Mr. Seth Cowell
Ethics Counselor
ESC/JA
(781) 377-6055
 Why?
 Laws
Applicable to Government Employees
 Current Contractor Obligations: FAR
3.10/52.203.13
 Current ESC A&AS Contractor Obligations:
H112
 Future A&AS Contractor Obligations: FAR
3.11/52.203-16
 John
is a government engineer supporting a
$1B source selection, ultimately won by
General Electric. After the award, it
becomes known that at the time of the
source selection, John owned $100,000 of
General Electric stock.
 Consequences



Basis for bid protest
Black eye for the procurement system
Personal liability for John
 John
is a government contracted engineer
supporting a $1B source selection, ultimately
won by General Electric. After the award, it
becomes known that at the time of the
source selection, John owned $100,000 of
General Electric stock.
 Consequences



Basis for bid protest
Black eye for the procurement system
Liability for John or his employer?
•
•
•
Very few defense contractors’ ethics
programs require employees to
disclose personal conflicts of interest
DoD and OGE officials believe current
requirements are “inadequate to
prevent certain conflicts from arising,
especially financial conflicts of
interest [and] impaired impartiality”
“Given the magnitude of DOD’s
contractor employee use, our
analyses of the range of key roles
that contractor employees have
across DOD, and the need to ensure
the integrity of federal spending, we
believe that DOD needs departmentwide personal conflict of interest
safeguards for certain contractor
employees who are providing the type
of services affecting governmental
decisions, similar to those required of
DOD’s federal employees.”
•Increased reliance on
contracted technical, business
and procurement expertise
•No current disclosure
requirements
•NDAA FY 2009 Section 841:
prevent personal conflicts of
interest of contractors
performing acquisition
functions closely associated
with inherently government
functions
 Government
decision-making must be free
from the appearance of impropriety…the
taxpayer demands it
 Therefore, the Government expects that the
advice it gets from its employees and
contracted advisors is fair, impartial and
objective
Contractors must have a written code of
business ethics and conduct if they hold a
contract in excess of $5M
Contractor shall timely disclose…a violation of
Federal criminal law involving fraud, conflict
of interest…
 From
the GAO report: the current FAR
clauses “lack specific provisions to prohibit
conflicts of interest or employ other
safeguards to assure that the advice and
assistance received from contractor
employees is not tainted by personal
conflicts of interest.”
 Examples:


No mandated financial disclosure
Only requires company to disclose violations of
criminal conflict of interest statutes:
contractors are not subject to these
a)The contractor shall not assign, nor allow any employee for
whom it receives payment under this contract to perform
any task under this contract concerning any program,
prime contractor, contract, or other matter in which that
employee, or that employee's spouse, minor child or
household member has a financial interest.
b)A financial interest consists of any interest in, or affiliation
with, a prime contractor, a subcontractor to a prime
contractor, any offerors, or any prospective subcontractor
to any offeror for the program, contract, or other matter
for which the employee is performing the support task
under this contract.
c) The prime contractor shall obtain and maintain, as part of
its personnel records, a financial disclosure statement
from each employee assigned to perform support tasks for
the Government
d) PCO has authority to waive conflicts
 NDAA
2009, Section 841 reacts to the GAO
report
 New Subpart 3.11: “Preventing Personal
Conflicts of Interest for Contractor
Employees Performing Acquisition Functions”
and corresponding clause 52.203-16 (will
replace H112)
 Applies to acquisition A&AS (including FFRDC)
contracts above the simplified acquisition
threshold
 Public comment period closed January 2010
Conflicts Definition

“a situation where the employee has a financial
interests, personal activity or relationship that could
compete with the employee’s ability to act impartially
and in the best interests of the Government”
Financial interests may arise from







Outside compensation
Consulting relationships
Research funding
Stock/bond/partnership ownership (diversified mutual
funds excluded)
Real estate
Intellectual property interests
Business ownership
Non exhaustive list of sources of conflicts:




Financial interests of the employee, close family
members or other members of the household
Other employment
Seeking employment
Gifts
Contractor shall have





Screening procedures
A financial disclosure statement program with annual
and event-based updates
Train their employees
Report any conflict violation as soon as it is known
Flow the substance of the clause down to $100K+
subcontracts
Contractor shall not

assign an employee with a personal conflict to perform
a task
Mitigation/Waiver


If an employee has a conflict, the company may propose
a mitigation plan or ask for a waiver
The approval authority is the Head of the Contracting
Activity
Government Remedies




Suspension of contract payments
Impact on award fee
Termination
Suspension/Debarment
The Government’s Expectations/Standards


Increased obligation to monitor employee (including
subK employee) activities both under the contract and
outside
Information collected on disclosure forms




Dollar thresholds?
Degrees for covered relationships?
When to notify the Government?



How to identify the conflicts
Actual conflict
Apparent conflict
Standard applied by the Government to mitigation plans
or waiver requests
Mr. Seth Cowell
Ethics Counselor
ESC/JA
(781) 6055
ethics@hanscom.af.mil