Organizational Conflicts of Interest in Major Defense Acquisition Programs (DFARS Case 2009-D015)

Summary:

DCN 20101229 includes a final rule amending the Defense Federal Acquisition Regulation Supplement (DFARS) to implement section 207 of the Weapon Systems Acquisition Reform Act of 2009. Section 207 addresses organizational conflicts of interest in major defense acquisition programs.

Background:

Section 207 of the Weapon Systems Acquisition Reform Act of 2009 (WSARA) (Pub.L. 111-23)requires DoD to revise the DFARS to provide uniform guidance and tighten existing requirements relating to organizational conflicts of interest (OCIs) of contractors in major defense acquisition programs (MDAPs). The law sets out situations that must be addressed and allows DoD to establish such limited exceptions as are necessary to ensure that DoD has continued access to advice on systems architecture and systems engineering matters from highly qualified contractors, while also ensuring that such advice comes from sources that are objective and unbiased.

In developing regulatory language, section 207 directed DoD to consider the recommendation presented by the Panel on Contracting Integrity and further directed DoD to consider any findings and recommendations of the Administrator of the Office of Federal Procurement Policy (OFPP) and the Director of the Office of Government Ethics (OGE) pursuant to section 841(b) of the Duncan Hunter National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2009 (Pub. L. 110-417). Section 841(b) of the NDAA for FY 2009 required review by OFPP, in consultation with OGE, of FAR coverage of OCIs. Neither OFPP nor OGE has issued recommendations to date pursuant to section 841(b), but both have worked with the FAR Acquisition Law Team, which includes representatives from DoD and the civilian agencies, to draft a proposed rule on OCIs under FAR Case 2007-018. As part of this process, OFPP, OGE, and the FAR Acquisition Law Team reviewed comments received in response to an Advance Notice of Proposed Rulemaking, published in the Federal Register at 73 FR 15962 on March 26, 2008, and are also considering pertinent comments that were submitted in response to this DFARS Case 2009-D015 in formulation of the proposed FAR rule.

A  public meeting was held on December 8, 2009 (see 74 FR 57666) to provide opportunity for dialogue on the possible impact on DoD contracting of the section 207 requirements relating to OCIs.

DoD published a proposed rule in the Federal Register on April 22, 2010 (75 FR 20954). The comment period was initially scheduled to close on June 21, 2010. On June 15, 2010, the comment period was extended to July 21, 2010 (75 FR 33752).

DoD received comments from 21 respondents in response to the proposed rule. Some respondents expressed general support for the rulemaking. Others expressed concern that the rule did not achieve the overall objectives of section 207, either because the proposed coverage was too stringent or not sufficiently strong. Based on public comments, changes were made to the proposed rule, including the following:

•  Removing from the DFARS final rule the proposed changes that would have provided general regulatory coverage on OCIs to temporarily replace that in FAR subpart 9.5.

•  Locating the core of the final rule in subpart 209.5 and 252.209.

•  Making clear that this final rule takes precedence over FAR subpart 9.5, to the extent that there are inconsistencies.

•  Adding to the policy an explanation of the basic goals to promote competition and preserve DoD access to the expertise of qualified contractors.

•  Tightening the exception for "domain experience and expertise" to require a head of the contracting activity determination that DoD needs access to the domain experience and expertise of the apparently successful offeror; and that, based on the agreed-to resolution strategy, the apparently successful offeror will be able to provide objective and unbiased advice.

•  Refining the definition of "major subcontractor" to include upper and lower limits on application of the percentage factor test for determining if the value of the subcontract in relation to the prime contract warrants classifying the subcontract as major; specifically--

o  A subcontract less than the cost or pricing data threshold would not be considered a major subcontract; and

o  A subcontract equal to or exceeding $50 million would automatically be considered a major subcontract.

•  Addressing pre-MDAP as well as MDAP programs.

Dates:

The Effective Date for this final rule is 29 December 2010.

Click here to read the entire Federal Register notice for this rule.