,-o.lUuctOffict 

DEPARTMENT OF DEFENSE 

OFFICE OF GENERAL COUNSEL 

1600 DEFENSE PENTAGON 

WASHINGTION , DC 20301 - 1600 

MEMORANDUM FOR MEMBERS OF THE 000 ETHICS COMMUNITY 

July 12, 2011 

SUBJECT: Updated Guidance on Application of the Procurement Integrity Act and Regulation 

This memorandum updates and combines guidance previously provided through 

memoranda dated August 28, 1998, and August 10, 1999, on applying the restrictions found 

under Section 27 of the Office of Federal Procurement Policy Act, as amended,1 commonly 

referred to as the Procurement Integrity Act (PIA or Act). The Act, which is implemented 

through section 3.104 of the Federal Acquisition Regulation (FAR), 48 C.F.R. § 3.1 04 

(hereinafter FAR § 3.104), imposes various restrictions on Federal employees who have been 

involved in agency procurements. This memorandum addresses three restrictions, namely: (I) 

employment contacts with contract bidders and offerors; (2) release of and obtaining certain 

procllrement-sensitive information; and (3) post-employment receipt of compensation from 

certain government contractors. 

I. Restrictions on Seeking Non-Federal Employment 

a, General Rule 

Subsection 27(c) of the Act, as implemented at FAR § 3.104-4(c), imposes job-search 

restrictions on Federal employees who have been involved in agency procurements. The Act 

contains notification and disqualification requirements for employees who contact or are 

1 The PIA has been cited as 41 U.S.C. § 423. However, on January 4, 2011, 41 U.S.C. § 423 was repealed and 

subsequently replaced by 41 U.S.C.A. §§ 2101 - 21 07. See Pub. L. No. 111-350, sec. 7(b), 124 Stat. 3855 (2011). 

In the codification of the Act, the post-employment restrictions sel forth in subsection (d) of the Act were codified 

into a separate section. Ed (to be codified at 41 U.S.C. § 2104). See Office of Government Ethics (OGE) Legal 

Advisory 11-02 (March 8, 2011). hup:llwww.uSQ!!t.goyl",h.cs gu.danccl.dvjsorie~':!OII Il .-II-0 2, n<lr. 

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contacted by bidders or offerors regarding non-Federal employment, and prohibits disclosure of 

certain information relating to certain ongoing procurements. Specifically, the Act requires an 

employee who is "personally and substantially" participating in a "Federal agency procurement" 

in excess of the simplified acquisition threshold (currently $100,000), and who: 

• Contacts; or 

• Is contacted by, a bidder or offeror in that procurement regarding possible nonFederal employment 

to do the following: 

• Report the contact promptly in writing to the official's supervisor and to the agency 

Designated Agency Ethics Official (the DoD General Counsel) or designee (ethics 

counselor) and either: 

• Reject the possibility of non-Federal employment; or to disqualify himself from 

further participation in the procurement. 

b. Definitions 

"Contact" must relate to seeking employment. To determine when a contact is made, the 

regulations at 5 C.F.R. § 2635.601, et seq., should be consulted. There is no contact under the 

Act ifthe employee is not "seeking employment" under 5 C.F.R. § 2635.601, et seq. For 

example, under those regulations, requesting a job application is not considered "seeking 

employment," so there would be no contact with the recipient of the request for purposes of the 

PIA; however, if the employee then submits the application, he/she must then report the contact 

and disqualify himsel£lherself from further participation. 

"Participated personally and substantially," as defined in FAR § 3.104-3, means active and 

significant involvement in activities directly related to the procurement, to include: 

• drafting, reviewing, or approving the specification or statement of work for the 

procurement; 

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• preparing or developing the solicitation; 

• evaluating bids or proposals, or selecting a source; 

• negotiating price or terms and conditions of the contract; and 

• reviewing and approving the award of the contract. 

"Participating personally" means to participate directly, and includes the direct and 

active supervision of a subordinate's participation. 

