Establishment; Appointment of Director

(a) Establishment.—

There is established an executive agency to be known as the Office of Government Ethics

(b) Director.—

There shall be at the head of the Office of Government Ethics a Director (herein referred to as the "Director"), who shall be appointed by the President, by and with the advice and consent of the Senate. Effective with respect to any individual appointed or reappointed by the President as Director on or after October 1, 1983, the term of serice of the Director shall be 5 years. 

(c) Authority of Director. —The Director may—

(1) appoint officers and employees, including attorneys, in accordance with chapter 51 and subchapter III of chapter 53 of this title; and

(2) contract for financial and administrative services (including those related to budget and accounting, financial reporting, personnel, and procurement) with the General Services Administration, or such other Federal agency as the Director determines appropriate, for which payment shall be made in advance, or by reimbursement, from funds of the Office of Government Ethics in such amounts as may be agreed upon by the Director and the head of the agency providing such services. 

Contract authority under paragraph (2) shall be effective for any fiscal year only to the extent that appropriations are available for that purpose.

The regulation of government contractors presents a dilemma for the evolution of public ethics regimes. While the value and variety of government activities performed by contractors have grown substantially over recent decades, rules governing financial conflicts of interests and other ethics concerns have yet to adapt this new state of affairs. As a result, contractors may increasingly be found in roles traditionally performed by civil servants without being subject to the same ethics safeguards. While especially pronounced in the US, this mismatch in the regulation of government con- tractors and public servants is also an issue in the UK and in other jurisdictions.

As highlighted below, many of the very reasons that drive governments to outsource to contractors – added flexibility, reduced costs achieved by competitive bidding, the temporary nature of the work, and the ability to adapt the structures and incentives to suit the task at hand – make it difficult to extend the existing public ethics framework to these individuals. This article reviews the current state of government contractor ethics regulations in the US, highlights certain problems inherent in the design of these rules, and suggests areas for further investigation. In doing so, we also suggest that the extension of the US federal ethics rules to government contractors may speak to the need for more fundamental changes in public ethics architecture so as to reflect the dynamic nature of the modern public workforce.

Current US ethics regulation of government employees and contractors

In the US, federal executive branch ethics regulation of individuals is based principally on their status as employees, whether full-time or part- time. Full-time employees of the federal government are required to make periodic financial disclosures and are subject to prohibitions or limitations with the possibility of criminal sanctions for conflicts of interest, earning outside income, the receipt of gifts, and the use of non-public in- formation among others. The basic rules are tailored for special cases, for example, certain political appointees and other designated office-holders are subject to additional limitations, including a one- to two-year ‘cooling off’ period restricting post-employment conduct in the private sector, while part-time Special Government Employees (SGEs) are more lightly regulated, notably by being permitted to hold outside employment. However, all employees of the government are otherwise still subject to many ethics restrictions, including a prohibition on direct conflicts of interest and acting on non-public information.

In contrast, government contractors fall entirely outside of most executive branch ethics rules, with certain limited and targeted exceptions. The general provisions of the Ethics in Government Act of 1978, as amended, the cornerstone of federal ethics regulation, do not apply to contractors because they are not ‘federal employees’. There are certain executive branch departments and agencies where the distinction is not so stark – for example, a statute specially applies executive branch ethics laws to contractors of the Federal Deposit Insurance Corporation (FDIC). In addition, a conflict of interest rule contained in the Federal Acquisition Regulations (FAR) prohibits ‘organizational conflicts’ by contractors involved in the procurement process. On the whole, however, a large number of government contractor employees are not actually covered by government ethics rules, including contractors whose work responsibilities make them at times indistinguishable from government employees within the same agencies.

US law attempts to draw a sharp line by prohibiting the outsourcing of ‘inherently governmental functions’(IGFs) to contractors. However, the demand for expert personnel and the difficulty of precisely defining an IGF have diluted this distinction in practice. As a consequence of this state of affairs, individuals in a position to influence key decisions have been later revealed to have had conflicts of interest that would have disqualified their participation were it not for their con- tractor status. For example, Treasury Department contractor Dan Jester act- ed as a key negotiator in the 2008 bail- out of AIG despite having substantial holdings in Goldman Sachs exposed to AIG’s potential default. Similarly, retired Admiral Dennis Blair was president of the federally-financed defense think tank that recommended continuation of the F-22 jet fighter programme while simultaneously a board member of a major subcontractor to the F-22 programme.

