Federal tax compliance: implications for contractor responsibility determinations

Abstract

The Federal Acquisition Regulation (FAR) states that no contract award shall be made unless the contracting officer makes an affirmative determination of the contractor's responsibility. Two aspects of determining responsibility include the contractor's financial resources and record of integrity and business ethics. Recent reports from the Governement Accountability Office (GAO) indicate that many federal contractors are not complying with federal tax compliance requirements and are abusing the federal tax system. Recent GAO reports on contractor compliance issues were researched along with the Federal Acquisition Regulations and the Internal Revenue Code and Regulations to identify requirements for contractor responsibility determinations and contractor tax compliance. Many federal contractors are failing to pay their taxes and are continuing to win government contracts. These contractors may have an unfair competitive advantage over contractors that are complying with the tax law, and they should not be considered as maintaining a satisfactory record of integrity and business ethics. Contracting officers face many challenges in making contractor responsibility determinations in the area of tx compliance, specifically related to tax disclosure issues. However, there are some support programs that may provide contracting officers with contractor tax compliance information, specifically federal tax liens and the Federal Payment Levy Program.