Breakout Session #401

2. CONFLICTS OF INTEREST – ORGANIZATIONAL & PERSONAL Breakout Session #401 Raymond S.E. Pushkar, Esq., PartnerMcKenna Long & Aldridge LLP, Washington, D.C. Date: Monday, April 23, 2007 Time: 10:45 am – 11:45 am

3. Organizational Conflicts of Interest • Government Interest is fair, competitive, and unbiased performance of a government contract (FAR Subpart 9.5) • Involves Agency Acquisition Planning

4. Organizational Conflicts of Interest • There are Four Basic FAR Rules (9.505) for Analysis and Avoidance of OCI

5. Rule 1: Systems Engineering & Technical Direction Contracts • Contractor not to be awarded prime supply contract for the system or subcontractor • Includes substantially all representative list of tasks (FAR 9.505-1)

6. Rule 2: Specifications & Statements of Work Contracts • Contractor for non-development items not to be awarded prime contract to furnish items or subcontract(FAR 9-505-2)

7. Rule 2: Specifications & Statements of Work Contracts (Cont’d) • Exclusions: • Supplementing other specifications provided by the government • Helping agency to prepare or refine under the control of agency

8. Rule 2: Specifications & Statements of Work Contracts (Cont’d) • Rule 2 only applies to competitive contracts for non-developmental items (e.g., prototype does not bar contractor from follow-on contracts for further development and production)

9. Rule 2: Specifications & Statements of Work Contracts (Cont’d) • Rule 2 does not apply to non-competitive procurements (e.g., sole source or non-competitive follow-ons) • Restrictions apply for “reasonable time”

10. Rule 3: Technical EvaluationContracts • Contracts for technical evaluation of other contractors’ products or advisory assistance services may not be awarded to contractors who would evaluate or advise agency on their own product (FAR 9.505-3)

11. Rule 3: Technical EvaluationContracts (Cont’d) • Proper safeguards can ensure objectivity • Contracting Officer has discretion for safeguards

12. Rule 4: Access to Proprietary Data of Other Contractors in Performing Advisory Services (FAR 9.505-4) • May Not Take Advantage of Same • Government requires non-disclosure agreement to protect proprietary information

13. Rule 4: Access to Proprietary Data of Other Contractors in Performing Advisory Services (FAR 9.505-4) (Cont’d) • Contractor can bid on subsequent production contracts provided it does not use the proprietary data covered by non-disclosure agreement • No OCI if data has fallen into public domain

14. Implementation of Rules (FAR 9.506) • Role of CO is to identify “significant potential OCI” • Must prepare written analysis and plan for avoiding or mitigating OCI

15. Implementation of Rules (FAR 9.506) (Cont’d) • Could involve solicitation language identifying nature and duration of potential conflict and restraints on offerors/awardees • CO given “sound discretion,” protest cases illustrate

16. Implementation of Rules (FAR 9.506) (Cont’d) • Government has burden of anticipating OCI and for mitigation plans, but some agencies shift that burden to contractors (e.g., DOE, EPA, by rules)

17. Penalties for OCI • Loss of contract opportunities • If disclosures in bidding are inaccurate or wrong, criminal false statements may apply (18 U.S.C. 1001) • Suspension or debarment under FAR Part 9.1

18. Marketing Consultants (FAR 9.501) • Contractors must disclose activities • Offerors must certify no unfair competitive advantage • FAR defines as “independent” contractors who furnish advice, information, direction, or assistance to offeror or contractor

19. Marketing Consultants (FAR 9.501) (Cont’d) • Exclusions from definition: • “Advisory assistance” services under FAR 37.2; • Routine engineering and technical services;

20. Marketing Consultants (FAR 9.501) (Cont’d) • Legal, actuarial, auditing, and accounting services; and • Training services • Bottom line: • OCI rules apply to marketing consultants

21. Personal Conflicts of Interest • Prohibition of situations in which interests of persons inside government or recently departed from such service conflict with person’s responsibilities as a present or past federal employee (18 USC 207 & 208) NOTE: Sections 207 & 208 do not apply to enlisted members of armed forces because they are not officers or employees (Joint Ethics Regulation, DOD 5500.7-R, extends the requirements to enlisted)

22. Personal Conflicts of Interest(Cont’d) • Personal financial interest conflict • Employment restrictions • Military personnel (pensions)

23. Other Post-Employment Restrictions • Permanent restrictions • Former government employee cannot make appearance, influence, communicate before a department in a particular matter where: • U.S. or D.C. is a party or has substantial interest; or • Former officer or employee participated personally or substantially in the particular matter in his/her official capacity

24. Other Post-Employment Restrictions(Cont’d) • One-year restrictions: • Trade & treaty matters • Advice on ongoing trade or treaty negotiations if personally and substantially participated in on behalf of U.S.; had access to treaty or trade negotiations and knew or should have known information was exempt from disclosure

25. Other Post-Employment Restrictions(Cont’d) • Senior Personnel • One-year prohibition from representing another party before agency from which he/she was terminated

26. Other Post-Employment Restrictions(Cont’d) • Very Senior Personnel • One-year prohibition • Includes Executive Schedule I to V – Vice President of the United States and Executive Office of the President – at set levels

27. Other Post-Employment Restrictions(Cont’d) • Members of Congress and Staff • One-year prohibition similar to those imposed on senior and very senior executive employees

28. Other Post-Employment Restrictions(Cont’d) • Two-Year Restrictions • Executive Branch Employees • Prohibited from knowingly making, with intent to influence, any communication or appearance before an agency on behalf of another in connection with particular matters in which US or DC is a party or has direct & substantial interest and former employee knows or should know that the particular matter was actually pending under his/her official responsibility within one year before termination of employment

29. Violations/Penalties • Penalties Vary • Imprisonment of not more than one year and $50,000 for each violation, conspiracy, aiding and abetting, false statements in certification or report • Suspension and debarment

30. Conflicts Under Procurement Integrity Act & Regulations • Governed by 41 USC 423 and FAR Part 3.104 • Restrictions on Former Agency Officials’ Acceptance of Compensation From a Contractor

31. Conflicts Under Procurement Integrity Act & Regulations (Cont’d) • One-year prohibition after official: • Served as PCO SSA, SSB, chief of financial or technical team in which contractor was selected • Award must be for contracts in excess of $10 million

32. Conflicts Under Procurement Integrity Act & Regulations (Cont’d) • Served as program manager, deputy, or ACO for contract in excess of $10 million • Personally made decision to award contract/subcontract, modification, or delivery order to contractor in excess of $10 million • Established overhead rates valued in excess of $10 million

33. Conflicts Under Procurement Integrity Act & Regulations (Cont’d) • Approved payment to contractor in excess of $10 million • Paid or settled claim of contractor if in excess of $10 million

34. Conflicts Under Procurement Integrity Act & Regulations (Cont’d) • Exceptions • No prohibition against compensation from a division or affiliate of contractor that does not produce same or similar products or services • Law provides contractor must make careful inquiries before providing compensation

35. Conflicts Under Procurement Integrity Act & Regulations (Cont’d) • Should contact agency ethics officer prior to offering/providing compensation to former government employee • Good-faith reliance on agency ethics official protects against allegations of violations of Procurement Integrity Act