The FAR Councils have issued a final rule addressing the prevention of personal conflicts of interest (PCOIs) for contractor employees performing acquisition functions closely associated with inherently governmental functions. 76 Fed. Reg. 68,017 (Nov. 2, 2011). The final rule amends the FAR to add Subpart 3.11 and a corresponding contract clause (FAR 52.203-16) requiring contractors to identify and prevent PCOIs of their covered employees and prohibiting covered employees who have access to non-public information gained by performance of a government contract from using it for personal gain. This Subpart implements the requirement set out in section 841(a) of the Duncan Hunter National Defense Authorization Act for Fiscal Year 2009.

Among the clarifications in the final version of new PCOI rule:

  • Although new FAR clause 52.203-16 is a mandatory flowdown, higher tier contractors will not be directly responsible for the employees of their subcontractors.
  • Self-employed individuals working as subcontractors will be treated as a covered employee of the prime contractor and the clause will not flow down.
  • Not all contractors are considered “covered employees.”  Covered employees are limited to those who perform an acquisition function closely associated with governmental functions.
  • The final clause expands the list of financial interests that may lead to a PCOI and makes it clear that the list is a series of examples.
  • The requirement to notify the contracting officer of a PCOI “as soon as it is identified” is clarified to permit contractors to conduct a reasonable investigation.
  • Thoughtless or careless actions resulting in the inappropriate disclosure of confidential information may be a violation, even if it not motivated by a PCOI or personal gain.