Conflicts of Interest

1
Conflicts of Interest

• AMC Symposium
• Sherley Mizzell and Darryl Grant
• Division of Acquisition Policy Evaluation (DAPE)

2
Background

• Outsourcing
• Shrinking base of federal employees
• Increasing reliance on Contractors
• Renewed Public Attention on Ethics
• Congressional Scrutiny of NIH

3
Two types of Conflicts of Interest

• Organizational Conflicts of Interest
• Personal Conflicts of Interest

4
Organizational Conflicts of Interest (OCI)

• Defined in FAR 2.101
• Means that because of other activities or
  relationships with other persons, a person is
  unable or potentially unable to render impartial
  assistance or advice to the Government, or the
  persons objectivity in performing the contract
  work is or might be otherwise impaired, or a
  person has an unfair advantage.
• Guidance provided in FAR subpart 9.5
• GAO and Court of Federal Claims Decisions

5
Principles of OCIs

• Preventing an Unfair Competitive Advantage
• Unequal Access to Nonpublic Information
• Proprietary
• Source Selection Information
• Other Nonpublic Information

6
Principles of OCIs

• Preventing an Unfair Competitive Advantage
• Biased Ground Rules
• Concern the firm could skew the competition,
  whether intentional or not, in favor of itself
• Did the firm receive an actual benefit?

7
Principles of OCIs

• Preventing Impaired Objectivity
• Does the contract at issue require the exercise
  of judgment by the contractor?
• Evaluation of Offers (FAR 9.505-3)
• Evaluation of Performance
• Protests
• Handled on a case-by-case basis
• Common sense, good judgment and sound
  discretion (FAR 9.505)

8
CO Responsibilities

• FAR 9.504
• Identify and evaluate potential OCIs as early in
  the acquisition process as possible
• Avoid, neutralize or mitigate significant
  potential conflicts before contract award.

9
Procedures

• FAR 9.506 Necessary documentation
• Written analysis, including recommendations for
  avoiding, neutralizing, or mitigating the OCI
• A draft solicitation provision calling the
  attention of prospective offerors to the
  potential conflict and
• If appropriate, a contract clause that precludes
  the awardee from performing certain related
  opportunities for a specified period

10
Important Decisions

• Operational Resource Consultants, Inc.
  B-299131.1 B-299131.2 (Feb. 16, 2007)
• Once an agency has given meaningful
  consideration to potential conflicts of interest,
  GAO will not sustain a protest challenging a
  determination unless it is unreasonable or
  unsupported by the record.
• Axiom Resource Mgt. Inc. v. The United States
  (Sept. 28, 2007) U.S. Ct. of Federal Claims
• Relying on the Contractors OCI assessment in
  and of itself not sufficient.

11
Additional Rulings

• United States v. Sci. Applications Intl Corp.,
  502 F. Supp. 2d 75 (D.D.C. 2007)
• SAIC was required to disclose its sponsorship of
  and participation in a trade organization that
  created an appearance of bias
• held that a contractor could be liable under the
  civil False Claims Act for a false certification
  relating to an OCI

12
Strategies to Mitigate OCI

• Prior to Award
• Disqualify the offeror from award
• Award the contract under the waiver provision of
  FAR 9.503
• Require contractor to submit a comprehensive COI
  mitigation plan
• Enter into nondisclosure agreements
• Disclose sensitive information to all
  competitors and
• Avoid or eliminate such conflicts by appropriate
  measures.

13
Strategies to Mitigate OCI

• Post Award
• Notify the CO and program officials ASAP
• Require the Contractor to complete a disclosure
  statement
• Avoid or mitigate effects of the COI
• Exclude contractor from subsequent NIH contracts
  and
• In severe cases, contractor could reorganize,
  restructure or divest corporate entities.

14
Personal Conflicts of Interest (PCI)

• Limitations
• FAR Subpart 2 defines OCI, no definition
  provided for PCI
• FAR Subpart 3.1
• Contractor Code of Ethics and Business Conduct
• No guidance provided for identifying, evaluating
  and resolving personal COI committed by
  contractor employees
• FAR Subpart 9.5 Guidance for OCI only
• Code of Federal Regulations (CFR)

15
Personal Conflicts of Interest (PCI)

• Occur when contractor staff, including spouses
  and dependent children, receive personal
  financial reward from an external company,
  agency, institution, individual, or any other
  entity which may bias the individuals judgment,
  or compromise his or her ability to carry out
  their contractual obligation to the contracting
  organization.

