[Federal Register Volume 75, Number 77 (Thursday, April 22, 2010)]
[Proposed Rules]
[Pages 20954-20965]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-9210]


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DEPARTMENT OF DEFENSE

Defense Acquisition Regulations System

48 CFR Parts 202, 203, 212, and 252

RIN 0750-AG63


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

AGENCY: Defense Acquisition Regulations System, Department of Defense 
(DoD).

ACTION: Proposed rule with request for comments.

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SUMMARY: DoD is proposing to amend the Defense Federal Acquisition 
Regulation Supplement (DFARS) to implement section 207 of the Weapons 
System Acquisition Reform Act of 2009.

DATES: Comments on the proposed rule should be submitted in writing to 
the address shown below on or before June 21, 2010, to be considered in 
the formation of the final rule.

ADDRESSES: You may submit comments, identified by DFARS Case 2009-D015, 
using any of the following methods:
    Federal eRulemaking Portal: http://www.regulations.gov. Follow the 
instructions for submitting comments.
    E-mail: [email protected]. Include DFARS Case 2009-D015 in the subject 
line of the message.
    Fax: 703-602-0350.
    Mail: Defense Acquisition Regulations System, Attn: Ms. Amy 
Williams, OUSD (AT&L) DPAP (DARS), 3060 Defense Pentagon, Room 3B855, 
Washington, DC 20301-3060.
    Comments received generally will be posted without change to http://www.regulations.gov, including any personal information provided.

FOR FURTHER INFORMATION CONTACT: Ms. Amy Williams, 703-602-0328.

SUPPLEMENTARY INFORMATION:

A. Background

    DoD is proposing to amend the DFARS to implement section 207 of the 
Weapons System Acquisition Reform Act of 2009 (WSARA) (Pub. L. 111-23). 
Section 207 requires DoD to revise the DFARS to provide uniform 
guidance and tighten existing requirements for organizational conflicts 
of interest (OCIs) by contractors in major defense acquisition 
programs. 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 
ensuring that such advice comes from sources that are objective and 
unbiased.
    In developing regulatory language, DoD is directed to consider the 
recommendation presented by the Panel on Contracting Integrity. DoD has 
reviewed the provisional recommendations of the Panel in the formation 
of this proposed rule and will consider the final recommendations of 
the Panel in the formation of the final rule. DoD must also 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, but are working with the FAR Acquisition Law Team, which 
includes representatives from DoD and the civilian agencies, to draft a 
proposed rule under FAR Case 2007-018. As part of this process, OFPP, 
OGE, and the Team are reviewing comments received in response to an 
Advance Notice of Proposed Rulemaking, published in the Federal 
Register at 73 FR 15962 on March 26, 2008.
    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. In the 
formation of this proposed rule, DoD considered the comments provided 
at the public meeting, as well as other unsolicited comments received 
from the public. Various presenters at the public meeting (1) Expressed 
a desire for policy and regulation to emphasize the importance of using 
mitigation strategies to address OCIs, (2) sought a more consistent 
approach within the Government to resolve OCIs, and (3) voiced a strong 
interest in ensuring any rule is published for comment prior to taking 
effect.
    To implement section 207 and its call for the tightening of 
existing OCI requirements effectively, DoD felt it was necessary to 
review the FAR's coverage on OCIs in subpart 9.5 carefully. FAR subpart 
9.5 is intended to provide the foundational principles and processes 
for identifying and addressing OCIs. At the same time, FAR subpart 9.5 
is essentially unchanged from the days when the coverage was located in 
an appendix to the Defense Acquisition Regulation (DAR). The existing 
FAR coverage relies primarily upon examples to describe OCI; some in 
the contracting community incorrectly thought the examples in FAR 9.505 
contained the universe of conflicts. Further, the existing FAR coverage 
does not provide any standard provisions or clauses addressing OCIs, 
and the requirements of FAR subpart 9.5 were often overlooked by the 
contracting community.
    DoD has concluded from its review that--
     The many decisions issued in the past 15 years by the 
Government Accountability Office (GAO) and the Court of Federal Claims 
(CoFC) on OCIs should be reflected in any updated coverage;
     The coverage of OCIs should be better organized and 
relocated to a new subpart 203.12 to be addressed along with improper 
business practices and personal conflicts of interest;
     Standard provisions and clauses will be beneficial, as 
long as there is opportunity for contracting officers to tailor the 
provisions and clauses for particular circumstances, as appropriate; 
and
     Expanding coverage to address unique issues associated 
with task and delivery order (indefinite-delivery/indefinite-quantity) 
contracts is also useful.
    DoD proposes to use DFARS subpart 203.12 in lieu of the present FAR 
subpart 9.5. However, when the FAR is revised, pursuant to the section 
841(b) review, to incorporate broader OCI changes, DoD will follow the 
FAR and

[[Page 20955]]

revise the DFARS to address only those aspects of OCIs that relate 
specifically to major defense acquisition programs.

B. Details of Proposed Revised Coverage on OCIs.

    202.101 Definition: Adding a new definition of ``organizational 
conflict of interest'' refers to the types of conflicts first defined 
in Aetna Government Health Plans (B-254397, July 27, 1995). Further 
details necessary to identify conflicts are contained in section 
203.1204, entitled Types of organizational conflicts of interest. DoD 
believes it would be more useful to the contracting community if these 
details are in subpart 203.12 instead of in the part 202 definition.
    203.1200 Scope. This section is comparable to the scope statement 
at FAR 9.500(a); however, there are meaningful differences between the 
proposed and current coverage. The proposed coverage adopts principles 
from case law to define conflicts rather than relying primarily on 
examples. This proposed section continues to implement section 8141 of 
the National Defense Appropriations Act for Fiscal Year 1989 (Pub. L. 
100-463), which was codified as 41 U.S.C. 405b.
    203.1201 Definitions.
    The proposed new coverage includes the following definitions:
     Contractor, clarifying that the entire contractor 
organization is included when protecting against OCIs. GAO stated in 
its decision on Aetna Government Health Plans, supra, that there is no 
basis to distinguish between a firm and its affiliates, at least where 
concerns about potentially biased ground rules and impaired objectivity 
are at issue. (See ICF Inc., B-241372, February 6, 1991.)
     Firewall, one of the techniques to mitigate an OCI.
     Resolve, explaining that there are ways to acquire needed 
goods and services and also address OCIs.
    Unlike current FAR subpart 9.5., the proposed DFARS coverage does 
not include a definition of ``marketing consultant'' because the 
coverage is expanded beyond contracts only for marketing consultants.
    203.1202 Applicability. DoD proposes that this rule should continue 
to apply to contracts with both profit and nonprofit organizations 
(current FAR 9.502(a)).
    DoD addresses the applicability of part 12, proposing that, except 
for commercially available off-the-shelf (COTS) items, the rule should 
also apply to acquisitions of commercial items. DoD made this 
determination, in part, based on the belief that the acquisition of 
commercial services might not be free from OCI concerns.
    203.1203 Policy. DoD proposes including a policy statement that 
reflects the harm that can be caused by OCIs. It is, therefore, the 
policy of DoD to protect its interests by identifying and resolving 
OCIs. It is also DoD policy that mitigation is generally the preferred 
method of resolution.
    203.1204 Types of organizational conflicts of interest. This 
section explains the three types of OCIs as recognized by the GAO and 
the Court of Federal Claims--
     Impaired objectivity;
     Unfair access to non-public information; and
     Biased ground rules.
Subsequent case law has amplified and refined the principles first 
articulated in the Aetna decision. This section reflects these further 
amplifications when they would help contracting officers identify 
conflicts of interest.
    The section organizes OCIs by type of conflict of interest, rather 
than type of task. However, an example taken from section 9.505 of the 
FAR is provided for each type of OCI. DoD believes that the expanded 
explanation reflecting the tenets from case law will improve 
contracting officers' understanding of OCIs and their ability to both 
identify them and to work with contractors to address them. This 
approach should also help to address the criticism made by some that 
contracting officers believe no OCI exists when a contract differs from 
the examples listed in FAR subpart 9.5.
    ``Unfair access to non-public information'' is one of the three 
types of conflicts discussed in section 203.1204. Different sources 
sometimes refer to ``unfair access to data.'' DoD selected the term 
``information'' because it is (a) broader than ``data,'' which is 
defined in the FAR clause at 52.227-14, Rights in Data--General, to 
mean recorded information, and (b) used most frequently in case law. 
The section also includes a statement that natural competitive 
advantages are not conflicts which contracting officers are required to 
resolve.
    203.1205 Contracting officer responsibilities. This section 
addresses comments from several respondents to the Advance Notice of 
Proposed Rulemaking that the section on contracting officer 
responsibilities in current FAR subpart 9.5 does not encompass all the 
contracting officer responsibilities with regard to OCIs. Rather, these 
responsibilities are spread throughout the current subpart. One 
respondent requested that the coverage provide better direction to 
contracting officers to ensure more predictable results, and to ensure 
that the contracting officer roles and responsibilities are identified 
and fulfilled.
    203.1205-1 General. This subsection uses the principles in the 
current FAR 9.504 to set forth the overarching responsibilities of 
contracting officers, which are to identify and evaluate OCIs prior to 
contract award, using common sense and good judgment, and the DoD 
preference for mitigation.
    203.1205-2 Identification of OCIs. This new subsection provides 
specific guidance on the identification of OCIs and introduces the 
differences between a potential OCI and an actual OCI. The subsection 
segregates the solicitation phase of acquisitions from the evaluation 
phase.
    In the solicitation phase of the process, contracting officers must 
examine the nature of the work to determine whether it may create a 
conflict, applying the principles in the new section 203.1204. 
Subsection 203.1205-2 requires that a statement be placed in the file 
documenting a finding of no conflicts. This subsection also provides 
that contracting officers should obtain the assistance of the program 
office, appropriate technical specialists, and legal counsel to 
identify potential conflicts of interest.
    During the evaluation phase, contracting officers are required to 
examine the financial interests of the offerors to determine whether 
there is a conflict of interest. However, contracting officers are 
cautioned not to rely solely on information provided by the offeror in 
making this determination. Other sources of information are identified 
in this subsection.
    Overlook Systems Technologies, B-298099.4, B-298099.5, November 28, 
2006, held that communications regarding OCI do not constitute 
discussions. Implementation of Overlook means that, even in a sealed 
bidding situation, it is possible to converse about an OCI mitigation 
plan to arrive at an acceptable solution without such conversation 
being considered to be ``discussions.'' It should be noted that 
Overlook's holding on communications only applies when OCI is an 
eligibility factor, which is accomplished by the provision at 252.203-
70XX, Notice of Potential Organizational Conflicts of Interest.
    203.1205-3 Resolution of organizational conflicts of interest. This 
section covers the three methods of resolution: avoidance, limitation 
on future contracting (neutralization), and mitigation. It addresses a 
response to the

