Federal Acquisition Regulation; FAR Case 2008-025, Preventing Personal Conflicts of Interest for Contractor Employees Performing Acquisition Functions, 58584-58589 [E9-27309]

Agencies

• General Services Administration
• National Aeronautics and Space Administration
• DEPARTMENT OF DEFENSE

[Federal Register Volume 74, Number 218 (Friday, November 13, 2009)]
[Proposed Rules]
[Pages 58584-58589]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-27309]


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DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Parts 3 and 52

[FAR Case 2008-025; Docket 2009-0039, Sequence 1]
RIN 9000-AL46


Federal Acquisition Regulation; FAR Case 2008-025, Preventing 
Personal Conflicts of Interest for Contractor Employees Performing 
Acquisition Functions

AGENCY: Department of Defense (DoD), General Services Administration 
(GSA), and National Aeronautics and Space Administration (NASA).

ACTION: Proposed rule.

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SUMMARY: The Civilian Agency Acquisition Council and the Defense 
Acquisition Regulations Council (Councils) are proposing to amend the 
Federal Acquisition Regulation (FAR) to address personal conflicts of 
interest by employees of Government contractors as required by section 
841(a) of the Duncan Hunter National Defense Authorization Act for 
Fiscal Year 2009 (Pub. L. 110-417).

DATES: Interested parties should submit written comments to the 
Regulatory Secretariat on or before January 12, 2010 to be considered 
in the formulation of a final rule.

ADDRESSES: Submit comments identified by FAR case 2008-025 by any of 
the following methods:
     Regulations.gov: https://www.regulations.gov. Submit 
comments via the Federal eRulemaking portal by inputting ``FAR Case 
2008-025'' under the heading ``Comment or Submission''. Select the link 
``Send a Comment or Submission'' that corresponds with FAR Case 2008-
025. Follow the instructions provided to complete the ``Public Comment 
and Submission Form''. Please include your name, company name (if any), 
and ``FAR Case 2008-025'' on your attached document.
     Fax: 202-501-4067.
     Mail: General Services Administration, Regulatory 
Secretariat (MVPR), 1800 F Street, NW., Room 4041, Washington, DC 
20405, Attn: Hada Flowers.
    Instructions: Please submit comments only and cite FAR case 2008-
025 in all correspondence related to this case. All comments received 
will be posted without change to https://

[[Page 58585]]

www.regulations.gov, including any personal and/or business 
confidential information provided.

FOR FURTHER INFORMATION CONTACT:  Ms. Suzanne Neurauter, Procurement 
Analyst, at (202) 219-0310 for clarification of content. For 
information pertaining to status or publication schedules, contract the 
Regulatory Secretariat division at (202) 501-4755. Please cite FAR Case 
2008-025.

SUPPLEMENTARY INFORMATION:

