[Federal Register Volume 76, Number 212 (Wednesday, November 2, 2011)]
[Rules and Regulations]
[Pages 68017-68026]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-27780]
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DEPARTMENT OF DEFENSE
GENERAL SERVICES ADMINISTRATION
NATIONAL AERONAUTICS AND SPACE ADMINISTRATION
48 CFR Parts 1, 3, 12, and 52
[FAC 2005-54; FAR Case 2008-025; Item II; Docket 2009-0039, Sequence 1]
RIN 9000-AL46
Federal Acquisition Regulation; Preventing Personal Conflicts of
Interest for Contractor Employees Performing Acquisition Functions
AGENCIES: Department of Defense (DoD), General Services Administration
(GSA), and National Aeronautics and Space Administration (NASA).
ACTION: Final rule.
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SUMMARY: DoD, GSA, and NASA are issuing a final rule amending the
Federal Acquisition Regulation (FAR) to address personal conflicts of
interest by employees of Government contractors as required by statute.
DATES: Effective Date: December 2, 2011.
Applicability Date: Except for contracts, including task or
delivery orders, for the acquisition of commercial items, this rule
applies to--
Contracts issued on or after the effective date of this
rule; and
Task or delivery orders awarded on or after the effective
date of the rule, regardless of whether the contracts, pursuant to
which such task or delivery orders are awarded, were awarded before,
on, or after the effective date of this rule.
Contracting officers shall modify, on a bilateral basis, in
accordance with FAR 1.108(d)(3), existing task- or delivery-order
contracts to include the FAR clause for future orders. In the event
that a contractor refuses to accept such a modification, the contractor
will not be eligible to receive further orders under such contract.
FOR FURTHER INFORMATION CONTACT: Mr. Anthony Robinson, Procurement
Analyst, at (202) 501-2658, for clarification of content. For
information pertaining to status or publication schedules, contact the
Regulatory Secretariat at (202) 501-4755. Please cite FAC 2005-54, FAR
Case 2008-025.
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Background
II. Discussion and Analysis of the Public Comments
A. General
B. Definitions
C. Applicability
D. Contractor Procedures
E. Mitigation or Waiver
F. Violations/Remedies
G. Clause Flowdown
H. Cost and Administrative Burden
I. Miscellaneous Comments
III. Executive Orders 12866 and 13563
IV. Regulatory Flexibility Act
V. Paperwork Reduction Act
I. Background
Section 841(a) of the Duncan Hunter National Defense Authorization
Act (NDAA) for Fiscal Year 2009 (Pub. L. 110-417), now codified at 41
U.S.C. 2303, requires that the Office of Federal Procurement Policy
(OFPP) develop policy to prevent personal conflicts of interest by
contractor employees performing acquisition functions closely
associated with inherently governmental functions for, or on behalf of,
a Federal agency or department. The NDAA also requires OFPP to develop
a personal conflicts-of-interest clause for inclusion in solicitations,
contracts, task orders, and delivery orders. To address the
requirements of section 841(a) in the most effective manner possible,
OFPP collaborated with DoD, GSA, and NASA on this case to develop
regulatory guidance, including a new subpart under FAR part 3, and a
new clause for contracting officers to use in contracts to prevent
personal conflicts of interest for contractor employees performing
acquisition functions for, or on behalf of, a Federal agency or
department.
DoD, GSA, and NASA published a proposed rule in the Federal
Register at 74 FR 58584 on November 13, 2009. OFPP and DoD, GSA, and
NASA proposed a policy that would require each contractor that has
employees performing acquisition functions closely associated with
inherently governmental functions to identify and prevent personal
conflicts of interest for such employees. In addition, such contractors
would be required to prohibit covered employees with access to non-
public Government information from using it for personal gain. The
proposed rule also made contractors responsible for--
Having procedures to screen for potential personal
conflicts of interest;
Informing covered employees of their obligations with
regard to these policies;
Maintaining effective oversight to verify compliance;
Reporting any personal conflicts-of-interest violations to
the contracting officer; and
Taking appropriate disciplinary action with employees who
fail to comply with these policies.
Comments were received from 19 respondents; these are analyzed in
the following sections.
II. Discussion and Analysis of the Public Comments
The Civilian Agency Acquisition Council and the Defense Acquisition
Regulations Council (the Councils) have reviewed the public comments in
development of the final rule. As a result of this review, the Councils
have incorporated some changes in the final rule, including the
following more significant changes:
Revised the definition of ``covered employee'' to clarify
applicability to subcontracts.
Revised the contracting officer procedures at FAR
3.1103(a)(1) and (a)(3), and (b)(3).
Revised the discussion of violations at FAR 3.1105.
Added a new paragraph FAR 3.1106(c) to provide additional
clarification on use of FAR clause 52.203-16 when contracting with a
self-employed individual.
Amended 12.503(a) to clarify that the statute does not
apply to contracts for the acquisition of commercial items.
Revised the clause at FAR 52.203-16 by--
[cir] Clarifying the financial disclosure requirements in paragraph
(b)(1), including deletion of the requirement for an annual update of
the disclosure statement;
[cir] Adding to the list of possible personal conflicts-of-interest
violations in (b)(6);
[cir] Removing the list of remedies in paragraph (d); and
[cir] Clarifying the clause flowdown.
A. General
Comments: Several respondents commented on general elements of the
proposed coverage. Some supported implementing the proposed coverage,
while others stated that the proposed
[[Page 68018]]
rule is not necessary, is duplicative, or should not apply to certain
organizations, such as DoD-sponsored Federally Funded Research and
Development Centers (FFRDCs).
Response: The Councils concur with those respondents who support
the rule. In addition to implementing a statutory requirement,
contained in section 841(a) of the NDAA for FY 2009, the proposed
coverage fills a current gap in the FAR, which contains very little
coverage on preventing personal conflicts of interest for contractor
employees. The proposed coverage is not duplicative of current
organizational conflicts-of-interest coverage, or the current coverage
in FAR subpart 3.10 regarding the contractor Code of Business Ethics,
and should not be limited to exclude FFRDCs.
Comments: Several respondents addressed the issue of whether
personal conflicts-of-interest coverage for contractor employees should
mirror the ethics rules that apply to Government employees.
Response: The Councils recognize that most of the ethics statutes
that apply to Government employees are not applicable to contractor
employees. The differences between the coverage here and the ethics
standard applicable to Federal employees reflect those differences in
the underlying statutes.
