Organizational Conflict of Interest (OCI)

For contractors, defending (and overcoming) bid protests that challenge contract awards based on alleged Organizational Conflicts of Interest (OCI) may hinge on what a contractor does at the very beginning of the procurement process.  Whether the contractor revealed, acknowledged, addressed, and documented potential OCI with the Contracting Officer (CO) could determine the fate of the protest (and, in turn, the contract award).

In a recent decision, GAO sustained a protest asserting that the Department of Health and Human Services (HHS) failed to meaningfully consider the threat of OCI posed by the awardee.

In the opinion, GAO details several material points that all contractors should consider:

  1.  The awardee disclosed to the CO that its parent company might pose an OCI, but the awardee did not believe there was a conflict.
  2. The CO did not address this potential OCI in the pre-award OCI memorandum.
  3. GAO rejected the agency’s argument that the CO did not need to consider the OCI issue presented because the agency had considered and dismissed a similar conflict in a different jurisdiction.

Based on these points, GAO offers a bright line principle that operates in accordance with the FAR:  GAO will not substitute its judgment for the agency’s, provided that the agency gives meaningful consideration to whether a significant conflict of interest exists.  In other words, GAO is saying that if there is no meaningful consideration of potential OCI, as in this case, GAO may sustain a protest on that fact alone.

There are a couple of take-away lessons for contractors:

  • Contractors must always actively search for potential OCI during every procurement.
  • Contractors should take an active role in informing the CO about potential OCI and ensure that the CO adequately documents any potential issues.
  • Contractors cannot rely on OCI waivers in other contracts to determine whether their potential OCI might give rise to a successful protest.

So next time you have a potential OCI issue, do not count on the CO to document the issue properly. Instead, insist that the CO consider the OCI, determine that it is not an issue, and document that process.

As we previously broke down in detail here, an Organization Conflict of Interest (OCI) exists when work performed on a federal contract leads to an unfair competitive advantage or impaired objectivity.  Federal contractors must establish appropriate safeguards against OCI because a finding of OCI can lead to losing a contract or, worse, suspension or debarment from future federal work.

One of the more common issues that leads to OCI is unequal access to information.  Unequal access to information can arise when a contractor has access to non-public information on a federal contract that later turns out to provide an unfair competitive advantage in future procurements.

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But, what if you current hold a federal contract (or multiple federal contracts) where your business and employees routinely access such confidential data?   Is it realistic (or even possible) to form a firewall between your business and the nuts and bolts of your federal work?

In a recent decision, the GAO considered a contractor’s access to agency information obtained during its work as a subcontractor at the agency’s program office.  According to GAO, a contractor may possess unique information, advantages, and capabilities due to its prior experience under a government contract without qualifying as an OCI.  The key is not allowing that incumbent contractor advantage to spill over into preferential treatment by the agency.

The responsibility to avoid an OCI based on preferential treatment falls on both the agency and the contractor.  For example, the GAO notes that an agency can neutralize the appearance of unequal access by releasing information to all procurement offerors.  For the contractor, internal safeguards should be in place to identify the possibility of OCI and – if not appropriately mitigated by the agency – disclosed in advance.

Constant vigilance is required to stay out in front of OCI issues and avoid the potentially devastating consequences.

If you are protesting a Federal contract award on the basis of an Organizational Conflict of Interest, the GAO has a word of advice:  Don’t Hold Back!!

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Organizational Conflicts of Interest (or OCIs) that provide an unfair competitive advantages on a Federal procurements are prohibited under the FAR and can lead to exclusion from contracting opportunities, contract termination, or even suspension/debarment from performing future Federal work.  But what do you do if you think your competition is unfairly benefitting from an insider connection?

In a recent opinion, the GAO denied a protest based on the absence of concrete evidence to establish the claimed OCI.  In the words of the GAO:  “A protester must identify hard facts that indicate the existence or potential existence of a conflict; mere inference or suspicion of an actual or potential conflict is not enough.”

The GAO offered some examples of the types of facts that contractors must allege in order to avoid dismissal and, eventually, prove the OCI during a protest.  Specifically, the protest must identify evidence that the conflict of interest:

·         Resulted in biased ground rules for the procurement (for example, evidence that the competition was involved in crafting provisions of the solicitation that turned in its favor; or

·         Resulted in actual impaired objectivity during the award process.

In other words, the goal should be to identify the OCI as specifically as possible and to provide detailed examples of how it affected the agency’s decision making process.

From a larger perspective, the GAO’s insights can apply to a wide range of subjects in the protest world.  GAO protests unfold quickly and often offer little in the way of the traditional “discovery” that takes place during court proceedings.

When drafting a protest, focus on the error and the resulting prejudice, providing specific examples whenever possible.  There is no reason to hold back evidence or wait to play a trump card.  The ace up your sleeve may end up being a card that you never get to play.