1 Changes to Regulations Governing Personal Conflicts of Interest and Organizational Conflicts of Interest Breakout Session # C08 Name: Barbara S. Kinosky, Esq. Date: July 30, 2012 Time: 4:00 – 5:15 p.m.

2 Final rule: prevents personal conflicts of interest for contractor employees performing acquisition functions for government agency. Took effect December 2, Issued by DoD, GSA, NASA. Federal Register No New FAR Subpart 3.11; Clause Personal Conflicts of Interest (PCI) Rule – Publication and Effective Date

3 Congressional mandate that FAR Councils provide clear guidance about contractor personal conflicts of interest (PCIs). Section 841(a) of Duncan Hunter National Defense Authorization Act for Fiscal Year Personal Conflicts of Interest (PCI) Rule – Overview

4 Contracts where employees perform specific, enumerated types of acquisition work closely associated with inherently governmental functions. Applies to all contracts above the simplified acquisition threshold other than commercial items contracts under FAR Part 12. Personal Conflicts of Interest (PCI) Rule – Applicability

5 What is acquisition work? Planning acquisitions. Determining what supplies or services are required. Writing statements of work. Developing or approving contractual documents. Personal Conflicts of Interest (PCI) Rule – Applicability (Cont.)

6 What is acquisition work? Evaluating contractor proposals. Awarding contracts. Administering contracts, including terminations. Determining whether contract costs are reasonable, allocable, and allowable. Personal Conflicts of Interest (PCI) Rule – Applicability (Cont.)

7 “A situation in which a covered 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.” Exception – a de minimus interest. Personal Conflicts of Interest (PCI) Rule – What is a Personal Conflict of Interest?

8 Employee of contractor. Subcontractor that is a self-employed individual where there is no employer to whom such an individual could submit the required disclosures. Performing acquisition-related work for government. Prime NOT responsible for employees of subcontractors. Personal Conflicts of Interest (PCI) Rule – What is a Covered Employee?

9 Identify “covered employees” and obtain financial disclosures. Supervise employee assignment process. Obtain signed NDAs from covered employees. Disclose violations to the Contracting Officer. Personal Conflicts of Interest (PCI) Rule – Requirements

10 Train covered employees to identify and avoid PCIs. Maintain PCI compliance oversight. Discipline covered employees who violate PCI obligations. Personal Conflicts of Interest (PCI) Rule – Requirements (Cont.)

11 Investing in Winner Co. because your employee knows it will soon win a huge government contract. Tipping off a family member about good or bad news regarding a company or contract. Using third party proprietary information for personal gain. Personal Conflicts of Interest (PCI) Rule – Examples of Violations

12 Accepting gifts for performance. Seeking or accepting employment or other opportunities for your employee or his family members based on information gleaned or relationships developed in the course of performance. Personal Conflicts of Interest (PCI) Rule – Examples of Violations (Cont.)

13 Preparation of standardized disclosure forms. Proper training of employees. Supervision issues. Monitoring covered employees. Managing at subcontractor level. Personal Conflicts of Interest (PCI) Rule – Implementation Challenges for Contractors

14 Proposed rule: Organizational Conflicts of Interest. Issued by DoD, GSA, NASA. Federal Register No , April 16, 2011 (comment period reopened June 29, 2011). Similar to OCI rule published in DFARS in December Organizational Conflicts of Interest Rule – Publication

15 Proposed rule identifies two kinds of risks caused by OCIs: Harm to integrity of the competitive acquisition system. Harm to the government’s business interests. Proposed rule categorizes OCIs by nature of the harm to the government’s interests. Organizational Conflicts of Interest Rule

16 Contracting Officer responsible for identifying OCIs; is final authority in determining whether OCI exists or has been properly addressed. Initial assessment. Pre-solicitation activities. Evaluation of offers. Rule proposes pre-award and post-award OCI disclosure requirements. Organizational Conflicts of Interest Rule – Identification

17 Avoidance. Limitation on future contracting. Mitigation. Acceptance of risk. Waiver (only in exceptional circumstances). Organizational Conflicts of Interest Rule – Addressing OCIs

18 Rule addresses risks and potential remedies for a contractor’s unequal access to information. Creates new section within FAR Part 4, relating to administrative matters, to address unequal rights. “Non-public information” includes government or third-party information that is exempt from disclosure under FOIA. Organizational Conflicts of Interest Rule – Proposed Treatment of Unequal Access to Non- public Information

19 Policy – requires government to take action when an offeror has obtained an unfair competitive advantage because of unequal access to competitive information. Contracting Officer must require offeror to resolve unequal access when: Information is unavailable to other offerors; and It is competitively useful in the solicitation; and It provides an unfair advantage. Organizational Conflicts of Interest Rule – Proposed Treatment of Unequal Access to Non- public Information

20 How to resolve unequal access: Share information amongst potential offerors to nullify potential competitive advantages. Mitigate effects by creating internal firewalls, either through organizational separation, facility or IT access restrictions, independent compensation or individual and organizational NDAs. Disqualification of contractor. Organizational Conflicts of Interest Rule – Proposed Treatment of Unequal Access to Non- public Information (Cont.)

Questions? 21 Contact Us: Barbara S. Kinosky, Esq.: