Analysis of FAR Subpart 3.11: Preventing Personal Conflicts of Interest

Overview

FAR Subpart 3.11 establishes the policy and procedures for identifying and preventing personal conflicts of interest (PCI) for contractor employees who perform acquisition functions closely associated with inherently governmental functions. It aims to ensure that these individuals provide impartial advice and do not use their access to nonpublic information for personal gain, thereby maintaining the integrity of the federal procurement process.

Key Rules

• Definition of Covered Functions: Applies to "acquisition functions closely associated with inherently governmental functions," which include planning acquisitions, developing statements of work (SOW), evaluating proposals, awarding/terminating contracts, and determining cost reasonableness.
• Mandatory Disclosure: Contractors must obtain financial disclosure statements from "covered employees" upon assignment and require updates whenever circumstances change.
• Non-Disclosure Requirements: Covered employees must sign Non-Disclosure Agreements (NDAs) to protect nonpublic information accessed during performance.
• Prohibition on Personal Gain: Employees are strictly prohibited from using nonpublic information for personal financial gain.
• Reporting Violations: Contractors are required to report any PCI violations to the Contracting Officer (CO) as soon as they are identified, including proposed corrective actions.
• Threshold for Applicability: The clause (52.203-16) is required in solicitations and contracts exceeding the simplified acquisition threshold (SAT) where contractor employees perform acquisition-related tasks.

Responsibilities

• Contractors:
  • Screen covered employees for potential conflicts (financial interests, gifts, relationships).
  • Prevent employees with identified conflicts from performing specific tasks.
  • Maintain oversight and disciplinary procedures for non-compliance.
  • Report violations to the government and follow up with corrective actions.
• Contracting Officers (CO):
  • Insert Clause 52.203-16 in qualifying contracts.
  • Review contractor reports of violations and determine if the resolution is satisfactory.
  • Consult with agency legal counsel if a violation is not resolved or if a violation is suspected.
• Head of Contracting Activity (HCA):
  • Review and potentially approve mitigation plans or grant waivers in exceptional circumstances.
  • Note: This authority is non-delegable.
• Covered Employees:
  • Disclose financial interests and relationships of themselves, close family members, and household members.
  • Avoid even the appearance of a personal conflict of interest.

Practical Implications

• Administrative Burden on SETA/A&AS Firms: Companies providing Systems Engineering and Technical Assistance (SETA) or Advisory and Assistance Services (A&AS) must maintain robust HR and legal compliance systems to manage continuous financial disclosures for their workforce.
• Investment Restrictions: Employees working on specific government programs may be forced to divest from certain stocks or recuse themselves from high-profile projects if their family members work for competing defense contractors.
• "De Minimis" Gray Areas: While the regulation excludes de minimis interests, the lack of a specific dollar threshold in this subpart requires contractors to exercise high levels of professional judgment or seek agency guidance to avoid "appearance of conflict" risks.
• Subcontractor Management: Small businesses or self-employed consultants acting as subcontractors must be treated as "covered employees," meaning prime contractors are responsible for ensuring these individuals comply with the same rigorous disclosure standards.

AI Insights

• Bridge to Federal Ethics: This subpart essentially "exports" the ethical standards of the federal workforce to the private sector. Since contractors often sit side-by-side with federal employees, this regulation prevents a "double standard" where a contractor could influence an award that a federal employee is legally barred from touching.
• Risk of Performance-Based Conflicts: Unlike Organizational Conflicts of Interest (OCI), which focus on the company's unfair advantage, PCI focuses on individual human bias. A single employee's failure to disclose a spouse's stock holdings can lead to a contract being voided or a major procurement being protested and overturned.
• Enforcement Trigger: The requirement to report "as soon as identified" creates a high-stakes environment for contractors. Failure to report a known violation is often viewed more severely by the government than the conflict itself, potentially leading to suspension or debarment.