`[Federal Register Volume 90, Number 9 (Wednesday, January 15, 2025)]
[Proposed Rules]
[Pages 4376-4395]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-31561]



[[Page 4375]]

Vol. 90

Wednesday,

No. 9

January 15, 2025

Part VIII





Department of Defense





General Services Administration





National Aeronautics and Space Administration





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48 CFR Parts 1, 2, 3, et al.





Federal Acquisition Regulation: Preventing Organizational Conflicts of 
Interest in Federal Acquisition; Proposed Rule

  Federal Register / Vol. 90, No. 9 / Wednesday, January 15, 2025 / 
Proposed Rules  

[[Page 4376]]


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DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Parts 1, 2, 3, 7, 8, 9, 10, 11, 12, 13, 15, 16, 17, 18, 37, 
42, 50, and 52

[FAR Case 2023-006, Docket No. FAR-2023-0006, Sequence No. 1]
RIN 9000-AO54


Federal Acquisition Regulation: Preventing Organizational 
Conflicts of Interest in Federal Acquisition

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

ACTION: Proposed rule.

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SUMMARY: DoD, GSA, and NASA are proposing to amend the Federal 
Acquisition Regulation (FAR) to implement the Preventing Organizational 
Conflicts of Interest in Federal Acquisition Act. The statute requires 
the FAR to provide and update definitions, guidance, and examples 
related to organizational conflicts of interest, including the creation 
of solicitation provisions and contract clauses to avoid or mitigate 
organizational conflicts of interest. The statute also requires the FAR 
to permit contracting officers to consider professional standards and 
procedures to prevent organizational conflicts of interest to which an 
offeror or contractor is subject.

DATES: Interested parties should submit written comments to the 
Regulatory Secretariat Division at the address shown below on or before 
March 17, 2025 to be considered in the formation of the final rule.

ADDRESSES: Submit comments in response to FAR Case 2023-006 to the 
Federal eRulemaking portal at https://www.regulations.gov by searching 
for ``FAR Case 2023-006''. Select the link ``Comment Now'' that 
corresponds with ``FAR Case 2023-006''. Follow the instructions 
provided on the ``Comment Now'' screen. Please include your name, 
company name (if any), and ``FAR Case 2023-006'' on your attached 
document. If your comment cannot be submitted using https://www.regulations.gov, call or email the points of contact in the FOR 
FURTHER INFORMATION CONTACT section of this document for alternate 
instructions.
    Instructions: Please submit comments only and cite ``FAR Case 2023-
006'' in all correspondence related to this case. Comments received 
generally will be posted without change to https://www.regulations.gov, 
including any personal and/or business confidential information 
provided. Public comments may be submitted as an individual, as an 
organization, or anonymously (see frequently asked questions at https://www.regulations.gov/faq). To confirm receipt of your comment(s), 
please check https://www.regulations.gov, approximately two to three 
days after submission to verify posting.

FOR FURTHER INFORMATION CONTACT: For clarification of content, contact 
Ms. Mahruba Uddowla, Procurement Analyst, at 703-605-2868 or by email 
at [email protected]. For information pertaining to status, 
publication schedules, or alternate instructions for submitting 
comments if https://www.regulations.gov cannot be used, contact the 
Regulatory Secretariat at 202-501-4755 or [email protected]. Please 
cite ``FAR Case 2023-006.''

SUPPLEMENTARY INFORMATION:

I. Background

    DoD, GSA, and NASA are proposing to revise the FAR to implement the 
Preventing Organizational Conflicts of Interest in Federal Acquisition 
Act (Pub. L. 117-324, 41 U.S.C. 2303 note), enacted December 27, 2022. 
The statute directs the Federal Acquisition Regulatory Council to 
revise the FAR to provide and update--
     Definitions, to include those related to specific types of 
organizational conflicts of interest (OCIs), including unequal access 
to information, impaired objectivity, and biased ground rules;
     Guidance and illustrative examples related to 
relationships of contractors with public, private, domestic, and 
foreign entities that may result in OCIs;
     Illustrative examples of situations related to the 
potential for OCIs.
    The statute also requires that the FAR be revised to provide 
agencies with tailorable solicitation provisions and contract clauses 
to avoid or mitigate organizational conflicts. The statute provides 
agencies the ability to take agency-specific needs into consideration 
when addressing risk that may be unique to the agency.
    The statute instructs the Federal Acquisition Regulatory Council to 
require executive agencies to establish or update agency conflict of 
interest procedures to implement these revisions to the FAR. Agencies 
will be instructed to develop or update procedures to reflect the 
requirements of this new regulatory coverage when it is finalized.
    DoD, GSA, and NASA published a proposed rule under FAR Case 2011-
001, Organizational Conflicts of Interest, on April 26, 2011 (76 FR 
23236) intended to amend the FAR coverage of OCIs and provide 
additional coverage regarding unequal access to nonpublic information. 
However, given the amount of time that had passed since publication of 
the proposed rule, and potential changed circumstances, a decision was 
made not to proceed with finalization of that rule. As a result, the 
proposed rule was withdrawn and the case was closed on March 19, 2021 
(86 FR 14863).

II. Discussion and Analysis

    This rule proposes to create a new FAR subpart 3.12, Organizational 
Conflicts of Interest, to reflect the direction of the statute. A 
summary of the proposed changes follows:

A. Placement of OCI Coverage

    This rule proposes to move OCI coverage from FAR subpart 9.5 to a 
new subpart in FAR part 3. Part 9 addresses contractor qualifications. 
While the ability to provide impartial advice and assistance is an 
important qualification of a Government contractor, the larger issues 
that underlie efforts to identify and address OCI are more directly 
associated with some of the business practice topics discussed in FAR 
part 3. Part 3 is already the home of coverage on personal conflicts of 
interest. As a result, FAR subpart 9.5 is proposed to be marked 
``reserved'' and the coverage of OCIs in 9.000, Scope of part, is 
removed.
    To reflect the broader scope of part 3, this rule proposes to 
change the title from ``Improper Business Practices and Personal 
Conflicts of Interest'' to ``Business Ethics and Conflicts of 
Interest.'' As a result, the proposed rule also revises section 3.000, 
Scope of part, to reflect the new scope.

B. Definitions

    The proposed rule updates definitions and creates several new 
definitions. The definition of OCI in FAR part 2 is revised to address 
``unequal access to information, impaired objectivity, and biased 
ground rules,'' in accordance with the statute. For clarity, a 
definition of ``entity'' is created for the context of OCIs. The 
definition is refined to clearly reflect the two types of situations 
that result in OCI concerns: impaired objectivity and unfair 
competitive advantage.
    A new definition is added for impaired objectivity, which is a type 
of OCI in which an entity or its affiliate has or may have financial or 
other interests or an incentive to provide other than impartial advice 
to the

[[Page 4377]]

Government, or the entity or its affiliate's objectivity in performing 
the contract work is or might be otherwise impaired. In the context of 
these definitions related to OCIs, ``entity'' can mean an individual, a 
corporation or other organization.
    Unfair competitive advantage in turn can result from biased ground 
rules or unequal access to information. The proposed rule adds a 
definition for ``biased ground rules'' that describes a situation in 
which an entity or its affiliate, as part of its performance of a 
Government contract, has or may have materially influenced the 
development of the requirement, evaluation criteria, or other source 
selection procedures for another Government contract. The primary 
concern is that the entity could skew the future competition, whether 
intentionally or not, in favor of itself.
    A new definition for ``unequal access to information'' describes 
situations in which an entity or its affiliate has or may have an 
unfair competitive advantage because they have access to Government-
provided information that all potential offerors do not have. That 
information may assist the entity in obtaining the contract.
    The proposed rule also adds a definition of ``firewall'' to new 
section 3.1201 since the term reflects an important mitigation strategy 
for addressing OCI resulting from unequal access to information in the 
new subpart.

C. General Policy

    The new OCI coverage at FAR subpart 3.12 provides updated statutory 
citations and a more concise depiction of the applicability of the 
requirements. While the requirements are applicable to most 
procurements, acquisitions below the simplified acquisition threshold 
(SAT) and those for commercial products are exempt, as well as 
subcontracts for commercial products or commercial services.
    Within the new policy section at FAR 3.1203, the proposed rule 
explains the two types of harm that OCIs may cause to the procurement 
system: harm from impaired objectivity and harm to the integrity of the 
competitive acquisition process. The discussion provides the actions 
that the Government and agency contracting officers should take to 
address or prevent harm.
    The rule describes the role a contractor's advantage can play in 
OCIs. Proposed language clarifies that the mere fact that a contractor 
has a competitive advantage in an acquisition on the basis of having 
previously performed work for the Government (i.e., ``natural 
advantage'') does not mean that the contractor has an OCI or that the 
contractor's advantage is unfair. Guidance is provided to contracting 
officers on the hard facts needed (vs. innuendo and supposition) to 
determine the presence of OCIs in a procurement.
    The new section directs contracting officers to address situations 
where one or more offerors hold an unfair competitive advantage due to 
unequal access to information. The rule directs contracting officers to 
explore all available methods to address an OCI based upon unequal 
access to information before selecting disqualification of an offeror 
to alleviate unfair competitive advantage. Language in this section 
contains general principles for determining when access to information 
is ``unequal,'' constitutes an OCI, and needs to be addressed.

D. Examples

    As required by the statute, the proposed rule provides 
``illustrative examples'' of potential OCIs that could result from 
``relationships of contractors with public, private, domestic, and 
foreign entities'' at section 3.1204. The rule also provides examples 
of potential OCIs that result from a ``Federal regulatory agency'' 
awarding a contract for consulting services to a contractor in which 
``employees of the contractor performing work under such contract are 
permitted by the contractor to simultaneously perform work under a 
contract for a private sector client under the regulatory purview of 
such agency.''
    For clarity, the examples are broken out by the two sources of 
OCIs: impaired objectivity and unfair competitive advantage. The 
examples of impaired objectivity include situations in which a firm's 
relationships with other entities can create undue influence or 
otherwise impair their performance on a Government contract. The 
examples of unfair competitive advantage are broken out by when the 
advantage is created from biased ground rules and from unequal access 
to information.

E. Methods of Addressing OCIs

    The proposed rule provides guidance at 3.1205 on the various 
methods for addressing OCIs. Agencies are advised that OCIs and their 
associated risks may be addressed by means of avoidance; limitations on 
future contracting; mitigation; and/or the Government's assessment that 
the risk inherent in the conflict is acceptable.
    The rule explains the methods of avoiding OCIs at 3.1205-1 and 
advises contracting officers to work with the program office or 
requiring activity early in the acquisition process to successfully 
implement an avoidance strategy. Similar to current FAR 9.505-2 
language, the rule lists techniques for avoidance such as developing a 
statement of work that does not require contractors to utilize 
subjective judgment and, when required, soliciting advice from more 
than one contractor rather than relying on the advice of a single 
contractor. The coverage recognizes that the available tools and 
appropriate use of avoidance by disqualification of an offeror depend 
on the circumstances involved.
    The rule also provides guidance at 3.1205-2 for addressing OCIs by 
using a limitation on future contracting. Such limitations apply when 
the contractor's work on a current contract could be impaired by virtue 
of its expectation of future work or could jeopardize the integrity of 
the competitive process. As a result, a contractor and its affiliates 
may be precluded from entering into certain future contracts, either as 
a prime contractor or subcontractor. Similar to current FAR 9.507-2 
language, the rule directs contracting officers to place a reasonable 
duration for the limitation that is sufficient to neutralize the OCI. 
Contracting officers are advised to provide a specific end date for the 
limitation or indicate that the limitation would end upon occurrence of 
an identifiable event.
    The rule provides guidance at 3.1205-3 on techniques that can 
reduce, or mitigate, OCI risk. These techniques may require Government 
action, contractor action, or a combination of both. The new text 
requires that, when mitigation is used to address OCIs, the offeror-
submitted and Government-approved mitigation plan be incorporated into 
the contract. The mitigation plan must reflect all actions the offeror 
has agreed to take to mitigate OCIs. The proposed rule describes 
several mitigation techniques and explains when the techniques should 
be used.
    The proposed rule provides direction at 3.1205-4 for instances in 
which the Government determines that the risk of harm from impaired 
objectivity is an acceptable performance risk. In making such a 
determination, the contracting officer will assess whether some or all 
of the performance risk is acceptable because the risk is outweighed by 
the expected benefit of having the offeror perform the contract, and 
whether the performance risk is manageable. The rule provides agencies 
the flexibility to set approval levels for such determinations above 
the contracting officer in agency procedures. When making a 
determination that the risk is acceptable, contracting officers should

[[Page 4378]]

use a combination of methods to address OCIs, particularly mitigation.
    The proposed rule adds new FAR section 3.1206 to provide guidance 
on waivers, much of which is similar to the coverage currently in FAR 
9.503. Agencies have the authority to pursue a waiver from a 
preexisting limitation on future contracting or from the requirements 
to address OCIs in a particular acquisition when certain circumstances 
exist. The new text provides the minimum requirements for each waiver 
and specifies that the approval authority is the agency head, without 
delegation below the head of the contracting activity.

F. Contracting Officer Responsibilities

    The proposed rule consolidates the discussion of contracting 
officer responsibilities to identify, analyze, and address OCIs at FAR 
3.1207. The new text provides more detailed guidance than the current 
coverage at FAR 9.504.
    FAR 3.1207-2 requires contracting officers to identify whether an 
acquisition has the potential to result in an OCI during the 
presolicitation phase of the acquisition process to decide whether to 
include an appropriate provision in the solicitation.
    New text at section 3.1207-3 provides guidance on analyzing 
information from the offeror and other sources to determine if an OCI 
is present during the evaluation phase.
    New text at section 3.1207-4 describes the contracting officer's 
responsibilities in implementing the selected method or methods to 
reduce or eliminate the risks associated with a particular OCI. Part of 
addressing, for example, could include negotiating an acceptable 
mitigation plan. The responsibility to ``address'' is similar to the 
requirement to ``resolve'' in current FAR subpart 9.5 prior to award of 
a contract or issuance of an order under a contract. The new term 
reflects the range of flexibilities that are allowed under the new, 
risk-based approach to OCIs. While existing case law requires the 
contracting officer to determine that a conflict has been adequately 
mitigated, the proposed rule allows the contracting officer to accept a 
risk when the conflict results from impaired objectivity and the risk 
to performance is low (see proposed FAR 3.1205-4).
    New text at FAR 3.1207-5 is similar to current direction at FAR 
9.504(e), which requires contracting officers to award to the apparent 
successful offeror after all OCIs have been addressed or waived. 
Contracting officers are required to notify the offeror, provide the 
reason for withholding award, and allow the offeror a reasonable 
opportunity to respond prior to withholding award due to OCIs.
    FAR 3.1207-6 requires contracting officers to consider OCI at the 
time of award and again when issuing an order. For interagency 
acquisitions where the ordering (customer) agency places an order 
directly under another agency's contract (a ``direct acquisition''), 
the ordering agency is responsible for addressing OCIs on that order. 
For interagency acquisitions where the servicing agency performs 
acquisition activities on the requesting agency's behalf (an ``assisted 
acquisition''), the interagency agreement between the servicing and 
requesting agency to establish the terms and conditions of the assisted 
acquisition would need to identify which party is responsible for 
carrying out these responsibilities.