A. Background

    The Duncan Hunter National Defense Authorization Act (NDAA) for 
Fiscal Year 2009, section 841(a), requires that the Office of Federal 
Procurement Policy (OFPP) develop policy to prevent personal conflicts 
of interest by contractor employees performing acquisition functions 
closely associated with inherently governmental functions for or on 
behalf of a Federal agency or department. The NDAA also requires OFPP 
to develop a personal conflicts-of-interest clause(s) for inclusion in 
solicitations, contracts, task orders, and delivery orders. To address 
the requirements of section 841(a) in the most effective manner 
possible, OFPP collaborated with the Councils on this case to develop 
regulatory guidance, including a new subpart under FAR part 3, and a 
new clause for contracting officers to use in contracts to prevent 
personal conflicts of interest for contractor employees performing 
acquisition functions for or on behalf of a Federal agency or 
department.
    OFPP and the Councils are proposing a policy that will require each 
contractor that has employees performing acquisition functions closely 
associated with inherently governmental functions to identify and 
prevent personal conflicts of interest for such employees. In addition, 
such contractors will be required to prohibit covered employees with 
access to non-public Government information from using it for personal 
gain. The proposed rule also makes contractors responsible for (1) 
Having procedures to screen for potential conflicts of interest, (2) 
informing covered employees of their obligations with regard to these 
policies, (3) maintaining effective oversight to verify compliance, (4) 
reporting any personal conflict-of-interest violations to the 
contracting officer, and (5) taking appropriate disciplinary action 
with employees who fail to comply with these policies.
    This proposed rule does not address the issue of personal conflicts 
of interest by contractor employees with respect to other functions, or 
the issue of additional coverage addressing organizational conflicts of 
interest. Those issues, which were the subject of an Advance Notice of 
Proposed Rulemaking (see Federal Register at 73 FR 15961 on March 26, 
2008, and Federal Register at 73 FR 34600 on June 17, 2008), will be 
addressed consistent with the requirements of section 841, which 
requires review by the Administrator for Federal Procurement Policy, in 
consultation with the Director of the Office of Government Ethics, to 
determine whether further revision to the FAR, and action by the FAR 
Council, is necessary.
    1. Sources Reviewed. In developing the proposed rule in this case, 
the Councils reviewed the Government Accountability Office (GAO) Report 
to the Committee on Armed Services, U.S. Senate, GAO-08-169, Defense 
Contracting: Additional Personal Conflict of Interest Safeguards Needed 
for Certain DoD Contractor Employees, dated March 2008, and internal 
policies, procedures, and regulations of various Federal agencies.
    2. Definitions (FAR 3.1101) and 52.203-16.
    a. Personal conflict of interest. The legislation requires 
development of a definition for ``personal conflict of interest''. The 
Councils reviewed various documents on personal conflicts of interest 
in developing the proposed definition, including identification of 
sources of personal conflicts of interest and examples of financial 
interests.
    b. Acquisition function closely associated with inherently 
governmental functions. The statute requires that contractors, whose 
employees perform acquisition functions closely associated with 
inherently governmental functions, identify and prevent personal 
conflicts of interest for employees of the contractor who are 
performing such functions. The Councils developed the definition of 
``acquisition function closely associated with inherently governmental 
functions'' by reviewing FAR subpart 7.5, Inherently Governmental 
Functions, especially 7.503(d), and identifying those functions that 
are acquisition related. Supporting or providing advice or 
recommendations with regard to any such acquisition function is defined 
to be an acquisition function closely associated with inherently 
governmental functions. Additional changes may be made to this guidance 
as part of the Office of Management and Budget's (OMB) review of the 
definition of inherently governmental function and the manner in which 
agencies identify critical functions to be performed by Federal 
employees. OMB is performing this review in accordance with the 
President's March 4, 2009, Memorandum on Government Contracting and 
section 321 of the Duncan Hunter National Defense Authorization Act for 
Fiscal Year 2009 (Pub. L. 110-417).
    c. Covered employee. In order to simplify the regulation, the 
Councils defined the term ``covered employee'' so that term could be 
used in lieu of constantly repeating the phrase ``contractor employee 
who performs an acquisition function closely associated with inherently 
governmental functions''. In addition, the Councils have included in 
the definition of ``covered employee'' (i) subcontractor employees, 
(ii) consultants, (iii) partners, or (iv) sole proprietors. Although, 
these categories might not ordinarily be considered to be an employee 
of the contractor, the Councils believe that covering these categories 
is necessary to effectively meet the objective of the statute.
    d. Non-public Government information. The statute requires that 
contractors must prohibit contractor employees who have access to non-
public Government information obtained while performing such functions 
from using such information for personal gain. Therefore, a definition 
of ``non-public Government information'' is also necessary to implement 
the law. The Councils adapted the definition of non-public Government 
information found at 5 CFR 2635.703, the Office of Government Ethics 
regulation entitled ``Use of nonpublic information,'' to make it 
applicable to contractor employees. Non-public Government information 
means any information that a covered employee gains by reason of work 
under a Government contract and that the covered employee knows, or 
reasonably should know, has not been made public (e.g., proprietary 
contractor information in the possession of the Government).
    3. Policy (FAR 3.1102). The proposed policy would require 
contractors to identify and prevent personal conflicts of interest of 
their covered employees and prohibit covered employees who have access 
to non-public Government information from using such information for 
personal gain. The basis of the policy is derived from FAR section 
841(a)(1)(B)(i) and (ii) of the statute.
    4. Procedures (FAR 3.1103(a) and 52.203-16(b)).
    a. Use of contract clause to impose requirements on contractors. 
The procedures at FAR 3.1103(a) mirror the requirements in paragraph 
(b) of the

