REILLY'S FEDERAL PROCUREMENT LAW BLOG
An Introduction to Understanding the 3 Main Types of Organizational Conflicts of Interest in Federal Government Procurement & Contracts
What An Organizational Conflict of Interest Means and Why it Matters
A conflict of interest (COI) is a situation in which a person is involved in multiple interests (financial or otherwise), one of which could possibly corrupt the motivation of the individual.
An organizational conflict of interest (OCI) may exist in the same way especially when a corporation provides two types of service to the government. If these services conflict (for example manufacturing parts and also participating on a selection committee for parts manufacturers), an OCI may exist.
An OCI exists when work performed by a contractor on a federal contract:
(a) results in an unfair competitive advantage for the contractor; or
(b) impairs the contractor’s objectivity in performing federal contract work.
The responsibility for determining whether an actual or apparent OCI exists lies with a procuring agency’s Contracting Officer (“CO”). However, many OCI claims are raised by a contractor’s competitors in the form of a bid protest. A finding of an OCI can result in the contractor being found ineligible for award and may result in a host of other sanctions including suspension or debarment in particularly egregious cases.
From a bidding standpoint, it is important to understand OCIs for two important reasons:
First, if your company is found to have an OCI, you can be excluded from bidding or worse.
Second, if you believe an OCI has occured in a Solicitation, you may have grounds to file a bid protest.
Even sole-source Solicitations can be prime candidates for an OCI challenge. If successful, you may be able to level the playing field, get yourself into the competition and possibly even exclude the favored bidder from being considered for award.
Therefore, understanding the basics of OCIs is essential to a successful bidding strategy.
Although there are many types of OCIs, some of the more common include the following:
Biased Ground Rules OCIs:
One example of a Biased Ground Rule OCI is when a contractor is involved in the preparation of the specifications that form a significant basis upon which the Solicitation is awarded. This can happen for example in the construction arena when a project designer such as an A/E becomes aligned or affiliated with a proposed construction contractor.
According to the GAO, the appropriate test for a Biased Ground Rule OCI is "whether a firm was in a position to affect the competition, intentionally or not, in favor of itself". This is very important, because a Protestor does not bear the burden of proving that the offending conduct was intentional. Simply proving the existence of a Biased Ground Rule OCI can sometimes be sufficient to have a Bid Protest sustained.
Unequal Access to Information OCIs:
When a competitor improperly obtains confidential or proprietary cost pricing data, that competitor can and should be excluded from competition. Access to this data can be obtained through the transfer of personnel between bidders or even from the improper disclosure of cost data during a debriefing on a similar project. In some cases, a bidder may attempt to obtain cost pricing data through a FOIA request. If the government improperly discloses the data to a bidder, it is possible for that bidder to be disqualified if an Unequal Access to Information OCI challenge is filed. According to the GAO, there is a presumption of prejudice to competing offerors when an Unequal Access to Information OCI is found. The GAO has specifically ruled that an unfair competitive advantage is presumed if an offeror improperly possesses competitively useful non-public information that would assist that offeror in obtaining the contract. According to the GAO, an inquiry as to whether the information was actually used is uneccessary. What this means is that the Protestor does not have the burden of proof to show that the information actually provided any competitive advantage in efforts to obtain the procurement.
Impaired Objectivity OCIs:
An Impaired Objectivity OCI can occur when a bidder provides both services and related products to the government. When a bidder is placed in the position of servicing its own products, there is the potential that this type of arrangement can unduly influence acquisition decisions. This is especially possible when the bidder's involvement is tantamount to the performance of a self-evaluation. For example, if the bidder is awarded the contract to overhaul or repair products that it had previously manufactured, it can be inferred that such an arrangement could be improper in some cases. This is because the bidder could possibly use subjective evaluations in its service contract to mask issues such as design or manufacturing defects that directly relate to its manufacturing contract.
Because the bidder could potentially increase the likelihood of being awarded a follow-on manufacturing contract by failing to find such deficiencies in its service contract, an Impaired Objectivity OCI challenge may be successful.
When bidding on a federal government Solicitation, federal law provides certain remedies in the event that an OCI is present in the procurement process. Additional potential OCIs can occur in several ways depending on the unique facts and circumstances of the Solicitation. However, untimely protests will not be entertained by the GAO.
In general, OCI related challenges should usually be brought in the pre-award context. Filing an OCI challenge prior to the due date for bids or proposals is oftentimes required. This is because OCI challenges can be deemed waived if not timely made. The GAO will usually deem an OCI challenge untimely if it can be shown that the Protestor knew or should have known the basis for its OCI challenge and failed to object prior to the deadline for the submission of bids or proposals.
