Security Clearances In Federal Government Contracting

       Image:  Fedweek

While exploring the federal government marketplace the small business will encounter programs and potential contracts that involve security clearances. This is common in the Departments of Defense, Energy, Homeland Security and many other agencies.

Small business must grow into federal government classified programs. Individual and company clearance designations exist at various levels, depending on the relative risk to national security if unauthorized disclosure occurs. Clearances for key management are necessary to achieve a company clearance and all clearances are expensive. Either your company or a sponsor in the form of a prime contractor or government agency must pay for the process; the higher the security clearance the more costly the clearance. For facility clearances involving housing classified material, a building itself may require modifications for classified storage, communication devices or meeting accommodations (Sensitive Compartmented Information Facility or SCIF).

Becoming involved in the classified contract venue requires that you budget the time, the expense and the processes necessary and that you expense them in your forecasted overhead rate budgets so the costs can be appropriately priced and recovered via government contract billing. You must also carefully research government regulations such as the "National Industrial Security Program" (NISP) which governs the classified environment across all federal agencies:

National Industrial Security Program

The US Government security clearance process is based on two major principles:

1. A "Need to Know"

2. A requirement to perform a job on a specific government contract containing classified work.

Initial clearances are obtained by developing a business relationship with an agency or a prime contractor performing classified work and then getting assigned to a contract effort which is classified. Thereafter, clearances at certain lower levels can be carried by your employees or your company to other contracts at the same level of clearance requirement or even to a different agency within certain time constraints. At higher levels of clearances every employee is "Read On" and "Read Off" each and every contract on a singular basis after extensive background checks and in certain instances a polygraph. The process can involve lifetime nondisclosure commitments by an individual.

So you need a sponsor - a prime contractor company or an agency that will request your clearance based on your need to know classified information to participate in classified government contracts.Naturally they must be convinced via your marketing campaign that you can add value to the program involved. 

The Defense Counterintelligence Security Agency (DCSA) then conducts and grants your security clearance.  

It may seem like a "Chicken and Egg" process - but every business working in the classified venue has to go through the gates discussed in this article and maintain a vigilant program of compliance with associated regulations.

NOTE:  Comments at this post have been maintained from previous discussions on this topic at "Small to feds" in the interest of demonstrating the often complex and confusing nature of the clearances process. 

As one anonymous commentor (not published due to anonymity)  pointed out, some of the published comments are wrong and ill advised.  It pays to read the latest issue of the NISPOM, linked above. 

The anonymous commentor also maintained that clearances no longer cost the company.  I do not agree. The indirect costs of maintaining training programs to keep company and individual clearances is an ongoing tangible cost that must be planned for. The government considers  that cost allowable through the overhead on contracts, much the same way they are now considering a similar allowability for cyber-security certification.  

Unsolicited Government Contract Proposals - A Multiple Stage Challenge

INTRODUCTION

Most enterprises in government contracting encounter the possibility of submitting an unsolicited proposal.  The perceived opportunity arises as a result of observing a requirement that the company could uniquely fulfill, but for which the government has yet to issue a formal solicitation.

These opportunities are normally  large enough so they can't be sold off a GSA schedule or an existing contract delivery order, and do not fall under FAR Part 12, "Commercial Contracting”  

CHALLENGES AND STRATEGY

Since your product or service is not on the funding docket with the agency it does not have a funding I.D. Your job is to get the technical and project personnel enthused enough about it to carve out a niche in their program area and support a funding request for it. They do so by  to obtaining a solicitation I.D; money and authorization to buy from you.

The key to achieving the above is a good presentation revolving around your capability statement but supplemented by a pitch that should emphasize specifically how you understand the agency mission and that your offerings could further it.

Your objective should be to submit a hard hitting summary with a proposal in letter form, protected with the standard proprietary markings, through the contracting officer with whom you have already had discussions to the technical lead in the agency and request a meeting to make the full pitch. 

