On April 26, 2011, the government issued a proposed rule governing organizational conflicts of interest. This proposed rule diverges substantially from the current framework in FAR 9.5, from the DFARS rule proposed last year, and from certain aspects of decades of decisional law from GAO and the Court of Federal Claims. Please click here for our summary of the FAR proposal.
There are four differences that are particularly interesting:
- Analysis Of Risk. The proposed FAR provision asserts that there are two kinds of risk that can flow from OCIs – (i) harm to the integrity of the competitive acquisition system and (ii) harm to the government’s business interests. The proposed rule sets forth different treatment based on that distinction.
- Acceptance Of Risk Of Harm To Government Business Interests. In circumstances where the OCI harms the competitive acquisition system, the OCI must be substantially reduced, eliminated, or waived. However, in contrast, the FAR Councils’ proposal provides that the risk of harm to the government’s business interests may sometimes be assessed as an acceptable performance risk and further action may not be necessary to address the conflict.
- Recognition Of Corporate Structural Barriers And Internal Controls. The proposed FAR provision recognizes that corporate structural barriers – such as independent boards of directors – may, in some circumstances, constitute sufficient mitigation.
- Removal Of Unequal Access To Nonpublic Information From The OCI Framework. The proposed FAR provision removes the concept of unequal access to nonpublic information from the definition of OCIs, and treats it separately under FAR Part 4.
In addition, the government has asked industry to focus on specific issues in formulating comments (which are due on or before June 27, 2011), including:
- Is the definition of “organizational conflict of interest” sufficiently comprehensive to address all potential forms of such conflicts?
- Do the enumerated techniques for addressing OCIs adequately address the Government’s interests? Are any too weak or overbroad? Are there other techniques that should be addressed?
- Do the proposed solicitation provisions and contract clauses adequately implement the policy framework set forth in the proposed rule? For example, is a clause limiting future contracting an operationally feasible means of resolving a conflict? Would it be beneficial and appropriate for this information generally to be made publicly available, such as through a notice on FedBizOpps? Do the solicitation provisions and contract clauses afford sufficient flexibility to help an agency meet its individual needs regarding a prospective or actual conflict?
- Does the proposed rule strike the right balance between providing detailed guidance for contracting officers and allowing appropriate flexibility for dealing with the variety of forms that organizational conflicts of interest take and the variety of circumstances under which they arise?
- Are there certain types of contracts, or contracts for certain types of services, that warrant coverage that is more strict than that provided by the proposed rule?