Organizational and Consultant Conflicts of Interest - A Mandatory Reference for ADS Chapter 302

Organizational and Consultant Conflicts

of Interest

A Mandatory Reference for ADS Chapter 302

New Edition Date: 09/13/2018

Responsible Office: M/OAA/P

File Name: 302mbm_091318

Purpose

This mandatory reference supplements FAR Subpart 9.5, AIDAR Subpart 709.5,

and ADS 302.3.5.10. It provides an overview of Contracting Officer (CO)

responsibilities for identifying, analyzing, and resolving Organizational Conflicts of

Interest (OCI) and provides Agency OCI policy.

This mandatory reference and ADS 302mas Special Contract Requirements prescribe

agency-specific special contract requirements that must be used where there is high

potential for OCI when an organization:

1. Designs an USAID activity and then expects to compete for the

implementation of the activity;

2. Evaluates a USAID activity or Contractor and then expects to provide

services that are requested as a result of that evaluation; and

3. Audits USAID Contractors and then seeks to perform consulting services

under contract with USAID (sometimes in competition with the firm(s)

audited).

Background

FAR Subpart 9.5 prescribes responsibilities, general rules, and procedures for

identifying, evaluating, and resolving organizational conflicts of interest. It also

provides examples to assist COs in applying those rules and procedures to

individual contracting situations. The FAR, however, cannot illustrate all potential

situations needing OCI analysis, and does not provide any Government-wide

standard OCI solicitation provisions or contract clauses. Prior agency-specific

guidance for OCI was contained in CIB 99-17, Organizational Conflict of Interest,

which is now incorporated into this mandatory reference. This mandatory

reference also provides updated terminology about the types of OCI as well as

updated guidance to address and resolve OCI issues.

Types of OCI

Organizational conflicts of interest generally fall under one of the following:

1. Biased Ground Rules: Where a contractor sets the “ground rules” for a

federal procurement (e.g., writing a procurement’s statement of work,

specifications, or performing systems engineering and technical direction

for the procurement), which appears to skew the competition in favor of

the contractor. This comes into play when a procuring agency contracts

for services to develop the terms of a procurement and the contractor or

one of its affiliates subsequently competes for implementation of that

contract work (see FAR 9.505-2). For example, an organization who was

contracted by USAID to design an USAID activity wants to be eligible for

the competition to implement the activity.

2. Impaired Objectivity: Where a contractor’s work under a federal contract

requires the contractor to evaluate proposals/past performance of itself or

a competitor, which calls into question the contractor’s ability to render

impartial advice to the government (See FAR 9.505-3). For example, an

organization contracted by USAID to evaluate an activity or contractor

wants to provide services that are requested as a result of the evaluation.

3. Unequal Access to Information: Where a contractor has access to

nonpublic information as part of its performance of a federal contract,

which may provide the contractor (or an affiliate) with an unfair competitive

advantage in current or future procurements (FAR 9.505-4). For

example, an organization contracted by USAID to conduct audits seeks to

do consulting work under contract with USAID (sometimes in competition

with the firms audited)

Addressing and Resolving OCI Issues

When an actual or apparent conflict of interest exists, the CO must avoid,

neutralize, mitigate or waive the OCI to ensure that no unfair competitive

advantage exists in a federal procurement.

1. Avoiding OCI. This involves preventing the occurrence of an actual or

potential OCI through actions taken early in the acquisition process, such

as excluding sources from competition, or eliminating a segment of work

from a contract or task.

2. Neutralizing OCI. This involves negating a potential or an actual OCI

through specific actions taken by the CO and the Government, such as

invoking a limitation on a Contractor’s future competition or contracting.

3. Mitigating OCI. This involves reducing or alleviating the impact of

unavoidable OCIs to an acceptable level of risk to the Government, such as

the inclusion of a Contractor’s OCI mitigation plan in a contract award.

4. Waiving OCI. The Head of the Contracting Activity may authorize a waiver

(in accordance with FAR 9.503 and AIDAR 709.503) determining that

preclusion of the Contractor from the implementation contract would not be

in the Government’s interest.

In some circumstances, it may not be feasible to mitigate potential OCI. Accordingly,

USAID may apply certain restrictions to Contractors involved in design or evaluation of

contracts, as described below. This mandatory reference also establishes requirements

for use in contracts for audits to mitigate potential OCI.

For situations not specifically covered in this mandatory reference, the CO must consider

the FAR standards to determine whether an OCI exists and whether it can be avoided or

mitigated in a manner that would allow the Contractor to participate in a particular

procurement.