Spurred by these and other controversies, some commentators advocate expanding existing ethics rules to cover contractors, or at least to those contractors that perform IGFs or are ‘personal services’ contractors employed within federal agencies. Other proposals would integrate ethics in the procurement process, using a mix of contractual and regulatory tools to induce compliance. In 2011, the Administrative Conference of the United States (ACUS), an independent federal agency dedicated to regulatory reform, proposed that model language prohibiting conflicts of interest and misuse of non-public information be added to the Federal Acquisition Regulation (FAR) for procurement officers to adopt on a voluntary basis. In a similar vein, in 2014 the UK Committee for Standards in Public Life (CSPL) recommended that providers of public services be required to undertake to uphold public ethics principles as part of the contracting process, that the adequacy of contractor ethics controls be covered in certain public audits, and that identification and management of contractor ethics be made a core element in government procurement personnel training.

Obstacles in the design of contractor ethics and possible solutions

Extending existing ethics rules to cover government contracts would seem to be the most straightforward solution to the problem. However, certain features of government contracting make it more difficult to apply the basic principles of government ethics regulation to contractors than to traditional executive branch employees. Firstly, there is the inherent ‘two masters’ problem that US ethics rules were originally created to address.

Because contractors work for a private employer at the same time they are providing service to the federal government by definition, conflict of interest and outside employment rules cannot be applied to contractors without significant carve-outs. Secondly, there is challenge of creating meaningful, administrable distinctions that can be adapted to the diverse and changing worker roles, contract structures, and provider types that engage in government contracting, from custodial services firms to individuals advising high level policymakers. In other words, because the category of government contractors encompasses a variety of arrangements, from quasi-employees to one-off consultants, a single set of ethics rules is unlikely to be successful. Thirdly, the reliance on status-based categories defined by traditional employment law factors of ‘control’ means that a contractor’s ethics obligations do not change regardless of the substance or nature of the work. The focus on control may perversely create incentives to insulate contract work from agency management, even where ethics risk factors such as the worker’s responsibility, access, or discretionary authority would dictate closer supervision. Collectively, these issues make the regulation of government contractor ethics resistant to an easy solution.

Developing a regulatory structure that might address these problems requires that policymakers first agree on what the chief aim and method of regulating contractor ethics ought to be. On the one hand, ethics rules seek to prevent distortions in government decisions that could result if contractors act in furtherance of their own interests, or that of their employer’s, instead of the public interest.

At the same time, these rules aim to preserve government legitimacy by avoiding the appearance of conflict that could lead to the perception of self-dealing or other violations of norms, even if no actual conflict exists. In the design of the system, policymakers need to consider whether to prioritize substantive equality between the ethics standards applied to public employees and contractors, or instead to focus on outcome efficacy, if not equality. Those concerned more about avoiding an ‘appearance’ of substantial conflicts and therefore indirectly concerned with public perception of legitimacy might favour the former; contractor rules need to be equally tough to avoid the perception that contracting offers a public ethics loop- hole. Those concerned more about preventing policy distortion might opt for a set of controls on contractors that, while they may look and operate differently from the rules for public servants, have a similar effect in deterring abuse.

Inspiration for new models may be found in restructuring within the professional services sector, as firms in consulting, accounting, and other industries that have lessened the emphasis on hierarchy to focus on the types of services that each worker provides to clients. Contractor ethics might also feature a shift towards activity-based compliance requirements, such as are common in securities regulation. Under this approach, ethical standards would attach to certain functions and contractual obligations – for example, involvement in procurement or providing advice to a decisionmaker – regardless of whether the work is executed by a contractor or an employee.

While this may be most logical from an ethics standpoint, designing and applying activity-based definitions with respect to the wide range of government functions would present a daunting administrative burden, and new offices or agencies would then need to be created that would have the resources and authority needed to monitor compliance and sanction failures.

Regardless of the approach taken, there is a need to assemble more comprehensive data about the number of workers employed as government contractors, the roles that they occupy within agencies, the limits placed on their activities, and the specific conflict issues that arise in those circumstances. For those agencies that have adopted ethics certifications, it would be also valuable to examine the resulting contractor policies and practices to assess what the burdens and benefits of these compliance practices have been, if any. Finally, the regulatory community as a whole may take this problem as an opportunity to consider whether the distinctions between categories of service providers that have driven government ethics rules in the past need to be re-imagined to better match the reality of the modern public sector.

Conflict of Interest— Status of an Informal Presidential Advisor as "Special Government Employee"

A question has arisen as to whether Mr. A should be regarded as a special Government employee for purposes of the Federal conflict-of-interest laws. Generally, Mr. A advises the President almost daily, principally on an informal basis. This essentially personal relationship would not in itself result in Mr. A’s being a Government employee or special Government employee. However, as explained in the latter part of this memorandum, Mr. A should be designated as a special Government employee in connection with his work on a current social issue that is of concern to the Administration.

