Conflicts of Interest in Government Procurement

Conflicts of interest in procurement undermine the fundamental premise of competitive government contracting -- that award decisions are made on merit. Both personal conflicts (affecting government employees) and organizational conflicts (affecting contractor firms) are regulated, with different but overlapping frameworks applying to each.

What is a Conflict of Interest in Government Procurement?

Organizational Conflicts of Interest (OCIs) arise when a company's work for the government in one context creates an unfair advantage or impairs its objectivity in another. FAR Subpart 9.5 identifies three types of OCI:

1. Biased ground rules: A contractor helps define the requirements or evaluation criteria for a competition in which it later competes. Because it shaped the rules, it may have an inherent advantage.
2. Unequal access to information: A contractor has access to nonpublic information about a competitor or about the government's requirements that is not available to other competitors.
3. Impaired objectivity: A contractor is asked to evaluate the performance or products of another contractor (or its own work), creating an inherent bias.

Contracting officers must identify potential OCIs during acquisition planning and either mitigate them (through mitigation plans, firewalls, and recusals) or restrict the contractor from certain competitions. FAR 9.505-4 and 9.506 provide specific examples and mitigation guidance.

Personal conflicts of interest for government employees are governed separately by criminal conflict-of-interest statutes (18 U.S.C. §§ 208-209) and OGE regulations, which require federal employees to recuse themselves from matters in which they have a financial interest.

Why conflicts of interest matter for government contractors

Contractors who hold systems engineering, advisory, and assistance services (SEAAS) contracts for a government program are typically barred from competing for the follow-on development or production contracts that their advisory work helped define. Failing to identify and disclose potential OCIs can result in contract award invalidation, termination for default, and debarment. Proactively managing OCIs -- including through firewalls and mitigation plans submitted with proposals -- demonstrates integrity and avoids costly disputes.

Example

A defense contractor holds an advisory contract supporting the Army's development of requirements for a new training system. When the Army releases the development solicitation, the advisory contractor wants to bid. The contracting officer reviews the contractor's mitigation plan (which proposes a firewall between the advisory team and the proposal team) but determines that the contractor's participation in drafting the requirements cannot be adequately mitigated. The contracting officer excludes the contractor from the competition. The contractor files a protest with the Government Accountability Office, which sustains the exclusion decision.

Frequently Asked Questions

How does a contractor disclose a potential OCI?

Contractors disclose potential OCIs in their proposal or in response to a specific OCI representation clause in the solicitation (typically FAR 52.209-7 or 52.209-11). The disclosure should describe the nature of the potential conflict and propose a mitigation plan.

What is an OCI mitigation plan?

An OCI mitigation plan describes specific actions the contractor will take to prevent the conflict from affecting contract performance or proposal preparation, such as establishing information firewalls, recusing specific individuals from work on the conflicted contract, or providing access to a neutral third party for oversight.

Can a prime contractor's OCI disqualify its subcontractors?

Yes. A prime contractor's OCI may extend to its subcontractors, particularly when the subcontractor is the entity that actually holds the conflicting work or possesses the improperly available information.

How long does an OCI restriction last?

OCI restrictions can last for the duration of a related advisory contract plus a cooling-off period after that contract ends. Some solicitations specify a "look-back period" (commonly two to four years) within which prior advisory work creates an OCI.