Conflict of Interest Contract: Everything You Need to Know
A conflict of interest contract sets an expectations to protect both employer and employee from conduct that can potentially lead to conflict.3 min read
A conflict of interest contract is an agreement between an employer and employee to set expectations and protect both parties from conduct that can potentially lead to conflict.
Conflict of Interest
Can an Employer Place Any Condition on Employment?
Labor laws allow an employer to set certain conditions on employment, as long as it's not illegal or against public policy. The position of most courts is that employers have no right to request for information about your private life except where the questions are related to your ability to perform on the job.
Can an Employer Inquire into Your Personal Life?
An employer cannot force you to divulge details of your sex life, investment portfolio, or favorite means of entertainment.
Can an Employer Force You Not to Take on Other Jobs Unrelated to the Employer?
An employer cannot restrain you from taking jobs or selling items which are not directly related to the employer, in which sense, it will constitute competition.
Why Is a Conflict of Interest Statement Important?
- A conflict of interest statement is necessary to protect you from situations where conflicts can arise. For example, if your employee has family members who are also working in the same profession, they may share sensitive information by accident.
- It also helps to protect confidential information when an employee works for two different companies in the same industry.
- It helps to spell out the expectations of both the employer and employee.
What Are the Types of Conflicts of Interest That Federal Contractors Should Be Concerned With?
There are two main types of conflicts of interest regarding federal contractors. They include:
- Organizational Conflicts of Interest (OCI).
- Personal Conflicts of Interest (PCI).
Organizational Conflicts of Interest
When Does an OCI Occur?
An OCI occurs when a contractor's relationships or circumstances:
- Prevent the person from serving the government without any sentiment or biases.
- Limit a contractor's ability to maintain objectivity in discharging their duties is curtailed.
- Allow a competitive edge which cannot be justified.
What Are the Categories of OCI?
There are three basic categories of OCI including:
- Biased Ground Rules.
- Impaired Objectivity.
- Unequal Access to Information.
When Does an OCI Occur Based on Biased Ground Rules?
An OCI can occur if a contractor, either through a government contract or transaction, set certain "ground rules" which apply to another government contract or transaction. If the contractor was associated with the formulation or implementation of the "ground rules" for subsequent government acquisition, such contractor might not be eligible to work for that acquisition.
When Does an OCI Occur Based on Impaired Objectivity?
An OCI based on impaired objectivity may occur if, due to competitive or financial reasons, a contractor loses its partiality, objectivity, judgment, or independence while discharging its duties to the government. OCI for 'impaired objectivity' often occurs when a contractor has the power to assess its own performance or that of its competitors.
When Does an OCI Occur Based on Unequal Access to Information and Unfair Competitive Advantage?
An OCI may also occur if a contractor gains knowledge of secret information through their activities in a government contract or such acquisition which can be used to purchase or secure subsequent governmental contracts and associated acquisitions. The said information may be confidential or proprietary information belonging to either the government or competitors in the private sector.
Personal Conflicts of Interest
Personal Conflicts of Interest regarding government contracts may arise if a covered employee is unable to perform impartially and in the best interest of the government while working on a government contract due to their relationships, financial interests, or personal conduct.
Where Is the Emphasis of Current PCI Regulations?
The current rules regarding PCIs are focused on analyzing the PCI of covered employees who are involved with governmental contracting.
Who Is a Covered Employee?
A covered employee refers to a person in charge of acquisition functions related to important governmental services.
What Do Services of Covered Employees Include?
According to the FAR §3.1101, covered employees perform some of the following functions:
- Planning governmental acquisitions.
- Identifying the services and supplies the government needs to acquire.
- Development and approval of contractual documents such as evaluation criteria, incentive plans, and contract requirements.
- Contract proposal evaluations.
- Award of government contracts.
- Contract administration.
- Termination of contracts.
- Deciding whether the cost of contracts is reasonable, allowable or allocable.
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