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Conflicts of Interest and Participation on A-76 Evaluation Panels

by Robert Antonio

  On January 12, 1999, the Comptroller General issued its decision on DZS/Baker LLC; Morrison Knudsen Corporation, B-281224; B- 281224.2; B-281224.3; B-281224.4; B-281224.5; B-281224.6. Since that decision, a controversy has developed in regard to conflicts of interest for federal employees who participate in the evaluation of industry proposals under Office of Management and Budget (OMB) Circular No. A-76.

Although controversy is often a part of federal contracting, a controversy that involves the authorities and decisions of two federal agencies is not needed. Such a controversy should be dealt with and resolved quickly. This article looks at the basics of that controversy.

The Comptroller General's Decision

In the digest of the above decision, the Comptroller General said

"In a cost comparison study pursuant to Office of Management and Budget Circular No. A-76, where 14 of 16 agency evaluators held positions under the study and thus subject to being contracted out, a conflict of interest that could not be mitigated was created, and protests challenging the evaluators' conclusion that all private-sector offers were unacceptable are therefore sustained." (italics and bold supplied)

In reaching the decision, the Comptroller General relied on the Federal Acquisition Regulation (FAR) which provides

"In setting out the standards of conduct that apply to government business, Federal Acquisition Regulation (FAR) sec. 3.101-1 states: Transactions relating to the expenditure of public funds require the highest degree of public trust and an impeccable standard of conduct. The general rule is to avoid strictly any conflict of interest or even the appearance of a conflict of interest in Government-contractor relationships. The standards contained in FAR subpart 3.1 are explicitly applicable to the actions of government personnel."

In justifying the decision that a conflict of interest existed, the Comptroller General turned to a common-sense argument

"Where, as here, a private-sector offeror submits a technical proposal as part of an A-76 cost comparison study for work currently performed in-house by an agency, and agency personnel holding positions under the study and thus subject to being contracted out are involved in evaluating the commercial offeror's proposal, it seems self-evident that, as addressed in FAR sec. 9.501(d), the agency evaluators are potentially unable to render impartial assistance or advice to the contracting officer--their objectivity in performing the evaluation may be impaired. Indeed, as addressed analogously in FAR sec. 9.505-3, in this situation agency evaluators are in effect evaluating a competitor's proposal." (italics and bold supplied)

It is difficult to argue with the Comptroller General's decision. It makes sense. Should one competitor evaluate another competitor's proposal? Although the Comptroller General's decision appears well-founded, little in government contracting is clear-cut. In the case of conflicts of interest, a specific federal agency--the Office of Government Ethics--is involved.

The Office of Government Ethics

The Office of Government Ethics (OGE) is the executive branch agency responsible for overseeing and providing guidance on government ethics for the executive branch, including the ethics programs of executive departments and agencies. OGE was created by the Ethics in Government Act of 1978, Public Law 95-521, as amended. The Act created OGE to provide overall direction for executive branch policies designed to prevent conflicts of interest and to help insure high ethical standards on the part of agency officers and employees. OGE is the "supervising ethics office" for the executive branch for various purposes, including public and confidential financial disclosure reporting by executive agency officials. OGE also has various government ethics guidance responsibilities under Executive Order 12674 of April 12, 1989, "Principles of Ethical Conduct for Government Officers and Employees" (3 CFR 1989 Compilation, pp. 215-218). (See 5 C.F.R. 2600.101) Clearly, OGE is the executive branch authority in determining when conflicts of interest exist.

The Controversy

On September 9, 1999, noting that it had received several inquiries on the above decision, OGE sent a memorandum to the designated agency ethics officials in the federal government to reaffirm the applicability of its regulation that provides an exemption from a conflict of interest for employees who participate in matters conducted under OMB Circular No. A-76. In regard to the Comptroller General's decision noted above, the OGE pointed out that

"The Comptroller General decision did not address the Office of Government Ethics (OGE) exemption under 18 U.S.C. 208 for employees who participate in particular matters where the disqualifying financial interest arises from Federal Government employment."

Pointing to the same FAR provision the Comptroller General used, OGE added the sentence directly preceding the FAR section used by the Comptroller General. Specifically, that sentence states.