[[Page 58586]]

clause, implementing the statutory requirement at FAR section 
841(a)(1)(B) in more detail, adding the requirements to--
     Have procedures in place to screen covered employees for 
potential personal conflicts of interest (FAR section 841(a)(1)(B)(v));
     Inform covered employees with regard to their obligations 
to disclose and prevent personal conflicts of interest; not use non-
public Government information for personal gain; and avoid even the 
appearance of personal conflicts of interest;
     Maintain effective oversight to verify compliance with 
personal conflict-of-interest safeguards (FAR section 
841(a)(1)(B)(iv));
     Take appropriate disciplinary action in the case of 
covered employees who fail to comply with policies established pursuant 
to this section (FAR section 841(a)(1)(B)(vi)); and
     Report to the contracting officer any personal conflict-
of-interest violation by a covered employee as soon as identified (FAR 
section 841(a)(1)(B)(iii)), including the actions taken by the 
contractor in response to the violation.
    b. Contracting officer actions upon receipt of contractor reports 
of personal conflict-of-interest violation. At FAR 3.1103(b), the 
Councils have proposed the following general guidelines for the 
contracting officer to follow, upon receipt of a contractor report of a 
personal conflict-of-interest violation:
    (i) Review the actions taken by the contractor;
    (ii) Decide whether the contractor has resolved the violation 
satisfactorily; and
    (iii) Take any other appropriate action in consultation with agency 
legal counsel or an agency ethics official.
    c. Non-disclosure agreements. The proposed rule requires 
contractors to obtain non-disclosure agreements from covered employees.
    5. Mitigation and waiver (FAR 3.1104 and 52.203-16(c)). Although 
the statute did not specifically provide for mitigation or waiver 
authority, the Councils recommend allowing the head of the contracting 
activity, in exceptional circumstances, to agree to mitigation of a 
personal conflict of interest or waive the requirement to prevent 
conflict of interest for a particular employee, if he/she determines in 
writing that such mitigation or waiver is in the best interest of the 
Government. This authority cannot be re-delegated.
    6. Violations and remedies (FAR 3.1105 and 52.203-16(d)). To ensure 
compliance with this policy, the proposed rule includes a ``remedies'' 
clause that spells out the additional relief to which the Government 
may be entitled for contractor noncompliance, including suspension of 
contract payments, loss of award fee, termination for cause, and 
suspension or debarment. The Councils welcome comment on additional 
controls or remedies to help deter noncompliance, such as annual 
reporting requirements to verify compliance with the clause 
requirements, or certification by the contractor or by the contractor's 
employees.
    7. Contract clause.
    a. Prescription (FAR 3.1106). A new contract clause was developed 
that specifically sets out the contractor's duty to comply with the 
language in the legislation. In accordance with FAR section 
841(a)(3)(A), the clause must be included in contracts that exceed the 
simplified acquisition threshold and are for services that involve 
performance of acquisition functions closely associated with inherently 
governmental functions for or on behalf of a Federal agency or 
department.
    FAR Section 841(a)(3)(B) provides that, if only a portion of a 
contract is for the performance of acquisition functions described in 
that subparagraph, then the clause must be applied only to that portion 
of the contract (see FAR 3.1106(b)).
    b. Flowdown (FAR 52.203-18(e)). The Councils have provided for 
flowdown to subcontracts that meet the same requirements as provided in 
the clause prescription, i.e., subcontracts that exceed $100,000 and in 
which subcontractor employees may perform acquisition functions closely 
associated with inherently governmental functions.
    8. Effective date and applicability. The statute requires that the 
final rule shall apply to--
    (a) Contracts entered into on or after the effective date; and
    (b) Task or delivery orders awarded on or after that effective 
date. If the contracts pursuant to which such task or delivery orders 
are awarded do not contain the clause at FAR 52.203-16, then the clause 
must be included in such contracts by bi-lateral modification.
    This is a significant regulatory action and, therefore, was subject 
to review under Section 6(b) of Executive Order 12866, Regulatory 
Planning and Review, dated September 30, 1993. This rule is not a major 
rule under 5 U.S.C. 804.

