On Saturday, September 27, 2008, the Senate Armed Services Committee approved the final version of the Fiscal Year 2009 National Defense Authorization Act (NDAA). The House Armed Services Committee passed the bill overwhelmingly on September 24. The bill, which would authorize about $611 billion for national-security programs in the Defense and Energy departments in the fiscal year beginning October 1, will now be sent to President Bush for his signature. The final version of the FY 2009 NDAA contains provisions that could affect government contractors in a number of important areas, including:

Conflicts of Interest: Section 841 of the FY 2009 NDAA will require the Administrator of the Office of Federal Procurement Policy (OFPP) to develop a standard policy to prevent personal conflicts of interest (PCIs) by contractor employees performing acquisition functions closely associated with inherently governmental functions. Among other things, the policy must provide a definition of the term “personal conflict of interest” and require each contractor whose employees perform acquisition functions closely associated with inherently governmental functions to: (1) identify and prevent PCIs for employees who are performing such functions; (2) prohibit contractor employees who have access to non-public government information obtained while performing such functions from using such information for personal gain; (3) report any PCI violation by such an employee to the applicable contracting officer (CO) or CO’s representative as soon as it is identified; (4) maintain effective oversight to verify compliance with PCI safeguards; (5) have procedures in place to screen for potential conflicts of interest for all employees performing such functions; and (6) take appropriate disciplinary action in the case of employees who fail to comply with PCI policies.

The OFPP Administrator would also be required to develop a PCI clause or set of clauses for inclusion in solicitations and contracts (and task or delivery orders) for the performance of acquisition functions closely associated with inherently governmental functions that sets forth the PCI policy and the contractor’s responsibilities under that policy.

Finally, the Act will require the OFPP Administrator, in consultation with the Director of the Office of Government Ethics (OGE) to review the Federal Acquisition Regulation (FAR) to: (1) identify contracting methods, types and services that raise heightened concerns for potential PCIs and OCIs; and (2) determine whether revisions to the FAR are necessary to address PCIs by contractor employees performing acquisition functions closely associated with inherently governmental functions or achieve sufficiently rigorous, comprehensive and uniform government-wide policies to prevent and mitigate OCIs in federal contracting.

Database for Contracting Officers and Suspension and Debarment Officials: Section 872 of the FY 2009 NDAA will require the Administrator of General Services to establish and maintain a database of information regarding the integrity and performance of government contractors that have contracts in excess of $500,000. The database will include a brief description of any of the following types of information from the previous five years: (1) any civil, criminal or administrative proceeding in connection with the award or performance of a contract with the federal Government if the proceeding resulted in a criminal conviction or payment of a fine, penalty or reimbursement of $5,000 or more (Note: Settlements of such proceedings in which the contractor did not acknowledge fault will not be included in the database); (2) any termination for default; (3) a federal suspension or debarment, or an administrative agreement to resolve a suspension or debarment proceeding; and (4) any non-responsibility determination.

The Act would also require the Administrator to develop policies to require that contractors are timely notified if information about them is entered into the database and to allow opportunities for such contractors to submit comments pertaining to the information entered.

Personal Services Contracts: Section 831 of the FY 2009 NDAA will require the Secretary of Defense to develop guidance related to personal services contracts to: (1) require a clear distinction between employees of the Department of Defense (DoD) and employees of DoD contractors; (2) provide appropriate safeguards with respect to when, where and to what extent the Secretary may enter into a contract for the procurement of personal services; and (3) assess and take steps to mitigate the risk that non-personal services contracts may become personal services contracts.

Definition of “Inherently Governmental Function:” Section 321 of the Act will require the OFPP Administrator to review the current definition of the term “inherently governmental function” to determine whether it is sufficiently focused to ensure that only officers or employees of the federal Government or members of the Armed Forces perform such functions. The Act requires the Administrator to establish a single consistent definition that would apply across all federal agencies and develop criteria that individual agencies could use to identify critical positions that agencies would restrict to performance by government employees to ensure the agency maintains control of its mission and operations.

Private Security Contractors: In response to strong opposition to a prior version of the House-passed version of the NDAA that would have placed severe restrictions on the activities of private security contractors, the final version of the Act simply provides in Section 832 that it is the “sense of Congress” that: (1) private security functions should ordinarily be performed by members of the Armed Forces if they will be performed in highly hazardous public areas where the risks are uncertain and could reasonably be expected to require deadly force that is more likely to be initiated by personnel performing such security operations than to occur in self-defense; (2) it should be the sole discretion of the commander of the relevant combatant command to determine whether or not the performance by a private security contractor is appropriate; (3) the Secretaries of the military departments and the Chiefs of Staff of the Armed Services should ensure that the military has appropriate numbers of trained personnel to perform private security functions without the need to rely on private security contractors; and (4) DoD regulations should ensure that private security contractors are not authorized to perform inherently governmental functions in an area of combat operations.