CONFLICTS OF INTEREST

1. CONFLICTS OF INTEREST Working Together to Identify, Disclose, Neutralize, Mitigate, and Prevent Organizational Conflicts of Interest (COIs) and Related Forms of Procurement Irregularities

2. Overview • USAID’s Office of Acquisitions and Assistance (OAA) • Contracting Officers (CO)/Agreement Officers (AO) and Contracting Officer’s Representatives (COR) and Agreement Officer Representatives (AOR) • COIs: types and examples • Remedies: compliance, disclosure, mitigation plans • Consequences and the relevant legal framework • Scenarios and questions

3. Office of Acquisition and Assistance • Negotiates, awards, and administers contracts and grants. • Protects U.S. Government (USG) interests and resources. • Supports the delivery of foreign assistance. • Facilitates contractor and recipient (Partner) compliance with the terms of an award.

4. Roles and Responsibilities: CO/AO & COR/AOR CO/AO • Identifies and evaluates potential organizational conflicts of interest early in the acquisition process. • Works with the Partner to avoid, neutralize, or mitigate potential conflicts. COR/AOR • Serves as the primary point of contact with Partner. • Abides by the standards of conduct as explained in the COR/AOR Designation letter.

5. What is COI?

6. Types of COIs • Unequal Access: unfair competitive advantage. • Impaired Objectivity: Partner’s advice does not serve USG business interest because limited by bias. • Biased Ground rules: Partner drafts specifications favoring its own capabilities. Actual vs. Apparent COIs

7. Apparent vs. Actual COI • Apparent COI: gives the “appearance” of a COI although one might not exist. However, as a best practice, organizations must remedy even the appearance of a COI to avoid negative perceptions. • Actual COI: refers to the actual existence of a COI.

8. Common COI Examples and Indicators • Unexplained or unusual favoritism toward a particular vendor. • Relatives of an employee work for the organization. • Continued acceptance of high priced, but low quality services or supplies. Each employee has a responsibility to identify COIs!

9. Recommended Courses of Action • Avoid: change the requirement to eliminate the conflict prior to solicitation. • Neutralize: take specific action to eliminate the conflict after solicitation, e.g., facilitating contractor recusal, excluding contractor participation in source selection activities to prevent access to procurement sensitive information. • Mitigate: reduce the risk or the impact of the conflict.

10. COI Risk Mitigation Plan Common elements of OCI Mitigation Plans: • Non-disclosure agreements • Controlled access to sensitive information • Establishment of an employee OCI awareness/compliance program • Physical separation of contract employees from sensitive data, i.e. firewall • Organizational separation • Management separation • Limitation on personnel transfers

11. Detection and Prevention Possibilities • Internal Controls • Implement procedures to screen employees and obtain financial disclosure statements. • Train employees in accordance with organizational policies to prevent, avoid, and disclose conflicts. • Implement a conflict avoidance plan. • Corporate Culture • Tone from the top: organizational leaders must promote integrity and transparency,

12. Handling Conflicts of Interest Once Identified • Disclose early and often! • Internally investigate the issue • Cooperate fully and quickly with USG • Take disciplinary and remedial actions • Strengthen internal procedures to identify and prevent conflicts in the future Benefits of Voluntary Partner Disclosure!

13. Consequences! Present Responsibility Present Responsibility: failure to act appropriately may indicate a lack of business integrity. • Going forward, can the partner be trusted to adhere to award terms, comply with laws and regulations, and conduct themselves ethically? • Some factors considered in assessing responsibility: • Standards of conduct • Voluntary disclosure • Internal investigation • Full cooperation • Paid costs • Disciplined employee Remedial Actions Ethics training Adequate amount of time Management recognition of issue Consider: What steps has a partner taken to identify, resolve, and prevent problems?

