United States: Organizational Conflicts Of Interest (Post-Award Protest Primer #13)

Last Updated: January 8 2018
Article by Daniel E. Chudd and James A. Tucker

Today we'll consider Organizational Conflicts of Interest (OCIs) as a ground of protest. The Federal Acquisition Regulation (FAR) defines an OCI as a situation where "because of other activities or relationships with other persons, a person is unable or potentially unable to render impartial assistance or advice to the Government, or the person's objectivity in performing the contract work is or might be otherwise impaired, or a person has an unfair competitive advantage." FAR 2.101. An entire subpart of the FAR (9.5) currently addresses OCIs. The FAR Councils issued proposed amendments to the OCI regulations nearly seven years ago, 76 Fed. Reg. 23,236 (Apr. 26, 2011), but those changes appear to be stuck in limbo and unlikely to be finalized any time soon.

Put simply, an OCI may occur when a firm's performance of one government contract may compromise its ability to perform another government contract or to compete for it in a fair way. The GAO's case law identifies three basic kinds of OCIs:

  1. Impaired Objectivity: Certain government contracts require the contractor to give objective advice or recommendations to the Government. A contract may, for example, require the contractor to inspect goods or services provided to the Government by other contractors, or evaluate competitive proposals. Or a contract may require the contractor to analyze prospective or existing programs and make recommendations to the Government concerning them. An impaired objectivity OCI may arise if the contractor could be called upon to evaluate goods or services provided by itself or an affiliate, or to make recommendations concerning programs where its own financial interest is at stake – thus potentially compromising the objectivity of the advice the Government has paid for.
  2. Biased Ground Rules: Certain government contracts require the contractor to develop requirements, including statements of work, that may find their way into future competitive procurements. A biased ground rules OCI may arise if, after developing requirements for a new acquisition, the contractor or its affiliate then competes for the resulting contract. The concern here is that a firm may (even subconsciously) skew a competition by writing requirements that favor itself.
  3. Unequal Access to Information: As a result of performing a government contract, a firm sometimes acquires nonpublic, source selection sensitive information, or the proprietary information of other companies. This often occurs in technical assistance contracts, where a contractor assists in acquisition-related functions or systems engineering work related to other companies' systems. An unequal access OCI may arise if the contractor's competitive proposal personnel are not prevented from accessing competitively useful information that other firm personnel possess as a result of performing other contracts. Importantly, unequal access OCIs are not triggered by the superior knowledge that incumbents typically possess, short of Government-provided access to proprietary or nonpublic source selection sensitive information.

Agencies are required to consider actual or potential OCIs that may affect a procurement and, as early as possible in the acquisition process, take steps to neutralize, mitigate, or avoid all significant conflicts before contract award. FAR 9.504(a). GAO case law recognizes that an OCI may arise not only within the offeror itself, but also in relation to its affiliates or even teammates, as well as from former Government employees who may provide unequal access to information of the sort contemplated by the OCI regulations.

Of the three basic kinds of OCIs, unequal access OCIs are the easiest to mitigate. It is generally enough to set up and enforce a robust firewall to prevent any nonpublic information in the files or minds of the potentially conflicted personnel from crossing over to other parts of the company or its affiliates or teammates. Enterprise Info. Servs., B405152, Sept. 2, 2011, 2011 CPD ¶ 174; LEADS Corp., B292465, Sept. 26, 2003, 2003 CPD ¶ 197. Impaired objectivity OCIs also can be mitigated, and the GAO has found that the use of firewalled subcontractors may, under the right circumstances, be an effective mitigation method. See, e.g., Bus. Consulting Assocs., LLC, B-299758.2, Aug. 1, 2007, 2007 CPD ¶ 134 at 9 10; Alion Sci. & Tech. Corp., B-297022.4, B-297022.5, Sept. 26, 2006, 2006 CPD ¶ 146 at 10-11. Biased ground rules OCIs are the most difficult to mitigate, and some have suggested that biased ground rules OCIs are simply unmitigable.

