Acquisition panel takes up conflict of interest issues

Federal officials should consider writing standard contract clauses to set forth vendors' responsibilities related to conflicts of interest, and should enhance training for procurement staff on recognizing and resolving such conflicts, an acquisition advisory panel recommended Tuesday.

The recommendations, part of a larger set of proposals on the role of federal contractors, were provisionally adopted as the last in a long series of suggestions by the panel, which was created under the 2003 Services Acquisition Reform Act.

In debate Tuesday, panelists discussed how contractors function in a blended workforce in which they sit side-by-side with federal employees, sometimes performing very similar work.

Conflict-of-interest rules applying to agency employees are generally familiar, panelists said. But they noted that many firms with government contracts have their own ethics guidelines and that employees on both sides can have misperceptions about how their colleagues are permitted to act.

In light of these differences, panel members suggested that service contractors who are part of a blended workforce be required to attend agencies' annual ethics training. Panelists said agencies should consider encouraging employees to attend contractors' ethics training as well.

Such cross-training could help avoid situations in which, for example, a contractor might create a potentially compromising situation through a casual offer to buy lunch for a government colleague. Marcia Madsen, panel chairwoman and a lawyer with Mayer, Brown, Rowe & Maw LLP, noted that while in most cases government ethics rules apply only to federal employees, gratuities rules make both offering and accepting a bribe an offense.

In its recommendations on personal conflicts of interest, panelists suggested disclosure, explicit prohibitions and clearly established principles could be used to promote ethical behavior by contractors. They said the Defense Industry Initiative, an organization for defense and security contractors, had developed ethical guidelines that could be used as a model.

The panel also highlighted the potential for organizational conflicts of interest to arise during the development of work statements and requirements, the vendor selection process and in contract administration. Such conflicts could stem from financial interests, an unfair competitive advantage or impaired objectivity.

In addition to the conflict of interest recommendations, the panel has over the past 19 months addressed commercial practices, interagency contracting, performance-based services acquisition, the federal acquisition workforce and small business issues.

A coalition of industry groups sharply criticized many of the recommendations on commercial practices that were adopted last month. But Alan Chvotkin, senior vice president of the Professional Services Council, an Arlington, Va.-based industry association included in the coalition, said its members had met with Madsen since then and resolved some of the differences. He said the wording of some of the recommendations was unclear, and that the coalition continues to oppose a change to the definition of commercial services that would complicate pricing for services not widely available in the marketplace.

After concluding debate on the final set of recommendations, Madsen said the group would probably convene for a final public meeting in September to iron out any disparities among the provisional recommendations before issuing them as a draft report in early October.