Since January of 2011, the GAO has issued 17 bid protest decisions (two of them in the past two months) that challenged the award of a government contract on the basis of an Organizational Conflict of Interest (OCI). A few of these cases are particularly noteworthy in that they demonstrate new trends in OCI enforcement.
In the case of PCCP Construction, JV and Bechtel Infrastructure Corporation, the GAO sustained one such bid protest despite a standard of review that demands considerable deference to agency determinations, overturning the award of a contract because the awardee was the beneficiary of an unfair competitive advantage. In the case of Nestar-1, the Court of Federal Claims increased scrutiny on contracts with potential for OCI, overturning the GAO determination that no OCI was present. In the case of VSE Corporation, the GAO may not have found reason to overturn the agency’s determination of “no OCI,” but still demonstrated its intent to apply a great deal of scrutiny to OCIs.
PCCP Constructors, JV and Bechtel Infrastructure Corporation
On August 4, 2011, the GAO issued a decision on the bid protest filed by PCCP Constructors, JV and Bechtel Infrastructure Corporation. The U.S. Army Corps of Engineers awarded a design-build contract for permanent canal closures and pumps along Lake Pontchartrain, Louisiana to CBY Engineers.
The protestors challenged the award, contending that CBY had an OCI and the Corps had failed to reasonably investigate or mitigate it. Specifically, the Army Corps’ Chief of Program Execution of the Hurricane Protection Office retired from his position as chief and, within a month, was employed as a project manager for CDM, a managing partner of CBY. CBY was in the midst of preparing its proposal for this project during the months when the Chief changed jobs.
The contracting officer investigated the possibility that an OCI existed as a result of the personnel overlap between the Army Corps and CBY. The CO prepared a Determination and Findings concluding that the Chief had “effectively removed himself from any involvement in this procurement,” and confirmed this finding in later revisions.
However, on review of the bid protest the GAO found that the agency’s contracting officer did not reasonably comply with the sections of the FAR governing OCIs. The CO’s determinations and findings focused on the Chief’s decision-making role in the agency and how it could have benefited his soon-to-be employer, overlooking the Chief’s access to non-public information, another important category of OCI. Further, the GAO found that the Chief had not removed himself from involvement in the procurement prior to his retirement.
Because the GAO must meet a very high standard of review (“reasonableness”) before it may overturn an agency’s determination regarding a potential OCI, even this one decision represents a high level of scrutiny applied to the process of evaluating OCIs. It demonstrates the GAO’s increased concern with unfair competitive advantages benefiting firms seeking to contract with the government/seeking to enter into procurement contracts with the government.
Netstar-1 and the Court of Federal Claims
In the summer of 2010, Netstar-1 and ALON submitted competing bids for a program management support services contract with the US Department of Homeland Security Immigration and Customs Enforcement Office (ICE). ALON was awarded the contract and Netstar was notified on September 15, 2010. Both Netstar-1 and ALON had performed similar contracts for ICE in the past.
Netstar-1 filed a bid protest on September 23, 2010, alleging that ALON had an OCI and should not have been awarded the contract because it used its previous connection to ICE, including proprietary information about the terms of Netstar-1’s previous contracts, to prepare its bid. ALON claimed that it did not gain any unfair advantage due to its access to this information because both firms had access to certain government databases.
The contracting officer analyzed ALON’s mitigation plans and determined, on the basis of ALON’s allegations about its own business practices, that ALON did not have an OCI because ALON claimed that certain personnel would not have had access to particular databases, and so would not use information improperly when preparing the bid. Netstar-1 filed two subsequent bid protests with the GAO, both of which were denied.
On May 11, 2011 Netstar-1 filed a complaint in court. In Netstar-1 Gov’t Consulting, Inc. v. United States, the United States Court of Federal Claims, reviewing a GAO bid protest decision, found that the “awardee had significant potential conflict of interest (OCI) from unequal access to information” and the “contracting officer’s (CO) delayed identification of potential OCI was unacceptable.”
The decision, in the eyes of one blogger, questioned “the [agency]’s lackadaisical attempt” to police impropriety,” and in so doing, called for a more rigorous and uniform process for identifying and mitigating contractor OCIs.
In 2011, the Army terminated a contract with VSE Corporation because it hired a former government project manager as a consultant to assist in preparing it’s proposal, creating an appearance of impropriety.
In it’s review of the termination, the GAO did not ultimately find that an OCI existed, but nevertheless demonstrated a capacity to focus intensely on the issue of OCIs. In this case, the only “hard fact” that the Contracting Officer was the fact that he kept his government laptop slightly longer after he stopped working then he had initially reported. Because there was little evidence to support the conclusion that the project managers’ employment with VSE created even the appearance of impropriety, the GAO recommended that the Army conduct another review of the matter and uncover some hard facts.
The GAO’s refusal to make a definitive determination until more concrete information was available reflects a strong commitment to improving the rules around OCIs in contracting, making them fairer, more concrete and easier to follow.
To learn more from the experts at Crowell and Moring about all aspects of OCI, take the following webinar: Organizational Conflicts of Interest (OCIs) and Personal Conflicts of Interest (PCIs) – New and Pending Rules