WORK YOUR PROPOSAL IN STAGES

The following link is the Federal Acquisition Regulation (FAR) guidance on unsolicited proposals:

FAR Guidance - Unsolicited Proposals

Be advised that you need to assert your rights in technical data and software on anything you give them that is product oriented because you have made an investment in it. When they start putting money into its further development you find them pressuring you for a deal on licensing and free use of it in exchange for funding and orders for services. That is the normal course of events and it can be managed.

Another approach is to carefully locate a platform provider that could use your product or services and team with them on a larger scale, bundled program that may be going to formal solicitation.

In either of the above instances, carefully protect your idea using the tips in the below article:

Protecting Intellectual Property

You will note that the FAR guidance specifies that cost and pricing data must be submitted so the proposal may be evaluated.  Naturally you must provide that ultimately, but it is recommended you do not do so with your initial proposal submission.  Simply state you will be pleased discuss with the agency the scope in terms of types and quantities of product and services, after which you will price the result of their input for planning purposes, pending a formal solicitation with funding commitment.

If the agency or a prime gets enthused, they will ask for a Rough Order of Magnitude (ROM) estimate for planning and funding purposes on what your product or services may cost. Be careful to make it conservative because those things get cast in concrete and caveat any ROM with a written statement that your ROM is not a formal commitment to a contract and that you will be pleased to commit with a formal proposal from the government through a duly authorized contracting officer under a funded solicitation.

I have had clients that have even been requested by agencies to write a statement of work for such a solicitation

The government fiscal year is a key driver in terms of available funding and getting it earmarked. Keep in mind funding for a program using your idea or a platform using it must fall within a funding cycle that begins 1 October, picks up heavily in July and August and must conclude in September.

CONCLUSION

Success in unsolicited proposals is a process:

1.   An initial unsolicited proposal submission after focused marketing is the gateway

2.   A strong presentation to the customer in person is key.

3.   Rough order of magnitude (ROM) pricing permits planning by the customer

4.   A funded solicitation is a green light for a firm contract proposal.

5    A Formal proposal submission under a funded solicitation, committing to negotiable price, schedule and delivery terms wins the contract. 

In addition to the articles linked above, please review the following 2 articles for further guidance:

Pricing Small Business Federal Government Contract Proposals

Contract Baseline Managment

10 Common Traits Among Successful Small Business Government Contractors

As a volunteer counselor over the last 19 years, I have noted common traits among the most successful small business federal government contractors.  The following are 10 of the most prominent traits and tips on how successful small companies developed them. 

Commercial success before entering government contracting.  From maintaining buildings to keeping the lights on, from grounds maintenance to flight maintenance, look for niches that can be pursued based on successful past performance, transitioning via industry teaming via subcontracts, partner roles with larger companies or in small business set aside orders for minor items and simpler services provided directly to the government.  Your Entry Points

Willingness to concede there were things they did not know and seeking advice early.   You may download the book, SmallBusiness Federal Government Contracting and its supplement from the "Box" in the right margin of this site.  You may also benefit from the free "Reference Materials". Contract agreements, incorporation instructions for all the US states, guidance on marketing and business planning are also included.   Free Books and Supplements

Recognition of the value in industry teaming. Synergism is paramount in teaming with any size company, whether in a lead or subcontracting role. There should be technical, management and market segment similarities between you and any company with whom you are considering teaming. Your prospective team member ideally will not be a direct competitor; rather a business in a related field with whom you share a mutual need for each other's contributions in pursuing large-scale projects. Small Business Teaming in Government Contracting 

Strong capability statement (CAPE) development, networked prudently among government agencies and large government contractors. Your CAPE targets contracting officers and prime contractor buyers who are seeking to fulfill their small business buying goals. It is a way to get you in the door and speak to, or correspond with, the management and technical personnel who are the decision makers in sourcing small business buys.  A good quality CAPE is the spearhead of your marketing campaign and your visual image;  focused and direct, it must be informative, concise and a snapshot of the very best you can offer. Your Capability Statement

