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New Federal Acquisition Regulation: Effective Communication Between Government and Industry

December 13, 2022

Overview

On December 1, 2022, the United States Department of Defense, General Service Administration, and National Aeronautics and Space Administration (NASA) issued a final rule amending the Federal Acquisition Regulation (FAR) to implement a section of the 2016 National Defense Authorization Act.

The previous FAR 1.102-2(a)(4) stated:

The Government must not hesitate to communicate with the commercial sector as early as possible in the acquisition cycle to help the Government determine the capabilities available in the commercial marketplace. The Government will maximize its use of commercial products and commercial services in meeting Government requirements.

The new FAR 1.102-2(a)(4) states:

The Government must not hesitate to communicate with industry as early as possible in the acquisition cycle to help the Government determine the capabilities available in the marketplace. Government acquisition personnel are permitted and encouraged to engage in responsible and constructive exchanges with industry (e.g., see 10.002 and 15.201), so long as those exchanges are consistent with existing laws and regulations, and do not promote an unfair competitive advantage to particular firms.

As described in the Final Rule, the new FAR 1.102-2(a)(4) is intended to “mak[e] clear that agency acquisition personnel are permitted and encouraged to engage in responsible and constructive exchanges with industry, so long as those exchanges are consistent with existing law and regulation and do not promote an unfair competitive advantage to particular firms.”

Any reluctance of industry representatives to communicate with government procurement officers, and vice versa, can curtail the efficiency of the government procurement process. By encouraging communication between the parties, this new final rule should have a positive impact on the dialogue occurring during the contracting process.

For small businesses participating in the SBA’s 8(a) program, and the accompanying possibility of directed awards, early communication with government agencies regarding procurement opportunities can be a vital component. The new FAR 1.102-2(a)(4) should be beneficial to small business’ pursuit of these, and other, types of government contracts.

However, while the new FAR 1.102-2(a)(4) attempts to encourage agency officials to have early contact with prospective contractors, it does not change the applicable rules governing organizational conflicts of interest and other procurement integrity requirements. Government contracts and acquisitions have long had a fraught history with ethics issues. For example, the former Director of Operations of the U.S. Navy’s Military Sealift Command Office in Busan, South Korea, was sentenced on December 2, 2022, to five years in prison for his role in illegally steering over $3.3 million in contracts to a company in exchange for bribes. To curb malfeasance, various statutes and regulations have been enacted to promote ethical dealings with the government and cost savings for taxpayers. These regulations include things such as mandating ethics and compliance programs and regulating (and barring) certain organizational conflicts of interest. The new FAR 1.102-2(a)(4) does not change these existing rules.

Compliance Program

Contractors who do business with the government are required to have a written code of ethics, per FAR 52.203-13. The regulations also require contractors with contracts over $5 million and a term of 120 days or more to institute a compliance plan and program. The requirement to have a written and accessible code is intended to promote a culture of ethical behavior within the contracting entity. 

Organizational Conflicts of Interest

One of the ways the federal government has attempted to limit bias in federal procurements is by disqualifying contractors with organizational conflicts of interest or whose involvement may suggest an illegal preference or the possibility of favoritism.

An organizational conflict of interest arises when a contractor is unable to be objective when providing advice or performing the contract, or has an unfair competitive advantage in procuring the contract. Major sources of ethics violations in the government contracting sphere are organizational conflicts of interest and can occur when:

  • a contractor assists a federal agency in preparing specifications for a procurement and then attempts to bid on that procurement;
  • a contractor possesses non-public knowledge about a procurement and could use that knowledge for its competitive advantage on a procurement; or
  • a contractor assists in the evaluation of proposals involving that company, another division of the company, or an affiliate of the company.

Subpart 9.5 of FAR requires the avoidance, elimination, or at least mitigation of ‎organizational conflicts of interest. While the new FAR 1.102-2(a)(4) encourages agency officials to have early contact with federal contractors regarding procurement activities, it does not change the federal contractor’s obligation to avoid organizational conflicts of interest.

Accordingly, federal contractors who utilize the new FAR 1.102-2(a)(4)’s attempt to encourage agency communication should be cognizant of the risk that an organizational conflict of interest may arise if they receive non-public knowledge about a procurement and could use that knowledge for their competitive advantage on a procurement.

Former Agency Officials

Some federal contractors employ former agency officials due to their subject-matter expertise and history in federal government contracting. Contractors who were previously employed by the agency that they seek to contract with may possess knowledge or relationships that could give them an advantage, and consequently 41 U.S.C. § 2104, as promulgated by FAR 3.104-3(d), imposes a uniform one-year moratorium on contracting with their former agencies for gain to minimize the possibility of a conflict.

Not only are former officials prohibited from achieving personal gain via contracting with their former agency, but under 18 U.S.C. § 207(c) they are also prohibited during that year from engaging in communications with their former agencies with the “intent to influence” the officers or employees of their former agency. This “intent to influence” is a strict standard, and former officials’ advice and opinions are sufficiently subjective to meet the threshold; only objective statements of fact avoid the definition.

While the new FAR 1.102-2(a)(4) may encourage current agency officials to reach out to former coworkers, the restrictions that apply to former agency employees continue to apply.

The discussion above addresses only some of the laws and regulations that regulate how contractors and agencies may communicate, interact, and bid/award contracts. While new FAR 1.102-2(a)(4) is a helpful step in encouraging more communication between procurement officials and federal contractors, limits remain on the type of information that can be shared between procurement officials and prospective federal contractors.

This article summarizes aspects of the law and does not constitute legal advice. For legal advice for ‎your situation, you should contact an attorney.

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