16
PHS Regulations Financial Conflicts of Interest
(FCOI)

• For Grants and Cooperative Agreements
• 42 CFR Part 50 Subpart F Responsibility of
  Applicants for Promoting Objectivity in Research
• For Contracts
• 45 CFR Part 94 Responsible Prospective
  Contractors
• Note The regulations became effective on
  October 1, 1995

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Promoting Objectivity is the Goal

• Institutions must establish standards to ensure
  there is no reasonable expectation that the
  design, conduct, or reporting of PHS funded
  research is biased by a conflicting financial
  interest of an Investigator

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Applicability of FCOI Regulations

• To be applicable, three elements must exist
• Public Health Service (PHS) funds
• Research as defined in the regulation
• Investigator specific definition
• (Note The regulations do not apply to Phase I
  SBIR or STTR projects)

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The Big View

• Institutions must
• Maintain a written, enforced FCOI policy for
  research investigators
• Ensure that Investigators are informed of the
  regulations, the policy, and the reporting
  responsibilities

20
The Big View (contd)

• Designate an Official (DO) to solicit and review
  Financial Disclosure Statements from
  Investigators planning to participate in the
  research
• Assume that by the time of application
  submission, the DO has received Financial
  Disclosure Statements from Investigators
• Report to awarding components the existence of
  FCOIs and that the FCOIs are managed, reduced
  or eliminated

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Key Terms

• Investigator P.I. and anyone responsible for
  the design, conduct, or reporting of PHS-funded
  research (includes Investigators spouse
  dependent children)
• Significant Financial Interest (SFI)
• Anything of Monetary Value (However, exclusions
  include salary from the applicant institution and
  equity interest not exceeding 10,000 and 5
  ownership)

22
Key Terms (contd)

• Financial Disclosure Statement A listing of
  Investigators SFIs (and those of his/her spouse
  and dependent children)
• (i) that would reasonably appear to be affected
  by the research or
• (ii) in entities whose financial interests would
  reasonably appear to be affected by the research
  (e.g., stocks)
• Required to be updated annually or as new SFIs
  occur

23
When Does a FCOI Exist?

• When the Institutional Designated Office (DO)
  reasonably determines that a SFI could directly
  and significantly affect the design, conduct, or
  reporting of the PHS funded research.

24
Ways to Manage, Reduce or Eliminate Conflicts

• Institutions may
• Publicly disclose the SFI (most common)
• Monitor research by independent reviewers
• Modify research plan
• Divest the SFI
• Sever relationship(s) that create conflicts
• (Note examples offered in the regulations)

25
What lies ahead?

• Section 841 of the FY 2009 Duncan Hunter National
  Defense Authorization Act
• OFPP to take lead
• Issue standard PCI policy within 270 days of
  enactment to prevent PCI by contract employees
  performing acquisition functions
• Review FAR within 12 months of enactment to
  determine need for FAR changes and uniform
  policies to address PCI and OCI
• Proposed HHSAR COI Case
• Limited coverage
• Advanced Notice of Proposed Rulemaking (ANPRM)
  drafted
• Expand scope of CFR regulations

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More Information?

• Conflict of Interest Information Resources
  Available on the Web
• http//grants.nih.gov/grants/policy/coi/index.htm
  
• Web-based tutorial
• http//grants.nih.gov/grants/policy/coi/tutorial/
  fcoi.htm
• Frequently asked questions
• http//grants.nih.gov/grants/policy/coifaq.htm
• Handout Identifying Latent Organizational
  Conflicts of Interest by Sarah McWilliams

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Contact Point

• Darryl Grant
• Phone [phone] Fax [phone]
• Email addresses grantda_at_od.nih.gov
• Division of Acquisition Policy and Evaluation
• Office of Acquisition Management and
• Policy, Office of the Director, NIH, DHHS