On January 15, 2009, the Department of Defense (“DoD”) issued an interim rule amending the Defense Federal Acquisition Regulation Supplement (“DFARS”) to implement Section 847 of the National Defense Authorization Act for Fiscal Year 2008.[i]  The interim rule, codified principally at DFARS 203.171 and implemented by a new mandatory contract clause at DFARS 252.203-7000, requires certain former DoD procurement officials to obtain – and requires DoD contractors to ensure that those former DoD procurement officials have obtained – an ethics opinion prior to their receipt of compensation from such contractors.[ii]

 

The first prong of the interim rule requires former DoD officials who have participated in certain capacities in an acquisition exceeding $10 million to obtain, from the appropriate DoD ethics counselor, a written ethics opinion regarding the revolving door restrictions that may apply to their work for DoD contractors.[1]  Significantly, former DoD officials must obtain the mandatory ethics opinion prior to accepting any “compensation” from a “DoD contractor.”[2]  This requirement applies to all DoD personnel who leave or have left DoD service on or after January 28, 2008, and who either:
 

(1) Participated personally and substantially in an acquisition with a value in excess of $10 million, and served in an Executive Schedule position, as a member of the Senior Executive Service, or as a military officer compensated at pay grade O-7 (Brigadier General/Rear Admiral) or higher; or

(2) Served in DoD as a program manager, deputy program manager, procuring contracting officer, administrative contracting officer, source selection authority, member of the source selection evaluation board, or chief of a financial or technical evaluation team for a contract in an amount in excess of $10 million.[3]
 

The second prong of the interim rule prohibits a “DoD contractor” from knowingly providing “compensation” to a covered DoD official, within two years after that official has left DoD service, unless the contractor first determines that the official has either:
 

(1) Received the mandatory ethics opinion; or

(2) Requested the mandatory ethics opinion at least 30 days prior to accepting compensation from the contractor.[4]
 

Pursuant to the interim rule, a DoD contractor that fails to comply with this requirement is subject to a wide range of administrative and contractual actions, including cancellation of a procurement, rescission of a contract, or initiation of suspension and debarment proceedings against the contractor.[5]

The applicability of the interim rule is sweeping in at least four respects.

• First, the definition of “compensation” that applies under the interim rule is incredibly broad.  The relevant FAR provision defines compensation to include “wages, salaries, honoraria, commissions, professional fees, and any other form of compensation, provided directly or indirectly for services rendered.”[6]  Guidance previously issued by the DoD Standards of Conduct Office in connection with the Procurement Integrity Act suggests that the interim rule will not be interpreted to apply to compensation paid by a prime contractor to a subcontractor that employs a former DoD procurement official.[7]  On the other hand, the same guidance suggests that the interim rule will be interpreted to apply to compensation paid to an individual as an independent contractor as well as instances in which a subcontract is a “sham or a vehicle established to provide services by individuals.”[8]
• Second, the interim rule does not define the term “DoD contractor.”  Thus, it appears to apply to any entity with one or more DoD contracts, regardless of their dollar value.  This interpretation is consistent with the prescriptive language of the interim rule, which requires the clause to be included in all solicitations and contracts.[9]
• Third, the interim rule is not limited to former DoD officials who will be performing work relating to DoD contracts.  Nor is it limited to former DoD officials whose new job responsibilities will involve contact with the Government.  In this regard, the rule is broader than the revolving door restrictions set forth in 18 U.S.C. § 207, which merely restrict a former Government employee’s interactions with the Government and do not apply to “behind the scenes” support activities.  The interim rule is also broader than the Procurement Integrity Act’s compensation ban, which extends for only one year after a procurement official has participated in a covered procurement.[10]
• Fourth, the interim rule applies to former DoD officials who performed in any of the enumerated capacities at any point in their careers.  Similarly, the rule does not require that a former DoD official have served in an Executive Schedule position, in the Senior Executive Service, or as a general or flag officer at the time he or she participated in the relevant acquisition.  Thus, the rule would appear to apply to a former DoD official who participated in a covered acquisition at the beginning of his or her military career and subsequently was promoted to one of the enumerated positions years or even decades later.

Given the breadth of the interim rule, a contractor would be wise to ensure that any former DoD official has obtained an ethics opinion before hiring that individual.

Independent of the interim rule, it is always a good idea for a contractor to require an ethics opinion prior to hiring a former Government employee, whether DoD or civilian.  Such an opinion can be incredibly valuable in assisting a contractor to identify the revolving door restrictions that will apply to a particular former Government employee and in determining whether those restrictions will make it impractical for the former Government employee to perform the job responsibilities of the position for which he or she is being sought.  In addition, requiring a former Government employee to obtain an ethics opinion, and complying with the restrictions set forth in that opinion, can provide valuable evidence of good faith in the event of any subsequent accusation that the former Government employee, or the contractor, has violated any of the applicable revolving door prohibitions.

For more information regarding revolving door restrictions generally, see "Watch Your Step: A Contractors Guide to Revolving-Door Restrictions", Public Contract Law Journal, Summer 2007 (Keith R. Szeliga).

Authored by:

Keith R. Szeliga

(202) 218-0003

kszeliga@sheppardmullin.com