Gifts are commonplace in the commercial world. Many business deals are done over dinner at a five-star restaurant or in box seats at a Major League Baseball game. When holidays and birthdays come around, a business owner may send a bottle of wine or a fruit basket to a valued customer. But when your business's customer is the U.S. federal government, the gift rules are very different.
For government contractors, giving gifts to federal employees can result in fines or even jail time. Every government contractor should understand and follow the government's rules on gifts.
Before giving anything of value to a government employee, learn the rules below.
Can You Give a Gift to a Federal Employee?
First, you should ask yourself "why am I giving this gift?" The federal bribery statue prohibits giving anything of value to a federal employee with the intent of obtaining a contract award, the exercise of an option year on an ongoing contract, or any other favorable treatment.
For example, assume your company has submitted a bid on a federal procurement, and you know the procuring agency is busy evaluating competing offers. The evaluation period happens to coincide with the holiday season, so you send the contracting officer a holiday card and include a pair of tickets to the upcoming Monday Night Football game.
Your hope, of course, is that the gift will cause the contracting officer to look more favorably upon your company's bid. Unfortunately, this motivation is considered improper under the bribery statute. You could land in very hot water, because the bribery statute prescribes stiff penalties, including jail time, for gifts motivated by the intent to obtain favorable treatment from a federal employee.
What if the agency had awarded your company the contract in July, and the football tickets are intended as a polite, after-the-fact "thank you"? Is the gift permissible?
No. In addition to prohibiting gifts based on an intent to obtain favorable treatment, federal law also prohibits giving or promising anything of value to a government official "because of or for" an official act. Although the sanctions may not be as severe as gifts motivated by an effort to obtain favorable treatment, after-the-fact gifts can still result in significant penalties.
Can the Federal Employee Accept the Gift?
Just because you may be able to offer a gift without fear of criminal penalties does not mean that the government employee is free to accept it. The government strictly limits the ability of its employees to accept gifts from so-called outside sources, such as you and your company.
If you determine that a gift you wish to give is not based upon improper motives, you should next consider whether the federal employee is permitted to accept the gift. After all, if the government employee cannot accept the gift, offering it will simply result in unnecessary embarrassment.
As a general rule, a federal employee cannot accept your gift if you or your company seeks official action by the employee's agency, does business with the agency, seeks to do business with the agency, or if you or your company would be otherwise affected by the employee's performance of his or her duties.
Assume, for instance, that your company wins a contract with the Department of Homeland Security. It should come as no surprise that your contracting officer is covered by the gift rules. But because your company does business with DHS, any other DHS employee is also prohibited from accepting your gift, even if the employee in question has no influence over your contract or line of work.
The same is true for all employees of any agency with which you seek to do business, even if you have yet to win a contract with that agency. As a rule of thumb, if you have recently submitted (or plan to submit) a proposal to a particular federal agency, you should assume that you cannot give gifts to the agency's employees.
Are There Exceptions to These Gift Rules?
Don't worry -- the gift rules do not mean that you are prohibited from giving your sister a birthday present just because she works for the government. Several commonsense exceptions exist to these rules. Government employees may accept gifts if any of the following are true:
- The gift is based upon a pre-existing personal or family relationship with the government employee, so long as the gift is motivated by the relationship (like a birthday present to your sister).
- The gift is valued at $20 or less, so long as the gift is not cash, and the employee accepts no more than $50 in gifts, in the aggregate, from the same outside source in a calendar year.
- The gift consists of modest refreshments, such as juice and bagels at a seminar, and not as part of a meal.
- The gift consists of free attendance at widely-attended gatherings (although some agency-by-agency restrictions may apply to this exception).
Remember that the exceptions apply to a government employee's ability to accept gifts, not your ability to give them. Giving anything of value to a government employee is still prohibited if it is motivated by an improper intent, even if it fits within these exceptions.
Ensuring Compliance With the Federal Gift Rules
Because violation of the gift rules can result in significant penalties to your business, you should ensure that all of your owners, officers, and employees understand the rules and faithfully follow them. You may wish to consider updating your employee handbook and/or code of ethics to specifically cover the gift rules and providing training on this subject to make sure that they, and your business, remain compliant.