Government business shall be conducted in a manner above reproach and, except as authorized by statute or regulation, with complete impartiality and with preferential treatment for none. Transactions relating to the expenditure of public funds require the highest degree of public trust and an impeccable standard of conduct. The general rule is to avoid strictly any conflict of interest or even the appearance of a conflict of interest in [g]overnment-contractor relationships.
Yet, humans are resolutely fallible. As such, robust enforcement of standards is integral to a functional procurement system. For example in 2020, a government official referred to as “Mr. X” by the U.S. Government Accountability Office (GAO) was “extensively involved in virtually every aspect of [an] agency’s acquisition process” while “maintain[ing] an ongoing personal relationship” with employees from two firms who had financial stakes in the outcome of a $700 million competitive solicitation. This relationship included weekly gatherings “for camaraderie, friendship, dinner, and to engage in competitive foosball.” Mr. X’s relationship conflicted with his official duties, thereby causing what is known as a “conflict of interest” (COI). A conflict of interest is “a conflict between the private interests and the official responsibilities of a person in a position of trust.” In such instances, a person with a conflict of interest cannot act impartially given their loyalty to more than one person or organization.
The United States is well-structured with a framework that explicitly addresses conflicts of interest in their different forms, whether organizational or personal or occurring on the government’s or contractor’s side, and the ethical conduct expected of executive branch employees. This article analyzes the United States’ personal conflicts of interest regime with a narrow focus on financial, personal activity, and relational conflicts of interests among federal agency officials assigned to work on procurement-related official matters.
The article begins by closely examining the United States’ attention to integrity, fairness, and transparency in the Federal Acquisition System. It also describes the statutory and regulatory regimes related to conflicting financial interests and impartiality when employees perform their official duties. Additionally, this article establishes that interested parties can protest agency officials’ conflicts of interest or the presence of impropriety in the government’s evaluation of competitive proposals.
Next this article analyzes some of the principal weaknesses of two of the fourteen general principles of ethical conduct. It also provides suggestions on how the United States can overcome these weaknesses through statutory and regulatory reform. This article concludes that no system will ever cover all possible financial dealings, personal activity, and relational conflicts of interest. Nonetheless, Congress can apply lessons learned from prior situations where federal agency officials assigned to work procurement-related official matters acted improperly and patch the statutory and regulatory language that has glaring holes to ensure the United States’ regime remains supreme.
II. Background
To understand why the United States’ Financial Conflict Principle and Impartiality Rule should be improved, this article next will closely examine the United States’ attention to integrity, fairness, and openness in the FAR alongside the statutory and regulatory regimes related to conflicting financial interests and impartiality.
A. Importance of Integrity, Fairness, and Openness in the Federal Acquisition System
The FAR establish the core requirements for the ethical conduct of business. The FAR recognizes that “[w]hile many Federal laws and regulations place restrictions on the actions of government personnel, their official conduct must, in addition, be such that they would have no reluctance to make a full public disclosure of their actions.”However, the FAR does not isolate these requirements to only FAR 3.101. The FAR repeats the theme of integrity elsewhere, emphasizing its importance. For example, FAR 1.102 provides the vision for the Federal Acquisition System, which requires that federal agency officials maintain the public’s trust through—among other means—“conduct[ing] business with integrity, fairness, and openness.” The FAR Council adds extra color to this point by stating:
An essential consideration in every aspect of the System is maintaining the public’s trust. Not only must the System have integrity, but the actions of each member of the Team must reflect integrity, fairness, and openness. The foundation of integrity within the System is a competent, experienced, and well-trained, professional workforce. Accordingly, each member of the Team is responsible and accountable for the wise use of public resources as well as acting in a manner which maintains the public’s trust. Fairness and openness require open communication among team members, internal and external customers, and the public.
In addition, yet similar, to the requirements outlined in the FAR, in 1989, the forty-first President of the United States established that executive branch employees must “respect and adhere to the fundamental principles of ethical service” to “ensure that every citizen can have complete confidence in the integrity of the federal government.” Among the fourteen general principles of ethical conduct, two particularly echo this theme: (1) “Employees shall not hold financial interests that conflict with the conscientious performance of duty” and (2) “Employees shall act impartially and not give preferential treatment to any private organization or individual.” Further, section 208 to title 18 of the United States Code—as implemented in 5 CFR 2635 Subpart D and 5 CFR Part 2635 Subpart E—expands on the financial conflict principle and impartiality rule, respectively.
B. Financial Conflict Principle and Criminal Conflict of Interest Statute
In addition to the financial conflict principle, 18 U.S.C. § 208 provides a related criminal statutory framework that addresses conflicting financial interests. As “the cornerstone of the executive branch ethics program,” this statute aims to promote the public’s confidence in the government’s decision-making by preventing agency officials from self-dealing or acting in their own best interests instead of the best interests of the country. Section 208 prohibits agency officials from participating “personally and substantially” in “particular matters” that would have a personal financial effect, whether positive or negative or substantial or insubstantial. However, section 208 extends beyond an employee’s financial interests by also narrowly imputing the interests of some others. More specifically, section 208 also prohibits agency officials from participating personally and substantially in particular matters that would affect the financial interests of “[their] spouse, minor child, general partner, organization in which [they are] serving as officer, director, trustee, general partner or employee, or any person or organization with whom [they are] negotiating or ha[ve] any arrangement concerning prospective employment.” Employees who knowingly violate section 208 face criminal or civil penalties.
