By: Paul Emanuelli
This article is an excerpt from the 2021 edition of The Art of Tendering: A Global Due Diligence Guide, which is available for purchase.
In its December 2019 decision in Inquiries, Inc., the U.S. Government Accountability Office (GAO) found that the government failed to properly enforce applicable organizational conflict of interest (OCI) rules when it awarded a contract to a service provider that required that service provider to assess its own performance for services provided under a prior ongoing contract. The dispute dealt with a solicitation for investigation and adjudication services for the Department of Defense. Those services included assessing ongoing work performed under a prior federal contract, under which the eventual winning bidder was already providing work. A competing bidder challenged the award, arguing that the winning bidder was precluded from being awarded the new work since that would create an OCI.
The GAO agreed, noting that OCI rules under the Federal Acquisition Regulation (FAR) recognize conflicts of interest in situations of biased ground rules, unequal access to information, or impaired objectivity created when contractors perform work under one contract that conflicts with their obligations under other existing contracts:
Organizational Conflicts of Interest
Inquiries argues that the award to iWorks was tainted by OCIs arising from prior and ongoing work performed by the awardee and its proposed subcontractor. The protester contends that the agency’s review of OCIs either failed to adequately address the potential significant conflicts or unreasonably concluded that they do not exist. For the reasons discussed below, we agree with the protester that the agency’s OCI analysis was unreasonable.
The FAR requires contracting officials to avoid, neutralize, or mitigate potential significant conflicts of interest so as to prevent an unfair competitive advantage or the existence of conflicting roles that might impair a contractor’s objectivity. FAR §§ 9.504(a), 9.505.
The situations in which OCIs arise, as described in FAR subpart 9.5 and the decisions of our Office, can be categorized into three groups: (1) biased ground rules; (2) unequal access to information; and (3) impaired objectivity.
A biased ground rules OCI exists where a firm, as part of its performance of a government contract, has in some sense set the ground rules for another government contract by, for example, writing the statement of work or the specifications. FAR §§ 9.505-1, 9.505-2; Systems Made Simple, Inc., B-412948.2, July 20, 2016, 2016 CPD ¶ 207 at 6. The primary concern in such cases is that the firm could skew the competition, whether intentionally or not, in favor of itself. Id.
An unequal access to information OCI exists where a firm has access to non-public information as part of its performance of a government contract, and where that information may provide the firm an unfair competitive advantage in a later competition for a government contract. FAR §§ 9.505(b), 9.505-4; Cyberdata Techs., Inc., B-411070 et al., May 1, 2015, 2015 CPD ¶ 150 at 6.
An impaired objectivity OCI arises where a firm’s ability to render impartial advice to the government would be undermined by the firm’s competing interests. FAR § 9.505(a); Diversified Collection Servs., Inc., B-406958.3, B-406958.4, Jan. 8, 2013, 2013 CPD ¶ 23 at 5-6.
As the GAO noted, the identification of conflicts of interest is a fact-specific exercise that requires considerable discretion on the part of government evaluators. Furthermore, those raising conflict allegations must meet the burden of proof in support of their allegations:
The identification of conflicts of interest is a fact-specific inquiry that requires the exercise of considerable discretion. Guident Techs., Inc., B-405112.3, June 4, 2012, 2012 CPD ¶ 166 at 7; see also Axiom Res. Mgmt., Inc. v. United States, 564 F.3d 1374, 1382 (Fed. Cir. 2009). A protester must identify hard facts that indicate the existence or potential existence of a conflict; mere inference or suspicion of an actual or potential conflict is not enough. TeleCommunication Sys. Inc., B-404496.3, Oct. 26, 2011, 2011 CPD ¶ 229 at 3-4. We review OCI investigations for reasonableness, and where an agency has given meaningful consideration to whether a significant conflict of interest exists, we will not substitute our judgment for the agency’s absent clear evidence that the agency’s conclusion is unreasonable. TISTA Sci. & Tech. Corp., Inc., B-408175.4, Dec. 30, 2013, 2014 CPD ¶ 17 at 6; TeleCommunication Sys., Inc., supra.
