Organizational Conflicts of Interest (OCI)

1. Organizational Conflicts of Interest(OCI) U.S. Army Acquisition, Logistics and Technology Senior Leader Training Forum Paul HoburgAssociate Deputy General Counsel (Acquisition)Office of the Army General Counsel November 2011

2. Road Map • Current OCI Framework • Federal Acquisition Regulation (FAR) • U.S. Court of Federal Claims (COFC) and Government Accountability Office (GAO) decisions • Special Rules Concerning OCI in Major Defense Acquisition Programs (MDAP) • Office of Federal Procurement Policy (OFPP) Proposed Changes

3. Current OCI Framework • Governed primarily by Federal Acquisition Regulation (FAR) Subpart 9.5 and case law • Definition • An “organizational conflict of interest” means that because of other activities or relationships with other persons, a person is unable to render impartial assistance or advice to the Government, or the person’s objectivity in performing the contract work is or might be impaired, or a person has an unfair competitive advantage (FAR 2.101) • “Person” includes a company or other organization and affiliated entities such as subcontractors • Distinct from ethics/standards of conduct restrictions

4. Current OCI Framework • OCI rules apply to contracts with for-profit and nonprofit entities • OCIs most likely to occur in contracts involving • Management support services • Consultant or other professional services • Contractor performance of, or assistance in, technical evaluations • Systems engineering and technical direction work performed by a contractor that does not have overall responsibility for development or production • OCIs can arise on an instant contract, or when the nature of the work to be performed on the instant contract creates an actual or potential conflict of interest on a future acquisition

5. Current OCI Framework • The FAR and Case Law address three types of OCI situations • “Unequal access to information” – Where a company has access to nonpublic information, typically through performance of a contract, that gives it an unfair advantage in the competition for a later contract • “Biased ground rules” – Where a company sets the ground rules for future competitions by, e.g., writing the specifications that competitors for a contract must meet • “Impaired objectivity” – Where a company is asked to perform tasks that require objectivity, but another role the company plays casts doubt on the company’s ability to be truly objective

6. Current OCI Framework – General Rules • A company that provides systems engineering and technical direction without overall contractual responsibility for development or production is ineligible to be a prime or sub contractor to supply the system or its major components • A company that prepares specifications or work statements covering nondevelopmental items shall not be allowed to furnish the items as a prime or sub • A company may not be awarded a contract to evaluate its own offers for products or services or those of a competitor without proper safeguards • A company may not obtain access to proprietary information from another company to perform a Government contract without restrictions - e.g., nondisclosure agreement with the company providing the information • Must analyze situations on a case-by-case basis using common sense, good judgment, and sound discretion

7. Current OCI Framework • Procedures and Contracting Officer/Head of Contracting Activity (HCA) Responsibilties • Analyze planned acquisitions to identify and evaluate potential OCIs and avoid, neutralize, or mitigate significant potential conflicts before award • If a significant OCI exists, recommend to the HCA a course of action to resolve • Before determining to withhold award based on OCI considerations, notify the contractor and allow the contractor to respond • The HCA may approve a waiver authorizing award to a particular company, notwithstanding an OCI if it is determined to be in the best interest of the Government

8. Current OCI Framework – Case Law • Unequal Access to Information • NetStar-1 Government Consulting, Inc v. U.S. (Fed. Cl. 2011) • ARINC Engineering Services, LLC v. U.S. (Fed. Cl. 2007) • Biased Ground Rules • Turner Construction Co., Inc. v. U.S. (Fed. Cl. 2010) • L-3 Services, Inc. (Comp. Gen. 2009) • Impaired Objectivity • Serco Inc. (Comp. Gen. 2010) • Aetna Government Health Plans, Inc. (Comp. Gen. 1995)

9. Special MDAP Rules • DFARS 209.571 - Organizational Conflicts of interest in MDAPs • Implements section 207 of the Weapons System Acquisition Reform Act of 2009 • Takes precedence over FAR 9.5 in the event of any inconsistency • MDAPs are defined as including pre-MDAPs • Is DoD policy that agencies obtain advice on MDAPs from sources that are objective and unbiased • Defines “systems engineering and technical assistance” (SETA); considerably expands existing FAR coverage • Defines “mitigation,” and where the KO and contractor have agreed to a mitigation, the mitigation plan must be incorporated into the contract • If an otherwise successful offeror cannot effectively mitigate , the KO shall use other approaches to resolve the OCI, such as selecting another offeror or requesting a waiver

10. Special MDAP Rules, Continued • DFARS 209.571 - Organizational Conflicts of interest in MDAPs • Agencies shall obtain advice on systems architecture and systems engineering on MDAPs from Federally Funded Research and Development Centers or other sources independent of the system contractor • Prohibits a SETA contractor on a program from participating as a contractor or major subcontractor in the development or production of a weapon system under the program • Non-waivable • EXCEPTION: If the HCA determines that DoD needs the domain experience and expertise of the highly qualified, apparently successful offeror AND there is assurance based on the agreed-to resolution strategy that the offeror will be able to provide objective and unbiased advice without a limitation on future participation in development or production

11. OFPP Proposed Changes • FAR Case 2011-001 • Proposed Rule dated April 26, 2011 • Currently undergoing comment review • Rulemaking expresses a willingness to depart from past case law if such changes will produce an OCI framework that is clearer, easier to understand, and better suited to protecting the Governments interests • Would establish a distinction between OCIs that cause harm to the competitive acquisition system versus those that merely harm the Government’s business interests • Would move OCI coverage from FAR Part 9 to Parts 3 and 4 • More to follow . . . Perhaps . . . .

12. Paul HoburgOffice of the Army General Counsel104 Army Pentagon, Rm 3C546Washington, DC 20310-0104 703-697-5120 paul.hoburg@us.army.mil