DOD contractor ethics rule enters critical stage

Proposed language on organizational conflicts of interest raises more questions than it answers

Stan Soloway (soloway@pscouncil) is president and CEO of the Professional Services Council.

The process of developing new Defense Department rules on organizational conflicts of interest has moved into a new, crucial stage. Public comments on DOD’s proposed OCI rule have been submitted, and teams at the department are reviewing and assessing a sizable and varied set of recommendations. The teams’ mission is clear: evaluate the comments and produce a final rule that is in the best interests of the department.

This issue has stirred considerable debate and controversy throughout the department and industry. To some extent, one’s views are guided by where one sits in the market or government. And determining the government’s best interests involves considering how to ensure that conflicts of interest do not inappropriately influence decisions while still giving the government access to the fullest possible range of capabilities and solutions.

One of the greatest weaknesses with the rule is how it deals with DOD’s fundamental premise that mitigation is the department’s preferred means of resolving possible conflicts. Indeed, the requirements associated with getting approval for a mitigation plan are so convoluted and complicated that the proposed rule is likely to result in contracting officers taking the path of least resistance. “Just say no” could become the operative strategy.

Other aspects of the rule must be modified substantially to achieve the requisite balance and clarity. For example, the rule’s breadth is, well, breathtaking. Rather than limiting its scope to weapons systems programs, as required by law, DOD has proposed covering every procurement, including all task orders, with one policy. In doing so, it presumes that the dynamics and competitive structure of the technology and solutions sector are the same as those of the weapons systems market. That simply is not true. The weapons systems market evolved in direct response to the government’s budgets and needs. Yet the technology and solutions market more closely reflects the characteristics of the broad commercial marketplace for similar requirements. Overlaying a single solution on such disparate markets is a treacherous approach.

Moreover, although it can be argued that OCI plans need to be reviewed at the task-order level to account for changes that occurred after the initial contract award, the rule makes no accommodation for the time-sensitive nature of task-order procurements. Nor does it provide adequate guidance to ensure the rules are predictably and consistently applied. Predictability and consistency, as the Professional Services Council suggested in its comments and in earlier recommendations to the department, should be DOD’s foremost goals. Instead, the rule places all of the responsibility on contractors to disclose and mitigate conflicts with little detail on how companies should meet those burdens or the terms on which government approval will be forthcoming.

In short, while the proposed rule is a step toward answering critical questions about the future of the department’s — and eventually, the entire government’s — approach to OCI, it seems to be walking in multiple directions at the same time. In the end, the proposed rule raises many more questions than it answers.

DOD officials know there are enormous implications attached to the final rule. Although the comment period enabled all stakeholders to bring their ideas to the fore, many of those ideas were already shared through a variety of means, including the public meeting convened by DOD in December 2009. It's problematic that those ideas weren’t entirely accounted for in the proposed rule. But all is not lost. DOD now has the chance to take the most salient and cogent recommendations to heart and deliver a final rule that provides needed clarity and a workable, logical process that best serves the department’s needs and interests.

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