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PCI a Non-Issue for Contractors

broken_glassIn the debate surrounding PCI, it’s worth noting that of 22 contractors audited by GAO, 18 of them already had written policies to prevent personal conflicts of interest within their workforce.  Many contractors model their safeguards on “the financial disclosure process used for DOD employees covered by federal conflict of interest safeguards. For example, the company’s instructions to employees state that the annual financial disclosure and certification process is done to assure that each employee is ‘free from any actual, potential, or apparent financial conflicts of interest with work he or she may perform on this [sub]contract.'”

At least once, a contractor self-reported a personal conflict of interest. From the GAO’s report, “In 2006, a conflict of interest for one of this company’s employees was disclosed on the annual certification. According to the company’s senior vice president, after the employee disclosed that his wife had taken a job with one of the center’s prime contractors, the company removed him from performing service under the subcontract. That was because the company’s annual review revealed not only that the employee might have a financial conflict of interest that could not reasonably be mitigated with the subcontracted work he was performing at the Electronic Systems Center,10 but he had not complied with the company’s ongoing requirement for employees to avoid prohibited financial interests and to immediately notify the company when financial interests change from what was certified in an employee’s last disclosure.”

Also, conflict of interest policies at corporations are often broader than those at government agencies, often “requir[ing] their employees to avoid a range of interests—such as owning substantial stock in competitors or suppliers—that conflict with the firms’ interests.”  And, while not every firm has a written policy, as we told you last week, just about every program manager at DoD has a written conflict-of-interest policy in place for their contractor employees.

According to GAO, a prevailing argument against new PCI regulations for contractors is “that the risk of conflicts of interest for contractor employees was low because it would be obvious if these employees tried to steer decision making to favor a personal interest or bias.”  Also, the report says that “most support contractor employees are retired military and have been accustomed to abiding by government rules for 30 years.”

There is no push for new PCI regulations from inside the acquisition community.  It seems that there’s a consensus, at least between contractors and their DoD program managers, that current conflict of interest safeguards adequately protect the government’s interests, and that new PCI regulations would only bring new costs and further delay projects.

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