"Participating substantially" means that the employee's involvement is of significance to 

the matter. Substantial participation requires more than official responsibility, knowledge, 

perfunctory involvement, or involvement on an administrative or peripheral issue. Participation 

may be substantial even though it is not determinative of the outcome of a particular matter. A 

finding of substantiality should be based not only on the effort devoted to a matter, but on the 

importance of the effort. While a series of peripheral acts may be insubstantial, the single act of 

approving or participating in a critical step may be substantial. However, the review of 

procurement documents solely to determine compliance with regulatory, administrative, or, 

budgetary procedures, does not constitute substantial participation in a procurement. 

Generally, an individual will not be considered to have participated personally and 

substantially in a procurement solely by participating in: 

• agency level boards, panels, or other advisory committees that review program 

milestones or evaluate and make recommendations regarding alternative technologies 

or approaches for satisfying broad agency level missions or objectives; 

• the performance of general, technical, engineering, or scientific effort having broad 

application not directly associated with a particular procurement, notwithstanding that 

such general, technical, engineering, or scientific effort subsequently may be 

incorporated into a particular procurement; 

• clerical functions supporting the conduct of a particular procurement; or 

• for procurements to be conducted under the procedures of OMB Circular A-76, 

participation in management studies, preparation of in-house cost estimates, 

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preparation of "most efficient organization" analyses, and furnishing of data or 

technical support to be used by others in the development of performance standards, 

statements of work, or specifications. 

c. Specific applications 

(1) "Sole Source" contracts 

The restrictions under this provision of the Act apply to "Federal agency procurements" 

that are defined, in essence, as competitively awarded contracts. See FAR § 3.104-3. 

Accordingly, employees do not have to report contacts from "sole source" contractors under the 

Act. That said, employees contacted by "sole source" contractors still may be disqualified from 

any further participation in the procurement pursuant to the criminal provisions under 18 U.S.C. 

§ 208 and 5 C.F.R. § 2635.604. Moreover, under section 2-204.c. of the Joint Ethics Regulation 

(JER), DoD 5500.07-R, employees must submit a written notice of disqualification. Further, 

employees are advised to inform their supervisor and seek the guidance of their Ethics Counselor 

as soon as possible. If a decision on the acquisition strategy hasn't been made, you should 

assume that the procurement is competitive and that a report would be required. 

(2) OMB Circular A-76 procurements 

In procurements conducted under OMB Circular A-76, the Federal Acquisition 

Regulation requires a clause in the solicitation and the contract that gives government employees 

who are adversely affected by the award of the contract a right of first refusal for employment 

under the contract. This right of first refusal, standing alone, is not an employment contact for 

the purposes off AR § 3.1 04-4( c). 

d. Disqualification 

(1) Procedures 

FAR § 3.104-5 sets forth disqualification procedures. An employee required to 

disqualifY himselflherselffrom a procurement shall submit a written notice of disqualification 

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from further participation in the procurement to the Contracting officer, the Source Selection 

Authority, and the agency official's immediate supervisor. At a minimum, the notice shall: 

• identify the procurement; 

• describe the nature ofthe employee's involvement in the procurement and specify the 

approximate dates or time period of participation; and 

• identify the bidder or offeror and describe its interest in the procurement. 

The agency must disqualify the employee. It may not force the employee to terminate 

employment discussions. 

(2) Duration 

Disqualification lasts until such time as the agency, in its discretion, authorizes the 

official to resume participation in such procurement because the person is no longer a bidder or 

offeror in that Federal agency procurement, or all discussions with the bidder or offeror 

regarding possible non-Federal employment have terminated without an agreement or 

arrangement for employment. 

(3) Limitation on disqualification 

Under 5 C.F.R. § 2635.604(d), where an agency determines that a civilian employee's or 

military member's action in seeking employment will require disqualification from matters that 

are so central or critical to the performance of official duties that his or her ability to perform 

those duties would be "materially impaired," the agency may allow the individual to take annual 

leave or leave without pay while seeking employment. However, where this is not possible or 

feasible, the agency may take appropriate administrative action, which may include disciplinary 

or adverse action. For example, a contracting officer that has special expertise that results in 

working almost exclusively on the contracts of a certain contractor or on contracts in a certain 

specialized area, might find his or her ability to perform duties "materially impaired" where the 

individual is disqualified from acting with regard to that contractor or to contractors in the 

specialized area under circumstances where either: (1) there is no other employee or member 

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capable of effectively performing those duties; or (2) the disqualification would cover so 

significant a portion of the employee or member's duties as to preclude him or her from 

effectively carrying out the duties of that position. In such a case, actions taken by an employee 

that result in disqualification may be construed as a refusal to perform assigned duties and 

disciplinary action may include removal from the position. 

