The Justice Department has proposed tough new regulations for those who do business with the government, a reflection of the growing number of fraud, bribery, and waste cases arising from the multibillion-dollar federal procurement process, say industry experts and regulators.

The new rules would require federal contractors to report themselves if any of their employees—or subcontractors—violate a criminal law related to a contract worth more than $5 million while that work is being done. If a contractor is caught not reporting its violations, it could be suspended or barred from doing business with the government for up to three years.

Currently, contractors can voluntarily report themselves. But the Justice Department says it is necessary to make reporting mandatory because "few companies have actually responded" to voluntary disclosure rules.