BRIBERY, GRAFT, AND CONFLICTS OF INTEREST

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP80-01794R000100040031-3
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 9
• Document Creation Date: December 12, 2016
• Document Release Date: January 10, 2002
• Sequence Number: 31
• Publication Date: March 6, 1963
• Content Type: REGULATION

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This Notice Expires 1 April 196+
PERSONNEL
6 Marc""
BRIBERY, GRAFT, AND CONFLICTS OF INTEREST
1. NEW STATUTORY REQUIREMENTS
A statute which became effective 21 January 1963 (Public Law 87-849)
revises law concerning bribery, graft, conflicts of interest, and
related activities with respect to Government personnel.
One of the main purposes of the statute is to assist the Government in
obtaining the temporary or intermittent services of persons with
special knowledge and skills whose principal employment is outside
the Government. For this purpose, the statute relaxes the conflicts-
of-interest rules with respect to consultants, advisers, and other
experts.
a. A "special Government employee" is an employee who is retained,
designated, appointed, or employed to perform, with or without
compensation, for not to exceed 130 days during any period of
365 consecutive days, temporary duties either on a full-time
or intermittent basis. In general, consultants, advisers, and
other experts are special Government employees.
b. "Official responsibility" means the direct administrative or
operating authority, whether intermediate or final, and either
exercisable alone or with others, and either personally or through
subordinates, to approve, disapprove, or otherwise direct-Govern-7
ment action.
1+. PROHIBITIONS APPLICABLE TO SPECIAL GOVERNMENT EMPLOYEES
A special Government employee is in general subject only to the fol-
lowing major prohibitions:
a. He may not, except in the discharge of his official duties, repre-
sent anyone else before a court or Government agency in a matter
in which the United States is a party or has an interest and in
which he has at any time participated personally and substantially
for the Government (18 U.S.C. 203 and 205).
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b. He may not, except in the discharge of his official duties, repre-
sent anyone else in a matter pending before the agency he serves
unless he has served there no more than 60 days daring the past
365 (18 U.S.C. 203 and 205). He is bound by this restraint even
if the matter is not one in which he has,iever participated personally
and substantially.
c. He may not participate in his governmental capacity in any matter
in which he, his spouse, minor child, outside business associate,
or any person with whom he is negotiating for employment has a
financial interest (18 U.S.C. 208).
1d. He may not, after his Government employment has ended, represent
anyone other than the United States in connection with a matter
in which the United States is a party or has an interest and in
which he participated personally and substantially for the Govern-
ment (18 U.S.C. 207(a)). fIl3
e. He may not, for one year after his Government employment has ended,
represent anyone other than the United States in connection with
a matter in which the United States is a party or has an interest
and which was within the boundaries of his official responsibility
during the last year of his Government service (18 U.S.C. 207(b)).
This temporary restraint of course gives way to the permanent
restriction described in subparagraph 4d above if the matter is
one in which he participated personally and substantially.
5. PROHIBITIONS APPLICABLE TO OTHER EMPLOYEES
Any other employee of the Government is in general subject to the fol-
lowing major prohibitions:
a. He may not, except in the discharge of his official duties, repre-
sent anyone else before a court or Government agency in a matter
in which the United States is a party or has an interest. This
prohibition applies both to paid and unpaid representation of
another (18 U.S.C. 203 and 205).
b. He may not participate in his governmental capacity in any matter
in which he, his spouse, minor child, outside business associate,
or any person with whom he is negotiating for employment has a
financial interest (18 U.S.C. 208).
c. He may not, after his Government employment has ended, represent
anyone other than the United States in connection with a matter
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in which the United States is a party or has an interest and in
which he participated personally and substantially for the Govern-
ment (18 U.S.C. 207(a)).
d. He may not, for one year after his Government employment has ended,
represent anyone other than the United States in connection with
a matter in which the United States is a party or has an interest
and which was within the boundaries of his official responsibility
during the last year of his Government service (18 U.S.C. 207(b)).
This temporary restraint of course gives way to the permanent
restraint described in subparagraph 5c above if the matter is one
in which he participated personally and substantially.
e. He may not receive any salary, or supplementation of his Government
salary, from a private source as compensation for his services
to the Government (18 U.S.C. 209).
6. AGFNCY IMPItEMEDTATION
During January and July of each year, each Deputy Director and the
Comptroller, the Inspector General, and the General Counsel shall
bring the provisions of this notice to the attention of the employees
under his supervision.
