Identifying and Mitigating Organizational Conflicts of Interest

George W. Ash and Erin L. Toomey

A buzz phrase that has become increasingly familiar to government contractors and contracting officers is “organizational conflict of interest” (“OCI”). As a result of the private sector hiring ex-government employees and the government outsourcing traditional public sector work to the private sector, OCIs have become a potential obstacle to a contractor’s ability to perform government contract work. Although the burden is on the contracting officer to identify, evaluate, avoid, neutralize, and negotiate potential conflicts of interest prior to award, all contractors must be diligent about anticipating OCI issues and developing mitigation plans to present to the government when issues arise. In this article, we will describe how to identify an OCI and what a contractor can do to avoid, neutralize and/or mitigate potential or actual OCIs.

Identifying OCIs

OCIs are addressed in Federal Acquisition Regulation (“FAR”) Subpart 9.5, “Organizational and Consultant Conflicts of Interest.” An OCI is defined in FAR 2.101, which provides:

Organizational conflict of interest means that because of other activities or relationships with other persons, a person is unable or potentially unable to render impartial assistance or advice to the Government, or the person’s objectivity in performing the contract work is or might be otherwise impaired, or a person has an unfair competitive advantage. FAR 2.101.

The General Accounting Office (“GAO”), a forum for hearing bid protests,¹ has broken down the FAR’s definition of an OCI into three different categories: (1) unequal access to information; (2) biased ground rules; and (3) impaired objectivity.

First, a contractor has unequal access to information when it has access to non-public information that leads to a competitive advantage. This does not include information that is furnished voluntarily without limitation on its use or information available to the Government or the contractor from other sources without restriction. Note too that the advantage inherent in being an incumbent does not, in and of itself, create an OCI. GAO acknowledges that an incumbent has information and know-how that is not necessarily available to other contractors, but that does not rise to the level of an OCI.

Second, a contractor encounters biased ground rules when the contractor has set the ground rules for a subsequent contract by, for example, writing the Statement of Work or specification. By setting the ground rules, a contractor can manipulate the ground rules so that they are more favorable to the contractor than to its competitors. To the extent the contractor prepares the Statement of Work or specification, it may be precluded from bidding on the contract for the development or sale of that work to the government.

Third, a contractor’s objectivity is impaired if it is unable to render impartial advice to the government, or will appear to be effected by its relationship with another entity in its performance of a government contract. This type of OCI most often arises in the context of a contractor providing consulting services to the government, where the contractor’s relationship with other entities has the potential to influence the contractor’s advice and, consequentially, impair the contractor’s objectivity.

Avoiding, Neutralizing and/or Mitigating OCIs

Every contractor must assess its government prime contracts and subcontracts that involve access to other’s proprietary information or provide unusual insight into an agency’s decision making process in making a contract award, to determine if the performance of its contracts create an actual or potential OCI. Additionally, contractors should consider OCI implications and identify measures that must be taken to mitigate OCI concerns before accepting an award. Last, prime contractors should make sure that their team members and/or subcontractors do not have any potential or actual OCIs and that they also have in place appropriate mitigation plans to address any OCIs that may arise.

Although encountering an OCI does not automatically disqualify a contractor from performing work on a procurement, the contractor must develop a mitigation plan to address the OCI concerns and receive contracting officer approval of such plan prior to proceeding to perform the contract work. Mitigation plans often include “firewalls” to prevent the spread of information from one division of a company to another or from one set of employees to others. They also often include the identification of an individual responsible for addressing OCI concerns.

OCIs are receiving more attention by contracting officers in evaluating proposals and by competitors in bid protests. Accordingly, to succeed in this environment, government contractors must become accustomed to identifying potential or actual OCIs and have in place a plan to deal with OCIs as they arise.

¹Although the issue of whether a contractor has an actual or potential OCI most often arises in the context of a bid protest, the government has also initiated a false claim lawsuit against a contractor for failing to disclose a potential or actual OCI. See United States v. Science Applications Int’l Corp., 502 F. Supp. 2d 75 (D.D.C. 2007).

George W. Ash and Erin L. Toomey are members of the law firm of Foley & Lardner LLP in Detroit, where they specialize in government procurement issues. They may be reached at (313) 234-7100.
Note: This update provides information of general interest presented in summary form, and does not constitute individual legal advice.