B. Definitions
1. Acquisition Function Closely Associated With Inherently Governmental
Functions
Comments: Some respondents suggested that the definition be
limited, either by explicitly restricting it to actions performed on
behalf of the Government or by removing the term ``supporting'' from
the definition. Some respondents argued that the proposed definition
was problematic because it was inconsistent with current FAR coverage
or the statutory language in the NDAA. Two respondents suggested
waiting to issue a final rule until the Office of Management and
Budget's (OMB) review of inherently governmental functions was
complete, to ensure compatibility with any definitions issued as a
result of that review. One of these respondents recommended publication
of a revised proposed rule rather than a final rule.
Response: Contextual text and applicability already limit the
definition to an appropriate class of actions, and striking the word
``supporting'' would imply that contractors were performing inherently
governmental tasks, which is prohibited by law and regulation. While
the definition provided is not identical to that provided in FAR
7.503(c)(12) or to the summary definition provided in the NDAA, it
builds on both of those definitions and is not inconsistent with them,
and no changes were made to the final rule that would require that it
be delayed or published as a revised proposed rule. Finally, if changes
will be required as a result of future OMB guidance regarding work
closely associated with inherently governmental functions, a separate
case will be opened to implement them.
2. Covered Employee
a. Prime Contractor Should Not Be Responsible for Employees Other Than
Own Employees
Comments: Several respondents were concerned that the definition of
``covered employee'' could be interpreted to include employees of
contractors, subcontractors, consultants, and partners. Respondents
were concerned that assuming responsibility for all of these employees
would create an unreasonable burden because the prime contractor could
not impose disciplinary actions against other companies' employees or
adequately identify or address personal conflicts of interest with
respect to such employees.
Response: The Councils have modified the definition to clarify that
the contractor is not directly responsible for the employees of
subcontractors. The subcontract flowdown portion of the clause at FAR
52.203-16(e) will ensure that subcontractor employees are adequately
covered while making sure that the subcontractor bears responsibility
for its employees.
b. Self-Employed Individual
Comment: One respondent stated that in the case of a self-employed
individual, the disclosure forms would be submitted to the same person
filling out the form.
Response: The Councils have addressed this issue in the final rule.
When a self-employed individual is a subcontractor and that individual
is personally performing the acquisition function closely associated
with inherently governmental functions, rather than having an employee
of the subcontractor perform the function, then the self-employed
individual will be treated as a covered employee of the prime
contractor for purposes of this rule and the clause will not flow down.
In such case, the clause could not meaningfully flow down to the
subcontractor, because there is no employer/employee relationship
involved at the subcontract level of performance. The individual
completing the disclosure form and the individual accepting and
reviewing those forms cannot be one and the same. The definition of
``covered employee'' was modified to reflect this.
Similarly, the clause cannot meaningfully apply at the prime level
if the functions are to be performed by a self-employed individual,
rather than a contractor employee. Since a self-employed individual is
a legal entity, conflicts of interest relating to a prime contract with
an entity (whatever its composition) are covered under the
organizational conflicts of interest coverage at FAR subpart 9.5.
c. Limit Covered Employee to Those Specifically Performing the
Acquisition Functions Under the Contract
Comment: One respondent raised the concern that agencies might
interpret ``covered employee'' to mean all employees who work for a
Government contractor, and suggested that the definition should be
revised to clarify that a covered employee is an employee that is
remunerated specifically to perform acquisition functions closely
associated with inherently governmental functions.
Response: The definition, as amended, is clear that an employee is
only covered under the rule if the employee performs acquisition
functions closely associated with inherently governmental functions.
Further, ``acquisition function closely associated with governmental
functions'' is defined to tie directly to support of the activities of
a Federal agency.
3. Non-Public Government Information
Comments: One respondent suggested that the definition of ``non-
public Government information'' be limited by providing more specific
guidance. One specific approach that was suggested involved requiring
that any protected information be explicitly designated as such in
writing by the Government. Another respondent suggested that the rule
should be broadened to prohibit contractor employees from using any
information related to the contract on which they work. This respondent
stated that anything less would ``open the floodgates'' for mitigation
or waivers, and debates over timelines of when information was publicly
available.
Response: It would be overly burdensome to require that all such
information be explicitly marked by the Government. The definition of
``non-public Government information'' was intended to have a broad
meaning, including proprietary data belonging to another contractor as
well as
[[Page 68019]]
information that could confer an unfair competitive advantage to a
contractor for whom the employees work. This proposed definition
requires the use of judgment on the part of contractors. A contractor
employee should presume that all information given to a contractor has
not been made public unless facts clearly indicate the contrary.
Further, the definition of ``non-public Government information'' is
similar to the standard Government employees use executing their jobs--
a standard that is particularly appropriate when tasks involve
acquisition functions closely associated with inherently governmental
functions.
This topic is relevant to other pending and forthcoming FAR cases,
and for that reason, some structural changes have been made to the
definition to harmonize this case with potential future usage.
Specifically, the qualification that the information be accessed
through performance on a Government contract has been removed from the
definition, but has been applied in the rule text in appropriate
places.
4. Personal Conflict of Interest
Comments: Many respondents commented on the definition of
``personal conflict of interest'' in proposed FAR 3.1101 and also in
the clause at FAR 52.203-16(a).
One cautioned against defining the term ``personal conflict of
interest'' by relying solely on terminology used in the Government's
Standards of Conduct for Employees of the Executive Branch (Standards),
at 5 CFR part 2635, urging the Councils to take differences between the
Government and contractor workforce into account.
Several other respondents considered the proposed definition of
``personal conflict of interest'' to be imprecise. Each of these
respondents identified terms in the definition that are undefined or
that they deemed ambiguous or overly broad, including ``personal
activity,'' ``relationship,'' ``close family members,'' ``other members
of the household,'' other employment or financial relationships,''
``gifts,'' ``compensation,'' and ``consulting relationships.'' Although
one of these organizations counseled against relying too heavily on
language in the Government's standards, as discussed above, four others
recommended that the Councils borrow from comparable definitions in
existing Government regulations.
One respondent suggested an alternative definition of the term
``personal conflict of interest'' that it considered an amalgam of the
proposed definition and definitions in the ethics regulations and the
Troubled Asset Relief Program regulations at 31 CFR 31.201, while
another respondent urged that the definition of ``personal conflict of
interest'' not rely on a listing of examples that is incomplete, yet
not specifically designated as non-exclusive.
One respondent urged that the rule ``incorporate some element of
contemporaneous `knowledge' on the part of the covered employee before
the PCI requirements are triggered,'' and that coverage be included to
exclude de minimis ownership or partnership interests. On the other
hand, another respondent recommended that the definition of ``personal
conflict of interest'' be expanded in scope to capture personal
conflicts of interest that can arise from prior work or employment
undertaken in support of Government acquisition functions.
