Organizational Conflicts of Interest – Part 2: OCI in Bid Challenges | Sheppard Mullin Richter & Hampton LLP

Last month, we began our three-part series on Organizational Conflicts of Interest (“OCI”) with an article discussing the different types of OCI and how they can be mitigated. Now, in Part 2 of our series, we analyze how OCI arises in bid protests. First, we explain how the Government Accountability Office (“GAO”) and Court of Federal Claims (“COFC”) review OIC protests. Next, we look at scenarios where OIC protests were upheld, followed by a summary of OIC protest grounds that will (almost) always be denied. Finally, we conclude with a summary of the key points to consider when faced with an OCI issue that arises during an offer dispute.

How are ICOs reviewed in the context of bid protest?

To prevail on an OIC protest pitch, the protester must identify “hard facts” that indicate the existence or potential existence of a conflict. A mere inference or suspicion of a real or apparent conflict is not sufficient. Once it has been determined that an actual or potential BEC exists, the protester is not required to demonstrate harm; on the contrary, the harm caused by the conflict is presumed to occur.

In addition, the COFC and GAO give considerable deference to contracting officers in their assessment of OIC concerns. Where an agency has given significant consideration to an OCI, either prior to award or as part of a protest alleging OCI concerns, GAO will not substitute its judgment for that of the agency in the matter. absence of “clear evidence” that the contractor’s conclusion as to whether an actual or potential existence of OCI is unreasonable.

When will an OCI offer challenge be upheld?

The COFC and the GAO had the opportunity to support numerous demonstrations raising the concerns of the OIC. Below, we look at three scenarios where OIC protest allegations can lead to a winning protest.

Inadequate OCI Investigations. As noted above, contracting officers have broad discretion in assessing whether a bidder’s proposal presents an actual or potential OCI. Accordingly, the COFC and GAO generally defer to the findings of the OIC’s evaluation of the contracting officer. However, where the Contracting Officer has failed to address an actual or potential OIC concern for which the protester has demonstrated “hard facts”, or where the Contracting Officer’s consideration of such OIC concern is unreasonable, the COFC and GAO will support a protest challenging the Contracting Officer’s OCI findings. So, for example, in Jacobs Technology, Inc. v. United States, 100 fed. Cl. 198 (2011), the COFC supported a protest where the contracting officer’s refusal to conduct a more detailed analysis of the OIC, despite being advised of the existence of a eventual OCI, was arbitrary and capricious. Likewise, in Serco, Inc.B-419617.2, B-419617.3, December 6, 2021, CPD ¶ 382, ​​GAO supported a protest in which the contracting officer unreasonably relied on contractor personnel’s representations regarding their lack of access to non-public and competitively relevant information when these claims were inconsistent with the documents on file, including emails demonstrating that these employees did have access to this information.

Acceptance of an inadequate mitigation plan. As discussed in our last article in this series, contractors can often avoid potential OIC pitfalls by preparing and submitting a detailed OIC mitigation plan with their proposal. But where such a mitigation plan fails to adequately address an actual or potential OIC concern, the bargaining agent’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 a BEC mitigation plan that consisted primarily of employee statements from only part of the personnel who had access to non-public, competitively relevant information and undated nondisclosure agreements that appeared to have been executed months after recipient personnel had access to this information. Likewise, in C2C Solutions, Inc., B-401106.5, January 25, 2010, 2010 CPD ¶ 38, GAO supported a protest where the contracting officer approved a mitigation plan that lacked the level of detail necessary to reasonably assess the viability of the approach to contractor mitigation. In this case, the OCI plan identified three potential approaches to mitigating 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 SocietyB-297342, 2006 CPD ¶ 1, the GAO concluded that the performance of tasks by a contractor protected by a firewall was unlikely to mitigate an “impaired objectivity” OCI because the tasks to be performed under of the contract were so interdependent that it would have been difficult to identify in advance the tasks likely to create an OCI.