[[Page 20956]]

Advance Notice of Proposed Rulemaking that requested more coverage 
regarding resolution. The new coverage replaces the phrase 
``neutralization'' with the phrase ``limitation on future contracting'' 
for purposes of clarity.
    To assist the contracting officer in fashioning an appropriate 
resolution, subsection 203.1205-3 describes the methods of resolution 
and provides illustrative examples (many of which are taken from case 
law) of each method. These examples are not intended to be all-
inclusive lists. The subsection also makes it clear that a combination 
of resolution methods may be appropriate in some circumstances.
    It is not uncommon for a company to have both advisory and 
production (or implementation) capabilities, and for such dual 
capabilities to raise potential conflict of interest concerns. The rule 
requires that such conflicts be addressed adequately to protect the 
Government's interest, but also provides that careful consideration be 
given to the manner in which conflicts are resolved. In particular, the 
rule restricts use of the avoidance method to exclude a class of 
contractors unless no less restrictive approach will protect the 
interests of the Government adequately.
    203.1205-4 Waiver. The proposed DFARS 203.1205-4 addresses the use 
of waivers. The coverage in current FAR subpart 9.5 is carried over. 
The proposed rule also makes it clear that waivers should be for 
residual conflicts that exist after all the techniques of resolution 
have been attempted to lessen a conflict.
    The proposed rule provides that waivers cannot be used in a 
competitive situation unless the solicitation specifically informed 
offerors that the Government reserves the right to waive the 
requirement to resolve an OCI. The reservation of the right to waive 
these requirements is incorporated in paragraph (i) of the provision at 
252.203-70XX, Notice of Potential Organizational Conflict of Interest, 
and implements a fundamental tenet that awards must be made using the 
evaluation factors stated in a solicitation.
    203.1205-5 Award. The proposed rule establishes that--
    (1) The contracting officer shall award the contract to the 
apparent successful offeror only if all organizational conflicts of 
interest are resolved (with limited exceptions);
    (2) Establishes what specific actions shall be taken if a 
contracting officer determines that award should be withheld from the 
apparent successful offeror based on conflict of interest 
considerations; and
    (3) If an organizational conflict of interest is identified at the 
time of task or delivery order contract award, the contracting officer 
shall include a resolution plan (mitigation plan, or limitation on 
future contracting) in the basic contract.
    DoD proposes to address in this subsection the unique OCI concerns 
created by task and delivery order contracts. The confluence of OCI 
concerns and task or delivery order contracting principles affects 
single-award and multiple-award task and delivery order contracts 
differently, resulting in a different balance between the need to 
resolve OCIs at time of award and timing of knowing the actual 
requirement.
    For multiple-award task or delivery order contracts (against which 
other agencies may place orders and for GSA Schedules), the contracting 
officer for the ordering agency may determine that an organizational 
conflict of interest precludes award of an order unless a Government-
approved resolution plan (mitigation plan or limitation on future 
contracting) is incorporated into the order. The contracting officer 
placing the order is responsible for administering the plan.
    203.1206 Solicitation provision and contract clauses. DoD used the 
requirements currently in FAR 9.506 and 9.507 as the basis for the new 
provision and clauses on OCI. DoD determined that it was preferable to 
have a provision and clauses that can be tailored rather than providing 
no provision or clauses. Recognizing the variability among OCIs, DoD 
recommends the provision and clauses be prescribed ``substantially the 
same as'' so that contracting officers can tailor them, as appropriate. 
Further, the provision contains specific fill-ins that the contracting 
officer is required to complete, and the actual OCI mitigation plan is 
referenced in 252.203-70YY, Resolution of Organizational Conflicts of 
Interest.
    Section 203.1270 specifically implements section 207 of WSARA. It 
cites the definition of ``lead system integrator'' in the clause at 
252.209-7007, cites the definitions of ``major defense acquisition 
program'' in 10 U.S.C. 2430, cites the definition of ``major 
subcontractor'' in the new proposed clause at 252.203-70WW, 
Organizational Conflict of Interest--Major Defense Acquisition Program, 
and bases the definitions of ``systems engineering'' and ``technical 
assistance'' on the discussion of systems engineering and technical 
direction at FAR 9.505-1.
    The policy section at 203.1270-3 is based on sections 207(b)(4) and 
(b)(2) of WSARA.
    Limitations on lead system integrators as required by 207(b)(1)(A) 
of WSARA are already incorporated in the DFARS at 209.570, and the 
associated clauses in 252.209.
    Section 203.1270-5 on identification of OCIs provides 
considerations of situations in which OCIs must be addressed, as 
specified in section 207(b)(1)(B) through (D) of WSARA.
    Section 203.1270-6(a) sets forth the restrictions on systems 
engineering and technical assistance contracts that are required by 
section 207(b)(3) of WSARA. With some exceptions, a contract for 
systems engineering and technical assistance for a major systems 
defense acquisition program shall prohibit the contractor or any 
affiliate of the contractor from participating as a contractor or major 
subcontractor in the development or construction of a weapon system 
under such program.
    Exceptions are proposed in paragraph 203.1270-6(b), as authorized 
in paragraph (b)(4) of WSARA. The first exception is based on the 
exception for design and development work in accordance with FAR 9.505-
2(a)(3), FAR 9.505-2(b)(3), or preparation of work statements in 
accordance with FAR 9.505-2(b)(1)(ii).
    The other exception is an exception for a contractor that is highly 
qualified with domain experience and expertise, if the OCI can be 
adequately resolved in accordance with the new proposed coverage at 
203.1205-3.
    Although authorized by section 207(b)(4) of WSARA, this rule does 
not propose any exceptions to the requirement of 207(b)(2) that a 
contractor for the performance of systems engineering and technical 
assistance functions for a major defense acquisition program receive 
advice from a federally funded research and development center or other 
sources independent of the prime contractor (implemented in the policy 
section 203.1270-3).
    Section 203.1270-7 proposes an additional solicitation provision 
and contract clause for use in solicitations and contracts for systems 
engineering and technical assistance for major defense acquisition 
programs. This solicitation provision and clause are used in 
conjunction with the other appropriate OCI provisions and clauses 
prescribed at 203.1206.
     252.203-70VV, Notice of Prohibition Relating to 
Organizational Conflict of Interest--Major Defense