Maximizing set-aside qualifications in seeking both prime and subcontract opportunities. Small business group-designated procurements are far more frequent than sole source contract awards.  Agencies must prepare special justifications for sole sourcing and those most frequently approved are for Hub Zone and Small, Disadvantaged [8(a)] firms.  Small business group designations are beneficial to firms who hold them by enhancing the probability of an award through agency restrictions on prime contractor bidding to only those who hold the group designation. Others may bid as subcontractors to the prime but the prime small business contractor must be capable of performing at least 51% of the total effort in terms of work scope, hours and dollars. Marketing to Achieve a Small Business Set-aside Contract

Prudent bid/no bid decisions. Government contract proposal preparation is time consuming and can be costly. Meeting agency Request for Proposal (RFP) requirements with a responsive proposal can be well worth the effort if a winning strategy can be formulated.  When considering a proposal to a given government solicitation, conduct a bid/no bid exercise. By going through that process you will begin formulating your win strategy or you will discover that you should not bid the job for lack of such a strategy. Making an Astute Bid/No Bid Decision

Ethical business conduct and avoidance of conflicts of interest. A small business ethics image is different than a product or service "Brand Identity". The latter focuses on that which the customer receives from you in the way of products and/or services. A company ethics image is how the organization is viewed in general from a public perception as positive or negative.  That view is held by customers, your industry partners or prospective partners, regulators and the average citizen. If carefully sculpted your public ethics image can be a vital element in business success; if neglected it can pose a high risk to your enterprise.  Maintaining an Ethical Company Image

Excellence in risk analysis. The challenges and difficulties for the small business in government contracting are not so much in the areas of barriers as  they are in lack of knowledge (which I concede is a form of barrier but one that can be dealt with) Large business and government agencies take advantage of the small enterprise lack of knowledge or make poor assumptions regarding what a small business knows about the Federal Acquisition Regulation (FAR) and associated Cost Accounting Standards (CAS). This leads directly to abusive practices. Managing Small Business Risk

 Solid long range planning and plan maintenance. The time to consider separating government from commercial work and/or establishing new cost centers for bidding, accounting and billing purposes is when the enterprise is generating a long range marketing plan to determine rates for bidding new long term contracts. The location of the work (both geographic location and whether performance is in or out of a government facility, its duration, skill set requirements, government-mandated fringe benefits for workers and the competition are all factors to consider).Strategic Planning for Small Business

Excelling in meeting the past performance challenge, building a performance record with solid customer service and sensitivity.  How can a new organization or one that is new to government contracting muster a response to the past performance challenge? The answer lies in historical projects that may be similar in the commercial arena and a high quality proposal that clearly demonstrates an understanding of the requirement at hand, a unique and cost effective project plan and high performing personnel and/or products tailored to the statement of work to offset an interim, light past performance record. Meeting the Past Performance Challenge

Vital Tips for Project Management in Small Business Federal Government Contracting

Effective small business project management focuses the resources on a plan for contract execution, the schedule, budget and customer requirements baseline and the status of a given effort among other concurrent projects to give visibility into problem solving and management trade offs.

If you are a small enterprise selling off-the-shelf commercial items under FAR Part 12 or marketing commercial products on a GSA schedule, you may be initially challenged by the government contracting venue. With persistence you will establish selling relationships through agencies and prime contractors. Your project management challenge is minimal.

A service contractor faces a far greater challenge in understanding the nature of government contact project management and succeeding at it
.
PLANNING IS KEY

Strategic thinking must be applied to structuring a government service contract project management capability in your company. It must involve long term planning and designing a business system as well as establishing rates and factors to bid new work and control it while interfacing with the customer.

A Framework For Small Business Federal Government Contracting Business Systrems

When one plans in detail to define the product or the service one reduces performance risk

The project management challenge is not to launch significant and costly resources before the specification for the product is sufficiently defined, obviating the need for costly revisions or abandonment, yet knowing when the product definition and plan are suitable for release.
Good project management starts early.

