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ETHICS FOR AN OUTSOURCED GOVERNMENT
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ETHICS FOR AN OUTSOURCED GOVERNMENT
Kathleen Clark1
Abstract
In recent decades, the federal government has greatly expanded its use of contractors to perform
services, and now purchases more than $260 billion in services every year. The government increasingly
turns to contractors to accomplish its programmatic goals, and contractor personnel are now performing
tasks that in the past had been performed by government employees.
While an extensive array of ethics statutes and rules regulate government employees to ensure
that they make decisions in the interest of the government rather than a private interest, only a few of
these restrictions apply to contractor personnel. If a federal employee makes a recommendation on a
matter that could affect her financial interest, she could be subject not only to administrative discipline
but also to criminal prosecution. In most cases, a contractor employee who has that same financial
interest and makes the same recommendation is not subject to any consequences. In fact, the government
does not have any systematic way of even finding out when contractor personnel have such conflicts of
interest. The personal conflicts of interest of contractor personnel are largely unregulated.
In light of the fact that so much of the government’s work is outsourced, the government needs to
develop appropriate safeguards to ensure that the public interest is protected when contractors are doing
the government’s work. This paper describes the complex set of government ethics statutes and
regulations, identifies the principles underlying those restrictions, and suggests ways that those principles
can be applied to government contractor personnel.
Table of Contents
Introduction ................................................................................................................................................... 2
I The Extensive Array of Ethics Restrictions on Government Employees .................................................. 5
A. Ethics Restrictions Applicable to all Executive Branch Employees ................................................ 5
B. Stricter Ethics Regulation of Employees in Sensitive Positions ........................................................ 7
C. Looser Ethics Regulation of Temporary Employees ......................................................................... 8
D. Implementation of Ethics Standards ............................................................................................... 10
II. Principles Underlying Government Ethics Restrictions ......................................................................... 11
III. Government Service Contracting: A $268 Billion Sector of Government Spending .......................... 17
IV. The Few Ethics Restrictions on Government Contractor Personnel.................................................... 23
A. Distinguishing Organizational from Personal Conflicts of Interest................................................ 23
B. Current Ethics Restrictions on Government Contractor Personnel ................................................. 25
1

Professor of Law and Israel Treiman Faculty Fellow, Washington University in St. Louis. kathleen@wustl.edu. This draft was
prepared under contract for the Administrative Conference of the United States. The views expressed are those of the author and
do not necessarily reflect those of the members of the Conference or its committees. I am grateful to Wilson Abney, Scott Amey,
Gary Bass, Cheryl Block, Leigh Bradley, Charles Chadwick, Dale Christopher, Alan Chvotkin, Mary Clark, Paul Conrad,
Adrienne Davis, John Duncan, Steve Epstein, Eugene Fidell, Robert Flannigan, Richard Fowler, Joseph Gangloff, Stephen
Gillers, Michael Golden, Dan Guttman, Rick Hasen, Craig Jennings, Daniel Keating, James Kee, Pauline Kim, Carolyn Kirby,
Harold Krent, Eric Lane, Ronald Levin, Steven Levine, Richard Loeb, Jeff Lubbers, Greg Magarian, C. Scott Maravilla, Diane
Mazur, Charles McManis, Mark Meagher, Jon Michaels, Alan Morrison, Emil Moschella, Thomas Papson, Stephen Pepper,
Michael Ravnitzky, Alasdair Roberts, Laura Rosenbury, Steve Schooner, Bruce Shirk, Jonathan Siegel, William Sjostrom, Jr.,
Thomas Susman, Robert Vaughn, Lenn Vincent, Jeff Walker, Robert Wechsler, Peter Wiedenbeck, David Wilkins and the
participants in the law faculty workshops at Brooklyn Law School, the University of Colorado, Denver, George Washington,
Hofstra, Seattle and Washington Universities for their comments on earlier versions, to Troy DeArmitt, Veronica Harwin and
Andrew Martin of Washington University’s Center for Empirical Research in the Law for their assistance in connection with
tracking and displaying federal budget figures, to Natalia Kolesnikova for her assistance in connection with adjusting those
figures for inflation, and to Beverly Owens and Andrea Donze for their assistance with the tables. Any mistakes are mine alone.

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1. Location of Ethics Standards: Statutes, Regulations, Formal Policies and Ad Hoc
Contractual Clauses ................................................................................................................. 26
2. Substantive Ethics Restrictions on Contractor Personnel........................................................ 28
3. Implementation Mechanisms and Sanctions .................................................................................. 30
V. Recommendations: Ethics Standards for Contractor Personnel ............................................................. 31
A. Proposed Substantive Standards for Contractor Personnel Ethics.................................................. 32
B. Proposed Mechanisms for Implementing Contractor Personnel Ethics......................................... 36
VI. The Need for Additional Empirical Research ...................................................................................... 38
Conclusion .................................................................................................................................................. 39
Table I: Ethics Restrictions on Executive Branch Employees, SGEs & Contractor Personnel .................. 41
Table II: Post-Employment Restrictions on Executive Branch Employees, SGEs, ITEP Detailees from
Industry & Contractor Personnel .......................................................................................................... 47
Table III: Federal Spending (1983-2009) ................................................................................................... 50
Table IV: Number of Executive Branch Employees: 1983-2009 ............................................................... 50
Table V: Federal Spending on Service Contracts (1983-2007) .................................................................. 51
Table VI: Proportion of Procurement Spending on Services vs. Products ................................................. 52
Table VII: Selected Regulations of Service Contractor Personnel Ethics .................................................. 54
Table VIII: Spending on Contracts v. Grants: 2000-2010 .......................................................................... 64
Appendix IX: Treasury Department Contract with Dan Jester (July 31, 2008) .......................................... 68
Introduction
During 2008, insurance giant AIG was under increasing financial pressure. AIG had expanded
from selling traditional products, such as life and auto insurance, to more exotic lines, such as credit
default swaps (CDSs), which functioned essentially as insurance on a security. Investment banks, such as
Goldman Sachs, would purchase a CDS in order to hedge an investment in a particular security. If the
security’s financial condition weakened (thus increasing the chance that it would default), AIG would
have to post cash collateral with the purchaser. If the security defaulted, AIG would have to pay the
purchaser the “insured” value of the security.2
By the end of 2007, AIG had sold CDSs on $500 billion of securities, $60 billion of which were
derived from subprime mortgages.3 Over the course of 2008, as the value of subprime mortgage
securities dropped, AIG had to post billions of dollars in cash collateral with the investment banks that
had purchased its CDSs. As the bottom fell out of the subprime mortgage market, AIG was unable to
make good on its CDS contracts, and was facing possible bankruptcy.4
The Treasury Department feared that an AIG bankruptcy could result in even greater financial
panic and chaos than the country had already experienced after the Lehman Brothers bankruptcy. To
avoid an AIG bankruptcy, Treasury bailed out the company. Treasury had several options available to it
in handling the bailout. First, Treasury could have pressured the investment banks to accept a discount
(or “haircut”) on their CDSs.5 (The government used this approach when Chrysler was on the verge of
collapse the following year.6) Second, Treasury could have negotiated with investment banks and
pressured them to return to AIG some of the collateral that AIG had posted earlier as the subprime

2

See William K. Sjostrom, Jr., The AIG Bailout, 66 WASH & LEE L. REV. 943 (2009).
BAIRD WEBEL, CONGRESSIONAL RESEARCH SERVICE, ONGOING GOVERNMENT ASSISTANCE FOR AMERICAN INTERNATIONAL
GROUP (AIG) 5 (March 18, 2010).
4
BAIRD WEBEL, CONGRESSIONAL RESEARCH SERVICE, ONGOING GOVERNMENT ASSISTANCE FOR AMERICAN INTERNATIONAL
GROUP (AIG) 1 (March 18, 2010).
5
Stephen Gandel, Could the U.S. Have Saved Billions on AIG Rescue?, TIME (Jan. 27, 2010) (a November 2008 report by a firm
that was advising the federal government indicated that “five of the six biggest creditors of AIG's financial-products division
would have been willing to end the contracts for less than face value”).
6
Louise Story and Gretchen Morgenson, In U.S. Bailout of A.I.G., Forgiveness for Big Banks, N.Y. TIMES June 29, 2010.
3

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mortgage market declined.7 Either one of these strategies would have limited taxpayer losses, but the
government did not take either approach. Instead, Treasury paid face value to the investment banks,8
spending over $100 billion to bailout AIG, nearly $13 billion of which went to Goldman Sachs.9 The
government even insisted that AIG waive its right to sue the investment banks for any misrepresentations
the banks had made in connection with the CDS transactions.10
The government’s handling of the AIG bailout was enormously controversial.11 Commentators
complained that the government didn’t just bail out AIG; it also bailed out the investment banks that had
purchased CDSs from AIG.12 Congressional investigators have asked why the federal government “did
not push the banks to make concessions like returning the collateral to AIG or accepting less than full
value for their contracts with the insurer.”13 Why did the government treat investment banks so
favorably, paying 100 cents on the dollar for their CDSs and insisting that AIG waive its right to sue the
banks for misrepresentation?
As is clear from this narrative, the government’s handling of the AIG bailout affected not just
AIG itself, but also the investment banks that had purchased CDSs from AIG.14 As such, government
ethics standards would prohibit a government employee who owned stock in AIG or one of those
investment banks from participating in the bailout. If a government employee advises the government on
how to handle a matter that could affect her own investments, she could end up in prison. A criminal
statute prohibits government employees from participating in matters that can have a direct and
predictable effect on their own financial interests.15
The government’s point person on the AIG bailout was Dan Jester, who owned a substantial
amount of Goldman Sachs stock.16 Jester advised the government not to pressure Goldman and the other
investment banks to accept a discount. Jester is not subject to criminal prosecution for this conflict of
interest because the Treasury Department brought him on as a contractor rather than as an employee.17
This technical maneuver exempted Jester from government ethics restrictions that are intended to protect
the public trust.

7

Louise Story and Gretchen Morgenson, In U.S. Bailout of A.I.G., Forgiveness for Big Banks, N.Y. TIMES June 29, 2010.
Gretchen Morgenson and Louise Story, Two at Fed Had Doubts Over Payout by A.I.G., N.Y. TIMES, Jan. 27, 2010.
9
Gretchen Morgenson and Louise Story, Two at Fed Had Doubts Over Payout by A.I.G., N.Y. TIMES, Jan. 27, 2010 (Goldman
Sachs was “A.I.G.’s largest trading partner, [and] received the most money — $12.9 billion — in the payments to
counterparties.”).
10
Louise Story and Gretchen Morgenson, In U.S. Bailout of A.I.G., Forgiveness for Big Banks, N.Y. TIMES, June 29, 2010.
11
See Gretchen Morgenson and Louise Story, Two at Fed Had Doubts Over Payout by A.I.G., N.Y. TIMES, Jan. 27, 2010. (“Of
all the government rescues undertaken during the credit crisis of 2008, none has stirred more outrage and raised more questions
than the bailout of A.I.G. . . . ”); Stephen Gandel, Could the U.S. Have Saved Billions on AIG Rescue?, TIME (Jan. 27, 2010)
(“The AIG bailout has become one of the most enduring controversies from the financial crisis.”).
12
Stephen Gandel, Could the U.S. Have Saved Billions on AIG Rescue?, TIME (Jan. 27, 2010) (“Some called the AIG payments,
funded by the government, a backdoor bailout of Wall Street, in particular Goldman Sachs.”); Gretchen Morgenson and Louise
Story, Two at Fed Had Doubts Over Payout by A.I.G., N.Y. TIMES, Jan. 27, 2010 (Two governors of the Federal Reserve Board
objected to paying the investment banks face value for the CDSs, “expressed worry that paying the [investment banks] . . . 100
cents on the dollar to unwind their insurance contracts could be a gift to the banks.”).
13
Gretchen Morgenson and Louise Story, Two at Fed Had Doubts Over Payout by A.I.G., N.Y. TIMES, Jan. 27, 2010.
14
See OFFICE OF THE SPECIAL INSPECTOR GENERAL FOR THE TROUBLED ASSET RELIEF PROGRAM [SIGTARP], FACTORS AFFECTING
EFFORTS TO LIMIT PAYMENTS TO AIG COUNTERPARTIES 30 (2009):
Questions have been raised as to whether . . . the AIG assistance was in effect a “backdoor bailout” of AIG’s
counterparties. Then [Federal Reserve Board of New York] President [Timothy] Geithner and . . . general
counsel deny that this was a relevant consderation for the AIG transactions. Irrespective of their stated intent,
however, there is no question that the effect of [the] decisions – indeed, the very design of the federal
assistance to AIG – was that tens of billions of dollars in Government money was funneled inexorably and
directly to AIG’s counterparties.
15
18 U.S.C. § 208.
16
Mark Landler and Edmund L. Andrews, For Treasury Dept., Now Comes Hard Part of Bailout, N.Y. TIMES, Oct. 4, 2008;
Louise Story and Gretchen Morgenson, In U.S. Bailout of A.I.G., Forgiveness for Big Banks, N.Y. TIMES June 29, 2010.
17
See Appendix: Treasury Department contract with Dan Jester (July 31, 2008).
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An extensive and complex array of ethics statutes and regulations restrict current and former
government employees’ activities and financial interests. In general, these restrictions aim to ensure that
when government employees make decisions, they do so in the interest of the government rather than for
their own (or some other private) interest. The government implements these substantive restrictions by
requiring employees to undergo ethics training; requiring certain employees to disclose their financial
interests; subjecting those disclosures to review for compliance with ethics standards; and investigating
alleged violations.
Most of the ethics statutes and rules that regulate government employees do not apply to
contractor personnel.18 There is no comprehensive regulation of government contractor ethics, even of
those individuals who are working in government offices, side-by-side with government employees,
providing services and exercising substantial discretion.19
The government has barely begun to address the ethics of contractor personnel.20 Government
contracting regulations instruct procurement officials to identify situations where corporations with
government contracts have organizational conflicts of interest that could bias their work, but those
regulations address only the financial interests of the companies themselves rather than the financial
interests of companies’ personnel.21 Several agencies have regulations addressing the ethics of contractor
personnel,22 but enforcement has been ad hoc and episodic, resulting in just one False Claims Act
lawsuit.23 The government has not yet engaged in any systematic effort to address the conflicts of interest
of contractor personnel, or to provide training on how to recognize and respond to such conflicts.
In 2007, a federal study found that “the trend toward more reliance on contractors . . . raises the
possibility that the government’s decision-making processes can be undermined,”24 and recommended
that the government determine whether additional measures are needed to address the personal conflicts
of interest of those working for contractors.25 The following year, the Government Accountability Office
recommended that the Defense Department institute personal conflict of interest standards for contractor
personnel.26
Recently, Congress has mandated the development of regulations to address conflicts of interest
that arise in one specific area: where contractor personnel are involved in purchasing goods or services,27
18

There are at least four distinct categories of individuals who perform work for the federal government’s executive branch:
1. (regular) government employees, including both civil service employees and high-level appointees;
2. “special government employees” who work on a temporary or intermittent basis;
3. individuals whom the federal government “hires” as independent contractors (e.g., Dan Jester);
4. individuals whom contractors and subcontractors employ or “hire” as independent contractors to perform work for the
government.
This paper refers to individuals in the first two categories as “government employees,” and refers to individuals in the last two
categories as “contractor personnel.”
19
GOVERNMENT ACCOUNTABILITY OFFICE, DEFENSE CONTRACTING: ARMY CASE STUDY DELINEATES CONCERNS WITH USE OF
CONTRACTORS AS CONTRACT SPECIALISTS 3 (2008) (“no [DoD] or FAR [Federal Acquisition Regulation] policy obliges DoD
offices using contractor employees to require that they be free from personal conflicts of interest”).
20
See Marilyn L. Glynn, Public Integrity and the Multi-Sector Workforce, WAYNE L. REV. 1433 (2006) (noting that “contractor
employees are not subject to most federal ethics requirements or direct discipline by the government”).
21
48 C.F.R. 2.101.
22
See Table VII.
23
United States v. Harvard, 323 F.Supp.2d 151 (D. Mass. 2004).
24
REPORT OF THE ACQUISITION ADVISORY PANEL 417 (2007) (“Unless the contractor employees performing these tasks are
focused upon the interests of the United States, as opposed to their personal interests or those of the contractor who employs
them, there is a risk that inappropriate decisions will be made.”).
25
Id. at 423.
26
GOVERNMENT ACCOUNTABILITY OFFICE, DEFENSE CONTRACTING: ADDITIONAL PERSONAL CONFLICT OF INTEREST SAFEGUARDS
NEEDED FOR CERTAIN DOD CONTRACTOR EMPLOYEES 31-32 (2008).
27
§ 841(a) of the Duncan Hunter National Defense Authorization Act for Fiscal Year 2009, Pub.L. 110-417, 122 Stat. 4537
(requiring “the Administrator for Federal Procurement Policy [to] develop and issue a standard policy to prevent personal
conflicts of interest by contractor employees performing acquisition functions closely associated with inherently governmental
functions”). In addition, Congress also required the Defense Department “to tighten existing requirements for organizational
conflicts of interest by contractors in major defense acquisition programs.” § 207 of the Weapon Systems Acquisition Reform

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and in 2009 the government issued proposed regulations.28 But the proposed regulations are relatively
narrow in scope, reaching only those contractor personnel who provide advice or assist the government in
dealing with other contractors. The broader issue – how ethics principles should apply to contractor
personnel more generally – has not yet been tackled.
Congress has tasked the Office of Federal Procurement Policy to work with the Office of
Government Ethics to determine whether the government needs new regulations to address personal
conflicts of interest of contractor personnel who perform non-procurement functions.29 This paper does
the groundwork on that issue, examining how government ethics principles should be applied to
government contractors. Part I gives a brief overview of the extensive ethics restrictions that apply to
executive branch employees, discussing the stricter rules that apply to those in more sensitive positions
and the looser rules that apply to those who work for the government on a temporary or intermittent basis.
Part II discusses the principles that underlie many of these ethics restrictions. Part III documents that the
executive branch has outsourced large amounts of work to contractors and that contractor personnel are
performing many of the same services as government employees. Part IV describes the few ethics
restrictions that do apply to government contractor personnel, discussing both the substantive standards
and the mechanisms for implementing them. Part V proposes substantive standards for contractor
personnel who are in a position to exercise discretion or have access to government resources, and
describes possible mechanisms for implementing those substantive standards. Part VI identifies areas for
additional empirical research.
I The Extensive Array of Ethics Restrictions on Government Employees
More than a hundred pages of regulations and over a dozen statutes impose ethics restrictions on
executive branch employees.30 This section will describe the restrictions that apply to all executive
branch employees, stricter rules that apply only to certain employees (such as high-level officials, treaty
negotiators and those involved in procurement), and the looser rules that apply to temporary or
intermittent employees (Special Government Employees or SGEs). It will also discuss the primary
mechanisms that the government uses to implement these standards, such as requiring many employees to
disclose their financial holdings so that ethics officials can review them for compliance with the ethics
standards.
A. Ethics Restrictions Applicable to all Executive Branch Employees
Government ethics restrictions can be divided into five substantive categories: financial
influences on an employee’s government work; the use of government position for non-government
purposes; an employee’s outside activities; an employee’s post-government employment; and restrictions
based on an employee’s pre-government employment.
Restrictions on financial influences include limits on outside payments to government employees,
on their own financial interests, and on their negotiating for future employment. With regard to outside
payments, Congress has enacted criminal prohibitions on bribes,31 gratuities related to government

Act of 2009, Pub.L. 111-23, 123 Stat. 1704 (emphasis added); Proposed Defense Federal Acquisition Regulation Supplement;
Organizational Conflicts of Interest in Major Defense Acquisition Programs (DFARS Case 2009-D015), 75 Fed. Reg. 20954
(April 22, 2010). For a discussion of the difference between personal and organizational conflicts of interests, see infra § IV.A.
28
Proposed Rule on Preventing Personal Conflicts of Interest for Contractor Employees Performing Acquisition Functions, 74
Fed. Reg. 58584 (Nov. 13, 2009).
29
Duncan Hunter National Defense Authorization Act for Fiscal Year 2009, Pub.L. 110-417, 122 Stat. 4539, § 841(b)(3).
30
5 C.F.R. Parts 2634-37, 2640; 18 U.S.C. §§ 201-219 (criminal conflict of interest statutes); 5 U.S.C. §§ 7351, 7353
(restrictions on gifts); 5 U.S.C. Appx. §§ 501-505 (limits on outside income). Most of these statutes also impose restrictions on
legislative branch officials, but this paper focuses on executive branch’s employees and contractors.
31
18 U.S.C. § 201(b).

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work,32 and “salary supplementation” (the payment by a non-governmental source for a government
employee to do government work).33 In addition to these criminal prohibitions, there are also noncriminal statutory restrictions on gifts from foreign governments,34 from those who could be affected by
the employee’s work or by her agency,35 from subordinates or other government employees of lower
salary,36 and regulatory restrictions on gifts37 and compensation from outside employment (including the
reimbursement of travel expenses).38 A criminal statute prohibits executive branch officials from making
decisions on matters that would affect their own financial interests or the financial interest of a family
member, an organization with which they are associated, or a person with whom they are negotiating for
future employment.39
The government has also placed limitations on employees’ ability to use their position for private
purposes. Examples include the statutory prohibitions on using one’s government position to influence an
election40 or to hire relatives,41 and regulatory prohibitions on using public office for private gain;42 using
non-public government information for personal gain;43 using government time or property for private
purposes, such as writing letters of recommendation on government letterhead for recommendations that
are unrelated to the subject’s government work;44 and the disclosure of sensitive procurement-related
information.45 Other regulations prevent employees’ from using their government position to further even
beneficent outside interests, such as raising money for charitable organizations.46
The government also limits its employees’ outside activities. There are criminal prohibitions on
employees’ representing parties in disputes against the government47 and regulatory restrictions on being
awarded a government contract,48 serving as an expert witness for an outside party in a case involving the
government,49 compensated teaching50 and partisan political activities.51
A fourth category of ethics restrictions consists of limits on post-government employment. All
executive branch employees are subject to a permanent ban on communicating with current government
officials in an attempt to influence them on behalf of someone else with respect to particular matters that
the employee participated in personally and substantially while in government, and a 2-year ban on such
communications with respect to particular matters that were pending under their responsibility during
their last year in government.52
32

18 U.S.C. § 201(c).
18 U.S.C. § 209.
34
5 U.S.C. § 7342.
35
5 U.S.C. § 7353.
36
5 U.S.C. § 7351(a) (prohibiting employees from giving gifts to superiors and accepting gifts from employees receiving less
pay).
37
5 C.F.R. 2635 Subparts B and C.
38
5 C.F.R. 2635 Subpart H.
39
18 U.S.C. § 208.
40
5 U.S.C. § 7323(a)(1).
41
5 U.S.C. § 3110.
42
5 C.F.R. 2635.702.
43
5 C.F.R. 2635.703.
44
5 C.F.R. 2635.702(b).
45
41 U.S.C. § 423(a). This ban applies not just to government employees but to anyone “who is acting or has acted for or on
behalf of, or who is advising or has advised the United States with respect to, a Federal agency procurement.” Id. at §
423(a)(2)(A).
46
5 C.F.R. 2635.808.
47
18 U.S.C. § 203 (prohibiting compensation for representational services in matters involving the United States); 18 U.S.C. §
205 (prohibiting representational services in matters involving the United States).
48
48 C.F.R. § 3.601.
49
5 C.F.R. 2635.805.
50
5 C.F.R. 2635.807.
51
The Hatch Act limits the partisan political activities of most executive branch employees, prohibiting them from running for
partisan political office. It also prohibits partisan political activities in the government workplace.
52
18 U.S.C. § 207(a). See also 5 C.F.R. 2641.201. In addition, the EPA prohibits the award of non-competitive contracts to
former EPA employees in their first year after leaving the agency, or to firms that are controlled by them or that employ them.
33

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A fifth category of ethics restrictions is based on an individual’s employment prior to joining the
government. Two long-standing regulations require a new government employee to recuse herself for
one year from participating in any matter involving her former employer if her impartiality could
reasonably be questioned,53 and for two years if that employer gave her a payment greater than $10,000
that may be related to her government position.54
B. Stricter Ethics Regulation of Employees in Sensitive Positions
In addition to the statutes and regulations that apply to all executive branch employees, the
government has imposed additional ethics restrictions on certain classes of employees who are thought to
have particularly sensitive positions, such as high-level officials, political appointees, and those involved
in treaty negotiation, bank examinations and procurement.55
Presidential appointees may not receive any outside earned income;56 may not accept any gifts from
lobbyists;57 and may not participate in particular matters Noncareer employees are subject to increased
restrictions on their compensation for expressive activities,58 and highly paid noncareer employees are
limited in the outside earned income they can receive.59
The most extensive array of specialized restrictions are post-employment bans, which restrict
three types of activities: (1) communicating with current government officials in an attempt to influence
them on behalf of others; (2) representing others who seek to influence current government officials; and
(3) receiving compensation from particular parties with whom the employee had dealings while in
government.60 A criminal conflict of interest statute imposes two temporary bans on communications:
 a 1-year ban on former high-level officials contacting officials in the agency where they worked
in the year prior to leaving government service;61 and
 a 2-year ban on former very high-level officials contacting officials in the agency where they
worked in the year prior to leaving government service or other high level officials;62
and three bans on representation:

48 C.F.R. 1503.601. The Nuclear Regulatory Commission (NRC) has a similar regulation, but applies for its former employees
in the first two years after they leave the commission. 48 C.F.R. 2009.100(a).
53
5 C.F.R. § 2635.502.
54
5 C.F.R. § 2635.503 (requiring recusal where the payment was “not pursuant to the former employer's established
compensation program” and was made “after the former employer knew that the individual was being considered for a
Government position”).
55
In addition to the ethics statutes and regulations that apply across the entire executive branch, many government agencies have
additional restrictions that apply only to employees within this agency. See 5 C.F.R. Chapters 21-82. Congress has also enacted
some agency-specific restrictions.
See, e.g., 47 U.S.C. § 154(b)(2)(A)(ii) (prohibiting all F.C.C. employees from having a
financial interest in any company engaged in “the business of communication by wire or radio or in the use of the
electromagnetic spectrum”).
56
5 C.F.R. 2635.804(a).
57
Exec. Ord. No. 13490, 74 Fed. Reg. 4673, (Jan. 21, 2009) (§ 1 of the Ethics Pledge)..
58
Noncareer employees are subject to a relatively broad prohibition on receiving compensation for expressive activity, such as
teaching, speaking or writing. They may not receive compensation if the expression concerns subject matter, industry or
economic sector affected by her agency. 5 C.F.R. 2635.807(a)(2)(i)(E)(3). By contrast, regular employees are subject to a
narrower prohibition for such compensation: only if it concerns her agency’s policies or a matter the employee has worked on
during the previous year. C.F.R. 2635.807(a)(2)(i)(E)(1), (2).
59
These employees are limited to $26,955 in outside earned income. See 5 U.S.C. Appx. § 501(a)(1); 5 C.F.R. §§ 2635.804(b),
2636.304 (limiting outside earned income of covered noncareer employees to 15% of the basic rate of pay for level II of the
Executive Schedule), 2636.303(a) (defining “covered noncareer employee”); Exec. Ord. No. 13525, 74 Fed. Reg. 69231 (Dec.
23, 2009) setting the pay for Level II at $179,700).
60
See Table II for a list of the post-employment restrictions.
61
18 U.S.C. § 207(c). President Obama issued an executive order on his first full day in office requiring Presidential appointees
to pledge that they would abide by this ban for two years (rather than the statutorily-required one year). Exec. Ord. No. 13490,
(Jan. 21, 2009).
62
18 U.S.C. § 207(d).

