Selling To The Government: Strict Rules To Follow On Gratuities, Gifts


Steve Charles
Steve Charles

Whether it's understanding established conduct with government employees, hiring former federal employees or ensuring that your own organization meets federal employment standards, a misstep here can be expensive, and can cost you a contract or seriously damage your reputation.

Over the next several columns, we'll look at personnel and related hurdles a company has to clear in the process of running a business that sells to the government. Let's look first at the notion of gifts and gratuities to current federal employees.

It's a criminal offense to give or offer anything of value to public officials in connection with their official capacity. That includes direct exchanges or indirect exchanges via a spouse or other connected persons. There is a fine difference between a bribe and a gratuity. When there's an up-front quid pro quo between the giver and the public official, the exchange is considered a bribe. A gratuity is an exchange made to thank a public official for an act. It's still illegal because the giver nonetheless is rewarding a public official for an official act.

It is possible to offer a civil servant a small token or a meal without it being construed as a bribe or gratuity, provided you're very careful.

Prohibited Sources

The government's ethics regulations define prohibited sources of consideration as people that (1) seek official action from a federal agency; (2) do business or seek to do business with an agency; (3) conduct activities regulated by an agency; (4) have interests that may be substantially affected by performance or nonperformance of the employee's official duties; or (5) are an organization, a majority of whose members are prohibited sources.

A civil servant can accept a gift from a prohibited source without violating the gratuity statute under a basic rule known as the $20/$50 exception or de minimis exception. Civil servants may accept unsolicited gifts, but not cash, worth up to $20 at any one occasion, provided that they don't accept more than $50 worth of gifts during a calendar year from any one source. A company counts as one source.

"Modest refreshments" offered independently by a prohibited source don't count toward the $20 or $50 limit. Items with almost no intrinsic value, such as a cheap plaque or a certificate, also do not count toward the limit.

The moment the appearance of a quid pro quo enters under any circumstance, however, the $20/$50 exception is off. All bribes, even cheap ones, are illegal.

The rules about accepting gifts place the burden mainly on feds to refuse. But a company caught systematically handing out too many gifts, even if the gifts aren't illegal, could draw attention from debarment officials.

NEXT: Determining The Value Of A Gift