Conflict-Of-Interest Chaos Could Produce New Abuses

As I noted in a posting on October 30, the Obama Administration is enforcing tighter conflict-of-interest standards on who may provide technical assistance to the federal government. The new rules focus in particular on what role (if any) companies that build military satellites and networks may play in helping the government to monitor contract execution. Because some types of expertise are hard to find outside small communities involved in highly secret work, the government has established firewalls over the years that enable it to tap the same organizations for both integration and analytic talent. There are well-established procedures for mitigating conflicts of interest, and little evidence that firewalls have been breached.

Under the new rules, though, the standards for addressing conflict-of-interest concerns have become much more demanding. In some cases, contracting officers are rejecting any mitigation efforts, effectively excluding companies from participating on system engineering and technical assistance (SETA) work if they also want to develop and integrate hardware. One consequence is that only a handful of companies are now qualifying to assist the government in monitoring and assessing performance — mainly companies with minimal experience in actually building systems. Thus, the resources available to support the government in doing its job are significantly reduced.

But there may be a bigger problem. Because the government has not established a single standard for how potential conflicts of interest should be addressed, contracting officials are deciding on a case-by-case basis what kind of mitigation measures are needed, or whether mitigation is even feasible. Thus, a bureaucrat intent on harming or benefiting a particular company has the subjective discretion to decide how rules should be interpreted in situations where billions of dollars in taxpayer money may be on the table. Most officers are probably erring on the side of caution, but as they get used to this newfound authority, the potential for abuse is easy to see.

There is also potential for contractor protests due to the subjectivity associated with applying conflict-of-interest standards. For example, employees of the Government Accountability Office — the office that adjudicates protests of contract awards — recently were organized by a union that opposes awarding the Air Force’s tanker program to Northrop Grumman. So if Northrop loses the next round of competition and lodges a protest, couldn’t it allege that GAO is conflicted and thus not a suitable arbiter of the protest? It sounds absurd, but without a unified standard similar situations might arise at the National Reconnaissance Office, the National Security Agency, and other agencies. The government needs to establish a clear standard for applying the new rules before they lead to improper behavior, gratuitous protests, and other problems.