B. Regulatory Flexibility Act

    The Councils do not expect this proposed rule to have a significant 
economic impact on a substantial number of small entities within the 
meaning of the Regulatory Flexibility Act, 5 U.S.C. 601, et seq., 
because the requirements of the clause are not significantly 
burdensome. The requirement to obtain and retain information on 
employees' potential conflict of interest is limited to service 
contractors whose employees are performing acquisition functions 
closely associated with inherently governmental functions for or on 
behalf of Federal agencies. This class is a minority of Government 
contractors and is becoming smaller as Government agencies bring more 
such functions back in house, e.g., DOD announced in April that it is 
bringing 10,000 acquisition positions back in house. Further, there is 
no requirement to report the information collected to the Government. 
It is not a significant economic burden to report to the contracting 
officer personal conflict-of-interest violations by covered employees 
and the corrective actions taken. The proposed rule has also reduced 
potential burden by--
    1. Not including a certification requirement;
    2. Not requiring a formal training program; and
    3. Allowing mitigation under exceptional circumstances.
    An Initial Regulatory Flexibility Analysis has, therefore, not been 
performed. We invite comments from small businesses and other 
interested parties. The Councils will consider comments from small 
entities concerning the affected FAR Parts 3 and 52 in accordance with 
5 U.S.C. 610. Interested parties must submit such comments separately 
and should cite 5 U.S.C. 601, et seq. (FAR case 2008-025), in all 
correspondence.

C. Paperwork Reduction Act

    The Paperwork Reduction Act does apply because the proposed changes 
to the FAR impose information collection requirements that require the 
approval of the Office of Management and Budget under 44 U.S.C. 3501, 
et seq.

Annual Recordkeeping Burden

    The proposed rule will require the contractor to collect and review 
information from covered employees. There is, however, no requirement 
for the contractor to submit this information to the Government. There 
will be an estimated 250,000 covered contractor employees working for 
an estimated 10,000 contractors (recordkeepers). There will be an 
estimated 36 records per recordkeeper (using an average of 25 employees 
per recordkeeper and allowing for updates during the year when a 
covered employee's reportable circumstances

[[Page 58587]]

change). We estimate that it will take approximately 10 minutes review 
time per response.
    We estimate the annual total recordkeeping burden hours as follows:

 
 
 
Recordkeepers.................................................    10,000
Records per recordkeeper......................................      x 36
                                                               ---------
    Total annual records......................................   360,000
Review hours per response.....................................    x 0.17
                                                               ---------
    Total recordkeeping burden................................    61,200
 

Annual Reporting Burden

    There will be an estimated 200 burden hours for the required 
reporting to the contracting officer of violations in connection with 
the award or performance of any Government contract or subcontract (10 
violations x 2 hours per response) and 1,800 hours for submission of 
mitigation requests (450 responses x 4 hours per response).
    We estimate the annual total reporting burden hours as follows:
    Respondents: 460
    Responses per respondent: 1
    Total annual responses: 460
    Preparation hours per response: Approximately 3.96
    Total reporting burden hours: 1,820