Response: As explained in the preamble to the proposed rule, the
Councils considered various sources of guidance when developing the
definition of ``personal conflict of interest.'' The definition of
``personal conflict of interest'' provided by the rule clearly borrowed
from the Government ethics provisions. On the other hand, the Councils
intentionally did not create a mirror image of either 18 U.S.C. 208 or
the Government's impartiality provision. The Government's impartiality
standard judges a public servant's circumstances from the perspective
of a ``reasonable person,'' whereas the FAR standard focuses on the
contractor's obligation to the Government and defines a ``personal
conflict of interest'' as a situation ``that could impair the
employee's ability to act impartially and in the best interest of the
Government when performing under the contract.'' (A verb other than
``impair'' was inadvertently used in the proposed contract clause. The
Councils have corrected this error to make the clause consistent with
the rule text.)
Similar to the Government's approach in its ethics regulations, the
proposed definition of ``personal conflict of interest'' listed
``sources'' of conflicts, including the financial interests of an
employee and other members of his or her household, and then listed
types of financial interests in subparagraphs (2)(i) through (2)(viii).
In response to several comments, the Councils have decided to revise
the wording of paragraph (2) of the definition to make it clear that
this listing is intended to amplify the term ``financial interest'' as
used earlier in the definition. The Councils have also inserted the
words ``[f]or example'' at the beginning of paragraph (2) to clearly
indicate that the listing in subparagraphs (2)(i) through (2)(viii) is
not exhaustive.
The Councils have not attempted to further define other terms or
phrases used within the definition of ``personal conflict of
interest.'' The Councils consider the proposed terminology adequate to
enable a contractor to develop screening procedures that will elicit
relevant information from its covered employees. In the definition of
``personal conflict of interest'', the regulation affords flexibility
regarding de minimis interest, since it may be determined that a de
minimis interest would not ``impair the employee's ability to act''
with the required objectivity. Separately, although no ``knowledge''
element has been added, the Councils acknowledge that neither a
contractor nor its employees can apply the impartiality standard if it
cannot yet be known what interests may be affected by a particular
acquisition.
C. Applicability
Comments: One respondent recommended that specific language be
added to the proposed rule limiting its application to those contractor
employees who directly support Government buying offices.
Response: Section 841(a) of the NDAA for FY 2009 required that
policy be developed to prevent personal conflicts of interest by all
contractor employees performing acquisition functions closely
associated with inherently governmental functions for, or on behalf of,
a Federal agency or department, and not all such work occurs in direct
support of a buying office.
Comment: One respondent stated that the statutory requirement that
the clause be included in task or delivery orders is not recognized in
the rule.
Response: The applicability to task or delivery orders against
existing contracts is addressed under the applicability date in this
preamble. Such transitional issues are not included as part of the
regulation, because they are only temporary, until the clause is
included in most existing contracts.
D. Contractor Procedures
1. Screening of Covered Employees (Including Financial Disclosure)
Comments: More than half the respondents commented on this issue,
and provided a variety of concerns and suggestions, which are addressed
more specifically in the following response.
Response: In response to these comments, the Councils have narrowed
the scope of the required disclosures in
[[Page 68020]]
a number of ways. First, in response to concern that the word
``including'' in FAR 3.1103(a) created ambiguity, the Councils have
substituted the word ``by,'' to indicate that disclosure is the
mandated screening mechanism. Next, in response to a wide variety of
comments regarding the breadth of required disclosures, the Councils
have made several revisions to FAR 3.1103(a)(1) to make it clear that
contractors are afforded some flexibility in determining how to
implement the screening requirement (i.e., one method of effective
screening might require each covered employee to review a list of
entities affected by the upcoming work and either disclose any conflict
or confirm that he or she has none), and to allow that disclosures be
limited to financial interests ``that might be affected by the task to
which the employee has been assigned.'' Finally, the Councils
recognized that other potential sources of conflicts, including
employment or gifts, should be covered by these procedures as well.
The Councils have also made changes in response to a number of
respondents that noted inconsistencies and other concerns regarding
updates to employee financial disclosures. These changes include
ensuring that the language in FAR part 3 is consistent with the
language in the clause, and that both require an update only when ``an
employee's personal or financial circumstances change in such a way
that a new personal conflict of interest might occur because of the
task the covered employee is performing.'' If it is the task that
changes, rather than the financial circumstances, the situation will be
covered by the requirement to obtain information from a covered
employee ``when the employee is initially assigned to the task under
the contract.'' Implementing ``as needed'' disclosure addresses one
respondent's concern about selling and repurchasing assets to avoid
personal conflict of interest requirements, and also eliminates the
need for disclosure on an annual basis.
Comments: In addition, several respondents addressed other areas
related to the financial disclosure requirement. Several respondents
were generally critical of the burden involved in the requirement to
screen employees for conflicts of interest, arguing that it is short-
sighted and ``has an element of impossibility,'' or that it would be
``onerous and unproductive'' to require disclosure, for example, every
time a covered employee's retirement portfolio, or that of his or her
spouse, might include potential contractors. Other respondents stated
that the financial disclosure requirement is intrusive, and would
provide employers with ``unprecedented insight into employee private
financial data'' that would give the employer leverage during
negotiations about salary, benefits, and work conditions.
Response: The Councils carefully considered the comments that were
critical of the burdensome or intrusive nature of the screening process
involving financial disclosure, but have determined that the concerns
expressed are outweighed by the importance of assuring the integrity of
the Government's acquisition process.
Comments: Finally, two respondents recommended clarification of
roles and responsibilities concerning the review of financial
disclosure statements. One recommended that the rule should specify
that contractors acting in good faith may rely on the information
submitted by their employees or that the rule specify that review by
the employee's supervisor and legal counsel or ethics officer is
sufficient. The other recommended that the contractor should be
required to designate an official to solicit and review financial
disclosure statements, but also suggested that the Government's
contracting officer should review the statements and be able to access
the services of subject matter experts to assist with the review. The
same respondent also suggested that the rule should require that the
covered employee's submission ``be accompanied by a certification as to
the accuracy, completeness and truthfulness of the submission.''
Response: The Councils consider that it is the contractor's
responsibility to decide how to review employee disclosures. Government
contracting officers have not been assigned the responsibility to
review disclosures of financial interests. Further, there is a
statutory prohibition on adding non-statutory certification
requirements to the FAR without express written approval by the
Administrator for Federal Procurement Policy (see FAR 1.107).