Irrevocable OICs. Sometimes, despite a contractor’s best efforts to establish a thorough mitigation approach, an attribution still cannot be made due to the presence of an OCI which, by its nature, cannot be mitigated. For example, FAR 9.505-1 prohibits a contractor who provides systems engineering and technical direction of a system from being awarded the contract to supply the system or any of its major components. Otherwise, these contractors would be complying with the very requirement they helped the procuring organization develop, creating a ground-rule biased OCI that cannot be avoided by a mitigation plan. If an agency were to nevertheless proceed with the award of the contract to such a contractor and not waive the OIC, this would be grounds for upholding a protest challenging the award as violating applicable procurement legislation. .

An example of irrecoverable OCI was presented in Aetna Government Health Plans, Inc.B-254397 et al., July 27, 1995, 95-2 CPD ¶ 129. In this case, the GAO found that a recipient’s proposed use of a subcontractor whose subsidiary was responsible for evaluating proposals for the agency. sourcing created a significant impairment of OCI objectivity that could not be mitigated. Although the GAO declined to adopt a in itself approach as to the types of OCI that cannot be mitigated, the GAO nevertheless explained that “[t]FAR recognizes… that some organizational conflicts of interest cannot be mitigated. Because the awardee’s proposed subcontractor presented such an irrefutable OCI, the GAO supported a protest challenging the award.

When will an OCI offer dispute be declined?

Given the high standard of review applicable to agency assessments of OCI, most OCI protests are dismissed 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 assessment was unreasonable. But even beyond these hurdles, there are certain scenarios where OIC protest claims are likely to be denied, whether or not the protester provides evidence to support their claims. Three of these scenarios are examined below.

Industrial spying. While access to non-public information may give rise to an OCI, it does so only if the information is obtained in the performance of a government contract. So, for example, in GEO Group c. United States, 100 fed. Cl. 223 (2011), the COFC held that a protester could not sustain an allegation of unequal access to OIC information when the offeror’s access to competitively useful information resulted because “an individual [took] information about his former employer to his new employer” and not the performance of a government contract.

OIC derogations. Even where an actual or potential OCI exists 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 interest of the government.” FAR 9.503 requires that the OCI waiver (1) be in writing, (2) state the extent of the conflict, and (3) be approved by the agency head or designate not lower than the level of head of a contracted activity. If these three conditions are met, an agency’s waiver decision will be confirmed. So, for example, in Steel Point Solutions, LLCB-419709.3, December 21, 2021, 2022 CPD ¶ 14, GAO dismissed a protester’s challenge to an agency’s decision to waive OCI potentially affecting a decision when the protester did not allege that the waiver of the agency did not comply with the requirements of FAR 9.503.

Untimely events. Finally, even when a protester has a valid OCI reason for protest, that protest will be rejected if the protester has not raised it in time. In this regard, 4 CFR § 21.2(a) contains strict timeliness rules for raising an OCI cause of protest before the GAO. For example, if the OIC concern was or should have been apparent to the protester in view of the solicitation, then to raise a timely protest challenging that concern, the protester must file it with the GAO by the deadline of receipt of proposals. While 4 CFR § 21.2(a) does not apply to the COFC, protests alleging OIC concerns may need to be filed in this forum prior to the Proposal Receipt Deadline as well as under what is known as the Blue and gold fleet waiver rule. This rule has been applied in Inserso Corp. vs. United States961 F.3d 1343 (Fed. Cir. 2020), where the Federal Circuit ruled that a protester could not continue their unequal access to information OIC allegations after attribution because the protester knew or would have should have known that the agency would be disclosing non-public information to its competitors before the deadline for receipt of proposals based on “[t]the law and the facts” at your fingertips. (Be sure to check out our blog post on Insertion for a detailed discussion of this case and what it means to bring the protests to the COFC in time!)

Conclusion

OCI grounds for protest are generally likely to succeed when the contracting officer conducts an inadequate OCI investigation or accepts a manifestly flawed OCI mitigation plan. On the other hand, OIC grounds for protest are more likely to be denied when they are based on mere suspicion of conflict, when the agency has conducted a thorough investigation of the OIC, or when the OIC has been waived in accordance with the applicable provisions of the FARs. In all cases, bidders and successful bidders should consult their government contracting attorney immediately when a BEC concern arises to ensure that they can maximize their chances of success in the event of a protest. Please see our next article on OCI, where we discuss the risks of liability under the False Claims Act arising from undisclosed OCI.

Aubrey L. Morgan