Last month, the Department of Defense, General Services Administration, and National Aeronautics and Space Administration issued a new change to the Federal Acquisition Regulation (FAR) that will affect federal government contractors who have employees that support government acquisition functions. The change became effective December 2, 2011.
The new rule, which is being implemented by a newly created FAR Subpart 3.11 and a related contract clause, requires contractors working under “covered contracts” to identify and prevent personal conflicts of interest of their covered employees, and prohibit covered employees who have access to non-public information by reason of performance on a government contract from using that information for personal gain. A “covered contract” is one that exceeds $150,000 and involves performance of acquisition functions closely associated with inherently governmental functions for, or on behalf of, a federal agency.
The definition of “acquisition function closely associated with inherently governmental functions” is very broad. It includes “supporting or providing advice or recommendations with regard to:”
- acquisition planning,
- developing statements of work,
- developing solicitation evaluation criteria,
- evaluating proposals,
- awarding contracts,
- administering contracts,
- terminating contracts, and
- determining the allowability of costs, among other functions.
In order to comply with the new FAR clause, contractors will be required to establish internal procedures to screen employees for potential personal conflicts of interest by requiring each affected employee to disclose interests that may be implicated by the employee’s work. This includes financial interests of the employee and his or her close family members and other members of his or her household. In addition, the covered employee will be required to update his or her disclosure statement whenever circumstances change in a way that may create a new personal conflict of interest.
All covered employees will also be required to sign a non-disclosure agreement to prohibit disclosure of non-public information learned through performance on a government contract. The new rule does not prescribe any particular forms of disclosure statement or non-disclosure agreement that must be used to satisfy the rule.
In addition to developing a new compliance program for the contractor employee personal conflict of interest avoidance program, the regulation also mandates contractor self-reporting and also that prime contractors flow the requirement down to subcontractors.
Strangely, while the new clause, as prescribed in FAR Subpart 3.11, must be included in all solicitations and contracts for “covered contracts,” FAR Part 12 expressly exempts commercial item acquisition from the statute that is the basis for the new rule (the FAR definition of “commercial item” includes commercial services). Contractors bidding on otherwise “covered contracts” that are solicited pursuant to FAR Part 12 should read the solicitation carefully to determine whether the new requirement is improperly included in the solicitation.
The new rule applies to all contracts, delivery orders, or task orders issued after the effective date of December 2, 2011.
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