2. Prevent Personal Conflicts of Interest (Including Nondisclosure
Agreements)
a. Preventing Personal Conflicts of Interest
Comments: Some respondents provided comments in this area
concerning the role of the Government in contractor processes. For
example, one respondent pointed out that the requirement to reassign
tasks does not oblige the contractor to report known or reported
conflicts of interest to the contracting officer in order for
reassignment to occur. Others suggested that the required non-
disclosure agreements be submitted to the contracting officer for
review and approval.
Response: It is up to the contractor to manage its employees, and
to assign them in a way that prevents personal conflicts of interest.
The Government only needs to be informed if violations occur, or if the
contractor needs approval for a mitigation plan or requests a waiver.
Similarly, while employer/employee non-disclosure agreements will be
available for Government inspection for recordkeeping compliance
purposes, it is the contractor's responsibility to ensure that such
agreements are enacted and enforced.
b. Non-Disclosure Agreements (NDAs)
Comments: One respondent stated that the proposed rule did not
provide any specific guidance concerning the NDA requirement. This
respondent requested that the Councils address--
Which parties are required to sign an NDA;
Whether the contractor and/or the contractor employee are
required to execute the NDA for each entity that provides information
to which it will have access;
Whether an entity that submitted non-public information is
entitled to know who has signed an NDA relating to that information;
and
Whether there is a required duration for the NDA. If an
NDA is not indefinite, how should a contractor address protection of
non-public information when the NDA expires?
Response: The rule requires that each employee sign an NDA with
respect to information obtained during the course of the work being
performed under the contract. The agreements should be structured to
protect the interests of the information owner(s), the contractor, and
the contractor employee, including protection of appropriate length
(often indefinitely or until the information is otherwise made public).
Since these agreements will be executed between each individual
contractor and that contractor's employees, and contractors are not
required to provide any notice of those agreements, there will be no
means of providing an entity with a listing of those who have signed
NDAs which cover their information.
3. Appearance of a Conflict
Comments: Several respondents expressed concern about the
difficulty contractors face in identifying circumstances that suggest
``even the
[[Page 68021]]
appearance of personal conflicts of interest.'' These respondents state
that the standard is vague and too difficult for contractors and their
employees to implement. One respondent points out that there are likely
different standards in the ``healthcare, defense, or transportation
industries'' and suggests limiting language along the lines of
``consistent with industry norms.''
Response: The rule requires that contractors inform covered
employees of their obligation to avoid even the appearance of personal
conflicts of interest. That same obligation is imposed on Government
employees by FAR 3.101-1. Nothing in this rule requires a report of an
``appearance of conflict.'' Concern about how to deal with an
``appearance of a conflict,'' where in fact there is actually no
conflict, is difficult, but once sensitized to the issue of
appearances, contractors and contracting officers can develop solutions
to the appearance questions that will protect the public's trust in the
acquisition system.
The Councils do not concur with the suggestion that the rule
incorporate industry norms as a standard. While there very well may be
different ways of doing business in the healthcare, defense, and
transportation industries, the threshold provided here is the minimum
level of coverage required across all industries regarding personal
conflicts of interest and the appearance of such conflicts.
4. Report Violations to the Contracting Officer
a. Timing of the Report
Comments: Various respondents raised concerns regarding the report
to the contracting officer. They pointed out that the proposed rule
both required a report of a conflict ``as soon as it is identified''
and also requires a full description of the violation and the actions
taken. The respondents suggested that the rule permit some time for
investigation and consideration of action before reporting the
conflict. Another suggestion was to allow for a specified number of
days to report.
Response: In response to these comments, the Councils have
clarified that the initial report of immediate actions taken may be
followed with a report of subsequent corrective action. The respondents
correctly pointed to the apparent dilemma presented in the proposed
rule which requires a report, as soon as the conflict is identified,
and yet requires that the report include a full description and a
contractor resolution. The rule necessarily requires that the
contractor notify the contracting officer about a conflict ``as soon as
it is identified'' so that, if necessary, the contracting officer can
take immediate steps to protect the Government.
The violation has not been ``identified'' until the Contractor has
performed sufficient investigation to confirm that a violation has
occurred. Practically speaking, we would expect contractors will be
able to identify the conflict, initially assess its scope, and even
evaluate potential corrective actions relatively quickly. We would also
expect that in proposing corrective action, it will be necessary in
many cases that the contractor takes the time to evaluate the
seriousness of the matter and develop a solution acceptable to the
Government, as well as the employee in some circumstances (where the
violation was inadvertent, for instance). The final rule better
reflects the requirements of such situations.
b. Report Violations to the Inspector General
Comments: Several agency respondents recommend that the report be
made to the Inspector General, as well as the contracting officer.
Response: Not all employee personal conflict-of- interest
violations are violations of criminal law or nefarious. The
contractor's report is treated here as a contractual issue to be
addressed first by the contractor and then by the contracting officer.
There is no reason to add a third party, such as the Inspector General,
unless violation of Federal criminal law has occurred. In those cases,
a report to the Inspector General will already be required in
accordance with FAR 52.203-13(b)(3). On the other hand, nothing in this
rule prevents individual agencies and their Inspector General from
establishing internal procedures for coordinating contractor reports.
5. Specify Period of Record Retention
Comments: One respondent recommended that the proposed rule should
include language requiring that contractors maintain records of
financial disclosures and all actions taken in response to an alleged
personal conflict of interest for a certain period of time (perhaps 3
or 5 years).
Response: FAR 4.703 provides requirements for retention of
contractor records (generally 3 years after final payment). Subpart 4.7
applies to records generated under contracts that contain either of the
FAR audit and records clauses (FAR 52.214-26 or FAR 52.215-2). Pursuant
to these clauses, contractors must generally make records available to
satisfy contract negotiation, administration, and audit requirements of
the contracting agencies and the Comptroller General.
E. Mitigation or Waiver
Comments: One respondent recommended removing the requirement that
any mitigation or waiver be limited to exceptional circumstances. At
the other end of the spectrum, one respondent suggested that mitigation
and waiver not be allowed at all.
Response: While the goal of the rule is to prevent personal
conflicts of interest, making provision for mitigation or waiver in
exceptional circumstances is necessary to prevent potential negative
consequences to the Government. Balancing these goals is achieved by
requiring that any mitigation or waiver be approved in writing,
including a description of why such action is in the best interest of
the Government.
Regarding the suggestion to allow approval of mitigation at the
chief of the contracting office level, mitigation and waiver should
only be employed in exceptional circumstances, and one means of
ensuring this is requiring the approval of the head of the contracting
activity.
F. Violations/Remedies
1. Description of Violations by Covered Employees (FAR 3.1103(a)(6) and
FAR 52.203-16(b)(6))
Comment: One respondent recommended several changes to this
section, which are addressed more specifically in the following
response.
