Contractors' conflicts of interest under scrutiny.

• Author: Moorhouse, Richard L.
• Position: Ethics Corner

Contractors may soon be required to police their employees' personal conflicts of interest. In March 2008, the Government Accountability Office issued a report entitled, "Defense Contracting, Additional Personal Conflict of Interest Safeguards Needed for Certain Department of Defense Contractor Employees," recommending new department-wide safeguards and policies to limit personal conflicts of interest involving contractor employees working alongside government employees.

At the request of the chairman and ranking member of the Senate Armed Services Committee, GAO conducted a 15-month study of defense contractor employees working in Defense Department operations, the type of work the contractor employees were performing and the safeguards currently in place to prevent personal conflicts of interest from arising. GAO found that while the department has significantly increased its reliance on contractors, there are few safeguards in place to identify and mitigate personal conflicts of interest for such defense contractor employees.

The GAO review defined "personal" conflict of interest (PCI) differently from an "organizational" conflict of interest (OCI).

An OCI exists whenever a government contractor could take unfair competitive advantage because of access to proprietary or source selection information or by having conflicting contract roles that biases its judgment. For example, under the Federal Acquisition Regulation, a company awarded a contract to prepare specifications and performance criteria as the basis for equipment competition would be excluded from competing for the equipment acquisition.

In contrast, a PCI applies to individual employees "in a position to materially influence Defense Department recommendations and/or decisions," who could lack objectivity because of his or her personal activities, relationships or financial interests. For example, a contractor employee who exercises influence over acquisition decisions may lack objectivity where a spouse's company or stock portfolio stand to benefit from a procurement decision.

GAO's recommendations will require contractors to implement written codes of business ethics and conduct that would bar contractor employees from participating in a government contract in which they have a personal conflict of interest. They would require the contractor to review and address any personal conflicts of interest its employees might have before assigning them to deliver contracted services...