Ethics Corner

December 2005

‘Tis Once Again the Season To Be Jolly, but Wise

By Joe Reeder and David T. Hickey

It is that time of year again when experts and pundits issue their annual holiday advice on assorted topics from toy purchases, to stress management tips, how to deal with visiting family and see those New Year’s resolutions through.

It also a time when the Defense Department’s Standards of Conduct Office, agency ethics officials and corporate ethics officers issue guidance and emphasize the rules governing partying and gift giving between contractors and their government customers. This guidance, as well as individual company ethics policies and programs, should be considered by government and contractor employees alike before celebrating the holiday season.

As invitations to receptions, office parties and holiday events begin to arrive, consider that the federal gift rule—the $20/$50 rule, the de minimis value exception, the bona fide personal relationship exception and the widely-attended gathering exception—should cover most circumstances.

All contractor and federal employees should receive training on the gift rule, which bars gifts to government employees from outside sources, particularly from sources doing business with an agency or gifts given because of an individual’s position. The de minimis value exception to the gift rule allows the giving and receipt of items of little or no intrinsic value. In addition, the rule permits acceptance of gifts worth $20 or less, so long as the government employee has not accepted gifts from the contractor that exceed $50 in value for the year.

The bona fide personal relationship exception allows gifts from an otherwise prohibited source if a true personal/familial relationship exists, as long as the individual giver on whom the relationship is based (and not his/her company) pays for the gift. Typically, this exception only applies to long-standing, pre-existing personal friendships or family relationships.

The widely attended gathering exception requires approval by a government employee’s supervisor and typically a determination by an appropriate ethics official that attendance is in the agency’s interest. The gathering must involve a large number of persons (the benchmark is 100) representing a diversity of views. Government employees may attend a contractor’s holiday party, open house, or reception as long as the widely attended gathering rule in particular applies. As usual, advance supervisor and a written agency “best interests” determination are best practices that should be followed scrupulously, especially when there is any doubt about the propriety of attending one of these holiday functions.

In summary, government employee attendance at contractor-sponsored celebrations open to the public, all government employees, is generally acceptable. But wisdom and good sense, rather than the spirit of the season, should be the ethical compass.

Government personnel often sponsor office events during non-duty hours, such as an after-work party. Contractor employees may participate in these festivities and voluntarily contribute a fair share towards items such as refreshments. Where the party occurs during duty hours, reimbursement issues regarding labor costs or charging under individual contracts are implicated, because the government will not reimburse contractors for morale and welfare expenses. Contracting officers and contractor supervisors should be consulted to clarify employee time issues under the terms of each contract and the policies of the contractor.

When government and contractor employees invite each other to private parties, typically in a private home, the gift rules still apply. At the government employee’s house, a gift of food and refreshments to a contractor employee does not violate the rules. However, any gift that the contractor brings to the government employee host must not exceed $20, and any food the contractor brings to the party exceeding the $20 threshold must be shared among all attendees. The average cost per attendee for that food should not exceed $20 even though certain government guidance does permit gifts of immediately edible food with a value in excess of $20 per guest to be shared among attendees without regard to the $20 threshold.

If the contractor employee is sponsoring the party, normally government personnel should be cautious about accepting the invitation since the food, drink and any entertainment provided are all gifts from a prohibited source. One exception to the gift rule must apply—such as the widely attended gathering, bona fide personal relationship or $20/$50 exception.

Actual gift exchanges between contractor and government employees will typically raise more eyebrows than eating and drinking at a holiday party. The gift rules apply year-round. The exceptions to the general rule apply and include gifts not exceeding $20 per gift/$50 per year from each contractor. Gifts based upon bona fide personal friendships that are paid by the contractor employee (not the contractor) are also permitted. If solicited by a government employee for a contribution to a gift, contractor employees should decline since they are considered a prohibited source under the rules. Finally, there is no monetary limit to random, mutual exchanges of gifts, such as a “Secret Santa” exchange, although self-imposed restrictions, such as the $20 limitation, are most wise in these circumstances.

The holiday season should be an appropriate time for contractors and their government customers to celebrate, express mutual thanks and to build stronger relationships. In doing so, however, awareness of the rules governing those celebrations and the appropriate, legal ways to say thanks are required.

Joe Reeder and David Hickey are attorneys with the Greenberg Traurig law firm. The opinions expressed here are solely those of the authors and are not intended to provide legal advice or represent the view of NDIA or the NDIA Ethics Committee.

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