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In previous Vision pieces, we have pointed out that Executive Order 13627 on “Strengthening Protections against Trafficking in Persons in Federal Contracts” is designed to bolster the U.S. government’s zero-tolerance approach to trafficking in persons in federal contracts. On January 29, 2015, the FAR (Federal Acquisition Regulation) Council released the much awaited “final rule” designed to implement the Executive Order signed by President Obama in September 2012, and Title XVII of the National Defense Authorization Act for 2013 (“Ending Trafficking in Government Contracting”)—both of which will require federal contractors and subcontractors to take specific proactive preventive measures to detect and eliminate human trafficking and forced labor in their supply chains. 

The final FAR rule amends federal contracting regulations to include stricter prohibitions of trafficking related activities and, in the case of contracts exceeding $500,000 performed abroad, imposes an obligation to develop and implement detailed and potentially onerous compliance plans.

 

Compliance Plans and Certification

These enhanced requirements require contractors providing supplies or services to the federal government abroad to develop and implement compliance plans appropriate to the size and complexity of the contract and commensurate with the associated trafficking in persons’ risk. Contractors are required to certify—prior to contract award and annually during the contract performance period—that they have implemented the specified compliance plan to prevent the occurrence of prohibited activities and to detect and take action against subcontractors and/or agents engaged in such activities. The rule contains mandatory flow-down provisions—prime contractors will be responsible for the acts and omissions of subcontractors and agents at every tier of the supply chain.

In addition, contractors must certify that they have conducted appropriate due diligence and that none of their agents, subcontractors (or their agents ) are involved in any trafficking-related activities—or, if they are, appropriate remedial action or law enforcement referral has occurred.

 

Due Diligence

Because insidious and complex abuses such as forced labor and trafficking are frequently subtle and hidden—particularly where there are tiers of subcontractors and labor brokers or agents in the supply chain—government contractors subject to the FAR need to shine a bright light on the areas of its supply chain where it manufactures or sources goods, services, or raw materials in order to detect and prevent prohibited trafficking-related activities.

These very specific due diligence requirements will be challenging for many government contractors.

 

What Does Good Due Diligence Look Like?

A tailored risk assessment is the first step in detecting and preventing serious problems like human trafficking and forced labor in an extended global supply chain. The risk assessment begins with an analysis of the supply chain by category, spend, country and strategic importance. Contractors should focus on high-risk countries where top-tier suppliers or subcontractors have operations involving commodities, components or services associated with human trafficking and forced labor. The Department of State recently published a report outlining the 11 industry sectors with the highest risk of trafficking in federal procurement supply chains.

This initial risk assessment typically identifies “hot spots” that warrant closer examination by cross-referencing against “red flag indicators” such as a concentration of migrant labor and the presence of labor brokers deep in the supply chain. A targeted baseline field investigation of a small number of representative subcontractor sites in high-risk areas and their contract labor arrangements help to illuminate the nature and extent of the potential exposure in the contractor’s extended supply chain.

Foreign Contract Worker (FCW) risk assessments conducted by Verité for major global companies in multiple sectors routinely uncover trafficking and labor abuses, particularly in Southeast Asia and the Middle East. These confidential comprehensive risk assessments of foreign subsidiaries and supplier and subcontractor operations invariably identify numerous violations of business and ethics codes of conduct and host country law. Workers pay illegally high recruitment fees funded by loans, are forced to accept unlawful terms and conditions of employment, are deceived about the type of work and where they will be working, have their passports confiscated, and cannot voluntarily terminate their contracts without incurring significant financial penalties.

Once the specific nature and scope of the trafficking risk in the supply chain is understood, the next step is the development and deployment of the type of detailed compliance plan required by the FAR—one that is appropriate to the size and complexity of the contact and identified trafficking risk.

For more information contact Declan Croucher, Director of Business Development.