September 9, 1999
DO-99-035
MEMORANDUM
TO: Designated Agency Ethics Officials
FROM: Stephen D. Potts
Director
SUBJECT: Section 208 Exemptions for Disqualifying Financial
Interests that are Implicated by Participation in OMB
Circular A-76 Procedures
A recent decision by the Comptroller General has generated several
inquiries about the applicability of the exemption under 5 C.F.R. §
2640.203(d) for employees who evaluate contractor proposals for
procurements conducted under Office of Management and Budget (OMB)
Circular A-76 procedures.(1) In that decision, fourteen of the sixteen
employee evaluators held positions that were subject to being
contracted out. The employees evaluated the technical proposals of
contractors who were offering to perform the maintenance, operation,
repair and minor construction services currently performed in-house by
the Government employees. A total of 495 employees worked in the
affected component. The Comptroller General concluded that it was a
conflict of interest for the affected employees to participate in the
evaluation of the contractor proposals, citing various provisions of
the Federal Acquisition Regulation (FAR).
The Comptroller General decision did not address the Office of
Government Ethics (OGE) exemption under 18 U.S.C. § 208 for employees
who participate in particular matters where the disqualifying
financial interest arises from Federal Government employment. We are
issuing this Memorandum to reaffirm the applicability of the exemption
at 5 C.F.R. § 2640.203(d) for employees who participate in matters
conducted under OMB Circular A-76 procedures.(2) The Federal
Acquisition Regulation at 48 C.F.R. § 3.101-1 requires that:
[g]overnment business be conducted in a manner that is above reproach
and, except as authorized by statute or regulation, with complete
impartiality and with preferential treatment for none. Transactions
relating to the expenditure of public funds require the highest degree
of public trust and an impeccable standard of conduct. The general
rule is to avoid strictly any conflict of interest or even the
appearance of a conflict of interest in Government-contractor
relationships. While many Federal laws and regulations place
restrictions on the actions of Government personnel, their official
conduct must, in addition, be such that they would have no reluctance
to make a full public disclosure of their actions. [underscoring
supplied]
While the Comptroller General opinion cited part of this FAR provision
as a basis for the decision, it did not include or discuss the first
sentence of the provision. Additionally, although raised by the
attorney representing the Department of the Air Force, the opinion
made no mention in the decision concerning the conflict of interest
statute in 18 U.S.C. § 208 nor of the exemptions that OGE has issued
by regulation implementing that statute. We believe that these were
significant omissions that may well have affected the conclusion in
that case.
Unless permitted by 18 U.S.C. § 208(b)(1)-(4), an employee is
prohibited by 18 U.S.C. § 208(a) from participating personally and
substantially in an official capacity in any particular matter in
which to his knowledge, he, or any other person specified in the
statute, has a financial interest, if the particular matter will have
a direct and predictable effect on that interest. A "particular
matter" includes evaluation of contract bids or proposals. An employee
who evaluates bids or proposals of contractors who are offering to
perform the work that the employee performs in-house is participating
personally and substantially in a particular matter that will have a
direct and predictable effect on his financial interest. In the
absence of an exemption or an individual waiver, the employee could
not evaluate such bids or proposals without violating Section 208(a).
In accordance with 18 U.S.C. § 208(b)(2), OGE has provided an
exemption for such employees who participate in particular matters
where the disqualifying financial interest arises from Federal
Government employment. While an employee may not make determinations
that would individually or specially affect his own salary and
benefits, the exemption does permit an employee to make determinations
that would affect an entire office or group of employees, even though
the employee is a member of that group. Under those circumstances,
employees who participate in matters connected with OMB A-76
procedures, including the evaluation of bids or proposals, are not in
violation of Section 208(a). As noted in 5 C.F.R. § 2635.501, a
determination that an exemption in subpart B of 5 C.F.R. part 2640
applies also constitutes a determination under the standards of
conduct that the interest of the Government in the employee's
participation outweighs the concern that a reasonable person may
question the integrity of agency programs and operations.
Employees who participate in A-76 procedures, however, should be
reminded of other conflict of interest provisions that may apply in
Title 18 of the United States Code, in the standards of ethical
conduct at 5 C.F.R. part 2635, and in the procurement integrity
provisions at section 27 of the Office of Federal Procurement Policy
Act (41 U.S.C. § 423) and its implementing regulations at 48 C.F.R. §
3.104.(3) For this reason, and because we anticipate that conflict of
interest issues will arise more frequently as A-76 efforts increase,
we ask that you share this Memorandum with procurement officials at
your agency and with those involved in the implementation of A-76
procedures.
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1. The decision was DZS/Baker LLC; Morrison Knudsen Corporation,
B-281224, January 12, 1999.
2. We address in this Memorandum only our interpretation of 18 U.S.C.
§ 208 and the exemption at 5 C.F.R. § 2640.203(d) that is authorized
by 18 U.S.C. § 208(b)(2). This Memorandum does not purport to
interpret OMB Circular A-76 nor the Revised Supplemental Handbook to
OMB Circular A-76.
3. For a fuller discussion of these restrictions, see OGE Informal
Advisory Letter 95 x 10 (originally published as an article in the
Government Ethics Newsgram, Summer 1995, entitled "Privatization
Issues Affect Federal Employees," Vol. 12, No. 2, pp. 1-3).