Mitigate Your Contract Conflicts of Interest: John Chierichella

It’s not hard for federal contractors to run afoul of conflict-of-interest rules, particularly if they’re involved in long-term or complicated government work. John Chierichella explains some of the ways a conflict of interest can sneak up on a well-meaning contractor and offers some tips to avoid them.

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Contractor rules regarding organizational conflicts of interest, just like fashion, have been nothing if not fluid. As early as 2010, contractors were required to identify all actual or potential conflicts. More recently, Congress proposed legislation, in response to certain consulting contracts awarded to McKinsey & Co.

In 2023, up your procurement style game and consider conflicts of interest “out.” Instead, focus on a few classic tips to stay “in” as far as the government is concerned. Early attention, good communication, and sometimes even a waiver are perennial contracting “do’s” for winning awards this year and beyond.

An “organizational conflict of interest,” or OCI, is when a contractor’s performance on one government contract could compromise its objectivity in the performance of another contract or give it an unfair competitive advantage.

Ultimately, it’s up to federal agencies to determine whether a conflict exists and if so, whether and how it can be mitigated. Such a determination can lead to exclusion from a competition, termination of a contract, suspension, or debarment. Because the stakes are high, contractors need to be sensitive to the various ways OCIs can arise and proactive in eliminating or mitigating them.

That’s easier said than done. Between unequal access to information, impaired objectivity, and biased ground rules, there are many opportunities to find conflicts at both the prime and subcontract levels if an agency or a competitor looks hard enough. This is especially true for contractors with subsidiaries or departments that function as silos.

For the Contractor Who Knows Too Much

Sometimes being a former US government employee can be of great value in the contracting world. However, it’s sometimes possible to know too much, specifically when data obtained from the government during Contract A might be competitively advantageous in preparing a proposal for Contract B.

To mitigate unequal access to such non-public information, contractors must establish an effective firewall to prevent access to information between team members who are preparing a bid and team members who might have such non-public knowledge. Documentation of this kind of firewall is crucial. Contracting agencies will require detailed explanation of the measures in place to eliminate any competitive advantage.

In some instances, a firewall may not be feasible, but that doesn’t mean the bid is doomed. It may be possible simply to share the information with all competing offerors to level the playing field. But that’s a remedy for the government to invoke, not the contractor.

For the Contractor Who Means Well

Impaired objectivity can occur when a contractor’s advice could impact his or her business interests. Assessments or proposal evaluations often fit into this category, as do system engineering and technical assistance contracts.

The quality of advice in these cases doesn’t matter. What matters is whether there’s even a whiff of impropriety. In cases of potential impaired objectivity, it’s crucial to identify the risk early and either try to change the contract scope or relegate the OCI-laden tasks to a subcontractor that doesn’t have an OCI.

Impaired objectivity OCI’s are very difficult to mitigate. Some companies have gone so far as to divest themselves of subsidiaries doing long-term systems engineering and technical assistance (SETA) work because of the far-reaching enterprisewide OCI consequences.

For the Contractor Who Should Know Better

Biased ground rules occur when a contractor who plans to submit a proposal also has a hand in the preparation of the specifications and statements of work for non-developmental items. The reason for this is simple—a contractor that drafts an RFP around its own pre-existing systems and products is shutting out the competition before the race starts. This should be an easy one, yet it still happens. Just don’t do it.

Solicitations are rife with OCI-related clauses. Read them carefully. Identify whatever proactive disclosure obligations you have, analyze your susceptibility to actual, potential, or perceived OCIs. Then work with the contracting officer to develop an acceptable mitigation. By working in good faith to address these issues as soon as they arise, contractors can position themselves with a better chance of remaining in the competition for the award.

With a few contractors ending up “out of style” in recent years, there has been increased scrutiny over OCIs, making it more important than ever that offerors not only understand what these conflicts are but also know how to mitigate them. Uncle Sam has a way of knowing when contractors commit the “don’ts” in their proposals, so applying these recommendations will help stay “in” this season and beyond.

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Author Information

John Chierichella is the founder of Chierichella Procurement Strategies , a consultancy helping contractors pursue and perform Federal contracts and subcontracts. An alum of Shepard and Mullins, Chierichella has 50 years of bid experience and is nationally recognized by Chambers & Partners, Legal 500, and most recently by Who’s Who Legal as one of the most instantly recognizable names in government contracts law.

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