Personal Conflict of Interest Rules to Apply to More Contractor Employees

Back in 2010, a section was added to FAR that addressed PCIs or Personal Conflicts of Interest. At the time, we wrote fairly extensive analysis of the new provision. See for example, here and here and here. Government employees engaged in the acquisition process are bound by all kinds of regulations to help prevent personal conflicts of interest. There was great concern however that since existing regulations didn't extend to contractor personnel performing the same or similar acquisition functions, there existed an internal control weakness that might allow personal conflicts of interest to influence Government acquisitions.

So, the Government developed some regulations pertaining only to contractor employees that were, in some manner, associated with Government acquisitions. These regulations required covered employees to prepare financial disclosure statements, rules regarding prevention, training, internal audits to test compliance, disciplinary actions, and reporting.

Recently, the FAR committees issued proposed regulations to significantly expand the number of employees covered by the PCI (Personal Conflict of Interest) regulations from those engaged in procurement related activities to anyone engaged in activities that are inherently governmental. Those inherently governmental positions are listed in FAR 7.5 which contains a listing of functions considered to be inherently governmental functions or which shall be treated as such. The regulations warn that the listing is not all inclusive meaning they're giving themselves a bit of wiggle room should they decide that it is in their best interest to call a function inherently governmental. This is an extensive listing, containing 20 functions that are by definition, inherently governmental.

This expansion of an existing regulation will have a significant impact on contractors because it will greatly increase the number of personnel required to prepare financial disclosures and go through indoctrination and training. It will also increase the number of employees that contractors need to monitor though their internal audit processes and other oversight.

Its probably not possible at this point to head off the new regulation as the requirement is statutory (i.e. it is based on the 2013 National Defense Authorization Act). Nevertheless, interested parties, and that's every contractor that is potentially affected by the expansion, have the opportunity to study it and provide comments to rule making authorities.

For more information on the proposed regulation including instructions on how to comment, click here.