This article is an excerpt from the 2023 edition of The Art of Tendering: A Global Due Diligence Guide.
In its December 2021 decision in Serco Inc., the U.S. Government Accountability Office (GAO) determined that a winning bidder’s improper access to inside information about a competing bidder created the appearance of unfair advantage and tainted the resulting contract award. The dispute dealt with a Department of the Navy Request for Proposals (RFP) for professional support services. The incumbent complainant, Serco Inc. (Serco), alleged that Booz Allen Hamilton, Inc. (BAH) had “gained an unfair competitive advantage in preparing its proposal by using information provided by former high-level agency officials.”
Serco asserted that BAH’s proposal “reflected its access to non-public, competitively useful information gained through BAH’s multiple communications with agency personnel”. More specifically, Serco claimed that two former government employees “actively and materially participated in the preparation of BAH’s proposal shortly after they retired from the Navy” and that the individuals in question “had virtually unlimited access to comprehensive and detailed non-public information regarding Serco’s: costs, staffing, technical approach, and past performance.”
More specifically, Serco alleged that those individuals “had access to Serco’s proprietary information including the burdened and unburdened labor rates, names, positions, and number of hours worked, for each employee who had performed under the prior task order.” Serco asserted that this information “formed the basis for BAH’s approach to drafting and pricing its proposal in a manner that led the agency to conclude that BAH’s ‘significantly lower’ cost/price and technical superiority offered the best value to the agency.”
While the government argued that the information in question was not competitively useful and created no actual unfair advantage, the GAO upheld the protest due to the appearance of unfair advantage. Citing prior rulings, the GAO stated that “where it can be demonstrated that a former government official had access to competitively useful information, the awardee will be found to have benefited from that information if the former government official participated in the proposal preparation effort.” The GAO cautioned that where a bidder “chooses to hire a former government official who has had recent access to competitively useful information and uses that official to help prepare the offeror’s proposal, the proposal may be properly disqualified based on the appearance of an unfair competitive advantage.”
As the GAO concluded, the government had no reasonable basis to determine that the information was not competitively useful or that BAH had no unfair competitive advantage in using that information to prepare its proposal. In fact, the GAO noted that the former government officials “were recruited and hired–either before or shortly after leaving government employment–by BAH’s subcontractors to assist in BAH’s proposal preparation efforts” and that the “record does not provide any indication that BAH or its subcontractors placed limitations on the scope of the information they provided.”
In fact, the GAO determined that the government was unreasonable in relying on the assertions of the former employees, who claimed to have had limited involvement in preparing the proposal, since “the declarations of both individuals are inconsistent with documents provided in the record.” The GAO ordered the government to disqualify BAH’s proposal or initiate other acts to avoid, neutralize, or mitigate the potential impact of the disclosed information and seek revised proposals.
As this case illustrates, to guard against the appearance of unfair advantage, purchasing institutions should establish proactive protocols to preclude bids from bidding teams that include former employees who had access to sensitive inside information. While those former employees may be free to participate on other bids, they should be recused from participating in bids submitted to their former employers. Purchasing institutions and bidders who fail to proactively implement these recusal protocols do so at their peril.
