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With the federal government continuing to rely heavily on service contracting coupled with industry consolidation, organizational conflicts of interest (and the safeguards against them) are becoming more common.  Until now, guidance related to organizational conflicts of interest (OCIs) was primarily provided through bid protest case law, rather than through regulations and policy.

Recently, the Department of Defense, GSA and NASA proposed an amendment to the Federal Acquisition Regulations as it relates to OCIs.  The Proposed Rule is expected to provide greater flexibility for contracting officers in addressing OCIs, while reducing litigation and associated costs for both the government and industry.

The Proposed Rule segregates OCIs into two categories - (1) conflicts arising out of judgmental work performed by the contractor and (2) conflicts relating to unequal access to competitively sensitive information.  OCIs are further distinguished between those that can impair "the integrity of the competitive process" and those that only threaten the "government's business interests."  In all instances, a contracting officer must take appropriate measures to reduce or eliminate risk to the integrity of the competitive process.  However, there is a greater flexibility when the conflict only impacts the government's business interests.  In such instances the contracting officer may assess that the risk of a conflict as being "acceptable" thus requiring no additional conflict resolution techniques.

What techniques may a contracting officer employ to resolve OCIs?  With respect to conflicts arising out of judgmental work performed, the contracting officer has three primary options:  avoidance, neutralization and mitigation.

Avoidance results in a statement of work that excludes tasks requiring subjective judgment or, in extreme circumstances, resulting in an offeror being excluded because "no less restrictive method" is available to protect the government's interest.
Neutralization involves limitations on future contracting efforts either as a prime contractor or subcontractor.
Mitigation includes having either a conflict-free, subcontractor (or other team member) perform the conflicted portion of the work or having the contractor implement internal controls and/or barriers prohibiting certain individuals from involvement with contract performance.  Any mitigation plan would be analyzed by the contracting officer in order to assess its expected effectiveness, as well as the government's ability to monitor and enforce.
With respect to OCIs that result in unequal access to competitively sensitive information, not only does the Proposed Rule provide measures to resolve this issue, it also adds an "access clause" which will contractually obligate all contractors and subcontractors to protect all nonpublic information to which they have access.

The "access clause" requires contractors, among other things, to safeguard such information from unauthorized use or disclosure; obtain non-disclosure agreements from each individual who "may" have access to the information (and provide a copy to the contracting officer upon request); and requires that any violations of the clause be reported by the contractor to the contracting officer.

What happens when an incumbent contractor, who has a natural advantage due to its experience, is also involved in the procurement?  The Proposed Rule addresses this matter and concludes that this, in and of itself, would not represent an unfair competitive advantage.  However, should the access to nonpublic information which was provided by the government or gathered through performance of the contract, provide the incumbent with greater information than other prospective offerors, then the contracting officer must take appropriate action to resolve the OCI.  Such measures include the following:

Information sharing - Certain information may be shared with all offerors to provide a competitive balance, and should be shared sufficiently early in the process to allow offerors adequate time to utilize such information.
Mitigation - This option works best when some contractor employees, who have had access to nonpublic information, can be excluded from the procurement, but also can be successful through organization/physical barriers or by establishing restricted access to select workplaces or data.
Exclusion - The last resort by the contracting officer and should only be used if the nonpublic information provided an unfair competitive advantage to an offeror and neither sharing nor mitigation techniques would protect the integrity of the competition.
If you have any questions please feel free to contact Mr. Flaherty at Flaherty@rubino.com, (301) 564-3636.