Response: While the Councils do not concur with recommendations to
create a definitive list of violations to replace the examples, or to
alter the requirement to report violations to tie specifically to a
failure to update the required financial disclosure form, the Councils
do concur with the suggestion to include ``Failure of a covered
employee to comply with the terms of a non-disclosure agreement,'' in
the list of violations. This covers situations where the inappropriate
disclosure of information might not be due to a personal conflict of
interest or for personal gain, but instead results from thoughtless or
careless action. Furthermore, this is parallel to the construction of
the requirements in FAR 3.1103(a)(2)(iii).
2. Violations by the Contractor
a. Clarification of Contractor Liability
Comments: Two respondents expressed concern about the imposition of
liability upon contractors, and suggested that an employer should only
be sanctioned when it fails to address
[[Page 68022]]
issues within its control, not as a guarantor of flawless performance
by its employees in the area of personal conflicts of interest.
Response: A contractor should only be held liable for a violation
if the contractor fails to comply with paragraphs (b), (c)(3), or (d)
of the clause at FAR 52.203-16. There is nothing in the clause that
establishes contractor liability for a violation by an employee, as
long as the contractor followed the appropriate steps to uncover and
report the violation.
Because the rule addresses both violations by a covered employee
and violations by the contractor, the Councils have clarified in each
instance what type of violation is being addressed (FAR 3.1103(a)(6)
and (b); FAR 3.1105(a) and (b); and FAR 52.203-16(b)(6)). This should
help the concern of the respondent that the contractor may be subject
to remedies for violations by covered employees, rather than compliance
with the clause requirements.
In addition, the Councils have adopted two suggested changes to the
text of FAR 3.1105(b). ``Pursue'' has been changed to ``consider,'' to
more accurately reflect the contracting officer's obligation. The
Councils also deleted the term ``sufficient'' before the word
``evidence'' in describing the conditions for considering appropriate
remedies. If the contracting officer finds evidence of a violation, the
contracting officer should consider appropriate remedies. The term
``evidence'' on its own presents the requirement for a level of
certainty beyond a mere rumor or suspicion.
3. Remedies for Violations by the Contractor
Comment: One respondent objected to inclusion of the list of
remedies in the clause at FAR 52.203-16(d), stating that the FAR
contains adequate remedies to address non-compliance with any material
requirement of a contract, which includes the proposed FAR clause
52.203-16.
Response: While the list of remedies included within FAR 52.203-16
specifically identified those remedies available for violations
involving potential conflicts, it was not intended to create new
remedies. For this reason, the Councils have removed the paragraph
regarding remedies from the clause. Removal of this section also
addresses comments from several respondents related to individual
remedies included in the list.
Comment: One respondent recommended adding a provision stating that
certain violations should immediately be entered into the new Federal
Awardee Performance and Integrity Information System (FAPIIS).
Response: Inclusion in the FAPIIS database is already adequately
covered. For violations that result in suspension, debarment, or
termination of the contract for default or cause, such actions will be
entered into FAPIIS in accordance with the requirements published in
the Federal Register at 75 FR 14059 on March 23, 2010. The other
violations are of a type that would be entered in FAPIIS through the
contracting officer performance evaluation of the contractor.
G. Clause Flowdown
1. Flowdown Requirements Should Mirror Clause
Comments: Respondents were concerned that the proposed rule
requires the prime contractor to be responsible for subcontractor
personnel, and that the requirements for inclusion in a subcontract are
broader than the requirements for including the clause in a prime
contract.
Response: The Councils have made changes to clarify the flowdown
requirements. First, the definition of ``covered employee'' has been
clarified to indicate that the prime contractor is not responsible for
screening subcontractor employees. See also the response to comment
B.2., definition of ``covered employee.'' Additionally, the flowdown
provision, which stated that the clause should be included in
subcontracts that ``may'' involve performance of certain work in the
proposed rule, has been revised to only apply to subcontracts that
``will'' involve such work, for consistency with the requirements for
inclusion in prime contracts.
2. Subcontract Threshold
Comment: The flowdown of the clause should be conditioned on
subcontracts that exceed the simplified acquisition threshold, rather
than specifying $150,000.
Response: The threshold for application to subcontracts will not be
subject to change during the performance of the contract, if the
simplified acquisition threshold changes, so stating a dollar amount is
preferable. When the simplified acquisition threshold changes, the
clause will be changed for future contracts, but those changes will not
be imposed on existing contracts.
H. Cost and Administrative Burden
1. Costs of Ethics Compliance Program
Comment: Several respondents expressed concerns about the costs
involved with establishing a comprehensive compliance program to comply
with the requirements of this rule.
Response: While the Councils recognize that there will be some
administrative costs associated with implementation of this program,
the Government anticipates that when preparing proposals for Government
contracts vendors will account for these costs appropriately and
through their normal procedures. Subcontractors also are expected to
include their anticipated costs in their offered price to the prime
contractor. The anticipated costs, therefore, are likely to be passed
on to the Government.
2. Information Collection Requirements
Comments: One respondent stated that the estimates of the Paperwork
Reduction Act burdens (information collection requirements) appear to
be significantly underestimated, and do not take into account the many
levels of internal reviews that would be required as well as efforts
associated with coordinating with legal counsel, program staff, etc.,
as necessary.
Another respondent, in response to the notice published in the
Federal Register at 76 FR 27648 on May 12, 2011, questioned the
accuracy and currency of the supporting statement for the information
collection requirement for the subject rule.
Response: In response, the Councils updated the data used in the
supporting statement, including current Federal Procurement Data System
data. This resulted in minor or non-material changes in the estimated
number of responses. For example, the estimate for the ratio of
violations reported to the Department of Justice compared to the base
of estimated number of Federal employees was doubled, due to correcting
the base to include only Federal civilian employees. However, this
approach only increased the estimated number of annual contractor
employee violations from 10 to 22.
In addition, the Councils considered the comment that the hours per
response are underestimated, due to the many levels of internal reviews
that would be required as well as efforts associated with coordinating
with legal counsel or program staff, as necessary. Although the
Councils did not have specific data as to how much increase these
reviews would require, the Councils doubled the previous estimates
[[Page 68023]]
of 2 hours for reporting a violation and 4 hours for requesting
mitigation, resulting in an estimate of 4 hours per violation report
and 8 hours per mitigation request. As with any estimate of an average
number, there will be a large range between the high end (as in a large
corporation) and the low end where only a few people may be involved.
These revisions result in an increase of the estimated response
burden hours from 1,820 hours in the proposed rule to 3,688 hours. The
estimated recordkeeping hours remain unchanged at 61,200 hours.