Without a well written Statement of Work (SOW) and associated supplies  and services specifications there is unacceptable risk in the future  contract and is it exceptionally high risk to bid or contract the job. 
Both the contractor and the customer must come to an understanding regarding the scope of effort to be performed. That understanding is conveyed in the Statement of Work (SOW) and confirmed in the specifications referenced therein.  A good SOW should have the following principal attributes:

* Clear identification of the products, services, skills, materials and performance factors required to complete the contract

* A description of the conditions under which the contractor will be required to perform and any related environmental or location factors

* Specific references to product specifications that govern an acceptable product or services performance outcome and delivery  acceptance

* A schedule for the contract that identifies discrete delivery dates for products and specific start and end dates for supporting labor.

* A precise description of customer furnished material or facilities required and when it will be made available to the contractor.

If your customer does not provide the above, offer the document during the comments period, during your proposal or during negotiations that represents a version to which your company will commit. 

Do not let the fact the program is competitive sway you from the facts. Signing off on a poorly written SOW results in a difficult contract to manage, a high probability for disputes during the  contracting period and a poor past performance record you will have to  deal with in the future on other jobs.

PROJECT MANAGEMENT RULES OF THUMB

A secondary and related challenge is managing the baseline for the product or service to avoid scope creep, superfluous bells and whistles and other diversions that risk the basic completion objectives. 

Set a baseline for what can and cannot be achieved for the resources and time that have been committed to the job and present to the client.  Use it as a bench mark for discussion to establish a plan going forward. Then control it using sound baseline management. 

Stay away from "Scope Creep" that can kill a contract, a customer relationship and a past performance record, all of which are important to your business. Stay in front of "Scope Creep" by communicating positively with the customer to control the baseline, keeping cost, schedule and technical performance integrated and synchronous.

Use the below rules of Thumb to control "Scope Creep":

KNOW - The contract value and its ceiling amount

KNOW - The incurred cost to date and commitments

KNOW - The scope of work and whether or not your current efforts are supporting it or some other objectives

KNOW - The estimated cost at completion based on where you are at today

KNOW - Your customer and who among the customer population is prone to direct out of scope effort.

 KNOW - WHEN TO SAY "NO" to "Scope Creep" and say it officially in   writing to the contracting officer specified in your contract.

For baseline management and earned value techniques in achieving the above, please see the articles linked below:

Baseline Management In Small Business Contracting

Earned Value Management Systems

CAREFULLY SELECT YOUR PROJECT MANAGER(S) OR PERFORM THE ROLE YOURSELF

The following are the more esoteric project manager attributes necessary in the government contracting industry:

DEVELOPING the ability to cross organizational lines and make disparate groups or functional organizations work together with only a power of persuasion and a contract.

EVOLVING the art of directing resources without having them as direct reports while keeping home departments and functional bosses happy at the same time.

MANAGING to convince the executives in the company that specific project (s) are the most important in the firm.

LIVING with the prospect that if the project is late, fails or otherwise disappoints the powers that be, replacing the project manager will be the designated corrective action.


GROWING to crave the satisfaction that comes from succeeding at the above challenges and you would not have any other job because no other pursuit makes your day go as fast, grows you skills as sharp and totally occupies your intellect.

Protecting Intellectual Property And Proprietary Data In Federal Government Contracting

Contractual relationships established directly with the US government or subcontracts and purchase orders under government contracts with other companies must contain provisions for the protection of intellectual property and proprietary data. This article will address the major processes by which that protection is achieved.

RIGHTS IN TECHNICAL DATA AND SOFTWARE

The Defense Federal Acquisition Regulation (DFAR) contains the most widely used provisions by a federal agency that allow a contractor, subcontractor or supplier under government contracts to assert ownership or protective rights for specific technical data and software. Keep in mind that the more a company has invested in a technology, a product or a system the higher the level of protection available under the DFAR. If the government has or will invest in the technical data and software then the level of protection that can be asserted diminishes and the government begins to assume ownership and attendant control of the related intellectual property.

