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Zag2009

DEAR 952.209-72, Organizational Conflicts of Interest

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My prime contract contains DEAR 952.209-72, Organizational Conflicts of Interest Alt 1 (1997).  If my company (prime contractor) issued a subcontract for design work to its affiliate, under this clause, is the affiliate then barred from being awarded the follow-on construction subcontract? 

 

In other words, should this clause be applied at the subcontract level when an affiliate holds a subcontract under the prime contractor. 

 

Alternatively, is this clause intended to only apply to contractors (defined as including affiliates) submitting bids on government acquisitions at the prime level?  For example, if my company were to submit a solicitation to a DOE acquisition, and my affiliate contributed to development of the SOW for that acquisition, I think it is clear my company is conflicted out from being awarded that contract, but want to ensure the DEAR clause should be applied to limit affiliates from being awarded at the lower-tier subcontractor level under an existing prime contract (as described above).  

 

 Note my question is specific to application of this specific clause only, not how other FAR/DEAR clauses would apply.   

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23 minutes ago, Zag2009 said:

In other words, should this clause be applied at the subcontract level when an affiliate holds a subcontract under the prime contractor. 

Well, here's the flowdown provision:

Quote

(f)Subcontracts.

(1) The Contractor shall include a clause, substantially similar to this clause, including this paragraph (f), in subcontracts expected to exceed the simplified acquisition threshold determined in accordance with  48 CFR part 13 and involving the performance of advisory and assistance services as that term is defined at  48 CFR 2.101. The terms “contract,” “Contractor,” and “contracting officer” shall be appropriately modified to preserve the Government's rights.

(2) Prior to the award under this contract of any such subcontracts for advisory and assistance services, the Contractor shall obtain from the proposed subcontractor or consultant the disclosure required by  48 CFR 909.507-1, and shall determine in writing whether the interests disclosed present an actual or significant potential for an organizational conflict of interest. Where an actual or significant potential organizational conflict of interest is identified, the Contractor shall take actions to avoid, neutralize, or mitigate the organizational conflict to the satisfaction of the Contractor. If the conflict cannot be avoided or neutralized, the Contractor must obtain the approval of the DOE Contracting Officer prior to entering into the subcontract.

I don't see an exception for a subcontractor who happens to be an affiliate of the prime.

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Thank you, Vern.  Don't you only have to flow down this clause to subcontracts for advisory assistance work (which in my case it is not)?   If it is not for this type of work, does the clause still apply to a prime contractor awarding a subcontract to an affiliate? 

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If I'm reading DEAR 970.905 and 952.209-72 correctly, then

  • the clause alternate containing the flowdown requirement goes into M&O prime contracts;
  • if it's properly in a prime contract, then the flowdown provision applies to all subcontracts under that prime contract, not just subcontracts for advisory and assistance work; and
  • if a subcontract is for advisory and assistance work the prime must obtain the disclosure statement mentioned in paragraph (2).

If you have any more questions I suggest you put them to your DOE contracting officer. I'm just reading the clause. I don't know any more than that.

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With respect to flowdown to subcontractors, the following benchmark is offered:

Lockheed Martin CORPDOC 3C (03-99) for DOE flowdowns is as follows:

952.209-72 ORGANIZATIONAL CONFLICTS OF INTEREST (JUN 1997) (ALT I) (Applicable if this Contract is for advisory and assistance services...

 

With respect to affiliates, I would argue that there are circumstances about the relationship where it could be determined that the prime controls the affiliate in such a way, and/or does not deal with it “at arms length” such that the affiliates work could bar the prime from future contracts due to conflict of interest related to the affiliates work.

 

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Vern:
Projecting that to this clause based on experience regarding tax and cost accounting situations, ACO questions and comments over the years, and interpretations regarding the general application of prime contract clauses on affiliates and prime contractors where the relationship is not arms length. Application and review of the relationship is included in CPSR reviews. See FAR 44.303(e).     

Neil

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When the relationship between the designer and the constructor is not at arms length for separately prepared design work and separately awarded construction work, there can be implications of a conflict of interest.

The roles and professional responsibilities of the designer(s) and the constructors should be independent. I am assuming here that this isn't a "design-build" scenario, with single entity responsibilities.  

The policy concept is covered in the prohibition at FAR 36.209.  

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Neil:

Thanks. I question whether that would hold true. We're talking about interpretation of a contractual agreement with a specific agency. What words in the clause would support an interpretation that since "the prime controls the affiliate in such a way, and/or does not deal with it 'at arms length' such that the affiliates work [w]ould bar the prime from future contracts due to conflict of interest related to the affiliates work." Those words are not in the clause. On what could DOE rely in the clause or elsewhere in the contract to support that interpretation?

I can certainly understand DOE wanting to make that assertion, but would the terms of the contract support it?

Maybe I don't understand the scenario that you're thinking about. The affiliate is doing some work, and that bars the prime, which is not doing that work or working as a subcontractor for the affiliate. Do I have it right?

For all--here is the clause in its entirety:

Quote

Organizational Conflicts of Interest (AUG 2009)

(a)Purpose. The purpose of this clause is to ensure that the Contractor (1) is not biased because of its financial, contractual, organizational, or other interests which relate to the work under this contract, and (2) does not obtain any unfair competitive advantage over other parties by virtue of its performance of this contract.