To avoid the possible criminal or civil penalties for knowingly violating 18 U.S.C. § 208, an executive branch employee must disqualify or recuse himself from any official business that “to his knowledge, he or a person whose interests are imputed to him has a financial interest, if the particular matter will have a direct and predictable effect on that interest.” The employee bears the burden of notifying the agency—coworker, supervisor, or agency ethics official—of his need to recuse himself from participating in a particular matter.
Although employees may determine that recusal from official matters is appropriate, the agency may determine that “[their] interest is not so substantial as to be deemed likely to affect the integrity of the services which the government may expect from such . . . employee” or that “the need for the individual’s services outweighs the potential for a conflict of interest created by the financial interest involved,” thereby allowing the employee to continue holding the financial interest while also working on the particular matter. If the agency designee makes either determination, the employee must continue participating in the particular matter on behalf of the government.
Congress requires all employees serving in a “covered position” to fill out a financial disclosure report each year. These reports give the agency insight into an executive branch employee’s financial interests and their other interests outside the government that may lead to a conflict between their official duties and private financial interests or affiliations. Agency officials who are considered public filers—such as the President, Vice President, and employees serving positions above the GS-15 of the General Schedule—fill out a public financial disclosure form. This form is known as OGE Form 278e. Conversely, agency officials who are considered confidential filers—those employees serving positions below the GS-15 of the General Schedule who are customarily required to render a decision or exercise significant judgment in taking a government action regarding, among others, contracting or procurement—fill out a confidential financial disclosure form. This form is known as OGE Form 450. As the terms suggest, the public financial disclosure forms are public, and confidential financial disclosure forms are kept private between the employee, the employee’s supervisor, and the agency ethics advisor.
C. Impartiality Rule
Not only do Federal agency officials have a statutory obligation to “not hold financial interests that conflict with the conscientious performance of duty,” but they also must “take[] appropriate steps to avoid an appearance of loss of impartiality in the performance of [their] official duties.” This is known as the impartiality principle or the impartiality rule. This rule focuses on appearance issues and applies even if an employee does not have any financial conflicts.
More specifically, the impartiality rule sets forth that an employee must consider whether a reasonable person would question their ability to remain impartial when participating in a particular matter if someone close to them is involved as a party to that matter. Unlike section 208 and the financial conflict principle, which narrowly imputes the financial interests of certain others onto the employee, the impartiality rule is much broader. For example, section 208 covers only the financial interests of “[the employee], his spouse, minor child, general partner, organization in which he is serving as officer, director, trustee, general partner or employee, or any person or organization with whom he is negotiating or has any arrangement concerning prospective employment.” Conversely, although the impartiality rule generally covers the same relationships as section 208, it implicates broader personal and business relationships than does section 208. Specifically, the impartiality rule covers “member[s] of the employee’s household,” “relative[s] with whom the employee has a close personal relationship,” and any “circumstances other than those specifically described in [5 CFR § 2635.502], [if the circumstance] would raise a question regarding [the employee’s] impartiality.” The Department of Justice also includes “[a] spouse’s clients and [a] spouse’s employer” within its interpretation of covered relationships. Therefore, although neither the criminal conflict of interest statute nor the impropriety rule implicates every person that the employee knows, between the law and the rule, the different types of relationships that the employee has to analyze before working particular agency matters are extensive. However, Congress should consider broadening the definition of covered relationships under the impartiality rule.
D. Conflict of Interest-Related Protests
Remaining consistent with the mandate for integrity, fairness, and openness in the Federal Acquisition System, the 1984 enactment of the Competition in Contracting Act made it possible for interested parties to protest (or challenge) various aspects of the procurement at different points in the acquisition cycle. Among the countless factors that an interested party can protest is the presence of an actual or apparent conflict of interest or, more generally, the agency’s integrity in the overall evaluation process.
Although an available option, there are relatively few protests by aggrieved interested parties alleging that government employees who participated in the acquisition had an actual or apparent personal conflict of interest. One likely reason is that agencies do not publicly publish a list of personnel assigned to work on particular acquisition matters, given that agency personnel responsible for evaluating offerors’ proposals are categorized as source selection information and prohibited from release. Without knowing who exactly is supporting the agency in the procurement, offerors face significant difficulty in analyzing whether those individuals have any conflicts, much less meeting the standard necessary to file a protest that survives dismissal.
Yet, despite no published list, offerors can discern some of the government’s participants during the acquisition’s market research phase (e.g., industry days or one-on-one sessions between the government and potential offerors) and from information available on the Internet. Therefore, the government must not be oblivious to the fact that, even with its best intentions to keep the identities of the agency’s procurement officials close hold, some identities always become known.
One challenge is that a protester must allege and prove “hard facts” that show the contracting officer’s investigation or conclusions are unreasonable. Additionally, GAO will dismiss bid protests based on speculation, often before a protester is able to access documents that might prove the allegations it suspects.
Another challenge is that both the Court of Federal Claims and GAO follow a discretionary standard of review. In DynCorp International, LLC, GAO emphasized its discretionary standard of review as follows: “Ultimately, the responsibility for determining whether an appearance of impropriety exists, and whether an offeror should be allowed to continue to compete, is a matter for the contracting agency, and we will not disturb the contracting agency’s determination unless it is shown to be unreasonable.”Similarly, in Appsential, LLC, the Court of Federal Claims acknowledged that while “a marriage between an agency employee and an employee of an offeror could create the appearance of a conflict of interest,” it found no reason to question the contracting officer’s determination that recusal of the wife and husband in question was sufficient to mitigate the conflict or determine the contracting officer’s decision to be arbitrary and capricious even if there were additional steps the contracting officer could have taken to protect the integrity of the acquisition or overcome the appearance standard.