As a protest ground at the GAO, OCIs generally are raised post-award, after an allegedly conflicted firm is selected for award. REEP, Inc., B-290688, Sept. 20, 2002, 2002 CPD ¶ 158 at 1-2. The exception to this rule is when a solicitation is issued on an unrestricted basis and the protester is on notice that (1) a competitor has an OCI and (2) the agency has determined that, notwithstanding the potential OCI, the competitor is eligible for award. Honeywell Tech. Solutions, Inc., B-400771; B-400771.2, Jan. 27, 2009, 2009 CPD ¶ 49 at 6-7. Under these exceptional circumstances, a protest is governed by the "solicitation impropriety" timeliness rules and must be filed by the date set for receipt of proposals. Id. at 7. (Note that, in at least one case, the Court of Federal Claims has apparently adopted an even stricter rule and held that, as long as a protester is aware that a conflicted competitor has shown an interest in a procurement, the protester must file a pre-award protest or waive the protest ground before the court.)

The flipside of the coin are protests challenging a protester's exclusion from award because of OCI concerns, which are governed by the ordinary 10-day timeliness rule. Much of the information in this post applies to both kinds of protests, but we will focus our discussion on protests alleging that an awardee is conflicted. (Where the terms of a solicitation exclude participation by certain firms, any protest must be brought before the date set for receipt of proposals.)

The first hurdle in making an OCI allegation is grounding the protest in "hard facts" rather than "mere innuendo." See TeleCommunication Sys. Inc., B-404496.3, Oct. 26, 2011, 2011 CPD ¶ 229 at 3-4. Concretely, that means explaining in some degree of detail how the competitor received unequal access to information, or will be put in a position of impaired objectivity, or had the opportunity to bias the ground rules of the competition in its own favor. This in itself is a steep hill to climb, but once an OCI is demonstrated, the protester is afforded a rebuttable presumption of prejudice, without a need to demonstrate that the OCI actually advantaged the awardee. See McCarthy/Hunt JV, B-402229.2, Feb. 16, 2010, 2010 CPD ¶ 68 at 10; Health Net Fed. Servs., LLC, B-401652.3, B-401652.5, Nov. 4, 2009, 2009 CPD ¶ 220 at 28.

The greater challenge in OCI protests (whether one is arguing for or against an OCI) is overcoming the deference due to an agency's determinations. The success of an OCI protest depends largely on the reasonableness of the agency's documented OCI investigation. As long as the contracting officer has meaningfully considered a potential OCI and made a reasonable determination regarding whether a significant OCI exists, or has been adequately avoided, neutralized, or mitigated (or waived in accordance with regulations), the GAO will not second-guess the agency. This includes agency determinations that were made even during the pendency of a protest. See, e.g., PCCP Constructors, JV; Bechtel Infrastructure Corp., B-405036 et al., Aug. 4, 2011, 2011 CPD ¶ 156 at 16. That, too, is a fact-intensive inquiry, subject to the rule of reason: As long as the contracting officer's documented rationale underlying the OCI determination is not wholly irrational, the agency wins.

Although the deck is stacked heavily in an agency's favor in OCI protests, the GAO continues to find OCI protests to sustain, and agencies continue to take corrective action based upon OCI allegations. With the continued growth of service contracting – particularly where contractors perform advisory services, services closely associated with inherently governmental functions, and services requiring them to receive proprietary or source selection sensitive information – OCIs are a minefield for the unwary, contractor and Government alike.

Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Morrison & Foerster LLP. All rights reserved

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Daniel E. Chudd
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement

    Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of www.mondaq.com

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

    Disclaimer

    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

    Registration

    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

    Cookies

    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

    Links

    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

    Mail-A-Friend

    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

    Emails

    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .

    Security

    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at enquiries@mondaq.com.

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions