Surprisingly, we get this question every once in awhile here at AAP.
Note: this question was submitted some time ago, hoping an answer is still being requested... for the benefit of other readers.
There is nothing in the Federal Acquisition Regulations which prohibits a Contracting Officer from acting as a project manager. There are rules restricing a contracting officer from performing certain accounting, finance, and payment functions, but that is beyond the scope of this question. However, most federal agencies do have policies on segration/separation of duties for internal control purposes.
In the event a contracting officer is also acting a project officer, the rules and requirements of FAR part 3 and FAR part 24 would still apply. One area that might be of concern is evaluating contractor performance and performing inspection and acceptance functions. But if you think about it, that is something the contracting officer is actually delegating to other members of the acquisition team (COR, PM, etc.), so they have every right to do it (see FAR 1.602-1(a)). But we can also see where in some instances this scenario may provide poor optics.