Therefore, quick thinking and quick action is required. Whether an OCI challenge is viable in any particular Solicitation will always be determined on a case-by-case basis. However, understanding this legal concept can help you know where you stand a little bit better on that next Solicitation.
FRANK V. REILLY
fEDERAL pROCUREMENT aTTORNEY
Florida construction law
Six Things to Consider Before Filing a Bid Protest
1. Is your protest pre-award or post-award?
If you are challenging the terms of a solicitation, you will normally be filing a pre-award bid protest. Pre-award bid protests must almost always be filed before the closing date. In some cases, you may be able to file an otherwise untimely pre-award bid protest if you are challenging a latent ambiguity in the solicitation. However, you will need to show that the solicitation error was not readily discernable and that it could not have been identified prior to the close of bids. Even if you are able to make this showing, this type of case may be more difficult to have decided in your favor.
Post-award bid protests primarily challenge adverse agency action as it relates to the proposal submitted. These protests may involve a broad range of issues such as improper evaluations and improper award decisions. If filing before the GAO, the 10 day deadline applies. The deadline begins once you knew or should have known of the adverse agency action at issue.
Tip: In all cases, it is best to carefully review the entire solicitation before starting to prepare your proposal. If you are unsure when to file your protest, sooner is oftentimes better than later.
2. Can you prove standing?
To file a bid protest, you must demonstrate that you have standing. This generally means that you must be able to show that you are an actual or prospective offeror whose direct economic interest would be affected by the award of a contract.
When challenging an agency’s award decision, you usually must also be able to show that you would be next in line for an award if the protest is sustained.
Tip: In cases where proposals are not ranked, you will be unable to show that you are next in line for award. You will instead need to show that you had a significant chance for award but for the erroneous actions taken by the agency.
3. Will your protest be timely?
In order to have any chance of success, your protest must be timely. Agency level bid protests and GAO bid protests must usually be filed no later than 10 days after the basis of protest is known or should have been known, whichever is earliest. Although agencies and the GAO may consider the merits of a protest filed outside the 10 day requirement, this rarely occurs.
When a protest challenges a procurement under which a debriefing is both requested and required, the protestor has 10 days after the debriefing to file a protest. However, the protest must be filed within five days of the debriefing in order to suspend contract performance.
The United States Court of Federal Claims (COFC) does not generally require protestors to satisfy strict filing deadlines in most cases.
Tip: In cases where your protest would be untimely under Agency or GAO rules, you may be able to still file your bid protest with the COFC or possibly elsewhere.
4. Your debrief - Is it requested and required?
Debriefings can vary greatly and may or may not be required depending on the terms of the solicitation. Some procurements may require that the agency prepare a written debriefing, while other procurements might provide for an in-person or telephonic debriefing.
Tip: In general, requesting a debriefing is usually a good idea. However, this may affect your filing deadlines. If your debriefing is not required, it will not toll the time to file your bid protest with the GAO. If your debriefing is required, it will toll the 10 day deadline to file your protest, but you will still need to file within 5 days in order for the automatic stay of award or performance to apply to your protest.
5. Where should you file?
In general, a bid protest may be filed with:
1. The agency administering the procurement,
2. The Government Accountability Office (GAO), or
3. The U.S. Court of Federal Claims (COFC)
Agency level protests are typically the least costly and most expeditious way to resolve a bid protest. However, in an agency level protest, you are requesting the agency to decide whether or not it committed error and violated federal law. Although this approach may be successful, some protestors may feel that the agency could have an inherent bias that would favor a decision that the agency did not commit error and did not violate federal law. The Federal Acquisition Regulation (FAR) requires agencies to use best efforts to resolve a protest within 35 days after the protest is filed. Some agencies have adopted rules shortening this time frame.
GAO protests are typically more expensive and the GAO normally has up to 100 days after the initial protest filing to issue a decision.
There are no time constraints on the COFC’s authority to resolve bid protests. Litigation before the COFC is typically more expensive that having a bid protest resolved by the GAO. Cases typically take anywhere from six months to a few years depending on the complexity of the issues being litigated.
6. Do you wish to have the CICA automatic stay implemented?
One very significant advantage with filing before the GAO is the automatic stay of contract award or performance under the Competition in Contracting Act (“CICA”). To obtain the CICA automatic stay, you will need to file your timely GAO bid protest.
Tip: The CICA automatic stay is not triggered until GAO notifies the agency of the protest. The GAO has up to a day to provide the required notice. Although the rules state that you have 10 days to file your protest, you actually need to file within 9 days in order to make sure that the GAO has sufficient time to notify the agency of your protest. Failure to do so may result in the loss of the automatic stay.