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

a 1-year ban on former trade or treaty negotiators representing or giving advice concerning such
negotiations that occurred during their last year in government;63
 a 1-year ban on former high-level officials representing foreign governments and political
parties;64 and
 a permanent ban on the US Trade Representative and Deputy Trade Representative representing
foreign governments and political parties.65
Two non-criminal statutes restrict certain former employees from accepting compensation from particular
parties, including:
 a 1-year ban on former procurement officials’ accepting compensation from contractors with
whom they did business;66 and
 a 1-year ban on former bank examiners’ accepting compensation from banks they examined.67
President Obama required all of his appointees to pledge that they would not lobby any senior executive
branch officials after they leave the government until the end of his administration.68
President Obama issued an executive order imposing new restrictions on political appointees
based their employment prior to joining the government. The executive order imposes a two-year cooling
off period before a registered lobbyist can be appointed to a post in an agency that she lobbied or can
participate in any particular matter or on any issue area on which she lobbied.69 In addition, it imposes a
two-year ban on all appointees (even those who were not lobbyists) participating in a particular matter
involving specific parties that is directly and substantially related to the appointee’s former employer or
client.70
C. Looser Ethics Regulation of Temporary Employees
Nearly fifty years ago, when Congress re-wrote the then-existing ethics statutes, it recognized that
imposing uniform ethics standards on all government employees could make it difficult for the
government to hire experts on a temporary basis.71 So the omnibus ethics legislation enacted in 1962
created a new category of federal employee -- “Special Government Employee” (SGE) -- for those who
would work for the government on a temporary or intermittent basis: 130 or fewer days in a 12-month
period.72
As of 2009, the government had 17,600 SGEs.73 While Congress created the SGE category so
that the government could access individuals with special expertise, at least one government agency uses
63

18 U.S.C. § 207(b).
18 U.S.C. § 207(f).
65
18 U.S.C. § 207(f)(2).
66
41 U.S.C. § 423(d).
67
12 U.S.C. §§ 1820(k), 1786(w).
68
Ex. Ord. No. 13490 (Jan. 21, 2009). President Clinton imposed on his senior political appointees a similar lobbying ban, Ex.
Ord. 12834 (Jan. 20, 1993), but rescinded it at the end of his administration. Jason Peckenpaugh, Clinton Lifts Lobbying
Restrictions on Appointees, GOVT. EXEC. (Jan. 2, 2001).
69
Exec. Ord. No. 13490, 74 Fed. Reg. 4673, (Jan. 21, 2009) (§ 3 of the Ethics Pledge).
70
Exec. Ord. No. 13490, 74 Fed. Reg. 4673, (Jan. 21, 2009) (§ 2 of the Ethics Pledge). The executive order specifies that a
“particular matter” can be a regulation or a contract.
71
Daniel Guttman, Organizational Conflict Of Interest and the Growth of Big Government, 15 HARV. J. LEGIS. 297, 303 (1978)
(noting that this legislation “facilitat[ed] the Government’s recruitment of persons with specialized knowledge and skills for
service on a part-time basis”) (quoting S. Rep. No. 2213, 87th Cong., 2nd Sess. 4 (1962)).
72
A Special Government Employee is an “employee of the executive or legislative branch . . . who is retained . . . with or without
compensation, for not to exceed one hundred and thirty days during any period of three hundred and sixty-five consecutive days .
. .” 18 U.S.C. § 202(a). The government further divides this group into two categories: those who have worked less than 60
days, and those who will work between 60 and 130 days in a year. Some of the ethics statutes apply only to the latter group of
SGEs. See, e.g., 18 U.S. § 207(c) (1-year ban on former senior officials contacting employees of the agency where they worked
during their last year in government).
73
June 22, 2010 telephone conversation with Dale Christopher, Associate Director, Program Review Division, Office of
Government Ethics.
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volunteer SGEs as free labor to leverage its limited resources. The Occupational Safety and Health
Administration (OSHA) has recruited over 1100 people to serve as unpaid SGEs to evaluate workplaces.74
Many ethics restrictions, including the criminal prohibitions on bribery and illegal gratuities, gift
regulations and most of the criminal post-employment restrictions, apply to all SGEs.75 Some ethics
provisions, such as the ban on compensation for fiduciary services, the limit on outside earned income,
the surtax on compensation from private foundations and the option of obtaining of certificate of
divestiture to obtain favorable tax treatment for divesting financial holdings, do not apply to SGEs at all.
The criminal prohibition on salary supplementation applies only to SGEs who are paid by the
government.76
Some ethics restrictions, including limits on representational services, award of government
contracts, fundraising, service as an expert witness, receiving compensation for expression and certain
post-employment activities, apply to SGEs under a narrower range of circumstances than for regular
employees. While regular employees may not provide representational services or receive compensation
for such services whenever the United States has an interest in the matter, this ban applies to SGEs only if
the matter is narrow in scope (i.e., it involves specific parties rather than general policy) and if the SGE
actually participated in the matter while in government. If the matter involves not just the government in
general but the SGE’s agency, then SGEs who are serving more than 60 days are also covered by the
representation ban.
While government contracts cannot be awarded to regular government employees, they can be
awarded to an SGE unless the contract arose directly out of the SGE’s activities, the SGE was in a
position to influence the contract award, or some other conflict of interest exists.77 While regular
executive branch employees are prohibited from serving as an expert witness in any proceeding in which
the United States has an interest, that prohibition applies to SGEs only if they have participated in the
same matter while in government or, in the case of a proceeding that involves the SGE’s agency, to SGEs
who are serving more than 60 days, have been appointed by the President, or are serving on a statutorily
created commission. While regular employees are prohibited from receiving compensation for expressive
activity whenever the subject matter of the expression deals in significant part with her agency’s policies
or programs,78 SGEs are exempted from this restriction.79 While regular employees are prohibited from

74

This program of using volunteer SGEs has enabled OSHA “to leverage [its] limited resources by utilizing private sector safety
and health professionals during VPP onsite evaluations.” Policies and Procedures Manual for Special Government Employee
(SGE) activity conducted under the auspices of the Occupational Safety and Health Administration's (OSHA) Voluntary
Protection
Program,
Directive
No.
CSP-03-01-001
(Jan.
4,
2002)
(available
at
http://www.osha.gov/pls/oshaweb/owadisp.show_document?p_table=DIRECTIVES&p_id=2810&p_text_version=FALSE#1VIII). The leveraging is literally true. SGEs can outnumber government employees on evaluation teams. Id. at Ch. 4, § I.B.
List of Active SGEs, available at http://www.osha.gov/dcsp/vpp/sge/active_sges.html. OSHA asserts that these SGEs are
subject to the same ethical standards as regular government employees. Policies and Procedures Manual for Special Government
Employee (SGE) activity conducted under the auspices of the Occupational Safety and Health Administration's (OSHA)
Voluntary
Protection
Program,
Directive
No.
CSP-03-01-001
(Jan.
4,
2002)
(available
at
http://www.osha.gov/pls/oshaweb/owadisp.show_document?p_table=DIRECTIVES&p_id=2810&p_text_version=FALSE#1VIII) (“While at an onsite evaluation, an SGE is held to the same ethical and legal standards as a . . . government employee.”)
75
See Table I (Ethics Restrictions on Executive Branch Employees, SGEs and Contractor Personnel) and Table II (PostEmployment Restrictions on Executive Branch Employees, SGEs & Contractor Personnel).
76
18 U.S.C. § 209(c). This limited application of the salary supplementation statute makes sense because if an SGE is not
receiving any salary from the government, it would be illogical to prevent that SGE from receiving a salary from a nongovernment entity.
77
48 C.F.R. § 3.601(b).
78
5 C.F.R. 2635.807(a)(2)(i)(E)(2).
79
5 C.F.R. 2635.807(a)(2)(i)(E)(4). SGEs who are in noncareer positions are also exempted from the broader restriction on
receiving compensation for expression related to her agency’s general subject matter or industry. Id. The prohibition on
compensated expression that deals with specific matters also has more limited application to SGEs. Id.

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soliciting charitable contributions from anyone regulated by their agencies,80 SGEs are prohibited from
soliciting contributions only from those who could be affected by the SGE’s own duties.81
Two post-employment restrictions apply only to SGEs who have worked more than 60 days
within a year: the one-year ban on a former senior official contacting employees of the agency where the
employee worked during the previous year, and the one-year ban on a former senior official representing
foreign governments and political parties.82 Limiting these bans to those who have worked more than 60
days may be justified by a theory that those with less experience in government are less apt to be in a
position to inappropriately influence their former government colleagues or less apt to have confidential
information that could be passed on to foreign governments.
One of the ways that the federal government obtains advice from experts is by appointing them to
serve on advisory committees. Advisory committees consist of individuals from diverse backgrounds
who bring their own expertise, experience and perspective to address particular policy problems and
provide advice to policy-makers.83 The members’ individual perspectives could be conceived of as
conflicts of interest, but the government accommodates – rather than eliminates – those conflicts of
interest. In the Federal Advisory Committee Act (FACA), Congress mandated that committee
membership must “be fairly balanced in terms of the points of views represented,” and that members must
disclose conflicts of interest.84
The criminal prohibition on financial conflicts of interest does not apply to SGEs who serve on
advisory committees if certain criteria are met, such as if they are dealing with matters that are broad in
scope (i.e. involving policy rather than particular parties) and if it would affect the SGE or her employer
in the same way it would affect other similarly situated individuals or entities.85 In addition, an agency
official can waive the conflict if she determines that the need for the SGE’s services on the advisory
committee outweighs the conflict.86
The modified ethics restrictions for SGEs demonstrate that government ethics regulation need not
involve an all-or-nothing approach.
The government can protect its ethical concerns while
accommodating its other interests, including its need to obtain expertise on a temporary basis.
D. Implementation of Ethics Standards
The government implements these substantive restrictions by requiring some employees to
disclose their financial interests and then reviewing those disclosures for conflicts, by facilitating
divestment of assets that would cause conflicts, by giving employees ethics training and advice, by
investigating alleged ethics violations, and by disciplining or prosecuting employees who have committed
violations.
The government’s largest investment in ethics implementation is the financial disclosure process.
Every year, approximately 25,000 employees must submit public financial disclosure forms,87 and about

80

5 C.F.R. § 2635.808(c)(1)(i).
5 C.F.R. § 2635.808(c)(1)(ii).
82
18 U.S.C. § 207(c)(2)(B).
83
The Federal Advisory Committee Act also permits the appointment of “representative” members who are supposed to
represent particular industries or interest groups. Such “representative” members are not considered government employees at
all, and are not subject to the conflict of interest or disclosure requirements. See Office of Government Ethics, Op. 82x22
(Memorandum dated July 9, 1982 from J. Jackson Walter, Director of the Office of Government Ethics to Heads of Departments
and Agencies of the Executive Branch regarding Members of Federal Advisory Committees and the Conflict-of-Interest
Statutes); Office of Government Ethics, Letter to the Chairman of a National Commission dated June 24, 1993, 1993 OGE
LEXIS 510.
84
5 U.S.C. Appx. § 5(b)(2).
85
5 C.F.R. 2640.203(g).
86
18 U.S.C. § 208(b)(3).
87
August 4, 2010 email to author from Dale Christopher, Associate Director, Program Review Division, Office of Government
Ethics.
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300,000 additional employees must submit confidential financial disclosure forms,88 revealing
information about their income, assets, liabilities,89 gifts, travel reimbursements, and employment and
business affiliations.90
All SGEs must file financial disclosure statements, although most of them are subject only to
confidential (rather than public) financial disclosures.91 Some SGEs who would ordinarily be required to
file public financial disclosure forms because of the significance of their position can file confidential
disclosures instead if they will serve less than 60 days, if the agency head certifies that there is a special
need for their services, or if they serve in the White House with a Presidential appointment or
commission.
Once the employees submit their disclosure forms, agency officials then review their forms to
check for compliance with ethics standards. When these reviews reveal financial conflicts, employees
generally have the option of recusing themselves from participating in matters that could affect their
finances or divesting themselves of those assets that would otherwise cause the conflict. Since divesting
may result in capital gains tax, Congress enacted a special program (a “certificate of divestiture”) to
relieve this tax burden.92
The Office of Government Ethics provides formal advice about the application of ethics
standards, publishing legal opinions about ethics statutes and regulations on a regular basis.93 In addition,
each agency has a Designated Agency Ethics Officer who counsels agency employees on ethics issues.94
Government agencies must provide information about ethics standards to all new employees,95 and must
provide at least one hour of ethics training annually to presidential appointees, White House employees,
contracting officers,96 and all other employees who are required to file public or confidential financial
disclosure reports.97 In general, Congress mandates that advice be available to employees and former
employees, who may choose whether or not to seek it.98 But a 2008 statute requires former high-level or
procurement officials from the Defense Department (DoD) to seek a written legal opinion from a DoD
ethics official before receiving compensation from a DoD contractor within 2 years of leaving the
department.99
II. Principles Underlying Government Ethics Restrictions
The extensive array of ethics restrictions described above has more in common with the tax code
than the Ten Commandments or the Golden Rule. As such, some observers have criticized these
restrictions as being so complicated that they lack the moral authority that one would hope for in an ethics
88

August 4, 2010 email to author from Dale Christopher, Associate Director, Program Review Division, Office of Government
Ethics.
89
Filers must report loans over $10,000, except those from financial institutions granted on terms made available to the general
public.
90
See OGE Form 450, Confidential Financial Disclosure Report, and SF 278, Public Financial Disclosure Report. Public filers
must also disclose transactions of real property and securities. Id.
91
5 C.F.R. § 2634.904(a)(2) (requiring SGEs to file confidential disclosures); See also 5 C.F.R. §§ 2634.202(h); 2634.204;
2634.205 (exempting certain SGEs from public disclosure requirements).
92
The option of obtaining a certificate of divestiture is not available to Special Government Employees. 26 U.S.C. §
1043(b)(1)(A).
93
5 U.S.C. App. § 402(b)(8).
94
5 C.F.R. 2638.203(b)(7).
95
5 C.F.R. 2639.703.
96
5 C.F.R. 2639.705(a).
97
5 C.F.R. §§ 2639.704(a), 2639.705(a). For SGEs who are expected to work 60 or fewer days and SGEs who must file public
financial disclosures, agencies can provide written training materials instead of one hour of training. 5 C.F.R. §§ 2639.704(e),
2639.705(d).
98
By regulation, when a current or former employee seeks advice from an ethics official about whether her acceptance of
compensation from a contractor would violate 41 U.S.C. § 423(d), the ethics official must provide a response within 30 days, and
the employee and contractor can rely on the ethics official’s advice. FAR 3.104-6(d).
99
National Defense Authorization Act of Jan. 28, 2008, P.L. 110-181, Div A, Title VIII, Subtitle D, § 847, 121 Stat. 243.

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code. Nonetheless, even within this complexity, one can discern four distinct principles that motivate
these many provisions: (1) preventing government employees from abusing the fiduciary nature of public
office; (2) the related goal of promoting public confidence in government; (3) maintaining Congressional
and executive branch control of federal workers; and (4) ensuring that officials devote adequate attention
to their responsibilities. In addition, some ethics restrictions appear to be motivated not by a principle, as
such, but simply by a desire to favor or disfavor particular groups or activities.
The principle that underlies most of these restrictions is the fiduciary nature of public office: the
idea that public office is a public trust. In a relationship of trust, the trusted party is expected to act for the
benefit of the other, and the law imposes a fiduciary obligation on the trusted party to ensure that she acts
solely in the interest of the trusting party.100 These are called fiduciary relationships, and the trusted party
is called a fiduciary. These relationships are governed not just by the explicit terms of any agreement
between the parties but by additional terms imposed by the common law.101 The law sees these
relationships as valuable, and will prevent fiduciaries from abusing their position of trust.102
Fiduciary relationships arise in two distinct factual settings.103 In the first, an advice-based trust
relationship, a person trusts a fiduciary to give her advice about a decision.104 In the second, an accessbased trust relationship, a person entrusts a fiduciary with access to an asset so that the fiduciary can use
the asset to benefit the beneficiary.105 The asset could be tangible property, a financial instrument, or
confidential information.
But the mere existence of advice or access is not enough to create a fiduciary relationship. The
advice or access must be coupled with an expectation (either subjectively intended or imposed by
operation of law) that the party giving the advice or being given access will act in the interest of the
trusting party.106 If one party gives another access to her assets but there is no expectation that the other
will use that access for her benefit, then she has merely given the other a gift, and no fiduciary obligation

100

Hospital Products Ltd v United States Surgical Corporation, 156 CLR 41, 96-7 (1984-5) (“The critical feature of these
relationships is that the fiduciary undertakes or agrees to act for or on behalf of or in the interests of another person in the
exercise of a power or discretion which will affect the interests of that other person in a legal or practical sense.”) (quoted in
Flannigan at 306). See also Guerin v The Queen, 2 SCR 335 [1985] (“where by statute, agreement, or perhaps by unilateral
undertaking, one party has an obligation to act for the benefit of another, and that obligation carries with it a discretionary power,
the party thus empowered becomes a fiduciary.”) (quoted in Flannigan at 307).
101
Deborah A. DeMott, Beyond Metaphor: An Analysis of Fiduciary Obligation, 1988 DUKE L.J. 879, 887 (“Once a court
concludes that a particular relationship has a fiduciary character, the parties' manifest intention does not control their obligations
to each other as dispositively as it does under a contract analysis."); Victor Brudney, Contract and Fiduciary Duty in Corporate
Law, 38 B.C.L. REV. 595, 598 (1997) (“[T]he content of . . . restrictions [on actions by fiduciaries] and the power to alter [those
restrictions] differ from the content and modifiability of the restrictions that ‘mere’ contract law imposes on non-fiduciary . . .
contracting parties.”).
102
P. D. Finn, 'The Fiduciary Principle', at 26 T. G. Youdan (ed), Equity, Fiduciaries and Trusts, Carswell, Toronto, 1989, cited
in Robert Flannigan, The Fiduciary Obligation, 9 Oxford J. Legal Stud. 285, 297 (1989).
103
Flannigan at 309 (“There are . . . two kinds of trusts that will attract fiduciary status. They are, firstly, the trust which gives the
trusted party the ability to exercise 'influence' over the trusting party and, secondly, the trust which allows the trusted party to
acquire 'access' to the employment of assets.”)
104
Flannigan refers to this type as a “deferential trust.”
105
Flannigan refers to this as a “vigilant trust.”
The fiduciary obligation deters the fiduciary from acting in a way that “would have the effect of diverting or not maintaining the
asset value.” Flannigan at 292. This is commonly referred to as “agency costs,” but Flannigan refers to them “intermediary
costs.” Flannigan at 289-290.
Flannigan further explains :
. . . Both types of trust in fact result in the trusted party acquiring 'access' to the employment of assets. In
the case of deferential trust, however, the access is indirect because it occurs through 'influence' exerted by
the trusted party. But in either case, and to the same extent, the 'access' to assets may be turned to
mischievous ends.
Flannigan at 309
106
Flannigan has identified fact-based and status-based fiduciary relationships. Robert Flannigan, The Fiduciary Obligation, 9
Oxford J. Legal Stud. 285, 294, n. 45 (1989). Subjectively intended expectations occur in fact-based fiduciary relationships.
Expectations imposed by operation of law occur in status-based fiduciary relationships.

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arises.107 Similarly, if someone gives advice to someone else, but there is no expectation that the adviser
is acting on the other’s behalf, then no fiduciary duty arises.108 A fiduciary is someone who is called upon
to give advice or has access to resources, but must give that advice or use that access to benefit the other
party rather than herself.109
Government officials are in a position of trust if they can give advice or have access to resources,
but must give that advice or use that access on behalf of someone other than themselves. For more than a
century, courts have recognized and enforced government officials’ fiduciary obligations even in the
absence of any specific statutory or regulatory codification of that obligation.110 As the following
discussion makes clear, Congress and the executive branch have also recognized the fiduciary nature of
governmental power by enacting statutes and regulations that reflect employees’ fiduciary duties.111
Three aspects of the fiduciary obligation are particularly relevant to government officials. First,
the norm against conflicts: a fiduciary must not place herself in a position where her own interest conflicts
with her duty toward a beneficiary. Second, the norm against misusing resources: a fiduciary must use
the beneficiary’s assets to help the beneficiary rather than to help herself or another party. Third, the
norm of impartiality: a fiduciary who allocates benefits among beneficiaries must treat beneficiaries of the
same class equally and beneficiaries of different classes fairly.112
The fiduciary norm against conflicts is implicated whenever a fiduciary could personally benefit
from a decision she makes or advice that she gives on behalf of a beneficiary. The anti-conflict norm is
reflected in many of the restrictions on outside payments to government employees. These fiduciarybased restrictions include limits on gifts and payments from those who could be affected by an
employee’s duties,113 criminal prohibitions on bribes and gratuities related to government work,114 and
107

Flannigan at 308 (“Not every kind of access will be of a fiduciary character. A person may acquire access as a gift.”).
See infra discussion of “representational members” of FACA committees, who are not even temporary employees of the
government and are not subject to the government’s fiduciary-based ethics restrictions.
109
See Robert Flannigan, The Fiduciary Obligation, 9 OXFORD J. LEGAL STUD. 285, 309 (1989) (discussing advice- and accessbased fiduciary relationships). The precise identity of the government official’s beneficiary is a matter of some contention, with
possibilities including the nation, the government itself, and the public. See parallel discussion of identifying the client of
government lawyers. Kathleen Clark, Government Lawyers and Confidentiality Norms, WASH. U. L. REV. (2007). What matters
here is that a government official must act on behalf of someone other than herself, and thus can be said to owe fiduciary duties.
While government contractors are not supposed to make decisions exercising governmental authority, Office of
Management and Budget, Policy Letter 92-1, Inherently Governmental Functions, one can find many examples of contractors
doing exactly this. Committee on Governmental Affairs, U.S. Senate, Oversight of the Structure and Management of the
Department of Energy, Staff Report, 96th Cong., 2nd Sess. (Dec. 1980); Subcommittee on Federal Services, Post Office, and Civil
Service, Committee on Governmental Affairs, U.S. Senate, Use of Consultants and Contractors by the Environmental Protection
Agency and the Department of Energy, S. Hrg. 101-554 (Nov. 6, 1989).
Because of this legal limit (even if it is honored in the breach), in the policy and legal debates over government
contracting, much is made of the distinction between making decisions to exercise governmental authority, on the one hand, and
giving advice to those who exercise such authority, on the other. But for the purpose of fiduciary analysis, this distinction is
unimportant because both those who make decisions about the use of an asset (such as governmental authority) and those who
give advice are fiduciaries if they have an obligation to act on behalf of the intended beneficiary rather than herself or another
private party. Ethics standards for government employees reflect this fact, requiring not just disinterested decision-making, but
also disinterested advice. See, e.g., 18 U.S.C. § 208(a) (prohibiting anyone who “participates personally and substantially as a
Government . . . employee, through . . . the rendering of advice . . . in [a] particular matter” from having a financial interest in the
matter. Compare Office of Legal Counsel, Applicability of the Emoluments Clause to Nongovernmental Members of ACUS
(June 3, 2010) (Constitution’s Emoluments Clause prohibiting “any present, Emolument, Office, or Title, of any kind whatever,
from any King, Prince, or foreign State,” does not apply to nongovernmental members of the Administrative Conference because
although they give advice, they do not exercise governmental authority).
110
Kathleen Clark, Do We Have Enough Ethics in Government Yet? An Answer from Fiduciary Theory, 1996 U. ILL. L. REV. 57,
74 (1996).
111
See, e.g., 5 C.F.R. 2635.101(a) (“Public service is a public trust.”).
112
Robert Flannigan, The Fiduciary Obligation, 9 OXFORD J. LEGAL STUD. 285, 311 (1989) (requirement that fiduciaries not trust
property or confidential information included in the conflict component); Kathleen Clark, Do We Have Enough Ethics in
Government Yet? An Answer from Fiduciary Theory, 1996 U. ILL. L. REV. 57, 71 (1996).
113
5 U.S.C. § 7353(a)(2).
114
18 U.S.C. § 201.
108

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restrictions on participation in matters that could affect an employee’s own financial interest or that of a
party whose interests are imputed to her (such as a family member, an organization with which she is
affiliated, or of a party with whom she is negotiating for future employment).115
The fiduciary norm against misuse of resources is explicitly reflected in restrictions on using
public office for private gain,116 using government time for private purposes,117 using government position
for fundraising or electioneering, and restrictions on partisan political activities in the workplace. It is
implicit in the restrictions on accepting gifts from subordinates118 and the anti-nepotism rules.119 The
fiduciary norm of impartiality is reflected in regulations that prohibit employees from giving preferential
treatment.120
Often a fiduciary has access to confidential information in order to conduct her duties for a
beneficiary, and the fiduciary duty requires that she use that confidential information only to further the
beneficiary’s interest rather than those of herself or someone else. This fiduciary duty is reflected in the
regulatory restriction on using government information for personal gain.121 The fiduciary duty not to
misuse information continues even after the relationship has ended. The continuing duty to protect
information is reflected in an ethics statute that prohibits the disclosure of sensitive procurement
information,122 and may be reflected in some of the post-employment restrictions.123
The third key aspect of fiduciary duty – treating beneficiaries in the same class equally and
beneficiaries in different classes fairly – is also reflected in government ethics regulations. One can find
explicit expression of this norm in the regulation setting out the general principles of government service,
requiring employees to “act impartially and not give preferential treatment to any private organization or
individual.”124 This principle may also be implicit in other regulations, such as the prohibition on hiring
relatives.125
While the restrictions described above directly express fiduciary norms, other restrictions are
quasi-fiduciary in nature. They reflect a fiduciary-like concern, but they use a proxy, often broadening
the scope of the restriction. For example, the direct fiduciary restriction on gifts prohibits employees
from accepting gifts from anyone who could be affected by their duties.126 A broader proxy-based
restriction prohibits an employee from accepting a gift from anyone who is regulated by her agency.127
These broader, proxy-based restrictions prevent the higher-order effects created by an environment in
which a regulated company can give gifts to the employees of the agency that regulates it, even if not to
the officials directly regulating it.128 Another example of a quasi-fiduciary restriction is the government’s
ban on employees’ accepting gifts from any other employee of lower salary.129 This regulation uses
salary is a proxy for subordinate position. The government also limits the partisan political activities of
civil servants not just in the workplace but also outside the workplace. These regulations prohibit
employees from soliciting campaign donations for partisan political candidates. While such outside
activities would not necessarily cause a civil servant to act in a partisan manner in the workplace, banning
115

18 U.S.C. § 208.
5 C.F.R. 2635.702.
117
5 C.F.R. 2635.705.
118
5 C.F.R. 2635.302(a)(1).
119
5 U.S.C. § 3110(b).
120
See, e.g., 5 C.F.R. 2635.101(a)(8).
121
5 C.F.R. 2635.703.
122
41 U.S.C. § 423(a).
123
See discussion below.
124
5 C.F.R. 2635.101(b)(8).
125
5 U.S.C. § 3110(b).
126
5 U.S.C. § 7353(b).
127
5 U.S.C. § 7353(a).
128
See Department of Interior Inspector General, Investigative Report: Island Operating Company et al. (2010) (employees of the
Mineral Management Service accepted gifts of travel and football tickets from oil and gas company employees).
129
The use of such proxies is not without criticism. See PRESIDENT’S COMMISSION ON FEDERAL ETHICS LAW REFORM, TO SERVE
WITH HONOR (1989).
116