[[Page 20957]]

Acquisition Program. This provision notifies the offerors that this 
solicitation is for the performance of systems engineering and 
technical assistance for a major defense acquisition program. It states 
the prohibition as required by paragraph (b)(3) of section 207, but 
provides the opportunity for offerors to request an exception.
     252.203-70WW, Organizational Conflict of Interest--Major 
Defense Acquisition Program. This clause defines ``major 
subcontractor'' and repeats the prohibition from section 207(b)(3) of 
WSARA, which is in effect unless an approved OCI mitigation plan has 
been submitted and incorporated into the contract. Compliance with the 
OCI mitigation plan is a material requirement of the contract.
     252.203-70XX, Notice of Potential Organizational Conflict 
of Interest. This provision--
    [cir] Provides a definition of ``organizational conflict of 
interest;''
    [cir] Places offerors on notice that the contracting officer has 
identified a potential OCI and makes resolution of an OCI (or waiver) 
an eligibility requirement for award;
    [cir] Requires the contracting officer to describe the nature of 
the potential conflict of interest and any steps the Government has 
taken to lessen the conflict;
    [cir] Requires an offeror to disclose all relevant information 
regarding an OCI, or to represent, to the best of its knowledge and 
belief, that there is no OCI.
    [cir] Regardless of whether the offeror discloses the existence of 
an OCI, the offeror must describe any other work performed on contracts 
and subcontracts within the past five years that is associated with the 
offer it plans to submit.
    [cir] Requires an offeror to explain the actions it intends to use 
to resolve any OCI, e.g., submit an acceptable mitigation plan if an 
actual OCI exists or agree to a limitation on future contracting;
    [cir] Indicates the clauses that may be included in the resultant 
contract depending upon the type of resolution;
    [cir] Indicates that failure to disclose facts regarding an OCI 
could result in a termination for default of any resulting contract; 
and
    [cir] Reserves the right to waive the requirement to resolve an 
OCI.
     252.203-70YY, Resolution of Organizational Conflicts of 
Interest. This clause is to be used generally when the contract may 
involve an OCI that can be resolved by an acceptable contractor-
submitted mitigation plan prior to contract award. The clause--
    [cir] Provides definitions of ``contractor'' and ``organizational 
conflict of interest;''
    [cir] Incorporates the mitigation plan in the contract;
    [cir] Addresses changes to the mitigation plan;
    [cir] Addresses violations of the mitigation plan;
    [cir] Addresses breach of the provisions of the clause; and
    [cir] Requires flowdown of the clause.
     252.203-70YZ, Limitation of Future Contracting. This 
clause will be used when the contracting officer decides to resolve a 
potential conflict of interest through a limitation on future 
contracting. The contracting officer must fill in the nature of the 
limitation on future contractor activities. Although the clause 
contains a default time period of three years, this time period may be 
modified as long as the duration is sufficient to avoid unfair 
competitive advantage or potential bias.
     252.203-70ZZ, Disclosure of Organizational Conflict of 
Interest After Contract Award. DoD recognizes that events may occur 
during the performance of a contract that give rise to a new conflict. 
Examples of such events could be a novation or the acquisition of a 
business interest. This clause, which is included in solicitations and 
contracts when the solicitation includes the provision 252.203-70XX, 
Notice of Potential Organizational Conflicts of Interest, requires the 
contractor to make a prompt and full disclosure of any newly discovered 
OCI.
    Part 212--Acquisition of Commercial Items. The proposed rule 
requires use of the provisions and clauses in contracts for the 
acquisition of commercial items (other than COTS items). The rule also 
notes that the representation in 252.203-70XX, Notice of Potential 
Organizational Conflicts of Interest, is not in the ORCA database. The 
proposed rule exempts acquisitions for COTS items (as defined at FAR 
2.101) from applicability of subpart 203.12 because the revised 
coverage is not based in statute (see section IV.C. discussion entitled 
``203.1200, Scope'') and COTS items are, by definition, sold in 
substantial quantities in the commercial marketplace and offered to the 
Government without modification, in the same form in which they are 
sold in the commercial marketplace. The requirements of the COTS 
definition render COTS items not susceptible to organizational 
conflicts of interest.
    This is a significant regulatory action and therefore is subject to 
Office of Management and Budget review under Section 6(b) of Executive 
Order 12866, Regulatory Planning and Review, dated September 30, 1993. 
This rule is not a major rule under 5 U.S.C. 804.

C. Regulatory Flexibility Act

    DoD believes that the proposed changes will not result in a 
significant economic impact on a substantial number of small entities 
within the meaning of the Regulatory Flexibility Act, 5 U.S.C. 601, et 
seq., because the requirements of subpart 203.12 do not differ from the 
burden currently imposed on offerors and contractors by FAR subpart 
9.5.
    Further, the proposed rule does not include a certification 
requirement and allows for avoidance, neutralization, or mitigation of 
organizational conflicts of interest or, under exceptional 
circumstances, waiver of the requirement for resolution.
    An Initial Regulatory Flexibility Analysis has, therefore, not been 
performed. DoD invites comments from small business concerns and other 
interested parties on the expected impact of this rule on small 
entities.
    DoD will also consider comments from small entities concerning the 
existing regulations in subparts affected by this rule in accordance 
with 5 U.S.C. 610. Interested parties must submit such comments 
separately and should cite 5 U.S.C. 610 (DFARS Case 2009-D015) in 
correspondence.

D. Paperwork Reduction Act

    The Paperwork Reduction Act (44 U.S.C. Chapter 35) applies because 
the proposed rule contains information collection requirements. DoD 
invites comments on the following aspects of the proposed rule: (a) 
Whether the collection of information is necessary for the proper 
performance of the functions of DoD, including whether the information 
will have practical utility; (b) the accuracy of the estimate of the 
burden of the information collection; (c) ways to enhance the quality, 
utility, and clarity of the information to be collected; and (d) ways 
to minimize the burden of the information collection on respondents, 
including the use of automated collection techniques or other forms of 
information technology. The following is a summary of the information 
collection requirement.
    Title: Defense Federal Acquisition Regulation Supplement (DFARS); 
Organizational Conflicts of Interest in Major Defense Acquisition 
Programs.
    Type of Request: New collection.
    Number of Respondents: 8,690.
    Responses per Respondent: Approximately 1.
    Annual Responses: 9,255.
    Average Burden per Response: Approximately 26.75 hours.

[[Page 20958]]

    Annual Burden Hours: 247,560.
    Needs and Uses: DoD needs the information required by 252.203-70XX, 
252.203-YY, and 252.203-ZZ to identify and resolve organizational 
conflicts of interest, as required by section 207 of the Weapons System 
Acquisition Reform Act of 2009.
    Affected Public: Businesses or other for-profit institutions.
    Respondent's Obligation: Required to obtain or retain benefits.
    Frequency: On occasion.
    These estimates are based on--
     252.203-70XX (e)(1)(i)(A) and (2)--5,650 responses 
providing information on OCIs and mitigation plans, average of 40 
burden hours per plan;
     252.203-70XX(e)(1)(ii)--2, 930 responses providing 
information from offerors that do not submit a mitigation plan, average 
of 2 burden hours per response.
     252.203-70YY(b)(2)--565 updates to mitigation plan, 
average of 20 hours per update.
     252.203-70ZZ--110 disclosures of OCIs after contract 
award, average of 40 hours per response.
    Written comments and recommendations on the proposed information 
collection should be sent to Ms. Jasmeet Seehra at the Office of 
Management and Budget, Desk Officer for DoD, Room 10236, New Executive 
Office Building, Washington, DC 20503, with a copy to the Defense 
Acquisition Regulations System, Attn: Ms. Amy Williams, 
OUSD(AT&L)DPAP(DARS), 3060 Defense Pentagon, Room 3B855, Washington, DC 
20301-3060. Comments can be received from 30 to 60 days after the date 
of this notice, but comments to OMB will be most useful if received by 
OMB within 30 days after the date of this notice.
    To request more information on this proposed information collection 
or to obtain a copy of the proposal and associated collection 
instruments, please write to the Defense Acquisition Regulations 
System, Attn: Ms. Amy Williams, OUSD(AT&L)DPAP(DARS), 3060 Defense 
Pentagon, Room 3B855, Washington, DC 20301-3060.

