Don’t Ask, Don’t Tell

NIH didn't know about a contractor's alleged conflict of interest because it never bothered to check.

With very few exceptions, such as national parks and tradition-rich military academies and universities, American society dismissed the idea of an honor system long ago. The notion that a patron, employee or student will voluntarily abide by societal rules and laws in the absence of any oversight is seen by most as an archaic principle steeped in simplistic naiveté. For years, however, the federal government, arguably the most skeptical and bureaucratically burdensome body on the planet, has applied the honor system to one of its most fiscally vulnerable responsibilities: federal contracting.

The Federal Acquisition Regulation encourages procurement officers to ferret out and rectify potential conflicts of interests early in the acquisition process. Once a job is awarded, however, contractors are not required to certify in writing that their work for the government will not conflict with their other business interests. While some agencies include such a clause in complex IT contracts, others seem to rely on the honesty and forthrightness of their contractor, occasionally with embarrassing consequences.

For example, on April 13 the National Toxicology Program's Center for the Evaluation of Risks to Human Reproduction terminated the contract of a consulting firm it hired to assess how dozens of potentially toxic chemicals affect women's reproductive health after reports surfaced that the company, Sciences International Inc. of Alexandria, Va., had business ties to the chemical industry. Sciences International was in its fourth year of a five-year, $5 million contract.

Most recently, the company issued a report on bisphenol-A, a plastic and resin ingredient commonly found in baby bottles and on the inside coating of canned food and drink products. Some studies have linked the chemical to prostate and breast cancer. Shortly after the report was issued, the Environmental Working Group, a public interest watchdog in Washington, raised concerns that the contractor's former client list included The Dow Chemical Co. and BASF, both whom manufacture bisphenol-A.

When reports of the company's industry relationships appeared on the front pages of the The Washington Post and Los Angeles Times, Sciences International was fired. The National Institutes of Health, which oversees the program, plans to review the bisphenol-A study, and Rep. Henry Waxman, D-Calif., chairman of the House Oversight and Government Reform Committee, has called for a thorough investigation of all federal reports the company has issued.

Herman Gibb, president of Sciences International, says his firm was "scapegoated" to defuse the controversy. The company, which was first awarded the federal contract in 1998, has been forced to lay off a pair of workers and additional cuts could be forthcoming. "This is grossly unfair," he says. "We were performing extremely well and there was never any sign of a conflict of interest. We always did objective science."

Gibb says Sciences International worked for BASF in 2004-a year before it began to investigate bisphenol-A-and the company once provided litigation support to a law firm representing Dow Chemical. The firm also has worked for three chemical trade groups, but Gibb says his federal research staff was unaware of the relationship.

Contracting experts say Sciences International's ugly divorce with NIH serves as strong indictment of an honor system that relies too heavily on contractors to voluntarily disclose their past and present business relationships.

Angela Styles, former administrator for Federal Procurement Policy at the Office of Management and Budget who now works at international law firm Crowell and Moring, has seen countless acquisition officers fail to include a strongly worded conflict of interest clause in their contracts and says, "they don't realize the extent that companies are working together or are subsidiaries of other companies. This is an extraordinary problem."

In its November 2002 contract proposal, Sciences International offered to screen its employees for potential conflicts of interest, but the language never made it into the final contract. NIH says it relied on the proposal language as verification that the company would avoid potential conflicts, but critics suggest the agency was derelict in its oversight responsibilities. "These are basic questions that they should be asking, but there is no conflict of interest policy at NIH," says Sandra Schubert, director of government affairs for the Environmental Working Group.

But the problems at NIH could be more widespread than just contracts. In February 2005, a Government Accountability Office report chastised the agency for lax conflict of interest policies concerning research arrangements with nongovernmental partners. And in March, Health and Human Services Department Inspector General Daniel R. Levinson announced a review of NIH's oversight of nonfederal scientists who conduct research with government money.

Reacting to the Sciences International dust-up, the National Toxicology Program announced that a conflict of interest clause would be inserted in all future contracts. The agency also plans to convene a federal advisory committee to evaluate the program's other contracts and to assess each contractor's business relationships for potential conflicts of interest. The committee is expected to issue its report by July 1.

Industry analysts, however, warn that blanket conflict of interest clauses could limit the government's options by disqualifying the most capable firm on suspect grounds. "There could be mitigating factors," says Alan Chvotkin, senior vice president and counsel of the Professional Services Council, a trade group in Arlington, Va., that represents contractors. "Many companies have a firewall in place to minimize potential conflict of interest."

Rather than instituting a one-size-fits-all approach, experts suggest that procurement officials should address each case on a contract-by-contract basis. "This is an important issue that the government needs to look at closely," says Warren Suss, president of Suss Consulting Inc. of Jenkintown, Pa. "But we also need to be careful not to overreact to the problem at NIH and undermine the effectiveness of future government work by being too restrictive."

It could be too late to mitigate the damage at the Center for the Evaluation of Risks to Human Reproduction. The agency, which has only one full-time and one part-time federal employee, was completely reliant on Sciences International to complete its work, and it could be months before a new contractor is hired.

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