G. New Provisions and Clauses

    The proposed rule adds 2 new solicitation provisions and 3 new 
contract clauses related to OCIs in FAR part 52. Existing FAR coverage 
anticipates appropriate handling of OCI issues through solicitation 
provisions and contract clauses, but does not provide a standard format 
(see FAR 9.507). The statute requires that the FAR provide contracting 
officers with standard language that can be used or tailored as 
appropriate. The proposed rule combines the requirements at FAR 9.506 
and 9.507 with the statutory direction that the clauses and provisions 
``require contractors to disclose information relevant to potential 
organizational conflicts of interest and limit future contracting,'' in 
the development of one proposed provision and all the clauses on OCI.
    The proposed rule adds a new provision at FAR 52.203-XX, Potential 
Organizational Conflict of Interest--Disclosure and Representation, to 
provide notice to offerors that the nature of the work described in the 
solicitation is such that OCIs may result from contract performance. 
When using this provision, contracting officers may identify 
contractors that are disqualified from participation and types of 
client or industry relationships that may present OCIs for the work to 
be performed under a contract resulting from that solicitation. This 
provision requires an offeror, as part of its proposal, to--
    (1) Disclose all relevant information regarding any OCI (including 
active limitations on future contracting and specific clients or 
industry relationships that may create OCI if identified by the 
contracting officer);
    (2) Disclose any professional standards to which it is subject, or 
any procedures it has in place, to prevent OCIs;
    (3) Represent, to the best of its knowledge and belief, that it has 
disclosed all relevant information regarding any OCI;
    (4) Explain the actions it intends to use to address any OCI (e.g., 
submit a mitigation plan if it believes an OCI may exist or agree to a 
limitation on future contracting); and
    (5) Update their disclosure(s) for new information not previously 
disclosed or if there is a change to any relevant facts relating to a 
previously disclosed OCI.
    The proposed rule adds a new clause at FAR 52.203-DD, Postaward 
Disclosure of Organizational Conflict of Interest, which requires the 
contractor to make a prompt and full disclosure of any new or newly 
discovered OCI. The clause is intended to address scenarios in which 
events occur during the performance of a contract that result in a new 
OCI, or an OCI is discovered after award. The contractor is informed 
that in certain circumstances, the newly reported OCI may result in 
termination of the contract. The clause is required to flow down to 
subcontracts exceeding the SAT where the work includes or may include 
tasks that may result in an OCI, except subcontracts for commercial 
products or commercial services.
    The proposed rule adds a new clause at FAR 52.203-MM, Mitigation of 
Organizational Conflicts of Interest, for contracts that may involve an 
OCI that can be addressed by an acceptable offeror-submitted mitigation 
plan prior to contract award. The clause incorporates the mitigation 
plan in the contract; addresses changes to the mitigation plan; and 
addresses noncompliance with the clause or with the mitigation plan. 
The clause is required to flow down to subcontracts exceeding the SAT 
where the work is addressed in the mitigation plan, except subcontracts 
for commercial products or commercial services.
    The proposed rule adds a new clause at FAR 52.203-LL, Limitation on 
Future Contracting, for use when the contracting officer decides to 
address a potential conflict of interest through a limitation on future 
contracting. The contracting officer must fill in the nature of the 
limitation on future contractor activities and the length of any such 
limitation. The clause provides explicit terms with which the 
contractor would comply regarding future competitions that would create 
an OCI. The clause is required to flow down to subcontracts exceeding 
the SAT for which the work includes tasks that are encompassed by the 
description of work the contracting officer identified

[[Page 4379]]

as subject to a limitation, except subcontracts for commercial products 
or commercial services.
    The proposed rule adds a new provision at FAR 52.203-AA, Unequal 
Access to Information--Representation, which requires the offeror to 
identify, prior to submission of its offer, whether it or any of its 
affiliates had unequal access to any information that could provide an 
unfair competitive advantage. If so, the offeror is required to advise 
the contracting officer of any actions that the offeror proposes to 
take to resolve the OCI. The provision also requires offerors to 
represent, by submission of an offer, that they effectively implemented 
any agreed-to mitigation measures and that any firewall that was used 
to mitigate the OCI has not been breached. The provision requires 
offerors to check a box if any planned firewall was not implemented or 
was breached. In the event an offeror checks that box, the provision 
requires the offeror to provide additional explanatory information.
    New prescriptions for the provisions and clauses are added at FAR 
3.1208. FAR provision 52.203-XX is prescribed for use in solicitations 
exceeding the SAT, other than solicitations for commercial products, 
when the contracting officer identifies the work may have the potential 
to result in an OCI.
    FAR clause 52.203-DD is prescribed for use when provision 52.203-XX 
is included. Contracting officers are instructed to fill in paragraph 
(b)(1)(iii) of the clause if they identified specific contractor client 
and industry relationships that may present a conflict of interest.
    FAR clause 52.203-MM is prescribed for use in solicitations 
exceeding the SAT, other than solicitations for commercial products, 
when the resulting contract may involve an OCI that can be addressed by 
an acceptable offeror-submitted mitigation plan. Contracting officers 
are instructed to only include the clause in the resulting contract if 
the offeror submits an organizational conflict of interest mitigation 
plan that will be incorporated into the contract.
    FAR clause 52.203-LL is prescribed for use in solicitations 
exceeding the SAT, other than solicitations for commercial products, 
when the contracting officer expects that the method of addressing the 
OCI will involve a limitation on future contracting. The clause is to 
be included in the resulting contract only if a limitation on future 
contracting is to be placed on the contractor. In the event the clause 
is to be included in the contract, prior to award the contracting 
officer must fill in the clause with the nature and duration of the 
limitation on future contracting or contractor activities, based on 
communications with the apparent successful offeror. Contracting 
officers are instructed to establish a duration sufficient to 
neutralize the projected organizational conflict of interest, but no 
longer than necessary.
    FAR provision 52.203-AA is prescribed for use in solicitations 
exceeding the SAT, other than solicitations for commercial products.

H. Conforming and Other Minor Edits

    FAR part 1 is proposed to be amended at 1.106 to reflect the OMB 
control number associated with the new FAR clauses and provisions that 
contain an information collection, requiring approval under the 
Paperwork Reduction Act.
    Conforming edits are made to part 2, subpart 3.6, parts 11, 15, 17, 
18, 37, 42, and 50 to reflect the movement of OCI coverage from FAR 
subpart 9.5 to new subpart 3.12. This includes moving the definition of 
``contractor team arrangement'' out of FAR 9.6 to part 2, since the 
term will be used in the OCI coverage in part 3, in addition to part 9.
    Language flagging applicability of OCI procedures to task orders is 
added to FAR 8.405, Ordering procedures for Federal Supply Schedules, 
and FAR 16.505, Ordering.
    Revisions to part 12 are proposed to reflect the Federal 
Acquisition Regulatory Council's determination that it would be in the 
best interest of the Federal Government to not exempt contracts for the 
acquisition of commercial services from the statute. Revisions to part 
13 are proposed to reflect that the statute does not apply to all 
acquisitions at or below the SAT in accordance with 41 U.S.C. 1905. See 
section III of the preamble below for further details.
    Language is added to FAR 15.306, Exchanges with offerors after 
receipt of proposals, to clarify that exchanges about OCIs are not 
necessarily considered discussions. Exchanges on an offeror's OCI 
mitigation plan are similar to responsibility determinations when OCI 
is not an evaluation factor. However, the language requires discussions 
if the other parts of the technical proposal and/or cost proposal are 
changed due to the exchanges. The language creates clear direction for 
both the Government and offerors regarding the extent to which an OCI 
mitigation plan may be changed without triggering the requirement to 
conduct discussions.

III. Applicability to Contracts at or Below the Simplified Acquisition 
Threshold (SAT) and for Commercial Products (Including Commercially 
Available Off-The-Shelf (COTS) Items) or for Commercial Services

    This rule proposes to add new provisions and clauses at--
     FAR 52.203-XX, Potential Organizational Conflict of 
Interest-- Disclosure and Representation;
     FAR 52.203-DD, Postaward Disclosure of Organizational 
Conflict of Interest;
     FAR 52.203-MM, Mitigation of Organizational Conflicts of 
Interest;
     FAR 52.203-LL, Limitation on Future Contracting; and
     FAR 52.203-AA, Unequal Access to Information--
Representation.
    These new provisions and clauses implement the requirements of the 
Preventing Organizational Conflicts of Interest in Federal Acquisition 
Act (Pub. L. 117-324). The provisions and clauses are prescribed at FAR 
3.1208 for use in acquisitions exceeding the SAT, and for acquisitions 
of commercial services, where OCIs are anticipated. The provisions and 
clauses are not prescribed for acquisitions of commercial products 
(including COTS).

A. Applicability to Contracts at or Below the Simplified Acquisition 
Threshold

    41 U.S.C. 1905 governs the applicability of laws to acquisitions at 
or below the SAT. Section 1905 generally limits the applicability of 
new laws when agencies are making acquisitions at or below the SAT, but 
provides that such acquisitions will not be exempt from a provision of 
law under certain circumstances, including when the Federal Acquisition 
Regulatory Council makes a written determination and finding that it 
would not be in the best interest of the Federal Government to exempt 
contracts and subcontracts in amounts not greater than the SAT from the 
provision of law.
    At this time, the Federal Acquisition Regulatory Council does not 
intend to make a determination to apply this statute to contracts or 
subcontracts at or below the SAT. However, the Federal Acquisition 
Regulatory Council may decide for the final rule to make a 
determination to apply this statute to certain contracts at or below 
the SAT, specifically those contracts that subsequently lead to future 
contracts in amounts greater than the SAT, where OCIs are anticipated. 
Public comments are welcome on whether it would be in the best interest 
of the Federal Government to apply this statute to the subset of 
contracts at or below the SAT.

[[Page 4380]]

B. Applicability to Contracts for the Acquisition of Commercial 
Products (Including Commercially Available Off-The-Shelf (COTS) Items) 
and Commercial Services

    41 U.S.C. 1906 governs the applicability of laws to contracts for 
the acquisition of commercial products and commercial services, and is 
intended to limit the applicability of laws to contracts for the 
acquisition of commercial products and commercial services. Section 
1906 provides that if the Federal Acquisition Regulatory Council makes 
a written determination that it is not in the best interest of the 
Federal Government to exempt commercial contracts, the provision of law 
will apply to contracts for the acquisition of commercial products and 
commercial services.
    41 U.S.C. 1907 states that acquisitions of COTS items will be 
exempt from certain provisions of law unless the Administrator for 
Federal Procurement Policy makes a written determination and finds that 
it would not be in the best interest of the Federal Government to 
exempt contracts for the procurement of COTS items.
    The Federal Acquisition Regulatory Council intends to make a 
determination to apply this statute to acquisitions for commercial 
services, but not commercial products. The Administrator for Federal 
Procurement Policy does not intend to make a determination to apply 
this statute to acquisitions for COTS items.

C. Determination

    As defined in this rule in accordance with the statute, OCI occurs 
when an entity has impaired objectivity or an unfair competitive 
advantage. Impaired objectivity could result in the Government 
acquiring products and services that are not the best value or for 
which the contractor's performance is biased against the Government's 
interest. Unfair competitive advantage, which is caused by either 
biased ground rules or unequal access to information, jeopardizes the 
Government's ability to solicit competitive proposals and removes 
integrity and fairness from the Federal acquisition process.
    Application of Public Law 117-324 to acquisitions of commercial 
services is in the best interest of the Government. Many of the 
situations in which the Government is vulnerable to OCI occur when it 
acquires services from the commercial sector. One such situation 
explicitly called out in the statute occurs when a ``regulatory'' 
agency acquires consulting services--which is a commercial service--
from a contractor, and the contractor has the same employees perform 
both under the agency's contract as well as on a contract with a 
private sector client that is regulated by said agency. Further, due to 
the preference of the Government to acquire commercial products and 
commercial services (41 U.S.C. 3307), a significant portion of the 
Government's spend is on these categories; and between the two, 
commercial services are acquired more often than commercial products. 
According to data from the Federal Procurement Data System, 61% of the 
contracts over the SAT awarded in fiscal year 2023 using commercial 
acquisition procedures were for services.
    Given the statute's explicit requirement to protect particular 
acquisitions of commercial services against OCIs and the prevalence of 
the Government's acquisition of commercial services, exempting 
acquisitions of commercial services from application of the statute 
would result in a failure to completely implement the statute and 
greatly limit the implementation of the remainder of the statute.
    Based on these findings, the Federal Acquisition Regulatory Council 
intends to determine that it would not be in the best interest of the 
Federal Government to exempt contracts for the acquisition of 
commercial services from the applicability of Public Law 117-324.
    Considering the nature of commercial products and the fact that 
protections will be applied against OCIs at the prime contract level 
for commercial services, it is not in the best interest of the 
Government to apply Public Law 117-324 to acquisitions of commercial 
products or to subcontracts for commercial services.

IV. Expected Impact of the Rule

A. Summary of the Rule

    This rule proposes to update the FAR coverage related to OCI. The 
revisions include moving the coverage from a FAR part that addresses 
contractor qualifications to a FAR part that addresses contractor 
business practices. While the ability to provide impartial advice and 
assistance is an important qualification of a Government contractor, 
the larger issues that underlie efforts to identify and address OCIs 
are more directly associated with business practice issues.
    The rule also proposes to revise the definition of OCI. Currently, 
the FAR definition of OCI is at a high level and only mentions that it 
can cause impaired objectivity or unfair competitive advantage. This 
rule proposes to provide more details on how OCIs could cause an unfair 
competitive advantage (i.e., through biased ground rules or unequal 
access to information) and further defines key terms used in the OCI 
definition. It is expected that the new definition will clarify what 
constitutes an OCI for both the acquisition workforce and industry. The 
rule provides a definition of ``firewall'' to provide more context to 
the new coverage related to mitigation strategies for various types of 
OCIs.
    The rule strengthens the OCI coverage by providing updated 
illustrative examples of what constitutes an OCI, offering an 
additional way of addressing OCIs, presenting a consolidated discussion 
of contracting officer responsibilities that provides more detailed 
guidance, establishing standardized FAR OCI clauses and provisions, and 
adding guidance related to situations in which OCI causes an unfair 
competitive advantage due to someone having unequal access to 
information. The illustrative examples are updated to reflect current 
acquisition scenarios and are broken out by the two sources of OCIs: 
impaired objectivity and unfair competitive advantage. This new 
coverage is expected to provide clarity and assist contracting officers 
in identifying the existence of OCIs in their procurement and 
therefore, take steps to appropriately address OCIs.
    The rule provides contracting officers with a new risk-based method 
of addressing OCIs, i.e., the ability to determine whether an OCI risk 
involving impaired objectivity is an acceptable risk in certain 
circumstances.
    The new guidance is structured according to the steps a contracting 
officer must take during the different phases of an acquisition to 
identify and address OCIs. The more detailed structure in this proposed 
rule is expected to help contracting officers more effectively 
identify, analyze, and address OCI for their procurements.
    Instead of directing contracting officers to create an OCI 
provision and a clause that will implement a limitation on future 
contracting, this rule proposes to establish a FAR provision that 
includes OCI disclosure requirements and provides OCI notices to 
industry as well as a FAR clause that implements limitations on future 
contracting. In addition, the proposed rule establishes FAR clauses 
related to postaward OCI disclosures and mitigation plans as well as a 
FAR provision addressing representations related to an unfair 
competitive advantage due to unequal access to information. By creating 
FAR clauses and provisions, it is expected that there

[[Page 4381]]

will be greater use of standardized OCI terms and conditions across 
Government procurements. The new guidance related to unequal access to 
information provides more complete OCI coverage.

