Regulators have withdrawn a proposed rule, first published a decade ago, which would have revamped federal rules on contractors’ organizational conflicts of interest.
The current OCI regulations, which have been developed since the 1960s, are set forth at Subpart 9.5 of the Federal Acquisition Regulation. The OCI regulations leave it to contracting officials to exclude bidders if those vendors have corporate conflicts of interest – competing business interests, for example, which will keep the contractor from providing unbiased advice, or if a vendor would be helping draw specifications against which the vendor (or its affiliate) will be bidding in the future. The OCI rules also allow contracting officials to exclude vendors that have an unfair competitive advantage due to unequal access to information.
Daniel Gordon, who as head of the bid protest unit at the Government Accountability Office (GAO) helped shape the GAO caselaw on OCI’s, also wrote a leading article on OCI’s. Dan Gordon took over as head of the White House’s Office of Federal Procurement Policy (OFPP) (where his work was highly regarded) in 2009, and in 2011 the proposed rule was published. Dan Gordon left the White House shortly thereafter, to serve as an associate dean at George Washington University Law School.
The proposed rule (76 Fed. Reg. 23236 (2011)) reflected opposition at the time, in both government and industry, to stringent application of OCI rules. Recognizing the practical problems that overly strict enforcement could bring, the proposed rule called for a more measured approach, which would tolerate apparent conflicts when they did not pose significant reputational or performance risks to the government.
Since the proposed rule was published in 2011, much has changed. The Defense Department separately addressed congressional concerns about conflicts of interest in a major defense acquisition programs (MDAP’s) by issuing the Department’s own regulations on OCI’s in MDAP’s. At the same time, the popular concern that contractors play an outsize role in government – a concern which informed the proposed rule, and which helped drive GAO’s prior decisions – has subsided. As observers have noted, GAO is less likely to sustain protests regarding OCI’s, and agencies now regularly grant waivers regarding apparent conflicts of interest. While OCI’s remain an important issue, there seems less appetite to revamp the existing OCI law – and so the proposed rule was withdrawn.
