DOD proposes new conflict of interest rules

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.