Of the few conflict of interest-related protests that do get filed, there are even fewer that get sustained due to a lack of convincing evidence. However, GAO recently sustained a conflict of interest-related protest in September 2020. In Teledyne Brown Engineering, Inc., the protestor argued that an agency employee who participated personally and substantially in the procurement had an “ongoing personal relationship with an individual who holds a high-level position with . . . the predecessor prime contractor [of a related agency requirement] . . . [and who is also proposed as a] major subcontractor to the awardee” of the instant procurement action. During GAO’s investigation, the agency admitted that it was aware of this employee’s personal relationship, yet believed “it took measures to mitigate the effect of the relationship that eliminated the possibility of prejudice either in favor of [the awardee] or against the other offerors.” However, the record showed differently, and GAO ultimately sustained Teledyne’s protest, noting that “the record establishe[d] that a conflict or apparent conflict of interest exist[ed], and the agency did not resolve the issue, to maintain the integrity of the procurement process.”
Although GAO sustained Teledyne’s protest, GAO’s rulings on other protests are noticeably different (with seemingly inconsistent outcomes). For example, compare Archimania, in which a small business protested that one of the agency’s five evaluators—a private sector practitioner, not a Federal agency employee—had a personal conflict of interest with the awardee, which it believed precluded an unbiased evaluation. GAO ruled there was no evidence that the evaluator had a financial, personal, or other relationship with the offeror selected for negotiations, given that the agency’s analysis of the facts and the evaluator’s conflict of interest statement revealed none. Thus, GAO concluded that there was no basis for it to sustain the protest. Interestingly, GAO did not consider the same appearance standard in Archimania that it did in Teledyne’scase.
Similarly, in yet another case, a protester alleged that agency’s evaluators were biased toward the incumbent (and awardee on the instant procurement action) because of the party’s close involvement on the predecessor contract, thus concluding that the “[evaluators] could not properly evaluate the merits of a well-qualified competitor.” There, GAO opined that “[w]here, as here, a protester alleges that procurement officials acted intentionally to preclude the protester from receiving the award, the protester must submit convincing proof that contracting officials had a specific and malicious intent to harm [the] protester, since contracting officials are presumed to act in good faith.” In the Teledyne case, however, GAO did not require that a standard of “convincing proof . . . [of] specific and malicious intent to harm” be met. Instead, GAO rested squarely on the “appearance” standard contained in FAR 3.101. Curiously, GAO looked beyond the appearance standard in the IMP case, ultimately ruling that mere “inference or supposition” is not enough. GAO further emphasized that “the opportunity for bias is not a sufficient basis to question an award of a contract, [but that the protester must show] actual bias.” In discerning whether the record shows convincing proof of bias or bad faith, GAO has focused on whether the individual in question exerted improper influence in the procurement on behalf of the awardee or against the protester.
Despite the apparent inconsistencies in protest outcomes discussed above, it is clear that personal conflicts of interest cases are so fact-specific that it is difficult to predict an outcome. However, with the recent Teledyne ruling, agencies should be mindful that they will likely lose a protest where the record shows that the contracting officer failed to investigate and resolve a question concerning whether an employee who actively and extensively engaged in procurement-related activities should have been recused from those activities. So long as an agency’s record is well-documented, showing that the contracting officer gave “meaningful consideration to whether a [conflict of interest] exists, [GAO] will not substitute its judgement for the agency’s, absent clear evidence that the agency’s conclusion is reasonable.”
III. Principal Weaknesses of the United States’ Financial Conflict Principle and Impartiality Rule Lead to Protest Risk
The United States assuredly has a robust ethics regime that focuses directly on conflicting financial, personal, and business relationships. Nevertheless, despite the apparent completeness of the conflict of interest statute (and the associated financial conflict principle) and the impartiality rule, lawmakers must patch several holes to minimize the risk of personal conflict of interest-related protests. Although this article separates the principal weaknesses into three broad categories, other additional, but interrelated, weaknesses exist within them.
A. No Broad Regulatory Process for Identifying Whether or Not Agency Personnel Assigned to a Procurement Action Have Any Significant Potential Conflicts
The implementing regulation to the conflict of interest statute delineates the steps that both the employee and an “agency designee” must take in the event of any conflicting financial interests. Similarly, the impartiality rule outlines the steps that both the employee and “agency designee” must take in the event of any conflicting personal or business relationships which could potentially lead to impartiality concerns. However, neither regulation identifies a specific person, whether by name or title, to make an affirmative determination that federal agency officials assigned to procurement-related particular matters are free of significant potential conflicts before the contracting officer awards the contract. Instead, the procedures only address what to do if conflicts exist, remaining otherwise silent on the due diligence required of the agency to ensure that none, in fact, does.