Furthermore, under section l-300.b. ofthe JER, this regulation is made applicable to 

enlisted members of the uniformed services. 

The disqualification could also bring a procurement action under a cloud of suspicion. 

Accordingly, we recommend that Ethics Counselors frequently and strongly encourage their 

civilian employees and military service members to discuss their job seeking plans with their 

supervisors and Ethics Counselors prior to the start of their job hunting. 

e. Penalties. 

Pursuant to subsection (e) of the Act, an individual who violates the above employment 

restriction may be fined up to $50,000 plus twice the compensation received or offered for the 

prohibited conduct. Organizations that employ an individual in violation of the above 

restrictions may be fined up to $500,000 plus twice the compensation received or offered. In 

addition, individuals who divulge procurement information in violation of the Act may face 

prosecution and imprisonment up to 5 years. In addition, contractors are subject to other 

administrative actions such as cancellation ofthe procurement, rescission ofthe contract, and 

debarment proceedings. 

II. Divulging or Obtaining Protected Procurement Information Prior to 

the Award of a Federal Procurement 

a. General Rule 

The Act prohibits present and former U.S. officials, including members of the Armed 

Forces, from knowingly: 

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• disclosing contractor bid or proposal information or source selection information 

before the award of a Federal agency procurement contract; and 

• other individuals from obtaining such information before the award of a Federal 

agency procurement contract. 

b. Definitions 

FAR § 3.104-1 defines the phrase "contractor bid or proposal information" to include 

any of the following information submitted to a Federal agency as part of or in connection with a 

bid or proposal to enter into a Federal agency procurement contract, if that information has not 

been previously made available to the public or disclosed publicly: 

• cost or pricing data (as defined by 10 U.S.C. § 2306a(h) with respect to procurements 

subject to that section, and section 304A(h) of 41 U.S.C. § 254b(h), with respect to 

procurements subject to that section); 

• indirect costs and direct labor rates; 

• proprietary information about manufacturing processes, operations, or techniques 

marked by the contractor in accordance with applicable law or regulation; or 

• information marked by the contractor as "contractor bid or proposal information," in 

accordance with applicable law or regulation. 

Further, the Act defines "source selection information" as any of the following 

information prepared for use by a Federal agency for the purpose of evaluating a bid or proposal 

to enter into a Federal agency procurement contract, if that information has not been previously 

made available to the public or disclosed publicly: 

• bid prices submitted in response to a Federal agency solicitation for sealed bids, or 

lists ofthose bid prices before public bid opening; 

• proposed costs or prices submitted in response to a Federal agency solicitation, or 

lists of those proposed costs or prices; 

• source selection plans; 

• technical evaluation plans; 

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• technical evaluations of proposals; 

• cost or price evaluations of proposals; 

• competitive range determinations that identify proposals that have a reasonable 

chance of being selected for award of a contract; 

• rankings of bids, proposals, or competitors; 

• the reports and evaluations of source selection panels, boards, or advisory councils; or 

• other information marked as "source selection information" based on a case-by-case 

determination by the head of the agency, his designee, or the contracting officer that 

its disclosure would jeopardize the integrity or successful completion of the Federal 

agency procurement to which the information relates. 

c. Other Information Release Statutes 

Finally, release of information may also violate other statutes including, but not limited to, the 

Privacy Act, 5 U.S.c. § 552a, and the Trade Secrets Act, 18 U.S.C. § 1905. 

d. Penalties 

In addition to the civil and administrative penalties set out in I.e., above, violations of 

subsections (a) and (b) of the Act may result in criminal prosecution where conduct constituting 

a violation of either provision is for the purpose of either: 

• exchanging the information covered by such subsection for anything of value; or 

• obtaining or giving anyone a competitive advantage in the award of a Federal agency 

procurement contract. 

