Proposed OCI regs would allow government to tolerate conflict of interest

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Proposed new governmentwide organizational conflict of interest regulations would allow contracting officers to make an assessment that a conflict is "acceptable" when the potential harm to government interests are outweighed by having a conflicted contractor perform the contract.

Acquisition officials representing both the military and civilian branches of government released the much-anticipated proposed regulations April 26. Among the main changes from the status quo in them is the addition of "acceptance" to the three current methods of addressing conflict of interest, which are avoidance, neutralization and mitigation.

Contracting officers could propose acceptance only when the potential danger is to government business interests as opposed to the integrity of the acquisition process. An example of the latter would be risk of a contractor obtaining an unfair advantage in competing for a future government contract, whereas an example of the former would be risk of a contractor offering up advice to the government "in a way that degrades the value" of the advice. Acceptance would "generally" have to combined with other methods, particularly mitigation, but a contracting officer could accept the mitigation plan even if it does not remove all the risk of a conflict, the proposed regulations say.

Allegedly biased advice emanating from system integrators and consultancies that may have had a financial interest in the outcome of the advice through placement deals with information technology manufacturers were the subject of a handful of False Claim Act lawsuits unsealed in 2007. Although several companies, including Computer Sciences Corp., Hewlett Packard and EMC, have settled with the Justice Department, none have admitted guilt and it's unclear from public documents how much the outcome of at least some of those cases depended on other lawsuit issues relating to pricing assertions companies made on their General Services Administration schedule contracts.

The proposed regulations would shift the location of conflict of interest regulations away from Part 9 of the Federal Acquisition Regulation, where current OCI language resides amid provisions pertaining to contractor qualifications, to Part 3 and Part 4. Part 3, which is where matters of improper business practices such as kickbacks are codified in the rules that govern federal contracting, would contain the language about methods for dealing with OCI.

Part 4, which is where the FAR addresses administrative matters such as records retention, would contain new policy meant to preclude contractor use of disclosure of nonpublic information, what the proposed regulation says are threats to the integrity of the acquisition system itself. Although incorporating into a proposal nonpublic information gained through the execution of a government contract already a violation of the Procurement Integrity Act, the proposed regulations would allow contracting officers to disqualify a contractor from a procurement on the grounds that it knows too much and no other method of resolution is appropriate.

The government invites public commenters to compare the provisions to an April 2010 proposed set of Defense Department OCI regulations the department ultimately discarded in favor of less strict rules.

The current proposed rules and the old DoD proposed regulations differ significantly and the changes ultimately incorporated into the FAR could contain elements of both proposals.

For more:
- download the proposed rules, which is FAR Case 2011-001 (.pdf)

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