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."
In its initial decision in Axiom, 2007 WL 2840414 (Sept. 28, 2007) ("Axiom I"), the court found:
(1) That Lockheed Martin Federal Healthcare’s (LMFH’s) performance of a Task Order for program management support services for the TRICARE Acquisition Directorate would create "impaired objectivity" and "unequal access to information" OCIs;
(2) That the Contracting Officer failed to identify and mitigate LMFH’s OCIs; and
(3) That LMFH’s OCI mitigation plan was inadequate because it expressed a "policy" rather than an enforceable contract requirement.
See Axiom Research Management v. United States: Judicial Scrutiny of Organizational Conflicts of Interest Intensifies (Oct. 30, 2007). The court sustained the protest, but concluded that it lacked sufficient information regarding the public interest to craft an appropriate remedy. Accordingly, the court ordered supplemental briefing with respect to whether LMFH should be required to divest existing contracts if the award were allowed to stand and whether LMFH’s mitigation efforts would be sufficient to address the company’s OCIs.
Award of Limited Injunctive Relief
In Axiom II, the court allowed LMFH to continue performing the base period of the Task Order, but enjoined the TRICARE Management Agency (TMA) from exercising options for additional periods of performance.
In applying the traditional four-factor test for injunctive relief, the court concluded that Axiom had succeeded on the merits and would suffer irreparable harm if injunctive relief were not granted. The court acknowledged that the balance of hardships disfavored injunctive relief, reasoning that an injunction would "interfere to some degree" with TMA’s ability to obtain the program management services required under the Task Order and noting that LMFH had been performing the contract for more than six months. On the other hand, the court concluded that the public interest in "ensuring that the ultimate awardee presents no potential or actual conflicts of interest" required the award of limited injunctive relief. The court explained, as it had in sustaining Axiom’s protest, that establishing the parameters for the use of proprietary information is critical to maintaining competition in government contracting. The court further observed that LMFH’s OCIs were exacerbated by the fact that Lockheed Martin currently is one of the largest government contractors in the country.
Rather than setting aside the entire award, the court issued an order prohibiting TMA from exercising any of its options under the Task Order. The court reasoned that such tailored relief would address LMFH’s OCIs while also allowing TMA ample time to re-solicit the Task Order.
Consideration of Judicial Oversight
The relief ultimately awarded by the court is unremarkable. But the relief the court nearly awarded – and concluded it had the authority to award – is nothing short of extraordinary. Specifically, the court stated that its preferred remedy would have been to allow continued performance of the contract subject to the oversight of TMA’s administration of LMFH’s OCI mitigation plan by a court appointed auditor.
During a conference with the court, LMFH had indicated its willingness to incorporate the terms of its proposed mitigation plan into a contract modification so that the plan would be enforceable. The court was amenable to this proposal, but expressed doubt that TMA would enforce compliance with the terms of the plan. "Given the fact that the CO repeatedly failed properly to identify or mitigate the OCIs at issue in this case," the court reasoned, "the court has little confidence that the CO will identify and properly mitigate potential or actual OCIs in the future." Accordingly, the court issued an order for the parties to show cause why the court should not appoint the United States Army Audit Agency (USAAA) to submit annual compliance reports regarding TMA’s implementation and enforcement of LMFH’s proposed OCI mitigation plan.
The Government argued that the proposed order would exceed the court’s bid protest jurisdiction under the Tucker Act and divest the Contracting Officer of contract administration authority. The court rejected the Army’s first argument on the basis that the Tucker Act authorized the court, in a bid protest action, to "award any relief that the court considers proper." With respect to the Government’s second argument, the court reasoned that the court appointed auditor’s function would be to ensure compliance with the court’s order, not to interfere in the administration of LMFH’s Task Order.
Although the court concluded that it had the authority to appoint an independent auditor, it ultimately declined to do so. The sole basis for the court’s decision was the Government’s statement that it would prefer the court to set aside the award altogether rather than to appoint an independent auditor to oversee performance.
The court’s decision in Axiom II is significant in several respects.
First, the decision constitutes further evidence of the court’s willingness to second guess contracting officers’ judgments regarding OCIs. The court’s statement that it had "lost confidence" in the Contracting Officer’s ability to identify and mitigate future OCIs is particularly telling, as is the court’s suggestion that the Contracting Officer might intentionally decline to enforce LMFH’s OCI mitigation plan. In contrast to the general rule that Government employees are presumed to act in good faith, the court seems to have assumed that the Contracting Officer would be unable or unwilling to comply with his obligations under the FAR.
Second, the case illustrates the need for a contractor to prepare and implement an adequate OCI mitigation plan in the first instance. The court suggested that LMFH’s revised OCI mitigation plan would have been acceptable had it been incorporated into the Task Order from the outset. However, the Contracting Officer’s failure to identify and appropriately mitigate LMFH’s OCIs caused the court to lose confidence in the Contracting Officer’s ability to administer the plan. As a result, the court forced the Government to choose between the appointment of an independent auditor and an injunction curtailing performance of the Task Order. The mere possibility that the court will not provide the Government with a second chance to implement an adequate OCI mitigation plan, without judicial oversight, provides both the Government and contractors with a powerful incentive to ensure that they have identified and adequately mitigated all potential OCIs prior to contract award.
Third, and perhaps most significantly, Axiom II advances an extraordinarily expansive view of the types of relief that may be awarded in bid protest cases. The opinion suggests that the court would have considered setting aside the award to LMFH – at a later date – if the independent auditor’s report indicated that the Contracting Officer had not properly implemented and enforced LMFH’s proposed mitigation plan. In essence, the court indicated that it would have been willing to award a downstream bid protest remedy if the contractor failed to comply, and if the agency failed to enforce, the terms of LMFH’s Task Order.
The potential consequences of the court’s view are sweeping. The logical conclusion of the court’s reasoning is that the Tucker Act allows the court to retain jurisdiction over a bid protest action to ensure that the awardee complies with any mandatory solicitation requirement. Based on the court’s rationale, for example, one might argue if the court sustained a protest based on the awardee’s failure to demonstrate compliance with a domestic preference clause, the court could retain jurisdiction to ensure that the contractor did not deliver noncompliant supplies, and set aside the contract years after award if it concluded that the awardee was not complying with the clause. Likewise, if a protestor were to establish that an agency unreasonably concluded that a contractor’s proposed technical solution would meet a mandatory solicitation requirement, then, based on the reasoning of Axiom II, it could ask the court to retain jurisdiction over the procurement to ensure that the awardee’s solution, as implemented, actually met that requirement. Whether the court ever would award such broad relief remains to be seen, but the court’s reasoning in Axiom II clearly leaves open such possibilities.