6 Marc
JOHN A. McCONE
Director of Central Intelligence
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Rules for the Avoidance of Organizational Conflicts of Interest
The Report to the President on Government Contracting for
Research and Development (generally known as the Bell Report)
states that "today about 80% of Federal expenditures for research
and development are made through non-Federal institutions" and
that "there is no doubt that the Government must continue to rely
on the private sector for the major share of the scientific and
technical work which it requires. "
In such contracting, it is the policy of the Department of
Defense that the contractor should be given the maximum responsi-
bility'and authority for the performance of assigned tasks, and
these tasks be of such a nature, even when they are part of a
major system, as to be self-contained from a management point
of view. The Report further states that there are certain essential
management functions in the research and development area that
must be retained within Government. For instance, the integra-
tion and coordination of the separate parts of a large weapons
system contract involving several major contractors would, as a
general rule, be handled by Government agencies. To achieve this
integration and coordination, however, special arrangements are
sometimes needed such as are made with nonprofit organizations
and industrial organizations. In this case, the Government must
be able to establish rules for its relationships with the nonprofit
or industrial organizations which may be stricter than those
normally employed with prime contractors. All prospective
contractors will be advised of the applicability of the rules by a
notice in solicitations and by a clause in resulting contracts.
Where the Department of Defense does contract for research
and development work, as it must for the bulk of that work, its
choice of a contractor should be based primarily upon two
considerations:
Getting the job done effectively and efficiently,
with due regard to the long-term strength of
the Nation's scientific and technical resources,
and
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"(2) Avoiding assignments of work which would
create inherent conflicts of interest. "
The Report points out that while there are advantages and
disadvantages to the various types of organizations within the
private sector (universities, private nonprofit organizations and
industrial corporations), these types of organizations should not
"be given areas of monopoly on different kinds of work, " or be
permitted to develop a privileged relationship to the Department
of Defense.
In connection with the second criterion, the Report nronnses
been developed in accordance with that instruction.
It should be borne in mind that the pragmatic test for the
the selection of a contractor for a particular research and
development contract covers both profit and nonprofit organiza-
tions, including those created largely or wholly with Government
funds. But the rules do not deal with the criteria for the creation
of additional Government -sponsored nonprofit organizations in
this category. It is the policy of the Department of Defense that
such organizations are created only under extraordinary circum-
stances, when private resources are not available to accomplish
a necessary objective beyond the scope of in-house capabilities.
Their termination is governed by the organic statutes of the
individual organizations. These rules should make it even less
likely that any additional Government-financed nonprofit organiza-
tions need be created. While these organizations are in existence
they will be treated by the Department on arms length basis, as
the rules prescribe.
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II. RULES
The following rules state general prohibitions which are
then explained and illustrated by specific examples. There will
undoubtedly occur cases which are not resolved by these rules.
As the Bell Report said, "[Conflict of Interest] arises in several
forms --not all of which are by any means yet fully understood. "
In order to assist in deciding what, if any, prohibitions should be
applied in such instances, the two basic principles of this code--
(1) preventing conflicting roles which might bias a contractor's
judgment, and (2) ventin unfair competitive advantage--should
be aram t The following rules and examples are not all
inclusive but merely attempt to achieve these two goals in a
variety of situations. The ultimate test should always be: Is the
contractor placed in a position where his judgment may be biased,
or where he has an unfair competitive advantage so, corrective
action must be taken ET-a-c-c-o-rdamce with a rule s below.
As used in these rules, "contractor" means the person under
contract to the Department of Defense to perform the work described
in each rule, and its affiliates; "system" means system, subsystem,
project or item.. The term "systems engineering" includes a
combination of substantially all the following activities: determina-
tion of specifications, identification and solution of interfaces
between parts of the system, development of test requirements or
plans and evaluation of test data, and supervision of design work.
The term "technical direction" includes a combination of sub-
stantially all the following activities: preparation of work statements
for contractors, determination of parameters, direction of con-
tractors' operations, and resolution of technical controversies.
1. If a contractor agrees to provide systems engineering and
technical direction (SE/TD) for a system, without at the same time
assuming over-all contractual responsibility for: (a) development,
or (b) integration, assembly and checkout (IAC), or (c) production of
the system, then that contractor shall not later be allowed to supply
the system or any major components thereof, or to be a subcontractor
or consultant to a supplier of the system or any major components
thereof.
Explanation: The SE./TD contractor occupies a highly in-
fluential and responsible position as an agent of the Department of
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Defense both in determining basic concepts of a system and in super-
vising their execution by other contractors. To assure the objectivity
of its services and hence a more soundly planned system, the SE/TD
contractor must not be in a position to make decisions which could
favor its own products. Furthermore, it would be inconsistent with
the managerial responsibility of an SE/TD contractor for it to be
concurrently one of the component suppliers.
