DOD proposes new conflict of interest rules

Proposed definitions adds new types of conflicts

The Defense Department is revising its rules on organizational conflicts of interest so it can standardize and expand them because companies can work on both ends of the acquisition process, according to a new proposal.

Defense officials have proposed definitions and explained new types of conflicts, in order to update and address issues that have arisen since the rules last underwent a major overhaul. DOD’s new proposal seeks to clarify terms such as "contractor" to note that it means the entire company. It also adds new terms such as “marketing consultant,” because conflicts now stretch beyond contracts, according to a notice in today’s Federal Register.


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The proposal lays out various types of conflicts, such as impaired objectivity and unfair access to information no one else has. Current rules in the Federal Acquisition Regulation (FAR) describe the conflict types by task, a point that has caused criticism of how conflicts are identified.

In the notice, DOD officials said the new explanation will improve contracting officer’s understanding of organizational conflicts of interest and their ability to address them. The new approach would also address criticisms that contracting officers believe no conflicts exist when they don’t match the specific instances noted in the FAR, the notices states.

The proposed policy notes that contracting officers must “identify and evaluate [potential conflicts] prior to contract award, using common sense and good judgment, and the DOD preference for mitigation.” These overarching principles are based on the FAR, the notice states.

DOD officials began to review the conflict of interest rules because of the Weapons System Acquisition Reform Act, which became law in 2009. It required officials to create uniform guidance and tighten existing requirements on organizational conflicts of interest. Defense officials reviewed rules both in its Defense Federal Acquisition Regulation Supplement as well as in the FAR, because the FAR is basically unchanged from the days when the conflict regulations were in the appendix of the Defense Acquisition Regulation, the notice states.

Government and industry have awaited this review for a long time, and the proposal will impact a wide range of defense contractors, and beyond if some of the reforms are added to the FAR in the future. Officials in the Office of Management and Budget have to review the policy first because of the wide-ranging effects.

At a meeting in December about the proposal, DOD noted that many people wanted the government to emphasize in the regulations the importance of mitigating the conflicts along with a more consistent approach among agencies on resolving the conflicts, the notice states.

One industry group said the proposal is a good start, but only that.

The proposals' core principles are good, but it may confuse rather than aid contracting officers and contractors, said Stan Soloway, president and chief executive officer of the Professional Services Council and Washington Technology columnist. DOD’s proposal also treats various industry sectors the same.

“Unchanged the proposed rule has the potential to negatively affect the national security industrial base,” he said.

DOD also noted that many people at the December meeting were concerned about not being able to comment on the proposed organizational conflict of interest rules before they go into effect. As a result, DOD will take comments through June 21.

Reader Comments

Mon, Apr 26, 2010 Fred

There is really only one clear approach for the Government to handle OCI. Take an OCI Avoidance approach - send a clear message to Industry - they will squawk, then they will adjust. Remember, the Government policies in the late 80's and 90's clearly facilitated the last round of consolidations and M&A that led to this situation. If this was an unintended consequence, then the Government should clearly state its intentions and let the marketplace adapt quickly. Doing it this way only delays the final desired outcome - OCI Avoidance

Sat, Apr 24, 2010

You cannot legislate ethical conduct; you cannot isolate product providers from advisory services providers that have strategic partnerships, thereby infringing on free enterprise; you cannot have unbiased advisors when they have worked both sides of the acquisition at some point in their lives; and you cannot have unbiased acquisition advisors when they are required to choose the higher quality of one companies products over another's.

Fri, Apr 23, 2010 Tom Kesolits New Jersey

What a mess. All I can say is that there are already measures that have not been adequately enforced to prevent OCI. All these provision do is make doing business more difficult. The government will suffer from programs that literally will never get into production for fear of OCI.

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