List of Subjects in 48 CFR Parts 202, 203, 212, and 252

    Government procurement.

Ynette R. Shelkin,
Editor, Defense Acquisition Regulations System.
    Therefore, DoD proposes to amend 48 CFR parts 202, 203, 212, and 
252 as follows:
    1. The authority citation for 48 CFR parts 202, 203, 212, and 252 
continues to read as follows:

    Authority:  41 U.S.C. 421 and 48 CFR chapter 1.

PART 202--DEFINITIONS OF WORDS AND TERMS

    2. Section 202.101 is amended by adding the definition for 
``organizational conflict of interest'' to read as follows:


202.101  Definitions.

* * * * *
    Organizational conflict of interest means a situation in which, 
with reference to a particular acquisition--
    (1) An offeror, or any of its prospective subcontractors, by virtue 
of its past or present performance of another Government contract, 
grant, cooperative agreement, or other transaction--
    (i) Had access to non-public information that may provide it an 
unfair advantage in competing for some or all of the proposed effort; 
or
    (ii) Was in a position to set the ground rules, and thereby affect 
the competition, for the proposed acquisition; or
    (2) The contract awardee or any of its subcontractors--
    (i) Will have access to non-public information that may provide it 
an unfair competitive advantage in a later competition for a Government 
contract;
    (ii) May, from the perspective of a reasonable person with 
knowledge of the relevant facts, be unable to render impartial advice 
or judgments to the Government; or
    (iii) Will be in a position to influence a future competition, 
whether intentionally or not, in its own favor.
* * * * *

PART 203--IMPROPER BUSINESS PRACTICES AND PERSONAL CONFLICTS OF 
INTEREST

    3. Section 203.000 is added to read as follows:


203.000  Scope of part.

    This part prescribes policies and procedures for avoiding improper 
business practices and conflicts of interest and for dealing with their 
occurrence. It implements 41 U.S.C. 405b.
    4. Subpart 203.12 is added to read as follows:
Subpart 203.12--Organizational Conflicts of Interest
Sec.
203.1200 Scope of subpart.
203.1201 Definitions.
203.1202 Applicability.
203.1203 Policy.
203.1204 Types of organizational conflicts of interest.
203.1205 Contracting officer responsibilities.
203.1205-1 General.
203.1205-2 Identification of organizational conflicts of interest.
203.1205-3 Resolution of organizational conflicts of interest.
203.1205-4 Waiver.
203.1205-5 Award.
203.1206 Solicitation provision and contract clauses.
203.1270 Implementation of section 207 of the Weapons System 
Acquisition Reform Act of 2009 (Pub. L. 111-23).
203.1270-1 Definitions.
203.1270-2. Applicability.
203.1270-3 Policy.
203.1270-4 Lead system integrators.
203.1270-5 Identification of organizational conflicts of interest.
203.1270-6 Systems engineering and technical assistance contracts.
203.1270-7 Solicitation provision and contract clause.

Subpart 203.12--Organizational Conflicts of Interest


203.1200  Scope of subpart.

    This subpart--
    (a) Prescribes general rules and procedures for identifying, 
evaluating, and resolving organizational conflicts of interest (as 
defined in 202.101); and
    (b) Implements section 207 of the Weapons System Acquisition Reform 
Act of 2009 (Pub. L. 111-23).


203.1201  Definitions.

    As used in this subpart--
    Contractor means a party to a Government contract other than the 
Government and includes the total contractor organization, including 
not only the business unit or segment that signs the contract. It also 
includes all subsidiaries and affiliates.
    Firewall means a combination of procedures and physical security 
arrangements intended to restrict the flow of information either within 
an organization or between organizations.
    Resolve means to implement an acquisition approach that will enable 
the Government to acquire the required goods or services while 
adequately addressing any organizational conflict of interest.


203.1202  Applicability.

    (a) This subpart--
    (1) Applies to contracts (including task or delivery orders) and 
modifications to contracts with both profit and nonprofit 
organizations, including nonprofit organizations created largely or 
wholly with Government funds;
    (2) Does not apply to the acquisition of commercially available 
off-the-shelf items, but does apply to acquisitions of other commercial 
items (see 212.301(f)(xiv));

[[Page 20959]]

    (b) Although this subpart applies to every type of acquisition, 
organizational conflicts of interest are more likely to arise in 
contracts involving--
    (1) Pre-solicitation acquisition support services;
    (2) Other support services;
    (3) Advisory and assistance services; or
    (4) Contractor access to non-public information.


203.1203  Policy.

    (a) Organizational conflicts of interest can impair--
    (1) The Government's ability to acquire supplies and services that 
are the best value to the Government. For example--
    (i) A contractor with an organizational conflict of interest may 
influence the Government to pursue an acquisition outcome that is more 
compatible with the contractor's interests than with the Government's 
interests.
    (ii) A contractor that properly had access to non-public 
information while performing under a Government contract, grant, 
cooperative agreement, or other transaction may be able unfairly to use 
the non-public information to its advantage to win award of a future 
contract.
    (2) The public trust. The Government must avoid the appearance of 
impropriety which taints the public view of the acquisition system. 
Organizational conflicts of interest, by their mere appearance, call 
into question the integrity and fairness of the competitive procurement 
process. This concern exists regardless of whether any individual 
contractor employee or contractor organization ever actually renders 
biased advice or benefits from an unfair competitive advantage.
    (b) The vast preponderance of contracting done within DoD is done 
free of actual or potential conflict of interest. However, there are 
circumstances under which potential or actual conflict of interest 
could exist. In those instances, it is the Government's policy to 
protect its interests by identifying and resolving organizational 
conflicts of interest. To that end, in every acquisition in which the 
contracting officer determines that contractor performance of the 
contemplated work may give rise to one or more organizational conflicts 
of interest, the contracting activity shall ensure that--
    (1) Offerors are required to disclose facts bearing on the possible 
existence of organizational conflicts of interest both prior to 
contract award and on a continuing basis during contract performance;
    (2) All identified organizational conflicts of interest are either 
resolved or waived prior to the award of a contract (including 
individual task or delivery orders); and
    (3) The contract establishes a process by which the parties will 
resolve any organizational conflicts of interest that arise during 
contract performance.
    (c) Except as may be otherwise prohibited within this regulation, 
it is DoD policy that, generally, the preferred method to resolve an 
organizational conflict of interest is mitigation (see 203.1205-1). It 
is recognized, however, that mitigation may not be advisable in every 
instance. In accordance with 203.1205-1(c), in those cases where the 
contracting officer determines that mitigation is not likely to be 
effective and the conflict of interest cannot otherwise be resolved, 
the contracting officer shall select another offeror or request a 
waiver in accordance with 203.1205-4.
    (d) See 203.1270 for additional requirements that apply to major 
defense acquisition programs.


203.1204  Types of organizational conflicts of interest.

    There are three types of organizational conflicts of interest.
    (a) ``Impaired objectivity'' organizational conflicts of interest 
exist when a contractor's judgment and objectivity in performing tasks 
for the Government might be impaired because the substance of the 
contractor's performance has the potential to affect other of its 
activities and interests.
    (1) Such conflicts generally involve two elements-
    (i) The contractor is performing tasks that involve the use of 
subjective judgment or giving advice; and
    (ii) The contractor has a financial or economic interest that could 
be affected by the outcome of its performance.
    (2) Examples of an organizational conflict of interest of this type 
may arise when--
    (i) The contractor (or one of its subcontractors) is required to 
evaluate products or services it or its affiliates provide or to 
evaluate the products or services of a competitor or a competitor of an 
affiliate; or
    (ii) A contractor will provide the Government technical or policy 
advice that could affect its other business interests, to include its 
interests beyond those related to Government acquisitions.
    (b) ``Unfair access to non-public information'' organizational 
conflicts of interest arise when a contractor has access to non-public 
information as part of its performance of a Government contract, grant, 
cooperative agreement, or other transaction and that non-public 
information may provide the contractor an unfair competitive advantage 
in a later competition for a Government contract.
    (1) Examples of an organizational conflict of interest of this type 
may arise when a support contractor in a program office has access to 
proprietary information or non-public source selection information 
which could provide the contractor with an unfair competitive advantage 
in future competitions.
    (2) The test for determining whether a contractor's access to non-
public information requires resolution is--
    (i) Whether the non-public information will be available to 
potential offerors;
    (ii) Whether the non-public information would be competitively 
useful in responding to a solicitation; and
    (iii) Whether the advantage afforded to the contractor by its 
access to the non-public information is unfair.
    (3) Not all competitive advantage is unfair.
    (i) The natural competitive advantage of an incumbent contractor or 
an offeror that has performed similar requirements in the past, does 
not by itself constitute an unfair competitive advantage.
    (ii) When a contractor develops or designs a product, that 
contractor frequently is in a position to produce the product more 
quickly, efficiently, and knowledgeably than firms that did not 
participate in its development. In many instances, the Government may 
have contracted for and financed the development. Because timeliness, 
efficiency, quality, and continuity are all important to the Government 
when it comes to the production process, development contractors have 
an inherent advantage when it comes to competing for follow-on 
production contracts. However, while the development contractor has a 
competitive advantage, it is an unavoidable advantage that is not 
considered unfair; hence, agencies should not prohibit development 
contractors from receiving award of follow-on production contracts 
merely because they have a competitive advantage.
    (c) ``Biased ground rules'' organizational conflicts of interest 
may arise when a contractor, in performing under one Government 
contract, grant, cooperative agreement, or other transaction, is in a 
position to set the ground rules for another Government acquisition. 
For example, this type of conflict may arise when, as part of its

