Organizational Conflict of Interest

[September]

Does the writer of the Commissioning requirements in a Buildings Construction Specs have an organizational conflict of interest that would impair their ability to serve effectively as the Commissioning Agent?

Some believe that if we provide the construction specs, including the commissioning specs with our RFP for the Commissioning Agent, it's not a problem for the writer of the Commissioning requirement to compete on this acquisition.

Others believe that the writer of the Commissioning specs will have a bias to believe the commissioning specs are perfect, and that will impact their ability of implement the most effective commissioning plan.

Our office does not have access to legal counsel that specializes in contracts. Thanks for any helpful feedback you can offer.

[joel hoffman]

Does the writer of the Commissioning requirements in a Buildings Construction Specs have an organizational conflict of interest that would impair their ability to serve effectively as the commisioning agent.

Some believe that if we provide the construction specs, including the commissioning specs with our RFP for the Commissioning Agent, it's not a problem for the writer of the Commissioning requirement to compete on this acquisition.

Others believe that the writer of the Commissioning specs will have a bias to believe the commissioning specs are perfect, and that will impact their ability of implement the most effective commissioning plan.

Our office does not have access to legal counsel that specializes in contracts. Thanks for any helpful feedback you can offer.

Response edited on Monday evening (11:07 or so):

Okay, I assume that you are talking about a construction contract and that the contractor must provide a commissioning agent. I also assume that the firm that you are inquiring about has provided A/E services in preparing the contract specs for commissioning.

In that case, yes, there will be a professional conflict of interest. The firm who prepares the design should not be involved in the subsequent construction contract as a prime or a sub to the prime. This might be covered in state licensing laws and regulations.

See also FAR 36.209 -- Construction Contracts With Architect-Engineer Firms.

"No contract for the construction of a project shall be awarded to the firm that designed the project or its subsidiaries or affiliates, except with the approval of the head of the agency or authorized representative." It's late tonight, but I'm thinking that there are statutes covering this - there are also FAR provisions covering business ethics and conflicts of interest. If I get an opportunity tomorrow, I will do some further research.

We (Corps of Engineers) generally write our construction and design-build contracts to require an commissioning agent independent from the contractor, installing firm or designer. There may be a clause in the A/E's contract that states this and/or a provision, clause or technical spec in the construction contract. I will do some more research. I haven't found an actual FAR clause which states that the A/E or its subs or affiliates cant be a subcontractor. Perhaps we have been using tech specs to prevent conflicts of interest. The Corps awards more building construction contracts than any other federal government agency that I am aware of.

If you are writing construction contracts, I would recommend requiring a commissioning agent that is independent of the designer, constructor, test and balance firm or installer.

[joel hoffman]

To add a further thought on this, I am a registered professional engineer who used to be a consulting engineer. The licensing and regulatory codes for the states I am registered under prohibit a conflict of interest where I performed services for the owner, then turn around and work for the contractor.

Also, the commissioning agent could possibly become involved in conflicts of interest with the design itself, regardless of whom they are working for.

[Guest Vern Edwards]

Does the writer of the Commissioning requirements in a Buildings Construction Specs have an organizational conflict of interest that would impair their ability to serve effectively as the Commissioning Agent?

Some believe that if we provide the construction specs, including the commissioning specs with our RFP for the Commissioning Agent, it's not a problem for the writer of the Commissioning requirement to compete on this acquisition.

Others believe that the writer of the Commissioning specs will have a bias to believe the commissioning specs are perfect, and that will impact their ability of implement the most effective commissioning plan.

Our office does not have access to legal counsel that specializes in contracts. Thanks for any helpful feedback you can offer.

The organizational conflict of interest is rather obvious.

[September]

Thanks for your responses. I think I have the clear answer, but just to clarify my question, here's a bit more of the details I neglected to provide initially.

The design was funded by a grant to an organization that then contracted with the A&E for the specs and drawings.

The construction is a direct federal contract using the design generated by the grant.

A subcontractor to the A&E wrote the commissioning specs which went into the construction contract.

That subcontractor to the A&E, which was contracted by another organization, which was funded by the government through a grant, is the vendor we are trying to determine whether they can compete on the Commissioning Agent requirement.

We, the government, are planning on contracting seperately for a Commissioning Agent. While the commissioning services are a part of the construction contract, there will be a seperate procurement for the commissioning agent.

I don't think those details change the conflict of interest, but I wanted to offer them up in case there are other comments you would want to provide.

Thanks again.

[joel hoffman]

Thanks for your responses. I think I have the clear answer, but just to clarify my question, here's a bit more of the details I neglected to provide initially.