(b)Scope. The restrictions described herein shall apply to performance or participation by the Contractor and any of its affiliates or their successors in interest (hereinafter collectively referred to as “Contractor”) in the activities covered by this clause as a prime Contractor, subcontractor, cosponsor, joint venturer, consultant, or in any similar capacity. For the purpose of this clause, affiliation occurs when a business concern is controlled by or has the power to control another or when a third party has the power to control both.

(1)Use of contractor's work product.

(i) The Contractor shall be ineligible to participate in any capacity in Department contracts, subcontracts, or proposals therefore (solicited and unsolicited) which stem directly from the Contractor's performance of work under this contract for a period of (Contracting Officer see  48 CFR 909.507-2 and enter specific term) years after the completion of this contract. Furthermore, unless so directed in writing by the Contracting Officer, the Contractor shall not perform any advisory and assistance services work under this contract on any of its products or services or the products or services of another firm if the Contractor is or has been substantially involved in their development or marketing. Nothing in this subparagraph shall preclude the Contractor from competing for follow-on contracts for advisory and assistance services.

(ii) If, under this contract, the Contractor prepares a complete or essentially complete statement of work or specifications to be used in competitive acquisitions, the Contractor shall be ineligible to perform or participate in any capacity in any contractual effort which is based on such statement of work or specifications. The Contractor shall not incorporate its products or services in such statement of work or specifications unless so directed in writing by the Contracting Officer, in which case the restriction in this subparagraph shall not apply.

(iii) Nothing in this paragraph shall preclude the Contractor from offering or selling its standard and commercial items to the Government.

(2)Access to and use of information.

(i) If the Contractor, in the performance of this contract, obtains access to information, such as Department plans, policies, reports, studies, financial plans, internal data protected by the Privacy Act of 1974 ( 5 U.S.C. 552a), or data which has not been released or otherwise made available to the public, the Contractor agrees that without prior written approval of the Contracting Officer it shall not - 

(A) use such information for any private purpose unless the information has been released or otherwise made available to the public;

(B) compete for work for the Department based on such information for a period of six (6) months after either the completion of this contract or until such information is released or otherwise made available to the public, whichever is first;

(C) submit an unsolicited proposal to the Government which is based on such information until one year after such information is released or otherwise made available to the public; and

(D) release such information unless such information has previously been released or otherwise made available to the public by the Department.

(ii) In addition, the Contractor agrees that to the extent it receives or is given access to proprietary data, data protected by the Privacy Act of 1974 ( 5 U.S.C. 552a), or other confidential or privileged technical, business, or financial information under this contract, it shall treat such information in accordance with any restrictions imposed on such information.

(iii) The Contractor may use technical data it first produces under this contract for its private purposes consistent with paragraphs (b)(2)(i) (A) and (D) of this clause and the patent, rights in data, and security provisions of this contract.

(c)Disclosure after award.

(1) The Contractor agrees that, if changes, including additions, to the facts disclosed by it prior to award of this contract, occur during the performance of this contract, it shall make an immediate and full disclosure of such changes in writing to the Contracting Officer. Such disclosure may include a description of any action which the Contractor has taken or proposes to take to avoid, neutralize, or mitigate any resulting conflict of interest. The Department may, however, terminate the contract for convenience if it deems such termination to be in the best interest of the Government.

(2) In the event that the Contractor was aware of facts required to be disclosed or the existence of an actual or potential organizational conflict of interest and did not disclose such facts or such conflict of interest to the Contracting Officer, DOE may terminate this contract for default.

(d)Remedies. For breach of any of the above restrictions or for nondisclosure or misrepresentation of any facts required to be disclosed concerning this contract, including the existence of an actual or potential organizational conflict of interest at the time of or after award, the Government may terminate the contract for default, disqualify the Contractor from subsequent related contractual efforts, and pursue such other remedies as may be permitted by law or this contract.

(e)Waiver. Requests for waiver under this clause shall be directed in writing to the Contracting Officer and shall include a full description of the requested waiver and the reasons in support thereof. If it is determined to be in the best interests of the Government, the Contracting Officer may grant such a waiver in writing.

(f)Subcontracts.

(1) The Contractor shall include a clause, substantially similar to this clause, including this paragraph (f), in subcontracts expected to exceed the simplified acquisition threshold determined in accordance with  48 CFR part 13 and involving the performance of advisory and assistance services as that term is defined at  48 CFR 2.101. The terms “contract,” “Contractor,” and “contracting officer” shall be appropriately modified to preserve the Government's rights.

(2) Prior to the award under this contract of any such subcontracts for advisory and assistance services, the Contractor shall obtain from the proposed subcontractor or consultant the disclosure required by  48 CFR 909.507-1, and shall determine in writing whether the interests disclosed present an actual or significant potential for an organizational conflict of interest. Where an actual or significant potential organizational conflict of interest is identified, the Contractor shall take actions to avoid, neutralize, or mitigate the organizational conflict to the satisfaction of the Contractor. If the conflict cannot be avoided or neutralized, the Contractor must obtain the approval of the DOE Contracting Officer prior to entering into the subcontract.

 

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Edit: deleted. I misidentified the name of a poster.  

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10 hours ago, joel hoffman said:

Vern, Neil indicated that his firm as the prime, issued a subcontract to an affiliate to design a project. I read that he is asking if the clause bars the same affiliate from being awarded the follow-on construction subcontract. I presume that his company, the prime, would be awarding the subcontract to construct the product of the design. 

Joel:

In which of his two posts did Neil indicate any of those things?

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