[[Page 20960]]

performance of a Government contract, an offeror will participate in 
preparing the statement of work or specifications, establishing source 
selection criteria, or otherwise influencing the ground rules of a 
future acquisition for which the contractor may compete.


203.1205  Contracting officer responsibilities.


203.1205-1  General.

    (a) The contracting officer shall assess early in the acquisition 
process whether contractor performance of the contemplated work is 
likely to create any organizational conflicts of interest (see 
203.1205-2) and shall then resolve, prior to contract award, any 
organizational conflicts of interest identified (see 203.1205-3).
    (b) The contracting officer shall exercise common sense, good 
judgment, and sound discretion--
    (1) In deciding whether an acquisition will give rise to any 
organizational conflicts of interest; and
    (2) In developing an appropriate means for resolving any such 
conflicts.
    (c)(1) The contracting officer shall give preference to the use of 
mitigation to resolve an organizational conflict of interest.
    (2) If the contracting officer determines, after consultation with 
agency legal counsel, that the otherwise successful offeror is unable 
to mitigate an organizational conflict of interest effectively, then 
the contracting officer, taking into account both the instant contract 
and longer term Government needs, shall use another approach to resolve 
the organizational conflict of interest, select another offeror, or 
request a waiver.
    (3) For any acquisition that exceeds $1 billion, the contracting 
officer shall brief the senior procurement executive before determining 
whether an offeror's mitigation plan is unacceptable.


203.1205-2  Identification of organizational conflicts of interest.

    (a) The nature of the work to be performed determines whether a 
potential for a conflict of interest exists; the financial interests 
and other activities of the offeror/contractor determine whether an 
actual conflict requiring resolution exists. Therefore, the contracting 
officer shall particularly consider organizational conflicts of 
interest during preparation of the solicitation and evaluation of the 
offers.
    (b) Solicitation. The contracting officer shall review the nature 
of the work to be performed to determine whether performance by a 
contractor could result in an organizational conflict of interest (see 
203.1202(b)).
    (1) The contracting officer should obtain the assistance of the 
program office, appropriate technical specialists, and legal counsel in 
identifying potential for organizational conflicts of interest.
    (2) In addition, the contracting officer shall require the program 
office or the requiring activity to identify any contractor(s) that 
participated in preparation of the statement of work or other 
requirements documents, including cost or budget estimates.
    (3) If the contracting officer determines that contractor 
performance of the contemplated work does not have the potential to 
create any organizational conflicts of interest, the contracting 
officer shall document in the contract file the rationale supporting 
the decision.
    (4) If the contracting officer determines that contractor 
performance of the contemplated work has the potential to create an 
organizational conflict of interest, then the contracting officer shall 
include a provision and clause as prescribed in 203.1206.
    (c) Evaluation of offers.
    (1) Information from offerors. The contracting officer shall use 
information provided by the offerors (see 252.203-70XX, Notice of 
Potential Organizational Conflict of Interest) to identify 
organizational conflicts of interest. However, the contracting officer 
should not rely solely on this contractor-provided information when 
determining whether an actual organizational conflict of interest will 
exist upon award.
    (2) Other sources of information. The contracting officer should 
seek readily available information about the financial interests of the 
offerors from within the Government or from other sources to determine 
whether an organizational conflict of interest will exist upon award.
    (i) Government sources. Government sources include the files and 
the knowledge of personnel within--
    (A) The contracting office;
    (B) Other contracting offices; and
    (C) The cognizant contract administration, finance, and audit 
activities.
    (ii) Non-Government sources. Non-Government sources include--
    (A) Offeror's Web site;
    (B) Credit rating services;
    (C) Trade and financial journals; and
    (D) Business directories and registers.
    (3) In competitive acquisitions, whether by sealed bid or 
negotiation, the contracting officer shall communicate to an offeror 
any issues or concerns raised by the offeror's proposed organizational 
conflict of interest resolution plan and provide the offeror an 
opportunity to craft an acceptable solution. If resolution of an 
organizational conflict of interest is an evaluation criterion, the 
evaluation methodology shall be on an acceptable/non-acceptable basis.


203.1205-3  Resolution of organizational conflicts of interest.

    Organizational conflicts of interest may be resolved by avoidance, 
limitation on future contracting, or mitigation. In some circumstances, 
a combination of resolution methods may be appropriate.
    (a) Avoidance. Avoidance consists of Government action on one 
acquisition that is intended to prevent organizational conflicts of 
interest from arising in future acquisitions. Use of this technique is 
appropriate when, because of the nature of the work contemplated in the 
initial acquisition, the contractor for the initial acquisition would 
have access to non-public information or would be in a position to 
influence the ground rules for a future acquisition. In order to remain 
eligible for the future acquisition, a contractor will avoid, or be 
prohibited from, submitting an offer for the initial acquisition. In 
order to successfully implement an avoidance strategy, the contracting 
officer should work with the program office or requiring activity early 
in the acquisition process. Methods of avoiding future organizational 
conflicts of interest include, but are not limited to, the following 
examples:
    (1) Excluding an offeror or class of offerors from proposing to 
perform the work that could create an organizational conflict of 
interest on a future contract (e.g., excluding offerors that have a 
production capability for the future contract from being eligible to 
develop the specifications or statement of work). The use of an 
avoidance approach that prohibits a class of contractors or a list of 
specific contractors from participating in an acquisition has the 
potential to substantially reduce competition and reduce the 
Government's potential to consider sources that may offer a best-value 
solution. Therefore, this approach should be used only if the 
contracting officer has determined that no less restrictive forms of 
resolution will adequately protect the Government's interest. This 
determination must be documented in the contract file.
    (2) Drafting the statement of work to exclude tasks that require 
contractors to utilize subjective judgment. Tasks requiring subjective 
judgment, which involves the exercise of independent judgment, 
include--

[[Page 20961]]

    (i) Making recommendations;
    (ii) Providing analysis, evaluation, planning, or studies; and
    (iii) Preparing statements of work or other requirements and 
solicitation documents.
    (3) Structuring the contract requirements so that contractors can 
perform the work without access to non-public information to the extent 
feasible.
    (b) Limitation on future contracting (neutralization).
    (1) A limitation on future contracting allows a contractor to 
perform on the instant contract but precludes the contractor from 
submitting offers for future contracts where the contractor could 
obtain an unfair advantage in competing for award. The limitation on 
future contracting effectively neutralizes the organizational conflict 
of interest.
    (2) Limitations on future contracting shall be restricted to a 
fixed term of reasonable duration that is sufficient to neutralize the 
organizational conflict of interest. The restriction shall end on a 
specific date or upon the occurrence of an identifiable event.
    (c) Mitigation. Mitigation is any action taken to minimize an 
organizational conflict of interest to an acceptable level. Mitigation 
may require Government action, contractor action, or a combination of 
both. A Government-approved mitigation plan, reflecting the actions a 
contractor has agreed to take to mitigate a conflict, shall be 
incorporated into the contract. Ways of acceptably mitigating 
organizational conflicts of interest include, but are not limited to, 
the following:
    (1) Using a firewall. (i) A firewall by itself, without any 
additional mitigation actions, is appropriate to resolve only ``unfair 
access to non-public information'' organizational conflicts of interest 
(but see paragraph (c)(3) of this subsection).
    (ii) A firewall--
    (A) May include an agreement to limit reassignment of contractor 
employees who have access to non-public information; and
    (B) May also apply to the reporting chain within a company to 
ensure that an employee's supervisor is not in a position to exercise 
inappropriate influence on another acquisition.
    (2) Disseminating previously non-public information to all 
offerors. This technique involves the Government disclosing to all 
offerors the competitively useful, non-public information previously 
accessed by the conflicted contractor in order to remove the unfair 
competitive advantage. This technique is appropriate only to resolve 
``unfair access to non-public information'' conflicts and should be 
used only after the contracting officer has carefully investigated and 
reasonably determined the extent and type of non-public information to 
which the conflicted contractor had access.
    (3) Requiring a subcontractor or team member that is conflict free 
to perform the conflicted portion of the work on the instant contract. 
This technique will not be effective unless it is utilized in 
conjunction with a firewall around the contractor or conflicted team 
member. This technique may be used to resolve any types of 
organizational conflict of interest.


