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

By John Chierichella

As many of you know, we frequently write on the topic of organizational conflicts of interests ("OCIs"). Several years ago, one of our partners, Keith Szeliga, published what remains the most comprehensive and insightful article available on this topic. The article, entitled Conflict and Intrigue in Government Contracts: A Contractor's Guide to Identifying and Mitigating Organizational Conflicts of Interest, has now been cited in three Court of Federal Claims opinions. Most recently, in Netstar-1 Government Consulting, Inc. v. United States, Judge Allegra cited Mr. Szeliga's article with approval no less than six times.
 

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By Keith Szeliga and Anne Perry

On April 26, 2011, the Department of Defense (“DoD”), General Services Administration (“GSA”), and National Aeronautics and Space administration (“NASA”) published a proposed rule to amend the Federal Acquisition Regulation (“FAR”) coverage of organizational conflicts of interest (“OCIs”). See 76 Fed. Reg. 23236 (Apr. 26, 2011). In addition to transferring the regulatory coverage of OCIs from FAR Part 9, “Contractor Qualifications,” to FAR Part 3, “Improper Business Practices and Personal Conflicts of Interest,” the proposed rule departs from existing FAR coverage of OCIs, as well as longstanding Government Accountability Office (“GAO”) precedent, in several important respects. Comments on the proposed rule are due by June 27, 2011.
 

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By Anne B. Perry and Jessica M. Madon
 

On July 16, 2010, the Court of Federal Claims (“COFC”) determined that a Government Accountability Office (“GAO”) bid protest recommendation that an awardee, Turner Construction Co. (“Turner”), be disqualified on the basis of organizational conflicts of interest (“OCI”) under an Army Corps of Engineers (the “Army”) hospital renovation contract was irrational. See Turner Construction Co., Inc. v. United States, Fed. Cl., No. 10-195C, July 16, 2010. We previously discussed the implications of the GAO decision here.
 

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By Keith R. Szeliga

As the economy begins to recover, the number of corporate transactions between Government contractors no doubt will increase. If your company is positioned as a potential acquirer or a potential target, you should be aware of a recent Government Accountability Office (“GAO”) decision holding that entering into negotiations for a corporate transaction can give rise to an organizational conflict of interest (“OCI”) well before, and potentially whether or not, the transaction actually occurs. See McCarthy/Hunt, JV, B-402229, Feb. 16, 2010, 2010 CPD ¶ 69.
 

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By John S. Tobey

On April 22, 2010 the Defense Acquisition Regulation Council proposed to amend the Defense Acquisition Regulation Supplement (“DFARS”) to provide uniform guidance and tighten existing requirements for organizational conflicts of interest (“OCIs”) by contractors in major defense acquisition programs.  See 75 Fed. Reg. 20,954 (April 22, 2010). The proposed rule implements section 207 of the Weapons System Acquisition Reform Act of 2009 (the “Act”) (Pub. L. 111-23), which directs the Secretary of Defense to revise the DFARS to provide both uniform guidance and tighten existing requirements related to OCIs to ensure that advice from contractors comes from sources that are objective and unbiased. The Act also authorizes limited exceptions to ensure that the DoD has continued access to highly qualified contractors.
 

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The Government Accountability Office (“GAO”) denies more than three quarters of all bid protests decided on the merits. Certain categories of protests, however, tend to be more successful than others. 

Three of our Government Contracts lawyers – Keith Szeliga, Marko Kipa, and Daniel Marcinak – recently published an article that assists protestors in identifying such allegations. Among other things, the article analyzes the most common categories of successful bid protest grounds and describes the circumstances under which each ground is likely to prevail. With permission of Briefing Papers, the article is reproduced in full in this issue of our blog. 

Click here to view a PDF copy of the article.

Authored by:

Keith R. Szeliga

(202) 218-0003

kszeliga@sheppardmullin.com

and

Marko W. Kipa

(202) 772-5302

mkipa@sheppardmullin.com

and

Daniel J. Marcinak

202) 772-5391

dmarcinak@sheppardmullin.com

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In AT&T Government Solutions, Inc., B-400216, Aug. 28, 2008, the GAO sustained a protest on the grounds that the Navy improperly excluded the protestor from the competitive range based upon an appearance of an organizational conflict of interest (OCI).  This case is significant because, among other things, it appears to be the first time the GAO has sustained a protest based on an agency's failure to consider a protestor's OCI mitigation plan prior to excluding that protestor from a procurement.  The case also stands for the proposition that the appearance of an OCI, standing alone, does not constitute a valid basis for excluding an offeror from a procurement.

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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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• 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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The Court of Federal Claims’ recent decision in Axiom Resource Management v. United States, 2007 WL 2840414 (Sept. 28, 2007), illustrates the trend toward more robust judicial review of organizational conflict of interest (OCI) allegations. The case also highlights several issues contractors should consider in drafting successful OCI mitigation plans.

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