Given that both the financial conflict principle and the impartiality rule cover particular matters far broader than just those related to federal contracts, it is not wholly surprising that neither the conflict of interest statute nor the impartiality rule or their implementing regulations require that the contracting officer (or the SSA if other than the contracting officer) be included in the employee’s recusal notification chain or made a part of the agency’s waiver process. Yet, given the contracting officer is responsible for ensuring that an agency’s “planned acquisition” is free of “significant potential conflicts,” and, with two parties to every federal contract (the federal agency and the contractor), it is troubling that the contracting officer’s responsibility is isolated to only the non-government party. Interestingly, despite the FAR not expressly tasking the contracting officer with ensuring that the government party is equally free of significant potential conflicts (or that suitable mitigations have been implemented) before awarding a contract, it is perplexing in much the same way that the regulations do not require anyone to affirmatively state that all assigned agency personnel assigned to the particular procurement matter are either free of conflicts or that any significant potential conflicts have been neutralized or mitigated. Ralph C. Nash, founder of the Government Contracts Program at The George Washington University Law School, had a similar concern in 2020. Regarding the contracting officer’s role in dealing with potential personal conflicts of interest, he noted that “[w]hile FAR Part 3 contains guidance on procedure for dealing with a variety of ‘improper business practices,’ there is no guidance on procedures to ensure that agency personnel participating in a program have no personal conflict of interest.”
While the FAR is seemingly silent on whose responsibility it is to ensure that agency personnel assigned to procurement matters are free of significant potential conflicts, the Department of Defense (DoD) Source Selection Procedures (SSP) identifies the source selection authority (SSA)—the individual with the final responsibility for selecting the awardee. The DoD SSP states:
The SSA shall ensure all [agency personnel] involved in the source selection are briefed and knowledgeable of . . . [the Procurement Integrity Act] . . . [and ensure that] all persons receiving source selection information sign a Non-disclosure Agreement and a Conflict of Interest statement. . . . The SSA shall [e]nsure Conflict of Interest Statements (from both Government members/advisors and nongovernment team advisors) are appropriately reviewed and actual or potential conflict of interest issues are resolved prior to granting access to any source selection information.
Although the DoD SSP makes it clear that the SSA is the responsible party for ensuring that “actual or potential conflict of interest issues [among agency personnel] are resolved” on negotiated, competitive acquisitions utilizing FAR Part 15 procedures, potential problems still exist. As a single illustrative example, a conflict of interest and nondisclosure agreement template that the Army recommends its agencies use for source selections does not address both financial conflicts and impartiality issues or the appearance thereof. Its template reads, in part:
5. To the best of my knowledge, neither I, my spouse, my dependent child(ren), nor members of my household:
a. Have any direct or indirect financial interest in any firm outside your current employer who may be a potential offeror or subcontractor in this acquisition.
b. Have any other beneficial interest in such firms except: [certifier to list firm(s) here, if applicable].
6. To the best of my knowledge, no person related to me by blood or marriage, or any business associate, is employed by or has a direct or indirect financial interest or any other beneficial interest in any of the potential offerors or subcontractors in this acquisition except: [certifier to list firm(s) here, if applicable].
The template addresses some, but certainly not all, of the relevant terms and issues from the criminal conflict of interest statute—section 208—and the impartiality rule. At the crux of what is missing though is an opportunity or invitation for agency officials to disclose those relationships which may trigger appearance issues. For example, the template does not invite agency officials involved in a procurement to admit at the outset whether they are dating a member of an offeror’s proposal development or leadership team. Nor does the template prompt agency officials to consider instances where they have a long-standing friendship with an employee of a prime or subcontractor competing for the contract that they are so deeply involved in that one would assume they would have unwavering loyalty to each other, perhaps at any cost. Although the agency employee may not directly benefit from any positive outcome in favor of the person they are closely tied to, such dating relationships or enduring friendships are certainly enough to raise eyebrows. Therefore, potential impartiality concerns come into play under either scenario. However, they are unlikely to be exposed by the agency’s conflict of interest statement template. The template fails to require an employee to consider or disclose whether any of their relationships may cause a reasonable person with knowledge of the facts about their relationship to question their impartiality in working the matter.
While the DoD has codified guidance in its SSP of who is responsible for ensuring actual or potential conflict of interest issues among agency personnel are resolved on FAR Part 15 acquisitions—the SSA—other types of procurements are not bound by the principles and procedures outlined in the DoD SSP because they do not follow FAR Part 15. For example, acquisitions that follow the fair opportunity process under FAR 16.505(b)(1) are not required to use the procedures outlined in the DoD SSP, nor are those falling under the simplified acquisition threshold as the agency would use the simplified acquisition procedures within FAR Part 13. While the FAR requires the government to conduct all business “in a manner above reproach, . . . with complete impartiality . . . [and in a way so as] to avoid strictly any conflict of interest or even the appearance of a conflict of interest,” it is problematic that the broadest regulations are silent on whose responsibility it is for ensuring the government’s team is free of significant potential conflicts on particular procurement matters.
The statutory and regulatory guidance place great responsibility on the employee for understanding and complying with the conflict of interest and impartiality laws. However, people face many situations daily that create moral dilemmas that they either fail to recognize or report. Oddly, the government’s starting point seems to be to assume no conflicts exist unless the employee or someone else believes otherwise.Although that may not be a bad starting point from the perspective of efficiency, it is unfair to expect the SSA (or contracting officer if other than SSA) to simply trust that employees will be knowledgeable about their need to disqualify themselves from an assigned procurement-related particular matter if required to do so. This is likely why the DoD SSP requires agency personnel assigned to source selections to affirmatively state on a conflict of interest and nondisclosure agreement form whether they have any conflicts with any of the expected or actual offerors. However, the form is generally not helpful if it does not contain a comprehensive list of the right probing questions related to the financial conflict principle and the impartiality rule. The government must fix the problem of not having a well-established checks and balance system in place when supervisors assign employees to any official matters, but especially procurement-related official matters.
