Defense industry teams must consider conflict-of-interest concerns.

Contractor teaming arrangements, long a defense industry fixture, have become even more popular in recent years.

These arrangements can provide significant business benefits to the teaming partners, such as enhanced system and subsystem capabilities, a more substantial and relevant past performance record, and greater diversity and ability to meet small business preferences and goals. Companies need to be aware, however, of the Organizational Conflicts of Interest (OCI) policies that govern contractor-teaming arrangements.

Three distinct OCI situations have been recognized under Federal Acquisition Regulations and various legal decisions:

Unequal Access to Information. In these cases, a competing firm having access to nonpublic information as part of its government contract performance gains a competitive advantage in a subsequent government contract competition not available to other competitors.

Biased Ground Rules. This is where a firm, in performing a government contract, sets the ground rules for a subsequent government contract (e.g., authoring the statement of work or the specifications), thereby "wiring" the later competition to fit or favor award to itself.

Impaired Objectivity. In this case, a firm's work under one government contract could entail self-evaluation of the firm or its affiliate, either by assessing performance under another contract or by evaluating proposals, thereby creating the appearance, if not the reality of undermining the firm's ability to render impartial advice to the Government.

The FAR ground rules for identifying, evaluating, and resolving OCIs charge the contracting officer with analyzing planned acquisitions to identify and thereby avoid, neutralize, or at least mitigate potential OCIs in advance. Once an OCI is identified, the contractor is to be given a reasonable opportunity to address it before contract award can be denied.

OCIs also may be waived when in the best interest of the government. OCIs render contractors ineligible for award if the conflict cannot be mitigated, in some situations, by imposing a restraint, such as a "Chinese Wall" or ineligibility for specified future contract awards.

FAR Subpart 9.6 notes that contractor team arrangements can benefit the government by enhancing capabilities, performance, cost, and delivery factors. In short, the FAR recognizes teaming as a positive industry practice, and in most circumstances, simply requires advance disclosure of teaming arrangements to the contracting agency. The government policy is to recognize the integrity and validity of contractor team arrangements and not normally require their dissolution.

Contractors, however, increasingly are encountering specific limitations on teaming and even outright bars in certain solicitations, often described as "prohibitions on cross-teaming." Cross-teaming generally entails one company participating on multiple teams in competing for a contract or task order under a multiple award contract.

An offeror may, for example, compete to be the prime for one team and a subcontractor for another team. Limitations on teaming and cross-teaming do not derive from FAR policies or FAR provisions governing OCIs.

The rationale for barring such arrangements, often expressed in the language of the clause itself, appears to be that they minimize the potential for OCIs and otherwise promote competition. Such clauses essentially presume existence of an OCI that cannot effectively be mitigated. These clauses provide a contractor no opportunity to counter with a proposed mitigation plan as contemplated by the FAR.

The FAR provides a few examples where OCIs, if they exist, cannot be mitigated. The comptroller general, in deciding bid protests, also has determined that certain OCIs are "unmitigatible"--most often in the context of "impaired objectivity" cases. In all other circumstances, the FAR requires that the contractor be given at least some reasonable opportunity to make its best case as to how a potential OCI can be avoided or an actual OCI can be mitigated or neutralized. An outright, or per se prohibition, therefore, appears to reach too far in most cases.

In some instances, contracting officers extended the cross-teaming prohibition to affiliates, requiring withdrawal from at least one team when affiliates participate on two different teams in the same acquisition. If a prospective contractor is given an opportunity to offer an effective mitigation plan, however, the result in most cases should be to avoid all potential and actual OCIs, and eliminate all concerns about decreased task order competition after award.

Features of an effective plan likely will include separate physical locations, separate work forces, separate management, separate computer systems, and a representation that there will be no "cross-talk" or information shared between the two affiliates in connection with all future task orders and task order proposals.

A mitigation plan should address all the concerns reflected in cross-teaming clauses while still providing the flexibility espoused by the relevant acquisition regulations. In contrast, per se prohibitions on affiliates participating on more than one team provide no flexibility either to the contracting officer or to the contractor.

OCIs are a real concern for those involved in formulating the acquisition strategy and evaluating proposals in a particular procurement or program. Teaming arrangements, nonetheless, do provide legitimate tangible benefits to contractors and agencies alike. One variation, cross-teaming, actually could enhance those benefits by offering the government more choices and potentially a better value.

NDIA Ethics Committee 

John D. Illgen Vice President, Northrop Grumman Simulation Technologies Corporation

Tofie M. Owen Jr. Senior Vice President for Corporate Development, SAIC 

James L. Pierce Consultant (Former Chairman & CEO, ARINC Inc.)

Thomas W. Rabaut President & CEO, United Defense LP

Joe R. Reeder, Esq. Attorney, Greenberg Traurig LLP 

Lawrence A. Skantze Gen., USAF (Ret.)

W. John Stoddart Executive Vice President and President Defense, Oshkosh Truck Corporation

William Usher Maj. Gen., USA (Ret.), President, National Correlation Working Group

TRUSTEES

Dr. Vincent J. Ciccone President & CEO, RASco Inc.

Mary E. Lacey Program Executive Officer, National Security Personnel System

James McAleese Principal, McAleese & Associates

Lewis A. Palumbo Senior Vice President, U.S. Business Development, Raytheon Company

John Stafford and Dave Hickey are attorneys with the Greenberg Traurig law firm. The opinions expressed here are solely those of the authors and are not intended to provide legal advice or represent the view of NDIA or the NDIA Ethics Committee.