It is important during the solicitation and proposal stage to assert rights in technical data and software so the business relationship is clearly understood by all parties and appropriate protective markings, licensing and related measures can be covered in the contractual documentation. The following information in the DFAR should be studied to ascertain how to appropriately assert rights during proposals to the government and to prime contactors:

SUBPART 227.71—TECHNICAL DATA AND ASSOCIATED RIGHTS

SUBPART 227.72—COMPUTER SOFTWARE, COMPUTER SOFTWARE DOCUMENTATION, AND ASSOCIATED RIGHTS

The government does not sign agreements to protect specific data, abiding instead by the DFAR-specified assertions regarding ownership and use of technical data and computer software as they are negotiated in contracts. The government will comply with specific marking and identification of proprietary data. Details on these markings are provided at the conclusion of this article.

NON-DISCLOSURE AGREEMENTS BETWEEN COMPANIES

When two companies begin an exchange of information that may lead to a mutually exclusive business arrangement under a government contract, a Non-Disclosure Agreement (NDA) is generally signed to protect proprietary data.

The first page of such an agreement is on the left in the illustration below. The entire document may be obtained free of charge by downloading it at the "Box Net" cubicle in the right margin of this site.

TEAMING AGREEMENTS BETWEEN COMPANIES

When two companies agree to form a mutually exclusive agreement to prepare a proposal as a team to a government agency a teaming agreement is generally executed. The first page of such an agreement is on the right in the illustration below . The entire document may be obtained free of charge by downloading it at the "Box Net" cubicle in the right margin of this site.

A teaming agreement remains in force until it is replaced by a subcontract from the lead company to the following company upon award of the prime contract. In the case of a joint venture, the prime contract award results in two contracts from the joint venture contract level to the respective participating company levels.

PLEASE CLICK ON ILLUSTRATION OR DOWNLOAD TO ENLARGE

PROTECTING RATE INFORMATION BETWEEN COMPANIES

It is generally recognized by all industries participating in federal government contracting that internal overhead and G&A rates and the data that support them are proprietary data. The reason for the proprietary nature of rate data between companies is that in government work firms are teaming with each other exclusively on one project and competing against each other on additional contracts or projects at the same time.

Assuming everyone pays a generally similar labor rate on the market to retain employees and that fringe costs about the same for everyone, then overhead and G&A are what wins and loses jobs and specific, company internal overhead rates are very closely held.

Companies do not disclose the details of their rates to other companies and they do not expect to see another company's proprietary rate information. So companies view each other’s rate information on a fully loaded basis, meaning the total of the base cost, any proprietary indirect cost and an agreed upon profit percent.

If a prime contractor requests that subcontractor proprietary rate information be supplied with a proposal the detail should be double wrapped and the package stamped, 'Government Eyes Only'. The prime will then hand the package off to DCAA without opening it and receive only the fully loaded result of the burdened rate pricing.

DCAA or federal agency pricing analysts perform detail audits of subcontractor rate information but prime contractors are not provided the result. An audit statement by the government that the subcontractor detail rate support is acceptable or not acceptable is all that is provided to the prime contractor.

Government auditors do not make value judgments or negotiate; they review the logic and support for rates, check the math and provide a report to the government contracting officer who will conduct the negotiations, if any.

