Tougher contractor ethics rule under consideration

Contractor employees providing services to federal agencies might be required to disclose personal financial holdings that could create a conflict of interest and would be required to refuse gifts from certain parties affected by those contracts, under a draft recommendation being considered by a panel of the Administrative Conference of the United States.

The conference is an independent public-private partnership that makes recommendations on federal administration and is subject to federal meetings rules. It recently has regrouped after being disbanded 15 years ago, and its Administration Committee considered a proposed draft rule for federal contractor ethics Dec. 8.

With more than $260 billion spent on service contracts annually, federal rules for contractor ethics vary by agency and in many cases are minimal or nonexistent, the committee said in its report. In cases where contractor employees work side by side with government employees, there is a great disparity in the ethics rules that are applied.

“The conference believes that certain important aspects of the ethics rules applicable to government employees should be extended to contractor employees in order to increase public confidence in the government’s acquisition system,” the draft rule states. “This should be done in a manner that is cost-effective, takes into account the disparate needs of the various agencies that utilize independent contractors, and is sensitive to the burdens that extension of the ethics system to contractor employees would impose on agencies and the companies and small businesses with which they contract.”

The draft recommendation proposes two options: either that a new rule be incorporated into the Federal Acquisition Regulation and applied governmentwide, or that federal agencies assess and prioritize their chief ethics risks and adopt a rule considering those risks.

The draft ethics rule also includes these recommendations:

• Directly Supervised Employees: Service contractor employees who work side-by-side with government employees, under direct supervision of a government employee, would need to follow the same ethics rules as other federal contractors. Further, Congress should consider passing a law mandating that the service contractor employees must follow the same ethics as the government employees in this situation.
• Personal Conflicts of Interest: For service contracts over $5 million, the contractor should identify among his or her employees and their family members any personal or business financial interest that may present a conflict, along with a mitigation plan, for review by the contracting officer. Potential conflicts would include ownership in a business that might compete for similar work or employment with an organization affected by the performance of the contract.
• Gifts: A service contractor or its participating employees may not accept or solicit any gift from any person outside the company who has some interest substantially affected by the performance or nonperformance of the contract.