Subpart 3.11 - Preventing Personal Conflicts

of Interest for Contractor Employees

Performing Acquisition Functions

Parent topic: Part 3 - Improper Business Practices and Personal Conflicts of Interest

3.1100 Scope of subpart.

This subpart implements policy on personal conflicts of interest by employees of Government

contractors as required by 41 U.S.C. 2303.

3.1101 Definitions.

As used in this subpartAcquisition 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.

(a) Covered employee means an individual who performs an acquisition function closely associated

with inherently governmental functions and is-

(1) An employee of the contractor; or

(2) A subcontractor that is a self-employed individual treated as a covered employee of the

contractor because there is no employer to whom such an individual could submit the required

disclosures.
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. (A de minimis interest that

would not "impair the employee’s ability to act impartially and in the best interest of the

Government" is not covered under this definition.)

(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

covered employee's household;

(ii) Other employment or financial relationships (including seeking or negotiating for prospective

employment or business); and

(iii) Gifts, including travel.

(2) For example, financial interests referred to in paragraph (1) of this definition 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.

3.1102 Policy.

The Government’s policy is 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 nonpublic information by reason of performance

on a Government contract 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

by-

(i) Obtaining and maintaining from each covered employee, when the employee is initially assigned

to the task under the contract, a disclosure of interests that might be affected by the task to which

the employee has been assigned, as follows:

(A) Financial interests of the covered employee, of close family members, or of other members of the

covered employee’s household.

(B) Other employment or financial relationships of the covered employee (including seeking or

negotiating for prospective employment or business).

(C) Gifts, including travel; and

(ii) Requiring each covered employee to update the disclosure statement whenever the employee’s

personal or financial circumstances change in such a way that a new personal conflict of interest

might occur because of the task the covered employee is performing.

(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 for which 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 information accessed through performance of a Government contract

for personal gain; and

(iii) Obtain a signed non-disclosure agreement to prohibit disclosure of non-public information

accessed through performance of a Government contract.

(3) Inform covered employees of their obligation-

(i) To disclose and prevent personal conflicts of interest;

(ii) Not to use non-public information accessed through performance of a Government contract 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 proposed actions

to be taken by the contractor in response to the violation, with follow-up reports of corrective

actions taken, as necessary.
(b) If a contractor reports a personal conflict-of-interest violation by a covered employee to the

contracting officer in accordance with paragraph (b)(6) of the clause at 52.203-16, Preventing

Personal Conflicts of Interest, the contracting officer shall-

(1) Review the actions taken by the contractor;

(2) Determine whether any action taken by the contractor has resolved the violation satisfactorily;

and

(3) If the contracting officer determines that the contractor has not resolved the violation

satisfactorily, take any 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 the requirement to prevent personal conflicts of interest.

(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.

If the contracting officer suspects violation by the contractor of a requirement of paragraph (b),

(c)(3), or (d) of the clause at 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.

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 by contractor employee(s) 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.

(c) Do not insert the clause in solicitations or contracts with a self-employed individual if the

acquisition functions closely associated with inherently governmental functions are to be performed

entirely by the self-employed individual, rather than an employee of the contractor.