DFARS Part 203: Improper Business Practices and Personal Conflicts of Interest

In plain English

DFARS Part 203 implements DoD-specific policies on improper business practices and personal conflicts of interest, covering reporting violations, procurement integrity, post-employment restrictions, subcontractor kickbacks, prohibitions on convicted felons, whistleblower protections, and internal confidentiality agreements. It matters to contractors because it imposes additional requirements beyond the FAR, such as mandatory clauses, reporting obligations, and restrictions on former DoD officials.

Key rules

• Contractors must report violations or suspected violations of certain requirements, including the Certificate of Independent Price Determination, procurement integrity, gratuities, antitrust laws, covenant against contingent fees, kickbacks, and prohibitions on convicted felons, in accordance with 209.406-3 or 209.407-3 and DoDD 7050.5. (203.070)
• DoD contractors may not knowingly provide compensation to a covered DoD official within 2 years after the official leaves DoD service unless the contractor first determines that the official has received or requested a written opinion from the appropriate DoD ethics counselor regarding post-employment restrictions. (203.171-3)
• The clause at 252.203-7000, Requirements Relating to Compensation of Former DoD Officials, must be used in all solicitations and contracts, including those for commercial products and services, and the provision at 252.203-7005 must be used in all solicitations. (203.171-4)
• The prohibition period for persons convicted of fraud or other defense-contract-related felonies shall not be less than 5 years from the date of conviction unless a waiver is granted for national security, and may be longer if the agency head makes a written determination. (203.570-2)
• The clause at 252.203-7001, Prohibition on Persons Convicted of Fraud or Other Defense-Contract-Related Felonies, must be used in all solicitations and contracts exceeding the simplified acquisition threshold, except for commercial products or commercial services. (203.570-3)
• Contractors and subcontractors are prohibited from discharging, demoting, or otherwise discriminating against an employee as a reprisal for disclosing information that the employee reasonably believes is evidence of gross mismanagement of a DoD contract, gross waste of DoD funds, abuse of authority, violation of law related to a DoD contract, or substantial and specific danger to public health or (203.903)
• An employee who believes they have been subject to a prohibited reprisal may file a complaint with the DoD Inspector General within three years of the alleged reprisal, and the complaint must be signed and contain specified information. (203.904)
• The clause at 252.203-7002, Requirement to Inform Employees of Whistleblower Rights, must be used in all solicitations and contracts, including those for commercial products and services. (203.970)

Who does what

In practice

• When bidding on DoD contracts, ensure you comply with the mandatory clauses and provisions, such as representing whether you have compensated former DoD officials and informing employees of whistleblower rights.
• If you hire a former DoD official within 2 years of their departure, verify that they have obtained or requested a written ethics opinion before providing compensation.
• Be aware that the prohibition on persons convicted of defense-contract-related felonies applies to contracts above the simplified acquisition threshold, and the prohibition period is at least 5 years unless waived.
• Implement policies to prevent reprisal against employees who report wrongdoing, and ensure complaints can be filed with the DoD Inspector General within three years.

Common pitfalls

• Failing to report violations or suspected violations as required by 203.070 can lead to serious consequences.
• Providing compensation to a covered DoD official within 2 years without first determining that they have received or requested a written ethics opinion violates 203.171-3.
• Using the wrong clause for displaying hotline posters or failing to use the required clause at 252.203-7004 when contract value exceeds $7.5 million.
• Discriminating against an employee for making a protected disclosure, even if requested by an executive branch official, is prohibited unless the request takes the form of a lawful order.

Written by AI from this part's codified text (2026-10-04); cited sections are checked against the part. A guide, not legal advice: the regulation text, the solicitation and your contract rule.