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Organizational Conflicts of Interests – Part 2: OCIs in Bid Protests

Last month, we began our three-part series on organizational conflicts of interests (“OCIs”) with an article discussing the different types of OCIs and how they can be mitigated. Now, in Part 2 of our series, we analyze how OCIs arise in bid protests. First, we explain how the Government Accountability Office (“GAO”) and the Court of Federal Claims (“COFC”) review OCI protests. Then, we examine scenarios where OCI protests have been sustained, followed by a synopsis of OCI protest grounds that (almost) always will be denied. Finally, we conclude with a summary of key points to consider when faced with an OCI issue that arises during a bid protest.

How are OCIs Reviewed in the Bid Protest Context?

To prevail on an OCI protest ground, the protester must identify “hard facts” that indicate the existence or potential existence of a conflict. A mere inference or suspicion of an actual or apparent conflict is not enough. Once it has been determined that an actual or potential OCI exists, the protester is not required to demonstrate prejudice; rather, harm from the conflict is presumed to occur.

In addition, both the COFC and GAO afford considerable deference to Contracting Officers in their evaluation of OCI concerns. Where an agency has given meaningful consideration to an OCI, either before award or in connection with a protest alleging OCI concerns, the GAO will not substitute its judgment for that of the agency absent “clear evidence” that the Contracting Officer’s conclusion as to whether an actual or potential OCI exists is unreasonable.

When will an OCI Bid Protest be Sustained?

The COFC and GAO have had occasion to sustain numerous protests raising OCI concerns. Below, we examine three scenarios where OCI protest allegations can lead to a winning protest.

Inadequate OCI investigationsAs discussed above, Contracting Officers are given broad discretion in evaluating whether an offeror’s proposal presents an actual or potential OCI. As a result, the COFC and GAO ordinarily defer to the Contracting Officer’s OCI evaluation findings. However, where the Contracting Officer failed to consider an actual or potential OCI concern for which the protester has demonstrated “hard facts,”, or where the Contracting Officer’s consideration of that OCI concern is unreasonable, the COFC and GAO will sustain a protest challenging the Contracting Officer’s OCI findings. Thus, for example, in Jacobs Technology, Inc. v. United States, 100 Fed. Cl. 198 (2011), the COFC sustained a protest where the Contracting Officer’s refusal to conduct a more detailed OCI analysis, despite being on notice of the existence of a potential OCI, was arbitrary and capricious. Similarly, in Serco, Inc., B-419617.2, B-419617.3, Dec. 6, 2021, CPD ¶ 382, the GAO sustained a protest where the Contracting Officer unreasonably relied upon declarations from the contractor’s personnel about their lack of access to nonpublic, competitively useful information when those assertions were inconsistent with documents provided in the record, including emails demonstrating that these employees did, in fact, have access to such information.

Acceptance of an inadequate mitigation planAs discussed in our last article of this series, oftentimes contractors can avoid potential OCI pitfalls by preparing and submitting a detailed OCI mitigation plan with their proposal. But when such a mitigation plan fails to adequately address an actual or potential OCI concern, the Contracting Officer’s acceptance of the offeror’s proposal renders the award invalid. This is what happened in Netstar-1 Government Consulting, Inc. v. United States, 101 Fed. Cl. 511 (2011), where the COFC was highly critical of the Contracting Officer’s approval of an OCI mitigation plan that consisted primarily of employee declarations from only some of the personnel who had access to competitively useful, nonpublic information and undated nondisclosure agreements that appeared to have been executed months after the awardee’s personnel had obtained access to such information. Similarly, in C2C Solutions, Inc., B-401106.5, Jan. 25, 2010, 2010 CPD ¶ 38, the GAO sustained a protest where the Contracting Officer approved a mitigation plan that lacked the necessary level of detail to reasonably assess the viability of the contractor’s mitigation approach. The OCI plan in that case identified three potential approaches to mitigate an OCI but did not explain how the strategies would work or when they would be implemented. As another example, in Alion Science and Technology Corporation, B-297342, 2006 CPD ¶ 1, the GAO concluded that the performance of tasks by a firewalled subcontractor was unlikely to mitigate an “impaired objectivity” OCI because the tasks to be performed under the contract were so interrelated that it would have been difficult to identify in advance those tasks that would be likely to create an OCI.

Unmitigable OCIsSometimes, despite a contractor’s best efforts to establish a thorough mitigation approach, an award still cannot be made because of the presence of an OCI that, by its nature, cannot be mitigated. For example, FAR 9.505-1 prohibits a contractor that provides systems engineering and technical direction for a system from receiving the contract to supply the system or any of its major components. Otherwise, these contractors would be delivering the very requirement they helped the procuring agency develop, thereby creating a biased grounds rules OCI that cannot be avoided through a mitigation plan. If an agency were to nonetheless proceed with awarding the contract to such a contractor, and also fail to waive the OCI, then that would be grounds for sustainment of a protest challenging the award as violative of applicable procurement law.

An example of an unmitigable OCI was presented in Aetna Government Health Plans, Inc., B-254397 et al., Jul. 27, 1995, 95-2 CPD ¶ 129. In that case, the GAO found that an awardee’s proposed use of a subcontractor whose affiliate was tasked with evaluating proposals for the procuring agency created a significant impaired objectivity OCI that could not be mitigated. While the GAO declined to adopt a per se approach as to which kinds of OCIs cannot be mitigated, the GAO nonetheless explained that “[t]he FAR recognizes … that some organizational conflicts of interest cannot be mitigated.” Because the awardee’s proposed subcontractor presented such an unmitigable OCI, the GAO sustained a protest challenging the award.