D. Request for Comments Regarding Paperwork Burden

    Submit comments, including suggestions for reducing this burden, 
not later than January 12, 2010 to: FAR Desk Officer, OMB, Room 10102, 
NEOB, Washington, DC 20503, and a copy to the General Services 
Administration, Regulatory Secretariat (MVPR), 1800 F Street, NW., Room 
4041, Washington, DC 20405.
    Public comments are particularly invited on: Whether this 
collection of information is necessary for the proper performance of 
functions of the FAR, and will have practical utility; whether our 
estimate of the public burden of this collection of information is 
accurate, and based on valid assumptions and methodology; ways to 
enhance the quality, utility, and clarity of the information to be 
collected; and ways in which we can minimize the burden of the 
collection of information on those who are to respond, through the use 
of appropriate technological collection techniques or other forms of 
information technology.
    Requester may obtain a copy of the justification from the General 
Services Administration, Regulatory Secretariat (MVPR), Room 4041, 
Washington, DC 20405, telephone (202) 501-4755. Please cite OMB Control 
Number 9000-00xx, Preventing Personal Conflicts of Interest for 
Contractor Employees Performing Acquisition Functions, in all 
correspondence.

List of Subjects in 48 CFR Parts 3 and 52

    Government procurement.

    Dated: November 5, 2009.
Al Matera,
Director, Office of Acquisition Policy.

    Therefore, DoD, GSA, and NASA propose amending 48 CFR parts 3 and 
52 as set forth below:
    1. The authority citation for 48 CFR parts 3 and 52 continues to 
read as follows:

    Authority:  40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 42 
U.S.C. 2473(c).

PART 3--IMPROPER BUSINESS PRACTICES AND PERSONAL CONFLICTS OF 
INTEREST

    2. Add Subpart 3.11 to read as follows:
Subpart 3.11--Preventing Personal Conflicts of Interest for Contractor 
Employees Performing Acquisition Functions
Sec.
3.1100 Scope of subpart.
3.1101 Definitions.
3.1102 Policy.
3.1103 Procedures.
3.1104 Mitigation or waiver.
3.1105 Violations.
3.1106 Contract clause.

Subpart 3.11--Preventing Personal Conflicts of Interest for 
Contractor Employees Performing Acquisition Functions


3.1100  Scope of subpart.

    This subpart implements the policy on personal conflicts of 
interest by employees of Government contractors as required by section 
841(a) of the Duncan Hunter National Defense Authorization Act for 
Fiscal Year 2009 (Pub. L. 110-417).


3.1101  Definitions.

    As used in this subpart:
    Acquisition function closely associated with inherently 
governmental functions means supporting or providing advice or 
recommendations with regard to the following activities of a Federal 
agency:
    (1) Planning acquisitions.
    (2) Determining what supplies or services are to be acquired by the 
Government, including developing statements of work.
    (3) Developing or approving any contractual documents, to include 
documents defining requirements, incentive plans, and evaluation 
criteria.
    (4) Evaluating contract proposals.
    (5) Awarding Government contracts.
    (6) Administering contracts (including ordering changes or giving 
technical direction in contract performance or contract quantities, 
evaluating contractor performance, and accepting or rejecting 
contractor products or services).
    (7) Terminating contracts.
    (8) Determining whether contract costs are reasonable, allocable, 
and allowable.
    Covered employee means an individual who--
    (1) Is an employee of the contractor or subcontractor, a 
consultant, a partner, or a sole proprietor; and
    (2) Performs an acquisition function closely associated with 
inherently governmental functions.
    Non-public Government information means any information that a 
covered employee gains by reason of work under a Government contract 
and that the covered employee knows, or reasonably should know, has not 
been made public. It includes information that--
    (1) Is exempt from disclosure under the Freedom of Information Act 
(5 U.S.C. 552) or otherwise protected from disclosure by statute, 
Executive order, or regulation; or
    (2) Has not been disseminated to the general public and is not 
authorized by the agency to be made available to the public.
    Personal conflict of interest means a situation in which a covered 
employee has a financial interest, personal activity, or relationship 
that could impair the employee's ability to act impartially and in the 
best interest of the Government when performing under the contract.
    (1) Among the sources of personal conflicts of interest are--
    (i) Financial interests of the covered employee, of close family 
members, or of other members of the household;
    (ii) Other employment or financial relationships (including seeking 
or negotiating for prospective employment or business); and
    (iii) Gifts, including travel.
    (2) Financial interests may arise from--
    (i) Compensation, including wages, salaries, commissions, 
professional fees, or fees for business referrals;
    (ii) Consulting relationships (including commercial and 
professional consulting and service arrangements, scientific and 
technical advisory board memberships, or serving as an expert witness 
in litigation);
    (iii) Services provided in exchange for honorariums or travel 
expense reimbursements;
    (iv) Research funding or other forms of research support;

