Government Contracts Monitor

If You See Smoke, Check for Fire

November 18, 2014

Given the FAR 9.103(b) mandate that “no purchase or award shall be made unless the contracting officer makes an affirmative determination of responsibility,” FCi Federal, Inc. (FCi) was surprised when the Department of Homeland Security (DHS) awarded a $210 million contract to FCi’s competitor, USIS PSD. Why? Because the award came after a flurry of media reports containing allegations of fraud and False Claims Act violations by USIS PSD’s parent company, USIS, LLC on an Office of Personnel Management (OPM) contract. Faced with this disconnect, FCi did the smart thing and protested the award to USIS PSD. B-408558.4, October 2014.

Given the allegations reported in the media, FCi doubted that the contracting officer (CO) fully considered all the required elements when she determined that USIS PSD was responsible. FCi also apparently knew that, while the GAO generally does not review affirmative determinations of responsibility by a contracting officer, it will make an exception where “the protester presents specific evidence that the CO may have ignored information that, by its nature, would be expected to have a strong bearing on whether the awardee should be found responsible.” Though FCi likely did not know the extent of the relationship between the parent and subsidiary described in USIS PDF’s proposal, it did know the solicitation provided that the agency would consider the past performance of a parent if the parent would be “substantially involved in performance” of the contract. Fortunately for FCi, the agency record provided in response to the protest revealed that the only rationale listed on the CO’s Determination of Prospective Contractor Responsibility Form to support the finding of “satisfactory” responsibility was “Past Performance Eval/EPLS.”

With no other information to review, the GAO found it “necessary to consider the [CO’s] post hoc explanations offered on the record in response to a protest in order to determine whether there is specific evidence that the [CO] may have ignored information that, by its nature, would be expected to have a strong bearing on whether the awardee should be found responsible.” The GAO went so far as to conduct a hearing – where the CO’s explanations left no doubt that FCi’s protest assertions were correct: the CO “lacked the facts necessary to make an informed decision about, and thus failed to adequately consider, the specific allegations of fraudulent activity made by the media and the DOJ.”

Specifically, the hearing testimony showed that although the CO had knowledge of the allegations of fraud (through media reports) and was aware the DOJ had joined the qui tam action, she failed (i) to read DOJ’s civil complaint for details regarding the allegations (ii) to ask for any information from USIS PSD or USIS LLC regarding the alleged fraud (iii) to discuss the allegations with anyone at OPM or (iv) to seek information from the suspension and debarment officials.

In its proposal, USIS PSD touted its close relationship with USIS LLC and promised it would operate “as one entity with its parent” (to take advantage of the latter’s past performance). Despite this representation, the CO never recognized the need to consider the allegations of fraud against USIS LLC in connection with her determination of USIS PSD’s responsibility.

And that wasn’t all that went wrong. As her testimony revealed, the CO misunderstood the applicable legal standard for determining responsibility. She thought she lacked authority to find a contractor non-responsible in the absence of a suspension or debarment, reasoning that such a finding would act as a de facto debarment without due process, something she considered inappropriate “under the standard of ‘innocent until proven guilty in a court of law.’” On the contrary, however, “a contractor is presumed non-responsible until the contracting officer affirmatively finds that there is information clearly indicating that the offeror is responsible.” FAR § 9.103(b).

For all these reasons, the GAO found the CO’s affirmative determination of responsibility unreasonable and sustained the protest.

FCi was not afraid to act on its reasonable belief that the CO had not done her job with respect to USIS PSA’s responsibility determination. The lesson? You don’t need to wait for certainty. If there’s enough smoke that it’s reasonable to believe there’s fire, protest and see if you can confirm your belief.