Federal Acquisition Regulation: Preventing Organizational Conflicts of Interest in Federal Acquisition

DEPARTMENT OF DEFENSE GENERAL SERVICES ADMINISTRATION NATIONAL AERONAUTICS AND SPACE ADMINISTRATION <CFR>48 CFR Parts 1, 2, 3, 7, 8, 9, 10, 11, 12, 13, 15, 16, 17, 18, 37, 42, 50, and 52</CFR> <DEPDOC>[FAR Case 2023-006, Docket No. FAR-2023-0006, Sequence No. 1]</DEPDOC> <RIN>RIN 9000-AO54</RIN> <SUBJECT>Federal Acquisition Regulation: Preventing Organizational Conflicts of Interest in Federal Acquisition</SUBJECT> <HD SOURCE="HED">AGENCY:</HD> Department of Defense (DoD), General Services Administration (GSA), and National Aeronautics and Space Administration (NASA). <HD SOURCE="HED">ACTION:</HD> Proposed rule. <SUM> <HD SOURCE="HED">SUMMARY:</HD> DoD, GSA, and NASA are proposing to amend the Federal Acquisition Regulation (FAR) to implement the Preventing Organizational Conflicts of Interest in Federal Acquisition Act. The statute requires the FAR to provide and update definitions, guidance, and examples related to organizational conflicts of interest, including the creation of solicitation provisions and contract clauses to avoid or mitigate organizational conflicts of interest. The statute also requires the FAR to permit contracting officers to consider professional standards and procedures to prevent organizational conflicts of interest to which an offeror or contractor is subject. </SUM> <EFFDATE> <HD SOURCE="HED">DATES:</HD> Interested parties should submit written comments to the Regulatory Secretariat Division at the address shown below on or before March 17, 2025 to be considered in the formation of the final rule. </EFFDATE> <HD SOURCE="HED">ADDRESSES:</HD> Submit comments in response to FAR Case 2023-006 to the Federal eRulemaking portal at <E T="03">https://www.regulations.gov</E> by searching for “FAR Case 2023-006”. Select the link “Comment Now” that corresponds with “FAR Case 2023-006”. Follow the instructions provided on the “Comment Now” screen. Please include your name, company name (if any), and “FAR Case 2023-006” on your attached document. If your comment cannot be submitted using <E T="03">https://www.regulations.gov,</E> call or email the points of contact in the <E T="02">FOR FURTHER INFORMATION CONTACT</E> section of this document for alternate instructions. <E T="03">Instructions:</E> Please submit comments only and cite “FAR Case 2023-006” in all correspondence related to this case. Comments received generally will be posted without change to <E T="03">https://www.regulations.gov,</E> including any personal and/or business confidential information provided. Public comments may be submitted as an individual, as an organization, or anonymously (see frequently asked questions at <E T="03">https://www.regulations.gov/faq).</E> To confirm receipt of your comment(s), please check <E T="03">https://www.regulations.gov,</E> approximately two to three days after submission to verify posting. <FURINF> <HD SOURCE="HED">FOR FURTHER INFORMATION CONTACT:</HD> For clarification of content, contact Ms. Mahruba Uddowla, Procurement Analyst, at 703-605-2868 or by email at <E T="03">Mahruba.Uddowla@gsa.gov.</E> For information pertaining to status, publication schedules, or alternate instructions for submitting comments if <E T="03">https://www.regulations.gov</E> cannot be used, contact the Regulatory Secretariat at 202-501-4755 or <E T="03">GSARegSec@gsa.gov.</E> Please cite “FAR Case 2023-006.” </FURINF> <SUPLINF> <HD SOURCE="HED">SUPPLEMENTARY INFORMATION:</HD> <HD SOURCE="HD1">I. Background</HD> DoD, GSA, and NASA are proposing to revise the FAR to implement the Preventing Organizational Conflicts of Interest in Federal Acquisition Act (Pub. L. 117-324, 41 U.S.C. 2303 note), enacted December 27, 2022. The statute directs the Federal Acquisition Regulatory Council to revise the FAR to provide and update— • Definitions, to include those related to specific types of organizational conflicts of interest (OCIs), including unequal access to information, impaired objectivity, and biased ground rules; • Guidance and illustrative examples related to relationships of contractors with public, private, domestic, and foreign entities that may result in OCIs; • Illustrative examples of situations related to the potential for OCIs. The statute also requires that the FAR be revised to provide agencies with tailorable solicitation provisions and contract clauses to avoid or mitigate organizational conflicts. The statute provides agencies the ability to take agency-specific needs into consideration when addressing risk that may be unique to the agency. The statute instructs the Federal Acquisition Regulatory Council to require executive agencies to establish or update agency conflict of interest procedures to implement these revisions to the FAR. Agencies will be instructed to develop or update procedures to reflect the requirements of this new regulatory coverage when it is finalized. DoD, GSA, and NASA published a proposed rule under FAR Case 2011-001, Organizational Conflicts of Interest, on