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New Contractor Conflict of Interest Rules May Be Coming Soon, with a Special Focus on Consulting and Advisory Contracts

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In legislation passed last week, Congress directed the FAR Council to issue new rules for contractor organizational conflicts of interest.  The legislation itself did not create any new OCI standards, but provided factors for the council to consider, focusing on conflicts of interest for companies that act as consultants to the government.

It is unclear at this point what the precise nature and extent of the resulting changes to the OCI rules may be.  But the new law makes it likely that there will be some fairly significant revisions.  Congress set a deadline of Summer 2024 for the new regulations, so the contracting community should be on the lookout for a notice of proposed rulemaking in the coming months, and should not hesitate to submit comments for the government’s consideration.

The OCI rules are administered by the FAR Council, which is a working group consisting of the Department of Defense, the General Services Administration, and the National Aeronautics and Space Administration.  Congress identified three key areas for the FAR Council to address, and we summarize each here.

First, the FAR Council must provide “definitions” for “specific types of organizational conflicts of interest, including [1] unequal access to information, [2] impaired objectivity, and [3] biased ground rules.”  These three OCI categories are not currently defined in the FAR; instead they were originally articulated in GAO’s 1995 decision in Aetna Gov’t Health Plans, Inc., and a large body of case law has developed over the years to define them.  It remains to be seen whether the FAR Council will adopt the definitions from existing case law or propose new definitions.  In addition, the FAR Council may consider announcing additional categories of OCIs.

Second, the FAR Council must prepare “illustrative examples” of OCIs involving two scenarios:  (a) “relationships of contractors with public, private, domestic, and foreign entities that may cause contract support to be subject to potential organizational conflicts of interest, including undue influence,” and (b) “the awarding by a Federal regulatory agency of a contract for consulting services to a contractor if employees of the contractor performing work under such contract are permitted by the contractor to simultaneously perform work under a contract for a private sector client under the regulatory purview of such agency.”

These rules appear directed at contractors who may have other clients with interests that conflict or potentially conflict with those of the contracting agency.  Congress also instructed the FAR Council “to permit contracting officers to take into consideration professional standards and procedures” that might mitigate OCI concerns. 

Third, the new rules must “allow executive agencies to tailor” their “solicitation provisions and contract clauses as necessary to address risks associated with conflicts of interest and other considerations that may be unique to the executive agency.”  Such tailored provisions could create added layers of complexity to the OCI standards.

Covington will continue to monitor developments and will watch for a notice of proposed rulemaking from the FAR Council.

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