I. Miscellaneous Comments
The Councils considered, but did not implement, a variety of
additional comments. These included suggestions that the rule require
the following:
Use of a standard non-disclosure agreement form, to be
published by the Government.
Use of a standards financial disclosure form, to be
published by the Government.
Placement of responsibility for compliance at a ``high
level'' within the contractor organization.
Use of established structures required for implementation
of the Contractor Code of Business Ethics for implementation of these
requirements.
Certification from the contractor that no personnel have a
personal conflict of interest.
Establishment of training programs for contractor
personnel.
In each of these cases, implementation of the recommendation is
neither necessary nor desirable, because establishing additional
structural requirements would eliminate the flexibilities provided to
contractors. The proposed rule sets out the requirements with which
each contractor must comply, but allows latitude for the application of
business judgment in structuring internal programs to achieve that
compliance.
Comment: Finally, one respondent suggested that the proposed rule
should require ``that a contractor certify that * * * no covered
personnel have a personal conflict of interest.''
Response: A certification requirement would not add any substantial
protections not already present in the rule.
III. Executive Orders 12866 and 13563
Executive Orders (E.O.s) 12866 and 13563 direct agencies to assess
all costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, public
health and safety effects, distributive impacts, and equity). E.O.
13563 emphasizes the importance of quantifying both costs and benefits,
of reducing costs, of harmonizing rules, and of promoting flexibility.
This is a significant regulatory action and, therefore, was subject to
review under section 6(b) of Executive Order 12866, Regulatory Planning
and Review, dated September 30, 1993. This rule is not a major rule
under 5 U.S.C. 804.
IV. Regulatory Flexibility Act
The Department of Defense, the General Services Administration, and
the National Aeronautics and Space Administration certify that this
final rule will not have a significant economic impact on a substantial
number of small entities within the meaning of the Regulatory
Flexibility Act, 5 U.S.C. 601, et seq., because the requirements of the
clause are not significantly burdensome. The requirement to obtain and
retain information on employees' potential conflicts of interest is
limited to service contractors whose employees are performing
acquisition functions closely associated with inherently governmental
functions for, or on behalf of, Federal agencies. This class is a
minority of Government contractors and is becoming smaller as
Government agencies bring more such functions back in house. Further,
there is no requirement to report the information collected to the
Government. It is not a significant economic burden to report to the
contracting officer personal conflict-of-interest violations by covered
employees and the corrective actions taken. The final rule has also
reduced potential burden by--
1. Not including a certification requirement;
2. Not requiring a formal training program;
3. Clarifying that the rule does not apply to commercial items;
4. Removing the requirement for an annual update of the financial
disclosure statement; and
5. Allowing mitigation under exceptional circumstances.
Comments on impact on small business: Three respondents expressed
concern about the potential impact this rule could have on small
businesses and specifically that the reporting, prevention, and
oversight requirement could be a burden for small businesses such that
they might reconsider pursuing Federal contracts. One respondent
believed that small businesses will be most affected by this rule
because it could force divestitures.
Response: The Councils agree that the reporting, prevention and
oversight requirements may cause some burden for small businesses. The
rule requires that prime contractors have procedures in place to screen
covered employees and requires avoidance or mitigation of any potential
conflicts. It may be difficult for smaller companies to avoid or
mitigate the conflict (e.g., remove the employee from that position on
the contract when the business only has a few employees). However, the
burden on small business is reduced because the rule--
Provides the contractor with discretion on how best to
implement its procedures;
Does not hold the prime contractor liable for violations
by employees, as long as the contractor has procedures in place and
deals appropriately with the violations;
Clarifies the meaning of ``covered employee'' and requires
a flowdown to all subcontracts involving performance of acquisition
related functions by employees, so that the prime contractor is not
directly responsible for assessing the subcontractor employee personal
conflicts of interest, as many respondents feared; and
Provides the contracting officer with discretion on the
handling of personal conflicts of interest violations.
Further, the public law did not create an exception for small
businesses with respect to implementation and it would be inconsistent
with the purpose and intent of the public law to not apply the rules
relating to personal conflicts of interest to any particular group of
contracts where personnel are performing acquisition functions closely
associated with inherently governmental functions.
V. Paperwork Reduction Act
The Paperwork Reduction Act (44 U.S.C. chapter 35) applies. The
final rule contains information collection requirements. OMB has
cleared this information collection requirement under OMB Control
Number 9000-0181, titled: Preventing Personal Conflicts of Interest for
Contractor Employees Performing Acquisition Functions.
List of Subjects in 48 CFR Parts 1, 3, 12, and 52
Government procurement.
[[Page 68024]]
Dated: October 21, 2011.
Laura Auletta,
Acting Director, Office of Governmentwide Acquisition Policy, Office of
Acquisition Policy, Office of Governmentwide Policy.
Therefore, DoD, GSA, and NASA amend 48 CFR parts 1, 3, 12, and 52
as set forth below:
0
1. The authority citation for 48 CFR parts 1, 3, 12, and 52 continues
to read as follows:
Authority: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 42
U.S.C. 2473(c).
PART 1--FEDERAL ACQUISITION REGULATORY SYSTEM
1.106 [Amended]
0
2. Amend section 1.106, in the table following the introductory text,
by adding FAR segments ``3.11'' and ``52.203-16'' and the corresponding
OMB Control Number ``9000-0181.''
PART 3--IMPROPER BUSINESS PRACTICES AND PERSONAL CONFLICTS OF
INTEREST
0
3. Add Subpart 3.11 to read as follows:
Subpart 3.11--Preventing Personal Conflicts of Interest for Contractor
Employees Performing Acquisition Functions
Sec.
3.1100 Scope of subpart.
3.1101 Definitions.
3.1102 Policy.
3.1103 Procedures.
3.1104 Mitigation or waiver.
3.1105 Violations.
3.1106 Contract clause.
Subpart 3.11--Preventing Personal Conflicts of Interest for
Contractor Employees Performing Acquisition Functions
3.1100 Scope of subpart.
This subpart implements the policy on personal conflicts of
interest by employees of Government contractors as required by section
841(a) of the Duncan Hunter National Defense Authorization Act for
Fiscal Year 2009 (Pub. L. 110-417) (41 U.S.C. 2303).
3.1101 Definitions.
As used in this subpart--
Acquisition function closely associated with inherently
governmental functions means supporting or providing advice or
recommendations with regard to the following activities of a Federal
agency:
(1) Planning acquisitions.
(2) Determining what supplies or services are to be acquired by the
Government, including developing statements of work.