[[Page 58588]]

    (v) Investment in the form of stock or bond ownership or 
partnership interest (excluding diversified mutual fund investments);
    (vi) Real estate investments;
    (vii) Patents, copyrights, and other intellectual property 
interests; or
    (viii) Business ownership and investment interests.


3.1102  Policy.

    It is Government policy to require contractors to--
    (a) Identify and prevent personal conflicts of interest of their 
covered employees; and
    (b) Prohibit covered employees who have access to non-public 
Government information from using such information for personal gain.


3.1103  Procedures.

    (a) By use of the contract clause at 52.203-16, as prescribed at 
3.1106, the contracting officer shall require each contractor whose 
employees perform acquisition functions closely associated with 
inherently Government functions to--
    (1) Have procedures in place to screen covered employees for 
potential personal conflicts of interest including--
    (i) Obtaining and maintaining a financial disclosure statement from 
each covered employee when the employee is initially assigned to the 
task under the contract;
    (ii) Ensuring that the disclosure statements are updated by the 
covered employees at least on an annual basis; and
    (iii) Requiring each covered employee to update the disclosure 
statement whenever a new personal conflict of interest occurs.
    (2) For each covered employee--
    (i) Prevent personal conflicts of interest, including not assigning 
or allowing a covered employee to perform any task under the contract 
if the Contractor has identified a personal conflict of interest for 
the employee that the Contractor or employee cannot satisfactorily 
prevent or mitigate in consultation with the contracting agency;
    (ii) Prohibit use of non-public Government information for personal 
gain; and
    (iii) Obtain a signed non-disclosure agreement to prohibit 
disclosure of non-public Government information.
    (3) Inform covered employees of their obligation--
    (i) To disclose changes in personal or financial circumstances and 
prevent personal conflicts of interest;
    (ii) Not to use non-public Government information for personal 
gain; and
    (iii) To avoid even the appearance of personal conflicts of 
interest;
    (4) Maintain effective oversight to verify compliance with personal 
conflict-of-interest safeguards;
    (5) Take appropriate disciplinary action in the case of covered 
employees who fail to comply with policies established pursuant to this 
section; and
    (6) Report to the contracting officer any personal conflict-of-
interest violation by a covered employee as soon as identified. This 
report shall include a description of the violation and the actions 
taken by the contractor in response to the violation.
    (b) If a contractor reports a personal conflict-of-interest 
violation to the contracting officer in accordance with paragraph 
(b)(6) of 52.203-16, Preventing Personal Conflicts of Interest, the 
contracting officer shall--
    (1) Review the actions taken by the contractor;
    (2) Decide whether the contractor has resolved the violation 
satisfactorily; and
    (3) Take any other appropriate action in consultation with agency 
legal counsel.


