Overview
FAR Subpart 3.6 establishes a strict policy prohibiting the government from entering into contracts with its own employees or business entities owned and controlled by them. The primary objective is to eliminate potential conflicts of interest and maintain public trust by preventing even the appearance of favoritism or preferential treatment.
Key Rules
- General Prohibition: Contracting officers (COs) are prohibited from knowingly awarding contracts to Government employees or organizations "substantially owned or controlled" by them.
- Special Government Employees (SGEs): Experts, advisors, and consultants (as defined in 18 U.S.C. 202) are generally exempt from this prohibition unless:
- The contract stems directly from their specific work as an SGE.
- They are in a position to influence the contract award.
- A separate conflict of interest is identified.
- Exception Threshold: Exceptions are rare and require a "most compelling reason," specifically when the government’s requirements cannot be reasonably met by any other source.
- Approval Authority: Only an Agency Head or a designee (no lower than the Head of the Contracting Activity) has the authority to authorize an exception to this policy.
Responsibilities
- Contracting Officer (CO):
- Must actively avoid awarding contracts to prohibited parties.
- Must seek formal authorization under 3.602 if they believe a prohibited party is the only viable source for a compelling need.
- Must perform a thorough review and comply with FAR Subpart 9.5 (Organizational and Consultant Conflicts of Interest) before awarding to any entity owned/controlled by government personnel.
- Agency Head / Head of Contracting Activity (HCA):
- Responsible for reviewing and potentially approving requests for exceptions based on critical government necessity.
Practical Implications
- Due Diligence for Contractors: Business owners who are also federal employees (or hold "Special Government Employee" status) must disclose their status early. Failure to do so can lead to contract termination or legal penalties if the CO "knowingly" awarded the contract in violation of 3.601.
- The "Compelling Reason" Bar: In practice, the "most compelling reason" standard is extremely high. It usually applies only in emergency scenarios, niche research, or highly specialized technical fields where the government employee is the only subject matter expert available in the country.
- Interplay with OCI: Even if an exception is granted, the CO must still address Organizational Conflict of Interest (OCI) concerns. This means that just because an employee is allowed to have a contract doesn't mean they are exempt from the rigorous mitigation strategies required to ensure they don't have an unfair competitive advantage.
- Post-Employment vs. Current Employment: It is important to note that this subpart applies to current employees. Rules regarding former employees (revolving door) are covered under different sections of FAR Part 3 and statutory ethics laws.