The term “employee” is not defined in the conflict-of-interest laws, but it was no doubt intended to contemplate an employer-employee relationship as that term is understood in other areas of the law. Perhaps the most obvious source of a definition under Federal law is in the civil service laws. For purposes of Title 5 of the United States Code, a person is regarded as an “officer” or “employee” of the United States if he or she (1) is appointed in the civil service by a Federal officer or employee; (2) is engaged in the performance of a Federal function under authority of law; and (3) is subject to the supervision of a Federal officer or employee while engaged in the duties of his or her position. See 5 U.S.C. §§2104, 2105. A review of our files and other available material reveals that variants of these same three factors have, in fact, been utilized in one context or another under the conflict-of-interest laws.

For example, the first criterion under the civil service test—that the person be appointed in the civil service 1—is analogous to the definition of the term “special Government employee” for purposes of the conflict-of-interest laws: an officer or employee “who is retained, designated, appointed, or employed” to perform duties not to exceed 130 out of the next 365 calendar days. 18 U.S.C. § 202(a). The quoted phrase connotes a formal relationship between the individual and the Government. See B. Manning, Federal Conflict of Interest Law, 27, 34 (1964). In the usual case, this formal relationship is based on an identifiable act of appointment. Id., However, an identifiable act of appointment may not be absolutely essential for an individual to be regarded as an officer or employee in a particular case where the parties omitted it for the purpose of avoiding the application of the conflict-of-interest laws or perhaps where there was a firm mutual understanding that a relatively formal relationship existed. We are not aware that Mr. A has been officially “retained, designated, appointed, or employed” as an adviser to the President or that there is any other basis for inferring a relatively formal relationship insofar as Mr. A’s advising the President is concerned.

The second criterion under the civil service laws is that the person be engaged in the performance of a Federal function under authority of law. It seems doubtful that Mr. A’s essentially personal advice on a wide variety of issues would be regarded as a Federal function under this test.

The third civil service factor—that the individual work under the supervision of a Federal officer or employee—is closely related to the second. It has been of importance in the conflict-of-interest area primarily in determining whether an individual is an independent contractor rather than an employee and therefore not subject to the conflict-of-interest laws. For example, if a person is hired to conduct a study using his own judgment and resources and then turn over the end product to the agency, he would probably be regarded as an independent contractor. On the other hand, if a person works on Government premises under the direction of Government personnel and performs work of a kind normally handled by Government employees, he is probably an employee. Manning, supra, at 32-33. The question is obviously one of degree, but the distinction between an employee and an independent contractor, based primarily on the element of supervision and the nature of the work, is well recognized in other areas of the law. See, e.g., United States v. Orleans, 425 U.S. 807 (1976) (tort claims); N LR B v. Hearst, 322 U.S. I ll (1944) (Labor). We have taken this same approach in the past under the conflict-of-interest laws. See also Manning, supra, at 32-33. Again, given the largely personal relationship between the President and Mr. A, apparently based on mutual respect rather than an assignment of duties, it seems doubtful that Mr. A ordinarily consults with the President under the latter’s supervision, 2 Appendix C to Chapter 735 o f the Federal Personnel Manual provides detailed guidelines for agencies to follow in appointing consultants and other temporary employees, principally to ensure that they are officially designated as special Government employees.

These guidelines of course reinforce the requirement of a formal relationship, direction, or control as that concept is applied in the conflict-of-interest and similar laws or engages in the type of work ordinarily performed by Government employees.

It is our conclusion, for the reasons given above, that Mr. A does not have to be designated as a special Government employee and abide by the restrictions of the conflict-of-interest laws applicable to such employees solely by virtue of his informal consultations with the President.

The conclusion is, for the most part, consistent with the position of Professor Manning, a noted commentator on the conflict-of-interest laws: “One does not become an “employee of the United States” merely by voicing an opinion on government matters to a federal official at a cocktail party. The distinction may be shadowy in a particular case, and each situation must be judged on its own facts. Formalities can play an important part. In the ordinary situation, a person will not be considered to be a consultant-employee if he does not bear a formal appointment, is not enrolled on the personnel roster of the relevant agency, has no government personnel file in his name, and has not been sworn in or signed the customary oath of a government employee. Other factors that might be relevant can be conjectured. Is the person’s advice solicited frequently? Is it sought by one official, who may be a personal friend, or impersonally by a number of persons in a government agency that needs expert counsel? Do meetings take place during office hours? Are they conducted in the government office, and does, perhaps, the adviser maintain a desk or working materials in government facilities? Manning, supra, at 29-30.”

This conclusion is also consistent with the prior position of this Office. By letter dated April 10, 1968, we advised the Acting Director of the Office of Foreign Direct Investments in the Department of Commerce that if he were to turn on occasion to a single expense or a group of such experts for informal advice on a particular regulation or policy, that would not make the experts “employees” for conflict-of-interest purposes.

