Government Finally Notices Contractors Might Have Conflicts of Interest
Published Date: 1/15/2025
Proposed Rule
Summary
The Department of Defense, GSA, and NASA want to update rules to stop companies from having conflicts of interest when working on government contracts. These changes will help make sure contractors play fair and don’t get an unfair advantage. If you’re involved in federal contracts, get ready to follow new guidelines and share your thoughts by March 17, 2025.
Analyzed Economic Effects
7 provisions identified: 0 benefits, 6 costs, 1 mixed.
Potential Significant Impact on Small Entities
The agencies state that the proposed rule may have a significant economic impact on a substantial number of small entities under the Regulatory Flexibility Act, because it applies to acquisitions exceeding the SAT and to commercial services. The rule will require disclosures, mitigation plans, and updates to agency procedures that affect small contractors.
New Offeror OCI Disclosure Duty
If you bid on federal contracts (solicitations exceeding the Simplified Acquisition Threshold and many commercial services), you must now include an OCI disclosure with your proposal under FAR 52.203-XX. The disclosure must list relevant OCI information (including active limitations on future contracting and client/industry relationships), state professional standards or procedures you follow, confirm you have disclosed all relevant facts, explain how you will address any OCI (for example, a mitigation plan or limitation on future contracting), and update disclosures when facts change.
Postaward OCI Disclosure Requirement
If you win a federal contract that may involve organizational conflicts of interest, FAR 52.203-DD will require you to promptly disclose any new or newly discovered OCI during contract performance. The rule warns that some newly reported OCIs may lead to contract termination, and the clause must be flowed down to subcontracts exceeding the SAT when work may create an OCI.
Mitigation Plans Must Be Incorporated
When an OCI can be handled by an acceptable mitigation plan, FAR 52.203-MM will require the contractor to submit the mitigation plan before award and have that plan incorporated into the contract. The clause covers changes to the plan and consequences for noncompliance, and must flow down to subcontracts exceeding the SAT where work is covered by the mitigation plan.
Limits on Future Contracting Can Be Imposed
Contracting officers may address some OCIs by imposing a FAR 52.203-LL limitation on future contracting that precludes the contractor (or affiliates) from entering certain future contracts for a specified duration or until a specific event. The contracting officer must fill in the nature and duration of the limitation and ensure the duration is sufficient to neutralize the OCI but no longer than necessary; the clause flows down to subcontracts exceeding the SAT.
Representations on Unequal Access to Information
FAR 52.203-AA will require offerors to state before submitting an offer whether they or affiliates had unequal access to information that could give an unfair advantage, describe steps they propose to resolve it, and represent that agreed mitigation measures were implemented. Offerors must also confirm that any firewall used was not breached or check a box and explain if it was not implemented or breached.
Expanded and Clarified OCI Definitions
The FAR definition of organizational conflicts of interest is revised to explicitly include 'unequal access to information,' 'impaired objectivity,' and 'biased ground rules' and adds definitions for affiliate/entity, firewall, impaired objectivity, biased ground rules, and unequal access to information. The change aims to clarify when an OCI exists and to give examples.
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