203.1205-4  Waiver.

    (a) Authority. (1) The agency head may waive the requirement to 
resolve an organizational conflict of interest in a particular 
acquisition only if the agency head determines that resolution of the 
organizational conflict of interest is either not feasible or is not in 
the best interest of the Government.
    (2) The agency head shall not delegate this waiver authority below 
the head of a contracting activity.
    (b) Any waiver shall-
    (1) Be in writing;
    (2) Cover just one contract action;
    (3) Describe the extent of the conflict;
    (4) Explain why it is not feasible or not in the best interest of 
the Government to resolve the organizational conflict of interest; and
    (5) Be approved by the appropriate official.
    (c) Use of waivers.
    (1) Agencies shall resolve conflicts to the extent feasible before 
granting a waiver for any remaining conflicts.
    (2) Circumstances when waivers are appropriate include, but are not 
limited to, the following examples:
    (i) A limited-time waiver is necessary to allow a contractor time 
to divest itself of conflicting businesses or contracts and the 
contractor agrees to stringent mitigation measures in the interim.
    (ii) A waiver is necessary in order for the agency to obtain a 
particular expertise.
    (3) Waivers shall not be used in competitive acquisitions unless 
the solicitation specifically informs offerors that the Government 
reserves the right to waive the requirement to resolve organizational 
conflicts of interest (see 252.203-70XX(h)).
    (4) The contracting officer shall include the waiver request and 
decision in the contract file.


203.1205-5  Award.

    (a) Before withholding award from the apparent successful offeror 
based on conflict of interest considerations, the contracting officer 
shall--
    (1) Notify the contractor in writing;
    (2) Provide the reasons therefor; and
    (3) Allow the contractor a reasonable opportunity to respond.
    (b) Except as provided in paragraphs (c) and (d), the contracting 
officer shall award the contract to the apparent successful offeror 
only if all organizational conflicts of interest are resolved.
    (c) If the contracting officer finds that it is in the best 
interest of the United States to award the contract notwithstanding a 
conflict of interest, a request for waiver shall be submitted in 
accordance with 203.1205-4.
    (d)(1) For task or delivery order contracts, it may not be possible 
for the contracting officer to identify all organizational conflict of 
interest issues at the time of award of the task or delivery order 
contract. To the extent an organizational conflict of interest can be 
identified at the time of task or delivery order contract award, the 
contracting officer shall include a resolution plan (mitigation plan or 
limitation on future contracting) in the basic contract.
    (2) The contracting officer shall consider organizational conflicts 
of interest at the time of issuance of each order. If a resolution plan 
is in the basic task or delivery order contract at the time of its 
award, the contracting officer may need to appropriately tailor the 
resolution when issuing an order. For example, appropriate tailoring 
could include--
    (i) Establishment of a reasonable time limitation on future 
contracting;
    (ii) Description of the arrangement where a team member without the 
conflict performs the effort;
    (iii) Description of the nature of the limitation on reassignments 
of a firewall; or
    (iv) Identification of the resolution method most appropriate for 
the order;
    (3) For multiple-award task or delivery order contracts against 
which other agencies may place orders and for GSA Schedules, the 
contracting officer for the ordering agency may determine that an 
organizational conflict of interest precludes award of an order unless 
a Government-approved mitigation plan is incorporated into the order. 
The contracting officer placing the order is responsible for 
administering the plan.


203.1206  Solicitation provision and contract clauses.

    (a) The contracting officer shall include a solicitation provision 
substantially the same as 252.203-70XX, Notice of Potential 
Organizational Conflict of Interest, upon determining that contractor 
performance of the work may give rise to organizational conflicts of 
interest.

[[Page 20962]]

    (1) The contracting officer should fill in paragraph (c) of the 
provision when the Government has taken action prior to release of the 
solicitation to address or resolve potential organizational conflicts 
of interest.
    (2) If the contracting officer has decided on an approach for 
resolving organizational conflicts of interest prior to release of the 
solicitation, the contracting officer may include information regarding 
the type of resolution the contracting officer believes will be 
necessary to resolve the conflict. For example, the contracting officer 
may determine in advance that a limitation on future contracting is the 
most appropriate method for resolving the conflicts.
    (3) The representation in this provision is not in the Online 
Representations and Certifications Application (ORCA) database.
    (b)(1) The contracting officer shall include in solicitations and 
contracts a clause substantially the same as 252.203-70YY, Resolution 
of Organizational Conflicts of Interest, when the contract may involve 
an organizational conflict of interest that can be resolved by an 
acceptable contractor-submitted mitigation plan prior to contract 
award.
    (2) The contracting officer shall consider whether the mitigation 
plan should include a limitation on reassignments of personnel with 
unfair access to non-public information. The contracting officer and 
the contractor shall agree upon a reasonable period of time for the 
restriction on reassignments. In the case of access to non-public pre-
solicitation information, a reasonable period of time is after contract 
award and expiration of the protest period.
    (c) The contracting officer shall include in solicitations and 
contracts a clause substantially the same as 252.203-70YZ, Limitation 
on Future Contracting, when the resolution of the organizational 
conflict of interest will involve a limitation on future contracting.
    (1) The contracting officer shall fill in the nature of the 
limitation on future contractor activities in paragraph (b) of the 
clause.
    (2) The contracting officer may modify the duration of the 
limitation, but the duration shall be sufficient to neutralize any 
unfair competitive advantage or potential bias.
    (d) The contracting officer shall include in solicitations and 
contracts a clause substantially the same as 252.203-70ZZ, Disclosure 
of Organizational Conflict of Interest after Contract Award, when the 
solicitation includes the provision 252.203-70XX, Notice of Potential 
Organizational Conflict of Interest.


203.1270  Implementation of section 207 of the Weapons System 
Acquisition Reform Act of 2009 (Pub. L. 111-23).


203.1270-1  Definitions.

    As used in this section--
    Lead system integrator is defined in the clause at 252.209-7007, 
Prohibited Financial Interests for Lead System Integrators.
    Major defense acquisition program is defined in 10 U.S.C. 2430.
    Major subcontractor is defined in the clause at 52.203-70WW, 
Organizational Conflict of Interest--Major Defense Acquisition Program.
    Systems engineering means a combination of substantially all of the 
following activities:
    (1) Determining specifications.
    (2) Identifying and resolving interface problems.
    (3) Developing test requirements.
    (4) Evaluating test data.
    (5) Supervising design.
    Technical assistance means a combination of substantially all of 
the following activities:
    (1) Developing work statements.
    (2) Determining parameters.
    (3) Directing other contractors' operations.
    (4) Resolving technical controversies.


203.1270-2  Applicability.

    This section applies to major defense acquisition programs.


203.1270-3  Policy.

    (a) The Department of Defense must ensure that it obtains advice on 
major defense acquisition programs from sources that are objective and 
unbiased.
    (b) Agencies shall obtain advice on systems architecture and 
systems engineering matters with respect to major defense acquisition 
programs from Federally Funded Research and Development Centers or 
other sources independent of the major defense acquisition program 
contractor.


203.1270-4  Lead system integrators.

    For limitations on contractors acting as lead systems integrators, 
see 209.570.


203.1270-5  Identification of organizational conflicts of interest.