Policy Regarding Potential OCI in USAID Contracts

1. Design

It is USAID's policy to preclude a Contractor from furnishing implementation services, as

the Prime or Sub-contractor, when the Contractor had a substantial role in the design of

an activity under contract with USAID by providing USAID with "material leading directly,

predictably and without delay" to a work statement for the implementation of the activity,

subject to the exceptions discussed in this section on design. In light of substantial OCI

risks of biased design and unfair competitive advantage, the preclusive policy is to be

applied when a single prime Contractor is responsible for the design of an activity, even if

the design contract does not call for the Contractor to prepare a work statement for the

activity, so long as the design work contemplated reasonably appears to be for "material

leading directly, predictably and without delay" to such a work statement.

While the FAR does not define the phrase "material leading directly, predictably and

without delay," some examples may help clarify when OCI is likely to be a concern. In the

case of very preliminary and general work prior to development of a specific design, it is

not required that the design Contractor be precluded from providing implementation

services. For example, services related to the development methodology for a particular

development objective/result, would nearly always be too remote from design of a specific

activity to cause OCI concerns. Also, a contract for assessment of the needs in a

particular sector would not trigger OCI concerns. However, developing a detailed

proposed intervention to address a specific need would most likely be design work and

could readily lead to conflicts of interest.

Proposing a series of potential ideas that might be used to address a problem without

developing in detail would not be considered design work.

The FAR provides an exception from the preclusion from providing implementation

services when the Contractor has participated in both the development and the design

work; however, as a matter of policy, USAID interprets this as applying only to research

and development type work. Therefore, participation in the development and design of an

activity does not exempt a Contractor from USAID's preclusive policy.

Prime Contractors are held to the above standard for all work products produced by the

Prime or its Subcontractors. Subcontractors whose actual level of involvement meets the

above standard are precluded from implementation as well.

Exceptions from preclusion apply when:

1. The design and implementation are competed and awarded together under the

same contract;

2. A non-competitive award for implementation to the design Contractor is justified

and approved;

3. More than one Prime Contractor works on the design; or

4. The design is awarded under one IDIQ task order and the implementation is

awarded as a separate task order under the same IDIQ or the same set of

multiple award IQCs.

In the case of the fourth exception above, although the preclusive policy does not

automatically apply when implementation is to be through a task order, the Agency still

has a responsibility to ensure that the design is unbiased and will best meet the Agency's

requirements. The CO may therefore apply the preclusive policy when the

implementation task order is to be competed among multiple award Contractors IF the CO

concludes that the design work is likely to be biased in favor of the design Contractor and

adequate steps to mitigate the design Contractor's potential competitive advantage

cannot be taken.

Note pertaining to design and implementation task orders:

FAR16.505(b)(2)(i)(c) provides an exception to the requirement to provide a fair

opportunity to be considered for a task order if the order is a logical follow-on to an order

already issued under the contract, provided that all awardees were given a fair

opportunity to be considered for the original order.

This exception may be appropriately applied to an implementation task order, provided

that all awardees were advised during the course of the "fair opportunity" process for the

design task order that this is the Agency's intent. Prior to awarding a task order for design

work that is expected to result in a new task order for the implementation of that design,

the CO must advise the awardees being considered what the Agency's intentions are

regarding the implementation award and what steps are planned to avoid an appearance

of an OCI.

The CO must insert the appropriate special contract requirement from ADS 302mas in the

solicitation, contract, and task order for the design work to advise the Contractors of the

above standard.

If the CO believes that the "directly, predictably and without delay" standard is not met in

a particular situation, the CO may determine not to apply this preclusion without a waiver.

Waivers: If the CO finds that it is in the best interest of USAID to allow the design

Contractor to furnish implementation services when the Contractor would otherwise be

precluded, a waiver must be authorized by the head of the contracting activity in

accordance with FAR 9.503 before award is made.

Even when USAID’s preclusive policy on design and implementation does not apply, the

CO still must determine whether there are Organizational Conflicts of Interest under FAR

subpart 9.5 in a particular case, and if so, how they can be mitigated or avoided, or

whether the organization must be precluded from working on the implementation contract

even if they would not be precluded under the conditions of this section.

2. Evaluation

Some OCI concerns are raised when a Contractor evaluates an activity or program.

Principal OCI concerns are that the evaluation Contractor might give biased, unfavorable,

or inaccurate reviews of competitors in order to gain unfair competitive advantage in

future solicitations. In addition, the evaluation Contractor may have access to

competitively useful information from other implementing organizations in the course of its

evaluations.

