Government Contracts Blog : Government Contracts Lawyer & Attorney : Sheppard Mullin Law Firm : Bids, Licenses, Awards, Conflict of Interest.

Disappointed bidders intent on protesting an allegedly improper contract award could pursue traditionally two avenues of potential relief.  They could file a post-award bid protest either:  (1) at the Government Accountability Office ("GAO") within 10 days of when they learned of the protest grounds (or, where competitive proposals were involved, within 10 days of the requested and required debriefing), or (2) at the United States Court of Federal Claims ("Court of Federal Claims" or "COFC"), constrained primarily by the Court’s 6-year statute of limitations.  While disappointed bidders may retain ultimately the discretion to choose the forum of their choice, protests at the Court of Federal Claims outside of the 10-day period after contract award (or after a requested and required debriefing) are in danger of becoming an artifact of the past.  This potential change to the post-award bid protest jurisdiction of the Court of Federal Claims is one that every contractor should be watching closely.

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The Court of Federal Claims' most recent decision in Axiom Resource Management v. United States, 2008 WL 541675 (Feb. 26, 2008) ("Axiom II"), suggests that extended judicial oversight of contract administration functions may be a viable bid protest remedy, particularly in the context of organizational conflicts of interest (OCIs).  The case also highlights the importance of preparing and implementing an OCI mitigation plan that will withstand rigorous judicial scrutiny, during the proposal phase, so that the Government's and the offeror's apparent front end indifference to the issue of OCIs does not jaundice the court's views with respect to their willingness or inclination rigorously to implement a mitigation plan to which they were dragged "kicking and screaming."

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On February 27, 2008, the Senate Judiciary Committee held hearings debating whether the civil False Claims Act, 31 U.S.C. §§ 3729-3733, should be expanded – potentially creating additional liability for companies receiving any government money, reducing the ability of any such company to defend itself against claims of fraud, and creating significant hurdles for companies in defending themselves against mere allegations of fraud by "whistleblowers" from the company and within the Government.  When the Department of Justice testified before the Committee, the DOJ indicated that it did not support the legislation as currently drafted, noting that there was "no pressing need" for changes to the FCA at this time despite the fact that the proposed legislation would provide greater opportunities for the DOJ to recover allegedly fraudulent payments to contractors.  The DOJ’s objections, however, which are outlined below, are limited in scope.

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A government contractor participating in an acquisition transaction must comply with both commercial and government-specific regulations. And there are numerous issues unique to government contractors that threaten a successful closing. If not identified or mitigated in a timely fashion, a contractor might unknowingly assume liabilities or fail to consummate the deal altogether. One issue involves the transfer of government contracts, which generally requires the government's consent, or a "novation." If the contractor does not novate the contract in accordance with designated rules, a buyer faces the possibility that its newly acquired contracts will be terminated for default. This could leave the contractor without the benefit of its bargain and with a "scarlet letter" on its record. While several exceptions to the general rule prohibiting the sale or transfer of government contracts have been carved-out in applicable regulations and case law, there are also structural alternatives available to the contractor that may not be so obvious. It is imperative that these options be considered and evaluated in order to attain the contractor's specific needs and expectations.

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Authored by:

Marko W. Kipa

(202) 772-5302

mkipa@sheppardmullin.com

and

Lucantonio Salvi

(202) 218-0004

lsalvi@sheppardmullin.com

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• Do understand the OCI rules and the different categories of OCIs.
• Do be particularly attuned to "impaired objectivity" OCIs.
• Do think broadly - OCIs are created at a company-wide level, not simply a division or sector level.
• Do consider the long-range business plan for a particular procurement; be aware that winning a small, preliminary award could create conflicts on a massive, future award.
• Do be aware of the potential restrictions on follow-on contracts that may accompany SETA work.
• Do not simply ignore an institutional competitive advantage when preparing a proposal.
• Do ensure that every proposal considers and, as required, implements an OCI mitigation plan.

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