Government Contracts Monitor

Suspicions Alone Are Not Enough for an OCI at GAO

August 8, 2016

As government contractors gain experience and develop their skills, they often reap the hoped-for reward: more contracts. But when success comes in the form of future awards, contractors (and the agencies with which they consistently do business) must always be on the lookout for potential organizational conflicts of interest (OCI). Determining whether an OCI exists can be a tricky endeavor, as shown in the recent GAO decision in Millennium Corporation, Inc., B-412866; B-412866.2 (June 14, 2016), which held that the alleged OCI based on unequal access to information was instead just a permissible subcontractor’s incumbency advantage.

The procurement at issue was for a task order for support services for the Department of Veterans Affairs’ (VA) acquisition and contract administration office. Award was made on a best value basis, with technical capability as the most important factor, followed by past performance and price. The source selection authority determined that the awardee, Systems Technologies, Inc. (Systek), which received a technical rating of “good,” merited a price premium of 20% as compared to the protestor, Millenium Corporation, Inc. (Millenium), which had been rated merely “Acceptable.” Millenium protested the Agency’s rating of proposals and also alleged that Systek’s previous performance—as a subcontractor providing acquisition support to the VA—created an OCI, by giving Systek unequal access to information.

An unequal access to information OCI exists where a firm has access to nonpublic information as part of its performance of a government contract and that information may provide the firm a competitive advantage in a later competition for a government contract. FAR § 9.505(b). Here, Millenium argued based on Systek’s claims in its proposal that the awardee had a competitive advantage based on its access to non-competitive information. Systek had claimed that its experience as a subcontractor providing the identical support to the agency for the past two years gave it “a comprehensive understanding of [the] current VA business processes, tools, and reporting systems and the ability to access and integrate these assets to help [the agency] achieve its objectives.” According to Millenium, that essentially amounted to an admission of an OCI based on unequal access to information.

GAO disagreed and found that any potential benefit gained by Systek constituted no more than the standard incumbent advantage. As GAO noted, a protestor alleging an OCI must identify “hard facts” that indicate the existence or potential existence of a conflict. Mere suspicion and cries of foul play are simply not enough. Here, Millenium’s reliance on language from Systek’s proposal was held insufficient because the numerous examples in the record of the agency’s proactive efforts to avoid an OCI were deemed effective.

After recognizing at the outset of the procurement that previous support subcontractors might potentially have an OCI, the VA ensured that only government personnel worked on the procurement itself and prohibited contractors and subcontractors from playing any role in the process. The contracting officer also reviewed the contract log for the previous task order, which listed every acquisition package on which Systek had worked as a subcontractor, and confirmed that none of its work related to this acquisition. The CO also noted that, because Systek was an off-site subcontractor, its employees would not have overheard conversations relating ot the procurement.

GAO also found important the VA’s transparency in providing a wealth of information to every bidder, to include details about the tools that Systek cited in its proposal, an approach that neutralized any appearance of an OCI. In this regard, GAO reiterated that an unequal access OCI exists where an offeror has unfair access to nonpublic information that provides a competitive advantage. Here, the VA had attempted to mitigate any potential incumbency advantage by providing the following to all offerors: Q&As, the level of work effort based on expected acquisition packages, the Business Tracking Tool User Guide, and the Acquisition Package Development Guide.

Significantly, all these agency actions were adequately documented. As a result, the agency had actual evidence of its attempts to mitigate OCIs based on unfair access to information and Millenium was left with only its allegations – and no “hard facts” regarding specific nonpublic information to which Systek had unequal access. Based on these facts, GAO found that Systek’s advantage, if any, was simply a normally occurring incumbent advantage as a result of its prior performance as a subcontractor, something that, in and of itself, does not constitute preferential treatment by the agency.

Had the record been less complete, or had the VA been less proactive in its mitigation efforts, Millenium may have been able to demonstrate the existence of an actual or potential OCI. But it could only have done so if it had the requisite “hard facts.” In order to prevail on an OCI-based protest, a disappointed bidder must both have the necessary hard evidence in hand and hope that the agency does not have strong evidence of mitigation.