The annual financial disclosure reports that Congress requires covered employees to complete are a positive step in the agency’s proactive oversight of significant potential conflicts. However, there are four primary flaws with assuming these reports indicate whether financial conflicts are present. First, such reports are only reviewed once a year by the employee’s first-line supervisor or the agency’s ethics advisor. Therefore, any red flags generated from the initial report may become a distant memory by the time that it is reviewed (and indeed beyond) as there is no requirement for supervisors to review the reports to refresh their memory of the report’s contents after the initial report is completed.
Second, and perhaps more concerning, is that the reports only contain “information current as of the filing date for the preceding 12 months.” Therefore, by the time the first-line supervisor (i.e., the party responsible for assigning particular matters to the employee) is made aware of his employee’s financial interests and other interests outside the government that may give rise to a conflict, it may be twelve months too late.
Third, although maybe moot given the potential staleness of the report’s contents, in addition to Congress not requiring supervisors to periodically review prior red flags throughout the reporting year, no standard process exists for supervisors to cross-reference employees’ private financial interests or affiliations against new particular matters before assigning the matter to the employee.
Finally, suppose a supervisor (or employee) moves to a different position. Today’s codified process does not require that the gaining supervisor familiarize himself with the potential conflicts of interests now under his purview. Based on this author’s professional experience, it is not until the following year that the agency will verify that the employees and supervisors are correctly matched in the reporting system from the previous year before the cycle begins again. This time frame creates a situation ripe for danger since incoming supervisors may have no awareness of their employee’s conflicts when assigning particular matters.
B. Impartiality Rule Narrowly Defines Covered Relationship, Leaving Roomfor Questionable Impropriety to Exist
Beyond lacking a well-established regulatory process is another problem: the impartiality rule narrowly defines an employee’s “covered relationships.” The laser-focused definition for “covered relationships” in the impartiality rule regarding whose interests are imputed to the employee, although broader than the definition in the conflict of interest statute, leaves room for questionable impropriety to remain undetected among agency personnel. These definitions are important because they determine whether employees must recuse themselves from a particular procurement-related matter.
The definition of “covered relationships” in the impartiality rule should implicate even broader relationships. Consider, for example, that “relative[s] with whom the employee has a close personal relationship” are covered by the impartiality rule. However, “close personal relationships” among friends are not. Therefore, an employee is not required to recuse themselves from a particular matter where their relative is a party to that matter unless the employee has a “close personal relationship” with them. Yet, it seems likely that anyone with whom the employee has a close personal relationship carries the potential to create a conflict of interest. The impartiality rule also completely fails to consider or address non-relatives (e.g., friends) with whom the employee has a close personal relationship.
Moreover, consider that many Americans have individuals in their lives who they refer to as aunts, uncles, or cousins despite there being no biological relationship to them. From a technical standpoint, these persons are considered “friends.” However, such persons are treated by those individuals as (even referred to as) “relatives” for all intents and purposes. This situation presents a real possibility that an employee’s loyalty to a “close friend” could directly conflict with an employee’s loyalty to their federal employer in much the same way that a “relative with whom the employee has a close relationship” could.
Ostensibly, it may seem appropriate for Congress to have intentionally excluded mere friendships from the conflict of interest rules absent some indicia of inappropriate conduct. However, given that the impartiality rule focuses on the extent of an employee’s relationship with their relative within the definition for covered relationships, it seems reasonable that the extent of an employee’s relationship should be considered, regardless of the title that the person holds for the employee. To illustrate, an employee is not required to disclose that their fraternity brother with whom they remain in close and frequent contact has a financial stake in one of the competitive proposals that he will be responsible for evaluating. Instead, the impartiality rule only invites the employee to do so. More precisely, disclosure is not required unless the employee is “concerned that [such a circumstance[] . . . would raise a question regarding his impartiality.” Even if the employee is “concerned” that his relationship(s) or interest(s) may create an appearance problem, the language merely invites the employee to disclose the appearance problem, but does not require them to do so. If the contracting officer, who is unaware of the relationship, or extent of the relationship, ends up awarding a contract to the firm associated with the fraternity brother, the agency will likely find itself in the same situation that National Aeronautics and Space Administration (NASA) was in the Teledyne Brown Engineering, Inc. case, which is why the current definitions are a problem.
C. Lack of Transparency
Lastly, in addition to lacking a well-established process for ensuring agency personnel are free from significant potential conflicts before a supervisor assigns them to particular procurement matters and the impartiality rule narrowly defining covered relationships, is the problem that the current laws and regulations do not require agencies to make recusals and waivers publicly available. Further, although the government requires contractors to disclose potential or actual conflicts of interest to the contracting officer as soon as they identify them, the agency does not extend the same courtesy to contractors when an agency official identifies potential or actual financial, personal, or business conflicts of interest that may impact the contractor. In essence, while the FAR requires that procurement officials act “with complete impartiality,” the lack of transparency and lack of openness inthe government’s current process relative to employee recusals and agency designee waivers allows unethical preferential treatment to flourish if left unchecked.
Without transparency in an agency’s identified or waived personal conflicts of interest, offerors are not assured that impropriety in the procurement did not exist. For example, consider how the agency may have avoided the protest filed by HumanTouch, LLChad it been more transparent. Of significance here, one of the bases for HumanTouch’sprotest was that “information available on the internet show[ed] that one of the technical evaluators ‘left the employ of the [contract] awardee to join the Agency just six months before proposals [sic] submitted.’” Further, HumanTouch contended that “there was nothing in the record to indicate that this evaluator recused themselves ‘from the technical evaluation of the awardee’s proposal,’ or ‘that the Agency either identified or mitigated this personal conflict of interest.’” It seems likely that had HumanTouchhad greater assurance from the agency that it conducted the procurement with integrity and fairness, the basis for its protest would have weakened by its own admission. Instead, GAO denied the protest given that “the protester present[ed] in support of its argument inaccurate information about the evaluator’s employment history [giving rise to the conflict] coupled with speculation about the differences in the evaluation results for the awardee and six other offerors, none of which [was] the protester.” However, in the absence of full transparency, offerors have little else to go on except “inference or supposition.”