"Government business shall be conducted in a manner above reproach and, except as authorized by statute or regulation, with complete impartiality and with preferential treatment for none." (italics and bold supplied)

In explaining that the Comptroller General failed to include the above sentence, OGE noted that

"Additionally, although raised by the attorney representing the Department of the Air Force, the opinion made no mention in the decision concerning the conflict of interest statute in 18 U.S.C. 208 nor of the exemptions that OGE has issued by the regulation implementing that statute. We believe that these were significant omissions that may well have affected the conclusion in that case."

The key here is the exemption that OGE issued in its regulation that implements the statute. Specifically, OGE said

"An employee who evaluates bids or proposals of contractors who are offering to perform the work that the employee performs in-house is participating personally and substantially in a particular matter that will have a direct and predictable effect on his financial interest. In the absence of an exemption or an individual waiver, the employee could not evaluate such bids or proposals without violating Section 208(a)."

"In accordance with 18 U.S.C. 208 (b) (2), OGE has provided an exemption for such employees who participate in particular matters where the disqualifying financial interest arises from Federal Government employment. While an employee may not make determinations that would individually and specially affect his own salary and benefits, the exemption does permit an employee to make determinations that would affect an entire office or group of employees, even though the employee is a member of that group. Under those circumstances, employees who participate in matters connected with OMB A-76 procedures, including the evaluation of bids or proposals, are not in violation of Section 208(a). As noted in 5 C.F.R. 2635.501, a determination that an exemption in 5 C.F.R. 2640 applies also constitutes a determination under the standards of conduct that the interest of the Government in the employee's participation outweighs the concern that a reasonable person may question the integrity of agency programs and operations."

What Next?

Common sense or the law--what should be applied? The Comptroller General's decision is persuasive. With 14 of 16 evaluators from the affected organization evaluating the competitions' proposals, the independence of the government's evaluation team is subject to question. However, the authority and rulings of the OGE cannot be ignored as they were in the Comptroller General's decision. OGE states that the 14 federal employees on the panel did not have conflicts of interest by being on the panel. By looking at one thing at a time, maybe reason can dictate an appropriate resolution.

First, the information provided by the FAR has been cited, at least in part, by both the Comptroller General and OGE. There is nothing to add here. However, one obvious error in the FAR exists. At section 3.101-3 (2) (b), the FAR notes that the Office of Personnel Management's regulations implementing Public Law 95-521 are to be followed. This is clearly wrong since OGE performs this function as explained at 5 C.F.R. 2600.101. This error should be corrected to avoid additional confusion.

Second, we need to look at OGE's exemption at 5 C.F.R. 2640.203 (d). These provisions deal with an "officer or employee" of the executive branch and certain other government entities. For that matter, OGE states that Public Law 95-521 "created OGE to provide overall direction for executive branch policies designed to prevent conflicts of interest and to help insure high ethical standards on the part of agency officers and employees." (Italics and bold added) Does OGE believe that its rulings cover the overall composition of panels in addition to officers and employees? That is not answered in its letter of September 9, 1999.

Third, the Office of Management and Budget (OMB) provides a minimum of guidance on source selection in the Supplemental Handbook to OMB Circular No. A-76. Specifically, at Chapter 3, H. 3. b. it is stated that

"As required by the FAR, the Government should establish a Source Selection Authority, including assurances that there are no potential conflicts of interest in the membership of the Authority."

Since we must use the regulations of OGE, none of the 14 agency evaluators would have a conflict of interest by acting as a member of an A-76 evaluation team. Therefore, OMB's requirement has been met. That leaves us in the current position. No answer here.

Finally, the Comptroller General generally is concerned with the fairness of the competitive procurement process. If the Comptroller General had avoided the use of "conflict of interest' in its decision, perhaps things would be different. In its decision, the Comptroller General focused on the number--14 of 16--of evaluators from the affected activity. Was the Comptroller General trying to state that an evaluation panel with fewer evaluators from the affected activity would provide the competitive procurement process with an air of fairness and credibility?

Perhaps some agreement can be reached on the composition and number of affected federal employees on an evaluation panel that all could accept. If done right, federal employees participating on such an evaluation panel would not be in violation of conflict of interest regulations and the fairness and credibility of the evaluation panel may be maintained. Such a solution could fit in the Supplemental Handbook to OMB Circular No. A-76. If not there, perhaps the FAR.

Copyright 2003 by Robert Antonio

 

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