3.1104  Mitigation or waiver.

    (a) In exceptional circumstances, if the contractor cannot 
satisfactorily prevent a personal conflict of interest as required by 
paragraph (b)(2)(i) of the clause at 52.203-16, Preventing Personal 
Conflicts of Interest, the contractor may submit a request, through the 
contracting officer, for the head of the contracting activity to--
    (1) Agree to a plan to mitigate the personal conflict of interest; 
or
    (2) Waive that requirement.
    (b) If the head of the contracting activity determines in writing 
that such action is in the best interest of the Government, the head of 
the contracting activity may impose conditions that provide mitigation 
of a personal conflict of interest or grant a waiver.
    (c) This authority shall not be redelegated.


3.1105  Violations.

    (a) If the contracting officer suspects violation of a requirement 
of the clause 52.203-16, Preventing Personal Conflicts of Interest, the 
contracting officer shall contact the agency legal counsel for advice 
and/or recommendations on a course of action.
    (b) If there is sufficient evidence of a violation, the contracting 
officer shall pursue appropriate remedies as specified in paragraph (d) 
of the clause. These remedies are in addition to any other remedies 
available to the Government.


3.1106  Contract clause.

    (a) Insert the clause at 52.203-16, Preventing Personal Conflicts 
of Interest, in solicitations and contracts that--
    (1) Exceed the simplified acquisition threshold; and
    (2) Include a requirement for services that involve performance of 
acquisition functions closely associated with inherently governmental 
functions for or on behalf of a Federal agency or department.
    (b) If only a portion of a contract is for the performance of 
acquisition functions closely associated with inherently governmental 
functions, then the contracting officer shall still insert the clause 
but shall limit applicability of the clause to that portion of the 
contract that is for the performance of such services.

PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

    3. Add section 52.203-16 to read as follows:


52.203-16  Preventing Personal Conflicts of Interest.

    Insert the following clause in solicitations and contracts as 
prescribed at 3.1106.
    Preventing Personal Conflicts of Interest (Date)
    (a) Definitions. As used in this clause:
    Acquisition function closely associated with inherently 
governmental functions means supporting or providing advice or 
recommendations with regard to the following activities of a Federal 
agency:
    (1) Planning acquisitions.
    (2) Determining what supplies or services are to be acquired by the 
Government, including developing statements of work.
    (3) Developing or approving any contractual documents, to include 
documents defining requirements, incentive plans, and evaluation 
criteria.
    (4) Evaluating contract proposals.
    (5) Awarding Government contracts.
    (6) Administering contracts (including ordering changes or giving 
technical direction in contract performance or contract quantities, 
evaluating contractor performance, and accepting or rejecting 
contractor products or services).
    (7) Terminating contracts.
    (8) Determining whether contract costs are reasonable, allocable, 
and allowable.
    Covered employee means an individual who--
    (1) Is an employee of the contractor or subcontractor, a 
consultant, a partner, or a sole proprietor; or

[[Page 58589]]

