Appearances are (almost) everything

Note: OCI is the abbreviated Federal term for Organizational Conflicts of Interest.

As previously mentioned, the US Dept. of Defense has proposed a new rule for identifying and dealing with OCIs. The proposed rule is intended to incorporate principles derived from caselaw dealing with OCI, to expand the utility of the examples the rule previously provided.

The stated policy of the proposed rule is:

203.1203 Policy.

(a) Organizational conflicts of interest can impair--

(1) The Government's ability to acquire supplies and services that
are the best value to the Government. For example--

(i) A contractor with an organizational conflict of interest may
influence the Government to pursue an acquisition outcome that is more
compatible with the contractor's interests than with the Government's
interests.

(ii) A contractor that properly had access to non-public
information while performing under a Government contract, grant,
cooperative agreement, or other transaction may be able unfairly to use
the non-public information to its advantage to win award of a future
contract.

(2) The public trust. The Government must avoid the appearance of
impropriety which taints the public view of the acquisition system.
Organizational conflicts of interest, by their mere appearance, call
into question the integrity and fairness of the competitive procurement
process. This concern exists regardless of whether any individual
contractor employee or contractor organization ever actually renders
biased advice or benefits from an unfair competitive advantage.

(b) The vast preponderance of contracting done within DoD is done
free of actual or potential conflict of interest. However, there are
circumstances under which potential or actual conflict of interest
could exist. In those instances, it is the Government's policy to
protect its interests by identifying and resolving organizational
conflicts of interest. To that end, in every acquisition in which the
contracting officer determines that contractor performance of the
contemplated work may give rise to one or more organizational conflicts
of interest, the contracting activity shall ensure that--

(1) Offerors are required to disclose facts bearing on the possible
existence of organizational conflicts of interest both prior to
contract award and on a continuing basis during contract performance;

(2) All identified organizational conflicts of interest are either
resolved or waived prior to the award of a contract (including
individual task or delivery orders); and

(3) The contract establishes a process by which the parties will
resolve any organizational conflicts of interest that arise during
contract performance.

(c) Except as may be otherwise prohibited within this regulation,
it is DoD policy that, generally, the preferred method to resolve an
organizational conflict of interest is mitigation (see 203.1205-1). It
is recognized, however, that mitigation may not be advisable in every
instance. In accordance with 203.1205-1(c), in those cases where the
contracting officer determines that mitigation is not likely to be
effective and the conflict of interest cannot otherwise be resolved,
the contracting officer shall select another offeror or request a
waiver in accordance with 203.1205-4.

It is worth reading the whole rule yourself. But since the language of such rules can be daunting, secondary sources are useful if incomplete guides, and WashingtonTecnhology.com has provided a few helpful articles on the subject.

DOD proposes new conflict of interest rules

Defense officials have proposed definitions and explained new types of conflicts, in order to update and address issues that have arisen since the rules last underwent a major overhaul. DOD’s new proposal seeks to clarify terms such as "contractor" to note that it means the entire company. It also adds new terms such as “marketing consultant,” because conflicts now stretch beyond contracts, according to a notice in today’s Federal Register.

The proposal lays out various types of conflicts, such as impaired objectivity and unfair access to information no one else has. Current rules in the Federal Acquisition Regulation (FAR) describe the conflict types by task, a point that has caused criticism of how conflicts are identified.

The proposed policy notes that contracting officers must “identify and evaluate [potential conflicts] prior to contract award, using common sense and good judgment, and the DOD preference for mitigation.”

As the proposed rule explains (in § 203.1205-3), there are generally "three methods of resolution: avoidance, limitation on future contracting (neutralization), and mitigation." The following article from Washington Technology discusses certain objections to the "mitigation" rules.

DOD ethics rule short on mitigation, industry complains

The Defense Department's proposed ethics regulations have left the defense industry feeling shortchanged. The proposal offers few details about mitigation and its use.

To protect the image of federal contracting, the government must avoid the appearance of impropriety, which taints the public view of it, according to the proposed policy. “Organizational conflicts of interest, by their mere appearance, call into question the integrity and fairness of the competitive procurement process,” it states.

In the proposed policy, officials define mitigation as a means to minimize an OCI to an “acceptable level.” The contracting officer can use a firewall to reassign company employees who may have had access to certain information or keeping a company’s supervisors from influencing an acquisition, the policy states. The contracting officer could also release the information to the rest of the bidders. Finally, a company could be required to have a subcontractor carry out the conflicted portion of the work. But the details basically end there.

[Criticizing the new proposal:] “Contracting officers may err on the side of avoiding even the appearance of an OCI and reject workable OCI mitigation plans, to the collective detriment of DOD, the public and the contractor community,” the American Bar Association wrote in its response to the proposed policy.

[Complementing the new proposal:] Industry experts said mitigation offers DOD access to more companies with expertise. It keeps competition in the acquisition process and promotes transparency. Moreover, mitigation allows contracting officers to use their expertise and experience to make decisions about the conflict, according to the Coalition for Government Procurement.