Personal Conflicts of Interest (PCIs) of Contractors' Employees - Part 2

In Part 1 of this series we discussed efforts by the Government to ensure that the acquisition process is not compromised with personal conflicts of interest by those engaged in buying goods and services for the Government. Existing regulations that help prevent personal conflicts of interest by Government employees engaged in the acquisition process, do not extend to contractor employees performing the same or similar contracting function. As the Government increases its reliance on contractors to assist in procurement-related matters, the risks associated with personal conflicts of intersts (PCIs) by contractor employees increase as well. To close this loophole, the OFPP in concert with the FAR councils have proposed new regulations requiring certain contractors to implement policies to identify and prevent PCIs. These new regulations will add a new Part 3.11 to the FAR.

Under the proposed regulations, contractors that have employees performing acquisition functions closely associated with inherently governmental functions to identify and prevent personal conflicts of interest for such employees. In addition, these contractors will be required to prohibit covered employees with access to non-public Government information from using it for personal gain. Note the highlighted words. Each of these terms has a precise meaning within the context of the proposed regulation and are defined within the new regulations as follows: 

Eemployee means an individual who

• is an employee of the contractor or subcontractgor, a consultant, a partner, or a sole proprietor
• performs an acquisition function closely associated with inherently governmental functions

Acquisition functions closely associated with inherently governmental functions means supporting or providing advice or recommendations with regard to the following activities;

• planning acquisitions,
• determining what supplies of services are to be acquired including developing statements of work,
• developing or approving any contractual documents, to include documents defining requirements, incentive plans, and evaluation criteria,
• evaluating contract proposals,
• awarding Government contracts,
• administering contracts (including ordering changes or giving technical direction in contract performance or contract quantities, evaluating contractor performance, and accepting or rejecting contractor products or services),
• terminating contracts, and
• determining whether contract costs are reasonable, allocable, and allowable.

Personal conflict of interest means a situation in which a covered employee has a financial interest, personal activity, or relationship that could impair the employee's ability to act impartially and in the best interest of the Government when performing under the contract.

• Among the sources of personal conflicts of interest are;
• financial interest of the covered employee, of close family members, or other members of the household
• other employment or financial relationships (include seeking or negotiating for prospective employment or business); and
• gifts, including travel
• Financial interest may arise from
• compensation, including wages, salaries, commissions, professional fees or fees for business referrals
• consulting relationships (including commercial and professional consulting and service arrangements, scientific and technical advisory board memberships, or serving as an expert whitness in litigation);
• services provided in exchange for honorariums or travel expense reimbursments;
• research funding or other forms of research support
• investment in the form of stock or bond ownership or partnership interest (excluding diversified mutual fund investments);
• real estate investments
• patents, copyrights, or other intellectul property interests; or
• business ownership and investment interests 

Non-public Government information means any information that a covered employee gains by reason of work under a Government contract and that the ocvered employee knows, or reasonably should know, has not been made public. In includes information that

•  is exempt from disclosure under FOIA or otherwise protected from disclosure by statute, Esecutive order, or regulation, or
• has not been disseminated to the general public and is not authorized by the agency to be made available to the public

In tomorrow's post, we will address some of the specific implementation issues associated with the proposed regulation.