Government Contracts Monitor
Organizational Conflicts of Interests Cannot be Based on “Suspicion and Innuendo”
September 6, 2011
By: Lindsay Simmons
The U.S. Court of Appeals for the Federal Circuit recently affirmed the Court of Federal Claims’ (CFC’s) decision regarding an organizational conflict of interest (OCI). In Turner Construction Co., Inc. v. United States, 2010-5146 (July 14, 2011), Turner had been awarded a construction contract by the Army that was protested based on alleged OCIs arising from merger discussions between Turner’s design partner, EB, and the parent of the Army’s design company for the project, AECOM.
The protest was initially granted by the GAO and, based on this decision, the Army terminated Turner’s contract. Turner then filed a protest with the CFC, in which the CFC (i) concluded that the Army’s decision to adopt the GAO’s recommendation was “arbitrary and capricious” and (ii) restored the contract to Turner. An appeal followed.
The issue before the Appeals Court was whether Turner’s design partner, EB, had a relationship with AECOM that gave the Turner/EB team a competitive advantage over the other bidders and, therefore, whether the Contracting Officer (CO) failed to exercise proper discretion in determining that no OCI existed. The Appeals Court upheld the decision of the CFC.
GAO concluded that AECOM had special knowledge of the Army’s requirements that it could have provided to Turner/EB and, if provided, would have given that team an unfair advantage. According to the Court of Appeals, the CFC was correct in finding that “GAO’s conclusory, three-page analysis of whether an unequal access OCI existed focused on the potential for access to nonpublic information, rather than on whether AECOM or EB personnel actually obtained access to competitively useful, nonpublic information” and, therefore, was irrational. The CFC’s rejection of GAO’s finding of biased ground rules – AECOM, by setting procurement ground rules, had special knowledge of the Army’s requirements that could have skewed the competition in favor of the Turner/EB team – was also upheld. On both OCI issues the Court of Appeals agreed with the CFC’s judgment that the “GAO [] relied on mere suspicion or innuendo rather than indentifying hard facts showing an appearance of impropriety” and ignored the CO’s extensive fact-specific post-award investigation and report.