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those activities helps to insulate the civil service from partisanship, preventing the creation of a partisan
culture that would undermine both the impartiality and the appearance of impartiality in decisions made
by such civil servants.
Other quasi-fiduciary restrictions include the bans on representing private parties in disputes with
the government (and on accepting compensation for such representation). These bans grew out of
experiences during the nineteenth century, when government officials exploited their positions to assist
outsiders with claims against the federal government. Rather than fashioning a narrowly tailored ban on
employees’ inappropriately exploiting their position, Congress enacted a broad ban on any employee
representing those with any claims against the federal government. This criminal ban on representation
reflects a legitimate fiduciary concern: the misuse of government position. But it is also much broader
than what would strictly be necessary to prevent inappropriate exploitation of government position. Thus,
the representation ban is but one illustration of the inexact proxies that the government uses in ethics
restrictions. Rather than applying to just those employees who could use their government position to aid
private parties with claims against the government, the ban applies to all employees, regardless of their
position.
Similar concerns motivate the bans on employees’ serving as an expert witness for such parties130
and on being awarded government contracts. Whether these activities would constitute a violation of a
government official’s fiduciary obligation would depend on a close examination of the particular facts:
was the employee exploiting confidential information or her government position on behalf of a private
party or herself? The government has dispensed with this kind of fact-specific inquiry by enacting
broader, proxy-based restrictions.131
The ethics statutes and regulations are not pure or perfect expressions of fiduciary concerns.
They often use inexact proxies rather than addressing directly the potential harm. For example, high-level
officials and political appointees are subject to stricter regulation of their outside activities, their
acceptance of gifts, and their post-government employment. These tighter restrictions may reflect a
judgment that such employees may exercise greater discretion and thus could more severely damage the
government through the improper exercise of that discretion. Employees who are expected to work less
than six months are subject to fewer restrictions, and those expected to work less than three months are
subject to even fewer.132 This may reflect both the presumption that temporary employees are less likely
to exercise broad discretion and the concern that imposing a broad swath of ethics restrictions on them
would make them less likely to agree to serve. The ethics rules’ imperfect expression of fiduciary duty
may reflect the government’s need to accommodate other values, such as the need to obtain expertise on a
temporary basis or the desire to permit fluidity in the flow of personnel in and out of government.133
The fiduciary norms against conflicts, misuse of resources and partiality can explain most
government ethics restrictions, but not all of them. A second principle that can help explain some ethics
restrictions is the desire to promote public confidence in government.134 This appears to be the primary
motivation for the government’s varied post-employment restrictions, a seemingly ad hoc collection of
temporary and permanent bans former government employees communicating with some or all federal
officials on behalf of others;135 providing representation or advice on particular topics (e.g., treaty
130

5 C.F.R. 2635.805.
Another example of a proxy is the government’s decision to restrict compensation for certain outside activities (such as
teaching) rather than restricting the outside activity itself. PRESIDENT'S COMMISSION ON FEDERAL ETHICS LAW REFORM, TO SERVE
WITH HONOR (1989).
132
See Table II.
133
See Beth Nolan, Public Interest, Private Income: Conflicts and Control Limits on the Outside Income of Government
Officials, 87 NW. U. L. REV. 57 (1992).
134
This principle – promoting public trust – is not entirely independent of fiduciary theory because fiduciary-based restrictions
also generally promote public confidence in government. But some government ethics restrictions (including some postemployment bans) cannot be explained by fiduciary theory, and instead seem to be aimed at promoting confidence. Many postemployment restrictions fall into this category.
135
18 U.S.C. § 207(a).
131

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negotiations);136 assisting certain parties (e.g., foreign governments and political parties);137 and receiving
compensation from parties that they could have affected while in government.138
At first glance, some of these post-employment restrictions (such as the bans applicable to
particular matters in which a government employee participated personally and substantially or which
was under the employee’s responsibility) may appear to be aimed at preventing the misuse of a
government resource, confidential information. But these bans on communications with government
officials do not prohibit former employees from disclosing or using confidential information, and such
employees remain free to give advice behind-the-scenes. While Congress included a ban on such advice
in the 1978 Ethics in Government Act, it repealed that provision before it went into effect after many
argued that it would prevent appropriate fluidity between the government and the private sectors.139
One way that post-employment bans may promote public confidence is by ensuring that former
high-level officials cannot misuse the relationships that they have developed while in office. For
example, a criminal statute imposes a temporary ban on former high-level employees contacting certain
government officials, regardless of whether there is any factual nexus between their former government
work and the matter they are now handling.140 Similarly, President Obama has banned all of his
Presidential appointees who leave office from lobbying any high-level officials for the duration of his
administration.141
A third principle behind ethics restrictions is the goal of maintaining Congressional and executive
branch control of federal workers. For example, restrictions on salary supplementation and on agencies’
acceptance of volunteer services reflect Congress’s desire to control the conduct of government
operations through its appropriations power.142 A fourth goal is to ensure that workers devote adequate
attention to their duties. The limits on outside earned income for certain high-level appointees appear to
promote this goal, ensuring that these officials are not distracted by other professional duties.143 Here,
Congress has used money as a proxy for the time that an employee would devote to that other job.
Some ethics restrictions seem to be motivated not by principle but by a desire to favor or disfavor
particular groups or activities. The criminal post-employment statutes favor colleges, universities,
nonprofit hospitals and research organizations by exempting them from many of the bans on
communication and representation.144 They disfavor foreign governments and political parties,
prohibiting former high-level officials from representing them regardless of whether there is any nexus
between that representation and their former government duties.145 This disfavoring of foreign
governments has a long history, from the Constitution’s ban on certain government officials accepting

136

18 U.S.C. § 207(b).
18 U.S.C. § 207(f). See also discussion infra.
138
41 U.S.C. § 423(d) (1-year ban on former procurement officials accepting compensation from contractors with whom they did
business); 12 U.S.C. §§ 1820(k), 1786(w) (1-year ban on former bank examiners accepting compensation from banks they
examined).
139
OFFICE OF GOVERNMENT ETHICS, REPORT TO THE PRESIDENT AND TO CONGRESSIONAL COMMITTEES ON THE CONFLICT OF
INTEREST LAWS RELATING TO EXECUTIVE BRANCH EMPLOYMENT 14 (2006).
The legal ethics rule on former government officials more closely tracks the fiduciary concern with protecting
confidential information, prohibiting lawyers who are former government officials from representing someone on a matter they
worked on while in government. American Bar Association Model Rule 1.11(a). See also Model Rule 1.11(c) (prohibiting
representation where the former government official had access to confidential government information that could be use d to the
detriment of another party).
140
18 U.S.C. § 207(d).
141
Ex. Ord. 13490 (Jan. 21, 2009), 74 Fed. Reg. 4673.
142
Beth Nolan, Public Interest, Private Income: Conflicts and Control Limits on the Outside Income of Government Officials, 87
NW. U. L. REV. 57 (1992).
143
5 C.F.R. 2635.804(a); 5 U.S.C. Appx. § 501(a)(1); 5 C.F.R. §§ 2635.804(b).
144
18 U.S.C. § 207(j)(2)(B).
145
18 U.S.C. § 207(f). Another example of an ethics restriction aimed at disfavoring particular parties is the statutory ban on
accepting gifts from foreign governments. 5 U.S.C. § 7342.
137

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gifts or honorary titles from foreign nations to a 1967 statute prohibiting all government employees from
accepting gifts from foreign governments.146
Another group that has been disfavored by the Obama administration’s ethics reforms is
lobbyists. On his first full day in office, President Obama issued an executive order severely restricting
registered lobbyists’ ability to become political appointees.147 He later issued a memorandum limiting
registered lobbyists’ ability to communicate with executive branch officials regarding the Recovery Act,
requiring any such communications about particular projects to be in writing rather than oral,148 and
instructed agency heads not to appoint registered lobbyists to advisory committees, boards or
commissions.149
In singling out lobbyists for disfavored treatment, President Obama has invoked the populist
rhetoric of “reducing the undue influence of special interests.”150 These anti-lobbyist initiatives may be
aimed at preventing biases that are based not on an individual’s current financial interests but on the
individual’s past associations. Even so, these measures are both underinclusive and overinclusive. They
are underinclusive in that they do not cover someone like former Senator Tom Daschle, who advised
special interests on public policy and legislative initiatives, but did not communicate on their behalf, and
thus did not have to register as a lobbyist.151 They are overinclusive because they cover not just those
lobbyists who have worked for moneyed “special interests,” but also those who lobbied for human rights
and for children in foster care.152
III. Government Service Contracting: A $268 Billion Sector of Government Spending
In the last two decades, federal government spending has expanded, more than quadrupling from
$800 billion in FY 1983 to $3.5 trillion in FY 2009.153 (See Figure: Federal Spending.) With the
additional spending, agencies are required to perform more tasks and are given additional funding to
perform those tasks, but they have not hired additional employees to accomplish that work. In fact,
Congress has placed limits on the size of the federal employee workforce, and the number of executive
branch employees has fallen by one-eighth.154 (See Figure: Number of Executive Branch Employees.)
146

U.S. CONST. art. I, § 9, cl. 8 ("No person holding any Office of Profit or Trust . . . shall, without the Consent of the Congress,
accept of any present . . . of any kind whatever, from any King, Prince, or foreign State."); 5 U.S.C. § 7342.
147
Executive Order 13490, 74 Fed.Reg. 4673 (Jan. 21, 2009) (2-year ban on registered lobbyists seeking or accepting a political
appointment in an agency they lobbied; participating in the specific issue area they lobbied; and participating in any particular
matter on which they lobbied). The Executive Order does not define “specific issue area,” so the scope of this prohibition is
unclear.
Even as a Presidential candidate, Barack Obama refused to accept political donations from registered lobbyists. See
Obama Returns Lobbyists’ Donations, April 14, 2007 (available at http://thecaucus.blogs.nytimes.com/2007/04/14/obamareturns-lobbyists-donations/).
148
Presidential Memorandum re: Recovery Act Funds (March 20, 2009).
149
Presidential Memorandum--Lobbyists on Agency Boards and Commissions (June 18, 2010).
150
Presidential Memorandum--Lobbyists on Agency Boards and Commissions (June 18, 2010).
151
Michael Scherer, Daschle’s Problems: When is a Lobbyist Not a Lobbyist?, TIME, Feb. 3, 2009.
152
Jonathan Martin, Lobbyist Ban Limits Obama’s Options, POLITICO, March 13. 2009; Peter Baker, Nonprofit Groups Seeking
Exceptions to Lobby Rule, N.Y. TIMES, April 21, 2009.
153
Table 1.1 — Summary of Receipts, Outlays, and Surpluses or Deficits (-): 1789–2015, Budget of the United States
Government: Historical Tables Fiscal Year 2011 (available at http://www.gpoaccess.gov/usbudget/fy11/hist.html). Note that
these figures are not adjusted for inflation.
154
GAO, DEFENSE CONTRACTING: ARMY CASE STUDY DELINEATES CONCERNS WITH USE OF CONTRACTORS AS CONTRACT
SPECIALISTS 5 (2008) (noting the ceilings on the authorized number of government employees have contributed to the
government’s increased reliance on contractors). The total number of executive branch employees (including members of the
military and postal service) fell 12 per cent from 1983 to 2009, from 5.0 to 4.4 million. Office of Personnel Management, Total
Government
Employment
Since
1962
(available
at
http://www.opm.gov/feddata/HistoricalTables/TotalGovernmentSince1962.asp). See Table IV - Number of Executive Branch
Employees 1983-2009. The civilian workforce (excluding the postal service) fell from 2.1 to 2.0 million during this same time
period. Table 17.1 — Total Executive Branch Civilian Full-Time Equivalent (FTE) Employees, 1981–2011, Budget of the
United States Government: Historical Tables Fiscal Year 2011.

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Federal Spending
(trillions of dollars - adjusted for inflation)
1.8
1.6
1.4
1.2
1.0
0.8
0.6
0.4
0.2
0.0

Number of Executive Branch Employees
(in millions)
6
5
4
3
2
1
0

Agencies are meeting these additional performance requirements by expanding their use of
contractors to perform services.155 These services range from the mundane, such as hauling trash or
cleaning government offices, to the sophisticated, such as advising the government on how to respond to
climate change or the economic crisis. Contractor personnel are now performing many of the tasks that in

155
In addition to contracts, the government also uses grants and mandates to accomplish its goals while avoiding any increase in
the number of government employees. See Donald F. Kettl, After the Reforms, GOVT. EXEC. 38 (April 1998):
The federal government . . . does relatively little itself. It . . . does most of its work through contracts with the
for-profit and not-for-profit sectors, grants to state and local governments, special provisions in the tax code,
and regulations on corporate and individual behavior. . . . The Energy Department is little more than a
hollow shell over a vast network of contractors. The actual provision of services in Medicare and Medicaid
occurs through private doctors; private contractors (notably regional Blue Cross/Blue Shield operations)
process the paperwork and mail the checks.

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the past had been performed by government employees.156 As the number of government employees has
decreased, the amount of government service contracting has increased 85 percent from FY 1983 to FY
2007.157 (See Figure: Spending on Service Contracting.) In an earlier era, most of the government’s
Spending on Service Contracting
(billions of constant 1983 dollars)
140.0
120.0
100.0
80.0
60.0
40.0
20.0
0.0

contracts were for products. Now most of the government’s contracts are for services. (See Figure:
Proportion of Procurement Spending on Services v. Products.)
The government can either contract directly with an individual or with a company that then
subcontracts with individuals or hires them as employees. Using service contractor personnel rather than
government employees has sometimes resulted in controversy. For example, the Treasury Department
used the former technique to obtain the services of Dan Jester, the former Goldman Sachs official
described in this paper’s introduction who was Treasury’s point person on the AIG bailout.158 The Army,
Navy and Air Force have used the latter technique to obtain the services of retired flag officers and
civilian officials in “mentoring” and giving advice to current officers.159 In some cases, these retired
156

See PAUL R. VERKUIL, OUTSOURCING SOVEREIGNTY: WHY PRIVATIZATION OF GOVERNMENT FUNCTIONS THREATENS
DEMOCRACY AND WHAT WE CAN DO ABOUT IT (2008); JANINE R. WEDEL, SHADOW ELITE: HOW THE WORLD’S NEW POWER
BROKERS UNDERMINE DEMOCRACY, GOVERNMENT, AND THE FREE MARKET (2009); ); PAUL C. LIGHT, THE TRUE SIZE OF
GOVERNMENT (1999). For a discussion of outsourcing in foreign affairs and defense, see ALLISON STANGER, ONE NATION UNDER
CONTRACT: THE OUTSOURCING OF AMERICAN POWER AND THE FUTURE OF FOREIGN POLICY (2009); Laura A. Dickinson, Public
Law Values in a Privatized World, YALE J. INTL. L. 383 (2006).
157
This paper focuses on the government’s service contracts, as opposed to its contracts for supplies. Service contracts “directly
engage[] the time and effort of a contractor whose primary purpose is to perform an identifiable task rather than to furnish an end
item of supply.” 48 C.F.R. 37.101.
Emblematic of the contracting out of so many government functions, in 2003 the federal government contracted out the
creation of its reports on contracting, the Federal Procurement Data System, to a private contractor, Global Computer Enterprises,
Inc., a company that has a “.gov” website (www.fpds.gov). See FY 2007 Federal Procurement Report at 3.
158
Karen Weise, Treasury’s ‘Point Man’ on AIG Bailout That Benefited Goldman, Owned Goldman Stock, Pro Publica, June 30,
2010 (http://www.propublica.org/article/treasurys-point-man-on-aig-bailout-that-benefited-goldman-owned-goldman-sto). Jester
received
$30,000
from
Treasury
for
his
services.
See
http://www.usaspending.gov/search?query=jester&searchtype=JTI1N0VmcSUyNTNEJTI1MjhNYWpvckFnZW5jeSUyNTNBK
iUyNTIxKkRlcGFydG1lbnQlMjUyMG9mJTI1MjB0aGUlMjUyMFRyZWFzdXJ5KiUyNTIxKiUyNTI5. For further discussion
of Treasury’s use of contractors in response to the financial crisis, see Kathleen Clark, Conflicts of Interest in Bailout
Contracting: Unlearned Lessons from the S&L Bailout, U. MINN. L. REV. (forthcoming 2011).
159
Tom Vanden Brook, Ken Dilanian and Ray Locker, How Some Retired Military Officers Became Well-Paid Consultants:
Retired Military Officers Cash in as Well-Paid Consultants, USA TODAY, Nov. 18, 2009 (Joint Forces Command obtained

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officers who were advising the military on operations had financial ties to companies that sell products
designed to aid those same operations.160 By using these contracts, the government avoids application of
almost all the ethics restrictions described above. As a Defense Department official has explained, “one
reason that mentors are not hired as employees is so they . . . have freedom from the government ethics
bureaucracy. . . . The ethics rules constrain [government employees’] ability to consult for private
companies.”161
In some cases, an agency contracts with an entity to perform one discrete task (such as
performing a study), and the entity then uses its own personnel to perform that task on its own premises
away from a government office.162 That is the traditional model, but in recent decades, much of service
contracting has followed a different model, known as “staff augmentation” or colloquially referred to as
“body shops.”163 Body shops are companies that supply the government with laborers (“bodies”) to work
in government offices, side-by-side with government employees, and often to perform exactly the same
tasks as government employees.164 Agencies contract with body shops to supply the labor that the agency
will not or cannot hire directly, and contractor personnel engage in functions that are central to the
government’s functioning, such as defining and managing project resources, developing briefings,
financial plans and budgets, evaluating and managing programs, advising on the selection of contractors,
“making trade-off decisions among costs and capabilities,”165 and conducting management oversight.166
mentoring services of retired flag officers by contracting with Northrop Grumman, which then hired mentors as subcontractors).
The Marines contracted directly with the retired officers. Id.
160
Id. (mentors with financial ties to companies selling products designed to aid particular launch operations from ships gave
advice on exercises related to such launch operations). Up until 2010, there were no requirements that the retired flag officers
disclose their financial ties to defense contracts and no restriction on their using the information they learn on behalf of those
contractors. The Defense Department did not even collect information about these retired officers’ business affiliations. Id.
161
Id. (quoting Brig. Gen. John R. "Bob" Ranck).
162
See text accompanying note 135 (discussing Defense Department’s contract with the Institute for Defense Analyses (IDA) to
analyze the F-22 jet fighter program).
163
Steven L. Schooner, Competitive Sourcing Policy: More Sail Than Rudder? 33 PUB. CONT. L.J. 263, 291 (2004).
164
The literature on contracting refers to this phenomenon as the multi-sector or blended workforce.
165
Government Accountability Office, Defense Acquisitions: DOD’s Increased Reliance on Service Contractors Exacerbates
Long-standing Challenges (Statement of David M. Walker, Comptroller General of the United States), Jan. 23, 2008, at 1, 4.
166
GOVERNMENT ACCOUNTABILITY OFFICE, DEFENSE CONTRACTING: ARMY CASE STUDY DELINEATES CONCERNS WITH USE OF
CONTRACTORS AS CONTRACT SPECIALISTS 45-46 (2008).
Much of the public debate on government contracting has centered on whether the government has contracted out
“inherently government functions.” In theory, the government may not contract out such functions. In general, the exercise of

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The shortage of government employees is so severe, in fact, that the government is now
contracting out the contracting-out function: advising the government on how to deal with other
contractors, including developing requests for proposals, evaluating contractors’ proposals, estimating
costs, determining the fees that other contractors can earn, developing criteria for evaluating other
contractors’ work, conducting those evaluations, and identifying the government’s and other contractor’s
liabilities.167 The government refers to this as contractors involved in the acquisition function.168 I refer
to this as “meta-contracting.”169 Not surprisingly, this meta-contracting area is rife with the potential for
conflicts of interest. It is one of the first areas of contracting that has been subjected to personal conflict
of interest analysis, as discussed in the next section.
This expansion of outsourcing has occurred despite the fact that Congress has placed two legal
constraints on such outsourcing. The first constraint addresses the nature of the relationship between the
government and the outsider who is doing the government’s work. Congress prohibits agencies from
using “personal service contracts” to circumvent the civil service system unless the agency is specifically
authorized by statute to do so.170 “Personal service contracts” are contracts that result in an employeremployee relationship rather than an independent contractor relationship. Determination of whether a
particular contract is a “personal services contract” requires analysis of several factors, including whether
contractor personnel are directly supervised by a government official. In the private sector, the issue of
whether a particular individual is an employee or an independent contractor has important implications
taxes, safety standards and potential liability. In the public sector, these same implications may arise, as
does the question of whether government ethics standards apply to such individuals.
A second legal constraint on outsourcing addresses not the nature of the relationship, but the
nature of the tasks that the individual is doing for the government. Congress prohibits the contracting out
of “inherently governmental functions” (IGFs),171 but it has provided a circular definition of the term,
stating that it “means a function that is so intimately related to the public interest as to require
performance by Federal Government employees.”172 If a particular task is deemed to be “inherently
governmental,” then the government must not outsource it. But the statute does not actually define what
would constitute an “inherently governmental function.”173 The statute does explain that the term
“includes activities that require either the exercise of discretion in applying Federal Government authority
or the making of value judgments in making decisions for the Federal Government, including judgments
relating to monetary transactions and entitlements.”174 It also provides examples of some functions that
government authority constitutes an “inherently governmental function,” but giving advice about how such authority should be
exercised and assisting someone who exercises that authority do not. Office of Management and Budget, Policy Letter 92-1,
Inherently Governmental Functions, 57 Fed.Reg. 45096 (Sept. 30, 1992); Office of Management and Budget, Work Reserved for
Performance by Federal Government Employees, 75 Fed.Reg. 16188 (March 31, 2010). This paper sidesteps the debate over
“inherently government functions,” because both those who exercise government authority and those who give advice or have
fiduciary obligations and should be subject to ethics restrictions.
Another key issue is whether the government has contracted for personal services even where not authorized by statute.
See 48 C.F.R. 37.104(b). This is an empirical question that deserves further study. See infra Section VI.
167
Id.
168
This includes evaluating the work of other contractors, helping design requests for proposals, and giving the government
advice about how “to acquire desired capabilities.” Id. at 8 (2008).
169
It is important to distinguish meta-contracting, where a contractor gives the government advice about how to handle current or
future contracts, from subcontracting, where a contractor engages another company to accomplish part of the task that it has
agreed to accomplish for the government.
170
There are at least two legal exceptions to this ban on outsiders’ performing inherently government functions. USAID Personal
Service Contractors can perform these functions, as can financial agents of the Treasury Department. See Kathleen Clark,
Fiduciary-Based Standards for Bailout Contractors: What Treasury Got Right and Wrong in TARP, U. MINN. L. REV.
(forthcoming 2011).
171
105 P.L. 270, § 5(2)(A); 112 Stat. 2382 (Federal Activities Inventory Reform Act of 1998).
172
Id. The Federal Acquisition Regulations contain a similar “definition” of IGFs, largely tracking the statute. 48 CFR 2.101
173
The regulatory “definition” of inherently governmental functions found in the Federal Acquisition Regulations seems to
acknowledge this weakness, stating that “[t]his definition is a policy determination, not a legal determination.”
174
Id. at § 5(2)(B) (emphasis added).

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are IGFs, such as “bind[ing] the United States to take or not take some action,”175 and some that usually
are not, such as “providing advice, opinions, recommendations, or ideas to Federal Government
officials.”176
The government has recently moved away from an exclusive focus on whether a particular task is
or is not an IGF. Instead, it examines two additional issues. The first issue is whether the government is
contracting out tasks that are “closely associated” with inherently governmental functions (i.e., situations
in which certain tasks, “if not appropriately managed, may materially limit Federal officials’ performance
of inherently governmental functions”).177 The Obama Administration has proposed a policy to ensure
that “when such work is performed by contractors, . . . [the government must] ensure that contractors'
duties do not expand to include performance of inherently governmental functions.”178 The second issue
is the government has sufficient capacity regarding “critical functions,” which is defined as those
necessary to ensure that an agency can “effectively perform and maintain control of its mission and
operations.” The Obama Administration has directed agencies to ensure that “[f]ederal employees have
the technical skills and expertise needed to maintain [this] control.”179
The government does not know how many contractor (and subcontractor) employees perform
services for it. Secretary of Defense Robert Gates recently made the “terrible confession” that he was
unable to determine how many contractors were working for him -- not in the Defense Department as a
whole, but in the Office of the Secretary of Defense itself.180
While we have reliable data on the amount of money that the government spends on service contracts,
we do not have reliable data on the number of individuals providing those services. Paul Light has

175

Id. at § 5(2)(B):
An inherently governmental function involves, among other things, the interpretation and execution of the
laws of the United States so as-(i) to bind the United States to take or not to take some action by contract, policy, regulation,
authorization, order, or otherwise;
(ii) to determine, protect, and advance United States economic, political, territorial, property, or other
interests by military or diplomatic action, civil or criminal judicial proceedings, contract management, or
otherwise;
(iii) to significantly affect the life, liberty, or property of private persons;
(iv) to commission, appoint, direct, or control officers or employees of the United States; or
(v) to exert ultimate control over the acquisition, use, or disposition of the property, real or personal,
tangible or intangible, of the United States, including the collection, control, or disbursement of appropriated
and other Federal funds.
(emphasis added).
176
Id. at § 5(2)(C):
The term does not normally include-(i) gathering information for or providing advice, opinions, recommendations, or ideas to Federal
Government officials; or
(ii) any function that is primarily ministerial and internal in nature (such as building security, mail
operations, operation of cafeterias, housekeeping, facilities operations and maintenance, warehouse
operations, motor vehicle fleet management operations, or other routine electrical or mechanical services).
(emphasis added).
177
Agencies must give special consideration to using federal employees to perform tasks that are closely associated with the
performance of an inherently governmental function. 10 U.S.C. § 2463; Pub. L. 111-8, Omnibus Appropriations Act, 2009,
Division D, § 736. Office of Management & Budget, Work Reserved for Performance by Federal Government Employees, 75
Fed. Reg. 16,188, 16,190 (proposed Mar. 31, 2010).
178
Id.
179
Office of Management & Budget, Work Reserved for Performance by Federal Government Employees, 75 Fed. Reg. 16,188,
16,190 (proposed Mar. 31, 2010) (“agencies must . . . take special care to retain sufficient management oversight over how
contractors are used to support government operations and ensure that Federal employees have the technical skills and expertise
needed to maintain control of the agency mission and operations.”).
180
Dana Priest and William M. Arkin, National Security, Inc., WASH. POST, July 20, 2010. (“‘This is a terrible confession,’
[Gates] said. ‘I can't get a number on how many contractors work for the Office of the Secretary of Defense,’ referring to the
department's civilian leadership.”).