(3) Developing or approving any contractual documents, to include
documents defining requirements, incentive plans, and evaluation
criteria.
(4) Evaluating contract proposals.
(5) Awarding Government contracts.
(6) Administering contracts (including ordering changes or giving
technical direction in contract performance or contract quantities,
evaluating contractor performance, and accepting or rejecting
contractor products or services).
(7) Terminating contracts.
(8) Determining whether contract costs are reasonable, allocable,
and allowable.
Covered employee means an individual who performs an acquisition
function closely associated with inherently governmental functions and
is--
(1) An employee of the contractor; or
(2) A subcontractor that is a self-employed individual treated as a
covered employee of the contractor because there is no employer to whom
such an individual could submit the required disclosures.
Personal conflict of interest means a situation in which a covered
employee has a financial interest, personal activity, or relationship
that could impair the employee's ability to act impartially and in the
best interest of the Government when performing under the contract. (A
de minimis interest that would not ``impair the employee's ability to
act impartially and in the best interest of the Government'' is not
covered under this definition.)
(1) Among the sources of personal conflicts of interest are--
(i) Financial interests of the covered employee, of close family
members, or of other members of the covered employee's household;
(ii) Other employment or financial relationships (including seeking
or negotiating for prospective employment or business); and
(iii) Gifts, including travel.
(2) For example, financial interests referred to in paragraph (1)
of this definition may arise from--
(i) Compensation, including wages, salaries, commissions,
professional fees, or fees for business referrals;
(ii) Consulting relationships (including commercial and
professional consulting and service arrangements, scientific and
technical advisory board memberships, or serving as an expert witness
in litigation);
(iii) Services provided in exchange for honorariums or travel
expense reimbursements;
(iv) Research funding or other forms of research support;
(v) Investment in the form of stock or bond ownership or
partnership interest (excluding diversified mutual fund investments);
(vi) Real estate investments;
(vii) Patents, copyrights, and other intellectual property
interests; or
(viii) Business ownership and investment interests.
3.1102 Policy.
The Government's policy is to require contractors to--
(a) Identify and prevent personal conflicts of interest of their
covered employees; and
(b) 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.
3.1103 Procedures.
(a) By use of the contract clause at 52.203-16, as prescribed at
3.1106, the contracting officer shall require each contractor whose
employees perform acquisition functions closely associated with
inherently Government functions to--
(1) Have procedures in place to screen covered employees for
potential personal conflicts of interest by--
(i) Obtaining and maintaining from each covered employee, when the
employee is initially assigned to the task under the contract, a
disclosure of interests that might be affected by the task to which the
employee has been assigned, as follows:
(A) Financial interests of the covered employee, of close family
members, or of other members of the covered employee's household.
(B) Other employment or financial relationships of the covered
employee (including seeking or negotiating for prospective employment
or business).
(C) Gifts, including travel; and
(ii) Requiring each covered employee to update the disclosure
statement whenever the employee's personal or financial circumstances
change in such a way that a new personal conflict of interest might
occur because of the task the covered employee is performing.
(2) For each covered employee--
(i) Prevent personal conflicts of interest, including not assigning
or allowing a covered employee to perform any task under the contract
for which the Contractor has identified a personal conflict of interest
for the employee that the Contractor or employee cannot satisfactorily
prevent or mitigate in consultation with the contracting agency;
(ii) Prohibit use of non-public information accessed through
[[Page 68025]]
performance of a Government contract for personal gain; and
(iii) Obtain a signed non-disclosure agreement to prohibit
disclosure of non-public information accessed through performance of a
Government contract.
(3) Inform covered employees of their obligation--
(i) To disclose and prevent personal conflicts of interest;
(ii) Not to use non-public information accessed through performance
of a Government contract for personal gain; and
(iii) To avoid even the appearance of personal conflicts of
interest;
(4) Maintain effective oversight to verify compliance with personal
conflict-of-interest safeguards;
(5) Take appropriate disciplinary action in the case of covered
employees who fail to comply with policies established pursuant to this
section; and
(6) Report to the contracting officer any personal conflict-of-
interest violation by a covered employee as soon as identified. This
report shall include a description of the violation and the proposed
actions to be taken by the contractor in response to the violation,
with follow-up reports of corrective actions taken, as necessary.
(b) If a contractor reports a personal conflict-of-interest
violation by a covered employee to the contracting officer in
accordance with paragraph (b)(6) of the clause at 52.203-16, Preventing
Personal Conflicts of Interest, the contracting officer shall--
(1) Review the actions taken by the contractor;
(2) Determine whether any action taken by the contractor has
resolved the violation satisfactorily; and
(3) If the contracting officer determines that the contractor has
not resolved the violation satisfactorily, take any appropriate action
in consultation with agency legal counsel.
3.1104 Mitigation or waiver.
(a) In exceptional circumstances, if the contractor cannot
satisfactorily prevent a personal conflict of interest as required by
paragraph (b)(2)(i) of the clause at 52.203-16, Preventing Personal
Conflicts of Interest, the contractor may submit a request, through the
contracting officer, for the head of the contracting activity to--
(1) Agree to a plan to mitigate the personal conflict of interest;
or
(2) Waive the requirement to prevent personal conflicts of
interest.
(b) If the head of the contracting activity determines in writing
that such action is in the best interest of the Government, the head of
the contracting activity may impose conditions that provide mitigation
of a personal conflict of interest or grant a waiver.
(c) This authority shall not be redelegated.
3.1105 Violations.
If the contracting officer suspects violation by the contractor of
a requirement of paragraph (b), (c)(3), or (d) of the clause at 52.203-
16, Preventing Personal Conflicts of Interest, the contracting officer
shall contact the agency legal counsel for advice and/or
recommendations on a course of action.
3.1106 Contract clause.
(a) Insert the clause at 52.203-16, Preventing Personal Conflicts
of Interest, in solicitations and contracts that--
(1) Exceed the simplified acquisition threshold; and
(2) Include a requirement for services by contractor employee(s)
that involve performance of acquisition functions closely associated
with inherently governmental functions for, or on behalf of, a Federal
agency or department.
(b) If only a portion of a contract is for the performance of
acquisition functions closely associated with inherently governmental
functions, then the contracting officer shall still insert the clause,
but shall limit applicability of the clause to that portion of the
contract that is for the performance of such services.
(c) Do not insert the clause in solicitations or contracts with a
self-employed individual if the acquisition functions closely
associated with inherently governmental functions are to be performed
entirely by the self-employed individual, rather than an employee of
the contractor.
