Organizational conflicts of interest: practical considerations in the face of developing law

With more corporate consolidations taking place, the instances of overlapping businesses with government contracts increases. As a result the Government Accountability Office and Court of Federal Claims more and more often must look for conflicts of interest, according to Mark D. Colley, partner with the Washington D.C. firm of Arnold & Porter LLP and moderator of a recent continuing legal education program. The program—Organizational Conflicts of Interest: Practical Considerations in the Face of Developing Law—was sponsored by the Section of Public Contract Law, the Government and Public Sector Lawyers Division, and the Center for Continuing Legal Education.

Panelists included Kathy A. Brown, associate general counsel, Acquisition and Logistics, Department of Defense Office of General Counsel; Joseph J. Kelley, counsel for Integrated Defense Systems, Raytheon Co.; and Glenn G. Wolcott, deputy assistant general counsel, Government Accountability Office.

Colley noted that the easiest conflict of interest to address involves ensuring that contractors do not have special access or information. More troublesome, he pointed out, is seeking to prevent favoritism to a contractor through "impaired objectivity" or existing relationships with government personnel. Identifying and mitigating conflict of interest is more difficult in those situations.

Wolcott expressed his view that the environment of government contracting has changed with the shrinking industrial base, resulting in large companies now doing a broad range of tasks. The GAO, he said, has not "made any conscious decision to increase scrutiny." Instead it is reacting to the environment.

Brown, too, said that she didn't think the department was focusing more on organizational conflicts of interest, it's "just that the conflicts are now more problematic."

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The contracting agency, said Wolcott, has an obligation to make a "knowing judgment" to reasonably mitigate and neutralize conflicts.

Colley asked how those conflicts of interest can be eliminated. In response, Brown stated that in some cases, businesses are trying to narrowly define their different business units as distinct profit centers although the process does not work. Brown said that organizational conflicts of interest have to be looked at from a corporate level. In some cases, she said, divestiture might be required. Another suggestion later in the program involved subcontracting as an additional means of eliminating the conflict of interest.

Further, Brown said, it's best to look upfront at the organizational conflict of interest. She outlined some of the legislative proposals to address the issue of conflicts of interest in contracting.

Kelley, too, emphasized the complexity of contracting today, "I don't believe that the rules that existed in the 1980s are good enough today." Kelley also spoke to the need to identify an organizational conflict of interest at the earliest possible time and for clearer, more consistent guidance.

While conflict of interest is important, the government also has critical needs for work products. Wolcott noted that the GAO is "pretty hard nosed" in terms of making a judgment, but once it does so, it gives a level of deference to the contracting officer.

A portion of the materials from this CLE are available online at www.abanet.org/cle/programs. You may purchase the CLE materials at the ABA Web Store.

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