The design was funded by a grant to an organization that then contracted with the A&E for the specs and drawings.

The construction is a direct federal contract using the design generated by the grant.

A subcontractor to the A&E wrote the commissioning specs which went into the construction contract.

That subcontractor to the A&E, which was contracted by another organization, which was funded by the government through a grant, is the vendor we are trying to determine whether they can compete on the Commissioning Agent requirement.

We, the government, are planning on contracting seperately for a Commissioning Agent. While the commissioning services are a part of the construction contract, there will be a seperate procurement for the commissioning agent.

I don't think those details change the conflict of interest, but I wanted to offer them up in case there are other comments you would want to provide.

Thanks again.

I will check with my subject matter experts and get back to you. They are gone for the day...

[joel hoffman]

I will check with my subject matter experts and get back to you. They are gone for the day...

While waiting, here is the latest wording from the Model RFP that we are using on design-build contracts on Army Military Construction and Base Realignment and Closure projects. I realize that it is technical in nature. However, it spells out the contractual roles in an attempt to avoid conflicts of interest:

"...(Hire) the Commissioning Authority (CA), certified as a CA by AABC, NEBB, or TABB, as described in ASHRAE Guideline 1.1. The CA will be an independent contractor and not an employee or subcontractor of the Contractor or any other subcontractor on this project, including the design professionals (i.e., the Designer of Record or their firm(s)). The Contracting Officer?s Representative will act as the Owner?s representative in performance of duties spelled out under OWNER in Annex F of ASHRAE Guideline 0."

[joel hoffman]

I will check with my subject matter experts and get back to you. They are gone for the day...

Here is what my mechanical engineer has advised, based upon Whole Building Commissioning criteria for LEED ("Leadership in Energy and Environmental Design") compliance by the US Green Building Council. Whole Building Commissioning goes beyond simply commissioning the HVAC system and is the way of the future. Note that the Corps of Engineers doesn't allow the CA to be an employee of the prime or sub, nor of the contractor's designer if the project is design-build instead of government designed.

"(A) source for the answer to this Commisioning Agent question is LEED-NC v2.2 (see excerpts below). Fundamental Commissioning (which is required for every project) and Enhanced Commissioning (Optional) both state that the CxA may be (can be) a qualified employee "or consultant of the Owner". However, based on the other qualifications of the CxA, the USGBC may have to be convinced that the consultant to the Owner is truly an Independent Commissioning Authority. Fundamental Commissioning states that the individual serving as the CxA may include a qualified employee of the design firm and for projects smaller than 50,000 gross square feet the CxA may be a person on the design team. For projects 50,000 gross square feet and larger the CxA may be an employee of the design firm but shall be independent of the project's design team. For projects attempting to get the Enhanced Commissioning Credit the CxA shall be independent of the work of design and not be an employee of the design firm with no deviation for project size."

Therefore in keeping with the intent of the USGBC for the CxA to be independent it appears that it is acceptable for the firm who prepared the (government prepared) design to be the CxA for Fundamental Commissioning but not for projects attempting to get the Optional Enhanced Commissioning Credit."

[Guest Vern Edwards]

And just what does any of that have to do with the rules in FAR Subpart 9.5, Organizational Conflicts of Interest?

[joel hoffman]

And just what does any of that have to do with the rules in FAR Subpart 9.5, Organizational Conflicts of Interest?

September indicated that a firm, which prepared the commissioning specifications for the project, wants to compete for the government contract to serve as the government's Commissioning Agent. September wants to know if that would be considered acceptable or would it be considered a conflict of interest.

The information I provided is the standard of the USGBC for participation both as the Commissioning Agent and in the design of the project. The standards are for Whole Building commissioning under LEED, which includes HVAC commissioning. I don't know whether the project at hand includes Whole Building Commissioning or just HVAC but the standards appear to be a reasonable standard to apply to determine what USGBC considers to be acceptable for avoidance of conflict of interest in the Commissioning process.

DOD has adopted LEED for new CONUS construction. DOD is the agency currently acquiring the most Federal building construction and may be the individual organization contracting for the most building construction in the US economy right now,

[Guest Vern Edwards]

Joel:

You offer the following opinion from some mechanical engineer who, as far as we know, may never have read FAR Subpart 9.5 or even heard of an organizational conflict of interest:

Therefore in keeping with the intent of the USGBC for the CxA to be independent it appears that it is acceptable for the firm who prepared the (government prepared) design to be the CxA for Fundamental Commissioning but not for projects attempting to get the Optional Enhanced Commissioning Credit.