B. Benefits

    Benefits of this rule, for both the Government and the public, 
include ensuring fair competition, maintaining integrity of the 
procurement process, avoiding unfair advantage, protecting Government 
interests, furthering legal compliance, maintaining public trust, 
enhancing efficient contract performance, standardizing terms and 
conditions, and protecting against contract termination.
    By revising the OCI coverage, the Government expects to enable fair 
competition among contractors. Fair competition encourages industry to 
focus on innovation and quality to stand out among competitors. This 
emphasis on excellence can result in better project outcomes and 
reduced costs associated with addressing issues that may arise from 
suboptimal performance.
    Revising the OCI coverage is expected to help maintain the 
integrity of the procurement process by furthering the Government's 
requirement that Federal procurements are conducted impartially and 
without undue influence. The revised coverage is expected to help the 
Government identify and address conflicts prior to the receipt of 
offers. Furthermore, effective OCI management can prevent legal 
challenges and bid protests related to perceived improprieties in the 
procurement process. Litigation can be time-consuming and costly for 
contractors and the Government and avoiding them contributes to overall 
cost savings for both parties.
    The proposed FAR OCI provisions and clauses are intended to prevent 
contractors from gaining an unfair advantage in current or future 
acquisitions. When used, potential offerors are notified of reasons for 
exclusion from receiving a contract award. Cost savings can result 
from:
    (1) Supporting fair competition, which--promotes an even playing 
field allowing all eligible contractors to compete;
    (2) Avoiding preferential treatment, which--prevents bid protests, 
saving legal fees, delays, and re-solicitation costs;
    (3) Preventing biased decision making;
    (4) Protecting proprietary information to prevent contractors with 
unfair advantages, such as access to sensitive information through 
conflicts of interest, from gaining insights into their competitors, 
which could allow those contractors' to affect pricing; and
    (5) Preventing postaward issues--by addressing OCI before the award 
of a contract, which helps prevent postaward issues that could arise if 
conflicts are discovered later. Timely management of OCI reduces the 
risk of protests, disputes, or legal challenges that can disrupt the 
contract execution phase.
    The revised OCI coverage may assist the Government in protecting 
its own interests by requiring its contractors to act in the best 
interest of the Government without compromising the effectiveness of 
the work. If the effectiveness of a contract is compromised, the 
contractor may be susceptible to price adjustments, delays, litigation, 
or contract termination. By ensuring the Government's interests are 
protected, the contractor's interests are protected as well.
    The updated OCI coverage is expected to help the Government comply 
with relevant laws, regulations, and procurement policies designed to 
promote fairness, competition, and ethical conduct in the procurement 
process. Compliance prevents costly litigation for both the Government 
and industry and allows the Government to avoid the possibility of 
unintended contract delays.
    The revised OCI coverage may contribute to building and maintaining 
public trust in the Government's procurement processes. It demonstrates 
a commitment to ethical practices and fairness in awarding contracts. 
Public trust is closely tied to perceptions of ethical conduct. 
Contractors with a reputation for ethical conduct are more likely to be 
trusted by the Government. A positive reputation can lead to increased 
business opportunities and a higher likelihood of contract awards, 
reducing the costs associated with extensive marketing efforts to 
secure contracts.
    The proposed OCI provision and clauses provide uniformity in 
direction across all Federal agencies, which helps to avoid ambiguity, 
making it easier for each agency to understand the terms and 
obligations. Standardization helps prospective contractors comply with 
applicable laws and regulations, reducing the likelihood of legal 
disputes and noncompliance issues. Standardization of OCI clauses and 
provisions may streamline the proposal development process. Industry 
may reuse or modify previous responses to the standardized provisions 
and clauses across multiple offers. This may result in reductions in 
the time and resources associated with customizing proposals for each 
solicitation.
    The proposed FAR OCI provisions and clauses provide a clear, 
comprehensive, and unambiguous description of the rights, 
responsibilities, and obligations of all parties intended to avoid 
conditions for termination and resulting consequences. Contract 
terminations can be costly to contractors as well as the Government.

C. Costs

    The proposed revisions in this rule create costs for both the 
public and the Government, though it is anticipated that the costs will 
be de minimis considering that many of the new procedures and 
requirements in this rule will take the place of existing procedures 
and requirements spread out across the Government such as in agencies' 
supplements to the FAR. As directed in the Preventing Organizational 
Conflicts of Interest in Federal Acquisition Act, agencies are required 
to update their conflict of interest procedures to implement these 
revisions to the FAR as appropriate. It is expected that since the FAR 
allows agencies to tailor certain coverage to address risks that are 
unique to the agency, the FAR coverage will ultimately replace much of 
the agency-specific OCI requirements that currently exist.
    The compliance requirements explicitly proposed in this rule for 
industry involve mitigation plans and disclosures. While this rule 
proposes to create a requirement for contractors to comply with any OCI 
mitigation plan that has been incorporated into their contract, these 
contractors are already subject to comparable mitigation plan 
requirements when contracting with certain agencies, e.g., Defense FAR 
Supplement 209.571-4(b), Department of Homeland Security's clause 
3052.209-72. Similarly, while this rule proposes to create a 
requirement for contractors to constantly monitor to ensure new OCIs or 
overlooked OCIs are discovered, these contractors are already subject 
to comparable disclosure requirements when contracting with certain 
agencies, e.g., Environmental Protection Agency's clause 1552.209-71, 
Department of Energy's clause 952.209-72. This rule also proposes to 
create a number of reporting requirements; see section VII of this 
preamble. However, since industry is already subject to similar 
reporting requirements via various agency-specific clauses and 
provisions, it is expected that the net reporting cost of this proposed 
rule is less than the estimate in section VII of this preamble.

[[Page 4382]]

    The proposed rule provides more detailed guidance to the 
acquisition workforce on OCIs. Current FAR coverage directs contracting 
officers to ``identify,'' ``evaluate,'' ``[a]void, neutralize, [and] 
mitigate,'' OCIs; however, there are not many specific procedures 
provided for contracting officers to follow. The current FAR coverage 
directs contracting officers to use a provision that addresses OCIs 
and, when appropriate, to use a clause that can implement a limitation 
on future contracting; however, no provision or clause text is 
provided. For example, the proposed new disclosure and unequal access 
to information provisions will provide contracting officers with the 
data necessary to best ``identify'' and ``evaluate'' OCIs. The proposed 
clause regarding a limitation on future contracting will help the 
contracting officer ``avoid'' potential OCIs. The proposed mitigation 
plan clause will help the contracting officer ``neutralize'' and 
``mitigate'' OCIs.
    While this rule is proposing to create new clauses and provisions 
for contracting officers to use and specific actions for contracting 
officers to take, the costs associated with these revisions should be 
offset by the current cost of the FAR coverage: cost of contracting 
officers having to determine the specific actions to take or write 
their own clauses and provisions, both of which places the Government 
at a greater degree of OCI risk. The costs associated with these 
revisions are also expected to replace the current costs associated 
with contracting officers following agency-specific guidance instead of 
contracting officers across the Government using a set of standardized 
and uniform procedures and terms and conditions.

V. Executive Orders 12866 and 13563

    Executive Orders (E.O.s) 12866 (as amended by E.O. 14094) and 13563 
direct agencies to assess the costs and benefits of available 
regulatory alternatives and, if regulation is necessary, to select 
regulatory approaches that maximize net benefits (including potential 
economic, environmental, public health and safety effects, distributive 
impacts, and equity). E.O. 13563 emphasizes the importance of 
quantifying both costs and benefits, of reducing costs, of harmonizing 
rules, and of promoting flexibility. This is a significant regulatory 
action and, therefore, was subject to review under Section 6(b) of E.O. 
12866, Regulatory Planning and Review, dated September 30, 1993.

VI. Regulatory Flexibility Act

    The proposed rule, if finalized, may have a significant economic 
impact on a substantial number of small entities within the meaning of 
the Regulatory Flexibility Act 5 U.S.C. 601-612. The Initial Regulatory 
Flexibility Analysis (IRFA) is as follows:

    1. Reasons for the action.
    The Department of Defense (DoD), General Services Administration 
(GSA), and National Aeronautics and Space Administration (NASA) are 
proposing to revise the Federal Acquisition Regulation (FAR) to 
implement a statute, which directs the Federal Acquisition 
Regulatory Council to revise the FAR to provide and update--
     Definitions related to specific types of organizational 
conflicts of interest;
     Definitions, guidance, and illustrative examples 
related to relationships of contractors with public, private, 
domestic, and foreign entities that may cause contract support to be 
subject to potential organizational conflicts; and
     Illustrative examples of situations related to the 
potential organizational conflicts identified.
    The statute also directs that the FAR be revised to--
     Provide agencies with solicitation provisions and 
contract clauses to avoid or mitigate organizational conflicts, for 
agency use as needed, that require contractors to disclose 
information relevant to potential organizational conflicts and limit 
future contracting with respect to potential conflicts with the work 
to be performed under awarded contracts;
     Allow agencies to tailor such solicitation provisions 
and contract clauses as necessary to address risks associated with 
conflicts of interest and other considerations that may be unique to 
the agency; and
     Permit contracting officers to take into consideration 
professional standards and procedures to prevent organizational 
conflicts of interest to which an offeror or contractor is subject.
    2. Objectives of, and legal basis for, the rule.
    The objective of this rule is to implement the updates to the 
FAR as required by the statute.
    The legal basis for the rule is the Preventing Organizational 
Conflicts of Interest in Federal Acquisition Act (Pub. L. 117-324, 
41 U.S.C. 2303 note). The promulgation of the FAR is authorized by 
40 U.S.C. 121(c); 10 U.S.C. chapter 4 and 10 U.S.C. chapter 137 
legacy provisions (see 10 U.S.C. 3016); and 51 U.S.C. 20113.
    3. Description of and an estimate of the number of small 
entities to which the rule will apply.
    The proposed rule is expected 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. 601-612.
    The rule is proposed to apply to acquisitions exceeding the 
simplified acquisition threshold (SAT). The rule is also proposed to 
apply to the acquisition of commercial services. The rule is not 
proposed to apply to commercial products, which includes 
commercially available off-the-shelf (COTS) items.
    DoD, GSA, and NASA do not have data on the number of 
acquisitions that may be affected by organizational conflicts of 
interest. As of December 3, 2023, there were 361,685 small business 
registrants (i.e., entities that are small for any North American 
Industry Classification System code) in the System for Award 
Management. These registrants may be required to complete the new 
FAR provisions that are proposed to be created in this rule.
    4. Description of projected reporting, recordkeeping, and other 
compliance requirements of the rule.
    This proposed rule includes both preaward and postaward 
reporting requirements. In terms of preaward requirements, offerors 
are required to disclose--
     Any relevant limitations on future contracting, the 
term of which has not yet expired, to which the offeror or potential 
subcontractor(s) agreed;
     All relevant information of which the offeror is aware 
regarding financial or other interests that could give rise to an 
organizational conflict of interest, including information about 
affiliates and potential subcontracts, except where such disclosure 
would constitute a violation of law (e.g., the Securities Exchange 
Act of 1934, 15 U.S.C. 78a et seq.);
     Information withheld pursuant to the previous paragraph 
as soon as the law no longer prohibits disclosure;
     Any professional standards to which the offeror is 
subject, or any procedures the Offeror has in place, to prevent 
organizational conflicts of interest;
     To the extent that either the offeror or the Government 
identifies any financial or other interests that could give rise to 
an organizational conflict of interest on the contract resulting 
from a solicitation, the offeror shall explain the actions it 
intends to use to address such organizational conflicts of interest, 
e.g., by submitting a mitigation plan and/or accepting a limitation 
on future contracting;
     Whether an offeror or any of its affiliates had unequal 
access to any information that could provide an unfair competitive 
advantage;
     Any actions that the offeror proposes to take to 
resolve a situation in which it or its affiliates had unequal access 
to information that could provide an unfair competitive advantage; 
and
     Whether any firewall it planned to put in place to 
mitigate the impact of an unfair competitive advantage due to 
unequal access to information was not implemented or was breached.
    In terms of postaward reporting requirements, contractors are 
required to make a full disclosure in writing within 5 days to the 
contracting officer if the contractor identifies financial or other 
interests that could result in an organizational conflict of 
interest that was not previously addressed and for which a waiver 
has not been granted, or a change to any relevant facts relating to 
a previously

[[Page 4383]]

identified organizational conflict of interest. The disclosure shall 
include a description of--
     The organizational conflict(s) of interest in 
sufficient detail for agency evaluation; and
     Actions to address the organizational conflict(s) of 
interest that--
    [cir] The contractor has taken or proposes to take; or
    [cir] The contractor recommends that the Government take.
    Other postaward reporting requirements include--
     Proposing updates to any mitigation plan incorporated 
into the contract within 30 days of--
    [cir] Any changes to the legal construct of a contractor's 
organization, any subcontractor changes, or any significant 
management or ownership changes; or
    [cir] A change to the contract requirements that impacts the 
mitigation plan; and
     Reporting to the contracting officer any noncompliance 
with the clause governing mitigation plans or with the mitigation 
plan itself, whether by the contractor's own personnel, those of the 
Government, other contractors, or subcontractors.
    In addition to the reporting requirements listed above, the rule 
establishes the following compliance requirements for offerors and 
contractors:
     If an offeror submits a mitigation plan, the resulting 
contract will include the Government-approved mitigation plan with 
which that contractor will be required to comply.
     Contractors must flow down the clauses pertaining to 
postaward disclosures, mitigation plans, and limitation on future 
contracting to certain subcontracts for which the work includes or 
may include tasks that may give rise to an organizational conflict 
of interest.
     Offerors must determine, to the best of their knowledge 
and belief, whether they or any of their affiliates had unequal 
access to any information that could provide an unfair competitive 
advantage.
    The proposed revisions in this rule create costs for industry, 
though it is anticipated that the costs will be de minimis 
considering that many of the new procedures and requirements in this 
rule will take the place of existing procedures and requirements 
spread out across the Government such as in agencies' supplements to 
the FAR. As directed in the Preventing Organizational Conflicts of 
Interest in Federal Acquisition Act, agencies are required to update 
their conflict of interest procedures to implement these revisions 
to the FAR as appropriate. It is expected that since the FAR allows 
agencies to tailor certain coverage to address risks that are unique 
to the agency, the FAR coverage will ultimately replace much of the 
agency-specific OCI requirements that currently exist.
    5. Relevant Federal rules which may duplicate, overlap, or 
conflict with the rule.
    The statute requires agencies to establish or update agency 
conflict of interest procedures to implement these revisions to the 
FAR made under the statute and periodically assess and update such 
procedures as needed to address agency-specific conflict issues. As 
such, the rule does not duplicate, overlap, or conflict with any 
other Federal rules.
    6. Description of any significant alternatives to the rule which 
accomplish the stated objectives of applicable statutes and which 
minimize any significant economic impact of the rule on small 
entities.
    There are no exemptions from the rule for small entities, 
because the law does not provide for any such exemption. To minimize 
impact on small entities, the rule exempts actions at or below the 
SAT; the rule only applies to those actions above the SAT.
    The rule also exempts acquisitions of commercial products, which 
includes COTS items.

