AUTHOR
Jessica Tillipman is the Associate Dean for Government Procurement Law Studies at The George Washington University Law School. She teaches the law school’s Anti-Corruption & Compliance, a course that focuses on anti-corruption, ethics, and compliance issues in government procurement.
Email: jtillipman@law.gwu.edu
ORGANIZATIONAL CONFLICTS OF INTEREST: AN OVERVIEW
INTRODUCTION
Competition is a primary goal of the U.S. government procurement system. “By maximizing
the effective use of competition, the government receives its best value in terms of
price, quality, and contract terms and conditions.”
To help ensure competition is not undermined by corruption, misconduct, or unfairness, the United States has enacted numerous laws that address, among other things, the integrity of the competitive marketplace. These laws range from criminal prohibitions (e.g., collusion, procurement integrity, conflicting financial interests) to regulatory restrictions (e.g., impartiality, personal conflicts of interest involving contractors performing acquisition functions, and organizational conflicts of interest).
The Federal Acquisition Regulation (FAR) provides a general prohibition against conflicts of interest and warns the government that “The general rule is to avoid strictly any conflict of interest or even the appearance of a conflict of interest in Government-contractor relationships.” (FAR 3.101-1).
Government business shall be conducted in a manner above reproach and, except as authorized by statute or regulation, with complete impartiality and with preferential treatment for none. Transactions relating to the expenditure of public funds require the highest degree of public trust and an impeccable standard of conduct. The general rule is to avoid strictly any conflict of interest or even the appearance of a conflict of interest in Government-contractor relationships. While many Federal laws and regulations place restrictions on the actions of Government personnel, their official conduct must, in addition, be such that they would have no reluctance to make a full public disclosure of their actions.
FAR 3.101-1
In addition to this general prohibition, the FAR also contains more specific restrictions relating to two types of conflicts of interest: Personal Conflicts of Interest (PCIs) (FAR 3.11) and Organizational Conflicts of Interest (OCIs) (FAR 9.5).
Contractor PCIs are present when an individual contractor-employee has a “financial interest, personal activity, or relationship that could impair the employee’s ability to act impartially and in the best interest of the Government when performing under the contract.”
In contrast, OCIs occur when because of other activities or relationships with other persons, a person or company is (1) unable or potentially unable to render impartial assistance or advice to the government, (2) their objectivity in performing the contract work is or might otherwise be impaired, or (3) they have an unfair competitive advantage.
THREE TYPES OF ORGANIZATIONAL CONFLICTS OF INTEREST
1. Impaired objectivity – may arise where a contractor’s other business or other financial interests create an economic incentive to provide biased advice in the performance of a government contract.
2. Biased ground rules – may occur when, as part of its work under one procurement, the contractor has helped set the procurement’s ground rules, such as writing the statement of work or developing specifications, for another procurement. The concern is that a contractor may bias the future procurement in favor of itself.
3. Unequal Access to Information – may occur when a contractor has access to nonpublic information which may provide the contractor with an unfair competitive advantage in a procurement.
FREQUENTLY ASKED QUESTIONS
How does the government learn about OCIs?
Contracting Officers depend on contractors to disclose, among other things, “any facts that may cause a reasonably prudent person to question the Contractor’s impartiality because of the appearance or existence of bias.” Agencies generally demand this information through solicitation provisions or contract clauses which clearly articulate the government’s expectations with regard to the disclosure of facts and circumstances that would give rise to an actual or potential OCI.
Once the government is aware of an OCI, is it required to do anything?
FAR 9.504 requires a Contracting Officer (CO) to “identify and evaluate potential organizational conflicts of interest as early in the acquisition process as possible; and avoid, neutralize, or mitigate significant potential conflicts before contract award.”
In some instances, the government may waive the OCI if it determines it is in the government’s interest to do so.
Notably, although the government may waive OCIs, per decisional precedent from the Government Accountability Office (GAO), it is not permitted to waive FAR 3.1 conflicts of interest, which have been found in matters where a contractor has an unfair competitive advantage stemming from its hiring of a former government employee.
What happens if a contractor fails to disclose an OCI?
Failure to disclose the information required by an applicable OCI clause can lead to a multitude of adverse consequences, including, but not limited to contract termination, prosecution for the making of false statements (including fines and imprisonment), or suspension or debarment. In addition, a false OCI certification could trigger potential civil and criminal liability under the False Claims Act, resulting in treble damages, penalties, imprisonment, and fines.
What is the new proposed OCI rule and why is it so important?
Although opinions may vary, many critics contend that the current framework in FAR 9.5 no longer reflects modern procurement practices, emerging risks, or the OCI decisional precedent that has developed over the past several decades.
Learn more about OCIs & the Proposed Rule