PART 12--ACQUISITION OF COMMERCIAL ITEMS
0
4. Amend section 12.503 by adding paragraph (a)(9) to read as follows:
12.503 Applicability of certain laws to Executive agency contracts for
the acquisition of commercial items.
(a) * * *
(9) Public Law 110-417, section 841(a), Policy on Personal
Conflicts of Interest by Employees of Federal Government Contractors 41
U.S.C. 2303 (see subpart 3.11).
* * * * *
PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES
0
5. Add section 52.203-16 to read as follows:
52.203-16 Preventing Personal Conflicts of Interest.
As prescribed in 3.1106, insert the following clause:
Preventing Personal Conflicts of Interest (DEC 2011)
(a) Definitions. As used in this clause--
Acquisition function closely associated with inherently
governmental functions means supporting or providing advice or
recommendations with regard to the following activities of a Federal
agency:
(1) Planning acquisitions.
(2) Determining what supplies or services are to be acquired by
the Government, including developing statements of work.
(3) Developing or approving any contractual documents, to
include documents defining requirements, incentive plans, and
evaluation criteria.
(4) Evaluating contract proposals.
(5) Awarding Government contracts.
(6) Administering contracts (including ordering changes or
giving technical direction in contract performance or contract
quantities, evaluating contractor performance, and accepting or
rejecting contractor products or services).
(7) Terminating contracts.
(8) Determining whether contract costs are reasonable,
allocable, and allowable.
Covered employee means an individual who performs an acquisition
function closely associated with inherently governmental functions
and is--
(1) An employee of the contractor; or
(2) A subcontractor that is a self-employed individual treated
as a covered employee of the contractor because there is no employer
to whom such an individual could submit the required disclosures.
Non-public information means any Government or third-party
information that--
(1) Is exempt from disclosure under the Freedom of Information
Act (5 U.S.C. 552) or otherwise protected from disclosure by
statute, Executive order, or regulation; or
(2) Has not been disseminated to the general public and the
Government has not yet determined whether the information can or
will be made available to the public.
Personal conflict of interest means a situation in which a
covered employee has a financial interest, personal activity, or
relationship that could impair the employee's ability to act
impartially and in the best interest of the Government when
performing under the contract. (A de minimis interest that would not
``impair the employee's ability to act impartially and in the best
interest of the Government'' is not covered under this definition.)
(1) Among the sources of personal conflicts of interest are--
(i) Financial interests of the covered employee, of close family
members, or of other members of the covered employee's household;
(ii) Other employment or financial relationships (including
seeking or negotiating for prospective employment or business); and
(iii) Gifts, including travel.
[[Page 68026]]
(2) For example, financial interests referred to in paragraph
(1) of this definition may arise from--
(i) Compensation, including wages, salaries, commissions,
professional fees, or fees for business referrals;
(ii) Consulting relationships (including commercial and
professional consulting and service arrangements, scientific and
technical advisory board memberships, or serving as an expert
witness in litigation);
(iii) Services provided in exchange for honorariums or travel
expense reimbursements;
(iv) Research funding or other forms of research support;
(v) Investment in the form of stock or bond ownership or
partnership interest (excluding diversified mutual fund
investments);
(vi) Real estate investments;
(vii) Patents, copyrights, and other intellectual property
interests; or
(viii) Business ownership and investment interests.
(b) Requirements. The Contractor shall--
(1) Have procedures in place to screen covered employees for
potential personal conflicts of interest, by--
(i) Obtaining and maintaining from each covered employee, when
the employee is initially assigned to the task under the contract, a
disclosure of interests that might be affected by the task to which
the employee has been assigned, as follows:
(A) Financial interests of the covered employee, of close family
members, or of other members of the covered employee's household.
(B) Other employment or financial relationships of the covered
employee (including seeking or negotiating for prospective
employment or business).
(C) Gifts, including travel; and
(ii) Requiring each covered employee to update the disclosure
statement whenever the employee's personal or financial
circumstances change in such a way that a new personal conflict of
interest might occur because of the task the covered employee is
performing.
(2) For each covered employee--
(i) Prevent personal conflicts of interest, including not
assigning or allowing a covered employee to perform any task under
the contract for which the Contractor has identified a personal
conflict of interest for the employee that the Contractor or
employee cannot satisfactorily prevent or mitigate in consultation
with the contracting agency;
(ii) Prohibit use of non-public information accessed through
performance of a Government contract for personal gain; and
(iii) Obtain a signed non-disclosure agreement to prohibit
disclosure of non-public information accessed through performance of
a Government contract.
(3) Inform covered employees of their obligation--
(i) To disclose and prevent personal conflicts of interest;
(ii) Not to use non-public information accessed through
performance of a Government contract for personal gain; and
(iii) To avoid even the appearance of personal conflicts of
interest;
(4) Maintain effective oversight to verify compliance with
personal conflict-of-interest safeguards;
(5) Take appropriate disciplinary action in the case of covered
employees who fail to comply with policies established pursuant to
this clause; and
(6) Report to the Contracting Officer any personal conflict-of-
interest violation by a covered employee as soon as it is
identified. This report shall include a description of the violation
and the proposed actions to be taken by the Contractor in response
to the violation. Provide follow-up reports of corrective actions
taken, as necessary. Personal conflict-of-interest violations
include--
(i) Failure by a covered employee to disclose a personal
conflict of interest;
(ii) Use by a covered employee of non-public information
accessed through performance of a Government contract for personal
gain; and
(iii) Failure of a covered employee to comply with the terms of
a non-disclosure agreement.
(c) Mitigation or waiver. (1) In exceptional circumstances, if
the Contractor cannot satisfactorily prevent a personal conflict of
interest as required by paragraph (b)(2)(i) of this clause, the
Contractor may submit a request through the Contracting Officer to
the Head of the Contracting Activity for--
(i) Agreement to a plan to mitigate the personal conflict of
interest; or
(ii) A waiver of the requirement.
(2) The Contractor shall include in the request any proposed
mitigation of the personal conflict of interest.
(3) The Contractor shall--
(i) Comply, and require compliance by the covered employee, with
any conditions imposed by the Government as necessary to mitigate
the personal conflict of interest; or
(ii) Remove the Contractor employee or subcontractor employee
from performance of the contract or terminate the applicable
subcontract.
(d) Subcontract flowdown. The Contractor shall include the
substance of this clause, including this paragraph (d), in
subcontracts--
(1) That exceed $150,000; and
(2) In which subcontractor employees will perform acquisition
functions closely associated with inherently governmental functions
(i.e., instead of performance only by a self-employed individual).
(End of clause)
[FR Doc. 2011-27780 Filed 11-1-11; 8:45 am]
BILLING CODE 6820-EP-P