Lawmakers aim to strengthen transparency in the lucrative -- and murky -- federal contracting process

A bipartisan coalition of senators introduced legislation on Monday meant to improve transparency in the highly competitive and notoriously murky federal contracting process, taking aim at companies that accept lucrative work from government agencies without having to disclose potential conflicts of interest.

The bill, called the Preventing Organizational Conflicts of Interest in Federal Acquisition Act, would seek to mitigate conflict-of-interest concerns by forcing contractors to "disclose other parts of their business that conflict with the work they are bidding to perform for the government," according to Sen. Gary Peters, D-Mich., chairman of the Homeland Security and Governmental Affairs Committee.

"If we don't know whether [federal contractors] are serving other, potentially conflicting interests, we can't be confident that Americans are getting exactly what they pay for," said Sen. Chuck Grassley, R-Iowa, a cosponsor of the bill.

For many American companies, federal contracts represent a crucial source of revenue, as well as visibility and credibility. Firms from every major business sector compete for this work, and winners often execute their end of the agreement while pursuing outside business opportunities -- which sometime overlap with their federal contracts.

While existing rules stipulate that government agencies assess potential conflicts of interest before determining contract winners, watchdogs say the process remains opaque.

"Based on current federal contract regulations, agencies cannot always discern whether government contractors have business relationships with foreign governments and private entities that could create a conflict of interest," said Noah Bookbinder, president of the nonprofit government watchdog group Citizens for Responsibility and Ethics in Washington.

Scott Amey, general counsel for the government ethics watchdog Project on Government Oversight, warned that "without more guidance, organizational conflicts of interest can result in unfair competitive advantages and biased contract awards -- both of which compromise the impartiality of the federal government and the integrity of the contracting process."

In a press release announcing the new legislation, lawmakers cited reporting in ProPublica that raised conflict-of-interest questions about consulting giant McKinsey & Company's recent work for the Food and Drug Administration. ProPublica reported that in at least one FDA contract, McKinsey allegedly failed to disclose its conflicts of interest with corporate pharmaceutical clients despite its contract with the agency obligating the firm to do so.

According to documents obtained by ProPublica, McKinsey allegedly advised the FDA's drug-regulation division for more than a decade while simultaneously accepting work from major pharmaceutical companies. In some cases, according to ProPublica, McKinsey helped those clients navigate FDA regulations while advising the FDA on how to strengthen regulations for the pharmaceutical industry.

Sen. Maggie Hassan, D-N.H., said McKinsey's handling of its work with the FDA demonstrates "the danger that conflicts of interest can pose in government contracting."

"Our bipartisan bill would help ensure that companies that enter into a contract with the government are acting in the best interest of the American people," Hassan said.

McKinsey spokesperson Neil Grace told ABC News that McKinsey's consulting work with pharmaceutical companies "did not create a conflict of interest" for the firm's work with the FDA because it "has not advised the FDA on regulatory policy or on specific pharmaceutical products." Instead, said Grace, McKinsey's work for the agency "focused on administrative and operational topics, including improvements to organizational structures, business processes and technology."

"Given the absence of a conflict of interest, there was no requirement for any McKinsey disclosure," Grace said. "That said, McKinsey's proposals to the FDA frequently mentioned the company's and personnel's experience with the pharmaceutical industry, making the FDA aware of this aspect of McKinsey's work in the field."

Republican Senator Joni Ernst of Iowa joined Peters, Grassley, and Hassan in sponsoring the federal legislation.