    The Regulatory Secretariat Division has submitted a copy of the 
IRFA to the Chief Counsel for Advocacy of the Small Business 
Administration. A copy of the IRFA may be obtained from the Regulatory 
Secretariat Division. DoD, GSA, and NASA invite comments from small 
business concerns and other interested parties on the expected impact 
of this proposed rule on small entities.
    DoD, GSA, and NASA will also consider comments from small entities 
concerning the existing regulations in subparts affected by the rule in 
accordance with 5 U.S.C. 610. Interested parties must submit such 
comments separately and should cite 5 U.S.C. 610 (FAR Case 2023-006), 
in correspondence.

VII. Paperwork Reduction Act

    The Paperwork Reduction Act (44 U.S.C. 3501-3521) applies because 
the proposed rule contains information collection requirements. 
Accordingly, the Regulatory Secretariat Division has submitted a 
request for approval of a new information collection requirement 
concerning ``Preventing Organizational Conflicts of Interest in Federal 
Acquisition'' to the Office of Management and Budget (OMB).

A. Public Reporting Burden

    Public reporting burden for this information collection includes 
the time for reviewing instructions, searching existing data sources, 
gathering and maintaining the data needed, and completing and reviewing 
the collection of information.
    1. The annual reporting burden estimated for the OCI disclosure and 
representation provision requirements is as follows:
    Respondents: 1,781.
    Total annual responses: 3,562.
    Hours/response: x 1.
    Total burden hours: 3,562.
    2. The annual reporting burden estimated for the OCI disclosure 
clause requirements is as follows:
    Respondents: 891.
    Total annual responses: 2,673.
    Hours/response: x 1.
    Total burden hours: 2,673.
    3. The annual reporting burden estimated for OCI mitigation plans 
is estimated as follows:
    Respondents: 1,114.
    Total annual responses: 3,342.
    Hours/response: x 0.5.
    Total Burden Hours: 1,671.
    4. The annual reporting burden estimated for the unequal access to 
information provision requirements is as follows:
    Respondents: 357.
    Total annual responses: 357.
    Hours/response: x 0.5.
    Total Burden Hours: 178.5.

B. Request for Comments Regarding Paperwork Burden

    Submit comments on this collection of information no later than 
March 17, 2025 through https://www.regulations.gov and follow the 
instructions on the site. All items submitted must cite OMB Control No. 
9000-XXXX, Organizational Conflicts of Interest. Comments received 
generally will be posted without change to https://www.regulations.gov, 
including any personal and/or business confidential information 
provided. To confirm receipt of your comment(s), please check https://www.regulations.gov, approximately two to three days after submission 
to verify posting. If there are difficulties submitting comments, 
contact the GSA Regulatory Secretariat Division at 202-501-4755 or 
[email protected].
    Public comments are particularly invited on:
     The necessity of this collection of information for the 
proper performance of the functions of Federal Government acquisitions, 
including whether the information will have practical utility;
     The accuracy of the estimate of the burden of this 
collection of information;
     Ways to enhance the quality, utility, and clarity of the 
information to be collected; and
     Ways to minimize the burden of the collection of 
information on respondents, including the use of automated collection 
techniques or other forms of information technology.
    Requesters may obtain a copy of the supporting statement from the 
General Services Administration, Regulatory Secretariat Division by 
calling 202-501-4755 or emailing [email protected]. Please cite OMB 
Control Number 9000-XXXX, Organizational Conflicts of Interest.

[[Page 4384]]

List of Subjects in 48 CFR Parts 1, 2, 3, 7, 8, 9, 10, 11, 12, 13, 
15, 16, 17, 18, 37, 42, 50, and 52

    Government procurement.

William F. Clark,
Director, Office of Government-wide Acquisition Policy, Office of 
Acquisition Policy, Office of Government-wide Policy.

    Therefore, DoD, GSA, and NASA propose amending 48 CFR parts 1, 2, 
3, 7, 8, 9, 10, 11, 12, 13, 15, 16, 17, 18, 37, 42, 50, and 52 as set 
forth below:

0
1. The authority citation for 48 CFR parts 1, 2, 3, 7, 8, 9, 10, 11, 
12, 13, 15, 16, 17, 18, 37, 42, 50, and 52 continues to read as 
follows:

    Authority:  40 U.S.C. 121(c); 10 U.S.C. chapter 4 and 10 U.S.C. 
chapter 137 legacy provisions (see 10 U.S.C. 3016); and 51 U.S.C. 
20113.

PART 1--FEDERAL ACQUISITION REGULATIONS SYSTEM

0
2. In section 1.106 amend the table by adding in numerical order 
entries for ``52.203-XX'', ``52.203-DD,'' ``52.203-MM,'' and ``52.203-
AA'' to read as follows:


1.106  OMB approval under the Paperwork Reduction Act.

* * * * *

------------------------------------------------------------------------
                      FAR segment                        OMB control No.
------------------------------------------------------------------------
 
                                * * * * *
52.203-XX.............................................         9000-xxxx
52.203-DD.............................................         9000-xxxx
52.203-MM.............................................         9000-xxxx
52.203-AA.............................................         9000-xxxx
 
                                * * * * *
------------------------------------------------------------------------

* * * * *

PART 2--DEFINITIONS OF WORDS AND TERMS

0
3. Amend section 2.101 by--
0
a. Removing from the definition of ``advisory and assistance services'' 
the phrase ``(see 9.505-1(b))'';
0
b. Adding in alphabetical order the definition ``contractor team 
arrangement''; and
0
c. Revising the definition of ``organizational conflict of interest''.
    The addition and revision read as follows:


2.101  Definitions.

* * * * *
    Contractor team arrangement means an arrangement in which--
    (1) Two or more companies form a partnership or joint venture to 
act as a potential prime contractor; or
    (2) A potential prime contractor agrees with one or more other 
companies to have them act as its subcontractors under a specified 
Government contract or acquisition program.
* * * * *
    Organizational conflict of interest means that an entity or its 
affiliate(s) has impaired objectivity or an unfair competitive 
advantage as a result of other activities or relationships with other 
entities or their affiliates, including with public, private, domestic, 
and foreign entities. An entity or its affiliate may have an unfair 
competitive advantage as a result of biased ground rules or through 
unequal access to information. As used in this definition--
    (1) Biased ground rules means a situation in which an entity or its 
affiliate, as part of its performance of a Government contract, has or 
may have materially influenced the development of the requirement, 
evaluation criteria, or other source selection procedures for another 
Government contract. The primary concern is that the entity could skew 
the future competition, whether intentionally or not, in favor of 
itself;
    (2) Entity means an individual, corporation, or other organization;
    (3) Impaired objectivity means a situation in which an entity or 
its affiliate has or may have financial or other interests or an 
incentive to provide other than impartial advice to the Government, or 
the entity or its affiliate's objectivity in performing the contract 
work is or might be otherwise impaired; and
    (4) Unequal access to information means a situation in which an 
entity or its affiliate has or may have an unfair competitive advantage 
because--
    (i) Access to the information was provided to the entity or its 
affiliate by the Government. Such information may include proprietary 
and source selection information, e.g., proposals, financial 
information;
    (ii) The information is not available to all potential offerors; 
and
    (iii) Having access to the information would assist the entity in 
obtaining the contract.
* * * * *

PART 3--BUSINESS ETHICS AND CONFLICTS OF INTEREST

0
4. Revise the heading for part 3 to read as set forth above.
0
5. Revise section 3.000 to read as follows:


3.000  Scope of part.

    This part prescribes policies and procedures for addressing issues 
regarding business ethics and conflicts of interest.


3.603   [Amended]

0
6. Amend section 3.603 in paragraph (b) by removing ``subpart 9.5'' and 
adding ``subpart 3.12'' in its place.
0
7. Add subpart 3.12 to read as follows:
Subpart 3.12--Organizational Conflicts of Interest
Sec.
3.1200 Scope of subpart.
3.1201 Definition.
3.1202 Applicability.
3.1203 Policy.
3.1204 Examples.
3.1205 Methods of addressing organizational conflicts of interest.
3.1205-1 Avoidance.
3.1205-2 Limitation on future contracting.
3.1205-3 Mitigation.
3.1205-4 Determination of acceptable risk.
3.1206 Waiver.
3.1207 Contracting officer responsibilities.
3.1207-1 General.
3.1207-2 Identification of organizational conflicts of interest.
3.1207-3 Analyzing organizational conflicts of interest.
3.1207-4 Addressing organizational conflicts of interest.
3.1207-5 Award requirements.
3.1207-6 Task-order or delivery-order contracts, blanket purchase 
agreements, basic ordering agreements, and interagency acquisitions.
3.1208 Solicitation provisions and contract clauses.

Subpart 3.12--Organizational Conflicts of Interest


3.1200   Scope of subpart.

    (a) This subpart prescribes policies and procedures, and provides 
illustrative examples, for identifying, analyzing, and addressing 
organizational conflicts of interest.
    (b) This subpart implements--
    (1) 41 U.S.C. 2304;
    (2) Section 841(b)(2) of the Duncan Hunter National Defense 
Authorization Act for Fiscal Year 2009 (Pub. L. 110-417); and
    (3) The Preventing Organizational Conflicts of Interest in Federal 
Acquisition Act (Pub. L. 117-324, 41 U.S.C. 2303 note).


3.1201   Definition.

    Firewall means a barrier against the unauthorized flow of 
information. Firewalls may consist of a variety of elements, including 
organizational and physical separation; facility and workspace access 
restrictions; information system access restrictions; independent 
compensation systems; and individual and organizational nondisclosure 
agreements.


3.1202   Applicability.

    (a)(1) Except as provided in paragraphs (a)(2) and (b) of this 
section, this subpart applies to--

[[Page 4385]]

    (i) Contracts, subcontracts, task orders, delivery orders, blanket 
purchase agreements, basic ordering agreements, and modifications for 
new work; and
    (ii) For-profit and nonprofit organizations, including nonprofit 
organizations created largely or wholly with Government funds.
    (2) This subpart does not apply to--
    (i) Contracts and subcontracts at or below the simplified 
acquisition threshold;
    (ii) Contracts for commercial products; or
    (iii) Subcontracts for commercial products or commercial services.
    (b) Contracting officers shall not apply this subpart where it 
conflicts with an agency-specific conflict-of-interest statute.


3.1203   Policy.

    (a) General. It is the Government's policy to identify, analyze, 
and address organizational conflicts of interest in order to maintain 
the integrity and fairness of the Federal acquisition system. 
Organizational conflicts of interest undermine the public's trust in 
the Federal acquisition system because they can result in the 
following:
    (1) Impaired objectivity. The Government's interests are to ensure 
that--
    (i) It acquires products and services that provide the best value 
to the Government; and
    (ii) The contractor's performance fulfills the Government's 
requirements without bias (see 3.1204(a)).
    (2) Unfair competitive advantage. Protection against biased ground 
rules and unequal access to information--
    (i) Preserves the Government's ability to solicit competitive 
proposals; and
    (ii) Provides prospective offerors an opportunity to compete for 
Government requirements, free from organizational conflicts of interest 
as governed by this subpart (see 3.1204(b)).
    (b) Contractor advantage. (1) The fact that a contractor may, on 
the basis of work previously performed, have a natural advantage in 
competing for a particular Government requirement does not necessarily 
mean that the advantage is unfair or that it creates an organizational 
conflict of interest. Although incumbent contractors will often have a 
natural advantage based on their experience, insights, and expertise, 
this situation must be distinguished from situations in which an 
incumbent contractor also has had access to information that could 
provide an unfair competitive advantage. For example--
    (i) Incumbent contractors may have a natural advantage that is not 
unfair when competing for follow-on contracts because of knowledge and 
expertise developed during contract performance; and
    (ii) Development contractors may have a natural advantage that is 
not unfair when they have done the most advanced work in a field and 
may be able to start production earlier, or offer products of a higher 
quality.
    (2) A contracting officer should not disqualify a contractor based 
on mere innuendo and supposition unsupported by the record (i.e., no 
hard facts), or when the contractor's advantage is speculative and too 
remote from the present procurement to establish an organizational 
conflict of interest. Additionally, any allegation that a contractor 
could theoretically act in bad faith while performing on a contract is 
not a basis for a finding of a conflict of interest and therefore not a 
basis to disqualify an offeror from a competition.
    (c) Unequal access to information. The Government shall address 
situations in which it has reason to believe an offeror has obtained or 
is attempting to obtain an unfair competitive advantage because of its 
unequal access to information.
    (1) Unequal access to information only covers situations in which 
access to information was provided by the Government either--
    (i) Directly, through, or in connection with, performance on 
another Government contract; or
    (ii) Indirectly, through sources such as former Government 
employees as described in 3.1204(b)(2)(ii) or employees of other 
contractors or subcontractors who received the nonpublic information 
from the Government.
    (2) Offerors and the Government should take action early to avoid 
situations where an unfair competitive advantage could be created 
because of unequal access to information. These actions, for example, 
may include implementing firewalls or, when appropriate, sharing the 
information with other interested parties.
    (3) The Government shall not disqualify the offeror from a 
competition on the basis of unequal access to information unless no 
other method of resolution is appropriate (see 3.1207-4(b)).
    (4) An offeror could gain unequal access to information that does 
not constitute an organizational conflict of interest such as through 
the offeror's own market research efforts or its private-sector 
business contacts.


