Tighter Rules for Conflicts of Interest

By Kennedy, Laura K. | National Defense, September 2009 | Go to article overview

Tighter Rules for Conflicts of Interest


Kennedy, Laura K., National Defense


This year, dramatic developments have changed the landscape for conflicts of interest in government contracting. The first-ever personal conflicts of interest (PCI) regulations were implemented by the Department of Treasury, and Congress enacted new organizational conflict of interest (OCIs) laws. These changes signal a new era of tighter rules governing actual and potential conflicts between the government and the contractor.

Historically, contractor employees have been flee of the ethical safeguards imposed on federal employees, even when they both performed the same type of work. Congress looks to change that. In the Defense Authorization Act for fiscal 2009, Congress directed the Office of Federal Procurement Policy to coordinate with the Office of Government Ethics to study contracting methods that raise concerns for potential PCIs and revise the Federal Acquisition Regulations (FAR) as needed.

Even before this study began, the first ever conflict of interest rules were published. On Jan. 21, the Treasury implemented new PCI regulations for contracts under the Troubled Assets Relief Program. If these rules serve as a model for FAR rules, contractors could be subject to burdensome conflict of interest requirements.

Treasury's rules broadly define PCI as "a personal, business, or financial interest of an individual, his or her spouse, minor child, or other family member with whom the individual has a close personal relationship, that could adversely affect the individual's ability to perform under the arrangement, his or her objectivity or judgment in such performance, or his or her ability to represent the interests of the Treasury."

Contractors must verify extensive financial information about their management employees and key individuals who work on covered contracts. This information sometimes mirrors data federal employees must disclose on financial disclosure Form SF-278, which solicits information about filers' property interests and other assets, transactions of property and investments, gifts, reimbursements and travel expenses, liabilities, arrangements with employers and outside positions and pay exceeding $5,000.

Merely reporting this information to the government to determine whether an improper PCI exists is not enough. Contractors must analyze the information, identify improper conflicts and disqualify such employees from performing contract work absent mitigation measures that effectively neutralize the conflict.

Contractors must also implement procedures designed to discover, monitor and report PCIs on a continuous basis and certify annually that management and key individuals have no issues. They must retain information needed to comply with this rule for three years following contract termination. …

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