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asserted that federal contractor personnel outnumber government employees by a factor of 1.8 to 1,181 but
his estimate includes not just jobs at contractors, but also jobs created indirectly through contract
spending, such as jobs at the grocery stores and dry cleaners that serve contractor personnel.182 The
Defense Department reported that nearly 600,000 contractor personnel provided services in FY 2008, but
the GAO determined that the Defense Department’s methodology was flawed, underestimating the actual
number.183 Congress is considering legislation to require each agency in the executive branch to report on
the number of contractor personnel providing services.184 Mandating that service contractors disclose the
number of individuals working on their contracts (and in turn requiring agencies to report those numbers)
will help the executive branch, Congress and outside observers get a handle on the scope of service
contracting.
While the phenomenon of contracting out services is not new,185 policy makers are only just
beginning to grapple with this reality of an outsourced workforce. The Chair and Ranking Member of the
Senate Homeland Security and Government Affairs Committee recently “expressed shock” that
contractor personnel outnumber government employees in the Department of Homeland Security.186
IV. The Few Ethics Restrictions on Government Contractor Personnel
Most of the government ethics statutes and regulations described in Section II of this paper do not
apply to government contractor personnel, even those employees working side by side with and
performing the same functions as government employees. As a result, government contractor personnel
may routinely be giving advice that is tainted by conflicts of interest. The government does not collect
information on the conflicts of interest of contractor personnel, so it is impossible to know the extent of
the problem. But as the following discussion shows, the government has imposed ethics restrictions on
only a few narrow slices of the service contractor workforce.
A. Distinguishing Organizational from Personal Conflicts of Interest
In considering government contractor ethics, it is important to distinguish between two different
types of restrictions: those that address the conflicts of interest of outside organizations that obtain
contracts (known as Organizational Conflicts of Interest or OCIs), and those that address the conflicts of
interest of the individuals actually performing the work (known as Personal Conflicts of Interest or PCIs).
An OCI arises when contractor personnel have access to government resources or can exercise discretion
in a way that could benefit the contractor.187 For example, an OCI exists if the employee of a contractor
evaluates on behalf of the government work performed by her employer.
The issue of OCIs often arises in the context of bid protests: where one company contests the
government’s decision to award a contract to another company, and argues that the award was improper.
181

In 2005, there were 7.5 million employees of federal contractors. PAUL LIGHT, THE TRUE SIZE OF GOVERNMENT. That same
year, the Office of Management and Budget reports that there were 4.1 million executive branch employees, including those
serving in the military and postal service. Office of Personnel Management, Total Government Employment Since 1962
(available at http://www.opm.gov/feddata/HistoricalTables/TotalGovernmentSince1962.asp).
182
PAUL C. LIGHT, THE TRUE SIZE OF GOVERNMENT 22 (1999). Light explains that his methodology begins with the dollar figures
reported in the FPDS, considers the Standard Industrial Code (SIC) associated with each contract, and then uses the “job
multipliers supplied by the Bureau of Economic Analysis [BEA] input-output model of the economy.” Id. at 19; August 20, 2010
telephone conversation with Paul Murphy, who conducted the research for Paul Light).
183
The National Defense Authorization Act for FY 2008 required DoD to report on the number of contractor personnel providing
services. 10 U.S.C. § 2330a(c) GAO, DEFENSE ACQUISITIONS: OBSERVATIONS ON THE DEPARTMENT OF DEFENSE SERVICE
CONTRACT INVENTORIES FOR FISCAL YEAR 2008 (Jan. 29, 2010).
184
H.R. 5136, National Defense Authorization Act for FY 2011, § 850.
185
See PAUL LIGHT, THE TRUE SIZE OF GOVERNMENT (1999).
186
Senate Homeland Security and Government Affairs Committee, Lieberman, Collins Astounded DHS Contract Workers
Exceed Number Of Civilian Employees (Press Release), Feb. 24, 2010.
187
Matter of: Aetna Government Health Plans, Inc., B-254397.15 (GAO 1995).

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In the seminal GAO bid protest case based on an OCI, a company that had lost its bid for a contract to
provide health services argued that the award was tainted by a conflict of interest because the government
hired a consultant to write the criteria for the contract award, and that consultant had a contractual
relationship with the winning company. The adjudicating agency agreed with this argument and
recognized that the government must guard against organizational conflicts of interest in awarding
contracts.188
The government has addressed OCI in its contracting regulations (the Federal Acquisition
Regulation or FAR), and defines an OCI as a situation in which a contractor’s activities or relationships
render it “unable or potentially unable to” provide “impartial assistance or advice,” or indicate that its
“objectivity in performing the contract work is or might be otherwise impaired.”189 The regulation
indicates that contracting officers need to identify such conflicts and avoid or mitigate them,190 but does
not explain how contracting officers should gather the information needed to discern that such conflicts
exist.191 These organizational conflict of interest regulations now form the basis for numerous bid protest
decisions, and there is a body of law and an infrastructure for implementing these principles through
standards and training.192 But some have criticized these regulations because they place the burden on
government officials to identify conflicts without specifying how the official can learn of them.193 The
onus of identifying OCIs is on the contracting officer prior to an award, and the government is not
required to monitor OCIs after the award of a contract.194
A personal conflict of interest or PCI arises when the employee of a contractor has access to
government resources, can exercise discretion in a way that could benefit herself or another person or
organization with whom she is associated, or can allocate government benefits among third parties. For
the most part, the government does not monitor or regulate contractors’ PCIs, as the following story
illustrates.
In 2006, the Defense Department needed an independent assessment of whether to extend its
controversial contract for the F-22 jet fighter, and commissioned the Institute for Defense Analysis (IDA)
to conduct that study. IDA is a federally chartered contractor (known as a Federally Funded Research and
Development Center or FFRDC).195 The then-President of IDA, retired admiral Dennis C. Blair, owned
hundreds of thousands of dollars of stock in and served on the board of one of the F-22’s subcontractors
and would benefit financially if the government extended the contract. Blair participated in the review of
the F-22 program, and IDA did not disclose Blair’s financial interest in it. IDA recommended that the
government extend the F-22 program for a three-year contract, and its recommendation was pivotal in the
government’s decision to do so. The existence of this financial conflict of interest came to light only after

188

Id.
48 C.F.R. 2.101. The government adopted these regulations in 1984. See Daniel I. Gordon, Organizational Conflicts of
Interest: A Growing Integrity Challenge, 35 PUB. CONT. L.J. 25, 30-31 (2005). The regulation also includes a third type of
organizational conflict: where the contractor’s activities or relationships give it “an unfair competitive advantage.” This type of
OCI is aimed at ensuring a level playing field among contractors rather than protecting the government’s fiduciary interest. See
Daniel Guttman, Organizational Conflict of Interest and the Growth of Big Government, 15 HARV. J. LEGIS. 297 (1978).
190
48 C.F.R. 9.504.
191
REPORT OF THE ACQUISITION ADVISORY PANEL 405 (2007).
192
Congress recently mandated that the executive branch examine whether these organizational conflict rules are adequate, §
841(b)(1) of the Duncan Hunter National Defense Authorization Act for Fiscal Year 2009, and that the Defense Department
tighten organizational conflict rules for contractors that are involved in the contracting function. § 207 of the Weapon Systems
Acquisition Reform Act of 2009. The Defense Department issued proposed rule for comment on April 22, 2010. DFARS Case
2009-D015.
193
NATIONAL PROCUREMENT FRAUD TASK FORCE LEGISLATION COMMITTEE, PROCUREMENT FRAUD: LEGISLATIVE AND
REGULATORY REFORM PROPOSALS 17 (2008).
194
GOVERNMENT ACCOUNTABILITY OFFICE, CONTINGENCY CONTRACTING IMPROVEMENTS NEEDED IN MANAGEMENT OF
CONTRACTORS SUPPORTING CONTRACT AND GRANT ADMINISTRATION IN IRAQ AND AFGHANISTAN 20 (2010).
195
The regulations authorizing FFRDCs require that they “be free from organizational conflicts of interest,” 48 CFR
35.017(a)(2), but does not require they also be free from personal conflicts of interest.
189

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a watchdog group found a reference to Blair’s holdings in SEC filings, prompting press scrutiny and a
Defense Department Inspector General investigation.196
While a criminal statute prohibits government employees from participating in matters that can
have a direct and predictable effect on their own financial interest and a regulation prohibits high-level
government employees from receiving compensation for serving on corporate boards of directors,197 these
restrictions do not apply to contractor personnel. Thus, Dennis Blair could legally be involved in
evaluating a program that could affect his financial interests.
While the government began addressing OCIs in the 1960s and adopted executive-branch wide
regulations to limit them decades ago, only a few agencies have adopted regulations addressing
contractors’ PCIs. As the following section will make clear, the government has imposed PCI restrictions
on only a few slivers of the vast contracting world.
B. Current Ethics Restrictions on Government Contractor Personnel
The government’s approach to regulating the ethics of contractors has been largely reactive rather
than proactive. After a government official admitted that the agency in charge of bank bailouts had “no
way of knowing whether any conflicts of interest exist among the thousands” of contractors it had
hired,198 Congress enacted statutory reforms subjecting any employees of FDIC contractors who are
supervised by FDIC managers to government ethics statutes and regulations, and required the FDIC to
adopt comprehensive ethics regulations for all other contractor personnel.199 After Congress investigated
the financial conflicts of interest of the president of a Federally Funded Research and Development
Center (FFRDC), the Defense Department instituted personal conflict of interest guidelines for
FFRDCs.200 After a series of USA TODAY articles about retired flag officers who worked both as
consultants for the Pentagon and for defense contractors, Secretary of Defense Robert Gates instituted a
new policy requiring that those consultants be hired only as SGEs so that they will be subject to the
financial disclosures and other ethics restrictions applicable to part-time government employees. After
the GAO issued several reports identifying ethical problems created by meta-contracting, the government
issued proposed regulations addressing personal conflicts of interest in that narrow field.201 But the
potential for conflicts exists on a much broader scale than just meta-contracting. It exists anytime
contractor personnel exercise discretion on behalf of the government or have access to government
resources.
196
PROJECT ON GOVERNMENT OVERSIGHT, PREYING ON THE TAXPAYER: THE F-22A RAPTOR (2006) (available at
http://www.pogo.org/pogo-files/reports/national-security/f-22a-raptor/ns-f-22a-raptor-2006.html#12); DEPARTMENT OF DEFENSE
OFFICE OF INSPECTOR GENERAL, REPORT OF INVESTIGATION: ALLEGED CONFLICT OF INTEREST: ADMIRAL DENNIS C. BLAIR, U.S.
NAVY (RETIRED) PRESIDENT, INSTITUTE FOR DEFENSE ANALYSES 15 (2006); R. Jeffrey Smith and Renae Merle, Leader of Panel
That Endorsed Jet Program Has Ties to Contractor, WASH. POST, July 25, 2006, D1.
197
18 U.S.C. § 208.
198
James Risen, S&L Bailout Agency is Ripe for Fraud, GAO Tells Congress, L.A. TIMES, Sept. 25, 1990, p.D1 (quoting the
director of the Resolution Trust Corporation’s asset management division). The Resolution Trust Corporation was a temporary
agency whose activities were taken over by the FDIC at the end of 1995.
199
12 U.S.C. § 1822(f), 103 Pub. L. 204, § 19(a) (Act of Dec. 17, 1993); 12 C.F.R. Part 366. Congress also subjected all FDIC
contractor personnel to the criminal prohibition on bribes and illegal gratuities. 12 U.S.C. § 1822(f)(1)(B).
FDIC’s contractor conflict of interest regulations originally applied to all of its service contractors. Contractor
Conflicts of Interest, Interim Final Rule, 61 Fed. Reg. 9590 (March 11, 1996). The agency later revised those regulations so that
they would not apply to contractors that provide “incidental or housekeeping service[s],” such as food service, janitorial and mail
delivery. Minimum Standards of Integrity and Fitness for an FDIC Contractor, Interim Final Rule, 67 Fed. Reg. 34591 (May 15,
2002).
200
Under Secretary of Defense (Acquisition, Technology & Logistics), Memorandum: Federally Funded Research and
Development Center (FFRDC) Avoidance of Conflict of Interest (COI) (Jan. 26, 2007). See GOVERNMENT ACCOUNTABILITY
OFFICE, DEFENSE CONTRACTING: ADDITIONAL PERSONAL CONFLICT OF INTEREST SAFEGUARDS NEEDED FOR CERTAIN DOD
CONTRACTOR EMPLOYEES 21-22 (2008); PROJECT ON GOVERNMENT OVERSIGHT, PREYING ON THE TAXPAYER: THE F-22A RAPTOR
(2006) (available at http://www.pogo.org/pogo-files/reports/national-security/f-22a-raptor/ns-f-22a-raptor-2006.html#12).
201
74 Fed. Reg. 58584 (Nov. 13, 2009).

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Until 1989, the executive branch’s approach to ethics regulation was primarily decentralized and
ad hoc.202 Each agency and department had its own set of ethics regulations. As a result, there was wide
variation across agencies in the regulation of gifts, financial conflicts, negotiation for future employment,
and other ethics concerns. In 1990, President George H.W. Bush issued an executive order requiring the
Office of Government Ethics (OGE) to develop regulations that would apply across the entire executive
branch.203 Agencies could then seek OGE’s permission to issue supplemental departmental ethics rules if
they had concerns not sufficiently protected by the executive branch-wide regulations. This endeavor –
centralizing and rationalizing ethics regulation – enabled the government to make strides in simplifying
and clarifying its ethics regime.
The regulation of government contractors’ ethics is now at a stage similar to where the
government ethics regulation was decades ago, before OGE undertook to bring rationality and uniformity
to government ethics regulation. Congress and a few agencies have addressed contractor personnel ethics
in a few narrowly defined areas, usually in response to specific scandals.
1. Location of Ethics Standards: Statutes, Regulations, Formal Policies and Ad Hoc
Contractual Clauses
The government has taken a variety of approaches in imposing ethics restrictions on contractor
personnel, from a few statutes that are broad enough to reach not just government employees but also
contractors, to regulations specifically aimed at contractor personnel, formal policies imposing such
restrictions, and the ad hoc use of contract clauses addressing the ethics of contractor personnel. Several
agencies have adopted specific substantive standards that contractor personnel must follow, and then
require contractors to implement those standards. Other agencies, such as the Defense Department, have
delegated to contractors not just implementation but also the decision of which specific substantive
standards to adopt.204
While most of the ethics statutes apply only to government employees, a few of them apply to
anyone “acting on behalf of the government,” and thus reach contractor personnel performing services for
the government. The criminal prohibitions on bribery and illegal gratuities have this broader language,205
and the government has successfully prosecuted contractor personnel for accepting bribes in connection
with their work for the government.206 The criminal prohibition on disclosure of sensitive procurement
information and the prohibition on serving as a foreign agent also have this broader reach.207 The
predecessor to the current criminal financial conflict of interest statute covered anyone who “acts as an . .
. agent of the United States,”208 but when Congress overhauled ethics statutes in 1962, it narrowed the
scope to just officers and employees.209
While the government has not yet adopted any executive branch-wide ethics restrictions on
contractor personnel, in 2009 it issued a proposed regulation for contractor personnel engaged in meta202

See PRESIDENT’S COMMISSION ON FEDERAL ETHICS LAW REFORM, TO SERVE WITH HONOR 92 (1989).
Ex. Ord. 12731, 55 Fed.Reg. 42547 (Oct. 17, 1990), § 201.
204
Under Secretary of Defense (Acquisition, Technology & Logistics), Memorandum: Federally Funded Research and
Development Center (FFRDC) Avoidance of Conflict of Interest (COI) (Jan. 26, 2007) (requiring FFRDCs to to have a conflict
of interest plan covering gifts, outside activities and financial conflicts).
205
18 U.S.C. § 201(a). In addition, Congress enacted an anti-kickback statute that reaches contractor and subcontractor
personnel. 41 U.S.C. § 51 et seq.
206
See GAO, DEFENSE CONTRACTING: ARMY CASE STUDY DELINEATES CONCERNS WITH USE OF CONTRACTORS AS CONTRACT
SPECIALISTS 11 (2008) (describing 2006 bribery convictions of contractor personnel at the Space and Naval Warfare Systems
Center and the Coalition Provisional Authority in Iraq for steering contracts). See also Dixson v. United States, 465 U.S. 482
(1984) (bribery statute reaches non-governmental organization employee who administered federal grants).
207
41 U.S.C. § 423; 18 U.S.C. § 219.
208
18 U.S.C. § 434. The seminal Supreme Court case interpreting this statute, United States v. Mississippi Valley Generating
Co. (also known as the Dixon-Yates case) involved a conflict of interest not of a regular government employee but of an unpaid
part-time consultant.
209
18 U.S.C. § 208(a).
203

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contracting.210 In addition, at least seven executive branch agencies have issued regulations imposing
ethics restrictions on the employees of some of their contractors.211 These regulations are generally
narrow in scope, covering only certain types of contractors. For example, personal conflict of interest
regulations adopted by the Department of Health and Human Services cover contractors involved with the
Medicaid Integrity Audit Program.212 Even with respect to covered contractors, the regulations generally
restrict only certain types of conflicts of interest rather than imposing more comprehensive restrictions.
The U.S. Agency for International Development (USAID), for example, restricts the financial investments
and outside employment of its contractors’ employees who are stationed abroad, but does not restrict their
receipt of gifts.213
Some agencies without contractor ethics regulations have nonetheless adopted formal policies
addressing conflicts of interests among their contractor personnel. For example, while the Defense
Department has no regulations addressing contractor personnel conflicts, it has issued three distinct
policies address these issues in particular contexts. In 2007, after the controversy concerning Dennis
Blair’s conflict of interest in evaluating the F-22 program, the Department issued a policy requiring its
Federally Funded Research and Development Centers (FFRDCs) to screen their employees for conflicts
of interest.214 In 2009, the Undersecretary of Defense for Acquisition, Technology & Logistics issued a
memorandum noting that the risk of personal conflicts of interest increases when contractor personnel are
tasked to make subjective judgments on behalf of the government.215 While the memorandum indicated
that the Defense Department “acquisition community must consider the risks of a contractors’ employee
having PCIs,” and discussed six personal conflict of interest scenarios, it did not explain how to identify
such conflicts or what to do about them once they are identified.216 In 2010, after a series of USA TODAY
articles about retired generals and admirals serving as mentors, Secretary of Defense Gates imposed a
new requirement that such retired flag officers be hired as employees (with the concomitant ethics
protections) rather than as contractors.217
Some agencies have addressed this issue in a more ad hoc fashion rather than in a more
systematic way by including personal conflict of interest clauses in their contracts.218 For example, before
USAID adopted a regulation on personal conflicts of interest, it included such provisions in some of its
contracts, and later adopted a regulation prohibiting contractor personnel who are assigned to work in a
foreign country from engaging in a business, investing or loaning money to a business in that country.219
210

Proposed Rule on Preventing Personal Conflicts of Interest for Contractor Employees Performing Acquisition Functions, 74
Fed. Reg. 58584 (Nov. 13, 2009).
211
Agencies that have adopted regulations imposing ethics restrictions on at least some of their contractors include the Agency
for International Development (USAID), the Department of Energy, the Environmental Protection Agency, the Federal Deposit
Insurance Corporation, Department of Health and Human Services, the Nuclear Regulatory Commission, and the Treasury
Department.
212
42 C.F.R. 455.238.
213
48 C.F.R. 752.7027.
214
Under Secretary of Defense (Acquisition, Technology & Logistics), Memorandum: Federally Funded Research and
Development Center (FFRDC) Avoidance of Conflict of Interest (COI) (Jan. 26, 2007).
215
Ashton B. Carter, Under Secretary of Defense for Acquisition, Technology and Logistics, Memorandum re: Personal Conflicts
of Interest (PCIs) of Contractors’ Employees (Nov. 24, 2009).
216
Id. [sic].
217
The Department of Health and Human Services has imposed ethics restrictions on Program Integrity contractors by including
such provisions in its Program Integrity Manuals.
218
See GAO, DEFENSE CONTRACTING: ARMY CASE STUDY DELINEATES CONCERNS WITH USE OF CONTRACTORS AS CONTRACT
SPECIALISTS 15, 48-52 (2008) (Air Force Electronic Systems Center and the Army Communications Electronics Lifecycle
Management Command have used clauses requiring contractors to certify that their employees do not have any personal
conflicts, or by requiring individual employees of contractors to sign agreements not to disclose certain sensitive information they
learn through their work).
219
USAID included a personal conflict of interest provision in a contract with Harvard University to advise the Russian
government on developing securities regulations. When Harvard employees disregarded those restrictions and invested in Russia
equities, that contractual provision formed the basis for a False Claims Act lawsuit against Harvard and those employees. United
States v. Harvard, 323 F.Supp.2d 151 (D. Mass. 2004). USAID’s regulation provides an exception for contractor personnel who

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The General Services Administration includes conflict of interest clauses in contracts for auditing and
brokerage services but apparently not in contracts for other services.220 Some Defense Department
components include personal conflict of interest clauses in their contracts for meta-contracting services,221
but few offices use such clauses for other services.222 Several agencies include confidentiality clauses in
their contracts to prevent contractor personnel from misusing confidential information.223
2. Substantive Ethics Restrictions on Contractor Personnel
This section provides a brief overview of some of the existing regulations imposing ethics
standards on government contractor personnel. Seven agencies have adopted regulations imposing such
standards on at least some of their contractor personnel.224 Many of these regulations are quite narrow,
applying only to a limited range of the agency’s contractors and imposing only a few restrictions on them.
For example, one agency has a regulation imposing ethics standards on contractor personnel who work
overseas, but that regulation simply prohibits those individuals from making investments or practicing a
profession in the foreign country where they are working.225
While the federal government’s regulation of contractor personnel ethics is generally spotty, two
agencies have taken a more comprehensive approach. The FDIC regulates the ethics of all its service
contractors’ employees, and has adopted regulations addressing their financial conflicts, gifts, outside
employment and activities, their use of government resources (including information), and activities after
the end of the contract.226 USAID imposes the full panoply of statutory and regulatory government ethics
restrictions on individuals with whom it has personal service contracts.227
Among these various regulations, one can find restrictions in four of the five substantive
categories of ethics regulation: financial influences, misuse of government resources, outside activities
and employment after the end of the contract. (See Table VII listing selected agency regulations.) The
remainder of this section will discuss how different agencies have regulated financial influences on
contractor personnel, their misuse of government resources (including information), outside activities and
employment after the end of a contract.
are citizens or legal residents of that foreign country. 48 C.F.R. 752.7027(e). This sort of exception is logical since those
individuals would already be expected to have an allegiance to that country through their status as citizen or legal resident.
220
Letter from GSA Inspector General Brian Miller to Kathleen Clark, July 20, 2010 (on file with author).
221
GAO, DEFENSE CONTRACTING: ARMY CASE STUDY DELINEATES CONCERNS WITH USE OF CONTRACTORS AS CONTRACT
SPECIALISTS 9 (2008) (“all DoD offices we reviewed that used contractor employees in the source selection process use
additional safeguard controls such as contract clauses designed to prevent personal conflicts of interests”). One Air Force office
had started using such a clause by the late 1990s. Id. at 15.
222
GAO, DEFENSE CONTRACTING: ARMY CASE STUDY DELINEATES CONCERNS WITH USE OF CONTRACTORS AS CONTRACT
SPECIALISTS 13 (2008) (only 6 of the 21 program officers had personal conflict of interest safeguards for contractor personnel
who provide advice and assistance on governmental decisions).
223
GAO, DEFENSE ACQUISITIONS: DOD’S INCREASED RELIANCE ON SERVICE CONTRACTORS EXACERBATES LONG-STANDING
CHALLENGES (2010).
224
The seven agencies with regulations addressing contractor personnel personal conflicts of interest are the Agency for
International Development, 48 C.F.R. 752.7027, Department of Energy, 48 C.F.R. 970.0371, Department of Health and Human
Services, 42 C.F.R. 455.238, Department of Treasury, 31 C.F.R. 31.214, Environmental Protection Agency, 48 C.F.R. 1552.20973, Federal Deposit Insurance Corporation, 12 C.F.R. Part 366, and Nuclear Regulatory Commission, 48 C.F.R. 2052.209.
225
See also 31 C.F.R. 31.200 (Department of Treasury regulations apply only to its TARP contractors); 225 48 C.F.R. 970.0371
(Department of Energy regulations apply only to its Management and Operations contractors); 48 C.F.R. 1552, 1503 (EPA
regulations apply only to its major Superfund contractors and outside bid evaluators.) See Table VII.
226
48 C.F.R. Part 366. See Table VII.
227
48 C.F.R. Ch. 7 Appendix D, § 7(m) (“The contractor receives and understands the USAID General Notice entitled
"Employee Review of the New Standards of Conduct" . . . .”); telephone interview with Amit Khardori, Attorney Advisor,
USAID Office of General Counsel (Feb. 25, 2011).
USAID has statutory authority to contract for personal services in its work outside the United States, 22 U.S.C. §
2396(a)(3), and treats these individual contractors as government employees for the purposes of ethics statutes and regulations.
USAID imposes a much narrower set of restrictions on the employees of organizations with whom it contracts for other services.
See infra discussion of 48 C.F.R. 752.7027.

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In discussing restrictions on financial influences, it is important to remember that most contractor
personnel are not bound by any financial conflict of interest restriction.228 But a handful of agencies have
adopted restrictions to prevent financial conflicts of interest among their contractors’ personnel. Agencies
have taken a range of approaches. USAID prohibits certain contractor personnel from making one
specific class of investments -- investing in businesses in the foreign country where they are performing
USAID work.229 But most agencies take a more general approach, prohibiting:
 financial interests “that could adversely affect . . . [the individual’s] objectivity or judgment,”230
 “conflict[s] of interest . . . that “may diminish [the individual’s] capacity to perform . . .
impartial[ly or] . . . objective[ly],”231
 a “financial interest . . . that relates to the services . . . perform[ed] under the contract,”232
 a “personal concern” that “may be incompatible with the government’s interest,”233 and
 “a relationship . . . with an entity that may impair the objectivity of the employee . . . in
performing the contract work.”234
These agency regulations do not explain which interest, concerns and relationships they prohibit, and their
scope is less clear than the financial conflict standard applicable to government employees, which
prohibits them from participated personally and substantially in matters in which they have a financial
interest.235
While the financial conflict of interest standards for government employees reach not just an
individual employee’s own interests but also those of her family members, organizations with which she
is associated, and anyone with whom she is negotiating for future employment,236 most contractor ethics
regulations reach only the contractor employee’s individual interests. One exception is the Treasury
Department’s new regulations for TARP contractors, which also addresses the interests of the contractor
employee’s “spouse, minor child, or other family member with whom the individual has a close personal
relationship.”237
Financial influences can include not just investments but also the receipt of gifts. Agencies have
taken a variety of approaches in restricting the receipt of gifts by contractor personnel. One agency
prohibits contractor personnel from soliciting or accepting gifts from any entity “reviewed, audited,
investigated, or contacted” under the contract, regardless of the employee’s particular duties.238 Other
agencies take a narrower approach, prohibiting contractor personnel from accepting gifts from anyone
who could be affected by the performance of their duties.239 The Energy Department takes an even
narrower approach, prohibiting gifts from individuals or organizations with whom the contractor is doing
228

Thus, as a contractor employee, Dennis Blair was able to participate in the evaluation of the F-22 fighter jet even though he
owned substantial stock in an F-22 subcontractor that would be affected by any decision whether to continue the program.
229
48 C.F.R. 752.7027. USAID’s approach is similar to certain financial conflict of interest provisions that restrict all of an
agency’s employees from owning certain types of investment, regardless of whether the particular employee has the authority to
exercise discretion in a way that could benefit that investment. See supra note 37.
230
31 C.F.R. 31.201 (Treasury Department regulation addressing TARP contractor personnel personal conflicts of interest).
231
48 C.F.R. 1503.104-5 (applicable to non-government employees who evaluate bids).
232
12 C.F.R. 366.10(a)(1).
233
48 C.F.R. 970.0371-6.
234
48 C.F.R. 1552.209-73(b) (EPA Superfund contracts in excess of simplified acquisition threshold).
235
18 U.S.C. § 208(a); 5 C.F.R. 2635.401 et seq.
236
18 U.S.C. § 208.
237
31 C.F.R. 31.212 (defining a personal conflict of interest to include “a personal, business, or financial interest of an individual,
his or her spouse, minor child, or other family member with whom the individual has a close personal relationship, that could
adversely affect the individual's ability to perform under the arrangement, his or her objectivity or judgment in such performance,
or his or her ability to represent the interests of the Treasury” (emphasis added)).
In addition, the Medicaid Integrity regulations indicate that it would be a conflict of interest for a contractor employee
to accept a job offer from an entity that is being reviewed. 42 C.F.R. 455.238. That regulation does not directly prohibit
contractor personnel from accepting such job offers. Instead, it states that an employee acceptance of a job offer would constitute
a post-award conflict of interest, and in response the government can terminate, modify, or choose not to renew the contract.
238
42 C.F.R. 455.238(b)(1) (Medicaid Integrity Audit Program ).
239
31 C.F.R. 31.213(a)(1) (Treasury); 12 C.F.R. 366.12(d)(1) (FDIC).