CICA automatic stays are not available in COFC protests. In order to obtain a stay of contract award or performance you will need to seek injunctive relief. You will need to establish entitlement to preliminary injunctive relief and you may be required to post security to pay the costs and damages sustained if the court later determines that injunctive relief was wrongly entered.
FRANK V. REILLY
fEDERAL pROCUREMENT aTTORNEY
Florida construction law
Understanding the Federal Government's Requirements for Partnership Agreements
In the context of bidding on federal solicitations, one of the more problematic issues many offerors routinely face is how to properly draft a Partnership Agreement when one is required.
This is oftentimes because an offeror may be faced with two conflicting goals. On the one hand, offerors may wish to allow themselves the maximum amount of freedom to handle their own business affairs in the post-award context. On the other hand, if the Partnership Agreement is too vague or otherwise not in compliance with the solicitation, an offeror could easily be deemed non-responsive and its proposal could be rejected.
Although the exact Partnership Agreement requirements will vary depending on the precise terms and conditions of the advertsed solicitation, there are a few general principles that can be followed for the purposes of increasing the likelihood that your proposal will not be rejected as non-responsive.
Some solicitations may require the Partnership Agreement to be binding on the parties prior to the due date for proposals while others may require the same only upon Award.
Due to the fact that government requirements may vary widely between Solicitations, one common mistake is for offerors to provide a non-binding Partnership Agreement when a binding agreement is required. This sometimes occurs when a bidder uses a Partnership Agreement from a previously successful bid without specifically tailoring the agreement to meet the needs of the new solicitation. When this occurs, most government agencies, the courts and the GAO will usually deem this to be a material noncompliance. This would render the offeror's proposal non-responsvie and therefore ineligible for the consideration of an Award. Beacuse each procurement stands on its own in the legal arena, the fact that the very same Partnership Agreement was already deemed acceptable by the government for another procurement is almost always completely irrelevant in the context of a bid protest.
Even where the Partnership Agreement is binding only upon Award, it can still be rejected prior to Award as non-binding if it is merely an "agreement to agree in the future".
According to many GAO decisions, the terms "Partnership Agreement" and "Partnering Agreement" do not usually mean an agreement to negotiate another agreement (i.e. a subcontracting agreement) if the Prime Contractor is awarded the contract. Instead, many GAO decisions require an actual agreement to provide certain detailed services. Preliminary agreements to negotiate a more detailed scope of work at a later date could fail to come to fruition and could therefore be deemed as non-responsive.
Although the FARs and some GAO decisions may indicate otherwise, Partnering Agreements and Teaming Agreements are not necessarily the same according to the United States Court of Federal Claims.
FAR 9.601 states:"Contractor Teaming Arrangement", as used in this subpart, means an arrangement in which:
(1.) Two or more companies form a partnership or joint venture to act as a potential prime contractor, or
(2.) A potential prime contractor agrees with one or more other companies to have them act as its
subcontractors under a specified Government contract or acquisition program.
Although FAR 9.601 would appear to possibly use these terms interchangeably, the United States Court of Federal Claims has taken issue with Protestors' positions that the terms are essentially interchangeable.
For example, in the case of Sentrillion Corporation v. U.S. and Tyco Integrated Security, the court stated:
The indeterminate agreements to negotiate that Sentrillion proffered as "teaming agreements" are a far cry from "signed partnership agreements". For example, Sentrillion's teaming with Diebold - the proposed subcontractor on which Sentrillion most heavily relied - stated that the parties would enter into "good faith negotiations with the intent of entering into a mutually acceptable subcontract agreement" if Sentrillion were awarded the contract.
Although template Partnership Agreements and Teaming Agreements are routinely used interchangeably by bidders and government agencies on a daily basis, recent case law has now opened the door to new protest grounds on this issue.
For unsuccessful bidders, this provides a new opportunity to have agency awards potentially overturned. For successful awardees, there is an increased risk that their Partnership Agreements could be deemed as noncompliant and their proposals therefore deemed as non-responsive.
Care should be taken to modify these agreements as needed to assure that they are in strict compliance with the Solicitation before proposals are submitted. Although the FARs may be instructive, there is case law from the United States Court of Federal Claims and the GAO that would appear to address issues not expressly covered in the FARs.
Therefore, at least a basic understanding of how the law is likely to operate on a given solicitation would be advisable not only to protect your company's Award, but also to examine the possibility of having the government's Award to another party possibly overturned.