    (a) When evaluating organizational conflicts of interest for major 
defense acquisition programs, contracting officers shall consider--
    (1) The ownership of business units performing systems engineering 
and technical assistance, professional services, or management support 
services to a major defense acquisition program by a contractor who 
simultaneously owns a business unit competing to perform as--
    (i) The prime contractor for the same major defense acquisition 
program; or
    (ii) The supplier of a major subsystem or component for the same 
major defense acquisition program;
    (2) The proposed award of a major subsystem by a prime contractor 
to business units or other affiliates of the same parent corporate 
entity, particularly the award of a subcontract for software 
integration or the development of a proprietary software system 
architecture; and
    (3) The performance by, or assistance of, contractors in technical 
evaluation.
    (b) See PGI 203.1270-5 for examples of organizational conflicts of 
interest that can arise in contracts for lead system integrators and 
the other specific areas of concern identified in paragraph (a) of this 
section.


203.1270-6  Systems engineering and technical assistance contracts.

    (a) Except as provided in paragraph (b) of this subsection, a 
contract for the performance of systems engineering and technical 
assistance for a major defense acquisition program shall prohibit the 
contractor or any affiliate of the contractor from participating as a 
contractor or major subcontractor in the development or construction of 
a weapon system under such program.
    (b) Paragraph (a) of this subsection does not apply if the 
contracting officer determines that--
    (1) The performance is design and development work in accordance 
with FAR 9.505-2(a)(3), FAR 9.505-2(b)(3), or preparation of work 
statements in accordance with FAR 9.505-2(b)(1)(ii); or
    (2) The contractor is highly qualified with domain experience and 
expertise and the organizational conflict of interest will be 
adequately resolved in accordance with 203.1205-3.


  203.1270-7 Solicitation provision and contract clause.

    In addition to the provisions and clause required by 203.1206--
    (a) Use the provision at 252.203-70VV, Notification of Prohibition 
Relating to Organizational Conflict of Interest--Major Defense 
Acquisition Program, if the solicitation includes the clause 252.203-
70WW, Organizational Conflict of Interest--Major Defense Acquisition 
Program; and
    (b) Use the clause at 252.203-70WW, Organizational Conflict of 
Interest--Major Defense Acquisition Program, in solicitations and 
contracts for systems

[[Page 20963]]

engineering and technical assistance for major defense acquisition 
programs, unless the contracting officer has determined that an 
exception at 203.1270-6(b) applies that does not require an 
Organizational Conflict of Interest Mitigation Plan.

PART 212--ACQUISITION OF COMMERCIAL ITEMS

    5. Section 212.301 is amended by adding paragraph (f)(xiv) to read 
as follows:


212.301  Solicitation provisions and contract clauses for the 
acquisition of commercial items.

* * * * *
    (f) * * *
    (xiv) Except when acquiring commercially available off-the-shelf 
items, the contracting officer shall use the provision and clauses 
relating to Organizational Conflicts of Interest as prescribed at 
203.1206 and 203.1270-7, when applicable. The representation in this 
provision is not in the Online Representations and Certifications 
Application (ORCA) database.

PART 252--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

    6. Sections 252.203-70VV through 252.203-70ZZ are added to read as 
follows:


252.203-70VV  Notice of Prohibition Relating to Organizational Conflict 
of Interest--Major Defense Acquisition Program.

    As prescribed in 203.1270-7(a), use the following provision:

Notice of Prohibition Relating to Organizational Conflict of Interest--
Major Defense Acquisition Program (DATE)

    (a) Definitions. Major subcontractor is defined in the clause at 
52.201-WW, Organizational Conflict of Interest--Major Defense 
Acquisition Program.
    (b) This solicitation is for the performance of systems 
engineering and technical assistance for a major defense acquisition 
program.
    (c) Prohibition. As required by paragraph (b)(3) of section 207 
of the Weapons System Acquisition Reform Act of 2009 (Pub. L. 111-
23), if awarded the contract, the contractor or any affiliate of the 
contractor is prohibited from participating as a prime contractor or 
a major subcontractor in the development or construction of a weapon 
system under the major defense acquisition program, unless the 
offeror submits, and the Government approves, an Organizational 
Conflict of Interest Mitigation Plan.
    (d) Request for an exception. If the offeror requests an 
exception to the prohibition of paragraph (c) of this provision, 
then the offeror shall submit an Organizational Conflict of Interest 
Mitigation Plan with its offer for evaluation. If the plan is 
acceptable, it will be incorporated into the resultant contract and 
paragraph (d) of the clause at 252.203-70WW will become applicable.


(End of provision)


252.203-70WW  Organizational Conflict of Interest--Major Defense 
Acquisition Program.

    As prescribed in 203.1270-7(b), use the following clause:

Organizational Conflict of Interest--Major Defense Acquisition Program 
(DATE)

    (a) Definition. Major subcontractor, as used in this clause, 
means a subcontractor that is awarded subcontracts totaling more 
than 10 percent of the value of the contract under which the 
subcontracts are awarded.
    (b) This contract is for the performance of systems engineering 
and technical assistance for a major defense acquisition program.
    (c) Prohibition. Except as provided in paragraph (d) of this 
clause, as required by paragraph (b)(3) of section 207 of the 
Weapons System Acquisition Reform Act of 2009 (Pub. L. 111-23), the 
Contractor or any affiliate of the Contractor is prohibited from 
participating as a prime contractor or major subcontractor in the 
development or construction of a weapon system under the major 
defense acquisition program.
    (d) Organizational Conflict of Interest Mitigation Plan. If the 
Contractor submitted an acceptable Organizational Conflict of 
Interest Mitigation Plan that has been incorporated into this 
contract, then paragraph (c) of this clause does not apply. The 
Contractor shall comply with the Organizational Conflict of Interest 
Mitigation Plan. Compliance with the Organizational Conflict of 
Interest Mitigation Plan is a material requirement of the contract. 
Failure to comply may result in the Contractor or any affiliate of 
the Contractor being prohibited from participating as a contractor 
or major subcontractor in the development or construction of a 
weapon system under the program, in addition to any other remedies 
available to the Government for non-compliance with a material 
requirement of a contract.

    (End of clause)


252.203-70XX  Notice of Potential Organizational Conflict of Interest.

    As prescribed in 203.1206(a), insert a provision substantially the 
same as the following:

Notice of Potential Organizational Conflict of Interest (DATE)

    (a) Definitions. As used in this provision--
    Organizational conflict of interest means a situation in which, 
with reference to a particular acquisition--
    (1) An offeror, or any of its prospective subcontractors, by 
virtue of its past or present performance of another Government 
contract, grant, cooperative agreement, or other transaction--
    (i) Had access to non-public information that may provide it an 
unfair advantage in competing for some or all of the proposed 
effort; or
    (ii) Was in a position to set the ground rules, and thereby 
affect the competition, for the proposed acquisition; or
    (2) The contract awardee or any of its subcontractors--
    (i) Will have access to non-public information that may provide 
it an unfair competitive advantage in a later competition for a 
Government contract;
    (ii) May, from the perspective of a reasonable person with 
knowledge of the relevant facts, be unable to render impartial 
advice or judgments to the Government; or
    (iii) Will be in a position to influence a future competition, 
whether intentionally or not, in its own favor.
    Resolve means to implement an acquisition approach that will 
enable the Government to acquire the required goods or services 
while adequately addressing any organizational conflict of interest.
    (b) Notice. The Contracting Officer has determined that the 
nature of the work to be performed in the contract resulting from 
this solicitation is such that it may give rise to organizational 
conflicts of interest (see subpart 203.12, Organizational Conflicts 
of Interest).
    (c) Action already taken by Government to resolve organizational 
conflict of interest. ------------------------ [Contracting Officer 
to describe the steps the Government has taken to resolve the 
conflict(s) of interest, if any.]
    (d) Pre-proposal requirement. Applying the principles of FAR 
subpart 203.12, the offeror shall assess whether there is an 
organizational conflict of interest associated with the offer it 
plans to submit. Before preparing its offer, the offeror should 
inform the Contracting Officer of any potential conflicts of 
interest, including those involving contracts, grants, cooperative 
agreements, or other transactions with other Government 
organizations, in order that the Government may assess whether the 
conflicts will require resolution.
    (e) Proposal requirements. (1) The offeror shall--
    (i)(A) Disclose all relevant information regarding any 
organizational conflicts of interest; or
    (B) Represent, to the best of its knowledge and belief, that 
there will be no organizational conflict of interest; and
    (ii) Describe any other work performed on contracts, 
subcontracts, grants, cooperative agreements, or other transactions 
within the past five years that is associated with the offer it 
plans to submit.
    (2) To the extent that either the offeror or the Government 
identifies any organizational conflicts of interest, the offeror 
shall explain the actions it intends to use to resolve such 
conflicts, e.g., by submitting a mitigation plan and/or accepting a 
limitation on future contracting.
    (3) If the offeror's proposed action to resolve an 
organizational conflict of interest is not acceptable, the 
Contracting Officer will