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business only where “circumstances which might reasonably be interpreted as an attempt to influence the
recipient[] in the conduct of [his] duties.”240
Of the agencies surveyed, only the FDIC and Treasury have regulations restricting the use of
government property,241 and only the FDIC explicitly prohibits contractor personnel from providing
preferential treatment.242 While five agencies have regulations imposing confidentiality obligations on
contractor personnel, these obligations vary in scope. The EPA’s regulation covers “information relating
to the proposal” that the contractor employee is evaluating.243 Other regulations cover any information
protected from disclosure under the Privacy Act and FOIA, “nonpublic information,” or “privileged
information.” The FDIC’s regulation reaches any information obtained in connection with the contract,
but exempts information that is “generally available to the general public.”
Six agencies have regulations restricting the outside employment of contractors’ employees.
Some regulations are very general in approach, prohibiting any “business . . . or financial . . . relationship
that relates to services . . . perform[ed] under the contract,”244 while others identify specific types of
employment that are prohibited because of their nexus to the subject of the contract. For example,
Treasury prohibits TARP contractors who are involved with the management or disposition of assets from
purchasing those assets,245 and prohibits those involved with the purchase of assets from selling them.246
Two agencies have regulations addressing the outside activities of contractor personnel. The FDIC
prohibits its contractor personnel from engaging in any activity that would impair their independence,
from having relationships that relate to the services they are performing, and from participating as a party
or representing a party in litigation against it.247 Treasury prohibits management officials and “key
personnel” of its TARP contractors from engaging in other transactions with Treasury regarding TARP
assets.
Finally, two agencies have regulations imposing narrowly tailored restrictions on the employment
options available to contractor personnel after they leave the contractor or the contract ends. The FDIC
imposes a three-year ban on contractor personnel acquiring assets on which they performed services,248
and the Nuclear Regulatory Commission imposes a one-year ban on contractor personnel working for a
licensee.249
3. Implementation Mechanisms and Sanctions
Government agencies have adopted, to a limited degree, some of the same mechanisms to
implement ethics restrictions on contractor personnel that exist for government employees: training,
advice, mandated disclosure and review of those disclosures, investigation of alleged violations and
sanctions for violations. In addition, some agencies have required contractor personnel with access to
confidential information to sign nondisclosure agreements.250 But just as in the case with substantive
restrictions, their use of these implementation mechanisms for contractor personnel is spotty and
inconsistent.
240

48 C.F.R. 970.0371-4.
12 C.F.R. 366.12(d)(2); 31 C.F.R. 31.213(a)(2).
242
12 C.F.R. 366.12(a). Similarly, employees for Medicaid Integrity Audit Program contractors may not work for “any entity
that is reviewed, audited, investigated, or contacted” under the contract, 42 C.F.R. 455.238(b)(1), and employees for certain
NRC contractors may not work for a “NRC licensee or applicant undergoing an NRC audit, inspection, or review.” 48 C.F.R.
2052.209-72(c)(2).
243
48 C.F.R. 1503.104-5 (EPA).
244
12 C.F.R. 366.10(a)(1) (FDIC).
245
31 C.F.R. 31.214(a).
246
31 C.F.R. 31.214(b).
247
12 C.F.R. 366.10(a).
248
12 C.F.R. 366.10.
249
48 C.F.R. 2052.209-72.
250
GOVERNMENT ACCOUNTABILITY OFFICE, STRONGER SAFEGUARDS NEEDED FOR CONTRACTOR ACCESS TO SENSITIVE
INFORMATION 30 (Sept. 2010).
241

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The Environmental Protection Agency (EPA) requires individuals who evaluate bids to certify
that they do not have any conflicts of interest that could diminish their capacity to act impartially and that
they will not disclose or misuse the information they learn.251 This approach – requiring certification of
no financial conflicts rather than comprehensive disclosure of financial interests – is less intrusive of the
privacy of contractor personnel. But its efficacy in preventing conflicts depends on the ability of
contractor personnel to understand what would constitute a conflict and to apply that knowledge to their
own investment portfolio.
In November 2009, the executive branch proposed new regulations to address personal conflicts
of interest of contractor personnel who are involved in meta-contracting.252 These draft regulations would
require contractors to screen their employees for conflicts of interest by requiring that employees annually
disclose their financial interest to the contractor.253 Contractors would be required to inform their
employees of the personal conflict of interest standards, verify their employees’ compliance with those
standards, discipline employees who violate them and report any violations to the contracting officer.254
The government would become involved only if the contracting officer suspects a violation, or if the
contractor notifies the contracting officer of a violation and requests a waiver from the head of the
contracting agency.255
Violation of the contractor ethics standards can result in a range of sanctions. The government
can modify the contract, refuse to renew it, or terminate the contract. A conflict of interest may result in a
contractor’s disqualification. Inaccurate statements on certifications or disclosures may result in
debarment, False Claims Act lawsuits,256 and criminal prosecution.
V. Recommendations: Ethics Standards for Contractor Personnel
As Section III described, the government has outsourced huge swaths of its work to the private sector.
It has chosen to do so because of certain perceived benefits: the ability to obtain expertise without going
through the unwieldy process of hiring government employees;257 the flexibility to obtain services quickly

251

48 C.F.R. 1503.104-5.
Proposed Rule on Preventing Personal Conflicts of Interest for Contractor Employees Performing Acquisition Functions, 74
Fed. Reg. 58584 (Nov. 13, 2009).
253
The draft regulation requires contractor personnel to update their financial disclosures at least annually, and whenever a new
personal conflict arises. § 3.1101. It defines personal conflict as any “financial interest, personal activity, or relationship that
could impair the employee’s ability to act impartially and in the best interest of the Government when performing under the
contract,” including compensation, investments, gifts, travel expense reimbursement, intellectual property interest of the
“employee, close family members, or other members of the household.” § 3.1101.
254
74 Fed. Reg. 58584 (Nov. 13, 2009) (proposed regulations).
255
§§ 3.1105, 3.1103, 3.1104.
256
The government has brought False Claims Act cases on the theory that a contractor’s failure to disclose a conflict of interest
constitutes an implied false certification. See e.g., United States v. Harvard, 323 F.Supp.2d 151 (D. Mass. 2004); Harrison v.
Westinghouse Savannah River Co., 176 F.3d 776 (4th Cir. 1999) (false certification to Department of Energy that contractor had
no conflicts of interest); United States v. Science Applications International Corp., 2010 U.S. App. LEXIS 24808 (D.C. Cir.
2010) (recognizing false certification theory, but vacating jury verdict based on collective knowledge standard).
A key issue that arises in these cases is the appropriate measure of damages. Defendants argue that the government
incurred no damages because the defendants provided the services requested. The government argues that the entire cost of the
contract should be refunded because the government contracted for unbiased services. The D.C. Circuit recently rejected both
positions, deciding that the amount of damages is “the amount the government actually paid minus the value of the goods or
services the government received or used.” In a case involving an implied false certification that the contractor had no
organizational conflicts of interest, the district court accepted the government’s measure of damages. United States v. Science
Applications International Corp., 2010 U.S. App. LEXIS 24808 (D.C. Cir. 2010). There may well be substantial uncertainty
regarding the value of expert services that are tainted by a conflict of interest.
257
National Commission on the Public Service, Urgent Business for America: Revitalizing the Federal Government for the 21st
Century 27, 29 (2003). PARTNERSHIP FOR PUBLIC SERVICE, CLOSING THE GAP: SEVEN OBSTACLES TO A FIRST-CLASS FEDERAL
WORKFORCE 4 (2010).
252

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in response to a crisis258 or on a short-term basis;259 the possibility of saving money and gaining efficiency
by using the private sector;260 and the political benefit of being able to claim a smaller government
without the political cost of actually decreasing government services.261
Some critics of contracting have expressed concern that individual members of the public are not
adequately protected against abuses by contractor personnel who do not take an oath of office and are not
subject to the Constitution, the Freedom of Information Act or other laws that can hold government
employees accountable.262 This paper focuses on a different issue: whether the government has
adequately protected itself from contractor personnel.263
A. Proposed Substantive Standards for Contractor Personnel Ethics
While we do not know how often contractor personnel have acted in ways that would be prohibited if
they had been government employees, the examples of Dan Jester and Dennis Blair suggest that the
government is vulnerable to such abuse. As the government delegates more services to contractor
personnel, it becomes vulnerable to abuses by those employees.264
Some commentators have suggested that contractor personnel should not be subject to the same
ethics restrictions that apply to government employees because many contractors already impose ethics
restrictions on their employees.265 The government already requires its largest contractors to have their
own internal ethics codes,266 but it does not require that those codes prohibit employees with personal
conflicts of interest from working on government contracts.267 Most corporate ethics codes are aimed at
preventing their employees from acting in a way that is disloyal to the corporation, not disloyal to the
corporation’s client, the government.268 A GAO report found only a few examples of contractors with
conflict of interest policies that protect the government.269 Some of these codes address the financial
258

See Steven L. Schooner & Daniel S. Greenspahn, Too Dependent on Contractors? Minimum Standards for Responsible
Governance, 6 J. CONTRACT MGMT. 9 (Summer 2008) (discussing the government’s extensive use of contractors after initiating
two wars in a two-year period); MARK K. CASSELL, HOW GOVERNMENTS PRIVATIZE: THE POLITICS OF DIVESTMENT IN THE UNITED
STATES AND GERMANY (2003) (describing the Resolution Trust Corporation’s extensive use of contractors in the early 1990s to
respond to the savings and loan crisis).
259
Steven J. Kelman, Achieving Contracting Goals and Recognizing Public Law Concerns: A Contracting Management
Perspective, in GOVERNMENT BY CONTRACT: OUTSOURCING AND AMERICAN DEMOCRACY 153 (Jody Freeman and Martha Minow,
eds. 2009).
260
But see Bernard D. Rostker, Robert S. Leonard, Obaid Younossi, Mark V. Arena, and Jessie Riposo, Cost Controls: How
Government Can Get More Bang for Its Buck, RAND REVIEW (April 2009) (reporting on several studies indicating that contractor
personnel cost more than government employees).
261
PAUL LIGHT, THE TRUE SIZE OF GOVERNMENT (1999).
262
See Gillian E. Metzger, Privatization As Delegation, 103 COLUM. L. REV. 1367 (2003); Laura A. Dickinson, Public Law
Values in a Privatized World, YALE J. INTL. L. 383 (2006); Daniel Guttman, Public Purpose and Private Service, The Twentieth
Century Culture of Contracting Out and the Evolving Law of Diffused Sovereignty, OECD J. BUDGETING 861 (2003); Dru
Stevenson, Privatization of Welfare Services: Delegation by Commercial Contract, 45 ARIZ. L. REV. 83 (2003); David H.
Rosenbloom and Mei Jen Hung, Administrative Law and Culture for the U.S. Collaborative Governance State, 2009 J. DISP.
RES. 327.
263
While the government has not adequately protected its own interests, it has used its procurement policy to promote the
interests of many other constituencies, including laborers 48 C.F.R. 22.403-1 et seq., the blind, 48 C.F.R. 8.700 et seq., small
businesses, 48 C.F.R. 19.000 et seq., historically black colleges, 48 C.F.R. 26.300 et seq., and potential victims of human
trafficking. 48 C.F.R. 22.1700 et seq.
264
The Obama administration may have reversed this trend by encouraging agencies to in-source services.
265
Letter from Alan Chvotkin to Meredith Murphy commenting on FAR Case 2007-017 “Service Contractor Employee Personal
Conflicts of Interest” at 2 (July 17, 2008).
266
FAR Subpart 3.10.
267
Cf. 42 C.F.R. 414.912 (requiring Medicare Drug Contractors to have a code of conduct addressing “conflicts of interest
between the [contractor] and any entity, including the Federal Government, with whom it does business”).
268
GOVERNMENT ACCOUNTABILITY OFFICE, DEFENSE CONTRACTING: ADDITIONAL PERSONAL CONFLICT OF INTEREST SAFEGUARDS
NEEDED FOR CERTAIN DOD CONTRACTOR EMPLOYEES 18 (2008).
269
GOVERNMENT ACCOUNTABILITY OFFICE, DEFENSE CONTRACTING: ADDITIONAL PERSONAL CONFLICT OF INTEREST SAFEGUARDS
NEEDED FOR CERTAIN DOD CONTRACTOR EMPLOYEES 9 (2008) (“only three [out of 18 contractors with conflict of interest

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conflicts of individual employees, but unlike the government ethics regulations, they do not attribute to
the employee the financial interests of their spouses or other family members.270 At least one contractor
has required all professional employees annually to submit a financial disclosure form modeled on a
federal form, requiring disclosure of the employee’s or a household’s financial interest in contractors that
are involved in the defense programs on which the employee works.271
Are additional ethics standards needed for contractor personnel? GAO asked Defense
Department program officers whether the government should impose additional ethics standards for
contractor personnel. While all recognized the need for ethics standards in meta-contracting, few had
implemented such standards for other services and some opposed imposing new restrictions. They noted
that government officials -- rather than contractor personnel – are ultimately responsible for making
decisions; and that additional restrictions will impose additional costs, and could deter some from
contracting work.272 Even if a government official is ultimately responsible for a final decision, there can
be no doubt that contractor personnel now advise the government about those decisions, and the ethics
rules for government employees appropriately reach both those who make decisions and those who give
advice. The other concerns, cost and deterring others from bidding on contracts, are legitimate, and in
identifying mechanisms to implement ethics standards, the government should consider how to reduce the
cost to contractors and the inconvenience to contractor personnel.273
It is quite a challenge to develop the right approach to applying ethics principles to government
contractor personnel. At the extremes, one could either exempt all government contractor personnel from
all ethics restrictions or impose the full panoply of ethics restrictions on all government contractor
personnel.274 Of course, neither of these approaches is satisfactory. The government has for the most part
taken the former approach,275 leaving it vulnerable to abuse by contractor personnel. The other extreme -reflexively imposing every government ethics restriction on all contractor personnel -- may provide only
limited benefit for the government while imposing substantial costs, such as imposing ethics restrictions
on contractor personnel (such as those mowing lawns) who are not in a fiduciary position.
This paper recommends an alternative approach. As a preliminary matter, one must first
determine which ethical principles are appropriately applied to contractors. Ethics restrictions on
government employees reflect four distinct principles: (1) the fiduciary nature of public office; (2) public
confidence in government; (3) Congressional and executive branch control of workers; and (4) ensuring
that officials devote adequate attention to their responsibilities. Of these four, the first and third principles
appear to be the most compelling and should also be applied to the employees of government contractors.
To the degree that contractor personnel influence government decisions or have access to
government resources, they – like their government employee counterparts – owe fiduciary duties. They
are in a position to use that influence or resource for their own or another private purpose. It is

policies] directly require their employees to identify potential personal conflicts of interest with respect to their work for DOD so
they can be screened and mitigated by the firms”).
270
GOVERNMENT ACCOUNTABILITY OFFICE, DEFENSE CONTRACTING: ADDITIONAL PERSONAL CONFLICT OF INTEREST SAFEGUARDS
NEEDED FOR CERTAIN DOD CONTRACTOR EMPLOYEES 19 (2008).
271
GOVERNMENT ACCOUNTABILITY OFFICE, DEFENSE CONTRACTING: ADDITIONAL PERSONAL CONFLICT OF INTEREST SAFEGUARDS
NEEDED FOR CERTAIN DOD CONTRACTOR EMPLOYEES 20 (2008).
272
GOVERNMENT ACCOUNTABILITY OFFICE, DEFENSE CONTRACTING: ADDITIONAL PERSONAL CONFLICT OF INTEREST SAFEGUARDS
NEEDED FOR CERTAIN DOD CONTRACTOR EMPLOYEES 25 (2008).
273
Cf. National Commission (2003) (discussing need to simplify financial disclosure requirements for government employees).
274
Cf. Letter from A.R. Hodgkins to Diedra Wingate commeting on FAR Case 2007-017 at 5 (May 27, 2008) (“the full panoply
of laws and regulations applicable to Government employees are inappropriate for application to even that subset of [contractor]
employees whose roles may raise PCI concerns”).
275
There are a few exceptions where the government has imposed ethics restrictions on contractor personnel. See Section IV,
supra.

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appropriate to put in place restrictions that help ensure that contractor personnel know about and do not
violate their fiduciary duties.276
The third principle – Congressional and executive branch control of workers – has particular
resonance with regard to contractor personnel. While the federal government has engaged in large-scale
outsourcing of services, it has not closely monitored this outsourcing, and does not yet have an accurate,
comprehensive inventory of the services contractors provide and the number of contractor personnel
providing them. While it is appropriate for the government to delegate to contractors the day-to-day
monitoring of particular contractor personnel, the government should be able to exercise control over
contractor-provided services on a more global level. To do that, it must first get a handle on the number
of contractor personnel who are performing those services. While Congress has passed legislation
requiring an inventory of contractor-provided services, the government also needs to develop an accurate
census of contractor personnel. Only with this information can the government exercise an appropriate
level of control over the contractor personnel who are working indirectly on its behalf.
There is a less compelling case for expressing the remaining two principles in the regulation for
contractor personnel. While the second principle -- public confidence in government -- is a legitimate
concern, it can largely be addressed by imposing fiduciary-based restrictions that actually protect the
public trust rather than simply respond to public perception. The government can address the fourth
principle – ensuring that workers devote adequate attention to their work -- in the structure of contracts
themselves rather than imposing an extra layer of regulation on contractor personnel. By using fixedprice rather than time-and-materials contracts, the government can effectively delegate to the contractor
the responsibility and incentive to ensure that contractor personnel perform diligently.
This paper argues that the government should gather sufficient information about service
contractor personnel so that it can exercise control over their work, and that it should impose on those
employees ethics restrictions that reflect their fiduciary position. The next step is to determine which
types of fiduciary-based restrictions are most appropriate in this context.
A few of the fiduciary-based restrictions already apply to contractor personnel. The criminal
prohibitions on bribery, illegal gratuities, revealing sensitive procurement information and acting as an
agent for a foreign government apply not just to government employees, but also to any “person acting for
or on behalf of the United States.”277 An earlier iteration of the financial conflict of interest statute took a
similar approach. It applied not just to employees, but also to agents,278 and the leading Supreme Court
decision construing that statute dealt with a government consultant who worked on an unpaid, part-time,
temporary basis.279 A contracting fraud task force recently recommended that the criminal financial
conflict of interest statute be amended to cover contractor personnel who are involved in meta276

The fact that a contractor employee may also owe duties to her direct employer – the contractor – does not diminish the
fiduciary duties she owes to her employer’s client, the government. This situation of a contractor employee is analogous to that
of a law firm associate. Both owe fiduciary duties to the employer’s client.
277
18 U.S.C. § 201(a); 18 U.S.C. § 219(c); 41 U.S.C. § 423(a)(2)(A). See also 5 U.S.C. § 7342(a)(1)(B) (restriction on gifts from
foreign governments and international organizations applies not just to employees, but also to some outside experts and
consultants).
278
The predecessor statute, 18 U.S.C. § 434, repealed by Act of Oct. 23, 1962, Pub. L. 87-849 § 2, 76 Stat. 1126:
Whoever, being an officer, agent or member of, or directly or indirectly interested in the pecuniary profits or
contracts of any corporation, joint-stock company, or association, or of any firm or partnership, or other
business entity, is employed or acts as an officer or agent of the United States for the transaction of business
with such business entity, shall be fined not more than $2,000 or imprisoned not more than two years, or
both.
(emphasis added). While the predecessor statute was broader than its replacement in that it reached not just employees
but also agents, it was narrower than its replacement in that it applied only to “transaction[s] of business with . . .
business entit[ies,], whereas the replacement applied to any “proceeding, application, request for a ruling or other
determination, contract, claim, controversy, charge, accusation, arrest or other particular matter.” 18 U.S.C. § 208(a),
Pub. L. 87-840, 76 Stat. 1124.
279
United States v. Mississippi Valley Generating Co., 364 U.S. 520 (1961) (government contract for purchase of power plant
was unenforceable where government consultant that advised the government on contract negotiations was employee of bank that
would benefit from construction of plant).

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contracting.280 But the problem of contractor conflicts of interest is not limited to the meta-contracting
context, and the government should take a more comprehensive approach.
Two components of the FDIC’s approach to contractor ethics appear to be particularly attractive
and worth emulating. First, contractor personnel who act like government employees (i.e., those who
perform functions or activities of the executive branch and are directly supervised by government
managers) are deemed to be government employees for the purpose of government ethics restrictions.281
Interestingly, while Congress mandated that the FDIC take this approach, in practice the FDIC has not
The executive branch can – and should -- unilaterally impose the full panoply government ethics
regulations on such contractor personnel.282 It does not need statutory authority to do so.283 On the other
hand, applying government ethics statutes (including the criminal prohibition on financial conflicts) on
such contractor personnel will require legislation.284 Adopting this realistic (rather than formalistic)
approach toward individuals who are formally independent contractors (or contractor personnel) but act
like government employees can prevent future “Dan Jester” problems: where agencies avoid application
of government ethics standards by “hiring” individuals as independent contractors.
Second, the executive branch should adopt comprehensive ethics restrictions for all of its service
contractors. The FDIC took this approach more than a decade ago, adopting regulations on the financial
influences on contractor personnel, their use of government resources, outside activities, and postemployment activity. The FDIC’s experience in administering this ethics regime demonstrates that a
comprehensive approach to contractor personnel ethics is possible.
The FDIC’s regulations provide a useful starting point, but in some cases, specific regulations
adopted by other agencies appear to better address fiduciary concerns. As an initial matter, it is important
to recognize that some services, such as lawn mowing, do not place contractor personnel in a fiduciary
position, and fiduciary-based restrictions should not be imposed on those contractor personnel.
Therefore, agencies should have the ability to exempt from coverage those service contracts that do not
place contractor personnel in a fiduciary position. The Treasury Department takes this approach,
authorizing the TARP Chief Compliance Officer to exempt contracts for “administrative services” from
its conflict of interest regulations.285
Another aspect of the TARP regulations worth emulating is its provision on financial conflicts of
interest. It reaches not just the interests of the individual employee of a contractor, but also his “spouse,
minor child, or other family member with whom the individual has a close personal relationship.”286 On
280

NATIONAL PROCUREMENT FRAUD TASK FORCE LEGISLATION COMMITTEE, PROCUREMENT FRAUD: LEGISLATIVE AND
REGULATORY REFORM PROPOSALS 16-17 (2008) (recommending an expansion of the statute on financial conflicts, but not the
other criminal conflict of interest statutes).
281
12 U.S.C. § 1822(f)(1)(B).
282
The regulatory language could closely follow the model of the FDIC statute. 12 U.S.C. § 1822(f)(1)(B). Here is proposed
regulatory language:
“Any individual who, pursuant to a contract or any other arrangement, performs functions or activities of the
executive branch, under the direct supervision of an officer or employee of the executive branch, shall be
deemed to be an employee of the executive branch for purposes of the ethics and conflict of interest rules and
regulations issued by the Office of Government Ethics, including those concerning employee conduct,
financial disclosure, and post-employment activities.”
283
While the FDIC adopted its comprehensive ethics regulations for contractors in response to a statutory mandate, 12 U.S.C. §
1822(f)(3), the executive branch could impose ethics regulations on service contractor personnel without any additional statutory
authority. Most of the agency regulations on contractor ethics were not adopted in response to specific statutory mandates.
284
Proposed statutory language would be:
“Any individual who, pursuant to a contract or any other arrangement, performs functions or activities of the
executive branch, under the direct supervision of an officer or employee of the executive branch, shall be
deemed to be an employee of the executive branch for purposes of title 18, United States Code.”
285
See 31 C.F.R. 31.200(b).
286
31 C.F.R. 31.212 (defining a personal conflict of interest to include ““a personal, business, or financial interest of an
individual, his or her spouse, minor child, or other family member with whom the individual has a close personal relationship,
that could adversely affect the individual's ability to perform under the arrangement, his or her objectivity or judgment in such
performance, or his or her ability to represent the interests of the Treasury” (emphasis added)).