Even though GAO’s initial starting point when deciding protests is that federal agency officials are presumed to act with integrity, given there have been instances where GAO has found that agency officials have not, the public deserves more overt assurance through proactive transparency. Consider Teledyne, whose hunch also started as mere “inference or supposition,” about the agency official’s personal relationship with its competitor. However, its protest paid fruitful dividends. The agency could have achieved a more desirable outcome—without needing to scrap the solicitation and “begin its acquisition anew”—had the contracting officer disclosed the basis for his determination at the outset. Such transparency would have given offerors, such as Teledyne, a chance to question the agency’s determination outside of any protest fora. Recall that the FAR puts federal officials on notice that they shall act in such a way as to “have no reluctance to make a full public disclosure of their actions.”Therefore, agencies should have “no reluctance” in sharing how they satisfied statutory and regulatory requirements.
IV. Suggestions for Improving the United States Financial Conflict Principle and Impartiality Rule
Although it may be tempting to conclude that the United States’ conflict of interest regime is working writ large given the limited number of relevant protests alleging that the government violated either the financial conflict principle or the impartiality rule, one should thoughtfully consider whether its effectiveness can be meaningfully assessed given the lack of transparency. There are instances—such as here—where the mantra “if it ain’t broke, don’t fix it” should be ignored. While reactive approaches are initially easier than spending thoughtful consideration and energy making proactive moves, anticipating (and correcting) problems before they manifest avoids being in a perpetual state of damage control. Considering that the FAR places a high value on the integrity of the government’s conduct, sitting passively until (not if) the Teledyne matter repeats itself is unwise. Therefore, Congress, through its power to legislate, or the President and his Office of Management and Budget, and its Office of Federal Procurement Policy, through their power to regulate, should consider the following suggestions to overcome the aforementioned principal weaknesses.
A. Pass Legislation or Implement Regulation for Steps a Requiring Activityand Contracting Agency Must Take When Assigning Federal Employeesto Procurement Matters
Our laws need to include a proactive overall regulatory process requiring agencies to affirm that no procurement officials have conflicts (or that no one close to the officials is involved as a party to the matter). More precisely, the FAR Council should establish a process that the requiring activity and contracting agency must follow before assigning Federal employees to procurement-related official matters. Additionally, the FAR Council should identify the specific person(s) responsible for making an affirmative determination that the agency’s employees are free from significant potential conflicts before a contracting officer is permitted to make a contract award. Given that the contracting officer is the person who makes such determinations about the contractor’s organizational and personally occurring conflicts of interest, it seems likely that the contracting officer would make this same determination, but regarding the federal agency and its personnel.
Steps the requiring activity and contracting agency must take before assigning federal employees to procurement-related official matters could include reviewing—before the employee begins working their assignment—the vendors in the marketplace in comparison to any financial, personal, or business conflicts that the employee may have, or whether any relationships could cause a reasonable person to question whether the employee would act impartially and in the best interest of the government. Often, the agency is hyper-focused on personal conflicts existing when the government is ready to evaluate proposals. However, the agency must consider conflicts much earlier in the procurement process. For example, conflicts should be considered when agency officials begin drafting the government’s specification and acquisition strategy. Identifying and evaluating potential organizational conflicts earlier in the acquisition process could help avoid allegations from aggrieved offerors that, for example, a government official tailored the requirement in favor of their personal or financial interests.
The FAR Council can model the process established within the DoD SSP as its starting point in broadening the process for all procurement actions, not just those using FAR Part 15 procedures. That process requires, in part, that all personnel involved in a FAR Part 15 source selection sign a conflict of interest statement. It then requires the SSA to review and resolve any actual or potential conflicts of interest before providing such personnel access to source selection information. Other federal agencies should follow suit by requiring that agency personnel assigned to work on procurement-specific particular matters sign a conflict of interest statements to obtain an accurate, complete, and current disclosure from their employees regarding potential conflicts. It is of critical importance that the conflict of interest statement template accurately accounts for all potential situations that might create a personal conflict of interest and that are covered by the conflict of interest statute or the impartiality rule, including those giving rise to appearance issues. In other words, the previously mentioned template used by the Department of the Army is a great starting point. However, it must be expanded to be of truly beneficial use.
Unlike the process established within the DoD SSP whereby the employee presumably completes the conflict of interest statement in the latter phases of the procurement cycle (i.e., the evaluation phase), the broader process recommended here should set forth that agency personnel are required to sign a conflict of interest statement when they are first assigned to the matter. Furthermore, the process should require that the agency actively seek updates to the employees’ conflict of interest statements whenever new potential (or actual) offerors are identified, or the relevant facts regarding an employee’s potential conflicts change. In other words, neither party should treat the conflict of interest disclosure process as a one-and-done event. Instead, they should treat their review and analysis of potential conflicts as a continuous process, performed at intervals that make sense for the particular procurement matter.
