Federal contracting has rules designed to keep competitions fair and contractor advice objective. One of the most important, and most misunderstood, is the concept of an organizational conflict of interest, or OCI. An OCI can arise when a contractor’s other activities or relationships make it unable, or potentially unable, to give impartial assistance or advice, or give it an unfair competitive advantage.
OCI issues can be complex and fact-specific. This article provides general background; for real situations, consult a government contracts attorney.
The three common types
Decisions by the Government Accountability Office and the courts have generally grouped OCIs into three categories:
- Biased ground rules. A firm helped set the terms of a competition, for example by writing the statement of work or specifications, and could then compete in a way that favors itself.
- Impaired objectivity. A firm’s work on one contract would require it to evaluate itself, its affiliates or its competitors, or to make recommendations that affect its own interests.
- Unequal access to information. A firm obtained nonpublic information through its work for the government that would give it an unfair advantage in a later competition.
Where OCIs commonly arise
OCIs are most common in professional services, especially work like systems engineering and technical assistance, program management support, acquisition support and evaluation work. A firm that helps an agency plan a program may later want to compete to build it. A company that evaluates other contractors’ performance may also have a business relationship with those contractors.
Mergers, acquisitions and teaming arrangements can create OCIs unexpectedly, because the conflicts of one company may become the conflicts of the combined organization.
How OCIs are managed
Under the FAR, contracting officers are responsible for identifying and evaluating potential OCIs and for avoiding, neutralizing or mitigating significant conflicts before award. Solicitations may include provisions requiring offerors to disclose potential conflicts or to propose mitigation plans.
Common approaches include:
- Avoidance, such as excluding a firm from competing for related work
- Mitigation plans, which may include firewalls separating teams, nondisclosure agreements and restrictions on who works on what
- Sharing information with all offerors to neutralize an advantage from unequal access
- Waivers, which agencies may grant in limited circumstances under the FAR
Building OCI awareness into your business
Firms that manage OCIs well think about them before they bid, not after an award is challenged. Consider:
- Tracking which contracts give your staff access to nonpublic information or influence over requirements
- Reviewing potential OCIs as part of every bid decision
- Disclosing potential conflicts candidly when solicitations require it
- Training employees on OCI risks and firewall procedures
- Considering OCI implications in teaming, mergers and new lines of business
An OCI is not necessarily a sign of wrongdoing. It is a structural issue that needs to be identified and addressed. Being transparent and proactive protects both your eligibility and your reputation with the agencies you serve. Current FAR provisions can be found on acquisition.gov.