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the regulation of outside activities, while the FDIC has both specific, narrowly tailored restrictions (such
as litigating against the FDIC287) and broader, somewhat vague prohibitions (such as engaging in an
activity that would impair independence288). Rather than imposing a broad and vague prohibition on all
service contractor personnel, the government should define with greater precision what types of outside
activities would impair an individual’s independence.
Only two agencies have adopted regulations restricting the activities of contractor personnel after
the end of the contract, and both are narrow in scope. The FDIC prohibits contractor personnel who have
performed services on specific assets from purchasing assets for three years,289 and the NRC prohibits
contractor personnel who have performed work at the site of an NRC licensee or applicant from seeking
work from or working for that licensee or applicant for one year.290 The FDIC’s regulation appears to be
aimed at preventing the abuse of confidential information about FDIC assets. The NRC’s regulation
appears to be aimed at preventing a contractor employee’s current work for the agency from being
influenced by the prospect of future employment by an entity regulated by the agency. The narrow reach
of these regulations suggests that appropriate reach of post-employment restrictions is quite contextdependent. Rather than adopting a post-employment rule that would apply across the entire executive
branch, individual agencies need to identify those types of situations where concerns about the protection
of confidential information or potential bias (based on the prospect of future employment) should be
addressed through post-employment restrictions.
The following section discusses the government’s options for implementing these fiduciary-based
standards.
B. Proposed Mechanisms for Implementing Contractor Personnel Ethics
In addition to the challenges of creating the appropriate ethics standards for contractor personnel,
it will be necessary to create mechanisms for implementing them. The protection provided by substantive
ethics standards will be illusory unless those standards are accompanied by implementation
mechanisms.291 The substantive ethics standards for government employees are implemented through
training, advice, mandated financial disclosures, review of those disclosures, investigation of alleged
violations, employment discipline and prosecutions. The government must decide whether to implement
its ethics standards for contractor personnel through criminal, regulatory or contractual prohibitions, and
whether to provide for enforcement through criminal prosecution, civil fines, False Claims Act litigation,
debarment or other contractual remedies.
A key issue in implementing the substantive ethics standards outlined above is whether
responsibility for implementation and enforcement will be centralized within a single office in the federal
government;292 relegated to individual contracting officers who already have responsibility for identifying
and addressing organizational conflicts of interest; distributed among contractor-ethics point persons in
the various federal agencies;293 or delegated to the government’s many contractors themselves.
In addition, the Medicaid Integrity regulations indicate that it would be a conflict of interest for a contractor employee
to accept a job offer from an entity that is being reviewed. 42 C.F.R. 455.238. That regulation does not directly prohibit
contractor personnel from accepting such job offers. Instead, it states that an employee acceptance of a job offer would constitute
a post-award conflict of interest, and in response the government can terminate, modify, or choose not to renew the contract.
287
12 C.F.R. 366.10(a)(2).
288
12 C.F.R. 366.10.
289
12 C.F.R. 366.10(a)(3).
290
48 C.F.R. 2052.209-72.
291
See LIBRARY OF CONGRESS, A COUNTRY STUDY: SOVIET UNION (FORMER) (available at http://lcweb2.loc.gov/cgibin/query/r?frd/cstdy:@field(DOCID+su0219)) (the Soviet constitution purported to guarantee certain political rights, but did not
include mechanisms for the protection of those rights).
292
The government has a central office for developing contracting policies: the Office of Federal Procurement Policy, located
within the Office of Management and Budget.
293
Each federal agency has a Designated Agency Ethics Officer who administers the financial disclosure requirements and
provides ethics advice and training. The government may want to consider creating within each agency the position of

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The responsibility to recognize and resolve organizational conflicts of interest has been placed on
contracting officers, and some observers have complained that these officials do not have the information,
expertise, inclination or resources to detect and respond adequately to these conflicts.294 Contracting
officers’ primary concern is the efficient administration of the procurement system, not careful adherence
to ethical standards. Once again, the FDIC appears to provide the best practice for dealing with personal
conflicts of interest. While FDIC contracting officers are charged with reviewing contractors’ assertions
regarding conflicts,295 they must forward all conflict issues to the contracting unit of the agency’s general
counsel’s office, which then undertakes a review of the conflict.296 This separation of responsibility helps
ensure that someone trained in ethics concerns will address conflicts that arise.
The issue of how to implement financial conflict of interest standards on contractor personnel is
quite complicated. While the government requires hundreds of thousands of its own employees to file
financial disclosure forms that are then reviewed by ethics officials, this may not be the optimal
approach.297 The FDIC does not require contractor personnel to fill out annual financial disclosure forms,
but does require them to certify to the contractor whether they have any financial or other conflicts that
would violate the FDIC’s standards,298 and then requires contractors to certify whether their employees
have any such conflicts.299
This certification model is similar to the federal government’s approach in monitoring the
conflicts of interest of employees of recipients of research grants. Institutions receiving those grants have
the responsibility – and freedom -- to develop and administer conflict of interest disclosure programs for
their own employees.300 The Treasury Department’s TARP regulations mandate financial disclosures
from contractor personnel, and a proposed regulation currently under consideration would impose such an
obligation on contractor personnel involved in meta-contracting.301 The government should not expand
financial disclosure requirements until it evaluates the relative merits of other approaches that are less
burdensome and more narrowly tailored to addressing legitimate ethical concerns.
If a contractor’s certification that its employees have no personal conflicts is false, it may form
the basis for a civil lawsuit or criminal prosecution under the False Claims Act. The government has
used this approach with respect to both personal and organizational conflicts of interest, and has filed
False Claims Act suits where contractors made false certifications.302
One such case stemmed from a USAID contract with Harvard University to assist the Russian
government in the development of its capital markets. While there was no statutory or regulatory
mandate to do so, USAID incorporated into its contract a provision requiring Harvard to prohibit the
employees who worked on this project from investing in equities in Russia. After the government learned
that the leaders of the Harvard program had invested in Russian companies, USAID rescinded the

“Designated Agency Contracting Officer,” and placing on that official the responsibility for monitoring contractors’ compliance
with ethics norms.
294
In 2010, the Defense Department proposed regulations that would require contractors that have identified an organizational
conflict of interest after a contract award to disclose the conflict to the Contracting Officer. 75 Fed. Reg. 20954 (April 22,
2010).
295
FDIC, ACQUISITION PROCEDURES, GUIDANCE AND INFORMATION § 1.309(a) (2008).
296
FDIC, ACQUISITION PROCEDURES, GUIDANCE AND INFORMATION § 1.306(b) (2008).
297
These paper-based forms take extensive amounts of time for individual employees to fill out, and require the disclosure of
information that may have no clear relation to application of financial conflicts standards.
298
12 C.F.R. § 366.14(a).
299
12 C.F.R. 366.14(c).
300
See 42 C.F.R. 50.601 et seq.
301
FAR Case 2008-025, Preventing Personal Conflicts of Interest for Contractor Employees Performing Acquisition Functions,
74 Fed.Reg. 58584 (November 13, 2009) (proposing 48 C.F.R. 3.1103(a)(1)).
302
See, e.g., cases cited in note 173; but see United States ex rel. Siewick v. Jamieson Science and Engineering, 214 F.3d 1372
(D.C. Cir. 2000) (rejecting case premised on false certification of no conflict because law was unsettled).

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contract and filed a civil False Claims Act lawsuit against those employees and Harvard. The suit
survived a motion to dismiss, and eventually the parties settled the case for $31 million.303
The tale of Harvard and USAID might suggest to some that we can rely on False Claims Act
lawsuits to ensure the integrity of government contractors. But not all agencies include this kind of
conflict of interest provision in their contracts, and even those that do must resort to lengthy and
expensive litigation to enforce these norms. The better approach would be to clarify the ethics standards
with which contractor personnel must comply, provide them with clear training on those standards, and
ensure adequate disclosure so that contractors can be held accountable in an efficient manner when they
violate those standards. The FDIC requires contractors to agree to employ only individuals who comply
with the ethics standards for contractors,304 and to train their employees about those standards.305 The
government should impose these obligations on all service contractors across the entire executive branch.
VI. The Need for Additional Empirical Research
The contracting out of government services is of enormous significance, both in terms of the
many important services being outsourced, and in terms of the hundreds of billions of dollars the
government spends every year for these services. In the course of performing these services, contractor
personnel exercise discretion and have access to government resources. They are in a position to abuse
that discretion and those resources. This paper has laid out the case that the government needs to prevent
such abuses by imposing ethics standards on the employees of those service contractors.
This paper has also described several significant gaps in the empirical information about
individuals performing services on behalf of the government. Addressing these issues will enable the
government to make more informed decisions about the relative need for ethics restrictions and the
relative costs of different options for imposing them. This section identifies four of the most critical
empirical questions.
The number of people who have individual contracts to perform services for the
federal government, and whether they are covered by the government ethics rules.
This paper began with a description of Dan Jester, a former Goldman Sachs official whose individual
contract with the Treasury Department apparently enabled him to avoid coverage of the financial conflict
of interest statute that applies to government employees. More than 130 agencies have authority to enter
into service contracts with experts and consultants,306 but it is unclear how many agencies use that
authority and how many individuals are hired through this contract mechanism. While Treasury
apparently viewed Jester as exempt from government ethics restrictions, it is unclear whether consultants
and experts hired in this way are considered “employees,” and thus subject to government ethics
standards.307
The number of individuals performing such services under non-contract vehicles,
such as grants, and the government’s experience with imposing ethics restrictions on
those individuals.
303

U.S. Attorney’s Office, Harvard Defendants Pay Over $31 Million to Settle False Claims Act Allegations, Reports U.S.
Attorney,
Aug.
2,
2005
(press
release)
(available
at
http://www2.prnewswire.com/cgibin/stories.pl?ACCT=104&STORY=/www/story/08-03-2005/0004081794&EDATE=).
304
12 C.F.R. 366.14(d).
305
12 C.F.R. 366.12(b).
306
GOVERNMENT ACCOUNTABILITY OFFICE, AMERICA COMPETES ACT: NIST APPLIED SOME SAFEGUARDS IN OBTAINING EXPERT
SERVICES, BUT ADDITIONAL DIRECTION FROM CONGRESS IS NEEDED 19 (2009) (More than 130 agencies can “obtain temporary or
intermittent services of experts and consultants under 5 U.S.C. § 3109.”)
307
Id. (it is unclear whether agencies obtaining these services must “appoint[] individuals as federal employees . . . or . . . [can]
award[] personal services contracts in accordance with the FAR [Federal Acquisition Regulation]”).

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While this paper has focused on contractors, the government actually awards more money in grants
than in contracts.308 A significant portion of these grants are for research, and the government has more
than a decade of experience in imposing ethics guidelines on the recipients of research grants.
While the government has not directly imposed restrictions on the employees of grant recipients, it
has required those recipients to set up systems for monitoring their employees’ conflicts of interest,
including requirements that individuals working on government grants annually disclose to their
employer any conflicting interests or certify that no conflicts exist. Thus, in the research sphere, we have
more than a decade of experience with delegated monitoring. The government should evaluate grant
recipients’ record of monitoring to see whether that method has sufficiently protected the public’s interest
in unbiased research.
Government contractors’ record in monitoring and reporting their own
organizational conflicts of interest.
For more than a decade, the government has relied on its contractors to disclose their own
organizational conflicts of interest or to certify that they had no such conflicts. In at least one case, the
government alleged that a contractor’s certification was false, and filed a False Claims Act lawsuit
premised on those false certifications.309 In deciding whether to delegate to contractors the task of
monitoring their employees’ personal conflicts, it would be prudent to assess contractors’ track record in
monitoring and disclosing their organizational conflicts.
Whether annual financial disclosures have been effective in preventing financial
conflicts of interest among government employees.
The government’s primary method of preventing financial conflicts of interest among its own
employees is by requiring hundreds of thousands of them to file annual financial disclosures. These
disclosure requirements impose significant costs on the employees who must file them (both their time
and their privacy) and on the government (such as the time that ethics officials spend reviewing these
forms). Such costs may be justified if annual disclosures are effective in preventing conflicts.
But an annual disclosure form becomes out-of-date as soon as an employee buys or sells stock,
and ethics officials’ review of that disclosure is effectively out of date as soon as an employee’s job
responsibilities change (such as when she moves from one matter to another). The TARP regulations take
this same approach,310 and proposed personal conflict of interest regulation for meta-contracting would
greatly expand this requirement.311 Before imposing this expensive implementation mechanism on
contractor personnel, the government should determine how effective annual disclosures have been and
whether another approach (such as requiring employees to certify with respect to particular tasks that they
have no conflicts) would be more effective.
Conclusion
Well into the twentieth century, the law allowed product liability suits only where there was
privity between the parties. As a result, manufacturers were immune from tort liability as long as they did
not enter into contractual relations with the ultimate consumers or those affected by their defective
products. Eventually, as the complexity of the modern production and distribution system revealed the
308

From Fiscal Years 2000 to 2010, the federal government spent 16.5% more on grants ($4.97 trillion) than it spent on
contracts ($4.27 trillion). See Table VIII.
309
United States v. Science Applications International Corp., 2010 U.S. App. LEXIS 24808 (D.C. Cir. 2010).
310
31 C.F.R. 31.217.
311
74 Fed. Reg. 58584 (Nov. 13, 2009).

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problems with the formalistic approach, the common law adjusted, and recognized the appropriateness of
imposing on the manufacturer the responsibility for making safe products, regardless of whether there
was privity between the manufacturer and the injured party.312 This more realistic approach ushered in an
era when consumers were able to recover from manufacturers, and manufacturers had the incentive to
protect consumers from defective products.
A similar change is needed with respect to government contractor personnel. We need to
recognize employees’ ethical obligations to the government regardless of whether those individual
employees have a contractual relationship with the government. Ethics needs to follow function, not
formalism.
The current black and white distinction between government employees (who are subject to a full
panoply of government ethics restrictions) and contractor personnel (most of whom are subject to none)
might have made some sense in an earlier era where contractors provided mostly products rather than
services. But the last two decades have witnessed a dramatic outsourcing of government functions to
contractors. Contractor personnel are giving advice, making recommendations, and providing services
that used to be the exclusive province of government employees. Government ethics regulation needs to
catch up with the reality of outsourced government and needs to address the ethics issues that arise when
contractor personnel are doing the government’s work.
As discussed above, for decades, the government’s approach to ethics regulation has been
primarily reactive rather than proactive. Perhaps it will continue with this approach and wait until an
enterprising journalist uncovers a scandal caused by the lack of ethics standards for contractor personnel.
The government should not wait for that enterprising journalist to identify the disaster that has been
caused by our lax approach to government contractor ethics, but should take action to address contractor
personnel ethics before the next ethics disaster occurs.
The government should impose comprehensive ethics standards on the employees of its service
contractors. For more than a decade, one agency, the FDIC, has imposed such ethics regulations on its
contractors. The government should build on the FDIC’s experience and impose such regulations across
the entire executive branch.

312
Products Liability, WEST’S ENCYCLOPEDIA OF AMERICAN LAW (2005) (“The history of the law of product liability is largely a
history of the erosion of the doctrine of privity, which states than an injured person can sue the negligent person only if he or she
was a party to the transacdtion with the injured person.”).

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Table I:
Ethics Restrictions on Executive Branch Employees, SGEs & Contractor Personnel
Citation

Restriction

Constitutional provision:
accepting “any
present, Emolument,
Art. I, § 9, cl. 8
Office, or Title, of
(Emoluments
any kind whatever,
Clause)
from any King,
Prince, or foreign
State”
Criminal statutes:
Bribery; illegal
18 U.S.C. § 201
gratuity
Receive
compensation for
18 U.S.C. § 203
representing others
against US
18 U.S.C. § 205

Represent others
against US

18 U.S.C. § 208

Participating in a
matter that has a
direct & predictable
effect on financial
interest of

self

family memberv

employer

prospective
employervi

affiliated
organizationvii

Applies to:
(all employees unless indicated
otherwise)

Applies to SGEs?
SGEs 60+ days

SGE <60 days

Application to Contractor
Personnel

“Person[s] holding any Office of Profit
or Trust” (i.e., exercising
governmental authority)i

“officer or employee or person acting
for or on behalf of the United States”

“officer or employee”

Yes
Yes if matter involves specific parties &:

SGE participated in the matter while
in government;iii or
if matter is pending in
SGE’s agencyiv
Yes, except SGEs who serve on FACA
committee where

the matter is of general applicability
& would affect SGE or SGE’s
employer in a way similar to other
class members;viii or

agency official certifies that need for
SGE’s services outweighs the COI;ix

the SGE is a nonvoting representative
on a FDA-created FACA committee
& the SGE’s financial interest arises
from the class she represents;x or

the FACA committee deals with
medical products & the SGE’s
financial interest arises from
o her employment at a
hospital that could use or
sell the product or
o the use or prescription of

Yesii

No

No

No

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the product for patientsxi
18 U.S.C. § 209

Salary
supplementation

“officer or employee of the executive
branch ”

Yes if SGE is paid by governmentxii

No

18 U.S.C. § 219

Serve as agent for
foreign principal

“officer or employee or person acting
for or on behalf of the United States”

Yes unless agency head certifies that
SGE’s employment is required in the
national interest.xiii

Yes

41 U.S.C. § 423

Disclosure of
sensitive
procurement
information

“present or former official . . . or a
person acting . . . on behalf of, or who .
. . has advised the United States with
respect to, a federal agency
procurement”

Non-criminal statutes:
Political activities
5 U.S.C. §
on- and off-duty
7321-26
(Hatch Act)

5 U.S.C. § 7342

5 U.S.C. § 7351

5 U.S.C. § 7353

Gifts from foreign
governments &
international
organizations
Gifts from
subordinates
gifts from parties that
could be effected by
employee’s duties or
by her agency

Employees

Yes

Yes while SGE is conducting government
business

No

Employees, “expert or consultant who
is under contract under section [5
U.S.C. § 3109 . . . including, in the
case of an organization performing
services under such section, any
individual involved in the performance
of such services”

Yes

Employees

Yes

No

“officer or employee ”

Yes

No

Yes

No




5 U.S.C. Appx.
§ 101

Yes

employee excepted from
competitive service by reason of
confidential or policymaking
character;xiv or
appointed pursuant to 5 U.S.C.
§ 3105xv

Public Financial
Disclosure


Employees > GS-15, or receiving
at least 120% of minimum GS-15
payxvi

Yesxvii

But may be
allowed
confidential
disclosure if
SGE provides
services
specially
needed & it is

<60 SGEs must file
confidential (rather
than public)
disclosuresxix

Yes if expert or consultant
“hired” under 5 U.S.C. § 3109

No

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unlikely that
outside
employment
and financial
interests will
create a
COIxviii


5 U.S.C. Appx.
§ 501(a)(1)

5 U.S.C. Appx.
§ 502

Limiting outside
earned income to
$26,955xxii
Permit employee’s
name to be used by
firm that provides
professional services
involving a fiduciary
relationship
Receive
compensation for:

practicing
profession that
involves a
fiduciary
relationship;

affiliating with
firm that
provides
professional
services
involving
fiduciary
relationship;

serving as
officer or board
member of any
association,
corporation or
other entity

teachingxxiv

White House employees with a
commission or appointment from
the Presidentxx

Noxxi

No

Noncareer employees above GS-15
(i.e., senior-level political appointees)

Noxxiii

No

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18 U.S.C. §
1913

Lobbying with
appropriated funds

26 U.S.C. §
1043

Certificate of
divestiture

26 U.S.C. §
4941

Imposing a tax on
compensation &
other transactions
between private
foundations & high
level government
officials

President, Vice-President, Presidential
& Schedule C appointees, &
employees paid at Senior Executive
Service levelxxvi

Confidential
Financial Disclosure

Employees < GS-15 or receiving less
than 120% of minimum GS-15 pay if:

Duties involve participation in
decision or judgment re:
o Procurement,
o Administering or
monitoring of grants,
subsidies or other
federal financial or
operational benefits,
o Regulating or auditing a
non-federal entity, or
o Other activities that will
have a direct substantial
economic effect on a
non-federal entity, or

Agency concludes that such
reports are required, such as
investigating or prosecuting
violations of criminal or civil
lawxxviii
Optional Form 450-A (Confidential
Certificate of No New Interests) Permits incumbent confidential filers
to certify no new interests rather than
filing entire new formxxx

[31 U.S.C. § 3152]
Not available to SGEsxxv

No

Noxxvii

No

Regulations:

5 C.F.R.
2534.901 et seq.

5 C.F.R.

Using nonpublic

All SGEs (regardless of GS-level) who
are not required to file public financial
disclosuresxxix

No

Not available to SGEsxxxi

n/a

Yes

No

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2635.703
5 C.F.R.
2635.101(b)(7)
& 2635.703

5 C.F.R.
2635.201 et seq.

5 C.F.R.
2635.502

5 C.F.R.
2635.804(a)

5 C.F.R.
2635.805

information for
private gain
Misuse of
government position
for private gain
solicit or accept gifts
from “prohibited
sources” (including
contractors &
contractor
employees)xxxii
Participate in matter
that could affect
financial interest of
household member
or associate, or
where her
impartiality could
reasonably be
questioned
Limit on outside
earned income

expert witness

Presidential appointees to full-time
noncareer positions
Serving as expert witness in a
proceeding in which US is a party or
has a substantial interest

Serving as expert witness in a
proceeding in which employing agency
is a party or has a substantial
interestxxxiv


5 C.F.R.
2635.807

compensation for
teaching, speaking
and writing




activity is part of employee’s
duties;
invitation was extended primarily
because of employee’s position;
Invitation or compensation is
from someone with interests that
could be affected by employee’s

Yes

No

Yes

No

Yes

No

No

No

Yes if SGE who participates in the
particular proceeding or matter;xxxiii
Yes if <60 SGE
who

was
appointed
by the
President;
xxxvi
or

serves on a
commission
created by
statute.xxxvii

Yesxxxv

Yes

No

No

No

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duties; or
Information draws substantially
on nonpublic information
Any matter to
which employee
is currently or
has been assigned
in previous
subject matter
yearxxxviii
deals with:
Ongoing policy,
program or
operation of
employee’s
agencyxxxix
Subject matter,
Noncareer
industry or
employee &
economic sector
subject matter
affected by
deals with:
agency xl
may not solicit funds from a
subordinate;xli
may not permit use of title or position
to further fundraising;xlii
may not solicit funds from someone
the employee knows is a prohibited
sourcexliii


5 C.F.R.
2635.808

48 C.F.R. 3.601

48 C.F.R.
1503.601

48 C.F.R.
1903.670

fundraising

prohibits a
contracting officer
from awarding a
contract to a
Government
employee
prohibits awarding
contract to current or
former (within 1
year) EPA employee
who were involved in
the proposal
prohibits awarding
contract to current or
former (within 2
years) Broadcasting
Board of Governors

Yes -- during current
appointment

Yes -- but only
with respect to
particular
matters
involving
specific parties

No

No

No

No

Yes

No

Yes -- if the prohibited source’s interests
may be substantially affected by SGE’s
performance of dutiesxliv
Yes -- if:

contract arose directly out of SGE’s
activities;

the SGE was in a position to
influence the contract award; or

there is another conflict of interest

Yes

No

Noxlv

No

No

No

No

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employee who was
involved in the
proposal

Table II:
Post-Employment Restrictions on Executive Branch Employees, SGEs, ITEP Detailees from Industry & Contractor Personnel

Provision

Trigger in govt

Scope of ban

Duration

Ban on
Communication

Ban on
Representatio
n / Advice

Application to Information
Technology Exchange
Program detailees from
industry
identical

18 U.S.C. § 207 – general post-employment statute
participated
personally and
(a)(1)
Same matter
permanent
substantially in a
matter
Matter was
pending under
Same matter
2 years
(a)(2)
employee during
last year in govt
Contact
officials in
agency where
(c)
senior official
1 year
worked during
last year in
govt
Contact
officials in
agency where
Very senior
worked during
(d)
2 years
official
last year in
govt or high
level officials
in any agency
Representation
Trade or treaty
(b)
regarding
1 year
negotiator
negotiations

modified

None

Application to
SGEs
SGEs
60+
days

SGE
<60
days

Application
to
Contractor Personnel

x

x

x

X

No

x

x

x

x

No

x

X

x

x

X

X

x

No

X

x

x

No

X

No

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(f)

senior official

Represent
foreign govts
& political
parties

(f)(2)

US Trade
Representative
(USTR) &
Deputy USTR

Represent
foreign govts
& political
parties

(a)

Bank Examination statutes
Was employee
of a Federal
Reserve bank,
12 U.S.C.
Federal banking
§§
agency or
1820(k),
National Credit
1786(w)* Union
Administration
& served as

No

x

X?

X?

No

x

x

x

No

x

X

Yes

X

X

No

1 year

X

X

permanent

x

41 U.S.C. § 423 – Procurement Integrity statute
Served as
contracting
officer, program
manager, or
Accept
made a decision
compensation
re: a contract,
(d)*
from
1 year
subcontract
contractor
modification,
involved
applicable rate,
payment or
settlement of a
claim
Advised the US
on a
procurement or
had access to
contractor bid,
proposal, or
source selection
info

x

Very
senior
SGEs
<60
days

Disclose
contractor bid,
proposal, or
source
selection info

Until
award of
the
contract

Accept
compensation
as employee,
officer,
director or
consultant
from that
depository
institution

1 year

More
strictxlvi

X

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senior examiner
of a depository
institution for 2
or more months
during last 12
months of
employment

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Table III:
Federal Spending (1983-2009)
(adjusted for inflation)
(in trillions of constant 1983 dollars)
Fiscal Year
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009

Federal Spending
0.808
0.820
0.880
0.904
0.884
0.900
0.922
0.959
0.972
0.985
0.975
0.986
0.995
0.995
0.998
1.014
1.022
1.039
1.052
1.118
1.174
1.214
1.266
1.317
1.316
1.385
1.640

source: Table 1.1 — Summary of Receipts, Outlays, and Surpluses or Deficits (-): 1789–2015, Budget of
the United States Government: Historical Tables Fiscal Year 2011 (available at
http://www.gpoaccess.gov/usbudget/fy11/hist.html).
Table IV:
Number of Executive Branch Employees: 1983-2009
Year
1983
1984

Number of employees
(in millions)
4.983
5.032

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1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009

5.198
5.172
5.243
5.230
5.232
5.173
5.088
4.865
4.691
4.556
4.413
4.293
4.164
4.134
4.073
4.065
4.068
4.086
4.144
4.123
4.072
4.069
4.063
4.142
4.365

source = Historical Federal Workforce Tables - Total Government Employment Since 1962
(http://www.opm.gov/feddata/HistoricalTables/TotalGovernmentSince1962.asp)
(includes uniformed servicemembers and postal service employees)

Table V:
Federal Spending on Service Contracts (1983-2007)
(adjusted for inflation – constant 1983 dollars)
Year
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992

Spending on Service Contracting
(billions of constant 1983 dollars)
70.0
73.6
74.2
76.2
78.6
74.9
71.7
69.7
76.7
76.3

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1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007

74.3
75.4
76.2
72.5
68.5
71.6
71.4
73.8
76.6
83.7
101.0
108.4
116.0
121.4
129.4

Table VI:
Proportion of Procurement Spending on Services vs. Products

Year

Spending*
on
Service
Contracts

Spending*
on
Product
Contracts

Total
Contract
Spending*

1983
1984
1985
1986
1987
1988
1989
1990
1991
1990
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003

70.0
76.5
79.8
83.5
89.3
88.6
88.9
91.1
104.4
107.1
107.3
111.8
116.2
113.8
110.0
116.7
118.9
127.0
135.7
150.6
185.9

82.3
90.4
102.7
99.0
89.2
85.5
79.9
80.2
85.3
70.7
71.0
62.9
64.6
64.8
62.8
64.1
64.2
76.5
79.9
84.3
104.4

152.3
166.9
182.5
182.6
178.5
174.1
168.7
171.3
189.6
177.8
178.3
174.7
180.8
178.6
172.8
180.8
183.1
203.5
215.6
234.9
290.3

Services
as %
of Total
Contract
Spending
46%
46%
44%
46%
50%
51%
53%
53%
55%
60%
60%
64%
64%
64%
64%
65%
65%
62%
63%
64%
64%

Products
as %
of Total
Contract
Spending
54%
54%
56%
54%
50%
49%
47%
47%
45%
40%
40%
36%
36%
36%
36%
35%
35%
38%
37%
36%
36%

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2004
2005
2006
2007

204.8
226.6
244.8
268.4

124.0
149.4
169.7
191.3

328.8
376
414.5
459.7

62%
60%
59%
58%

38%
40%
41%
42%

* in billions of dollars (not adjusted for inflation)
Based on data in Federal Procurement Data System Reports for FY 1983-2007
(available at https://www.fpds.gov/fpdsng_cms/index.php/reports)

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Table VII:
Selected Regulations of Service Contractor Personnel Ethics
SUBSTANTIVE RESTRICTIONS:
a. Financial Influences

Agency

Energy

Conflicting financial interests:

Contracts
Affected
Mgmt. &
Operations
xlvii

EPA

Superfund
contracts >
$150,000

Personnel
Affected
employees
assigned to
work under
the
contractxlviii
Consultants
and employees
of contractors
&
subcontractors