In addition to the conflict of interest statements, supervisors can rely on the financial disclosure reports (i.e., OGE Form 450) when determining whether or not a subordinate is clear to work on a particular matter. However, such reports are more useful if the supervisor reviews them more frequently than annually and if the reports contain a more current snapshot of the employee’s personal financial interests or affiliations. Therefore, Congress should require that supervisors to review all covered employee’s financial disclosure reports falling under their purview that the agency ethics official identified as containing potentially risky personal or financial interests at least quarterly. Since the reports are generated and reviewed electronically, it should be relatively easy for the agency to modify the software to automatically notify the supervisor of a need to review flagged financial disclosure reports again. Implementing this change should help supervisors maintain awareness of their employee’s potential conflicts relative to particular procurement matters within their purview by checking the reports more than once a year. Additionally, Congress should consider requiring confidential filers to complete a transaction report similar to the OGE Form 278T report that public filers have to complete within thirty days of any reportable transaction. This report would provide visibility to the supervisor whenever a covered employee buys or sells stocks above a predetermined dollar threshold and thus would provide a way to ensure that the supervisor always has accurate, complete, and current information regarding an employee’s financial holdings.
Lastly, presuming that the contracting officer will become the responsible party for affirming that the agency is free from significant potential conflicts—as recommended above—the implementing regulations should be reformed to require that the contracting officer be notified of an employee’s recusal from a particular procurement matter due to conflicts regarding their covered personal relationships or financial interests that may give rise to an actual or potential conflict. Additionally, should the agency designee determine that waiving the employee’s recusal is justified, the agency head or his designee should be the approval authority. This recommendation follows the FAR’s existing process in cases where the contractor’s “significant potential conflicts” cannot be avoided, mitigated, or neutralized, and awarding to the contractor is in the best interest of the government. Therefore, given the rank of the official required to approve waivers of conflicts of interest on the contractor’s side, it seems appropriate that the government would follow suit when waiving similar conflicts occurring on its side. In addition, the contracting officer should be made a part of the process since a waiver can subject the agency to protest risk. Contracting officers should be far enough removed from the preparation of the waiver that they would be a suitable party to look at the facts without bias and ensure that the agency’s analysis is sound and well-supported.
Presently, well-established processes exist for reviewing and waiving conflicts of interest occurring on the contractor’s side that the agency can replicate for conflicts arising on the government’s side. For example, the contracting officer is the party responsible for analyzing planned acquisitions for the existence of potential organizational conflicts of interests and avoiding, mitigating, or neutralizing significant potential conflicts before contract award. Strangely, the FAR explicitly states that “contracting officer’s judgment need be formally documented only when a substantive issue concerning potential organizational conflict of interest exists.” Absent a definition for what constitutes a “substantive issue” within the FAR, it is seemingly up to the discretion of the contracting officer whether such an issue exists. Therefore, considering the contracting officer’s role and judgment in analyzing the acquisition for the presence of conflicts occurring on the contractor’s side, contracting officers should have a formal role in performing a thorough analysis for conflicts more generally, regardless of whether the potential conflict exists on the contractor’s or government’s side.
Surprisingly, of all places the FAR Council grants contracting officers reprieve from documenting the contract file, it is in the area of conflicts of interest. FAR 9.504(d) states, “In fulfilling their responsibilities for identifying and resolving potential conflicts, contracting officers should avoid creating unnecessary delays, burdensome information requirements, and excessive documentation.” Considering the value the highest levels of government place on integrity, fairness, and openness, documenting the level of attention the contracting officer gives to analyzing the procurement for questionable conflicts should be emphasized, not minimized.
B. Redefine Covered Relationship to Include “Any” Relationship That WouldCause Reasonable Person with Knowledge of the Relevant Facts to Questionan Employee’s Impartiality in the Matter
As a final means of improving the United States conflict of interest regime, Congress should redefine “covered relationships” within the impartiality rule. More specifically, its definition should contemplate all relationships that could give rise to questionable impropriety. Such omissions have left agency ethics advisors with the responsibility of combing through the relevant facts (which they already do) before determining whether disqualification is recommended or required. Despite the existing regulatory language not being particularly broad, GAO has generally relied on an employee’s duty to comply with the “overarching FAR mandate [in FAR 3.101-1] . . . that government employees [must] strictly avoid not only actual conflicts of interest, but also avoid even the appearance of a conflict of interest” when deciding conflict of interest-related protests. However, an explicit regulatory reference for the parties to understand and abide by will give GAO and the Court of Federal Claims a narrower and more applicable cite in which to pinpoint.
Of relevance here, currently the regulatory language limits an employee’s covered relationships to persons who are members of the employee’s household or who are relatives with whom the employee has a close personal relationship. It does not cover an employee’s other personal relationships other than those who qualify as “relatives.” It is obvious that, in certain circumstances, people are as—if not more—loyal to persons who are not blood relatives if they have a tightly-knit personal friendship. Stated differently, agency officials would face a similar moral dilemma when assigned to official matters involving their “best friend” as they would with a “relative with whom [they] ha[ve] a close personal relationship.” Either relationship would cause a reasonable person with knowledge of the relevant facts to question an employee’s impartiality in the matter.
Therefore, Congress should redefine covered relationships within the impartiality rule to broadly include family members, relatives, and friends. The term friend would not need to be formally defined in advance. Instead, the term can be defined on a case-by-case basis based on specific facts related to the situation at issue. This recommendation follows suit with Canada’s conflict of interest regime which has a law prohibiting a “public office holder [from] us[ing] his or her position as a public office holder to seek to influence a decision of another person to further the public office holder’s private interests or those of the public office holder’s relatives or friends or to improperly further another person’s private interests.”
