Type: Law Bulletins
Date: 04/07/2014

Proposed Rule to Expand Regulation of Contractor Personal Conflicts of Interest

On April 2, 2014, the Department of Defense, NASA and the U.S. General Services Administration issued a proposed rule that would amend the existing conflict of interest FAR rules to cover all functions that are closely associated with “inherently governmental functions” and personal services contracts that are not related to acquisitions. The purpose of the rule is to prohibit contractor and subcontractor employees from improperly benefiting from nonpublic information that they access through their performance on a government contract or subcontract.

The proposed changes are primarily to FAR Part 3.11, Preventing Personal Conflicts of Interest for Contractor Employees Performing Acquisition Functions, and FAR § 52.203-16, the related clause. The stated policy behind FAR Part 3.11 is to require contractors to:  

  1. Identify and prevent personal conflicts of interest of their covered employees.
  2. Prohibit covered employees who have access to non-public information by reason of performance on a government contract from using such information for personal gain.

The existing conflict of interest FAR clause applies to contractor employees who perform acquisition functions closely associated with inherently governmental functions. The proposed rule would expand the application of the clause to all covered employees who perform non-acquisition inherently governmental functions or contracts for personal services. Covered employees include individually employed subcontractors.

Like the existing rule, the proposed rule does not apply to commercial items contracts or contracts below the simplified acquisition threshold ($150,000). And there is no exemption for small businesses. According to the proposed rule, between March 1, 2012, and March 1, 2013, there were 22,716 contracts over the simplified acquisition threshold that were classified as including functions closely associated with inherently governmental functions. Of that number, 10,600 were awarded to small businesses. Of the contracts awarded to small businesses, 4,444 different small business entities received those awards.

This proposed rule is not yet in effect. If it becomes final, it will require contractors, at a minimum, to collect information related to the financial interests of their employees and their employees’ family members. This requirement will be burdensome for many employers and could have privacy implications as well.

Comments on the rule must be submitted prior to June 2, 2014. See 79 Fed. Reg. 18503 (April 2, 2014), available here. Those who wish to provide comments may do so via internet, fax or mail. Further instructions are provided in the proposed rule.

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