PROTECTIVE MARKINGS FOR PROPRIETARY DATA SUBMITTED TO THE GOVERNMENT AND TO A PRIME CONTRACTOR

Your proposal data may contain rate information, proprietary data or strategic technical solutions that you would not want to fall into the hands of a competitor. The government does not sign Proprietary Data Agreements (PDA's). Examples of the government's obligation to protect your information are covered under the DFAR rights in technical data and software assertions discussed above and in the following FAR clause that requires protective markings by you on the title page of your document and on each subsequent page.FAR 15.509 Limited use of data:

(a) A proposal may include data that the offeror does not want disclosed for any purpose other than evaluation. If the offeror wishes to restrict the proposal, the title page must be marked with the following legend:

"The data in this proposal shall not be disclosed outside the Government and shall not be duplicated, used, or disclosed in whole or in part for any purpose other than to evaluate the proposal; provided, that if a contract is awarded to this offeror as a result of or in connection with the submission of these data, the Government shall have the right to duplicate, use, or disclose the data to the extent provided in the contract. This restriction does not limit the Government's right to use information contained in the data if it is obtainable from another source without restriction."

(b) The offeror shall also mark each restricted sheet with the following legend:

"Use or disclosure of proposal data is subject to the restriction on the title page of this Proposal."

(c) The coordinating office shall return to the offeror any unsolicited proposal marked with a legend different from that provided in 15.509(a). The return letter will state that the proposal cannot be considered because it is impracticable for the Government to comply with the legend and that the agency will consider the proposal if it is resubmitted with the proper legend.

Organization Conflict of Interest (OCI) In Small Business Federal Government Contracting

 

                                       Image: purchasinginsight.com

INTRODUCTION

While planning, marketing, teaming, proposing or performing under federal government programs (particularly service contracts) the small business will encounter the term, "Organizational Conflicts of Interest" or "OCI". The term has been established by the government as part of the process to control procurement integrity.

OCI clauses in solicitations and contracts require that companies certify their organizations and personnel do not have a procurement integrity issue with regard to a pending contract award or disclose what may be deemed an issue and provide mitigating factors to still be considered.

This site has discussed procurement integrity and the law at the following article:

Procurement Integrity and the Law

Meeting OCI requirements involves strategic planning to avoid situations where your company, your management and/or your personnel are placed in potentially compromising positions while government contracting in your industry.

An apparent win can be delayed indefinitely by a competitor protest claiming OCI. Government actions after the fact if an OCI violation is uncovered will be annotated to a contractor's past performance history and in severe cases result in disbarment from government contracting.

This article will define Organizational Conflict of Interest (OCI),  discuss situations under which OCI issue are likely to occur and recommend strategic planning and processes to manage the requirement. 

DEFINITION

The term "organizational conflicts of interest" means that a relationship or situation exists whereby an offer or a contractor has past, present, or currently planned interests that either directly or indirectly (through a client, contractual, financial, organizational or other relationship) may relate to the work to be performed under the forthcoming contract and:

 (a) may diminish its capacity to give impartial, technically sound, objective performance

 (b) may result in it having an unfair competitive advantage.

It includes chief executives and directors, to the extent that they will or do become involved in the performance of the contract, and proposed consultants or subcontractors where they may be performing services similar to the services provided by the prime contractor. 

It does not include the normal flow of benefits from the performance of the contract.

EXAMPLES

1. Competing for a management/services contract that might require the contracting company to evaluate its own or its competitors’ products for use by the government

2.  Competing to supply products/services for which you have designed the specifications

3.  Access to other companies’ proprietary information that has not been authorized for use in landing/performing the contract

4.  Access to other companies’ proprietary information obtained by leveraging the contract in question, which might provide an unfair competitive advantage.

The below article in the Washington Post addresses an apparent blatant example of OCI:

OCI Case Sheds Needed Light On Government Contracting

TYPICAL OCI REPRESENTATION AND DISCLOSURE

Below are exampes of typical representation certifications and disclosure statements required by OCI regulations.   For a given procurement either the Representation or the Disclosure is submitted - not both:

OCI REPRESENTATION STATEMENT

I hereby certify (or as a representative of my organization, I hereby certify) that, to the best of my knowledge and belief, no facts exist relevant to any past, present or currently planned interest or activity (financial, contractual, personal, organizational or otherwise) which relate to the proposed work; and bear on whether I have (or the organization has) a possible conflict of interest with respect to (1) being able to render impartial, technically sound, and objective assistance or advice; or (2) being given an unfair**competitive advantage.