C. Require Agencies to Publicly and Proactively Disclose Recusals and Waiversof Conflicting Financial Interests or Personal or Other Relationshipsor Activities for Procurement-Related Official Matters
When offerors lose a competitive procurement, they could be motivated to file a protest increases because the cost is relatively low compared to the revenues a sustained protest could yield if they become the awardee. Therefore, even if unsuccessful offerors merely have a hunch about whether impropriety is (or was) present in an agency’s procurement—especially if compounded with other allegations—it is a worthwhile investment for them to protest the award. However, consider the amount of time, effort, and money both parties could save if the government were transparent at the outset about its identified internal conflicts of interest and its analysis and determination regarding how such conflicts were avoided, neutralized, or mitigated. Therefore, as a final measure towards improving the United States’ conflict of interest regime, lawmakers should require agencies to publicly and proactively disclose conflicts of interest-related employee recusals and agency waivers.
This recommendation would also follow suit with Canada’s conflict of interest regime as it has a statute requiring reportingpublic office holders to publicly disclose, within sixty days, instances in which they “recused [themselves] to avoid a conflict of interest” with “sufficient detail to identify the conflict of interest that was avoided.” Such public declarations of recusals give assurance—in the spirit of openness and transparency—that agency employees are not only aware of the need to recuse themselves, but that they actually do it. The United States should consider implementing a similar requirement.
Transparency and collaboration between the parties create a win-win situation. First, giving the public—interested parties to the procurement—an opportunity to raise their concerns will decrease the likelihood of a protest containing nothing more than mere speculation. More specifically, it will allow interested parties to know whether or not the contracting officer was aware of an internal potential personal conflict of interest and whether or not the contracting officer sufficiently avoided, mitigated, or neutralized it. Second, through an interested party’s inquiry, it could reveal to the contracting officer gaps or weaknesses in the agency’s analysis, including whether it failed to consider relevant facts. In the case of Teledyne, the record was littered with instances where, for example, the contracting officer was not aware of particular facts or was aware and failed to mitigate them sufficiently. Imagine how the outcome may have been different if the contracting officer proactively informed potential offerors why he believed the agency official could continue participating in the procurement despite his close personal relationship with one of the offerors.
An agency’s proactive and public disclosure would not need to identify the government official’s name or role within the procurement. Instead, the disclosure could simply provide a statement such as: “An agency official participating personally and substantially in [this] procurement disclosed a real or apparent conflict of interest; however [this] was the agency’s basis for determining the official could continue participating in the procurement.” The agency would not need to invite responses from industry at the time of its disclosure. Instead, interested parties—if so compelled—would respond or inquire automatically, without an explicit invitation to do so. If interested parties do raise questions, the agency should be prepared to answer them sufficiently.
V. Conclusion
Fortunately, judging by the infrequency of personal conflicts of interest-related protests brought against the government, it appears that there are few “Mr. Xs” working on federal agency procurements. However, that does not mean Congress should sit around passively waiting for a Mr. Y who also values his tabletop games and fellowship more than acting in a manner that maintains the public’s trust. Therefore, lawmakers should consider reforming the conflict of interest laws and regulations before known weaknesses are exploited and the public’s confidence in the integrity of the federal government is brought into further question.
Three broad categories of principal weaknesses exist in the current regime, and, with some effort, all can be overcome. First, lawmakers should establish a procurement-specific regulatory process requiring the contracting officer to affirm for the record that all agency employees assigned to a procurement are free from significant potential conflicts before the government is permitted to award a contract. A codified process will help ensure that the agency’s record is well-documented and show that the contracting officer gave meaningful consideration to whether a conflict of interest exists.
Second, lawmakers should consider redefining “covered relationships” within the impartiality rule to focus on the extent of an employee’s relationship with family members, relatives, and friends. These three broad relational groupings should not be narrowly defined. Instead, the terms should be given their plain, ordinary, and literal meaning. Any recusals that may otherwise be triggered as a result of the term’s plain, ordinary, and literal meaning could be overcome by the existing waiver process should the agency determine that a reasonable person with knowledge of the relevant facts would be unlikely to question an employee’s impartiality in the matter.
Lastly, in the spirit of transparency, lawmakers should require agencies to publicly and proactively disclose conflicts of interest-related employee recusals and agency waivers given the FAR’s emphasis that agencies should have“no reluctance to make a full public disclosure of their actions.”Therefore, agencies should have “no reluctance” in sharing how they satisfied statutory and regulatory requirements. These suggestions are not a panacea for solving every situation that an agency will face regarding an employee’s conflicts of interest related to official procurement matters. Finding and mitigating conflicts of interest is a robust, fact-specific, and multifaceted inquiry. However, the suggestions argued for in this article provide a practical starting point for lawmakers to consider to address these largely overlooked weaknesses within the U.S. conflict of interest regime.
Even if these reforms are not adopted by Congress, contracting officers must still ensure that they give meaningful consideration to whether conflicts exist within federal procurements, especially when they do not fit squarely within the conflict of interest or impartiality rule framework. As long as contracting officers do a facially thorough job in investigating real or potential conflicts, GAO and the Court of Federal Claims will generally provide judicial deference (or yield to their judgment). However, case law requires that the courts determine whether there is a “rational connection between the [agency’s] facts found and the choice made.”
To that end, it would be interesting for future research to analyze whether courts should more heavily scrutinize an agency’s waiver of a conflict or an agency’s determination as to whether a significant potential conflict has been sufficiently mitigated.
