 30 days after 
        receiving an Inspector General report pursuant to 
        subsection (b), the head of the executive agency 
        concerned shall determine whether there is sufficient 
        basis to conclude that the contractor or grantee 
        concerned has subjected the complainant to a reprisal 
        prohibited by subsection (a) and shall either issue an 
        order denying relief or shall take one or more of the 
        following actions:
                  (A) Order the contractor or grantee to take 
                affirmative action to abate the reprisal.
                  (B) Order the contractor or grantee to 
                reinstate the person to the position that the 
                person held before the reprisal, together with 
                compensatory damages (including back pay), 
                employment benefits, and other terms and 
                conditions of employment that would apply to 
                the person in that position if the reprisal had 
                not been taken.
                  (C) Order the contractor or grantee to pay 
                the complainant an amount equal to the 
                aggregate amount of all costs and expenses 
                (including attorneys' fees and expert 
                witnesses' fees) that were reasonably incurred 
                by the complainant for, or in connection with, 
                bringing the complaint regarding the reprisal, 
                as determined by the head of the executive 
                agency.
          (2) Exhaustion of remedies.--If the head of an 
        executive agency issues an order denying relief under 
        paragraph (1) or has not issued an order within 210 
        days after the submission of a complaint under 
        subsection (b), or in the case of an extension of time 
        under paragraph (b)(2)(B), not later than 30 days after 
        the expiration of the extension of time, and there is 
        no showing that such delay is due to the bad faith of 
        the complainant, the complainant shall be deemed to 
        have exhausted all administrative remedies with respect 
        to the complaint, and the complainant may bring a de 
        novo action at law or equity against the contractor or 
        grantee to seek compensatory damages and other relief 
        available under this section in the appropriate 
        district court of the United States, which shall have 
        jurisdiction over such an action without regard to the 
        amount in controversy. Such an action shall, at the 
        request of either party to the action, be tried by the 
        court with a jury. An action under this paragraph may 
        not be brought more than two years after the date on 
        which remedies are deemed to have been exhausted.
          (3) Admissibility of evidence.--An Inspector General 
        determination and an agency head order denying relief 
        under paragraph (2) shall be admissible in evidence in 
        any de novo action at law or equity brought pursuant to 
        this subsection.
          (4) Enforcement of orders.--Whenever a person fails 
        to comply with an order issued under paragraph (1), the 
        head of the executive agency concerned shall file an 
        action for enforcement of such order in the United 
        States district court for a district in which the 
        reprisal was found to have occurred. In any action 
        brought under this paragraph, the court may grant 
        appropriate relief, including injunctive relief, 
        compensatory and exemplary damages, and attorney fees 
        and costs. The person upon whose behalf an order was 
        issued may also file such an action or join in an 
        action filed by the head of the executive agency.
          (5) Judicial review.--Any person adversely affected 
        or aggrieved by an order issued under paragraph (1) may 
        obtain review of the order's conformance with this 
        subsection, and any regulations issued to carry out 
        this section, in the United States court of appeals for 
        a circuit in which the reprisal is alleged in the order 
        to have occurred. No petition seeking such review may 
        be filed more than 60 days after issuance of the order 
        by the head of the executive agency. Review shall 
        conform to chapter 7 of title 5. Filing such an appeal 
        shall not act to stay the enforcement of the order of 
        the head of an executive agency, unless a stay is 
        specifically entered by the court.
          (6) Burdens of proof.--The legal burdens of proof 
        specified in section 1221(e) of title 5 shall be 
        controlling for the purposes of any investigation 
        conducted by an Inspector General, decision by the head 
        of an executive agency, or judicial or administrative 
        proceeding to determine whether discrimination 
        prohibited under this section has occurred.
          (7) Rights and remedies not waivable.--The rights and 
        remedies provided for in this section may not be waived 
        by any agreement, policy, form, or condition of 
        employment.
  (d) Notification of Employees.--The head of each executive 
agency shall ensure that contractors, subcontractors, and 
grantees of the agency inform their employees in writing of the 
rights and remedies provided under this section, in the 
predominant native language of the workforce.
  (e) Construction.--Nothing in this section may be construed 
to authorize the discharge of, demotion of, or discrimination 
against an employee for a disclosure other than a disclosure 
protected by subsection (a) or to modify or derogate from a 
right or remedy otherwise available to the employee.
  (f) Exceptions.--(1) This section shall not apply to any 
element of the intelligence community, as defined in section 
3(4) of the National Security Act of 1947 (50 U.S.C. 401a(4)).
  (2) This section shall not apply to any disclosure made by an 
employee of a contractor, subcontractor, or grantee of an 
element of the intelligence community if such disclosure--
          (A) relates to an activity of an element of the 
        intelligence community; or
          (B) was discovered during contract, subcontract, or 
        grantee services provided to an element of the 
        intelligence community.
  (g) Definitions.--In this section:
          (1) The term ``abuse of authority'' means an 
        arbitrary and capricious exercise of authority that is 
        inconsistent with the mission of the executive agency 
        concerned or the successful performance of a contract 
        or grant of such agency.
          (2) The term ``Inspector General'' means an Inspector 
        General appointed under the Inspector General Act of 
        1978 and any Inspector General that receives funding 
        from, or has oversight over contracts or grants awarded 
        for or on behalf of, the executive agency concerned.
  (h) Construction.--Nothing in this section, or the amendments 
made by this section, shall be construed to provide any rights 
to disclose classified information not otherwise provided by 
law.
  [(i) Duration of Section.--This section shall be in effect 
for the four-year period beginning on the date of the enactment 
of this section.]

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