What is that supposed to mean with respect to OCIs under FAR? Is that supposed to mean that in his opinion there would be no organizational conflict of interest (OCI) under FAR 9.5 in September's case? Is that what the ME means by "it appears to be acceptable"?

He or she cites a publication of the U.S. Green Building Council as the basis for his opinion, whatever that opinion is about. At its website, the USGBC describes itself as follows:

The U.S. Green Building Council (USGBC) is a Washington, D.C.-based 501?(3) nonprofit organization committed to a prosperous and sustainable future for our nation through cost-efficient and energy-saving green buildings. USGBC works toward its mission of market transformation through its LEED green building certification program, robust educational offerings, a nationwide network of chapters and affiliates, the annual Greenbuild International Conference & Expo, and advocacy in support of public policy that encourages and enables green buildings and communities.

In short, it sells memberships, publications, training, and certifications associated with "green building." What official role does it play, if any, with respect to implementation of government policy about OCI's? None!

What kind of information are you providing to people, Joel? What are September and the rest of us supposed to make of it? Why be so hasty?

[Guest carl r culham]

September - Another view that may help.

Company A designed the project. In doing so Company A subcontracted with Company B to write the commissioning specs. Company B now wants to compete for the commissioning agent requirement.

Seems this is very close to the examples of FAR Part 9.508 that illustrate where a conflict exists. I do not believe the contract and funding stream facts you offer change the conclusion that a conflict does exist.

[joel hoffman]

I apolgize for answering September's question, which focused on standards of professional conflict of interest, rather than "organizational" conflict of interest.

Based upon professional standards of conflict, one could determine whether or not it would be permissible to use a firm involved in design as the owner's Commissioning Agent. It would be permissible to include CA services as what used to be referred to as "Title II" services (services during during construction) in an AE contract under appropriate circumstances. I feel that the LEED guidelines

are reasonable standards to determine professional independence.

Here, the real problem, which I overlooked and nobody else specifically addressed either, is that the design was performed under a contract by the other owner entity, so we can't just use the design firm under the same contract for services during construction.

Therefore, we are competing the services under a separate contract and the question is - does the firm have an "organizational" conflict of interest? The question of ethical and professional conflict can be resolved using PROFESSIONAL standards and the LEED standards make sense. However, the next question is - does the firm have an unfair advantage over other firms in the competition for the owner contract? From a practical standpoint, firms other than the original firm should be able to perform the service. One must decide if they think that this firm has an unfair advantage under FAR 9.5 guidelines.

By the way, Vern, DOD is a member of the US Green Building Council and I imagine that GSA might also be a member.

Now please tell me what you think the organizational conflict of interest really is here. I don't think there is a professional conflict of interest in the firm being able to ethically serve as CA. There may be a question of unfair competitive advantage. Aside from your questioning the motives of USGBC, what do you think?

[joel hoffman]

The role of the CA is to be an independent agent of the owner in the Commissioning process whether for HVAC or for Whole Building Commissioning.

For LEED projects, the USGBC wants an honest submission of the performance documentation supporting certification from the Whole Building Commissioning process, which incorporates HVAC commissioning . They feel that the entity who designed the project for the owner can be trusted to serve as the CA under the conditions delineated in the LEED policy and we accept that.

This is a service that could be included in the original A/E contract as services during construction.

For simpler commissioning only of HVAC, which is a subset of Whole Building Commissioning, the same standards should be able to be applied to the question if the same firm who wrote the specs can effectively and honestly serve as the commissioning agent.

The question of insider advantage is separate.

[Guest Vern Edwards]

I apolgize for answering September's question, which focused on standards of professional conflict of interest, rather than "organizational" conflict of interest.

Uh, actually, September's question was about OCI, not professional conflict of interest. Read the first post. It expressly refers to OCI.

By the way, Vern, DOD is a member of the US Green Building Council and I imagine that GSA might also be a member.

So what?

Now please tell me what you think the organizational conflict of interest really is here. I don't think there is a professional conflict of interest in the firm being able to ethically serve as CA. There may be a question of unfair competitive advantage. Aside from your questioning the motives of USGBC, what do you think?

According to FAR 9.505(, one of the underlying principles of OCI is "Preventing unfair competitive advantage."

According to FAR 9.505-2((1)--with three specific exceptions that do not apply in this case (see ((1)(i), (ii), and (iii))--if a firm prepares or assists in the preparation of a work statement to be used in competitively acquiring a service, then that firm may not provide the service. Keep in mind that the example is not exhaustive of all OCI situations.

It strikes me that if the firm in question prepared the commissioning service SOW (specs) there may be an OCI that should prevent it from competing for the commissioning services contract on grounds that it would have a competitive advantage. For example, it would have a better understanding of the government's interpretation of the spec or have a head start on proposal preparation.

