Policy Letter

Contractor Conflict of Interest Rule Needs Improvement

General Services Administration

Regulatory Secretariat (MVPR)

Attn: Ms. Hada Flowers

1800 F Street, NW

Room 4041

Washington, DC 20405

Subject: FAR Case 2008-025

Dear Ms. Flowers:

The Project On Government Oversight (POGO) provides the following public comment to FAR Case 2008-025—"Preventing Personal Conflicts of Interest for Contractor Employees Performing Acquisition Functions." (74 Fed. Reg. 58584 (November 13, 2009)). POGO is an independent nonprofit organization that investigates and exposes corruption and other misconduct in order to achieve a more accountable federal government. POGO has a keen interest in government contracting matters, especially matters related to acquisition and conflicts of interest. The proposed rule provides enhanced measures to identify and prevent personal conflicts of interest when contractor employees are performing acquisition functions closely associated with inherently governmental functions. As such, POGO supports the intent of the proposed rule. However, we have many concerns about the rule's implementation that merit additional consideration.

The proposed rule by the Federal Acquisition Regulatory (FAR) Councils would amend the FAR to implement Section 841(a) of the Duncan Hunter National Defense Authorization Act for Fiscal Year 2009 (Pub. Law 110-417). The Office of Federal Procurement Policy (OFPP) and the Councils are proposing a policy and contract clause that will require each contractor that has employees performing acquisition functions closely associated with inherently governmental functions to identify and prevent personal conflicts of interest for such employees. In addition, such contractors will be required to prohibit covered employees with access to nonpublic government information from using it for personal gain. The proposed rule also makes contractors responsible for (1) having procedures to screen for potential conflicts of interest, (2) informing covered employees of their obligations with regard to these policies, (3) maintaining effective oversight to verify compliance, (4) reporting any personal conflict-of-interest violations to the contracting officer, and (5) taking appropriate disciplinary action with employees who fail to comply with these policies.

The proposed rule is the result of a Government Accountability Office (GAO) report, Contracting: Additional Personal Conflict of Interest Safeguards Needed for Certain DoD Contractor Employees (GAO–08–169) released in March 2008. That report found that in certain DoD offices, "contractor employees outnumbered DoD employees and comprised as much as 88 percent of the workforce." The functions these contractors performed include "studying alternative ways to acquire desired capabilities, developing contract requirements, and advising or assisting on source selection, budget planning, and award-fee determinations." The Councils' proposed rule is a result of GAO's finding that "government officials believed that current requirements are inadequate to prevent conflicts from arising for certain contractor employees influencing DoD decisions, especially financial conflicts of interest and impaired impartiality." Simply stated, very few conflict-of-interest laws and regulations that apply to federal employees apply to contractor employees performing the same jobs.

The stated intent of the Section 841(a) was to require covered contractors to prohibit employees from conducting DoD work with respect to a program, company, contractor, or other matter in which contractor employees have a financial interest. That intent—which should be emphasized throughout the proposed rule—has effectively been watered down by the Councils. POGO offers a number of recommendations for your consideration.

First, the FAR and DoD regulations do not require that government employees perform acquisition functions closely associated with inherently governmental functions. POGO urges the Councils to recommend that federal agencies audit those services to ensure that contractor employees are not performing inherently governmental functions. Moreover, agencies should reevaluate whether such functions and activities should be performed by contractor employees and consider hiring public servants to work on acquisition activities.

Second, the implementation of this rule should be placed on hold until the Office of Management and Budget clarifies the definition of "inherently governmental activities" as proposed by President Obama in March 2009. There will be confusion until that guidance is finalized, incorporated into FAR Subpart 7.5, and applied by federal agencies. In addition, the proposed definition for inherently governmental should specify if the list of activities is comprehensive or "includes, but is not limited to" to clarify the extent of the examples provided.

Third, POGO urges the Councils to clarify the term "Non-public Government information" in proposed FAR Subparts 3.1101 and 52.203-16(a). If the intent of the proposed rule is to prevent personal conflicts of interest, contractor employees should be prohibited from using for their personal benefit any information related to the contract on which they work. Anything less would open the floodgates for mitigation or waivers, and debates over timelines of when information was publicly available.

The definition of "financial interests" should also be expanded to include a period of time after the contractor employee leaves the contract or his or her employment. For example, a contractor employee's ability to act impartially might not be an issue during their employment, but could result in a personal conflict of interest at some later point – potentially for personal benefit as well as the benefit of a competitor. Due to the sensitive nature of the federal acquisition process, POGO urges the Councils to add protections requiring prohibitions on personal conflicts of interest as they relate to employees currently and previously employed in supporting federal government acquisition functions.

Fourth, the mitigation and waiver provision and clause are outside the intent of the legislation and therefore should be removed. Congress did not provide for any such provision and any attempt to infer one is incorrect, and ripe for abuse. Federal spending of taxpayer dollars must always be above reproach. The Councils' inclusion of a waiver will only go to enhance public opinions that backroom deals, cozy contractors, and biased individuals are making public decisions. Frankly, if a situation arises where a contractor employee's impartiality is in dispute, it is an indication that that particular position should not be outsourced in the first place.

Finally, POGO supports the proposed language of the violations section and clause. Acting on suspected conflicts is necessary to ensure that contractors and their employees are held accountable. Additionally, the penalties of suspended contract payments, loss of award fees, termination of the contract for default or cause, disqualification of the contractor from subsequent related contractual efforts, or suspension or debarment are essential to the effectiveness of the rule. POGO urges the Councils, however, to consider adding a provision stating that certain violations should immediately be entered into the new Federal Awardee Performance and Integrity Information System (FAPIIS).

Although POGO supports the intent of the proposed rule, we have many concerns requiring additional consideration. If you have any questions, you may contact me at (202) 347-1122.


Scott H. Amey

General Counsel