14. Consequences: Suspension and Debarment • Suspension and Debarment: exclusion from the procurement process. • Termination of on-going contracts • Loss of revenue • Reputational damage • Refused credit • Denied business • Bankruptcy

15. Period of Exclusion • Suspension • Generally, may last 12 months before legal proceedings are initiated or until OIG/DOJ investigation is concluded. Once legal proceedings are initiated, the suspension may stay in place until the proceedings conclude. • Debarment • Commensurate with the seriousness of the cause, generally not to exceed three years • Must take into account any period of suspension when determining the period of debarment* *Suspension does not have to precede debarment. It can, but it is not required.

16. Relevant Criminal and Civil Statutes • False Claims: criminal – 18 USC §287; civil – 31 USC §3729 • Program Fraud Civil Remedies Act: 31 USC §3801-3812 • Major Fraud: 18 USC §1031 • False Statements: 18 USC §1001 • Procurement Integrity Act: 41 USC §423, FAR 3.104 • Anti-Kickbacks: criminal – 41 USC §54; civil – 41 USC §55(a)(1) • Illegal Gratuities: 18 USC §201(c) • Bribery: 18 USC §201(b) • Foreign Corrupt Practices Act: 15 USC §78dd-1, et seq.

17. Reportable Items • Contract, Procurement, and Grant Fraud • Bribery & Illegal Gratuities • Kickbacks • Embezzlement • Product Substitution • Conflicts of Interest • Travel Fraud • Theft or Abuse of Government Property • False Statements & Claims • Foreign Corrupt Practices Act violations This list is illustrative. It is NOT ALL INCLUSIVE.

18. Scenario 1 Sara recently started working as the Human Resources (HR) Director for the Cooperation of Rural Organizations Overlooking Karachi, an NGO that provides counsel to microfinance institutions (MFIs) in the rural areas of Sindh province. While in Islamabad, Sara met with Sumaira, the USAID AOR, and someone very well known in Sindh. Sumaira indicated that Sara should hire her cousin for the Deputy Chief of Party position. Sumaira’s cousin has ten years of experience working with MFIs in Sindh. What should Sara do?

19. Scenario 2 Shiraz serves as the lead Procurement Officer for a large USAID contractor for a substantial energy contract. He has 20 years of experience and an excellent reputation. Unfortunately, work has overwhelmed him. As a result, he delegated some small procurements to junior procurement staff. Recently, Shiraz realized that this staff purchased 30,000 pounds of fuel in 6,000 pound increments from a trusted vendor without competition. However, the contractor’s procurement policy requires competition for any purchase that exceeds 5,000 pounds. What should he do?

20. Scenario 3 At the beginning of the same energy contract two years ago, Shiraz performed extensive market research and after a few competitive procurements, developed a “Preselected Vendor” List. Over the last two years, these vendors successfully performed, often exceeding expectations. In a few months, Shiraz will need to acquire $1M USD of bio-gas. He intends to compete this requirement among his trusted vendors. How should he handle this procurement?

21. Scenario 4 Humaira runs a disaster relief organization in Balochistan. After a particularly severe earthquake, Humaira received a sudden influx of donor funds to work with people in rural areas severely impacted by the earthquake. Humaira disburses funds through not-for-profit organizations in small increments, which in turn provide food, water, clothing, and blankets to the victims. She hires five individuals to monitor the distribution of these funds by the not-for-profit organizations. What did Humaira do right? What can go wrong?

22. Scenario 5 Before an acquisition for information technology is conducted, Company A receives a contract to prepare data system specifications and equipment performance criteria to be used as the basis for the equipment competition. Since the specifications are the basis for selection of commercial hardware, a potential conflict of interest exists. Company A should be excluded from the initial follow-on information technology hardware acquisition.

23. Certain Applicable Contract Clauses • FAR § 52.203-13: CONTRACTOR CODE OF BUSINESS ETHICS AND CONDUCT • AIDAR 752.209-71: ORGANIZATIONAL CONFLICTS OF INTEREST DISCOVERED AFTER AWARD

24. References • FAR Sub-Part 9.5 • AIDAR • CIB 99-17: Organizational Conflict of Interest • Assistance Mandatory Provisions

25. QUESTIONS?