Signature: Date:

Name : Organization:

Title :

OCI DISCLOSURE STATEMENT

I hereby certify (or as a representative of my organization, I hereby certify) that, to the best of my knowledge and belief, all relevant facts--concerning past, present or currently planned interests or activities (financial, contractual, organizational or otherwise) which relate to the proposed work and bear on whether I have (or the organization has) a possible conflict of interest with respect to (1) being able to render impartial, technically sound, and objective assistance or advice, or (2) being given and unfair**competitive advantage--are fully disclosed on the attached page(s) and formatted to show:

o For ease of presentation, divide following data into four parts: Organizational,
contractual, financial, other;

o The company, agency, organization in which you have a past, present, or currently planned interest or activity (financial, contractual, organizational, or otherwise);
 
o A brief description of relationship;

o A period of relationship;

o The extent of relationship (e.g., value of financial interest of work; percent of total holdings, total work, etc.).


Signature:


 Date:

** An unfair competitive advantage does not include the normal flow of benefits from the performance of the contract. 

STRATEGIC MANAGEMENT FACTORS

When considering the implications of OCI, examine your strategic plan for the following factors:

1.   Examine your market niche and what aspects of it would be subject to OCI as a function of your company role in it or the roles of past and future  personnel and suppliers or prime contractors. 

2.   If you are considering becoming  a SETA contractor determine what portion of the market in your industry will be unavailable to you in that role.  Systems Engineering and Technical Assistance (SETA) contractors are civilian employees or government contractors who are contracted to assist the government (In some areas of DOD, the acronym SETA refers to "Systems Engineering and Technical Assessment" contractors; also refers to "Systems Engineering and Technical Analysis.")  SETA contractors provide analysis and engineering services in a consulting capacity, working closely with the government's own staff members. SETA contractors provide the flexibility and quick availability of expertise without the expense and commitment of sustaining a government staff long-term.

3.  Bear in mind that non-disclosure agreements and OCI requirements for major programs have long term implications and expiration dates. 

4.  Keep in mind that subcontractor and prime contractor relationships also bear on OCI.  Vet your prospective teaming companies and suppliers carefully with regard to the OCI impact they may have on ventures you undertake and flow the requirement down to them in the early stages of any teaming agreement with them. 

5.  Carefully consider the following guidance from FAR Part 9.505:
 
“Each individual contracting situation should be examined on the basis of its particular facts and the nature of the proposed contract. The exercise of common sense, good judgment, and sound discretion is required in both the decision on whether a significant potential conflict exists and, if it does, the development of an appropriate means for resolving it. The two underlying principles are—
 
(a) Preventing the existence of conflicting roles that might bias a contractor’s judgment; and
 
(b) Preventing unfair competitive advantage. In addition to the other situations described in this sub-part, an unfair competitive advantage exists where a contractor competing for award of any Federal contract possesses — Proprietary information that was obtained from a Government official without proper authorization; or  Source selection information (as defined in 2.101) that is relevant to the contract but is not available to all competitors, and such information as would assist that contractor in obtaining the contract.”

CONCLUSION AND RECOMMENDATIONS

If a potential for a conflict of interest is real, it is best to make that fact a principal factor in your bid/no bid decision.

If you feel the risk could be mitigated and an effective OCI management plan could be submitted as part of your proposal to the government then carefully establish how such practical matters as firewalls, OCI certifications and clearances at the individual worker level will be handled.

Keep careful records of all written certifications and commitments in the form of NDA's, Teaming Agreements and OCI Certifications and Disclosures.  Review them on a regular basis for renewal, expiration and in connection with bid/no bid decisions.

Be open and honest in your presentation of the facts to the government.  Your past performance rating will take a major hit if OCI is uncovered after award and you have not made full and open disclosure previously.

NOTE:  Comments at this post have been maintained from previous discussions on this topic at "Small to feds" in the interest of demonstrating the often complex nature of the OCI process.