On January 15, 2025, the Federal Acquisition Regulatory Council (FAR Council) issued a long-awaited proposed rule that would overhaul how organizational conflicts of interest (OCIs) are treated in government procurements under the Federal Acquisition Regulation (FAR). As proposed, the rule, which implements the Preventing Organizational Conflicts of Interest in Federal Acquisition Act, Pub. Law 117-324, would greatly expand FAR coverage of OCIs and standardize OCI terms and conditions across government procurements. It also consolidates OCI provisions in FAR Part 3.

Proposed Revisions to the FAR

In line with the Act's directives, the proposed rule makes a host of changes to the FAR, including new definitions, solicitation provisions, and contract clauses, and provides guidance to contracting officers (COs) and contractors on the types of relationships and situations giving rise to OCIs and how best to identify and resolve any potential conflicts. We highlight the key changes below. 

Definitions

FAR 2.101's definition of "organizational conflict of interest" is revised to specifically define the three types of OCI found in government contracting:

• Biased ground rules: "a situation in which an entity or its affiliate, as part of its performance of a Government contract, has or may have materially influenced the development of the requirement, evaluation criteria, or other source selection procedures for another Government contract."
• Impaired objectivity: "a situation in which an entity or its affiliate has or may have financial or other interests or an incentive to provide other than impartial advice to the Government, or the entity or its affiliate's objectivity in performing the contract work is or might be otherwise impaired."
• Unequal access to information: "a situation in which an entity or its affiliate has or may have an unfair competitive advantage because: 
  • Access to the information was provided to the entity or its affiliate by the Government. Such information may include proprietary and source selection information, e.g., proposals, financial information;
  • The information is not available to all potential offerors; and
  • Having access to the information would assist the entity in obtaining the contract."

The rule also establishes definitions for "entity" and "firewall" in the context of OCIs and moves the definition of "contractor team arrangement" from FAR 9.601 to FAR 2.101. 

FAR Subpart 3.12

The proposed rule would move OCI coverage to new FAR subpart 3.12, replacing and expanding upon the OCI guidance currently found in FAR subpart 9.5. The new FAR subpart would:

• Apply to all contracts and subcontracts above the simplified acquisition threshold (SAT), except for contracts for commercial products and subcontracts for commercial products or commercial services (FAR 3.1202)
• Provide examples of situations that might give rise to the three OCIs (FAR 3.1204)
• Provide the methods for a CO to address OCIs, including avoidance, mitigation, and acceptance of risk (FAR 3.1205) 
• Address when an OCI may be waived (FAR 3.1206)
• Discuss COs' responsibilities in identifying, analyzing, and addressing OCI risk (FAR 3.1207)

Solicitation Provisions and Contract Clauses

The rule proposes adding two solicitation provisions and three contract clauses that can be used or "tailored as appropriate" by COs: 

• FAR 52.203-XX, Potential Organizational Conflict of Interest – Disclosure and Representation: Provides notice to offerors that performing under the contract may give rise to OCIs, and instructs offerors, as part of their proposal, to disclose all relevant information regarding OCIs and their procedures in place to prevent conflicts. 
• FAR 52.203-AA, Unequal Access to Information-Representation: Requires an offeror to identify, prior to submission of its offer, whether it or any of its affiliates had unequal access to any information that could provide an unfair competitive advantage and if so, mitigation measures taken.
• FAR 52.203-DD, Postaward Disclosure of Organizational Conflict of Interest: Requires the contractor to make a prompt and full disclosure of any new or newly discovered OCI during contract performance. This clause flows down to subcontracts exceeding the SAT where the work includes or may include tasks that result in an OCI.
• FAR 52.203-MM, Mitigation of Organizational Conflicts of Interest: Incorporates the mitigation plan into the contract and addresses changes to mitigation plan, as well as non-compliance with the clause or mitigation plan. This clause flows down to subcontracts exceeding the SAT where the work is addressed in the plan.
• FAR 52.203-LL, Limitation on Future Contracting: Addresses limitation on future contracting, with fill-ins for the CO to define the nature and duration of the limitation before contract award. This clause flows down to subcontracts exceeding the SAT for which the work includes tasks encompassed by the limitation.

Other Changes

• FAR 15.306: Revised to explain that exchanges about OCIs, including exchanges about any proposed mitigation plan, are likely not considered discussions unless other parts of the technical proposal and/or cost proposal are changed due to the exchanges. 
• FAR 3.1202: Provides that any "natural advantage" of incumbent contractors does not necessarily create an unfair competitive advantage or OCI.
• FAR Parts 7 and 10: Updated to require COs to discuss potential conflicts and proposed methods for addressing OCIs in acquisition plans and to use market research to identify potential offerors with unequal access to information.

Key Takeaways for Contractors

The FAR Council anticipates various benefits associated with the proposed rule, including "ensuring fair competition, maintaining integrity of the procurement process, avoiding unfair advantage, protecting Government interests, furthering legal compliance, maintaining public trust, enhancing efficient contract performance, standardizing terms and conditions, and protecting against contract termination." For contractors, the proposed rule provides detailed guidance and standardized terms that, in theory, should reduce some of the tricky questions surrounding OCIs that often give rise to bid protests. While we wait for a final rule, contractors should familiarize themselves with the proposed forthcoming changes and (if appropriate) submit comments. In particular, the FAR Council has requested feedback on the limitation of the rule's applicability to contracts and subcontracts above the SAT. 

Comments are due March 17, 2025. If you have questions on the proposed rule or on OCIs generally, please contact one of the Miller & Chevalier attorneys listed below.

Jason N. Workmaster, jworkmaster@milchev.com, 202-626-5893

Alex L. Sarria, asarria@milchev.com, 202-626-1584

Scott N. Flesch, sflesch@milchev.com, 202-626-1584

Ashley Powers, apowers@milchev.com, 202-626-5564

Connor W. Farrell, cfarrell@milchev.com, 202-626-5925

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