When will an OCI Bid Protest be Denied?

Given the high standard of review applicable to agency evaluations of OCIs, most OCI protests are denied simply because the protester is unable to demonstrate the “hard facts” necessary to establish the existence or potential existence of an OCI, or the “clear evidence” required to show that the Contracting Officer’s OCI evaluation was unreasonable. But even beyond these hurdles, there are certain scenarios where OCI protest allegations likely will be denied, regardless of whether the protester provides evidence to support its allegations. Three such scenarios are examined below. 

Corporate espionageWhile access to nonpublic information can give rise to an OCI, it only does so if the information is obtained during the performance of a government contract. So, for example, in GEO Group v. United States, 100 Fed. Cl. 223 (2011), the COFC held that a protester could not maintain an unequal access to information OCI allegation where the offeror’s access to competitively useful information resulted because “an individual [took] information about his former employer to his new employer” and not from the performance of a government contract. 

OCI waiversEven when an actual or potential OCI does exist and cannot be mitigated, FAR 9.503 permits an agency to waive the OCI rules when their “application in a particular situation would not be in the Government’s interest.” FAR 9.503 requires that the OCI waiver (1) must be in writing, (2) shall set forth the extent of the conflict, and (3) be approved by the agency head or a designee not below the level of head of a contracting activity. Provided these three requirements are met, an agency’s waiver decision will be upheld. Thus, for example, in Steel Point Solutions, LLC, B-419709.3, Dec. 21, 2021, 2022 CPD ¶ 14, the GAO denied a protester’s challenge of an agency’s decision to waive OCIs potentially affecting an award where the protester did not allege that the agency’s waiver failed to comply with the requirements of FAR 9.503.

Untimely protestsFinally, even when a protester has a valid OCI protest ground, that protest will be dismissed if the protester failed to raise it in time. In this regard, 4 C.F.R. § 21.2(a) contains strict timeliness rules for raising an OCI protest ground before the GAO. For example, if the OCI concern was or should have been apparent to the protester from the face of the solicitation, then to raise a timely protest challenging that concern, the protester must file it with the GAO before the deadline for receipt of proposals. While 4 C.F.R. § 21.2(a) does not apply to the COFC, protests alleging OCI concerns may need to be filed in that forum before the deadline for receipt of proposals as well under what is known as the Blue & Gold Fleet waiver rule. This rule was applied in Inserso Corp. v. United States, 961 F.3d 1343 (Fed. Cir. 2020), where the Federal Circuit held a protester could not pursue its unequal access to information OCI allegations post-award because the protester knew or should have known the agency would disclose nonpublic information to its competitors before the deadline for receipt of proposals based on “[t]he law and facts” at hand. (Make sure to check our blog article on Inserso for a detailed discussion of that case and what it means for bringing protests in time at the COFC!) 

Conclusion

OCI protest grounds are mostly likely to succeed where the contracting officer conducts an inadequate OCI investigation or accepts an obviously defective OCI mitigation plan. On the other hand, OCI protests grounds are most likely to be denied where they are based on mere suspicion of a conflict, where the agency has conducted a thorough OCI investigation, or where the OCI has been waived in accordance with applicable FAR provisions. In all cases, offerors and awardees should consult with their government contracts counsel immediately when an OCI concern arises to ensure they can maximize their chances of success in the event of a protest. Please look out for our next installment about OCIs, where we address the risks of False Claims Act liability arising from undisclosed OCIs.

Copyright © 2022, Sheppard Mullin Richter & Hampton LLP.National Law Review, Volume XII, Number 271
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About this Author

Anne Bluth Perry, Investigations & International Trade Attorney, Sheppard Mullin
Partner

Anne B. Perry is a partner and former co-chair of the Government Contracts, Investigations & International Trade Practice Group in the firm's Washington, D.C. office. 

Areas of Practice

Ms. Perry concentrates in the areas of Government Contracts law and litigation and is a lecturer and author in the area.  Her broad experience in Government Contracts includes, for example: bid protests before the U.S. General Accounting Office, and the United States Court of Federal Claims; complex litigation in connection with the False Claims Act; claims litigation...

202-218-6875
Keith R. Szeliga, government contracts attorney, Sheppard Mullin, law firm
Associate

Keith R. Szeliga is an associate in the Government Contracts & Regulated Industries Practice Group of the firm's Washington, D.C. office.

Mr. Szeliga has broad experience in Government contracts matters, including bid protests, claims and appeals, compliance reviews, and internal investigations. He has advised clients ranging from small businesses to some of the nation's largest defense contractors regarding the full spectrum of statutes and regulations applicable to Government contractors, including, for example, matters relating to...

202-218-0003
Adam A. Bartolanzo, Sheppard Mullins, government contracts litigation, FAR Counsil

Adam A. Bartolanzo is an attorney in the Government Contracts, Investigations & International Trade Practice Group in the firm’s Washington, D.C. office.

Mr. Bartolanzo’s practice focuses on government contracts litigation and counseling. His experience includes advising clients on small business set asides, assisting contract termination appeals, performing transactional due diligence specific to government contractors’ needs, and assessing client compliance with the FAR and other regulations.  He has represented both plaintiffs and...

202-747-2643
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