Organizational Conflict of Interest (OCI)

An Organizational Conflict of Interest (OCI) exists when a contractor's other activities, relationships, or access to non-public information could impair its objectivity in performing work for the government or provide it with an unfair competitive advantage in a government procurement.

What is an Organizational Conflict of Interest?

OCI is addressed in FAR Subpart 9.5. It recognizes that certain contractor activities can create situations where the contractor's other interests could affect, or appear to affect, either the quality of work it provides to the government or the fairness of a competitive procurement. The FAR identifies three types of OCI:

1. Unequal access to information
A contractor gains access to non-public information during performance of a government contract that provides a competitive advantage in subsequent procurements. For example, a contractor helping the government write an RFP gains insight into requirements and evaluation criteria that competitors do not have.

2. Impaired objectivity
A contractor's work for the government requires it to evaluate itself, its competitor, or its own products. For example, a contractor asked to evaluate competing proposals when one of the competing companies is its own subsidiary cannot be objective.

3. Biased ground rules
A contractor establishes the requirements or specifications for a future procurement in a way that favors its own subsequent proposal. For example, a systems architect who writes a technical specification for a system only their company can build creates biased ground rules.

Contracting officers must identify and evaluate potential OCIs before awarding contracts, particularly for advisory and assistance services, systems engineering, and support contracts. Mitigation strategies include: firewall arrangements (information barriers within the company), limitations on future competitions, and in extreme cases, disqualification from competing.

Why OCI matters for government contractors

OCI can disqualify your company from pursuing high-value contracts even when you have no intent to act improperly. Companies that perform consulting, advisory, or systems engineering work for agencies must proactively identify and disclose potential OCIs, hiding a known OCI and winning a contract can result in contract termination, False Claims Act liability, and debarment. Conversely, competitors can challenge awards based on undisclosed OCIs, and the GAO has sustained many protests on OCI grounds. Contractors should maintain a formal OCI assessment process for all new pursuits and consult legal counsel when potential conflicts are identified.

Example

A defense contractor helps the Air Force develop performance requirements and evaluation criteria for a new training systems program. The same contractor later wants to compete for the training systems contract itself. This is a classic "biased ground rules" OCI, the contractor shaped the specifications in a way that likely reflects its own capabilities. The contracting officer may: require the contractor to recuse itself from competing for a period of time; accept a mitigation plan (using a separate division with information firewalls); or disqualify the contractor from competing. A competitor who learns of the relationship files a bid protest citing the OCI.

Frequently Asked Questions

Does an OCI automatically disqualify a contractor from competing?

No. Contracting officers must evaluate the specific circumstances and determine whether the OCI can be mitigated, neutralized, or avoided, or whether disqualification is the only appropriate remedy. Mild OCIs are often mitigated; severe OCIs (especially unmitigated unequal access to information) may result in disqualification.

Are OCIs required to be disclosed in proposals?

Yes. Contractors are generally required to disclose known or potential OCIs in their proposals and certify that they are unaware of any undisclosed conflicts. Failure to disclose a known OCI is a material misrepresentation that can void the contract and expose the contractor to False Claims Act liability.

Can OCI apply to subcontractors?

Yes. OCIs can arise at the subcontractor level and can affect the prime contract. Prime contractors are responsible for identifying and managing OCI risks throughout their team. A subcontractor's OCI can disqualify the entire team from a competition.

What is a "firewall" in the context of OCI mitigation?

A firewall is an information barrier within a company that prevents employees working on one contract from accessing or communicating sensitive information to employees working on a potentially conflicting contract or pursuit. Firewalls are a common mitigation strategy for large contractors who perform both advisory and competitive work for the same agency, but they must be formally documented, implemented, and auditable.