Congress Takes Aim at Organizational Conflicts of Interest for Government Contractors and Consultants

By Derek C. Flint and Brett W. Johnson
    
A major issue faced by government contractors (at any tier) is the risk of organizational conflicts of interest (“OCIs”). To reform the OCI regulatory framework, Congress recently passed the Preventing Organizational Conflicts of Interest in Federal Acquisition Act (the “Act”). When bidding, protesting, and performing government contracts, entities and individuals will need to be aware of the heightening regulation and enforcement related to OCIs to avoid unintended and costly consequences.

The Act requires the Federal Acquisition Regulatory Council (the “Council”) to revise the section of the Federal Acquisition Regulations (“FAR”) that govern OCIs (Subpart 9.5 of the FAR). Specifically, the Act requires the Council to provide and update the following:

•    Definitions related to specific types of OCIs, including unequal access to information, impaired objectivity, and biased ground rules;
•    Definitions, guidance, and illustrative examples regarding relationships with government contractors that may create potential OCIs; and
•    Illustrative examples of situations that may create OCIs, including an example of a scenario where a government agency hires a consultant to perform regulatory work when that consultant is simultaneously advising private-sector clients with the agency’s regulatory purview.

The Act also requires the Council to provide executive agencies with solicitation provisions and contract clauses to avoid OCIs.

With regard to executive agencies, the Act allows them to tailor the Council’s solicitation provisions and contract clauses to address their own specific OCI risks, likely via supplemental acquisition regulations. It also requires executive agencies to (1) establish or update their own OCI procedures to implement the revisions to the FAR; and (2) periodically assess and update OCI procedures to account for agency-specific issues. Although practical since each agency faces their own OCI issues, the reality is there is not going to be a “one size fits all” approach to OCIs and contractors will need to not only understand the nuances related to each agency, but also ensure that all agents and subcontractors are also aware via appropriate training.

Although the Council is not required to revise the FAR until summer of 2024, government contractors—particularly incumbents—may want to consider what steps they can take now to prepare for a more stringent set of OCI regulations. For instance, contractors may want to be a part of the process and provide comment to the Council about the revisions.

Contractors may also want to start preparing now by inserting into existing training that the OCI framework will be changing, be nuanced to each agency, and the importance of vigilance in this area. As a part of potential policy updates, contractors may want to assess the feasibility of implementing firewalls that limit the sharing of information that could create an OCI. Contractors may also want to consider the strategic use of subcontractors to fill roles that might lead to an OCI in a future business opportunity. In taking these and other mitigation measures, a conservative approach that accounts for the likelihood of more rigid OCI rules may be best.