3.1204   Examples.

    The examples in this section are intended to help the contracting 
officer identify potential organizational conflicts of interest. They 
are not all inclusive.
    (a) Impaired objectivity. The following contractual tasks 
illustrate certain situations likely to create an organizational 
conflict of interest that could impair or influence the contractor's 
performance under a Government contract:
    (1) A contractor is reviewing or evaluating, for Government 
approval, the delivery of products or performance of services under an 
existing contract, when the products or services are its own products 
or services or those of an affiliate or of a competitor.
    (2) A contractor is providing systems engineering or technical 
direction involving a major system or components thereof when the same 
contractor or one of its affiliates will be furnishing the same major 
system or components (or will be a subcontractor or consultant to the 
contractor furnishing the major system or component).
    (3) A contractor is providing systems engineering or technical 
direction involving a major system or components thereof when the same 
contractor or one of its affiliates will be testing or verifying the 
system or a component (or will be a subcontractor or consultant to the 
contractor furnishing or testing the major system or component).
    (4) A contractor is assisting an agency in developing policies or 
regulatory procedures and the contractor or one of its affiliates may, 
at some future point, be governed by or subject to (or be a 
subcontractor or consultant to an entity governed by or subject to) 
such policies or regulatory procedures.
    (5) A contractor is providing consulting services to an agency that 
is responsible for regulating an industry and the contractor is 
performing work under a contract for a public or private sector client 
that is regulated by that agency. Organizational conflict of interest 
is more likely to occur if the contractor's employees are 
simultaneously performing work under both contracts.
    (6) A contractor is providing support to an agency involving a 
subject area or issue while it is also performing work for other 
entities with a competing interest involving the same subject area or 
issue. For example, a contractor assisting an agency with implementing 
legislation or regulations may have a conflict if the contractor is 
also assisting industry with compliance on that same legislation or 
regulations.

[[Page 4386]]

    (7) A contractor is providing enforcement support to an agency 
(e.g., cost recovery, litigation) while also assisting or representing 
parties subject to those activities. In addition, when a contractor 
supports enforcement activities for an agency, and those enforcement 
activities continue beyond the life of the contract, such conflicting 
client relationships could continue to jeopardize enforcement actions 
for a time even after the contract ends, especially if the contractor 
had access to sensitive information about the agency's enforcement or 
litigation strategy.
    (8) A contractor is conducting research for an agency, but that 
contractor or its researchers has financial or non-financial ties to a 
foreign entity that seeks capability or advantage related to the topic 
of that research and is likely to exert undue influence on the 
contractor. Undue influence in this context describes a situation in 
which an entity that is not party to a contract, through financial 
support, position of authority, or other ties, persuades the contractor 
to take actions that it would not have taken otherwise, such as taking 
the research in a certain direction or engaging in unauthorized 
information-sharing with other parties.
    (9) A contractor is providing services to an agency related to 
national security or foreign policy matters, but that contractor is 
also providing similar services to a foreign government or other 
foreign entity (e.g., foreign state-owned or private enterprise) with a 
competing or opposing interest in those matters, which could result in 
the foreign entity having undue influence on the contractor's 
performance on the contract.
    (b) Unfair competitive advantage. (1) The following contractual 
tasks illustrate situations likely to create an organizational conflict 
of interest due to unfair competitive advantage through biased ground 
rules:
    (i) A contractor is writing specifications, preparing the 
Government estimate of cost, or providing draft evaluation criteria or 
a draft evaluation plan for a competitive solicitation, and it or one 
of its affiliates may be in a position to compete for (or perform as a 
subcontractor) the relevant requirement.
    (ii) A contractor is assisting the Government with acquisition 
planning activities, and the contractor or one of its affiliates or 
clients may be in a position to compete for (or perform as a 
subcontractor) the future requirement.
    (iii) A contractor is assisting the Government in evaluating 
technical proposals submitted in response to a competitive 
solicitation, and one of the contractor's affiliates or clients is 
among the competitors.
    (iv) A contractor is providing advice that could result in a 
recommendation to purchase particular goods or services, and the 
contractor or one of its affiliates is a potential supplier of such 
goods or services (whether as a prime contractor or subcontractor).
    (v) A contractor is providing a product or service to the 
Government and employs a former Government employee who was involved in 
developing the requirement for the product or service as part of such 
employee's Government job.
    (2)(i) Unequal access to information could provide an offeror with 
an unfair competitive advantage with respect to a particular 
competition.
    (ii) Unequal access to information could involve information in the 
possession of a former Government employee when--
    (A) The information was obtained by the former Government employee 
while working for the Government;
    (B) The information is, for example, contractor proprietary 
information or is source selection information; and
    (C) The former Government employee is in a position in which use of 
the information could provide an unfair competitive advantage to an 
offeror, e.g., working on or being a consultant to a team preparing a 
proposal in response to a competitive solicitation.
    (iii) Unequal access to information may involve a contractor 
assisting in the closeout of completed contracts gaining access to 
another contractor's proprietary information.


3.1205   Methods of addressing organizational conflicts of interest.

    Contracting officers may address organizational conflicts of 
interest, and their associated risks, using avoidance (3.1205-1), 
limitations on future contracting (3.1205-2), mitigation (3.1205-3), or 
the Government may assess and determine that the risk associated with 
the conflict is acceptable (3.1205-4). Contracting officers may address 
the risks using a combination of these methods. (See 3.1207-4).


3.1205-1   Avoidance.

    Avoidance consists of Government action taken in one acquisition 
that is intended to prevent an organizational conflict of interest from 
arising in the current acquisition or in a future acquisition. In order 
to successfully implement an avoidance strategy, the contracting 
officer should work with the program office or requiring activity early 
in the acquisition process. Techniques of avoidance include, but are 
not limited to, the following:
    (a) Developing statements of work and performance work statements 
that do not require contractors to utilize subjective judgment. Tasks 
that could require subjective judgment include--
    (1) Making recommendations;
    (2) Providing analysis, evaluation, planning, or studies; and
    (3) Preparing requirements or solicitation documents.
    (b) Obtaining advice from more than one contractor, so that the 
Government does not rely solely on the advice of any one contractor.
    (c) Disqualifying an offeror or offerors from receiving a contract 
award. Use of this technique may be appropriate when the contracting 
officer concludes that--
    (1)(i) The offeror could have an unfair competitive advantage 
because of its--
    (A) Prior involvement in acquisition planning for the procurement 
(e.g., developing the solicitation);
    (B) Work on a Government contract that places the offeror in a 
position to influence the acquisition; or
    (C) Unequal access to information that cannot be mitigated.
    (ii) In such cases, if the offeror is not already disqualified 
through a limitation on future contracting (see 3.1205-2), 
disqualification may be the only appropriate means of addressing the 
organizational conflict of interest;
    (2)(i) The offeror could have an unfair competitive advantage 
because of an affiliate's--
    (A) Prior involvement in acquisition planning for the procurement 
(e.g., developing the solicitation); or
    (B) Work on a Government contract that places the affiliate in a 
position to influence the acquisition.
    (ii) In such cases, the contracting officer should consider the 
relationship between the offeror and the affiliate in determining 
whether disqualification of the offeror is appropriate (see 3.1207-
4(c)(2) and (d)(2)); or
    (3) The risk that an offeror's impaired objectivity poses to the 
Government's interest is more than the Government is willing to accept, 
because the substance of the work has the potential to affect current 
or future activities or interests of the offeror (or its affiliates or 
clients). In such cases, disqualification may be used only if less 
restrictive techniques for addressing the organizational conflict of 
interest will not adequately protect the Government's interests (see 
3.1207-4(b)(2)).


3.1205-2   Limitation on future contracting.

    (a) A limitation on future contracting allows a contractor to 
perform on the

[[Page 4387]]

current contract but precludes the contractor and its affiliates from 
entering into or participating as a contractor or subcontractor in 
certain future contracts. This method applies when the contractor's 
work on the current contract could be impaired by virtue of its 
expectation of future work or could jeopardize the integrity of the 
competitive process. Use this method to address an unfair competitive 
advantage or to address the risk to the Government's interest posed by 
impaired objectivity when the risk is greater than the Government is 
willing to accept.
    (b) Restrict limitations on future contracting to a reasonable 
duration that is sufficient to neutralize the organizational conflict 
of interest. The restriction shall end on a specific date or upon the 
occurrence of an identifiable event.


3.1205-3   Mitigation.

    (a)(1) Mitigation is an action taken to reduce the risk from an 
organizational conflict of interest.
    (2) Mitigation may require Government action, contractor action, or 
a combination of both.
    (b) When this method is utilized, contracting officers shall 
incorporate into the contract a Government-approved mitigation plan, 
that reflects the actions an offeror has agreed to take to mitigate an 
organizational conflict of interest. The mitigation plan should provide 
sufficient details commensurate with the complexity of the 
organizational conflict of interest and the value of the acquisition. 
While implementation of a mitigation plan is the contractor's 
responsibility, the Government retains the right to review 
implementation of the plan.
    (c) Possible techniques for mitigating organizational conflicts of 
interest include, but are not limited to, the following:
    (1) Requiring a subcontractor or member of a contractor team 
arrangement that is free of an organizational conflict of interest to 
perform the portion of the work that involves an organizational 
conflict of interest on the current contract. This technique will not 
reduce the risk associated with an organizational conflict of interest 
unless it is used in conjunction with controls to ensure that the 
entity with the organizational conflict of interest has no input or 
influence on how the party without the organizational conflict of 
interest performs the work.
    (2) Requiring the contractor to implement structural or behavioral 
barriers, internal controls, or both.
    (i) Barriers and internal controls may reduce the risk that 
potentially conflicting financial or other interests of an affiliate 
will influence the contractor's exercise of judgment during contract 
performance. When appropriate, contracting officers may use barriers 
and controls to prevent corporate officials with a direct interest in 
an affiliate's performance from participating in or influencing 
contract performance. Contracting officers should select specific 
barriers or controls based on an analysis of the facts and 
circumstances of each case.
    (ii) When appropriate, use a firewall to implement the controls in 
paragraph (c)(2)(i) of this section. However, a firewall intended to 
limit the sharing of information may not adequately address an 
organizational conflict of interest regarding an affiliate.
    (iii)(A) For example, if an affiliate anticipates competing for a 
future related contract, the parties may negotiate a mitigation plan 
that requires the contractor and its affiliates to implement structural 
or behavioral barriers, internal controls, or both. The contracting 
officer for the future contract will determine whether these mitigation 
measures were sufficient to allow the affiliate to compete for that 
contract, in accordance with 3.1207-4(d)(2)(ii).
    (B) Since the mitigation techniques in paragraph (c)(2)(iii)(A) of 
this section are resource intensive, use the techniques when 
appropriate to allow the affiliate to compete for the future contract 
when this offers a benefit to the Government (e.g., increased 
competition in a narrow industry field). Absent such benefit, 
contracting officers should address this type of organizational 
conflict of interest using a limitation on future contracting (see 
3.1205-2).
    (3) Disseminating the information to all potential offerors when 
there is an organizational conflict of interest as a result of unequal 
access to information (see 3.1204(b)(2)).


3.1205-4   Determination of acceptable risk.

    (a) Contracting officers shall not determine any risk is acceptable 
when an organizational conflict of interest involves unfair competitive 
advantage (see 3.1204(b)).
    (b)(1) Contracting officers may determine that some or all of the 
performance risk associated with an organizational conflict of interest 
resulting from impaired objectivity is acceptable when--
    (i) The risk is outweighed by the expected benefit from having the 
offeror with an organizational conflict of interest perform the 
contract; and
    (ii) The performance risk is manageable, i.e.--
    (A) The performance risk after implementing mitigation measures is 
minimal; or
    (B) The agency has sufficient oversight controls (see 3.1207-
3(b)(3)).
    (2) The contracting officer determination may require approval by a 
higher authority in accordance with agency procedures.
    (c) Contracting officers should use this method to address 
organizational conflicts of interests in combination with other 
methods, such as mitigation. For example, the contracting officer may 
require a mitigation plan and elect to accept the remaining risk if the 
contracting officer determines that the mitigation plan does not remove 
all of the performance risk associated with the organizational conflict 
of interest.


3.1206   Waiver.

    (a) Authority. (1) The agency head may waive--
    (i) The requirement to address an organizational conflict of 
interest in a particular acquisition if methods of addressing the 
organizational conflict of interest are not adequate or feasible (e.g., 
the agency cannot assess the remaining risk as acceptable because the 
organizational conflict of interest involves an unfair competitive 
advantage); or
    (ii) A preexisting limitation on future contracting.
    (2) The agency head shall not delegate this waiver authority below 
the head of the contracting activity.
    (b) Requirements. (1) All waivers shall--
    (i) Be in writing;
    (ii) Not include a class of contracts;
    (iii) Describe the extent of the organizational conflict of 
interest;
    (iv) Explain why other methods of addressing the organizational 
conflict of interest are not feasible or not adequate; and
    (v) Explain why the waiver is in the Government's interest.
    (2) The contracting officer shall include the waiver documentation 
in the contract file.


3.1207   Contracting officer responsibilities.


3.1207-1   General.

    (a) The contracting officer shall--
    (1) Identify as early as possible in the acquisition process 
whether the facts of an acquisition may result in an organizational 
conflict of interest;
    (2) Analyze the financial and other interests of the offerors and 
their affiliates to determine whether an organizational conflict of 
interest exists (see 3.1207-3(a));

[[Page 4388]]

    (3) Determine whether an organizational conflict of interest exists 
and whether the organizational conflict of interest can be adequately 
addressed; and
    (4) Address any such organizational conflicts of interest, giving 
proper consideration to decisions of a prior contracting officer when 
such decisions are known.
    (b) Contracting officers should obtain the assistance of the 
program office, appropriate technical specialists, and legal counsel in 
carrying out the responsibilities of this subpart.
    (c) Contracting officers are encouraged to consult with potential 
offerors early in the process (see 3.1207-2(b)).
    (d) The contracting officer shall identify, analyze, and address 
organizational conflicts of interest throughout all phases of the 
acquisition as required in this subpart.


3.1207-2   Identification of organizational conflicts of interest.