April 26, 2011 (76 FR 23236) intended to amend the FAR coverage of OCIs and provide additional coverage regarding unequal access to nonpublic information. However, given the amount of time that had passed since publication of the proposed rule, and potential changed circumstances, a decision was made not to proceed with finalization of that rule. As a result, the proposed rule was withdrawn and the case was closed on March 19, 2021 (86 FR 14863). <HD SOURCE="HD1">II. Discussion and Analysis</HD> This rule proposes to create a new FAR subpart 3.12, Organizational Conflicts of Interest, to reflect the direction of the statute. A summary of the proposed changes follows: <HD SOURCE="HD2">A. Placement of OCI Coverage</HD> This rule proposes to move OCI coverage from FAR subpart 9.5 to a new subpart in FAR part 3. Part 9 addresses contractor qualifications. While the ability to provide impartial advice and assistance is an important qualification of a Government contractor, the larger issues that underlie efforts to identify and address OCI are more directly associated with some of the business practice topics discussed in FAR part 3. Part 3 is already the home of coverage on personal conflicts of interest. As a result, FAR subpart 9.5 is proposed to be marked “reserved” and the coverage of OCIs in 9.000, Scope of part, is removed. To reflect the broader scope of part 3, this rule proposes to change the title from “Improper Business Practices and Personal Conflicts of Interest” to “Business Ethics and Conflicts of Interest.” As a result, the proposed rule also revises section 3.000, Scope of part, to reflect the new scope. <HD SOURCE="HD2">B. Definitions</HD> The proposed rule updates definitions and creates several new definitions. The definition of OCI in FAR part 2 is revised to address “unequal access to information, impaired objectivity, and biased ground rules,” in accordance with the statute. For clarity, a definition of “entity” is created for the context of OCIs. The definition is refined to clearly reflect the two types of situations that result in OCI concerns: impaired objectivity and unfair competitive advantage. A new definition is added for impaired objectivity, which is a type of OCI in which an entity or its affiliate has or may have financial or other interests or an incentive to provide other than impartial advice to the Government, or the entity or its affiliate's objectivity in performing the contract work is or might be otherwise impaired. In the context of these definitions related to OCIs, “entity” can mean an individual, a corporation or other organization. Unfair competitive advantage in turn can result from biased ground rules or unequal access to information. The proposed rule adds a definition for “biased ground rules” that describes a situation in which an entity or its affiliate, as part of its performance of a Government contract, has or may have materially influenced the development of the requirement, evaluation criteria, or other source selection procedures for another Government contract. The primary concern is that the entity could skew the future competition, whether intentionally or not, in favor of itself. A new definition for “unequal access to information” describes situations in which an entity or its affiliate has or may have an unfair competitive advantage because they have access to Government-provided information that all potential offerors do not have. That information may assist the entity in obtaining the contract. The proposed rule also adds a definition of “firewall” to new section 3.1201 since the term reflects an important mitigation strategy for addressing OCI resulting from unequal access to information in the new subpart. <HD SOURCE="HD2">C. General Policy</HD> The new OCI coverage at FAR subpart 3.12 provides updated statutory citations and a more concise depiction of the applicability of the requirements. While the requirements are applicable to most procurements, acquisitions below the simplified acquisition threshold (SAT) and those for commercial products are exempt, as well as subcontracts for commercial products or commercial services. Within the new policy section at FAR 3.1203, the proposed rule explains the two types of harm that OCIs may cause to the procurement system: harm from impaired objectivity and harm to the integrity of the competitive acquisition process. The discussion provides the actions that the Government and agency contracting officers should take to address or prevent harm. The rule describes the role a contractor's advantage can play in OCIs. Proposed language clarifies that the mere fact that a contractor has a competitive advantage in an acquisition on the basis of having previously performed work for the Government ( <E T="03">i.e.,</E> “natural advantage”) does not mean that the contractor has an OCI or ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Preview showing 10k of 149k characters. Full document text is stored and available for version comparison. ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━