In latest edition of The Wright Toolbox:
- New Law Requires the Federal Government To Update The Rules Regarding Organizational Conflicts of Interest
New Law Requires the Federal Government To Update The Rules Regarding Organizational Conflicts of Interest
On December 27, 2022, President Biden signed the Preventing Organizational Conflicts of Interest in Federal Acquisition Act (P.L. 117-324). As the name states, the purpose of the Act is to prevent organizational conflicts of interest in federal acquisition. An Organizational Conflict of Interest (OCI) is typically defined as because of other activities or relationships with other persons, a person is unable or potentially unable to render impartial assistance or advice to the Government, or the person’s objectivity in performing the contract work is or might be otherwise impaired, or a person has an unfair competitive advantage. OCI looks at the institution and everyone in it, as well as any possible or actual conflicts. A regular conflict of interest, only looks at individuals. Three types of OCI that can arise include:
- Biased Ground Rules: A company has in some sense set the ground rules for the competition for another Government contract by writing the Statement of Work (SOW) or the specification such that it could skew the competition in favor of itself.
- Unequal Access to Information: A company has access to nonpublic information as part of its performance of a government contract and where that information may provide the company an unfair competitive advantage in a later competition for a Government contract.
- Impaired Objectivity: A company’s work under one government contract could entail its evaluating itself or a related entity, either through an assessment of performance under another contract or an evaluation of proposals.
In general, the new law provides that within 18 months, the Federal Acquisition Regulatory Council must revise the Federal Acquisition Regulation to provide and update (A) definitions related to specific types of organizational conflicts of interest, including unequal access to information, impaired objectivity, and biased ground rules; (B) definitions, guidance, and illustrative examples related to relationships of contractors with public, private, domestic, and foreign entities that may cause contract support to be subject to potential organizational conflicts of interest, including undue influence; and (C) illustrative examples of situations related to the potential organizational conflicts of interest. One example of such a conflict identified in the Act is the awarding by a federal regulatory agency of a contract for consulting services to a contractor if employees of the contractor performing work under such contract are permitted by the contractor to simultaneously perform work under a contract for a private sector client under the regulatory purview of such agency.
The Act further requires the FAR Council to provide solicitation provisions and contract clauses to avoid or mitigate organizational conflicts of interest and which require contractors to disclose information relevant to potential organizational conflicts of interest and limit future contracting with respect to potential conflicts of interest. Finally, the Act also requires executive agencies to establish or update agency conflict of interest procedures to implement the new FAR rules made under the Act. Stay tuned on this issue as the FAR Council will be issuing proposed rules on this issue over the next 18 months. It is impossible to predict whether these new rules will merely tweak the system or provide for whole-sale changes, but all federal contractors must stay updated and informed on these potential changes.
If you have any questions about this issue, please contact any member of our Government Contracts practice group.