Bid
evaluation

all

FDIC

All

all

NRC

Research,
Evaluation,
Technical
Consulting,
Mgmt.
Support
Services &
Those
resulting
from

chief
executive,
directors, key
personnel
identified in
the contract &
proposed
consultantsliv

Prohibition

make or influence any decisions on behalf of the contractor which directly or indirectly affect the
interest of the Government, if the employee's personal concern in the matter may be incompatible
with the interest of the Governmentxlix

a relationship with an entity that may impair their objectivity in performing the contract workl

any “conflict of interest . . . that may diminish [his] capacity to perform an impartial, technically
sound, objective review of [the] proposal[] or otherwise result in a biased opinion or unfair
competitive advantage”li
“a personal, business, or financial interest or relationship that relates to the services . . . perform[ed]
under the contract”lii

“a . . . present or planned interest[] related to . . . [work to be performed under the] contract which:
(1) May diminish its capacity to give impartial, technically sound, objective assistance and advice,
or may otherwise result in a biased work product; or
(2) May result in its being given an unfair competitive advantage”lv

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unsolicited
proposalsliii

Treasury

TARP
contracts
and
financial
agency
agreements
lvi

USAID

Contracts
performed
in a foreign
country


Agency

“key
individuals”lvii
&
“management
officials
performing
work under
the”
contractlviii

“a personal, business, or financial interest of an individual, his or her spouse, minor child, or other
family member with whom the individual has a close personal relationship, that could adversely
affect the individual's ability to perform under the arrangement, his or her objectivity or judgment
in such performance, or his or her ability to represent the interests of the Treasury”lix

all employees
&
consultantslx

“make loans or investments to or in any business, profession or occupation” in that countrylxi

Gifts

Contracts
Affected

Personnel
Affected
employees
assigned to
work under
the contract

Prohibition
accept any gratuity or special favor from individuals or organizations with whom the contractor is
doing business, or proposing to do business, in accomplishing the work under the contract “under
circumstances which might reasonably be interpreted as an attempt to influence the recipients in
the conduct of their duties”lxii
Accept / solicit for self / others any favor / gift / item of monetary value “from any person who you
reasonably believe is seeking an official action from you on our behalf, or has an interest that the
performance or nonperformance of your duties to us may substantially affect”lxiii

Energy

Mgmt. &
Operations

FDIC

All

All

HHS

Medicaid
Integrity
Audit
Program

employees,
agents &
subcontractors

“receive[], solicit[], or arrange[] to receive any . . . gift, . . . payment of expenses, . . . or any other
thing of value from any entity that is reviewed, audited, investigated, or contacted during the
normal course of performing” the contractlxiv

TARP

Officers,
partners &
employees

Accept / solicit favors / gifts / items of monetary value from any individual or entity whom the
retained entity / officer / partner / employee knows is seeking official action from the Treasury in
connection with the arrangement or has interests which may be substantially affected by the
performance or nonperformance of duties to the Treasury under the arrangement.lxv

Treasury

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

conflicting employment

Agency

Contracts Affected

Personnel Affected

Energy

Mgmt. & Operations

employees assigned to
work under the contract

FDIC

All

all

HHS

Medicaid Integrity
Audit Program

employees, agents &
subcontractors

all employees under the
contractlxix

NRC

Treasury

Research,
Evaluation,Technical
Consulting, Mgmt.
Support Services &
Those resulting from
unsolicited proposals

TARP contracts
involving acquisition
/ valuation /
management /
disposition of

Employees working “at any
NRC licensee or applicant
site”

management officials
performing work under the
arrangement & key
individuals

Prohibition
outside employment that will:
 “interfere with the proper and effective performance of the[ir] duties”
 “[a]ppear to create a conflict-of-interest”, or
 “[a]ppear to subject DOE or the contractor to public criticism or
embarrassment”lxvi
“Has a personal, business, or financial interest or relationship that relates to the
services . . . perform[ed] under the contract”lxvii
“receive[], solicit[], or arrange[] to receive any fee, compensation, . . . payment
of expenses, offer of employment, or any other thing of value from any entity
that is reviewed, audited, investigated, or contacted during the normal course
of performing” the contractlxviii
 “represent, assist, or otherwise support an NRC licensee or applicant
undergoing an NRC audit, inspection, or review where the activities that
are the subject of the audit, inspection, or review are the same as or
substantially similar to the services within the scope of this contract”lxx
 “consulting or other contractual arrangements with any firm or
organization the result of which may give rise to a conflict of interest with
respect to the work being performed under this contract.”lxxi
 “solicit work at that site for that licensee or applicant during the period of
performance of the task order or the contract”lxxii
 “perform work at that site for that licensee or applicant during . . .
[contract] and for one year thereafter”lxxiii
 “solicit []or perform work in the same or similar technical area for that
licensee or applicant organization . . . [during contract and for] one year
after completion of all work under the associated task order, or last time at
the site (if not a task order contract).”lxxiv
purchase / offer to purchase / assist anyone in purchasing / offering to purchase
assetslxxv

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specific troubled
assets
TARP contracts
involving giving
advice re: purchase
of troubled assets
USAID

performed in a
foreign country

sell / offer to sell / act on behalf of any with respect to sale of asset to
Treasurylxxvi
all employees &
consultants

“engage, directly or indirectly, either in his/her own name or in the name or
through the agency of another person, in any business, profession or
occupation in” that countrylxxvii

b. Misuse of Government Resources


government information

Agency

Contracts Affected

Energy

Mgmt. & Operations

EPA

Bid evaluation

all

FDIC

all

all

NRC

Research,
Evaluation,Technical
Consulting, Mgmt.
Support Services &
Those resulting from
unsolicited proposals

all employees
under the
contract



use information protected by the Privacy Act or FOIA for a private purpose until the
information has been released to publiclxxxi
disclose such informationlxxxii

TARP

management
officials
performing
work under the
arrangement &




“Disclose nonpublic information to anyone”
“Use or allow the use of any nonpublic information to further any private interest ”lxxxiv

Treasury

Personnel
Affected
employees
assigned to
work under the
contract

Prohibition

“use privileged information for personal gain, or make other improper use of privileged
information which is acquired in connection with their employment on contract work”lxxviii
 disclose information relating to the proposal
 use proposal information for any purpose other than evaluating bidlxxix
use or disclose information obtained from FDIC or a third party in connection with an
FDIC contractlxxx


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key
individualslxxxiii


government property

Agency
FDIC

Contracts
Affected
All

Treasury

TARP



Personnel
Affected
All
officers,
partners &
employees

Prohibition
“Use or allow the use of [FDIC] property, except as specified in the contract”lxxxv
“Improperly use or allow the improper use of Treasury property for the personal benefit of any
individual or entity other than the Treasury”lxxxvi

impartiality

Agency

FDIC

Contracts
Affected

Personnel
Affected

all

Prohibition



All

provide preferential treatment to anyone in their dealings on behalf of the FDIClxxxvii
engage “in an activity that would cause [FDIC] to question the integrity of the service you
provided, are providing or offer to provide us, or impairs your independence”lxxxviii

c. Outside Activities
Agency

FDIC

Contracts
Affected

Personnel
Affected

all

all

Prohibition





Engage in activity that would impair independencelxxxix
Have any relationships that relate to the services they are performingxc
Represent a party in litigation against FDICxci
Participate as a party in litigation against FDICxcii

d. Restrictions After the End of a Contract
Agency

Contracts Affected

FDIC

all

Personnel
Affected
all

Prohibition
submit “an offer to acquire an asset from [FDIC] for which services were performed during

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the past three years.”xciii

NRC

Research,
Evaluation,Technical
Consulting, Mgmt.
Support Services &
Those resulting from
unsolicited proposals

Those
performing
work for the
NRC under
this contract
at any NRC
licensee or
applicant site

solicit / perform work in the same or similar technical area or at that site for that licensee or
applicant organization for 1 year after work is completedxciv

IMPLEMENTATION MECHANISMS


Contractor Must Obtain Disclosures / Certifications from Its Personnel

Agency

Energy

Contracts
Affected
Mgmt. &
Operations

Personnel
Affected
employees
assigned to
work under
the contract

Required Disclosure/Certification




TARP

Treasury
TARP
contracts
involving
“acquisition,
valuation,
management,

“key
individuals” &
“management
officials
performing
work under
the” contract



“any actual or potential conflicts with DOE's policies regarding conduct of employees of
DOE's contractors”
“outside employment services which involve the use of information in the area of the
employee's employment with the contractor”xcv
“information . . . in writing about their personal, business, and financial relationships, as well
as those of their spouses, minor children, and other family members with whom the individuals
have a close personal relationship that would cause a reasonable person with knowledge of the
relevant facts to question the individual's ability to perform, his or her objectivity or judgment
in such performance, or his or her ability to represent the interests of the Treasury”xcvi
certification that they will not
o disclose nonpublic information
o use or allow the use of nonpublic information to further any private interestxcvii

the information described above at a level of detail at least as extensive as the public financial
disclosures required of high-level officials (Office of Government Ethics Form 278)xcviii

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or disposition
of troubled
assets”


Disclosure of Financial Interests / Certification of No Conflicting Interests to Agency

Agency

Contracts Affected

Energy

Mgmt. & Operations

Bid evaluation

All

Superfund contracts
> $150,000ci

Employees,
subcontractor
employees or
consultants
working on or
having access
to information
regarding the
contractcii

EPA

FDIC

Personnel
Affected
employees
assigned to
work under
the contract

all

chief
executive,
directors &
any proposed
consultant or
subcontractor

All

All

Required Disclosure/Certification

Employees’ disclosures to contractor described abovexcix
Individual certifies that he has “no conflict of interest . . . that may diminish [his] capacity to
perform an impartial, technically sound, objective review of this proposal(s) or otherwise
result in a biased opinion or unfair competitive advantage”c

Contractor must disclose any “relationship of an employee, subcontractor employee, or
consultant with an entity that may impair the objectivity of the employee, subcontractor
employee, or consultant in performing the contract work.”ciii

Prospective contractor must:
Either:
 Certify that it is not aware of “any information bearing on the existence of any
organizational conflict of interest”
Or:
 “describe[] concisely all relevant facts concerning any past, present, or planned interests
relating to the work to be performed and bearing on whether . . . their chief executive[],
directors, or any proposed consultant or subcontractor, may have a potential
organizational conflict of interest.”civ
 certify “in writing that you . . . have no conflict of interest under” 12 CFR 366.10(a).”cv

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
Those who
previously
worked at the
FDIC

Treasury



TARP contracts and
financial agency
agreements

“key
individuals” &
“management
Certify that these individuals have no personal conflicts of interest, or are subject to a
officials
mitigation plan or waiver approved by Treasurycviii
performing
work under
the” contract

Agreement to employ only employees who meet ethics criteria

Agency

Contracts
Affected

Personnel
Affected

FDIC

All

All





notify “within 10 business days after you become aware that you, or any person you
employ to perform services for us, are not in compliance with this part”cvi
sign a certification form that
o he was not a “senior employee” subject to a 1-year cooling off period; and
o his work for contractor does not involve any matter
 he participated personally & substantially in or
 under his official authority while at FDIC / RTCcvii

Provision
Agree in writing to “employ only persons who meet the requirements of this part to perform
services on our behalf”cix

Train employees about ethics standards

Agency

Contracts
Affected

Employees
Affected
employees
assigned to
work under
the contract

Energy

Mgmt. &
Operations

FDIC

All

All

Treasury

TARP
contracts and
financial

All “persons
receiving
nonpublic

Provision
must “inform[] employees that they are expected to disclose any incompatibilities between duties
performed for the contractor and their private interests and to refer undecided questions to the
contractor.”cx
“must ensure that any person you employ to perform services for [FDIC] is informed about their
responsibilities under this part”cxi
Must provide “[p]eriodic training to ensure that [they] know their obligation to maintain its
confidentiality and to use it only for purposes contemplated by the arrangement”cxii

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agency
agreements


information”

Agency Official Charged with Evaluating Conflicts

Agency

Contracts
Affected

Official

Responsibilities


FDIC

All

ensure that the FDIC Integrity and Fitness clause 7.3.2-46 is included in the request for
proposal or request for quotation for services estimated to cost greater than $100,000cxiii
 “ensure that a contractor being considered for an award has not been suspended or
excluded from performing services” by FDIC or the federal governmentcxiv
 review contractors’ representations & certifications for completeness & identify potential
issues that could affect eligibilitycxv
Contracting Officer
 consult with Acquisition Services Branch’s Policy and Operations Section and the Legal
Division Contracting Law Unit if “there are issues regarding” application of COI
regulationscxvi
 “forwards all conflicts of interest issues to the CLU for review and determination”cxvii
 can seek from Legal Division a waiver of suspension or exclusion when he “determines
it is in the corporation’s best interest”cxviii
 “reviews conflicts of interests raised by the representations and certifications submitted
by a contractor recommended for an award”cxix
 “issues a written decision of its determination”cxx
Legal
 “prepares the cases for eligibility determination, waiver of conflicts of interest,
Division Contracting
appeal from final decisions, and other documents for the Corporation Ethics
Law Unit (CLU)
Committee (CEC)”cxxi
 “may suspend or exclude contractors that violate” ethics regulationscxxii
 responsible for administration of Suspension and Exclusion regulations for all
contractors except law firmscxxiii
Legal Division
can waive a suspension or exclusion when requested by Contracting Officer
Legal Division
point of contact for matters involving post-government employment restrictions
Ethics Unit
Acquisition Services
reviews all cases prior to their submission to Corporation Ethics Committee (CEC)cxxiv
Branch (ASB)
Executive Secretary
decides all cases against contractors for suspension or exclusioncxxv
(“Ethics Counselor”)

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ETHICS FOR AN OUTSOURCED GOVERNMENT
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Assistant General
Counsel of the
Corporate and Legal
Operations (AGCCLO)
Corporation Ethics
Committee (CEC)

can waive a conflict of interest if the request is “simple and straightforward” (AGC-CLO
decisions can be appealed to CEC)cxxvi






Treasury

TARP

TARP Chief
Compliance Officer





can “reverse, stay, or uphold a final decision of the AGC-CLO” re: waivercxxvii
can “reverse, stay, or uphold a final decision” of Executive Secretary re: suspension /
exclusioncxxviii
can waive a conflict of interest if the request is “more complicated”cxxix
Identifies “administrative services” that are exempt from COI regulationscxxx
Receives contractors’ written notification of OCIscxxxi & disclosure/use of nonpublic
informationcxxxii
Evaluates whether proposed measures adequately mitigate PCIscxxxiii
Can waive PCIscxxxiv
Can waive any regulatory requirement “that is not otherwise imposed by law when it is
clear from the totality of the circumstances that a waiver is in the government's
interest”cxxxv

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Table VIII:
Spending on Contracts v. Grants: 2000-2010
in billions of dollars
(not adjusted for inflation)
Year
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Total
(2000- 2010):

Source: USASpending.gov

Grants
295
331
406
494
450
442
490
430
418
663
554

Contracts
206
223
263
318
346
391
430
475
541
540
535

4,971

4,268

65

ETHICS FOR AN OUTSOURCED GOVERNMENT
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http://www.usaspending.gov/trends?trendreport=default&viewreport=yes&&carryfilters=on&tab=List%2
0View&Go_x=21&&formFields=&&tab=List%20View&fiscal_year=2010&carryfilters=on# (accessed
Jan. 5, 2011)
i

The Justice Department’s Office of Legal Counsel has opined that the Emoluments Clause does not apply to purely advisory
positions. Memorandum Opinion for the Associate Counsel to the President from Noel J. Francisco, Deputy Assistant Attorney
General, Office of Legal Counsel, Re: Application of the Emoluments Clause to a Member of the President’s Council on
Bioethics at 10 (Mar. 9, 2005).
ii
See Dixson v. United States, 465 U.S. 482 (1984) (bribery statute reaches individuals who administer federal grant even though
neither they nor their employer has a contractual relationship with federal government).
iii
18 U.S.C. §§ 203(c)(1), 205(c)(1).
iv
18 U.S.C. §§ 203(c)(2), 205(c)(2).
v
The financial interests of employee’s spouse and minor children are imputed to the employee. 18 U.S.C. § 208(a).
vi
This applies to “organization[s] with whom [the employee] is negotiating or has any arrangement concerning prospective
employment.” 18 U.S.C. § 208(a).
vii
This applies to “organization[s] in which [the employee] is serving as officer, director, trustee, [or] general partner.” 18 U.S.C.
§ 208(a).
viii
5 C.F.R. 2640.203(g). This exception applies as long as the SGE’s financial interest arises as a result of her employment,
rather than as a result of any stock she may own in her employer. Id.
ix
18 U.S.C. § 208(b)(3).
x
5 C.F.R. § 2640.203(j)
xi
5 C.F.R. 2640.203(i).
xii
18 U.S.C. § 209(c).
xiii
18 U.S.C.§ 219(b).
xiv
5 U.S.C. Appx § 101(f)(5).
xv
5 U.S.C. Appx § 101(f)(4).
xvi
5 U.S.C. Appx § 101(f)(3). As of January, 2010, 120% of the minimum GS-15 rate of pay is $119,533.60. Office of
Government Ethics website (available at http://www.usoge.gov/news/whats_new_2010.aspx#75fr16890)
xvii
5 U.S.C. Appx § 101(d).
xviii
5 C.FR. 2634.205(a).
xix
5 C.F.R. 2634.201(a); 2634.204(a).
xx
5 U.S.C. Appx § 101(f)(8).
xxi
5 U.S.C. Appx § 101(f)(8).
xxii
5 U.S.C. Appx. § 501(a)(1).
xxiii
5 U.S.C. Appx. § 501(2).
xxiv
unless employee obtains prior approval of agency
xxv
26 U.S.C. § 1043(b)(A); 5 C.F.R. § 2634.1003(1).
xxvi
26 U.S.C. § 4946(c).
xxvii
26 U.S.C. § 4946(c).
xxviii
5 C.F.R. 2634.904(a)(1).
xxix
5 C.F.R. 2634.904(a)(2) (all SGEs -- except those required to file public financial disclosures -- are required to file
confidential financial disclosures). They must file these reports upon appointment or reappointment, but are not required to file
incumbent reports on an annual basis unless they also meet the criteria listed in 5 C.F.R. 2634.904(a)(1). See 5 C.F.R.
2634.903(a).
xxx
5 C.F.R. 2534.905(a).
xxxi
5 C.F.R. 2534.905(b)(1). (This may not be available to SGEs because SGEs are required to file new entrant forms, not
incumbent forms.)
xxxii
5 C.F.R. § 2635.102(k) (definition of person includes not only an entity but also any employee of that entity).
xxxiii
5 C.F.R. § 2635.805(a).
xxxiv
5 C.F.R. § 2635.805(b).
xxxv
5 C.F.R. § 2635.805(b)(2)(iii).
xxxvi
5 C.F.R. § 2635.805(b)(2)(i).
xxxvii
5 C.F.R. § 2635.805(b)(2)(ii).
xxxviii
5 C.F.R. 2635.807(a)(2)(i)(E)(1).
xxxix
5 C.F.R. 2635.807(a)(2)(i)(E)(2).
xl
5 C.F.R. 2635.807(a)(2)(i)(E)(3).
xli
5 C.F.R. § 2635.808(c)(1).
xlii
5 C.F.R. § 2635.808(c)(2).
xliii
5 C.F.R. § 2635.808(c)(1)(i).

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xliv

5 C.F.R. § 2635.808(c)(1)(ii).
48 C.F.R. 1503.600-71(b).
* These provisions are non-criminal, but provide for civil monetary penalties and administrative penalties, such as contract
rescission, suspension or debarment, 41 U.S.C. 423(e), and industry-wide prohibition orders. 12 U.S.C. §§ 1820(k)(6);
§1786(w)(5).
xlvi
Information Technology Exchange Program detailees from industry may not disclose this information until 3 years after
leaving government, even if the contract has already been awarded. 41 U.S.C. § 423(a)(1), 5 U.S.C. §§ 3701 et seq.
xlvii
48 C.F.R. 970.0371-2.
xlviii
48 C.F.R. 970.0371-3.
xlix
48 C.F.R. 970.0371-6(a). The regulation gives two examples of such conflicting interests:

“An employee . . . negotiat[ing], or influence[ing] the award of, a subcontract with a company in which the individual has an
employment relationship or significant financial interest;”

“an employee . . . evaluati[ng] for DOE or for any DOE contractor . . . some technical aspect of the work of another
organization with which the individual has an employment relationship, or significant financial interest, or which is a
competitor of an organization (other than the contractor who is the individual's regular employer) in which the individual has
an employment relationship or significant financial interest.” Id.
l
48 C.F.R. 1552.209-73(b).
li
48 C.F.R. 1503.104-5 (prescribing contract clause).
lii
12 C.F.R. 366.10(a)(1).
liii
48 C.F.R. 2009.570-4(b).
liv
48 C.F.R. 2009.570-2.
lv
48 C.F.R. 2009.570-2.
lvi
31 C.F.R. 31.200(b). The regulation permits the TARP Chief Compliance Officer to exempt contracts for administrative
services. 31 C.F.R. 31.201.
Financial agency agreements are in some respects distinct from most government contracts in that they are not subject
to the Federal Acquisition Regulations and they can involve the delegation of inherently functions, this paper uses the term
“contract” to refer to both regular contracts and financial agency agreements under TARP.
lvii
A“key individual” is “an individual providing services to a private sector entity who participates personally and substantially,
through decision, approval, disapproval, recommendation, or the rendering of advice, in the negotiation or performance of, or
monitoring for compliance under” the contract. 31 C.F.R. 31.201 (emphasis added).
lviii
31 C.F.R. 31.212(a). A “Management official” is “an individual within a retained entity's organization who has substantial
responsibility for the direction and control of the retained entity's policies and operations,” including members of a management
committee or executive committee or (in entities without such a committee) general partners. 31 C.F.R. 31.201.
lix
31 C.F.R. 31.201. The TARP regulation does not impose restrictions directly on contractor personnel. Instead, it mandates
that contractors “ensure that [their employees “have no personal conflicts of interest.”
lx
48 C.F.R. 752.7027. This restriction does not apply to employees or consultants who are nationals of foreign country where
they are performing under the contract.
lxi
48 C.F.R. 752.7027.
lxii
48 C.F.R. 970.0371-4 (emphasis added).
lxiii
12 C.F.R. 366.12(d)(1).
lxiv
42 C.F.R. 455.238(b)(1) The regulation does not directly prohibit these activities. It simply says that if these activities take
place, they would constitute a post-award conflict of interest, and that the government can then terminate / modify / not renew the
contract.
lxv
31 C.F.R. 31.213(a)(1).
lxvi
48 C.F.R. 970.0371-7 (DOE M&O).
lxvii
12 C.F.R. 366.10(a)(1).
lxviii
42 C.F.R. 455.238(b)(1).
lxix
48 C.F.R. 2052.209-72(c)(1).
lxx
48 C.F.R. 2052.209-72(c)(2).
lxxi
48 C.F.R. 2052.209-72(c)(1).
lxxii
48 C.F.R. 2052.209-72(c)(4)(i).
lxxiii
48 C.F.R. 2052.209-72(c)(4)(ii).
lxxiv
48 C.F.R. 2052.209-72(c)(3).
lxxv
31 C.F.R. 31.214(a).
lxxvi
31 C.F.R. 31.214(b).
lxxvii
48 C.F.R. 752.7027.
lxxviii
48 C.F.R. 970.0371-5. The regulation defines “privileged information” as “include[ing] but . . . not limited to, unpublished
information relating to technological and scientific developments; medical, personnel, or security records of individuals;
anticipated materials' requirements or pricing action; possible new sites for DOE program operations; internal DOE decisions;
policy development; and knowledge of selections of contractors or subcontractors in advance of official announcement.” Id.
xlv

67

ETHICS FOR AN OUTSOURCED GOVERNMENT
REVISED DRAFT - 2011-03-10

lxxix

48 C.F.R. 1503.104-5.
12 C.F.R. 366.13(a). The regulation provides for exceptions where the contract allows or the FDIC authorizes the use or
disclosure, the “information is generally available to the general public,” or the FDIC makes the information available to the
public. Id.
lxxxi
48 C.F.R. 2052.209-72(e)(1)(i).
lxxxii
48 C.F.R. 2052.209-72 (contractor must not disclose confidential information without prior written approval of contracting
officer).
lxxxiii
31 C.F.R. 31.217(c)(5). The TARP regulation does not impose confidentiality requirement directly on these contractor
personnel. Instead, it imposes these confidentiality restrictions on the contracting entity and requires that the entity to obtain
from these individuals nondisclosure agreements.
lxxxiv
31 C.F.R. 31.217(b). The TARP regulation defines “nonpublic information” as “Any information that Treasury provides to
a [contractor] . . . , or that the [contractor] obtains or develops pursuant to the arrangement . . . until the Treasury determines
otherwise in writing, or the information becomes part of the body of public information from a source other than the retained
entity.” 31 C.F.R. 31.217(a).
lxxxv
12 C.F.R. 366.12(d)(2).
lxxxvi
31 C.F.R. 31.213(a)(2).
lxxxvii
12 C.F.R. 366.12(a) (FDIC).
lxxxviii
12 C.F.R. 366.10(a)(4).
lxxxix
12 C.F.R. § 366.10.
xc
12 C.F.R. § 366.10.
xci
12 C.F.R. 366.10(a)(2).
xcii
12 C.F.R. 366.10(a)(2).
xciii
12 C.F.R. 366.10(a)(3). The regulation provides an exception if the contract allows for the acquisition. Id.
xciv
48 C.F.R. 2052.209-72.
xcv
48 C.F.R. 970.0371-8(a).
xcvi
31 C.F.R. 31.212(b).
xcvii
31 C.F.R. 31.217(c)(5).
xcviii
31 C.F.R. 31.212(b).
xcix
48 C.F.R. 970.0371-8(b).
c
48 C.F.R. 1503.104-5 (prescribing contract clause).
ci
48 C.F.R. 1509.507-2(c) (applicable to Superfund contracts “in excess of the simplified acquisition threshold”).
cii
48 C.F.R. 1552.209-73.
ciii
48 C.F.R. 1552.209-73.
civ
48 C.F.R. 1509.505-70(a).
cv
12 C.F.R. § 366.14(a).
cvi
12 C.F.R. 366.14(c).
cvii
FDIC Post-Government Employment Certification (available at
http://www.fdic.gov/buying/goods/acquisition/PostGovtEmploymentCert.pdf)
cviii
31 C.F.R. 31.212(d).
cix
12 C.F.R. 366.14(d).
cx
48 C.F.R. 970.0371-6(b) (“In making this certification, the [contractor] may rely on the information obtained [from its
employees] . . . unless [it] knows or should have known that the information provided is false or inaccurate.”).
cxi
12 C.F.R. 366.12(b).
cxii
31 C.F.R. 31.217(c)(3).
cxiii
FDIC, ACQUISITION PROCEDURES, GUIDANCE AND INFORMATION § 1.304 (2008).
cxiv
FDIC, ACQUISITION PROCEDURES, GUIDANCE AND INFORMATION § 1.307 (2008).
cxv
FDIC, ACQUISITION PROCEDURES, GUIDANCE AND INFORMATION § 1.309(a) (2008).
cxvi
FDIC, ACQUISITION PROCEDURES, GUIDANCE AND INFORMATION § 1.304 (2008).
cxvii
FDIC, ACQUISITION PROCEDURES, GUIDANCE AND INFORMATION § 1.306(b) (2008).
cxviii
FDIC, ACQUISITION PROCEDURES, GUIDANCE AND INFORMATION § 1.307 (2008).
cxix
FDIC, ACQUISITION PROCEDURES, GUIDANCE AND INFORMATION § 1.309(b) (2008).
cxx
FDIC, ACQUISITION PROCEDURES, GUIDANCE AND INFORMATION § 1.309(b) (2008).
cxxi
FDIC, ACQUISITION PROCEDURES, GUIDANCE AND INFORMATION § 1.309(b) (2008).
cxxii
FDIC, ACQUISITION PROCEDURES, GUIDANCE AND INFORMATION § 1.307 (2008).
cxxiii
FDIC, ACQUISITION PROCEDURES, GUIDANCE AND INFORMATION § 1.310(a) (2008).
cxxiv
FDIC, ACQUISITION PROCEDURES, GUIDANCE AND INFORMATION § 1.309(b) (2008).
cxxv
FDIC, ACQUISITION PROCEDURES, GUIDANCE AND INFORMATION § 1.310(b) (2008).
cxxvi
FDIC, ACQUISITION PROCEDURES, GUIDANCE AND INFORMATION § 1.309(e) (2008).
cxxvii
FDIC, ACQUISITION PROCEDURES, GUIDANCE AND INFORMATION § 1.309(e) (2008).
cxxviii
FDIC, ACQUISITION PROCEDURES, GUIDANCE AND INFORMATION § 1.310(b) (2008).
lxxx

68

ETHICS FOR AN OUTSOURCED GOVERNMENT
REVISED DRAFT - 2011-03-10

cxxix

FDIC, ACQUISITION PROCEDURES, GUIDANCE AND INFORMATION § 1.309(e) (2008).
31 C.F.R. 31.200(b).
cxxxi
31 C.F.R. 31.211(f).
cxxxii
31 C.F.R. 31.217(c).
cxxxiii
31 C.F.R. 31.212(c).
cxxxiv
31 C.F.R. 31.212(c).
cxxxv
31 C.F.R. 31.215.
cxxx

Appendix IX
Treasury Department contract with Dan Jester (July 31, 2008)

.
ORDER FOR SUPPLIES OR SERVICES
2

IMPORTANT: Mark all packages and papers with contract and/or order numbers.
1. DATE OF ORDER

6. SHIP TO:

2. CONTRACT NO. (If any)

a. NAME OF CONSIGNEE

07/31/2008
3. ORDER NO.