The following steps are required in such cases in order to mitigate and avoid OCI. First,

USAID must be able to provide adequate technical review of the evaluation report.

Second, within eighteen months of USAID’s acceptance of the evaluation report, the

evaluation Contractor must be precluded from furnishing implementation services that are

required as a result of any findings, proposals, or recommendations in the evaluation

report, as a Prime or Subcontractor.

In addition, the evaluation Contractor is restricted from using information obtained during

the evaluation. The Contractor must agree that it will not use any such information

obtained about another organization in the preparation of a proposal in response to any

solicitation for a contract or task order. If the Contractor obtains proprietary information

from another organization in its performance of a contract, FAR 9.505-4 requires an

agreement between the organizations restricting disclosure and use of the information for

any purpose other than that for which it was furnished. The CO must obtain copies of

these agreements and ensure that they are properly executed. Any waiver of the

preclusive provision of this policy, whether based on responses provided by a Contractor

in accordance with FAR 9.504(e) or other circumstances, must be authorized by the Head

of the Contracting Activity in accordance with FAR 9.503 and AIDAR 709.503. When

requesting a waiver, the CO must specify the steps that will be taken to minimize OCI.

If a Subcontractor performs substantive evaluation work, the Subcontractor will be subject

to the same restrictions as the Prime Contractor.

The CO must include the appropriate special contract requirements “Organizational

Conflicts of Interest: Evaluation, Definite (or Indefinite as applicable) Quantity” provided in

ADS 302mas in solicitations, contracts and task orders for evaluation services covered by

this policy.

If a CO determines that additional safeguards are necessary in a particular instance, they

may include additional requirements in the Schedule of the contract or in Section H –

Special Contract Requirements.

3. Audit

Contracts for the audit of other USAID Contractors also raise OCI concerns. The prime

OCI concern is that the auditing firm could obtain competitively useful information,

including sensitive cost data, regarding its competitors.

To mitigate concerns about the possibility that information obtained from audits may be

used in future competitions, Contractors must agree that any information obtained about

an organization as a result of an audit, will not be made available or used in any way to

help the Contractor prepare a proposal in response to a solicitation for a contract or task

order. In addition, if the Contractor obtains proprietary information from another

organization in its performance of a contract, FAR 9.505-4 requires an agreement

between the organizations restricting disclosure and use of the information for any

purpose other than that for which it was furnished. The CO must obtain copies of these

agreements and ensure that they are properly executed.

If a Subcontractor performs substantive audit work, the Subcontractor will be subject to

the same requirements as the Prime Contractor.

The CO must include the appropriate special contract requirements “Organizational

Conflicts of Interest: Audit” available in ADS 302mas in solicitations, contracts and task

orders for audit services covered by this policy.

These requirements are the minimal safeguards mandated by the FAR and cannot be

waived. If a CO determines that additional safeguards are necessary in a particular

instance, they may include additional requirements in the schedule of the contract or in

Section H – Special Contract Requirements. The requirements of FAR 9.504(e) apply

with regard to the Contractor’s response concerning any additional safeguards.

Application of Policy

All affiliates, divisions and sub-organizations of the design, evaluation or audit Contractor

that are not separate legal entities are subject to the special contract requirements

implemented in accordance with this section. Unless there is convincing evidence to the

contrary (e.g., a statement from the consortium that only certain members participated),

each member of a consortium is presumed to have had full access to the work product of

the consortium, and thus this policy applies to all members of consortia.

The policies in this section do not apply to:

 Individual employees of Contractors;

 Personal Service Contractors ("PSCs"); or

 Organizations that are affiliated with the precluded Contractor in name only, or that

have a separate legal identity. In situations where the relationship is not clear, the

CO must take steps to clarify the relationship, to include obtaining guidance from

the Agency Competition Advocate when necessary.

Requirements for the CO

COs must analyze planned acquisitions in order to identify and evaluate potential

organizational conflicts of interest as early in the acquisition process as possible,

and avoid, neutralize, or mitigate significant potential conflicts before, during, and

after contract award by inserting the special contract requirements prescribed in this

mandatory reference.

COs should obtain the advice of general counsel and the assistance of appropriate

technical specialists in evaluating potential conflicts and including the appropriate

special contract requirements in this mandatory reference.

If the CO decides that a particular acquisition involves a significant potential

organizational conflict of interest when an organization under contract with USAID

performs design, evaluation, or audit work, the CO must insert the appropriate

special contract requirements from ADS 302mas.

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