Mr. Seth Cowell Ethics Counselor ESC/JA (781)

 Why?  Laws Applicable to Government Employees  Current Contractor Obligations: FAR 3.10/  Current ESC A&AS Contractor Obligations: H112  Future A&AS Contractor Obligations: FAR 3.11/

 John is a government engineer supporting a $1B source selection, ultimately won by General Electric. After the award, it becomes known that at the time of the source selection, John owned $100,000 of General Electric stock.  Consequences  Basis for bid protest  Black eye for the procurement system  Personal liability for John

 John is a government contracted engineer supporting a $1B source selection, ultimately won by General Electric. After the award, it becomes known that at the time of the source selection, John owned $100,000 of General Electric stock.  Consequences  Basis for bid protest  Black eye for the procurement system  Liability for John or his employer?

Very few defense contractors’ ethics programs require employees to disclose personal conflicts of interest DoD and OGE officials believe current requirements are “inadequate to prevent certain conflicts from arising, especially financial conflicts of interest [and] impaired impartiality” “Given the magnitude of DOD’s contractor employee use, our analyses of the range of key roles that contractor employees have across DOD, and the need to ensure the integrity of federal spending, we believe that DOD needs department- wide personal conflict of interest safeguards for certain contractor employees who are providing the type of services affecting governmental decisions, similar to those required of DOD’s federal employees.”

Increased reliance on contracted technical, business and procurement expertise No current disclosure requirements NDAA FY 2009 Section 841: prevent personal conflicts of interest of contractors performing acquisition functions closely associated with inherently government functions

 Government decision-making must be free from the appearance of impropriety…the taxpayer demands it  Therefore, the Government expects that the advice it gets from its employees and contracted advisors is fair, impartial and objective

Contractors must have a written code of business ethics and conduct if they hold a contract in excess of $5M Contractor shall timely disclose…a violation of Federal criminal law involving fraud, conflict of interest…

 From the GAO report: the current FAR clauses “lack specific provisions to prohibit conflicts of interest or employ other safeguards to assure that the advice and assistance received from contractor employees is not tainted by personal conflicts of interest.”  Examples:  No mandated financial disclosure  Only requires company to disclose violations of criminal conflict of interest statutes: contractors are not subject to these

a)The contractor shall not assign, nor allow any employee for whom it receives payment under this contract to perform any task under this contract concerning any program, prime contractor, contract, or other matter in which that employee, or that employee's spouse, minor child or household member has a financial interest. b)A financial interest consists of any interest in, or affiliation with, a prime contractor, a subcontractor to a prime contractor, any offerors, or any prospective subcontractor to any offeror for the program, contract, or other matter for which the employee is performing the support task under this contract. c) The prime contractor shall obtain and maintain, as part of its personnel records, a financial disclosure statement from each employee assigned to perform support tasks for the Government d) PCO has authority to waive conflicts

 NDAA 2009, Section 841 reacts to the GAO report  New Subpart 3.11: “Preventing Personal Conflicts of Interest for Contractor Employees Performing Acquisition Functions” and corresponding clause (will replace H112)  Applies to acquisition A&AS (including FFRDC) contracts above the simplified acquisition threshold  Public comment period closed January 2010

Conflicts Definition  “a situation where the employee has a financial interests, personal activity or relationship that could compete with the employee’s ability to act impartially and in the best interests of the Government” Financial interests may arise from  Outside compensation  Consulting relationships  Research funding  Stock/bond/partnership ownership (diversified mutual funds excluded)  Real estate  Intellectual property interests  Business ownership

Non exhaustive list of sources of conflicts:  Financial interests of the employee, close family members or other members of the household  Other employment  Seeking employment  Gifts

Contractor shall have  Screening procedures  A financial disclosure statement program with annual and event-based updates  Train their employees  Report any conflict violation as soon as it is known  Flow the substance of the clause down to $100K+ subcontracts Contractor shall not  assign an employee with a personal conflict to perform a task

Mitigation/Waiver  If an employee has a conflict, the company may propose a mitigation plan or ask for a waiver  The approval authority is the Head of the Contracting Activity Government Remedies  Suspension of contract payments  Impact on award fee  Termination  Suspension/Debarment

The Government’s Expectations/Standards  Increased obligation to monitor employee (including subK employee) activities both under the contract and outside  Information collected on disclosure forms How to identify the conflicts  Dollar thresholds?  Degrees for covered relationships?  When to notify the Government? Actual conflict Apparent conflict  Standard applied by the Government to mitigation plans or waiver requests

Mr. Seth Cowell Ethics Counselor ESC/JA (781) 6055