As mentioned earlier, Mr. A speaks with the President almost every day by telephone, and these discussions cover a wide range of policy issues. The passage just quoted from Professor Manning’s book and our 1968 memorandum both appear to attach some significance to the frequency of consultation. But we do not believe the mere fact that Mr. A speaks with the President on a regular basis in itself alters the fundamentally personal nature of the relationship that is apparently involved here, just as Mrs. Carter would not be regarded as a special Government employee solely on the ground that she may discuss governmental matters with the President on a daily basis.

Mr. A, however, seems to have departed from his usual role of an informal adviser to the President in connection with his recent work on a current social issue. Mr. A has called and chaired a number of meetings that were attended by employees of various agencies, in relation to this work, and he has assumed considerable responsibility for coordinating the Administration’s activities in that particular area. Mr. A is quite clearly engaging in a governmental function when he performs these duties, and he presumably is working under the direction or supervision of the President. For this reason, Mr. A should be designated as a special Government employee for purposes of this work— assuming that a good faith estimate can be made that he will perform official duties relating to that work for no more than 130 out of the next 365 consecutive days. If he is expected to perform these services for more than 130 days, he should be regarded as a regular employee. In either case, he should be formally appointed and take an oath of office. This formal designation would not necessarily affect the conclusion that Mr. A’s other consultations with the President are of a personal rather than official nature. Should Mr. A assume governmental responsibilities in other areas, as he has done with his work on the above project, he should be regarded as a Government employee for these other purposes as well.

John M. Harmon

Acting Assistant Attorney General

Office of  Legal Counsel

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3110. Employment of Relatives; Restrictions

(a) For the purpose of this section

(1) "agency" means-

(A) an Executive agency;

(B) an office, agency, or other establishment in the legislative branch;

(C) an office, agency, or other establishment in the judicial branch; and

(D) the government of the District of Columbia;

(2) "public official" means an officer (including the President and a Member of Congress), a member of the uniformed service, an employee and any other individual, in whom is vested the authority by law, rule, or regulation, or to whom the authority has been delegated, to appoint, employ, promote, or advance individuals, or to recommend individuals for appointment, employment, promotion, or advancement in connection with employment in an agency; and

(3) "relative" means, with respect to a public official, an individual who is related to the public official as father, mother, son, daughter, brother, sister, uncle, aunt, first cousin, nephew, niece, husband, wife, father-in-law, mother-in-law, son-in-law, daughter-in-law, brother-in-law, sister-in-law, stepfather, stepmother, stepson, stepdaughter, stepbrother, stepsister, half brother, or half sister.

(b) A public official may not appoint, employ, promote, advance, or advocate for appointment, employment, promotion, or advancement, in or to a civilian position in the agency in which he is serving or over which he exercises jurisdiction or control any individual who is a relative of the public official. An individual may not be appointed, employed, promoted, or advanced in or to a civilian position in an agency if such appointment, employment, promotion, or advancement has been advocated by a public official, serving in or exercising jurisdiction or control over the agency, who is a relative of the individual.

(c) An individual appointed, employed, promoted, or advanced in violation of this section is not entitled to pay, and money may not be paid from the Treasury as pay to an individual so appointed, employed, promoted, or advanced.

(d) The Office of Personnel Management may prescribe regulations authorizing the temporary employment, in the event of emergencies resulting from natural disasters or similar unforeseen events or circumstances, of individuals whose employment would otherwise be prohibited by this section.

(e) This section shall not be construed to prohibit the appointment of an individual who is a preference eligible in any case in which the passing over of that individual on a certificate of eligibles furnished under section 3317(a) of this title will result in the selection for appointment of an individual who is not a preference eligible.

(Added Pub. L. 90–206, title II, §221(a), Dec. 16, 1967, 81 Stat. 640 ; amended Pub. L. 95–454, title IX, §906(a)(2), Oct. 13, 1978, 92 Stat. 1224 .)

E.O. 14158, issued Jan. 20, 2025, purported to create the Department of Government Efficiency. The legal status of DOGE and its various components has been the subject of debate. DOGE was terminated in Novermber 2025, about 8 months prior to its scheduled termination date. See Rozen, "Exclusive: DOE 'Doesn't Exist' With Eight Months Left on Its Charter," Reuters, Nov. 24, 2025.

"DOGE teams" are mentioned in E.O. 14158. DOGE teams usually consisted of personnel from outside the Federal government. The typical DOGE team included four individuals, including one lawyer.

DOGE operated through DOGE teams. DOGE teams contacted various Federal agencies and took actions within those agencies, including accessing computer systems, requesting information and taking personnel actions. Some of these actions were challenged in Federal court.