    (a)(1) The contracting officer shall review the nature of the work 
to be performed to decide whether performance by a contractor is likely 
to result in an organizational conflict of interest. In addition to 
evaluating the nature of the work to be performed on the current 
contract, the contracting officer should also consider whether 
performance of the current contract is likely to cause the contractor 
to have an organizational conflict of interest in an anticipated future 
contract.
    (2) During acquisition planning (see 7.105(b)(18)), the contracting 
officer shall ask the relevant contracting activity and requiring 
activity (as appropriate) to examine whether any potential offerors may 
have had unequal access to information relevant to the acquisition that 
could provide an unfair competitive advantage (see 3.1204(b)(2)).
    (3) The contracting officer shall identify specific contractor 
client and industry relationships (e.g., named organization, named 
industry) that may present a conflict with the work to be performed, 
especially when the contractor will be providing advisory and 
assistance services to the agency, or when the work will involve 
supporting policymaking or adjudicatory functions, assisting with 
regulatory enforcement and compliance, or performing work related to 
national security or foreign policy matters. See 3.1204(a) for examples 
of relationships that may present impaired objectivity. The contracting 
officer should use the fill-ins at paragraphs (c)(1)(ii) of the 
provision at 52.203-XX, Potential Organizational Conflict of Interest--
Disclosure and Representation, and at paragraph (b)(1)(iii) of the 
clause at 52.203-DD, Postaward Disclosure of Organizational Conflict of 
Interest, to identify these contractor relationships and require 
offerors to disclose them for review and decision by the agency.
    (b) When initially announcing an acquisition, the contracting 
officer shall ask potential offerors if they had unequal access to any 
information relevant to the acquisition that could provide an unfair 
competitive advantage as described in 3.1204(b)(2).
    (1) For contract actions, this inquiry should be included in the 
sources sought notification or the presolicitation notice.
    (2) For orders placed against multiple-award contracts, blanket 
purchase agreements, or basic ordering agreements, this inquiry shall 
be included in the first announcement to contract holders regarding the 
order.
    (3) For Federal Supply Schedule orders, this inquiry shall also be 
included in the request for quotations.
    (c) If the contracting officer decides that contractor performance 
of the contemplated work is likely to result in an organizational 
conflict of interest, the contracting officer should consult with the 
program office or requiring activity to determine whether avoidance 
could be used (see 3.1205-1).
    (d) Efforts supporting the development of a solicitation that could 
create an organizational conflict of interest include assistance in 
preparation of the statement of work or other requirements or the 
development of cost or budget estimates. If avoiding organizational 
conflicts of interest is not feasible during the development of the 
requirement, the contracting officer shall--
    (1) Require the program office or requiring activity to identify 
any contractors that participated in acquisition planning, including 
development of the solicitation, that do not have a preexisting 
limitation on future contracting; and
    (2) Review the nature and scope of the work performed to determine 
whether there was adequate mitigation before listing a contractor at 
paragraph (b)(3) of 52.203-XX, Potential Organizational Conflict of 
Interest--Disclosure and Representation, in accordance with 3.1205-
1(c).
    (e)(1) Contracting officers shall identify, to the extent known, 
any contractors prohibited from competing as a prime contractor or a 
subcontractor due to an applicable preexisting limitation on future 
contracting. See 52.203-XX.
    (2) To identify applicable preexisting limitations on future 
contracting, the contracting officer may contact the program office and 
examine prior acquisition history.
    (f) If the contracting officer has not identified the likelihood of 
an organizational conflict of interest in accordance with this section, 
the contracting officer shall document the contract file.


3.1207-3   Analyzing organizational conflicts of interest.

    (a) Sources of information--(1) Information from offerors. (i) 
Contracting officers shall use information provided in response to 
52.203-XX to determine whether an offeror's financial or other 
interests could result in an organizational conflict of interest. In 
the absence of conflicting information, the contracting officer may 
rely on the information provided by an offeror.
    (ii) Contracting officers may request additional information from 
an offeror or obtain information from other sources, if there is reason 
to believe that the offeror omitted relevant financial or other 
interests from its disclosure.
    (2) Other sources of information--(i) Governmental sources. 
Governmental sources include, but are not limited to, the files and the 
knowledge of personnel within--
    (A) The contracting office;
    (B) Other contracting offices;
    (C) The cognizant contract administration, finance, and audit 
activities; and
    (D) The requiring activity.
    (ii) Nongovernmental sources. Nongovernmental sources include, but 
are not limited to--
    (A) Offeror's websites;
    (B) Trade and financial journals;
    (C) Business directories and registers; and
    (D) Annual corporate shareholder reports.
    (b) Factors to consider. When analyzing the nature and scope of any 
organizational conflicts of interest and the associated risks that may 
arise during contract performance and considering how best to address 
any such organizational conflicts of interest, the contracting officer 
should weigh at least the following factors:
    (1) The extent to which the contract requires the contractor to 
exercise subjective judgment and provide advice.
    (2) The extent and severity of the expected impact of the 
organizational conflict of interest (e.g., whether it is expected to 
occur only once or twice during performance or to impact performance 
throughout the entire contract).

[[Page 4389]]

    (3) The extent to which the agency has effective oversight controls 
to prevent an organizational conflict of interest from influencing the 
contractor's actions during contract performance (e.g., postaward 
monitoring plans).
    (4) Whether the organizational conflict of interest involves a risk 
to the integrity of the competitive process (see 3.1204(b)).
    (5) The extent that the risk can be effectively mitigated through 
the offeror's proposed mitigation plan.
    (6) The degree to which any impairment of the contractor's 
objectivity may impact the agency mission or reduce the value of its 
services to the agency, and the agency's willingness to accept the 
performance risk of that impairment. For instance, the performance risk 
of awarding to a contractor with significant financial ties to or other 
interests in that same industry could be significant and jeopardize the 
mission (see examples at 3.1204(a)(4) through (6)). In another example 
(see 3.1204(a)(9)), an agency involved in addressing certain foreign 
issues may have significant performance risk awarding to a contractor 
that also provides advice or assistance to certain foreign entities on 
the same or similar issues. Significant performance risks such as these 
may not be acceptable to the agency, regardless of mitigation measures 
proposed.
    (7) Whether the offeror or contractor is required to adhere to 
certain professional standards or has internal operating procedures 
intended to prevent conflicts of interest. Contracting officers may 
consider how professional standards or the contractor's operating 
procedures will prevent or address organizational conflicts of interest 
during contract performance. However, an offeror or contractor having 
professional standards or procedures in place related to organizational 
conflicts of interest is not, by itself, a mitigation strategy.
    (c) Unequal access to information. If the contracting officer is 
aware that one or more offerors had unequal access to information 
relevant to the acquisition, the contracting officer shall--
    (1) Address the situation if access to the information could 
provide any offeror with an unfair competitive advantage (see 3.1203 
and 3.1204(b)(2)); or
    (2) Document the file, if the contracting officer does not need to 
address the situation.


3.1207-4   Addressing organizational conflicts of interest.

    (a) General. (1) Consistent with 3.1207-3(a), the contracting 
officer should consider relevant information regarding an offeror's 
financial or other interests in determining how to address any 
organizational conflicts of interest (see 3.1205). When determining 
what method or methods of addressing the organizational conflict of 
interest will be appropriate, contracting officers shall consider the 
specific facts and circumstances of the contracting situation and the 
nature and potential extent of the risks associated with an 
organizational conflict of interest.
    (2)(i) When organizational conflict of interest is not an 
evaluation factor (see 15.304) in a competitive solicitation, exchanges 
between the Government and an offeror regarding the offeror's 
mitigation plan or limitation on future contracting are not considered 
discussions.
    (ii) If the exchanges (see 15.306) result in a change to other 
parts of an offeror's technical proposal or cost proposal, the 
contracting officer shall either--
    (A) Open discussions;
    (B) Reopen discussions; or
    (C) Eliminate the offeror from further consideration.
    (iii) The contracting officer should conduct these exchanges as 
early as possible in the acquisition process so major changes to a 
mitigation plan that significantly affect proposed performance can be 
evaluated; e.g., having a member of a contractor team arrangement that 
is free of an organizational conflict of interest perform the portion 
of the work that involves an organizational conflict of interest.
    (3) Use of a firewall may address an unfair competitive advantage 
resulting from unequal access to information. If no firewall was 
previously required, or an existing firewall was breached, and the 
offeror has already received an unfair competitive advantage, the 
contracting officer should explore other methods such as information 
sharing or a combination of methods.
    (b) Avoidance by disqualifying offerors. Contracting officers shall 
refer to the standards for determining when disqualification of an 
offeror from participation in a competition is appropriate (see 3.1205-
1(c)).
    (1) Unfair competitive advantage. (i) Consistent with 3.1205-1(c), 
disqualification of an offeror from participation in a contract award 
is appropriate where there is a risk to the integrity of the 
competitive process. These organizational conflicts of interest involve 
the contractor or its affiliates' prior work on a Government contract 
that places it in a position to influence the acquisition when a 
limitation on future contracting was not included in the prior 
contract.
    (ii) The contracting officer shall disqualify the offeror or 
potential offeror from consideration for the contract if the 
contracting officer determines that--
    (A) Evidence exists that an offeror or potential offeror had an 
unfair competitive advantage in accordance with 3.1204(b)(2); and
    (B) No mitigation strategy will protect the integrity of the 
competition.
    (2) Impaired objectivity. Consistent with 3.1205-1(c)(3), when an 
organizational conflict of interest presents a risk to the Government's 
interests, the contracting officer shall prepare a written 
determination that less restrictive techniques for addressing the 
organizational conflict of interest will not adequately protect the 
Government's interests before disqualifying an offeror. The contracting 
officer determination may require approval by a higher authority in 
accordance with agency procedures.
    (c) Limitation on future contracting. (1) Contracting officers 
shall include a limitation on future contracting, when the contemplated 
work requires the contractor to exercise subjective judgment and 
provide advice, if the advice may create an unfair competitive 
advantage or result in impaired objectivity by virtue of the 
contractor's expectation of future work (see 3.1205-2 and 3.1208(d)).
    (2)(i) An offeror that is subject to a preexisting limitation on 
future contracting as an affiliate can request the agency waive the 
limitation in accordance with section 3.1206. If the contracting 
officer determines that the offeror's request has merit, the 
contracting officer shall process the waiver request.
    (ii) In determining whether to process a waiver to remove an 
affiliate from an existing future limitation on contracting, the 
contracting officer should analyze the nature of the relationship 
between the entities to determine whether the risk associated with the 
organizational conflict of interest should preclude the affiliate from 
competing. This analysis may include but is not limited to--
    (A) Controls put in place, either as the result of other Government 
contracts or the offeror's own initiative;
    (B) The financial relationships, or lack thereof, between the two 
entities;
    (C) The information sharing framework, or barriers to information 
sharing, between the two entities;

[[Page 4390]]

    (D) The work performed by the two entities, and whether there is 
overlap in the areas in which they work; and
    (E) The general corporate and control structure between the two 
entities.
    (iii) The contracting officer may also use this analysis with 
regard to affiliates' participation in situations in which a future 
limitation on contracting should have been included in the earlier 
contract.
    (d) Mitigation--(1) General. Consistent with 3.1205-3, when the 
acquisition involves offeror-submitted mitigation plans, the 
contracting officer shall analyze the feasibility of mitigation of the 
organizational conflict of interest, including the expected 
effectiveness of the proposed mitigation plan and the Government's 
ability to review implementation of the provisions of the plan.
    (2) Mitigation to avoid an affiliate's organizational conflicts of 
interest on future contracts. Contracting officers may negotiate a 
mitigation plan, which requires the contractor and its affiliates to 
implement structural or behavioral barriers, internal controls, or a 
combination of methods.
    (i) This technique is intended to provide a basis for the 
contracting officer of the future contract to determine whether the 
organizational conflict of interest has been effectively mitigated with 
regard to the affiliate on the future contract. Therefore, the 
contracting officer for the current contract shall document the file 
regarding how the mitigation plan is intended to address any 
organizational conflict of interest such that the affiliate may compete 
for a future contract.
    (ii) The contracting officer of the future contract shall consider 
the decisions of the contracting officer for the earlier contract when 
determining whether the risk associated with the organizational 
conflict of interest has been effectively reduced or eliminated. This 
analysis may include the factors in 3.1207-4(c)(2)(ii). If the 
contracting officer determines that the earlier mitigation measures are 
sufficient to allow the affiliate to participate, then the contracting 
officer shall prepare a written determination. The contracting officer 
determination may require approval by a higher authority in accordance 
with agency procedures.
    (iii) This technique is only available for an affiliate.
    (3) Mitigation to avoid unfair competitive advantage resulting from 
unequal access to information--(i) Information sharing. Contracting 
officers may use information sharing to avoid an unfair competitive 
advantage, which results from unequal access to information. 
Information sharing consists of disseminating the information in 
question to all potential offerors, either in the solicitation, in a 
solicitation amendment, or through some other method, such as posting 
it online. When using this technique, contracting officers shall--
    (A) Obtain permission to disseminate information that belongs to a 
third party; and
    (B) Provide such information to potential offerors early enough in 
the acquisition process to allow those offerors to effectively utilize 
the information.
    (ii) Use of a firewall. When some of an offeror's employees or an 
affiliate had access to the relevant information, the contracting 
officer may consider the use of a firewall to prevent those employees 
from sharing that information with employees involved in the 
competition.
    (A) The contracting officer has discretion to approve or reject an 
offeror's proposed firewall.
    (B) If an offeror's proposal includes use of a preexisting firewall 
as mitigation, the contracting officer shall require the offeror to--
    (1) Provide a representation that, to the best of its knowledge and 
belief, there were no breaches of the firewall during preparation of 
the proposal; or
    (2) Explain any breach that occurred (provided in paragraph (b) at 
52.203-AA, Unequal Access to Information-Representation).
    (iii) Safeguarding of proprietary information. When a contractor 
gains access to proprietary information of another entity as a result 
of its performance on a Government contract, the contracting officer 
shall require the contractor to execute nondisclosure agreements with 
each affected entity. Each nondisclosure agreement shall--
    (A) Provide protection for each entity's information from 
unauthorized use or disclosure for as long as it remains proprietary;
    (B) Prevent the use of such information for any purpose other than 
that for which it was furnished; and
    (C) Be submitted to the contracting officer for inclusion in the 
contract file.
    (4) Mitigation to avoid impaired objectivity through use of a 
firewall. When impaired objectivity may result in significant 
performance risk to the agency (see 3.1207-3(b)(6)), contracting 
officers should not accept use of a firewall as a contractor or its 
affiliate's sole mitigation strategy. Contracting officers should 
consider combining additional methods to adequately address the 
organizational conflict of interest.
    (5) Mitigation plans. If the contracting officer approves any 
changes to the mitigation plan after award, the contracting officer 
shall incorporate the revised plan into the contract (see 52.203-
MM(c)).
    (e) Assessment that the risk is acceptable. (1) If the contracting 
officer determines that the performance risk resulting from impaired 
objectivity is acceptable, the contracting officer shall document the 
file to--
    (i) Describe the extent of the organizational conflict of interest;
    (ii) Explain how it meets the conditions of 3.1205-4; and
    (iii) Discuss the reasons it is in the best interest of the 
Government to accept the risk associated with the organizational 
conflict of interest.
    (2) If the contracting officer identifies a performance risk 
associated with an organizational conflict of interest but cannot make 
a determination consistent with 3.1205-4, the head of the agency may 
waive the requirement to address the conflict of interest in accordance 
with 3.1206, prior to contract award.


3.1207-5   Award requirements.

    (a) Except as provided in 3.1207-6(a), the contracting officer 
shall award the contract to the apparent successful offeror after all 
organizational conflicts of interest have been addressed or the 
requirement to address the organizational conflict of interest has been 
waived in writing in accordance with 3.1206.
    (b) Before withholding award from the apparent successful offeror 
based on organizational conflict of interest considerations, the 
contracting officer shall--
    (1) Notify the offeror in writing;
    (2) Provide the reasons for withholding award; and
    (3) Allow the offeror a reasonable opportunity to respond.


3.1207-6  Task-order or delivery-order contracts, blanket purchase 
agreements, basic ordering agreements, and interagency acquisitions.

