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

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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


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Organizational Conflicts of Interest

  • Government Interest is fair, competitive, and unbiased performance of a government contract (FAR Subpart 9.5)

  • Involves Agency Acquisition Planning


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Organizational Conflicts of Interest

  • There are Four Basic FAR Rules (9.505) for Analysis and Avoidance of OCI


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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)


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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)


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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


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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)


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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”


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Rule 3: Technical Evaluation (Cont’d)Contracts

  • 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)


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Rule 3: Technical Evaluation (Cont’d)Contracts (Cont’d)

  • Proper safeguards can ensure objectivity

    • Contracting Officer has discretion for safeguards


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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


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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


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Implementation of Rules (FAR 9.506) Performing Advisory Services (FAR 9.505-4) (Cont’d)

  • Role of CO is to identify “significant potential OCI”

  • Must prepare written analysis and plan for avoiding or mitigating OCI


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Implementation of Rules (FAR 9.506) (Cont’d) Performing Advisory Services (FAR 9.505-4) (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


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Implementation of Rules (FAR 9.506) (Cont’d) Performing Advisory Services (FAR 9.505-4) (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)


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Penalties for OCI Performing Advisory Services (FAR 9.505-4) (Cont’d)

  • 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


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Marketing Consultants (FAR 9.501) Performing Advisory Services (FAR 9.505-4) (Cont’d)

  • 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


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Marketing Consultants (FAR 9.501) (Cont’d) Performing Advisory Services (FAR 9.505-4) (Cont’d)

  • Exclusions from definition:

    • “Advisory assistance” services under FAR 37.2;

    • Routine engineering and technical services;


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Marketing Consultants (FAR 9.501) (Cont’d) Performing Advisory Services (FAR 9.505-4) (Cont’d)

  • Legal, actuarial, auditing, and accounting services; and

  • Training services

  • Bottom line:

    • OCI rules apply to marketing consultants


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    Personal Conflicts of Interest Performing Advisory Services (FAR 9.505-4) (Cont’d)

    • 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)


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    Personal Conflicts of Interest Performing Advisory Services (FAR 9.505-4) (Cont’d)(Cont’d)

    • Personal financial interest conflict

    • Employment restrictions

    • Military personnel (pensions)


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    Other Post-Employment Restrictions Performing Advisory Services (FAR 9.505-4) (Cont’d)

    • 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


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    Other Post-Employment Restrictions Performing Advisory Services (FAR 9.505-4) (Cont’d)(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


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    Other Post-Employment Restrictions Performing Advisory Services (FAR 9.505-4) (Cont’d)(Cont’d)

    • Senior Personnel

      • One-year prohibition from representing another party before agency from which he/she was terminated


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    Other Post-Employment Restrictions Performing Advisory Services (FAR 9.505-4) (Cont’d)(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


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    Other Post-Employment Restrictions Performing Advisory Services (FAR 9.505-4) (Cont’d)(Cont’d)

    • Members of Congress and Staff

      • One-year prohibition similar to those imposed on senior and very senior executive employees


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    Other Post-Employment Restrictions Performing Advisory Services (FAR 9.505-4) (Cont’d)(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


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    Violations/Penalties Performing Advisory Services (FAR 9.505-4) (Cont’d)

    • 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


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    Conflicts Under Procurement Integrity Act & Regulations Performing Advisory Services (FAR 9.505-4) (Cont’d)

    • Governed by 41 USC 423 and FAR Part 3.104

    • Restrictions on Former Agency Officials’ Acceptance of Compensation From a Contractor


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    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


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    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


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    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


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    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


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    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


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