FAR 3.1103—Procedures.
Plain-English Summary
FAR 3.1103 sets out the operating procedures for preventing personal conflicts of interest when contractor employees perform acquisition functions closely associated with inherently governmental functions. It explains what the contractor must do under the mandatory clause at 52.203-16, including screening covered employees, collecting and updating disclosures of financial interests, family interests, outside employment, prospective employment, gifts, and travel, and preventing employees from working on tasks where a conflict cannot be satisfactorily mitigated. It also requires contractors to prohibit misuse of non-public information, obtain signed nondisclosure agreements, inform employees of their obligations, maintain oversight, discipline noncompliance, and report violations to the contracting officer with corrective-action follow-up. The section then describes the contracting officer’s role when a violation is reported: review the contractor’s response, decide whether the violation has been satisfactorily resolved, and take further action with agency legal counsel if needed. In practice, this section is the day-to-day compliance framework for managing personal conflict risk in sensitive support contracts, and it is intended to protect procurement integrity, public trust, and the fairness of acquisition decisions.
Key Rules
Screen covered employees
Contractors must have procedures to screen employees performing covered work for potential personal conflicts of interest. This starts with collecting a disclosure of relevant financial interests, family and household interests, outside employment or business relationships, and gifts, including travel, when the employee is first assigned.
Update disclosures promptly
Employees must update their disclosure statements whenever their personal or financial circumstances change in a way that could create a new conflict. The contractor must maintain these disclosures as part of an ongoing monitoring process, not just a one-time onboarding step.
Prevent unmitigable conflicts
A contractor may not assign or allow a covered employee to perform a task if the contractor has identified a personal conflict that cannot be satisfactorily prevented or mitigated in consultation with the contracting agency. The rule requires active conflict management, not mere disclosure.
Protect non-public information
Covered employees must be prohibited from using non-public information obtained through contract performance for personal gain. Contractors must also obtain a signed nondisclosure agreement to prevent unauthorized disclosure of that information.
Inform employees of duties
Contractors must tell covered employees about their obligations to disclose and prevent conflicts, avoid using non-public information for personal gain, and avoid even the appearance of a personal conflict of interest. Training and written policies are the practical tools for meeting this requirement.
Maintain oversight and discipline
Contractors must maintain effective oversight to verify compliance with conflict-of-interest safeguards and must take appropriate disciplinary action when employees fail to comply. This means the contractor needs monitoring, enforcement, and documentation, not just policy statements.
Report violations to CO
Any personal conflict-of-interest violation must be reported to the contracting officer as soon as it is identified. The report must describe the violation and the contractor’s proposed response, and follow-up reports must be provided as needed until corrective action is complete.
CO reviews contractor response
When a violation is reported, the contracting officer must review the contractor’s actions and decide whether the violation has been satisfactorily resolved. If not, the contracting officer must take appropriate action in consultation with agency legal counsel.
Responsibilities
Contracting Officer
Include the 52.203-16 clause when required; review contractor-reported personal conflict violations; determine whether the contractor’s corrective action satisfactorily resolves the issue; and, if not resolved, take appropriate action with agency legal counsel.
Contractor
Establish and maintain procedures to screen covered employees, collect and update disclosures, prevent unmitigable conflicts, prohibit misuse of non-public information, obtain nondisclosure agreements, inform employees of their obligations, oversee compliance, discipline violations, and report violations promptly to the contracting officer with follow-up corrective-action reports.
Covered Employee
Disclose relevant financial, family, employment, and gift/travel interests; update disclosures when circumstances change; avoid personal conflicts of interest; do not use non-public information for personal gain; comply with nondisclosure obligations; and follow contractor policies and training.
Contracting Agency
Consult with the contractor, as needed, on whether a conflict can be satisfactorily prevented or mitigated; and support the contracting officer in evaluating and responding to reported violations.
Agency Legal Counsel
Advise the contracting officer on appropriate actions when a reported violation has not been satisfactorily resolved.
Practical Implications
This section requires an active compliance program, not a paper policy. Contractors need onboarding questionnaires, periodic updates, training, oversight, and a documented escalation process for conflicts.
The biggest pitfall is treating disclosure as the end of the process. If a conflict is identified, the contractor must either mitigate it satisfactorily or remove the employee from the task.
Non-public information controls matter as much as financial conflicts. Contractors should use signed NDAs, access controls, and clear rules against personal use of sensitive information.
Reporting must be prompt and complete. A vague or delayed report to the contracting officer can create additional compliance risk and may undermine the contractor’s credibility.
Contracting officers should not assume the contractor’s internal discipline is enough. They must independently assess whether the violation has truly been resolved and involve legal counsel when further action is needed.
Official Regulatory Text
(a) By use of the contract clause at 52.203-16 , as prescribed at 3.1106 , the contracting officer shall require each contractor whose employees perform acquisition functions closely associated with inherently Government functions to- (1) Have procedures in place to screen covered employees for potential personal conflicts of interest by- (i) Obtaining and maintaining from each covered employee, when the employee is initially assigned to the task under the contract, a disclosure of interests that might be affected by the task to which the employee has been assigned, as follows: (A) Financial interests of the covered employee, of close family members, or of other members of the covered employee’s household. (B) Other employment or financial relationships of the covered employee (including seeking or negotiating for prospective employment or business). (C) Gifts, including travel; and (ii) Requiring each covered employee to update the disclosure statement whenever the employee’s personal or financial circumstances change in such a way that a new personal conflict of interest might occur because of the task the covered employee is performing. (2) For each covered employee- (i) Prevent personal conflicts of interest, including not assigning or allowing a covered employee to perform any task under the contract for which the Contractor has identified a personal conflict of interest for the employee that the Contractor or employee cannot satisfactorily prevent or mitigate in consultation with the contracting agency; (ii) Prohibit use of non-public information accessed through performance of a Government contract for personal gain; and (iii) Obtain a signed non-disclosure agreement to prohibit disclosure of non-public information accessed through performance of a Government contract. (3) Inform covered employees of their obligation- (i) To disclose and prevent personal conflicts of interest; (ii) Not to use non-public information accessed through performance of a Government contract for personal gain; and (iii) To avoid even the appearance of personal conflicts of interest; (4) Maintain effective oversight to verify compliance with personal conflict-of-interest safeguards; (5) Take appropriate disciplinary action in the case of covered employees who fail to comply with policies established pursuant to this section; and (6) Report to the contracting officer any personal conflict-of-interest violation by a covered employee as soon as identified. This report shall include a description of the violation and the proposed actions to be taken by the contractor in response to the violation, with follow-up reports of corrective actions taken, as necessary. (b) If a contractor reports a personal conflict-of-interest violation by a covered employee to the contracting officer in accordance with paragraph (b)(6) of the clause at 52.203-16 , Preventing Personal Conflicts of Interest, the contracting officer shall- (1) Review the actions taken by the contractor; (2) Determine whether any action taken by the contractor has resolved the violation satisfactorily; and (3) If the contracting officer determines that the contractor has not resolved the violation satisfactorily, take any appropriate action in consultation with agency legal counsel.