Example A: Company A agrees to provide SE/ TD for the Navy
on the power plant for a group of submarines (i. e. , turbine, drive
shafts, props, etc. ). Company A shall not be allowed to supply any
power plant components. Company A can, however, supply components
of the submarine unrelated to the power plant (e. g. , fire control,
navigation, etc. ). In this example, the system is the power plant,
not the submarine, and the ban on the supply of`components is
coterminous with the system only.
Example B: Company A is the SE/TD contractor for system X.
After some progress, but prior to completion, the system is canceled.
Later, system Y is developed to achieve the same purposes as system
X, but in a fundamentally different fashion. Company B is the SE/ TD
contractor for system Y. Company A may bid to produce system Y
or its components.
2. If a contractor agrees to prepare and furnish complete
specifications covering nondevelopmental items to be used in com-
petitive procurement, that contractor shall not be allowed to furnish
such items, either as a prime or subcontractor, for a reasonable
period of time including, at least, the initial -procurement. hiss
rule shall not apply to:
a. Contractors who furnish at Government request specifica-
tions or data with respect to the product they furnished, even though
the specifications or data may have been paid for separately or in the
price of the product.
b. Situations where one or more contractors acting as industry
representatives assist Department of"Defense agencies in preparing,
refining or coordinating speccations, regardless of source, which
assistance is supervised and controlled by Government representatives.
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c. Contracts for developmental or prototype items.
Explanation: If a single contractor is engaged by the Govern-
ment to draft complete specifications for nondevelopmental equipment,
he should be eliminated for a reasonable time from competition for
production based on the specifications. This should be done in order
to avoid a situation where he could draft specifications which would
favor his own products or capabilities. In this way the Government
can be assured of getting unbiased advice as to the content of its
specifications and can avoid allegations of favoritism in the award
of production contracts.
In development work it is normal to select firms which have
done the most advanced work in the field. It is to be expected that
these firms will design and develop around their own prior knowledge.
Development contractors. can frequently start production earlier and
more knowledgeably than firms which did not participate in the
development, and this affects the time and quality of production,
both of which are important to the Department of Defense. In many
instances the Government may have financed such development.
Thus, the development contractor may have an unavoidable com-
petitive advantage which is not considered unfair and no prohibition
should be imposed.
In instances of cooperation between industry and Department
of Defense agencies to prepare, refine or coordinate specifications,
there is continuous participation and supervision by Government
representatives and, usually, more than one contractor concerned.
In these circumstances Government supervision prevents the
establishment of specifications oriented to favor a given contractor's
products or capabilities.
Example A: Company A prepares updated Government speci-
fications for a standard refrigerator to be procured competitively.
Company A shall not be allowed for a reasonable period of time to
compete for supply of the refrigerator.
Example B: Company A designs or develops a new electronic
equipment and, as a result of the design or development, prepares
specifications. Company A may supply the electronics equipment.
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Example C: XYZ Tool Company and/or KLM Machinery
Company representing the American Tool Institute work under the
supervision and control of Government representatives to refine
specifications or to clarify the requirements of a specific procure -
ment. These companies may supply the item.
3. If a single contractor, other than a company which has
participated in the development or design of a system, agrees to
assist the Department of Defense or a contractor of the Department
of Defense inin tom, he reparation of a statement of work, or agrees to
provide material le ading ir ccffy; pre ictably, and without delay to
a statement of work, to be used in the competitive procurement of
a system or services, .coatracto-r, ll Cpl allowed tQ,,4jip ly
the serxVjxex,,,or.. system or major con npp exit-a.,thereof,,
nlesms
he is the sole source. The content of a statement of work shall
not be considered predictable if more than one contractor is involved
in the preparation of material leading to it.
Explanation: The various services related to a statement of
work to be used in a competitive procurement should normally be
performed by the Department of Defense. However, when it is
necessary to seek the assistance of contractors, they may often be
in a position to favor their own products or capabilities. To over-
come this possibility of bias, such contractors are to be prohibited
from supplying a system or services procured on the basis of work
statements growing out of their services.
No prohibitions are imposed on development contractors for
the reasons given in the explanation to rule 2.
Example A: Company A receives a contract to define the
detailed performance characteristics the Department of Defense
will require for the purchase of rocket fuels. A has not developed
the particular fuels. At the time the contract is awarded, it is
clear to both parties that the performance characteristics arrived
at will be used by the Department of Defense to choose competitively
a contractor to develop or produce the fuels. Company A shall not
be permitted to bid on this procurement.
Example B: Company A receives a contract to prepare a
detailed plan for the procurement of services aimed at the advanced
scientific and engineering training of Department of Defense personnel.
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