4. REQUISITiON/REFERENCE NO.

TD008225

08PR-TDP-238

TDP

5. ISSUING OFFICE (Address coff8spondence to)

b. STREET ADDRESS

DEPARTMENT OF THE TREASURY
PROCUREMENT SERVICES DIVISIONS
1500 PENNSYLVANIA AVENUE, NW
MAIL STOP:
1425 NEW YORK AVE, NW
SUITE 2100
WASHINGTON DC 20220

US DEPARTMENT OF THE TREASURY-DE PAR
FINANCIAL MANAGEMENT, ATT: MET SQUA
1500 PENNSYLVANIA AVE., NW

b. COMPANY NAME

~ a. PURCHASE

c.CITY

WASHINGTON

8. TYPE OF ORDER

Db. DELIVERY

7 C ; : ; ; : ; ; : ; : c ; - ; ; ; ; ; ; : ; ; : ; " , - - - - - - - - - - - - - - - - - - - - - - - - ! REFERENCE YOUR:
Except for billing instructions on the
reverse, this delivery order is subject
to instructions contained on this side
only of this form and is issued
subject to the terms and conditions
of the above-numbered contract

RFQ # A08-063 dtd 7/22/08

Please furnish the following on the terms
and conditions specified 011 both sides of

- : ; - " " " ' " " " - - - - - - - - - - - - - - - - - , , : - ; : ' " ~;o-r;-""_;o;;;;_;~--_Ithis order and on the altacl1ed sheet, if any,

~

including delivery as indicated.

g. ACCOUNTING AND APPROPRIATION DATA

10. REQUISITIONING OFFICE

See Schedule

DEPARTMENT OF THE TREASURY
12. F.O.B, POINT

11 BUSINESS CLASSIFICATION (Check appropriate box(es))

0 b. OTHER THAN SMALL

!ZJ a. SMALL
d. WOMEN-QWNED

HUBZone

LJ c. DISADVANTAGED

D g. DISABLED
SERVICE-

f. EMERGING SMALL
BUSINESS

VETERANOWNED

14. GOVERNMENT B/l NO

13. PLACE OF

Destination

15. DELIVER TO F.O.B. POINT

16. DISCOUNT TERMS

ON OR BEFORE (Date)

a. INSPECTION

b. ACCEPTANCE

Destination

Destination

30 Days After Award
17. SCHEDULE (see reverse for Rejections)

ITEM NO

SUPPLIES OR SERVICES

('I

(bl

QUANTITY
ORDERED UNIT
(e)
(d)

UNIT
PRICE

AMOUNT

QUANTITY
ACCEPTED

('I

(0

(91

The contractor shall provide Advisory and
Assistance Services as described in the
attached Statement of Work.
1. The attached Statement of Work and the
Contractor's proposal dated July 22, 2008
Continued ...
18. SHIPPING POINT

17(h)
TOTAL
(Cont.
pages)

20. INVOICE NO

19. GROSS SHIPPING WEIGHT

21. MAil INVOiCE TO'

S££BILLING
INSTRucnONS
ON REVERSE

a. NAME

TDP PAYMENT

b. STREET ADDRESS
(or P.O. Box)

DEPARTMENT OF THE TREASURY
1500 PENNSYLVANIA AVE, NW
ATTN: OFM, 6TH FLOOR MET SQUARE

$25,000.00

17(i)
GRANO
TOTAL

fcc=-." C,"TY::;------------------------Td=-."5T"A"T:::E"-'::.-,z",P,;C"0;;0"E'----I$ 25 / 0 0 0 . 0 0
WASHINGTON
22. UNITED STATES OF AMERICA

BY -(Signature)

~

DC

20220
23. NAME (Typed)

Ernest M. Dilworth
TITLE: CONTRACTING/ORDERING OFFICER

AUTHORIZED FOR LOCAL REPRODUCTION
PREVIOUS EDlTION NOT USA8LE

OPTIONAL FORM 3411Rev. 31<'0051
P","";bedby GSA/FAR 48 CFR 53.213(0)

ORDER FOR SUPPLIES OR SERVICES
SCHEDULE - CONTINUATION
IMPORTANT- Mark all packages and papers with contract and/or order numbers
DATE OF ORDER

ICONTRACT NO

07131/2008

I

ITEM NO

ORDER NO.

ITD008225
SUPPLIES/SERVICES

(A)

(8)

QUANTITY UNIT

UNIT

AMOUNT

ORDERED

PRICE
(E)

(F)

(e)

(0)

QUANTITY
ACCEPTED
(G)

are hereby incoporated into this purchase
order.
2.
The contractor shall perform the work
described in the aforementioned documents
at a cost of $25,000.00.
3.
Date of Performance is July 23, 2008
through January 17, 2009.
Admin Office:
DEPARTMENT OF THE TREASURY
PROCUREMENT SERVICES DIVISION
1500 PENNSYLVANIA AVE, NW
MAIL STOP:
1425 NEW YORK AVE, NW
SUITE 2100
WASHINGTON DC 20220
Accounting Info:
TDPOI01SE08XX-2008-610001-TDP1221200-2524-00
OOOOOO-XXX-XX-XXXXXXXXX-XXXXXXXXX-XXXXXXXXX

0001

25,000.00

Financial Advisory Services
Dan Jester

The total amount of award: $25,000.00. The
obligation for this award is shown in box
17 Ii) .

TOTAL CARRIED FORWARD TO 1ST PAGE (ITEM 17(H))
NSN 7540·01-152.8082

OPTIONAL FORM 34S iRev 6195!
P,..»aibed by GSA

FAR i~aCFR) 53.21J(Cl

1.0 STATEMENT OF WORK
1.1 Scope of Work

The Contractor will perfonn analyses and make recommendations for Treasury's Office
of Domestic Finance on financial markets and on possible structural solutions for
distressed institutions and/or sectors. Contractor will submit a report on such issues as
directed by the Contracting Officer Technical Representative (defined in Section 4.0,
below).
1.2 Deliverables/Period of Performance

The Contractor shall report its findings on an interim basis as detennined by the
Contracting Officer's Technical Representative and provide a final assessment by
January 17, 2009.
2.0 DESIGNATION OF GOVERNMENT CONTRACTING OFFICER

Ernest Dilworth, Contracting Officer, Procurement Services Division, has been assigned
to administer the contractual aspects of this contract. Changes in the Scope of Work,
contract cost, price, quantity and quality or delivery schedule shall be made only by the
Contracting Officer by a properly executed modification. All correspondence that in any
way concerns the tenns or conditions of this contract shall be submitted directly to the
Contracting Officer at the following address:
Department of the Treasury
Procurement Services Division
Attention: Ernest Dilworth
Contracting Officer
1425 New York Avenue, NW
2nd Floor, Suite 2100
Washington, DC 20220
(202) 927-1066
3.0 TECHNICAL DIRECTION

Perfonnance of the work under this contract shall be subject to the technical direction of
the Contracting Officer's Technical Representative. The tenn "technical direction" is
defined to include, without limitation, the following:
a. Directions to the Contractor which redirect the contract effort, shift work emphasis
between work areas or tasks, require the pursuit of certain lines of inquiry, fill in details
or otherwise serve to accomplish contractual statements of work.
b. Provision of infonnation to the Contractor which assists in the interpretation of
drawings, specifications or technical portions of the work description.

2

c. Review and, where required by contract, approval oftechnical reports, drawings,
specifications or technical information to be delivered by the Contractor to the
Goverrnnent under the contract.
Technical direction must be within the general scope of work stated in the contract. The
COTR does not have the authority to, and may not, issue any technical direction which:
(I) constitutes the assignment of any additional work outside the general scope ofthe
contract; (2) in any manner causes an increase or decrease in the total contract cost, or
time required for the contract performance or (3) changes any ofthe expressed terms,
conditions or specifications of the contract.
All technical directions shall be issued in writing by the COTR or shall be confirmed by
him/her in writing within 5 working days after issuance unless otherwise specified herein.
The Contractor shall proceed promptly with the performance of technical directions duly
issued by the COTR in the manner prescribed by this article and within hislher authority
under the provisions of this article.
If, in the opinion ofthe Contractor, any instruction or direction issued by the COTR is
within one ofthe categories as defined in (1) through (3) above, the Contractor shall not
proceed, but shall notifY the Contracting Officer, in writing, within 5 working days after
receipt of any such instruction or direction and shall request the Contracting Officer to
modifY the contract accordingly. Upon receiving such notification from the Contractor,
the Contracting Officer shall issue an appropriate contract modification or advise the
Contractor, in writing, that, in hislher opinion, the technical direction is within the scope
ofthis article and does not constitute a change. The Contractor shall thereupon proceed
immediately with the direction given. A failure of the parties to agree upon the nature of
the instruction or direction, or upon the contract action to be taken with respect thereto,
shall be subject to the provisions ofthe contract clause entitled Disputes 52.233-1 which
is incorporated herein.

4.0 1052.201-70 CONTRACTING OFFICER'S TECHNICAL
REPRESENTATIVE (COTR) DESIGNAnON AND AUTHORITY
(SEP 1997)
(a) The Contracting Officer's Technical Representative (COTR) is
Mr. Jim Wilkinson
202-622-1906
Department of the Treasury
Washington, DC 20220

(b) Performance of work under this contract shall be subject to the technical
direction of the COTR identified above, or a representative designated in writing.
The term "technical direction" includes, without limitation, direction to the
Contractor that directs or redirects the labor effort, shifts the work between work

3

areas or locations, fills in details and otherwise serves to ensure that tasks outlined in
the work statement are accomplished satisfactorily.
(c) Technical direction must be within the scope of the specification(s)/work
statement. The COTR does not have authority to issue technical direction that:
(I) constitutes a change of assignment or additional work outside the

specification(s)/work statement;
(2) constitutes a change as defined in the clause entitled "Changes";
(3) in any manner causes an increase or decrease in the contract price, or the
time required for contract performance;
(4) changes any of the terms, conditions, or specification(s)/work statement of
the contract;
(5) interferes with the Contractor's right to perform under the terms and
conditions of the contract; or,
(6) directs, supervises or otherwise controls the actions of the Contractor's
employees.
(d) Technical direction may be oral or in writing. The COTR shall confirm oral
direction in writing within five work days, with a copy to the contracting officer.
(e) The Contractor shall proceed promptly with performance resulting from the
technical direction issued by the COTR. If, in the opinion of the Contractor, any
direction of the COTR, or his/her designee, falls within the limitations in (c), above,
the Contractor shall immediately notify the contracting officer no later than the
beginning of the next Government work day.
(f) Failure ofthe Contractor and the contracting officer to agree that technical

direction is within the scope of the contract shall be subject to the terms of the clause
entitled "Disputes."

5.0 (Treasurv Dept.) REQUIRED CENTRAL CONTRACT REGISTRATION EXISTING CONTRACTS (JAN 2002)
The United States Department of the Treasury has adopted the Department of Defense's
Central Contractor Registration database as its database for contractor information. (This
clause does not apply to the Treasury Bureau known as the Comptroller ofthe Currency.)
Accordingly, the following requirements apply to this contract.
(a) Definitions. As used in this clause -

4

(1) "Central Contractor Registration (CCR) database" means the primary Department
of Defense (DoD) repository for contractor information required for the conduct
of business with DoD.
(2) "Data Universal Number System (DUNS) number" means the 9-digit number
assigned by Dun and Bradstreet Information Services to identify unique business
entities.
(3) "Data Universal Numbering System+4 (DUNS+4) number" means the DUNS
number assigned by Dun and Bradstreet plus a 4-digit suffix that may be assigned
by a parent (controlling) business concern. This 4-digit suffix may be assigned at
the discretion of the parent business concern for such purposes as identifying subunits or affiliates of the parent business concern.
(4) "Registered in the CCR database" means that all mandatory information,
including DUNS number or the DUNS+4, if applicable, is in the CCR database;
the DUNS number has been validated; and all edits have been successfully
completed.
(b) (1) The contractor agrees to register in the CCR database within IS calendar days of
the date of this modification (see Block 16c, Date Signed, on the SF30).
(2) During performance and through final payment of the contract, the contractor
further agrees that (a) it will remain registered in the CCR database and (b) it
will maintain its vendor record in the CCR with current, complete and accurate
data.
(3) The contractor agrees that, after registering in the CCR database, it shall provide
notification of its registration to the Contracting Officer along with its DUNS
number or, if applicable, its DUNS +4 number. The contractor shall provide this
confirmation within the IS calendar day registration period specified in
paragraph (b)(l) above.
(4) Lack of registration in the CCR database will make the contractor ineligible to
receive payments under the contract and may make the contractor ineligible for
contract renewal.
(5) DoD established a goal of registering an applicant in the CCR database within 48
hours after receipt of a complete and accurate application via the Internet.
However, registration of an applicant submitting an application through a
method othcr than the Internet may take up to 30 days. Therefore, the contractor
should consider applying for registration immediately.
(c) The Contractor is responsible for the accuracy and completeness of the data within
CCR, and for any liability resulting from the Government's reliance on inaccurate or
incomplete data. To remain registered in the CCR database after the initial registration,

5

the Contractor is required to confiIm on an annual basis that its information in the CCR
database is accurate and complete.
(d) Following the Contractor's initial registration in CCR and receipt of any Treasury
Department (excluding the Comptroller of the Currency) award of a contract, purchase
order, delivery order, task order, basic agreement, basic ordering agreement, or blanket
purchase agreement, the Contractor must directly notify the Contracting Officer of any of
its changed mandatory business data in CCR within three business days of the change.
(See the CCR Handbook at WWW.ccr.gov for the current mandatory registration data
fields, or contact the CCR Assistance Center at 888-227-2423 or 616-961-4725.)
(e) Contractors may obtain information on registration and annual confirmation
requirements via the Internet at http://www.ccr.gov, from the Defense Electronic
Business Program Office (Defense e-Business) at contact.ccr@us.pwcglobal.com, from
the CCR Assistance Center at 888-227-2423 or 616-961-4725, from the Defense Logistic
Information Service at dlis support@dIis.dla.mil.
(f) Contractors such as some consultants and sole proprietorships that are small firms
that would otherwise have no use for a Dun & Bradstreet (D&B) number, may use an
alternative D&B registration method. If needing a D&B number principally for CCR
registration, such a Contractor should call D&B toll-free at 800/333-0505, and clearly
state that it is a very small business and simply needs a DUNS number for the purpose of
CCR registration.

6.0 INVOICING AND PAYMENT INSTRUCTIONS
(a) Invoices shall be submitted in an original and two copies to the following
address:
.
Department ofthe Treasury
Office of Financial Management
1500 Pennsylvania Avenue, NW
Metropolitan Square Building
6th Floor
Washington, D.C. 20228-0001
(b) A copy of the invoice shall also be submitted to the COTR and CO simultaneously.
(c) Submission of proper invoices shall be rendered on a percentage complete
basis in an amount equal to the value of the work performed.
(d) Each invoice submitted shall be supported by appropriate documentation.
Documentation necessary to substantiate an invoice shall include, but is not limited to
project name and number, invoice number, percent complete, original contract amount,
modification amounts, contractor name, and contract number. Such documentation shall
meet the approval of the Contracting Officer.

6

7.0 52.252-2 CLAUSES INCORPORATED BY REFERENCE (FEB 1998)
,This cOntract incorporates one or more clauses by reference, with the same force and
~ effect as if they were given in full text. Upon request, the Contracting Officer will make
their full text available. Also the full text of a clause may be accessed electronically at
this address: http://www.arnet.gov/far/ or http://farsite.hill.af.mil/
52.222-3
52.222-21
52.222-26
52.222-36
52.222-50
52.227-17

52.225-13
52.232-1
52.232-8
52.232-11
52.232-25
52.232-33
52.233-1
52.233-3
52.233-4
52.244-6
52.253-1

Convict Labor (June 2003)
Prohibition of Segregated Facilities (Feb 1999)
Equal Opportunity (Mar 2007)
Affirmative Action for Workers with Disabilities (June 1998)
Combating Trafficking in Persons (Aug 2007)
Rights in Data - Special Works (DEC 2007)
Restrictions on Certain Foreign Purchases (Feb 2006)
Payments (Apr 1984).
Discounts for Prompt Payment (Feb 2002).
Extras (Apr 1984).
Prompt Payment (Oct 2003).
Payment by Electronic Funds Transfer--eentral Contractor
Registration (Oct 2003)
Disputes (July 2002).
Protest After Award (Aug 1996)
Applicable Law for Breach of Contract Claim (OCT 2004)
Subcontracts for Commercial Items (Mar 2007).
Computer Generated Forms (Jan 1991).

8.0 ADDITIONAL CONTRACT TERMS AND CONDITIONS
8.1 InspectionlAcceptance
The Contractor shall tender for acceptance only those items that conform to the
requirements of this contract. The Government reserves the right to inspect or test any
supplies or services that have been tendered for acceptance. The Government may require
repair or replacement of nonconforming supplies or reperformance of nonconforming
services at no increase in contract price. The Government must exercise its
postacceptance rights(I) Within a reasonable period of time after the defect was discovered or should
have been discovered; and

(2) Before any substantial change occurs in the condition of the item, unless the
change is due to the defect in the item.

8.2 Excusable Delavs

7

The Contractor shall be liable for default unless nonperfonnance is caused by an
occurrence beyond the reasonable control of the Contractor and without its fault or
negligence, such as acts of God or the public enemy, acts of the Government in either its
sovereign or contractual capacity, fires, floods, epidemics, quarantine restrictions, strikes,
unusually severe weather, and delays of common carriers. The Contractor shall notify the
Contracting Officer in writing as soon as it is reasonably possible after the
commencement of any excusable delay, setting forth the full particulars in connection
therewith, shall remedy such occurrence with all reasonable dispatch, and shall promptly
give written notice to the Contracting Officer of the cessation of such occurrence.
8.3 Termination for the Government's Convenience.
The Government reserves the right to tenninate this contract, or any part hereof, for its
sole convenience. In the event of such tennination, the Contractor shall immediately stop
all work hereunder and shall immediately cause any and all of its suppliers and
subcontractors to cease work. Subject to the tenns of this contract, the Contractor shall be
paid a percentage of the contract price reflecting the percentage of the work perfonned
prior to the notice oftennination, plus reasonable charges that the Contractor can
demonstrate to the satisfaction of the Government, using its standard record keeping
system, have resulted from the tennination. The Contractor shall not be required to
comply with the cost accounting standards or contract cost principles for this purpose.
This paragraph does not give the Government any right to audit the Contractor's records.
The Contractor shall not be paid for any work perfonned or costs incurred that reasonably
could have been avoided. If the contractor requests in writing that it do so, the
Government agrees to issue a no cost tennination no later than 30 days after the date of
the request.
8.4 Termination for Canse
The Government may tenninate this contract, or any part hereof, for cause in the event of
any default by the Contractor, or ifthe Contractor fails to comply with any contract tenns
and conditions, or fails to provide the Government, upon request, with adequate
assurances of future perfonnance. In the event oftennination for cause, the Government
shall not be liable to the Contractor for any amount for supplies or services not accepted,
and the Contractor shall be liable to the Government for any and all rights and remedies
provided by law. If it is detennined that the Government improperly tenninated this
contract for default, such tennination shall be deemed a tennination for convenience.

9.0 CONFIDENTIALITY PROVISION
The Contractor agrees that neither it nor its employees, nor subcontractors, nor
subcontract employees will disclose to any third party, or otherwise use, any infonnation
it obtains or prepares in the course of perfonnance of this contract without first receiving
written pennission from the Contracting Officer. The Contractor shall secure infonnation
received from or prepared or gathered for Treasury under this contract in a secure

8

·

'

location with access limited to only those Contractor employees with a "need to know".
All information gathered by the Contractor including but not limited to reports, research
and electronic files shall become the property of Treasury. Notwithstanding any other
provision of this contract, neither the Contractor nor subcontractors shall make any claim
of copyright nor any other ownership interest in any of the information gathered under
this contract for Treasury. The Contractor shall ensure that all information gathered or
prepared by the Contractor including but not limited to reports, research and electronic
files are not released to outside parties without written authorization from the Contracting
Officer. Upon termination of the contractor's engagement, all documents and records
covered by this clause will be disposed of in accordance with the Contracting Officer's
instructions. The Contractor's duty with respect to the covered information shall survive
the termination of this contract.
10.0 FINANCIAL INTEREST PROVISION
The Federal Acquisition Regulation (FAR) does not require that Contractors be subject to
the ethics rules that apply to agency employees. However, given the sensitive nature of
the work involved with this contract, Treasury wants to take every step possible - even
going beyond the requirements of the FAR - to ensure that the advice provided is as
unbiased as possible.
Thus, in addition to the FAR requirements: (1) the Contractor, before proceeding with
work under the contract, will disclose to the Department's Designated Agency Ethics
Official (DAEO) and to the COTR, in a manner prescribed by the DAEO, a list of his
financial interests; (2) the Contractor will consult with the COTR, before beginning any
new work assignment, for the specific purpose of determining whether, and the degree to
which, the Contractor has a financial conflict of interest in the matter; and (3) the
Contractor will not purchase or sell any securities without the prior written approval of
the DAEO. This restriction will apply to all securities, including those issued by any
financial institution, broker-dealer, or hedge fund. The term "securities" includes all
interests in debt or equity instruments, secured and unsecured bonds, debentures, notes,
securitized assets and commercial paper, securities or obligations collateralized by
mortgages, and all types of preferred and common stock. This does not prohibit the
contractor from acquiring or divesting interests in a publicly traded or publicly available
mutual fund provided that the fund does not have a policy of concentrating its
investments in a particular economic or geographic sector.

9

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'

(THiS

UU

THISRFQ

is NOT AN ORDER)

3, REaUlSITlONJPURC~Se REQUEST NO.

REQUEST NO.

,08-063
USSL!EOBV

PAGE
IS NOT A SMALl8USINESS SET ASIDE

RATING

AND/OR OMS REG.1
6. OEUVERY BY (0.18)

DEPARTMENT OF THE TREASURY

Multiple

PROCUREMENT SERVICES DIVISIONS
1500 PENNSYLVANIA AVENUE, NW
MAIL STOP: 1425 NEW YORK AVE, NW
SUITE 2100
WASHINGTON DC 20220

7,OEUVERY

""

0

IAJ FOB,DESTINATION

(&Ie0",",
SC/MduJe)

9. DESTINATION
.. NAME OF CONSIGNEE

Department of the Treasury, DO

5b, FOR INFORtMTION CALL', (ND~ caR;)

TELEPHONe NUMBER

,::::5'1' DILWORTH

PAGES

9

4_ eERT,fOR NAT. OEF.
UNDER eOSA REG. 2

07/22/2008

'AM!:"

OF

1

b. STREET ADDRESS

ATTN:

NUMBER

Ernest Dilworth

- - - - - - - - - - - - - - - , : : " . "To
':c,-...J.----I------------..j1425 New York Ave., NW

'"'."A".".--------------.:;.;.;:,'-.":""""":"-:."A"."'-----------------I2nd Floor, Suite 2100
e.. CiTY

, STREET ADDRESS

Washington

10 PLEAse FURNISH QUOTATIONS TO
THE ISSUING OFFICE IN BLOCK 5a ON
OR BEFORE cLose OF BUSINESS (Diflff)

07/25/2008 1500 ES
ITEM NO.
(a)

d,STATE

e.ZIPcooe

DC

20220

IMPORT
tionf fumiahad are nol offers. If you Ilfl!IlIruIbIlJ 10 quote. pJuse so
Indicate lm lhi~ form IIOd nrn.n lito Ill" Gdr$u in 6lock s.. Thi~ fequelll doQ not com.... lltMt GovltffltnClnllo ~ any co~b
ineutnlCl in th" ~plll"lltioo of ltMllli\lllmiSsion OfW, quDUIlIof1 or 10 con1rad for S\lpplie~ or MfVioI~. Suppii. . &1'$ of donIellie
origin ","i".. o~SIl inlj;cat.d by q<l<?ler. Any ""'J'"lNnlaliotlS and/Or ~ attachlld 10 thi' R8qUlI11 for Ou~,
mull be eompI"\&d bytla quater.

SUPPLIES/SERVICES

QUANTITY UNIT
(e)

(')

(o)

AMOUNT

UNIT PRICE
(0)

(f)

he contractor shall submit a quote for Advisory
nd Assistance Services as described in the
ttached Statement of Work.

0001

Final Report

1

A

Total Price
a. 10 CALENDAR DAYS (%l

b. 20 CAl.fNDAROAYS{%)

$
e. 30CAlENOAR CAYS (%)
NUMBER

~. DISCOUNT FOR PROMPT PAYMENT

PERCENTAGE

15. OATEOF QUOTA'nON

-----I

b. TELEPHONE

a. NAME (Type orprinl)

AREA CODE

NUMBER

THORIZED FOR lOCAl REPRODUCTION
~lIious edition not usable

STANDARD FORM '8 (REV. 6-95)
Prescribed by GSA· FAR (48 CFR) 53.215.1(a)