What You Should Know About Organizational Conflict of Interest

Summary: Conflicts of Interest may prevent you from winning a public contract or may result in being removed from one! Learn what Conflicts of Interest (COIs) and Organizational Conflicts of Interest (OCIs) are and why it’s important to have a plan in place before a conflict occurs.

What is a Conflict of Interest?

A Conflict of Interest (COI) occurs when an individual or organization is involved in multiple interests, any one of which could possibly bias their motivation, and be perceived as impacting their ability to act impartially or providing an unfair competitive advantage in current or future government procurements. Even the appearance of a COI should be avoided at all costs, and is a reason to put a plan in place.

As a government contractor, you may already be familiar with the acronym “COI”. If not, you should become knowledgeable, as Conflicts of Interests may start to pop up in your company’s business audits and cause “protest risk” on your newly won contracts.

For a more in-depth look at this topic watch this webinar with CohnReznick’s Rebecca Kehoe, manager of the firm’s Government Contracting Industry Practice, to learn about Conflicts of Interest and ways to address them.

There are basically two types of Conflicts of Interest (COIs):

1. A Personal Conflict of Interest (PCI)

   This involves an individual, and occurs when that person has other businesses, real estate, or financial assets that could bias them toward a particular decision or point of view.  A PCI can involve an employee, a subcontractor or an individual in an advisory role – so it’s important to understand common situations where PCIs occur and how to address them.

2. An Organizational Conflict of Interest (OCI)

   This occurs when work performed by a contractor on a federal contract results in an unfair advantage for the contractor, prevents the contractor from performing the work in an unbiased manner, or prevents the contractor from rendering impartial advice to the government.

Organizational Conflict of Interest Three Types - Described in FAR 9.5:

1. Unequal Access  (FAR 9.505-4)

   This situation can arisewhen a contractor has access to information not available to other contractors. An example might be if the contractor has information on what the government estimate is that could assist them in winning the contract.

2. Biased Ground Rules (FAR 9.505-1 & 2)

   This situation can occur when a contractor may be involved in writing a Statement of Work (SOW) or providing technical services or direction and then later seeks to submit a  proposal to fulfill that requirement.

3. Impaired Objectivity (FAR 9.505-3)

   This situation can occur when a contractor performs duties that involve assessing or evaluating itself, a parent company, subsidiary, partner, affiliate or competitor.

   Most OCI claims are raised by a contractor’s competitors in the form of a bid protest that challenges the contractor’s unfair competitive advantage in the procurement process or their ability to perform the work without bias. The responsibility for determining whether an OCI actually exists and whether it can be neutralized or mitigated lies with the procuring government agency’s Contracting Officer (CO).  

It’s important to have a plan in place before an OCI occurs or even the appearance of an OCI occurs. Here are some steps an organization can take:

• Establish a corporate culture of ethical compliance from the top down. When employees and subcontractors see that management takes it seriously – so will they.
• Perform Conflict of Interest Training for all personnel annually. Since there are different levels of training, ensure that each individual is receiving the appropriate level.
• Require Disclosure Statements from your top decision makers. Update them annually or when personal or financial circumstances change.
• Require Disclosure of Interest Statements from personnel working on contracts. Update them when personal or financial circumstances change or at least annually.
• Have a Written Conflict of Interest Policy and make sure people working on your contracts are knowledgeable about potential conflicts and know what they should do.
• Ensure there are no penalties for disclosure. You don’t want your employees hiding things only to hear it went to the government from another source.
• Have predetermined strategies and plans developed and on file – before an occurrence.
• If you do experience a violation – always disclose it to the CO – along with the corrective action you are taking to alleviate it. 

Learn More

Learn how Deltek Costpoint can help you record OCIs during the pre-award process by watching this 5 minute product demo found under “support materials” at the bottom of the new Costpoint Contract Management web page.