[joel hoffman]

Yes, you are most likely correct if this will be a service contract.

However, if September's organization decided to acquire a small A-E contract for CA services, it might be different. The A-E firm might well have performed the service during construction as part of its original contract, had the contract been with September rather than a different organization. The OCI rules cited above would stop virtually all such A-E services during construction, if they were literally applied to A-E contracts the same as to a service contract. We often retain the original design firm for services during construction to review shop drawings, perform inspections, perform special inspections, perform shop inspections, and probably to perform commissioning services, too. I've seen the A-E involved in commissioning of complex projects. Well, the A-E writes all these requirements into the contract specifications as part of the design effort.

it could be a real problem if the firm wrote the specs around its own unique or rare capabilities.

But if it used standard specs for services that many firms can provide, I don't see any inherent competitive advantage.

If this were to be a small A-E contract, experience, general capabilities, personnel quals/resources and past performance would be the discriminators for selection if the the A-E used standard commissioning specs (we have guide specs for Commissioning whether LEED or just for HVAC) and if the government can determine whether the specs are open or would prejudice the competition.

Price is negotiated on A-E contracts after the initial selection, so that isn't necessarily a competitive selection factor.

My perspective is from the A-E/construction side and knowing that our A-E's often provide some services during construction for which they wrote the specs. In fact, I served in that role myself before joining Civil Service. We always knew that we were serving the interests of the client, whether it was government or other owner. That's part of our licensing code of ethics.

But, I suppose one might be expected to apply the OCI rules literally for any separately awarded A-E contract for services during construction.

[joel hoffman]

Duplicate post.

[Guest Vern Edwards]

Yes, you are most likely correct if this will be a service contract.

However, if September's organization decided to acquire a small A-E contract for CA services, it might be different. The A-E firm might well have performed the service during construction as part of its original contract, had the contract been with September rather than a different organization. The OCI rules cited above would stop virtually all such A-E services during construction, if they were literally applied to A-E contracts the same as to a service contract. We often retain the original design firm for services during construction to review shop drawings, perform inspections, perform special inspections, perform shop inspections, and probably to perform commissioning services, too. I've seen the A-E involved in commissioning of complex projects. Well, the A-E writes all these requirements into the contract specifications as part of the design effort.

What are you talking about? An A-E contract is a service contract, and FAR Subpart 9.5 applies to A-E contracts. See SSR Engineers, Inc., Comp. Gen. Dec. B-282244, 99-2 CPD ? 27. I don't know what you mean when you say an A-E was "involved," but the fact that you've seen something done does not make what you saw right. It's not proof.

We're friends, Joel, but you tend to give hasty answers, sometimes dashing something off from your Blackberry while waiting in an airport. September asked a straightforward question that was not hard to answer. You went off like a rocket with a lot of blather. Please slow down and think about what you say and why you say it. We want to give good answers, helpful answers, don't we?

[joel hoffman]

We're friends, Joel, but you tend to give hasty answers, sometimes dashing something off from your Blackberry while waiting in an airport. September asked a straightforward question that was not hard to answer. You went off like a rocket with a lot of blather. Slow down and think about what you say and why you say it. We want to give good answers, helpful answers, don't we?

Vern, the reason you finally provided in your post yesterday (several days after the original question was asked), referred to FAR 9.505-2((1). It might appear that application of such reasoning could prohibit an A/E firm from performing A/E services for the owner after award of the resulting construction contract, if those services were described in the contract documents that the A/E prepared.

That doesn't make any sense at all in the real world of government A/E contracting. The A/E firm is the designer of record for the government and must often perform various technical reviews, inspections, etc. The Commissioning Agent is to act as the owner's representative during the commissioning of the building by the contractor.

As for me providing "hasty answers", I disagree. September specifically asked for feedback on the following points:

"Does the writer of the Commissioning requirements in a Buildings Construction Specs have an organizational conflict of interest that would impair their ability to serve effectively as the Commissioning Agent?"

"Others believe that the writer of the Commissioning specs will have a bias to believe the commissioning specs are perfect, and that will impact their ability of implement the most effective commissioning plan."

September asked on January 11 for feedback about organizational conflict of interest with respect to the above described professional and ethical considerations.

I responded that I assumed that September was talking about a firm that prepared the specs, then would be hired to work for the contractor after award. I said that there will be a conflict of interest.

Later, I added: "Also, the commissioning agent could possibly become involved in conflicts of interest with the design itself, regardless of whom they are working for."

