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On April 22, 2010, DoD issued proposed rules (.pdf) that would implement section 207 of the Weapons Systems Acquisition Reform Act of 2009 ("WSARA"), which requires DoD to provide “uniform guidance and tighten” existing regulations governing organizational conflicts of interest (“OCI”). We have previously published a detailed description and analysis of these proposed rules. Although the proposed rules would apply to DoD procurements only, non-DoD contractors should pay close attention, because it is widely expected that the FAR OCI rules, which are currently under review, will track these DOD rules.

DoD is requesting comments by June 21, 2010 for consideration in the formulation of final rules. As contractors review the proposed rules and think about filing comments, here are a few areas that might benefit from industry comment:

  • Instead of being located in Part 9 (relating to contractor qualifications, responsibility, and eligibility), where the current FAR OCI rules can be found, these new rules would be located in Part 3 fo the DFARS (relating to improper business practices and other integrity issues). What is the significance, if any, of the new location of the proposed OCI rules?
  • The proposed rules regarding unfair access to non-public information OCIs provide that “not all competitive advantage is unfair,” and – to that end – the rules incorporate the long-standing principle that incumbent contractors (or an offeror that has performed similar requirements in the past) may have a competitive edge over others, but that advantage by itself does not constitute an unfair competitive advantage. The proposed rules do not offer much guidance about what is a permissible "natural advantage of incumbency." At what point does that advantage become unfair (and, therefore, impermissible)?
  • Under the proposed rules, if a contracting officer determines that performance of the contemplated work has the potential to create an OCI, the CO must insert a solicitation provision, which includes broad disclosure and certification requirements, including an obligation on the offeror to disclose “all relevant information regarding any organizational conflicts of interest." Further, the offeror must describe “any other work performed on contracts, subcontracts, grants, cooperative agreements, or other transactions within the past five years that is associated with the offer it plans to submit.” What is meant by "all relevant information?" How broadly should an offeror construe "associated with the offer"? Is five years an appropriate length of time?
  • The proposed rules, implementing a specific WSARA mandate, provide that a contract for the performance of systems engineering and technical assistance for a major acquisition program must prohibit the contractor, or any affiliate of the contractor, from participating as a contractor or major subcontractor in the development or construction of a weapon system under such program. The proposed rules expressly recognize that an exception is appropriate for highly qualified contractors with domain experience and expertise if the conflict can be adequately resolved. How will DoD implement this exception? What standards will be used? How far in advance will an exception be granted? What does it mean to "adequately resolve" a conflict?