The impending presidential election presents the triple threat of political transition, leadership vacuum, and appropriations delays which will certainly impact agencies’ major acquisitions. It will also create challenges for contractors and their current and planned business. In his "Policy and Regs" column in Government Services Insider, Alan Chvotkin, PSC's Executive Vice President and Counsel, advises companies to take action now to protect their on-going work and position themselves for future business to give them a better chance of riding the crest of the transition.

On July 17, PSC submitted comments to the Federal Acquisition Regulations Councils responding to the March 26, 2008, Federal Register advance notice of proposed rulemaking request for public comments on whether additional coverage in the area of organizational conflicts of interest (OCI) is needed, the suitability of expanding government-wide one or a combination of the agencies' approaches, and whether expanded coverage would enhance the integrity of the Government's decision-making processes.

In our comments, PSC noted that the current FAR 9.5 has been in place for decades. While it has worked well to date, the nature and scope of contracting has changed significantly over the past seven years. As a result, PSC recommended that FAR 9.5 should be simplified, updated, and restructured to more effectively address current issues relating to organizational conflicts of interest (OCIs), to update the terminology for current situations, and to baseline the duties, timing and roles and responsibilities of agencies, contracting officers and contractors. PSC also recommended restructuring FAR 9.5 to address only OCI issues.

However, PSC strongly opposed the need for or use of a single standard FAR clause, or set of standard clauses; the years of experience without such a standard FAR clause demonstrate the appropriateness of such an approach, we said. By its very nature, a "conflict of interest" requires that two or more elements actually be, or have a concern with being, "in conflict." As a result, it is not likely that a one-size-fits-all "standard" FAR Part 52 clause could address the numerous situations that create an actual or potential conflict. In fact, current FAR 9.505 properly notes that: "Each individual contracting situation should be examined on the basis of its particular facts and the nature of the proposed contract." At most, such a clause could only address the fact that each solicitation and resulting contract should address the policies contained in FAR 9.5 along with addressing the respective roles and responsibilities of key players in the acquisition process.

In addition, PSC reviewed the nine different OCI clauses cited in the March 26 Federal Register notice, ranging in scope from the simple Department of Energy Clause at 48 CFR 3452.209-70 (which requires offerors to "check the box" certifying whether a potential conflict of interest exists) to the elaborate set of alternative provisions for specific contracting situations provided for by EPA. PSC noted that only a few of these clauses even properly address agency-specific issues or requirements relating to conflicts of interest and even fewer properly address the agency's roles and responsibilities.

PSC also proposed that the minimal coverage on "consultant" conflicts in current FAR 9.5 be moved to a newly created section of FAR Part 9. In addition, in separate comments to be submitted on personal conflicts of interest (PCI), PSC recommends that a new section of FAR Part 9 be created to specifically address PCI issues

On July 15, PSC submitted comments on FAR Case 2007-006, Changes to Proposed Rule, Contractor Compliance Program and Integrity Reporting, published in the Federal Register on May 16, 2008. These comments supplement the comments which PSC co-signed with the Council of Defense and Space Industry Associations (CODSIA).

The original proposed rule would require contractors to submit a written notification to the agency inspector general whenever they have reasonable grounds to believe that an employee, agent, or subcontractor has committed a violation of federal criminal law or received a substantial overpayment. A contractor would be subject to debarment or suspension for failure to provide a timely report.

The May 16, 2008 changes added three new elements to the November 14, 2007 proposed rule:
(1) Adding the reporting requirement to commercial item contracts;
(2) Adding the reporting requirement to contracts performed outside the United States; and
(3) Reporting violations of the civil False Claims Act. A knowing failure to report a violation was added as a grounds for debarment or suspension).

Subsequent to the publication of the proposed changes, on June 30, 2008, the President signed the Supplemental Appropriations Act, 2008, Public Law 110-252. Section 6102 of the statute now mandates that the Federal Acquisition Regulation be amended to include "provisions that require timely notification by Federal contractors of violations of Federal criminal law or overpayments in connection with the award or performance of covered contracts or subcontracts, including those performed outside the United States and those for commercial items."

PSC asserted in its comments that although the statute requires mandatory reporting, it does not specify the elements of the mandatory reports, except that they cover commercial and overseas contracts. Therefore, the Councils have full authority to address the concerns raised by PSC and others who have commented on the proposals, and craft a final regulation that relies on a voluntary disclosure program as its centerpiece, with mandatory reporting required only consistent with the due process rights identified in our comments.

Any reporting requirement must clearly state that it is not intended to interfere with attorney-client and work-product privileges or an individual's Fifth Amendment right not to self-incriminate, or to require a contractor to relinquish rights that a contract or regulation otherwise provides.

On July 14, PSC submitted comments to the Department of Defense on their second DFARS interim rule implementing the statutory requirement for regulations restricting DoD from paying any excessive pass-through charges on DoD contracts where the prime contractor or higher-tier subcontractor does not add value. The second interim DFARS rule was published on May 16, 2008.

While this second interim rule makes valuable improvements to the April 2007 interim rule, there are still significant inconsistencies in this second rule and further improvements and clarifications should be made, including clarifying the definitions of critical terms, modifying the reporting requirements, addressing the recovery mechanisms and applying certain flow-down requirement to subcontractors. In addition, since the regulations are already in effect, PSC urged the department to act expeditiously to resolve the comments received on this second interim rule.

We recognize that the Department is required to implement the statute. This second interim rule did make significant improvements over the first interim rule. For example, it (1) clarifies the exclusion for firm fixed-price contracts and subcontracts, task and delivery orders and commercial items; (2) adds a definition of "added value" to clarify that "subcontract management functions" are included as the type of contractor effort that represents a benefit to the government; and (3) adds an alternate contract clause (at 252.215.7004) for the contracting officer to use when a decision is made – prior to award – that there will be no excessive pass-through charges provided the awarded contractor performs the disclosed added value functions.

This second interim rule supersedes an April 2007 DFARS interim rule; in July 2007, PSC submitted extensive comments on that first interim rule and many of our recommendations were adopted in this second rule.

Transparency is essential to building credibility when dealing with public funds and the public trust, and numerous proposals now before Congress seek to enhance transparency in government contracting. In his “Buylines” column in Washington Technology, PSC President and CEO Stan Soloway asserts that while their essential goal is laudable, many of these proposals will result not in transparency, but in chaos.