Conviction can result in imprisonment for up to 5 years, or fined as provided under title 18, or 

both. 

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III. Post-Employment Compensation Ban 

a. General Rule 

Under subsection 27(d) of the Act, implemented at FAR § 3,104(d), a fonner Federal 

official is barred from accepting compensation from a contractor as an employee, officer, 

director, or consultant, for one year after he or she: 

• served, at the time of selection or contract award, as procuring contracting officer 

(PCO), source selection authority (or source selection evaluation board member), or 

the chief of a financial or technical evaluation team in a procurement in which that 

contractor was selected for award of a contract in excess of $10 million; 

• served as the program manager (PM), deputy program manager (DPM), or 

administrative contracting officer (ACO) for a contract in excess of$10 million 

involving that contractor; or 

• personally made a decision to award a contract, subcontract, modification, or task or 

delivery order in excess of $1 0 million to that contractor; establish overhead or other 

rates applicable to a contract or contracts for that contractor in excess of $1 0 million; 

approve issuance of a contract or payments in excess of $10 million to that contractor; 

or payor settle a claim in excess of $10 million for that contractor. 

b. Definitions 

"Compensation," under FAR § 3.104-1, means wages, salaries, honoraria, commission, 

professional fees, and any other form of compensation provided directly or indirectly, for 

services rendered. Compensation is indirect if paid to an entity or person other than the 

individual specifically in exchange for services to be provided by the individual. 

"Contractor," for purposes of the compensation ban provision, means: 

(1) Prime contractor. The compensation ban extends only to the prime contractor. For 

example, a fonner Program Manager may work for a subcontractor on the same program, even 

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though he or she dealt with the subcontractor in the role of program manager. However, if a 

subcontract is a sham or a vehicle established to provide services by individuals for the prime 

contractor on the program, compensation would be considered "indirect compensation" from the 

prime, which is restricted by the regulation. See FAR § 3.104-1. 

(2) Division or Affiliate. A division or affiliate should be presumed to be part of the 

contractor. An "affiliate," as defined at FAR § 2.101, means an associated business concern or 

individual if, directly or indirectly, either (a) one controls or can control the other, or (b) a 3rd 

party controls or can control both. However, under FAR § 3.1 04-3( d)(3), a former official is not 

prohibited from accepting compensation "from any division or affiliate of a contractor that does 

not produce the same or similar products or services as the entity of the contractor that is 

responsible for the contract." A determination as to what constitutes the "same or similar 

products or services" is fact dependent. It is recommended employees bear the burden of 

establishing that a product or service is "dissimilar enough." 

E.g., Advertising a particular product is the service, not advertising in general. 

Therefore, advertising for recruitment could be considered "dissimilar enough" 

from advertising the sale of used cars, so that former employees could accept 

compensation. It is not enough that a division is on the commercial, as opposed 

to government, side of the contractor's business. 

There is no exception in the Act or regulation regarding the quantity of the service or 

product. Therefore, the fact that a particular division's workload is only I % of the "same or 

similar product or service" is irrelevant. If that division produces any amount of the product, it 

would be included in the compensation ban. 

"In excess 0/$10 million," as defined at FAR § 3.104-1, means: 

• the value, or estimated value, at the time of award, of the contract, including all 

options; 

• the total estimated value at the time of award of all orders under an indefinite 

-delivery, indefinite-quantity, or requirements contract; 

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• any multiple award schedule contract unless the contracting officer documents a 

lower estimate; 

• the value of a delivery order, task order, or an order under a Basic Ordering 

Agreement; 

• the amount paid or to be paid in settlement of a claim; or 

• the estimated monetary value of negotiated overhead or other rates when applied to 

the Government portion of the applicable allocation base. 

c. Application 

(1) Team Awards 

As discussed in the 1998 memorandum, the Procurement Integrity Tiger Team advised 

that application of the compensation ban to team awards depends on the legal structure of the 

team -- for example, whether the team is a prime/subcontractor arrangement or a joint venture. If 

a team award designates one prime contractor, with the others in the team as subcontractors or 

not addressed, the employment ban should extend only to the named prime contractor. If a joint 

venture is awarded the contract, every party to the venture should be deemed awarded the 

contract and the compensation ban would extend to each party ofthe joint venture. We believe 

that this still constitutes sound guidance. 

