4.  Personal Conflict of Interest

Comments: Many respondents commented on the definition of "personal conflict of interest" in proposed FAR 3.1101 and also in the clause at FAR 52.203-16(a).

One cautioned against defining the term "personal conflict of interest" by relying solely on terminology used in the Government's Standards of Conduct for Employees of the Executive Branch (Standards), at 5 CFR part 2635, urging the Councils to take differences between the Government and contractor workforce into account.

Several other respondents considered the proposed definition of "personal conflict of interest" to be imprecise. Each of these respondents identified terms in the definition that are undefined or that they deemed ambiguous or overly broad, including "personal activity," "relationship," "close family members," "other members of the household," other employment or financial relationships," "gifts," "compensation," and "consulting relationships." Although one of these organizations counseled against relying too heavily on language in the Government's standards, as discussed above, four others recommended that the Councils borrow from comparable definitions in existing Government regulations.

One respondent suggested an alternative definition of the term "personal conflict of interest" that it considered an amalgam of the proposed definition and definitions in the ethics regulations and the Troubled Asset Relief Program regulations at 31 CFR 31.201, while another respondent urged that the definition of "personal conflict of interest" not rely on a listing of examples that is incomplete, yet not specifically designated as non-exclusive.

One respondent urged that the rule "incorporate some element of contemporaneous 'knowledge' on the part of the covered employee before the PCI requirements are triggered," and that coverage be included to exclude de minimis ownership or partnership interests. On the other hand, another respondent recommended that the definition of "personal conflict of interest" be expanded in scope to capture personal conflicts of interest that can arise from prior work or employment undertaken in support of Government acquisition functions.

Response: As explained in the preamble to the proposed rule, the Councils considered various sources of guidance when developing the definition of "personal conflict of interest." The definition of "personal conflict of interest" provided by the rule clearly borrowed from the Government ethics provisions. On the other hand, the Councils intentionally did not create a mirror image of either 18 U.S.C. 208 or the Government's impartiality provision. The Government's impartiality standard judges a public servant's circumstances from the perspective of a "reasonable person," whereas the FAR standard focuses on the contractor's obligation to the Government and defines a "personal conflict of interest" as a situation "that could impair the employee's ability to act impartially and in the best interest of the Government when performing under the contract." (A verb other than "impair" was inadvertently used in the proposed contract clause. The Councils have corrected this error to make the clause consistent with the rule text.)

Similar to the Government's approach in its ethics regulations, the proposed definition of "personal conflict of interest" listed "sources" of conflicts, including the financial interests of an employee and other members of his or her household, and then listed types of financial interests in subparagraphs (2)(i) through (2)(viii). In response to several comments, the Councils have decided to revise the wording of paragraph (2) of the definition to make it clear that this listing is intended to amplify the term "financial interest" as used earlier in the definition. The Councils have also inserted the words "[f]or example" at the beginning of paragraph (2) to clearly indicate that the listing in subparagraphs (2)(i) through (2)(viii) is not exhaustive.

The Councils have not attempted to further define other terms or phrases used within the definition of "personal conflict of interest." The Councils consider the proposed terminology adequate to enable a contractor to develop screening procedures that will elicit relevant information from its covered employees. In the definition of "personal conflict of interest", the regulation affords flexibility regarding de minimis interest, since it may be determined that a de minimis interest would not "impair the employee's ability to act" with the required objectivity. Separately, although no "knowledge" element has been added, the Councils acknowledge that neither a contractor nor its employees can apply the impartiality standard if it cannot yet be known what interests may be affected by a particular acquisition.