DoD proposal could tighten Organization Conflict of Interest rules

Tuesday - 4/27/2010, 8:00pm EDT

Marsha Madsen, partner, Mayer Brown

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By Dorothy Ramienski
Internet Editor
Federal News Radio

The Defense Department is proposing to amend the Defense Federal Acquisition Regulation Regulation regarding organization conflicts of interest (OCI), which could affect how vendors do business with DoD.

Marsha Madsen is a partner at Mayer Brown and led the Services Acquisition Reform Advisory Panel, which examined the changes that DoD wants to make.

She explained that, even in their current form, OCI rules have been around for years, but new concerns have cropped up which prompted the recent review.

"There's a perception that's been brewing for awhile that because of the number of contractor personnel that support the government, acquisition decisions in the government may, potentially, at least, be unduly influenced by contractors. Congress appears to have had this concern when it enacted the Weapons System Acquisition Reform Act. I think, actually, in practice agencies do a good job with OCI because, as I said, the rules have been around for a long time."

This does not mean that the system is perfect.

Madsen said there have been decisions from the GAO and the Court of Federal Claims that did show that the government did not analyze and mitigate organizational conflicts.

"While these decisions involved a very small number of acquisitions, the nature of the problem as revealed over a period of 15 years or so has caused some concerns. I should note here that in almost all of these cases, when the government went back and did do a proper analysis and there was a subsequent protest, that protest was denied."

In addition, contractors are also facing challenges.

"Contractors are finding that some agencies are really unwilling to do an OCI analysis. This is a phenomenon that has kind of surfaced in the last couple of years. [they also don't want] to permit mitigation. Instead, the agencies say -- 'This is very difficult, we just want to avoid an OCI, we don't want an issue, we don't want the risk' -- and so what they'll do is just say a company can't participate in the procurement, or it has to divest itself of a particular area of business."

Thus, the SARA panel recommended that the rules be reviewed and revised for clarification. Madsen said there is a whole chapter in the report that deals with various issues involving a blended workforce, and, within that, specific recommendations for OCI.

"The specific recommendations regarding [OCI] is the product of the panel going back and looking at those rules, the age of them, and the fact that, despite the fact that there were 15 years of GAO and Court of Federal Claims decisions providing guidance on the rules -- the rules had not been updated. So, the panel recommended that the rules be reviewed and updated."

There has been a great deal of debate about whether the OCI rules need to change in the first place, or, if they are changed, by how much.

Madsen said part of the confusion might stem from the fact that there has been a lot of decisional law that provides guidance, but is not specifically laid out in the FAR.

"A lot of the examples, quite frankly, in the FAR are outdated. So, while the underlying concepts may be still valid, the explanations and the guidance that's provided to contractors and to agencies needed to be updated to provide some predictability in this area."

The rule does have some negative aspects to it, as well, depending on how one looks at it. Madsen explained that there is, in her opinion, a very burdensome disclosure requirement that has been added to the rule's clauses.

"For the first time, this rule would actually establish contact clauses that go into the different types of contracts, and the current FAR rule doesn't do that. One of those clauses both requires the contractor to make a disclosure of OCIs if they're aware of them, and that's not really a new concept.

"But added to that, the contractor is obligated to provide to the federal government huge amounts of information describing other work it has performed on contracts or subcontracts within a five year past period that is 'associated with the offer that it is planning to submit'."

Madsen said that, in that clause, the word 'associated' isn't defined, which could place a huge burden on contractors, and create massive volumes of material for agencies to deal with.

The deadline to return comments to DoD is June 21, but the agency has said it will accept comments before that time.