(2) Measuring the "One-year Ban" on Compensation. 

The "one-year ban" is different from every other post government employment restriction in that 

it does not necessarily begin to run on the date ofretirement, separation or resignation. Rather, it 

begins to run as follows: 

• If you were serving as the peo, the SSA, a member of the SSEB, or the chief of a 

financial or technical evaluation team, on a contract over $10 million, the ban begins 

to run on the date of contract award (unless you were serving in one of these 

positions on the date of contractor selection but not on the date of contract award, in 

which case the ban begins to run on the date of contractor selection); 

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• If you served as the Program Manager, Deputy Program Manager, or Administrative 

Contracting Officer, on a contact over $10 million, the ban begins to run on the last 

date you served in that position. 

• If you made one of the seven types of decisions listed above on a contract over $10 

million, the ban begins to run on the date the decision was made. [FAR 3.I04-3(d)] 

Thus, if an employee was the Program Manager on a contract over $10 million, and he or 

she stopped serving in that position 14 months before retirement, the employee would be subject 

to the I-year compensation ban, but the I-year period would end before the employee retired. 

Likewise, if an employee makes one of the seven types of decisions listed above on a contract 

over $10 million, and does so six months before the employee retires, the employee will be 

subject to the I-year ban, but the ban will end six months after the employee retires. 

The potential for C<lnfusion and misinterpretation clearly exists concerning persons 

serving as the PCO, the SSA, a member of the SSEB, or the chief of a financial or technical 

evaluation team. Where an individual serves in dual capacities, such as PCO and SSA, the 

award date may also be the date of selection. Where it is anticipated that the selection and award 

decisions will coincide, SSEB member appointment documents should state that members serve 

until the date of award, thus eliminating the difficulty of trying to determine a separate date of 

selection for those employees who are still in Federal service on the date of award, but are no 

longer working in a covered position. 

In other cases, there is a clear demarcation between the selection and award decisions --

for example, when the SSA records the selection decision in a decision memorandum and award 

is made later by the PCO. In addition, there may be a gap of several days or weeks between the 

selection and award decisions -- e.g., due to the PCO waiting for receipt of funding for the 

contract or waiting for authorization from the Milestone Decision Authority for the overall 

program to proceed into the next program phase. In these cases, there should be no difficulty in 

determining the dates of the selection and award decisions. Moreover, in these cases, it may be 

considered unfair to extend the evaluation board members' service until the date of award and 

thereby delay the start of the I year compensation ban for them. 

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(3) Employees on transition or annual leave prior to retirement 

The prohibitions in FAR § 3.104-3(d) apply to former officials. Technically, the provisions do 

not apply to military members on transition leave, or civilian employees on annual leave prior to 

retirement. As a result, a member or employee in such status technically could accept 

compensation from an entity from which they could not accept compensation after retirement. 

Under the JER, sections 2-303 and 3-306.e., employees and military members who file a 

financial disclosure report, which should include everyone described in § 3.104-3(d), must obtain 

prior written approval from their Agency Designees before accepting compensated employment 

with a prohibited source while serving with the Department. We recommend that such designees 

withhold approval in this circumstance, as it would potentially detract from readiness. It is 

possible that bid protests or performance delays could result. This situation illustrates the need 

for members and employees to ask for advice prior to their seeking employment. 

In addition to issues arising under the PIA, employees and members above must be alert to avoid 

violating: 

• 18 U.S.c. § 208, by participating personally and substantially in any particular matter 

(which would involve not only contract negotiations, but also policy matters) that 

have a direct and predictable affect upon the financial interests of their future 

employer, or persons or entities with which they are negotiating or have arrangements 

for future non-Federal employment; and 

• 18 U.S.c. §§ 203 and 205, by representing others to the Federal Government. 