In considering the allegations, the GAO found that the complainant made its case in showing that the winning bidder fell into the impaired objectivity category of conflict due to the overlapping obligations under the different federal contracts, including prior work on the Defense Information System for Security (DISS). The GAO found that the government failed to properly identify those conflicts:
With regard to impaired objectivity, Inquiries argues that the award to iWorks gives rise to OCIs in two areas: (1) Xcelerate’s work under the DVD PMO task order creates conflicts with its work under the VROC/CAF contract; and (2) iWorks’ performance of the VROC/CAF contract will be affected by its prior work on DISS. Protester’s Comments, Nov. 7, 2019, at 30, 32. Here, we agree with the protester that the contracting officer’s analysis did not meaningfully consider whether the award to iWorks will give rise to impaired objectivity OCIs.
Our Office has explained that the concern associated with impaired objectivity situations is that a firm’s ability to render impartial advice to the government will be undermined by its relationship to the product or service being evaluated. PURVIS Sys., Inc., B-293807.3, B-293807.4, Aug. 16, 2004, 2004 CPD ¶ 177 at 7. The fact that the agency retains final approval or decision-making authority does not absolve the agency of assessing whether a conflict can arise; in this regard, the FAR requires the agency to consider whether a contractor’s advice to the government might be tainted by conflicting interests or obligations. Nortel Gov’t Solutions., Inc., B-299522.5, B-299522.6, Dec. 30, 2008, 2009 CPD ¶10 at 6-7; Johnson Controls World Servs., Inc., B-286714.2, Feb. 13, 2001, 2001 CPD ¶ 20 at 12. Where, for example, an agency found a firm is only “participating” in certain activities, as opposed to having final responsibility for those efforts, we concluded that this did not excuse the agency from considering whether the awardee might have an impaired objectivity OCI. Booz Allen Hamilton, Inc.–Costs, B-414822.4, May 7, 2018, 2018 CPD ¶ 183 at 8.
The GAO concluded that the government failed to explain how the conflict arising out of the winning bidder’s prior work on the DISS system, under which contractors under the new contract would have to perform related work, would be mitigated. The GAO rejected the government’s argument that there was no actual conflict since the winning contractor’s recommendations under the new contract would have to be approved by contract managers before being implemented:
We agree with the protester that the agency’s OCI analysis relies on unsupported conclusions. Specifically, the agency does not reasonably explain why the fact that other agencies also use DISS avoids an impaired objectivity OCI, here. To the extent iWorks has an OCI arising from its performance of the VROC/CAF contract and its prior work on the DISS, that conflict would affect the advice received by DSS–regardless of whether other agencies also use DISS. Additionally, as explained above, the fact that agency officials must approve recommendations made by iWorks under the VROC/CAF contract does not inherently mitigate the risk that the advice received by the agency from the awardee could be biased. The purpose of an OCI review is to determine whether a firm’s advice to the government would be impaired by conflicting duties or interests. See PURVIS Sys., Inc., supra.
Here, iWorks has a requirement to provide business process analysis advice directly to the DVD about the specific tasks iWorks is performing using the system it developed. We conclude that the contracting officer’s blanket reliance on the requirement that changes must be approved by government personnel does not reasonably show that the contracting officer gave meaningful consideration to the risk of impaired objectivity OCIs.
In sum, we conclude that the contracting officer’s OCI analysis did not meaningfully or reasonably consider the significant potential impaired objectivity OCIs identified by the protester because it did not provide adequate details concerning the information reviewed and because the analyses relied on unreasonable assumptions concerning mitigating effects on potential bias arising from the contractor’s conflicting obligations. We therefore sustain the protest.
In finding a potential impaired objectivity conflict of interest, the GAO ordered the government to conduct a re-evaluation consistent with its ruling and, if the new evaluation found a conflict that could not be mitigated, ordered that the contract award in question be revoked. As this case illustrates, conflicts of interest that impair a contractor’s ability to objectively perform new work due to prior or ongoing work under other contracts can potentially taint the defensibility of contract award decisions.
