Six Essential Tips for Identifying and Avoiding Conflicts of Interest in Government Contracting

In celebration of the release of the 6th Edition of the Government Contracts Compliance Handbook, we are sharing six critical tips to help government contractors identify and avoid conflicts of interest. For contractors working in the federal sector, conflicts of interest—both personal and organizational—can have serious legal and reputational implications. Navigating this complex landscape requires vigilance, robust compliance mechanisms, and an understanding of federal regulations. These tips, derived from our comprehensive handbook, aim to equip lawyers and executives with the tools needed to address potential conflicts effectively.

1. Understand the Different Types of Conflicts of Interest

Conflicts of interest in government contracting fall into two primary categories: personal conflicts of interest and organizational conflicts of interest (OCIs). 

• Personal Conflicts of Interest: These typically arise when a government employee or contractor’s employee has financial interests or personal relationships that could impair their objectivity. For example, a government official negotiating for employment with a contractor involved in a procurement they oversee is a clear conflict. 

• Organizational Conflicts of Interest (OCIs): These occur when a contractor’s other activities or relationships impair its ability to provide impartial advice, influence procurement outcomes, or provide access to competitively useful information. Examples include evaluating the performance of an affiliate, writing specifications for a contract and then bidding on that contract, and obtaining information about a competitor’s solution, if any of these occurred during performance of a government contract. 

Recognizing these distinctions is critical for tailoring policies and procedures to address each type of conflict effectively​.

2. Develop and Communicate a Comprehensive Conflict of Interest Policy

A well-drafted conflict of interest policy is a cornerstone of compliance for government contractors. This policy should: 

• Define what constitutes a conflict of interest under relevant laws, including the Procurement Integrity Act (PIA) and the Federal Acquisition Regulation (FAR). 

• Include clear examples of prohibited conduct, such as sharing proprietary information or participating in the development of solicitation the company intends to pursue. 

• Establish procedures for identifying, reporting, and mitigating conflicts. 

Regular communication and training on these policies ensure that all employees, including subcontractors and consultants, are aware of their responsibilities and the consequences of violations​.

3. Implement Screening Processes for Employees and Subcontractors

Screening is essential for identifying potential conflicts before they arise. Contractors should: 

• Vet subcontractors and consultants to ensure they do not bring conflicts of interest that could taint the contracting process. 

• Conduct pre-employment checks for former government employees to confirm they are not subject to post-employment restrictions, such as the one-year cooling-off period mandated by the PIA. 

These screening measures minimize risks and help contractors proactively address conflicts​.

4. Monitor and Mitigate Conflicts Through Compliance Oversight

Regular monitoring is critical to ensuring ongoing compliance. Contractors should establish oversight mechanisms, including: 

• Assigning responsibility for conflict management to a compliance officer or ethics committee. 

• Conducting periodic audits of projects, contracts, and personnel assignments to identify potential conflicts. 

• Using mitigation plans, such as firewalls or recusal agreements, to address identified conflicts. For example, if a contractor is involved in drafting a statement of work, it may be prohibited from bidding on the resulting contract. 

Documentation of these efforts demonstrates good faith compliance and can be valuable in the event of government scrutiny​

5. Address Revolving Door Risks with Former Government Employees

Hiring former government employees is common in government contracting, but it carries unique risks. Federal regulations, including the Ethics Reform Act and PIA, impose restrictions on the activities of former officials. Key rules include: 

• A lifetime ban on representing a contractor in matters the former employee was personally and substantially involved in during government service. 

• A one-year ban on representing a contractor to their former agency for certain high-ranking officials. 

• Restrictions on discussing employment with current government officials during active procurements. 

Contractors should establish clear guidelines for hiring former government employees and ensure compliance with these post-employment restrictions​

6. Respond Proactively to Potential Conflicts of Interest

Despite the best preventive measures, potential conflicts may still arise. Contractors should have a response plan that includes: 

• A reporting mechanism for employees to disclose potential conflicts. 

• Immediate investigation of reported conflicts to determine their scope and impact. 

• Collaboration with government contracting officers to address and mitigate conflicts, which may include implementing corrective actions or seeking a waiver if the conflict cannot be avoided. 

Transparency and swift action can help preserve trust with government agencies and protect against penalties​. 

Conflicts of interest are a significant compliance risk in government contracting, but with the right policies and procedures, contractors can effectively manage and mitigate these risks. By implementing the six tips outlined here, contractors can align their practices with federal regulations, maintain integrity in the procurement process, and safeguard their reputation. 

These insights, drawn from the 6th Edition of the Government Contracts Compliance Handbook, underscore our commitment to supporting government contractors in navigating complex compliance challenges. For tailored advice and assistance, our government contracts practice group is here to help.