As for being "not hard to answer", on the morning of Jan 12 you offered only your statement that "The organizational conflict of interest is rather obvious." What kind of "good, helpful answer" was that intended to be?

Later that morning, September clarified that the firm prepared the specs for an organization, that her/his organization was going to issue the construction contract and was going to separately direct contract with a Commissioning Agent. She/he said that she/he didn't think that that would change the conflict of interest, but offered them up in case there were other comments "we" would want to provide.

That afternoon I offered to check with my subject matter experts - those in the government who prepare designs, who execute contracts and commission buildings and work regularly with A/E firms.

I didn't notice any professorial admonition from you between then and 23 1/2 hours later when I offered a basis to determine what an organization that we belong to and adopt their standards considers to be a reasonable basis for allowing the design firm to participate as the Commissioning Agent. The scope of those services is for whole building commissioning, which is even more complex and critical than simply commissioning an HVAC system.

Because we regularly engage our A/E firms to provide some services after award of the construction contracts that they design and that they describe in the contract documents, that seemed to be a very professional and reasonable basis to respond to Septembers' concern. This concern was expressed as:

Would being the writer of the commissioning spec..."impair their ability to serve effectively as the Commissioning Agent?" And: "Others believe that the writer of the Commissioning specs will have a bias to believe the commissioning specs are perfect, and that will impact their ability of implement the most effective commissioning plan."

FAR 9.505 General Rules describes two underlying principles

"( a) Preventing the existence of conflicting roles that might bias a contractor's judgement; and

( Preventing unfair competitive advantage. In addition to the other situations described in this subpart, an unfair competitive advantage exists where a contractor competing for award of any federal contract possesses-

( 1) proprietary information(that was obtained from a government official without proper authorization; or

( 2) source selection information (as described in (2.101) that is relevant to the contract but is not available to all competitors, and such information would assist that contractor in obtaining the contract.

From my experience with specifications for commissioning of building systems - yes, these are "Buildings Construction Specs", Commissioning specs aren't custom written for construction projects. There are guide specs and there are standard industry guidelines for commissioning of HVAC systems or whole building commissioning. This isn't rocket science and it most likely isn't anything out of the ordinary.

I later apologized for not addressing the issue of unfair advantage. Quite frankly I don't see any "unfair" or "competitive" advantage for an A/E firm who wrote the commissioning requirements in an A/E competition for Commissioning Agent services - unless the specs are custom written so that they would be in a position of unfair advantage. There wasn't any mention of this and I haven't seen custom commissioning specs on typical building projects. The fact that September used the term "Commissioning Agent" indicates to me that this is a standard procedure. I admitted that a service contract competition might be different, where price is a factor, due to some familiarity with the design.

My concern was with the aspect of OCI that September specifically asked about: "Preventing the existence of conflicting roles that might bias a contractor's judgement." That is what I researched and answered. If you think that taking a day to request expert assistance, read that advice, check out the advice, then respond is "hasty", I suppose it is in comparison to the three days that you waited to provide your FAR reference.

Your analysis appears to be based upon determining who or what the USGBC is, then seemingly dismissing any relevance to what is considered by many organizations to be one industry standard for determining what is considered to be a conflicting role that might bias a contractor's judgement. All Army building construction is required to be at least LEED certifiable these days and the Air Force and NAVFAC have also adopted LEED.

Finally, you provided an answer on the basis of unfair advantage per FAR 9-505-2 ( . I don't know how you determined that the firm couldn't participate because it allegedly was in a position to favor its own capabilities. How is that so? How do you know that none of the exceptions in 9.505-2 ( (1) apply?

As for the relevance of our respective answers, I concentrated on responding to specific OCI questions concerning professional judgement and bias. I believe that my response was reasonable and researched. I didn't pay much attention to the separate consideration of unfair advantage because 1) September didn't ask about that and 2) I don't think that a firm would have a competitive advantage in competing for an A/E contract to be the CA, assuming that the CA specs are not custom written to favor that firm's capabilities. There are many firms who provide CA services.

You concentrated on concerns about unfair competitive advantage, basing your answer upon 9.505-2 (.

[Guest Vern Edwards]

Joel,

I scanned your post and decided not to spend the time to read it carefully.

Vern

[joel hoffman]

Joel,

I scanned your post and decided not to spend the time to read it carefully.

Vern

No problem, Vern. I said that you responded to the unfair advantage aspect of OCI, while I concentrated on the aspect of preventing the existence of conflicting roles that might bias a contractor's judgement.

You don't agree with my opinion and I don't agree with yours.

[joel hoffman]

Sorry, duplicate post. My home computer is experiencing technical problems in viewing the Forum. I was unable to view my last post.