    (2) Performs an acquisition function closely associated with 
inherently governmental functions.
    Non-public Government information means any information that a 
covered employee gains by reason of work under a Government contract 
and that the covered employee knows, or reasonably should know, has not 
been made public. It includes information that--
    (1) Is exempt from disclosure under the Freedom of Information Act 
(5 U.S.C. 552) or otherwise protected from disclosure by statute, 
Executive order, or regulation; or
    (2) Has not been disseminated to the general public and is not 
authorized by the agency to be made available to the public.
    Personal conflict of interest means a situation in which a covered 
employee has a financial interest, personal activity, or relationship 
that could compete with the employee's ability to act impartially and 
in the best interest of the Government when performing under the 
contract.
    (1) Among the sources of personal conflicts of interest are--
    (i) Financial interests of the covered employee, of close family 
members, or of other members of the household;
    (ii) Other employment or financial relationships (including seeking 
or negotiating for prospective employment or business); and
    (iii) Gifts, including travel.
    (2) Financial interests may arise from--
    (i) Compensation, including wages, salaries, commissions, 
professional fees, or fees for business referrals;
    (ii) Consulting relationships (including commercial and 
professional consulting and service arrangements, scientific and 
technical advisory board memberships, or serving as an expert witness 
in litigation);
    (iii) Services provided in exchange for honorariums or travel 
expense reimbursements;
    (iv) Research funding or other forms of research support;
    (v) Investment in the form of stock or bond ownership or 
partnership interest (excluding diversified mutual fund investments);
    (vi) Real estate investments;
    (vii) Patents, copyrights, and other intellectual property 
interests; or
    (viii) Business ownership and investment interests.
    (b) Requirements. The Contractor shall--
    (1) Have procedures in place to screen covered employees for 
potential personal conflicts of interest, including--
    (i) Obtaining and maintaining a financial disclosure statement from 
each covered employee when the employee is initially assigned to the 
task under the contract;
    (ii) Ensuring that the disclosure statements are updated by the 
covered employees at least on an annual basis; and
    (iii) Requiring each covered employee to update the disclosure 
statement whenever his/her personal or financial circumstances change.
    (2) For each covered employee--
    (i) Prevent personal conflicts of interest, including not assigning 
or allowing a covered employee to perform any task under the contract 
if the Contractor has identified a personal conflict of interest for 
the employee that the Contractor or employee cannot satisfactorily 
prevent or mitigate in consultation with the contracting agency;
    (ii) Prohibit use of non-public Government information for personal 
gain; and
    (iii) Obtain a signed non-disclosure agreement to prohibit 
disclosure of non-public Government information.
    (3) Inform covered employees of their obligation--
    (i) To disclose and prevent personal conflicts of interest;
    (ii) Not to use non-public Government information for personal 
gain; and
    (iii) To avoid even the appearance of personal conflicts of 
interest;
    (4) Maintain effective oversight to verify compliance with personal 
conflict-of-interest safeguards;
    (5) Take appropriate disciplinary action in the case of covered 
employees who fail to comply with policies established pursuant to this 
clause; and
    (6) Report to the Contracting Officer any personal conflict-of-
interest violation by a covered employee as soon as it is identified. 
This report shall include a description of the violation and the 
actions taken by the Contractor in response to the violation. Personal 
conflict-of-interest violations include--
    (i) Failure by a covered employee to disclose a personal conflict 
of interest; and
    (ii) Use by a covered employee of non-public Government information 
for personal gain.
    (c) Mitigation or waiver. (1) In exceptional circumstances, if the 
Contractor cannot satisfactorily prevent a personal conflict of 
interest as required by paragraph (b)(2)(i) of this clause, the 
Contractor may submit a request through the Contracting Officer to the 
Head of the Contracting Activity for--
    (i) Agreement to a plan to mitigate the personal conflict of 
interest; or
    (ii) A waiver of the requirement.
    (2) The Contractor shall include in the request any proposed 
mitigation of the personal conflict of interest.
    (3) The Contractor shall--
    (i) Comply, and require compliance by the covered employee, with 
any conditions imposed by the Government as necessary to mitigate the 
personal conflict of interest; or
    (ii) Remove the Contractor or subcontractor employee from 
performance of the contract or terminate the applicable subcontract.
    (d) Remedies. In addition to other remedies available to the 
Government, the Contractor's failure to comply with the requirements of 
paragraphs (b), (c)(3), or (e) of this clause may render the Contractor 
subject to--
    (1) Suspension of contract payments;
    (2) Loss of award fee, consistent with the award fee plan, for the 
performance period in which the Government determined Contractor non-
compliance;
    (3) Termination of the contract for default or cause, in accordance 
with the termination clause of this contract;
    (4) Disqualification of the Contractor from subsequent related 
contractual efforts; or
    (5) Suspension or debarment.
    (e) Subcontract flowdown. The Contractor shall include the 
substance of this clause, including this paragraph (e), in subcontracts 
that exceed $100,000, and in which subcontractor employees may perform 
acquisition functions closely associated with inherently governmental 
functions.


(End of clause)

[FR Doc. E9-27309 Filed 11-12-09; 8:45 am]
BILLING CODE 6820-EP-P