[[Page 20964]]

notify the offeror in writing, providing the reasons why the 
proposed resolution is not considered acceptable and allowing the 
offeror a reasonable opportunity to respond before making a final 
decision on the organizational conflict of interest.
    (4) The Contracting Officer has the sole authority to determine 
whether an organizational conflict of interest exists and to 
determine whether the organizational conflict of interest has been 
adequately resolved.
    (f) Resultant contract. (1) If the offeror submits an 
organizational conflict of interest mitigation plan that the 
Contracting Officer approves, the resultant contract will include 
the Government-approved Mitigation Plan and a clause substantially 
the same as 252.203-70YY, Resolution of Organizational Conflicts of 
Interest.
    (2) If the resolution of the organizational conflict of interest 
involves a limitation on future contracting, the resultant contract 
will include a clause substantially the same as 252.203-70YZ, 
Limitation on Future Contracting.
    (g) Termination for default. If the successful offeror was 
aware, or should have been aware, of an organizational conflict of 
interest before award of this contract and did not fully disclose 
that conflict to the Contracting Officer, the Government may 
terminate the contract for default.
    (h) Waiver. The agency reserves the right to waive the 
requirement to resolve any organizational conflict of interest.


(End of provision)


252.203-70YY  Resolution of Organizational Conflicts of Interest.

    As prescribed in 203.1206(b)(1), insert a clause substantially the 
same as the following:

Resolution of Organizational Conflicts of Interest (DATE)

    (a) Definitions. As used in this clause--
    Contractor means a party to a Government contract other than the 
Government and includes the total contractor organization, including 
not only the business unit or segment that signs the contract. It 
also includes all subsidiaries and affiliates.
    Organizational conflict of interest means a situation in which, 
with reference to a particular acquisition--
    (1) An offeror, or any of its prospective subcontractors, by 
virtue of its past or present performance of another Government 
contract, grant, cooperative agreement, or other transaction--
    (i) Had access to non-public information that may provide it an 
unfair advantage in competing for some or all of the proposed 
effort; or
    (ii) Was in a position to set the ground rules, and thereby 
affect the competition, for the proposed acquisition; or
    (2) The contract awardee or any of its subcontractors--
    (i) Will have access to non-public information that may provide 
it an unfair competitive advantage in a later competition for a 
Government contract;
    (ii) May, from the perspective of a reasonable person with 
knowledge of the relevant facts, be unable to render impartial 
advice or judgments to the Government; or
    (iii) Will be in a position to influence a future competition, 
whether intentionally or not, in its own favor.
    (b) Mitigation plan. (1) The Government-approved Organizational 
Conflict of Interest Mitigation Plan (Mitigation Plan) and its 
obligations are hereby incorporated in the contract by reference.
    (2) The Contractor shall update the mitigation plan within 30 
days of any changes to the legal construct of the organization, 
subcontractor changes, or significant management or ownership 
changes.
    (c) Changes. Either the Contractor or the Government may propose 
changes to the Mitigation Plan. Such changes are subject to the 
mutual agreement of the parties and will become effective only upon 
written approval of the revised Mitigation Plan by the Contracting 
Officer.
    (d) Noncompliance. (1) The Contractor shall report to the 
Contracting Officer any noncompliance with this clause or with the 
Mitigation Plan, whether by its own personnel or those of the 
Government or other contractors.
    (2) The report shall describe the noncompliance and the actions 
the Contractor has taken or proposes to take to mitigate and avoid 
repetition of the noncompliance.
    (3) After conducting such further inquiries and discussions as 
may be necessary, the Contracting Officer and the Contractor shall 
agree on appropriate corrective action, if any, or the Contracting 
Officer will direct corrective action, subject to the terms of this 
contract.
    (e) Subcontracts. The Contractor shall include the substance of 
this clause, including this paragraph (e), in subcontracts where the 
work includes or may include tasks related to the organizational 
conflict of interest. The terms ``Contractor'' and ``Contracting 
Officer'' shall be appropriately modified to reflect the change in 
parties and to preserve the Government's rights.


(End of clause.)


252.203-70YZ   Limitation on Future Contracting.

    As prescribed in 203.1206(c), insert a clause substantially the 
same as the following:

Limitation on Future Contracting (DATE)

    (a) Definitions.
    Contractor means a party to a Government contract other than the 
Government and includes the total contractor organization, including 
not only the business unit or segment that signs the contract. It 
also includes all subsidiaries and affiliates.
    (b) Limitation. The Contractor shall be ineligible to perform --
------------------ [Contracting Officer to describe the work that 
the Contractor will be ineligible to perform] for a period of three 
years.
    (c) Subcontracts. The Contractor shall include the substance of 
this clause, including this paragraph (c), in subcontracts where the 
work includes tasks which result in an organizational conflict of 
interest. The terms ``Contractor'' and ``Contracting Officer'' shall 
be appropriately modified to reflect the change in parties and to 
preserve the Government's rights.


(End of clause.)


252.203-70ZZ   Disclosure of Organizational Conflict of Interest after 
Contract Award.

    As prescribed in 203.1206(d), insert the following clause:

Disclosure of Organizational Conflict of Interest After Contract Award 
(DATE)

    (a) Definitions. As used in this clause--
    Contractor means a party to a Government contract other than the 
Government and includes the total contractor organization, including 
not only the business unit or segment that signs the contract. It 
also includes all subsidiaries and affiliates.
    Organizational conflict of interest means a situation in which, 
with reference to a particular acquisition--
    (1) An offeror, or any of its prospective subcontractors, by 
virtue of its past or present performance of another Government 
contract, grant, cooperative agreement, or other transaction--
    (i) Had access to non-public information that may provide an 
unfair advantage in competing for some or all of the proposed 
effort; or
    (ii) Was in a position to set the ground rules, and thereby 
affect the competition, for the proposed acquisition; or
    (2) The contract awardee or any of its subcontractors--
    (i) Will have access to non-public information that may provide 
it an unfair competitive advantage in a later competition for a 
Government contract;
    (ii) May, from the perspective of a reasonable person with 
knowledge of the relevant facts, be unable to render impartial 
advice or judgments to the Government; or
    (iii) Will be in a position to influence a future competition, 
whether intentionally or not, in its own favor.
    Resolve means to implement an acquisition approach that will 
enable the Government to acquire the required goods or services--
while adequately addressing any organizational conflict of interest.
    (b) If the Contractor identifies an organizational conflict of 
interest that has not already been adequately resolved and for which 
a waiver has not been granted, the Contractor shall make a prompt 
and full disclosure in writing to the Contracting Officer. 
Organizational conflicts of interest that arise during the 
performance of the contract, as well as newly discovered conflicts 
that existed before contract award, shall be disclosed. This 
disclosure shall include a description of--
    (1) The organizational conflict of interest; and
    (2) Actions to resolve the conflict that--
    (i) The Contractor has taken or proposes to take, or
    (ii) The Contractor recommends that the Government take.

[[Page 20965]]

    (c) If, in compliance with this clause, the Contractor 
identifies and promptly reports an organizational conflict of 
interest that cannot be resolved in a manner acceptable to the 
Government, the Contracting Officer may terminate this contract for 
convenience of the Government.
    (d) Breach. Any nondisclosure or misrepresentation of any 
relevant facts regarding organizational conflicts of interests will 
constitute a breach and may result in--
    (1) Termination of this contract for default; or
    (2) Exercise of other remedies as may be available under law or 
regulation.
    (e) Subcontracts. The Contractor shall include the substance of 
this clause, including this paragraph (e), in subcontracts where the 
work includes or may include tasks that may create a potential for 
an organizational conflict of interest. The terms ``Contractor'' and 
``Contracting Officer'' shall be appropriately modified to reflect 
the change in parties and to preserve the Government's rights.


(End of clause.)

[FR Doc. 2010-9210 Filed 4-21-10; 8:45 am]
BILLING CODE 5001-08-P