Federal employees may not represent anybody other than the United States to the 

Government on any particular matter involving the Government. The temptation for 

employees and members described above, is to start performing duties on behalf of 

the new employer. Simply being present in Government offices on behalf of a 

contractor inherently is a representation. Of course, members and employees may 

begin work with the contractor, but only "behind the scenes" at a contractor office or 

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otherwise away from the Government workplace. [Enlisted members are not subject 

to 18 USC § § 203 or 205]. 

c.. Interaction With Other Post-employment Restrictions 

Individuals subject to the compensation provisions of the Act also must be aware of, and 

their post-employment advice should reflect consideration of, the following: 

• 18 U.S.c. § 207. There are five prohibitions contained in this statute that apply to 

Executive Branch personnel [(a)(l), (a)(2), (b), (c), and (e)]. Prohibitions generally 

prohibit former employees from representing (and under certain provisions, aiding 

and assisting others in representing) anyone other than the United States to or before 

Federal agencies or courts under specific circumstances. 

• 18 U.S.C. § 203. To the extent that a former member or employee leaves the Federal 

Government to work for an employer that does representational work (e.g., law, 

public relations, lobbying firm) and the former member or employee draws his or her 

compensation through partnership shares, the former member or employee should 

seek advice as to the application of this statute to their non-Federal compensation. 

• 37 U.S.C. § 908. A former military member who intends to receive pay from a U.S. 

contractor or subcontractor for providing services to a foreign government, must 

obtain prior authorization from his or her Service Secretary and the Secretary of State 

before doing so. Failure to obtain authorization may result in the former member 

forfeiting his or her military pay during the time that he or she performs services for a 

foreign government. Retired personnel and reservists who violate this Constitutional 

proscription may forfeit pay equal in amount to their foreign pay. 

• Section 847 of the National Defense Authorization Act for Fiscal Year 2008 (pub. 

L. 110-181). A 000 official who either: (I) is a general or flag officer, Executive 

level, or SES official who has participated personally and substantially in a DoD 

acquisition exceeding $10 million; or (2) has held a key acquisition position (a 

position listed in subsection 27(d) of the PIA, see liLa., above) with regard to a 000 

contract exceeding $10 million, must obtain a written opinion from a 000 ethics 

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counselor regarding the activities that the official may undertake on behalf of a DoD 

contractor within two years after leaving DoD service. In addition, Section 847 

prohibits a DoD contractor from providing compensation to such a DoD official 

without first detennining that the official has received or appropriately requested a 

post-employment ethics opinion. Ethics officials are required to issue the written 

opinion letter within 30 days after receiving the request. 

• Penalties 

The penalties for violating the compensation ban provision are the administrative penalties set 

out in I.e., above. 

e. Advice 

An official or fonner official of a Federal agency who does not know whether acceptance 

of compensation from a competing bidder would violate the compensation ban, may request 

advice from an ethics counselor. Provided full disclosure of all relevant facts is made, a current 

or fonner official's good faith reliance on an ethics counselor's opinion will protect him against 

claims that he or she knowingly violated the Act. See FAR § 3-104.6(d). A request for an 

opinion should be in writing, dated and signed, and must include: 

• all infonnation reasonably available to the official or fonner official that is relevant to 

the inquiry (at a minimum, the request shall include infonnation about relevant 

procurements in which the individual was involved, including contract or solicitation 

numbers, dates of solicitation or award, and a description of the goods or services 

procured or to be procured); 

• infonnation about the individual's participation in procurement decisions, including 

the dates or time periods of the participation, and the nature of the individual's duties, 

responsibilities, or actions; and 

• infonnation about the contractor who would be a party to the proposed conduct, 

including a description of the products or services produced by the contractor, or its 

division or affiliate from whom the individual proposes to accept compensation. 

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An ethics cOWlSelor may request additional information from the official, from other 

procurement officials, or the official's supervisor. Pursuant to FAR § 3-104.6(c), the ethics 

counselor is required to issue an opinion within 30 days or as soon thereafter as practicable (thus, 

the written opinion is colloquially known as a "30-day letter"). When the requester knows or 

should know that the opinion is based on fraudulent or misleading information, reliance on the 

opinion will not be deemed to be in good faith. 

Director 

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