    (a) Task-order or delivery-order contracts, blanket purchase 
agreements, or basic ordering agreements. The contracting officer shall 
make a reasonable attempt to identify all organizational conflicts of 
interest prior to award of the task-order or delivery-order contract or 
establishment of the blanket purchase agreement or basic ordering 
agreement. The contracting officer shall address the organizational 
conflict of interest in the base contract or agreement, to the extent 
that an organizational conflict of interest can be identified prior to 
award, using the tools discussed at 3.1205.

[[Page 4391]]

    (b) Issuance of task or delivery orders or orders under a blanket 
purchase agreement or basic ordering agreement. Before placing an 
order, the contracting officer shall--
    (1) Consider whether the work involved has a potential for an 
organizational conflict of interest, consistent with the requirements 
in 3.1207-1 through 3.1207-5;
    (2) Supplement, in the order, the procedures for addressing an 
organizational conflict of interest in the task-order or delivery-order 
contract, blanket purchase agreement, or basic ordering agreement, as 
necessary, to reflect the nature and scope of the order being placed;
    (3) Address organizational conflicts of interest or obtain a 
waiver; and
    (4) For orders expected to exceed the simplified acquisition 
threshold, include terms substantially the same as those found in the 
provision at 52.203-AA in the--
    (i) Notice of fair opportunity under a multiple-award contract (see 
16.505(b)(1)(iii)(B));
    (ii) Request for quotation provided under a multiple-award blanket 
purchase agreement (see 8.405-3(c)(2)(iii); or
    (iii) Order under a basic ordering agreement (see 16.703(d)).
    (c) Interagency acquisitions. (1) If the order is placed as a 
direct acquisition (see 17.502-1), the contracting officer for the 
requesting agency is responsible for addressing organizational 
conflicts of interest associated with the order.
    (2) If an agency acquires supplies or services by means of an 
assisted acquisition, the servicing agency and requesting agency shall 
identify which agency is responsible for the actions identified in 
3.1207 and reflect this understanding in the interagency agreement.


3.1208   Solicitation provisions and contract clauses.

    (a)(1) If the contracting officer has identified the likelihood of 
an organization conflict of interest (see 3.1207-2), include in 
solicitations exceeding the simplified acquisition threshold, except 
for solicitations for commercial products, a provision substantially 
the same as 52.203-XX, Potential Organizational Conflict of Interest--
Disclosure and Representation.
    (2) The contracting officer shall fill in paragraph (b)(2) of the 
provision as instructed in the provision to identify contractors who 
have a known preexisting limitation on future contracting and that 
preexisting limitation has not been waived.
    (3) The contracting officer shall fill in paragraph (b)(3) of the 
provision, if any contractors have been identified as having 
participated in the development of the solicitation (see 3.1207-2(d)), 
and do not have a preexisting limitation on future contracting, but 
have been disqualified from the competition.
    (4) The contracting officer shall fill in paragraph (c)(1)(ii)(B) 
of the provision if the contracting officer has identified specific 
contractor client and industry relationships that may present a 
conflict with the work to be performed.
    (b)(1) Include in solicitations and contracts a clause 
substantially the same as 52.203-DD, Postaward Disclosure of 
Organizational Conflict of Interest, when the solicitation includes the 
provision at 52.203-XX, Potential Organizational Conflict of Interest--
Disclosure and Representation.
    (2) The contracting officer shall fill in paragraph (b)(1)(iii) of 
the clause if the contracting officer has identified specific 
contractor client and industry relationships that may present a 
conflict of interest.
    (c)(1) Include in solicitations exceeding the simplified 
acquisition threshold, except for solicitations for commercial 
products, a clause that is substantially the same as 52.203-MM, 
Mitigation of Organizational Conflicts of Interest, when the resulting 
contract may involve an organizational conflict of interest that can be 
addressed by an acceptable offeror-submitted mitigation plan prior to 
contract award.
    (2) Include in the resulting contract a clause that is 
substantially the same as 52.203-MM, Mitigation of Organizational 
Conflicts of Interest, only if the offeror submits an organizational 
conflict of interest mitigation plan that will be incorporated into the 
contract.
    (d)(1) Include in solicitations exceeding the simplified 
acquisition threshold, except for solicitations for commercial 
products, a clause that is substantially the same as 52.203-LL, 
Limitation on Future Contracting, when the contracting officer expects 
that the method of addressing the organizational conflict of interest 
will involve a limitation on future contracting (see 3.1207-4(c)).
    (i) The contracting officer shall establish a duration sufficient 
to neutralize the projected organizational conflict of interest, but no 
longer than necessary (see 3.1205-2(b)).
    (ii) Prior to contract award, the contracting officer shall fill in 
the nature and duration of the limitation on future contracting or 
contractor activities in paragraph (a) of the clause for incorporation 
into the contract, based on communications with the apparent successful 
offeror.
    (2) Include in the resulting contract a clause that is 
substantially the same as 52.203-LL, Limitation on Future Contracting, 
when a limitation on future contracting is used to address an 
organizational conflict of interest.
    (e) Include in solicitations that exceed the simplified acquisition 
threshold, except for solicitations for commercial products, a 
provision that is substantially the same as 52.203-AA, Unequal Access 
to Information--Representation.

PART 7--ACQUISITION PLANNING

0
8. Amend section 7.105 by--
0
a. Redesignating paragraphs (b)(18) through (b)(22) as paragraphs 
(b)(19) through (b)(23); and
0
b. Adding a new paragraph (b)(18).
    The addition reads as follows:


7.105  Contents of written acquisition plans.

* * * * *
    (b) * * *
    (18) Organizational conflicts of interest. (i) Discuss the 
potential for organizational conflicts of interest (see 2.101 and 
3.1207-2) that may--
    (A) Exist at time of contract award;
    (B) Occur during contract performance; or
    (C) Occur in a future acquisition.
    (ii) Discuss the proposed method or methods of addressing these 
organizational conflicts of interest. Also address unequal access to 
information (see 3.1207-2 through 3.1207-4). Identify any solicitation 
provisions and contract clauses that would be used.
* * * * *

PART 8--REQUIRED SOURCES OF SUPPLIES AND SERVICES

0
9. Amend section 8.404 by--
0
a. Removing from the end of paragraph (c)(2) ``and'';
0
b. Redesignating paragraph (c)(3) as paragraph (c)(4);
0
c. Adding a new paragraph (c)(3); and
0
d. Removing from newly redesignated paragraph (c)(4) ``Must'' and 
adding ``Shall'' in its place.
    The addition reads as follows:


8.404  Use of Federal Supply Schedules.

* * * * *
    (c) * * *
    (3) Shall comply with the requirements on organizational conflicts 
of interest (see subpart 3.12); and
* * * * *
0
10. Amend section 8.405-1 by--
0
a. Redesignating paragraphs (d)(3) and (4) as paragraphs (d)(4) and (5) 
respectively; and

[[Page 4392]]

0
b. Adding a new paragraph (d)(3).
    The addition reads as follows:


8.405-1  Ordering procedures for supplies, and services not requiring a 
statement of work.

* * * * *
    (d) * * *
    (3) When ordering services, the ordering activity contracting 
officer shall require schedule contractors planning on submitting a 
quote to disclose if they had unequal access to any information 
relevant to the acquisition that could provide an unfair competitive 
advantage (see 3.1207-2(b)).
* * * * *
0
11. Amend section 8.405-2 by revising paragraph (c)(3)(ii) to read as 
follows:


8.405-2  Ordering procedures for services requiring a statement of 
work.

* * * * *
    (c) * * *
    (3) * * *
    (ii) The ordering activity contracting officer shall provide an RFQ 
that includes a statement of work, the evaluation criteria, and a 
request that schedule contractors planning on submitting a quote 
indicate as early as possible whether they had unequal access to any 
information relevant to the acquisition that could provide an unfair 
competitive advantage (see 3.1207-2(b)).
* * * * *

PART 9--CONTRACTOR QUALIFICATIONS

0
12. Revise section 9.000 to read as follows:


9.000   Scope of part.

    This part prescribes policies, standards, and procedures pertaining 
to prospective contractors' responsibility; debarment, suspension, and 
ineligibility; qualified products; first article testing and approval; 
contractor team arrangements; and defense production pools and research 
and development pools.

Subpart 9.5 [Removed and Reserved]

0
13. Remove and reserve subpart 9.5.


9.601   [Removed and Reserved]

0
14. Remove and reserve section 9.601.

PART 10--MARKET RESEARCH

0
15. Amend section 10.001 by--
0
a. Removing from paragraph (a)(3)(viii) ``and'';
0
b. Removing the period from the end of paragraph (a)(3)(ix) and adding 
``; and'' in its place; and
0
c. Adding paragraph (a)(3)(x).
    The addition reads as follows:


10.001  Policy.

    (a) * * *
    (3) * * *
    (x) Determine if potential offerors had unequal access to any 
information relevant to the acquisition that could provide an unfair 
competitive advantage (see 3.1207-2(b)).
* * * * *

PART 11--DESCRIBING AGENCY NEEDS


11.002   [Amended]

0
16. Amend section 11.002 by removing from paragraph (c) ``subpart 9.5'' 
and adding ``subpart 3.12'' in its place.

PART 12--ACQUISITION OF COMMERCIAL PRODUCTS AND COMMERCIAL SERVICES

0
17. Amend section 12.301 by--
0
a. Redesignating paragraphs (d)(1) through (d)(14) as paragraphs (d)(3) 
through (d)(16); and
0
b. Adding new paragraphs (d)(1) and (2).
    The additions read as follows:


12.301  Solicitation provisions and contract clauses for the 
acquisition of commercial products and commercial services.

    (d) * * *
    (1) Insert a provision substantially the same as 52.203-XX, 
Potential Organizational Conflict of Interest--Disclosure and 
Representation, as prescribed in 3.1208(a).
    (2) Insert a provision substantially the same as 52.203-AA, Unequal 
Access to Information--Representation, as prescribed in 3.1208(e).
* * * * *
0
18. Amend section 12.504 by adding paragraph (a)(3) to read as follows:


12.504  Applicability of certain laws to subcontracts for the 
acquisition of commercial products and commercial services.

    (a) * * *
    (3) 41 U.S.C. 2303 note, Preventing Organizational Conflicts of 
Interest in Federal Acquisition (Pub. L. 117-324) (see 52.203-XX, 
52.203-DD, 52.203-MM, 52.203-LL, and 52.203-AA).
* * * * *
0
19. Amend section 12.505 by adding paragraph (d) to read as follows:


12.505  Applicability of certain laws to contracts for the acquisition 
of COTS items.

* * * * *
    (d) 41 U.S.C. 2303 note, Preventing Organizational Conflicts of 
Interest in Federal Acquisition (Pub. L. 117-324) (see 52.203-XX, 
52.203-DD, 52.203-MM, 52.203-LL, and 52.203-AA).

PART 13--SIMPLIFIED ACQUISITION PROCEDURES

0
20. Amend section 13.005 by redesignating paragraph (a)(7) as paragraph 
(a)(8) and adding new paragraph (a)(7) to read as follows:


13.005  List of laws inapplicable to contracts and subcontracts at or 
below the simplified acquisition threshold.

    (a) * * *
    (7) 41 U.S.C. 2303 note, Preventing Organizational Conflicts of 
Interest in Federal Acquisition (Pub. L. 117-324) (see 52.203-XX, 
52.203-DD, 52.203-MM, 52.203-LL, and 52.203-AA).
* * * * *

PART 15--CONTRACTING BY NEGOTIATION


15.206   [Amended]

0
21. Amend section 15.206 by removing from paragraph (d) introductory 
text ``15.306(e)'' and adding ``15.306(f)'' in its place.
0
22. Amend section 15.306 by--
0
a. Removing from paragraph (d)(3) the phrase ``and (e)'' and adding 
``and (f)'' in its place;
0
b. Redesignating paragraph (e) as paragraph (f); and
0
c. Adding a new paragraph (e).
    The addition reads as follows:


15.306  Exchanges with offerors after receipt of proposals.

* * * * *
    (e) Exchanges with offerors to address organizational conflicts of 
interest. Exchanges between the Government and an offeror regarding an 
offeror's mitigation plan or limitation on future contracting do not 
constitute discussions as long as--
    (1) The organizational conflict of interest is not an evaluation 
factor; and
    (2) The exchanges did not result in a change to other parts of the 
offeror's technical or cost proposal (see 3.1207-4(a)(2)).
* * * * *


15.604   [Amended]

0
23. Amend section 15.604 in paragraph (a)(2) by removing ``subpart 
9.5'' and adding ``subpart 3.12'' in its place.

PART 16--TYPES OF CONTRACTS

0
24. Amend section 16.505 by--
0
a. Removing from the end of paragraph (b)(1)(iii)(B)(1) ``and'';
0
b. Redesignating paragraph (b)(1)(iii)(B)(2) as paragraph 
(b)(1)(iii)(B)(3); and

[[Page 4393]]

0
c. Adding new paragraph (b)(1)(iii)(B)(2).
    The addition reads as follows:


16.505  Ordering.

* * * * *
    (b) * * *
    (1) * * *
    (iii) * * *
    (B) * * *
    (2) If appropriate, follow the procedures for addressing unequal 
access to information (see 3.1207-6); and
* * * * *

PART 17--SPECIAL CONTRACTING METHODS


17.605   [Amended]

0
25. Amend section 17.605 by removing from the third sentence in 
paragraph (a) ``adequately covered'' and adding ``addressed'' in its 
place.

PART 18--EMERGENCY ACQUISITIONS


18.000   [Amended]

0
26. Amend section 18.000 by removing from paragraph (b) ``FAR Part 3, 
Improper Business Practices and Personal Conflicts of Interest'' and 
adding ``part 3'' in its place.

PART 37--SERVICE CONTRACTING


37.102   [Amended]

0
27. Amend section 37.102 in paragraph (g) by adding (see subparts 3.11 
and 3.12)'' after ``conflicts of interest''.


37.110   [Amended]

0
28. Amend section 37.110 by removing paragraph (d) and redesignating 
paragraph (e) as paragraph (d).

PART 42--CONTRACT ADMINISTRATION AND AUDIT SERVICES

0
29. Amend section 42.1204 by revising paragraph (d) to read as follows:


42.1204   Applicability of novation agreements.

* * * * *
    (d) When considering whether to recognize a third party as a 
successor in interest to Government contracts, the responsible 
contracting officer shall identify, analyze, and address any 
organizational conflicts of interest in accordance with subpart 3.12. 
If the responsible contracting officer determines that an 
organizational conflict of interest cannot be addressed in accordance 
with 3.1207-4, but that it is in the best interest of the Government to 
approve the novation request, a request for a waiver may be submitted 
in accordance with the procedures at 3.1206.
* * * * *

PART 50--EXTRAORDINARY CONTRACTUAL ACTIONS AND THE SAFETY ACT


50.205-1   [Amended]

0
30. Amend section 50.205-1 by removing from paragraph (b) 
``7.105(b)(20)(v)'' and adding ``7.105(b)(21)(v)'' in its place.

PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

0
31. Add sections 52.203-XX, 52.203-DD, 52.203-LL, 52.203-MM, and 
52.203-AA to read as follows:


52.203-XX   Potential Organizational Conflict of Interest--Disclosure 
and Representation.

    As prescribed in 3.1208(a), insert a provision substantially the 
same as the following:

Potential Organizational Conflict of Interest--Disclosure and 
Representation (Date)

    (a) Definition. ``Organizational conflict of interest,'' as used 
in this provision, is defined in Federal Acquisition Regulation 
(FAR) clause 52.203-DD, Postaward Disclosure of Organizational 
Conflict of Interest.
    (b) Notice. (1) The Contracting Officer has determined that the 
nature of the work to be performed under the contract resulting from 
this solicitation is such that it may result in organizational 
conflicts of interest (see FAR section 3.1204, Examples).
    (2) The following entities are disqualified from competing as a 
prime contractor or a subcontractor, due to an applicable 
preexisting limitation on future contracting (see FAR 3.1205-2):
    [Contracting Officer shall insert entity name(s), if 
applicable.]
    (3) The following entities do not have an applicable preexisting 
limitation on future contracting. However, they participated in the 
preparation of the statement of work or other requirements 
documents, including cost or budget estimates, or otherwise 
participated in development of the solicitation. These prior 
activities result in an organizational conflict of interest due to 
an unfair competitive advantage. As a result, the Contracting 
Officer has determined the following entities are disqualified from 
competing as a prime contractor or a subcontractor:
    [Contracting Officer shall insert entity name(s), if 
applicable.]
    (c) Proposal requirements--(1) Disclosure. The Offeror shall--
    (i) Describe any relevant limitations on future contracting, the 
term of which has not yet expired, to which the Offeror or potential 
subcontractor(s) agreed;
    (ii) Disclose all relevant information of which the Offeror is 
aware regarding past (within the past twelve months), present, or 
currently planned financial or other interests that could result in 
an organizational conflict of interest, including information about 
affiliates, clients, and potential subcontracts, except where such 
disclosure would constitute a violation of law (e.g., the Securities 
Exchange Act of 1934, 15 U.S.C. 78a et seq.). At a minimum, such 
disclosure must include--
    (A) The name of the client(s) and a description of the services 
rendered or planned to be rendered;
    (B) Specific client and industry relationships, if identified by 
the Contracting Officer, that may present a conflict with the work 
to be performed:
    [Contracting Officer shall insert entity name(s) and 
relationship(s), if applicable]; and
    (C) The nature and extent of the financial or other interest and 
any entity or entities involved in the relationship;
    (iii) Disclose information withheld pursuant to paragraph 
(c)(1)(ii) of this provision as soon as the law no longer prohibits 
disclosure; and
    (iv) Describe any professional standards to which the Offeror is 
subject, or any procedures the Offeror has in place, to prevent 
organizational conflicts of interest.
    (2) Representation. The Offeror represents, by submission of its 
offer, that to the best of its knowledge and belief it has disclosed 
all relevant information of which the Offeror is aware regarding any 
organizational conflicts of interest as required in paragraph (c)(1) 
of this provision.
    (3) To the extent that either the Offeror or the Government 
identifies any financial or other interests that could result in an 
organizational conflict of interest on the contract resulting from 
this solicitation, the Offeror shall explain the actions it intends 
to take to address such organizational conflicts of interest, e.g., 
by submitting a mitigation plan and/or accepting a limitation on 
future contracting. The Offeror shall include information on planned 
flowdown to subcontracts of clauses 52.203-MM, Mitigation of 
Organizational Conflicts of Interest, or 52.203-LL, Limitation on 
Future Contracting.
    (4) The Contracting Officer will determine whether an 
organizational conflict of interest exists and whether the 
organizational conflict of interest has been adequately addressed. 
The Contracting Officer may withhold award if an organizational 
conflict of interest cannot be adequately addressed.
    (d) Disclosure update. The Offeror shall make a full disclosure 
in writing to the Contracting Officer within 5 days, if the Offeror 
identifies, after receipt of proposals but before contract award--
    (1) Financial or other interests that could result in an 
organizational conflict of interest that was not previously 
disclosed in its proposal in accordance with paragraph (c) of this 
provision; or
    (2) A change to any relevant facts relating to a previously 
disclosed organizational conflict of interest.
    (e) Resulting contract. (1) If the Offeror submits a mitigation 
plan, the Contracting

[[Page 4394]]

Officer will include the Government-approved mitigation plan and a 
clause substantially the same as 52.203-MM, Mitigation of 
Organizational Conflicts of Interest, in the contract resulting from 
this solicitation.
    (2) If a limitation on future contracting is used, the 
Contracting Officer will include a clause substantially the same as 
52.203-LL, Limitation on Future Contracting in the resultant 
contract.


(End of provision)


52.203-DD   Postaward Disclosure of Organizational Conflict of 
Interest.

    As prescribed in 3.1208(b), insert the following clause:

Postaward Disclosure of Organizational Conflict of Interest (Date)

    (a) Definition. ``Organizational conflict of interest,'' as used 
in this clause, means that an entity or its affiliate(s) has 
impaired objectivity or an unfair competitive advantage as a result 
of other activities or relationships with other entities or their 
affiliates, including with public, private, domestic, and foreign 
entities. An entity or its affiliate may have an unfair competitive 
advantage as a result of biased ground rules or through unequal 
access to information. As used in this definition--
    (1) ``Biased ground rules'' means a situation in which an entity 
or its affiliate, as part of its performance of a Government 
contract, has or may have materially influenced the development of 
the requirement, evaluation criteria, or other source selection 
procedures for another Government contract. The primary concern is 
that the entity could skew the future competition, whether 
intentionally or not, in favor of itself;
    (2) ``Entity'' means an individual, corporation, or other 
organization;
    (3) ``Impaired objectivity'' means a situation in which an 
entity or its affiliate has or may have financial or other interests 
or an incentive to provide other than impartial advice to the 
Government, or the entity or its affiliate's objectivity in 
performing the contract work is or might be otherwise impaired; and
    (4) ``Unequal access to information'' means a situation in which 
an entity or its affiliate has or may have an unfair competitive 
advantage because--
    (i) Access to the information was provided to the entity or its 
affiliate by the Government. Such information may include 
proprietary and source selection information, e.g., proposals, 
financial information;
    (ii) The information is not available to all potential offerors; 
and
    (iii) Having access to the information would assist the entity 
in obtaining the contract.
    (b) Disclosures. (1) Except as provided in paragraph (b)(3) of 
this clause, the Contractor shall provide the Contracting Officer a 
full disclosure in writing within 5 days if the Contractor 
identifies--
    (i) Financial or other interests that could result in an 
organizational conflict of interest that was not previously 
addressed and for which a waiver has not been granted;
    (ii) A change to any relevant facts relating to a previously 
identified organizational conflict of interest; or
    (iii) Specific client and industry relationships, if identified 
by the Contracting Officer, that may present a conflict with the 
work to be performed:
    [Contracting Officer shall insert entity name(s), if 
applicable].
    (2) The Contractor shall disclose organizational conflicts of 
interest identified during performance of the contract, as well as 
newly discovered organizational conflicts of interest that existed 
before contract award. This disclosure shall include a description 
of--
    (i) The organizational conflict(s) of interest in sufficient 
detail for agency evaluation; and
    (ii) Actions to address the organizational conflict(s) of 
interest that--
    (A) The Contractor has taken or proposes to take; or
    (B) The Contractor recommends that the Government take.
    (3) Where such disclosure would constitute a violation of law 
(e.g., the Securities Exchange Act of 1934, 15 U.S.C. 78a et seq.), 
the Contractor shall withhold information only until the law no 
longer prohibits disclosure.
    (c) Termination. If, in compliance with this clause, the 
Contractor reports financial or other interests that the Contracting 
Officer identifies as an organizational conflict of interest that 
cannot be addressed in a manner acceptable to the Government, the 
Contracting Officer may terminate the contract, one or more orders, 
the blanket purchase agreement, or the basic ordering agreement.
    (d) Subcontracts. The Contractor shall include the substance of 
this clause, including this paragraph (d), in subcontracts exceeding 
the simplified acquisition threshold where the work includes or may 
include tasks that may result in an organizational conflict of 
interest, other than subcontracts for commercial products, 
commercial services, and commercially available off-the-shelf items. 
The Contractor shall modify the terms ``Contractor'' and 
``Contracting Officer'' appropriately to reflect the change in 
parties.


(End of clause)


52.203-MM   Mitigation of Organizational Conflicts of Interest.

    As prescribed in 3.1208(c), insert a clause substantially the same 
as the following:

Mitigation of Organizational Conflicts of Interest (Date)

    (a) Definition. ``Organizational conflict of interest,'' as used 
in this clause, is defined in the clause 52.203-DD, Postaward 
Disclosure of Organizational Conflict of Interest.
    (b) Mitigation plan. The Government-approved organizational 
conflict of interest mitigation plan (mitigation plan) and its 
obligations are hereby incorporated as an attachment to the 
contract. While implementation of a mitigation plan is the 
Contractor's responsibility, the Government retains the right to 
review implementation of the plan.
    (c) Changes. (1) Either the Contractor or the Government may 
propose changes to the mitigation plan. Such changes are subject to 
the mutual agreement of the parties and will become effective only 
upon written approval of the revised mitigation plan by the 
Contracting Officer and incorporation into the contract.
    (2) The Contractor shall propose an update to the mitigation 
plan within 30 days of--
    (i) Any changes to the legal construct of its organization, any 
subcontractor changes, or any significant management or ownership 
changes that impact the mitigation plan; or
    (ii) A change to the contract requirements that impacts the 
mitigation plan.
    (d) Noncompliance. (1) The Contractor shall report to the 
Contracting Officer any noncompliance with this clause or with the 
mitigation plan, whether by its own personnel, those of the 
Government, other contractors, or subcontractors.
    (2) The report shall describe the noncompliance and the actions 
the Contractor has taken or proposes to take to cure and mitigate 
such noncompliance and avoid repetition of the noncompliance.
    (3) After conducting such further inquiries and communications 
as may be necessary, the Contracting Officer and the Contractor 
shall agree on appropriate corrective action, if any, or the 
Contracting Officer will direct corrective action, subject to the 
terms of this contract.
    (e) Subcontracts. (1) The Contractor shall include the substance 
of this clause, including this paragraph (e), in subcontracts 
exceeding the simplified acquisition threshold where the subcontract 
work is addressed in the mitigation plan, other than subcontracts 
for commercial products, commercial services, and commercially 
available off-the-shelf items.
    (2) The Contractor shall modify the terms ``Contractor'' and 
``Contracting Officer'' appropriately to reflect the change in 
parties.
    (3) The Contractor shall provide the Contracting Officer with 
information on the flowdown of this clause upon request.


(End of clause)


52.203-LL  Limitation on Future Contracting.

    As prescribed in 3.1208(d), insert a clause substantially the same 
as the following:

Limitation on Future Contracting (Date)

    (a) Limitation. The Contractor and any of its affiliates shall 
be disqualified from performing ___ [Before contract award, 
Contracting Officer to describe the work that the Contractor will be 
disqualified from performing] as a contractor or as a subcontractor. 
The disqualification will last until ___. [Before contract award, 
Contracting Officer to determine appropriate length of prohibition 
or identify the appropriate ending event for the limitation on 
future contracting.]
    (b) Subcontracts. (1) The Contractor shall include the substance 
of this clause, including this paragraph (b), in subcontracts 
exceeding the simplified acquisition threshold where the work 
includes tasks that

[[Page 4395]]

are encompassed by the description of work provided in paragraph (a) 
of this clause, other than subcontracts for commercial products, 
commercial services, and commercially available off-the-shelf items. 
The Contractor shall modify the terms ``Contractor'' and 
``Contracting Officer'' appropriately to reflect the change in 
parties.
    (2) Upon request, the Contractor shall provide information to 
the Contracting Officer with regard to flowdown of this clause.


(End of clause)


52.203-AA  Unequal Access to Information--Representation.

    As prescribed in 3.1208(e), insert a provision substantially the 
same as the following:

Unequal Access to Information--Representation (Date)

    (a) Preproposal requirements. The Offeror shall determine, to 
the best of its knowledge and belief, whether it or any of its 
affiliates had unequal access to any information that could provide 
an unfair competitive advantage as described in Federal Acquisition 
Regulation (FAR) 3.1204(b)(2). If so, the Offeror shall inform the 
Contracting Officer of such access prior to the submission of its 
offer. The Offeror shall also advise the Contracting Officer of any 
actions that the Offeror proposes to take to address the situation 
pursuant to FAR 3.1207-4(d).
    (b) Representation. (1) By submission of its offer, the Offeror 
represents, to the best of its knowledge and belief, that--
    (i) No firewall was necessary because the Offeror did not have 
an unfair competitive advantage due to unequal access to 
information; or
    (ii) If a firewall was planned to mitigate the impact of an 
unfair competitive advantage due to unequal access to information, 
the firewall was implemented and was not breached during the 
preparation of this offer; or
    (2) By checking this box [square], the Offeror represents, to 
the best of its knowledge and belief, that the planned firewall was 
not implemented or was breached, and additional explanatory 
information is attached.


(End of provision)

0
32. Amend section 52.212-3 by--
0
a. Revising the date of the provision; and
0
b. Removing from paragraph (t) introductory text ``12.301(d)(1)'' and 
adding ``12.301(d)(3)'' in its place.
    The revision reads as follows:


52.212-3  Offeror Representations and Certifications--Commercial 
Products and Commercial Services.

* * * * *

Offeror Representations and Certifications--Commercial Products and 
Commercial Services (Date)

* * * * *
0
33. Amend section 52.212-5 by--
0
a. Revising the date of the clause;
0
b. Redesignating paragraphs (c)(1) through (10) as paragraphs (c)(4) 
through (13); and
0
c. Adding new paragraphs (c)(1) through (3).
    The revision and additions read as follows:


52.212-5  Contract Terms and Conditions Required To Implement Statutes 
or Executive Orders--Commercial Products and Commercial Services.

* * * * *

Contract Terms and Conditions Required to Implement Statutes or 
Executive Orders--Commercial Products and Commercial Services (Date)

* * * * *
    (c) * * *
    __(1) 52.203-DD, Postaward Disclosure of Organizational Conflict 
of Interest (Pub. L. 117-324)(41 U.S.C. 2303 note).
    __(2) 52.203-MM, Mitigation of Organizational Conflicts of 
Interest (Pub. L. 117-324)(41 U.S.C. 2303 note).
    __(3) 52.203-LL, Limitation on Future Contracting (Pub. L. 117-
324)(41 U.S.C. 2303 note).
* * * * *
[FR Doc. 2024-31561 Filed 1-14-25; 8:45 am]
BILLING CODE 6820-EP-P`