Done Something Bad? Come Up With a Corrective Action Plan and Everything Will Be Okay Again

It seems like daily we read about another Government contractor embroiled in some kind of legal disputed. Yesterday we discussed Lockheed and the payment it made to settle a False Claims Act investigation by the Government. Whistleblowers are prolific - some out of a sense of duty and others hoping for a big payday. Then there are hiring practices and workplace issues to contend with or defend against. It's enough to make any attorney smile.

So, if there is an on-going investigation of a contractor concerning fraud, false claims, or some other illegal activity, how (and why) does the Government continue to award contracts? FAR 9.104 requires that contractors have a satisfactory record of integrity and business ethics and the contracting officer is required to make an affirmative determination that the prospective contractor is responsible. One company decided to answer this question by appealing the award of a contract to a competitor who was under investigation for two significant FAC (False Claims Act) violations.

In this case, DynCorp claimed that the Army failed to consider the impact of two pending False Claims Act (FCA) cases against its competitor KBR and argued that those cases demonstrate that KBR lacks the requisite satisfactory record of integrity and business ethics to justify an affirmative responsibility determination. Specifically, DynCorp argued that the contracting officer failed to review copies of the complaints filed by the US Government in the two FCA cases and relied exclusively on KBR's general, self-serving reports to the Army Suspension and Debarment Office about those fraud claims.

The Army disagreed. It contended that its affirmative responsibility determination reasonably considered the pending FCA litigation within the broader context of the totality of KBR's present responsibility.

The GAO agreed with the Army. The GAO found that the Army had convened a team that was responsible for researching and collecting data regarding the LOGCAP IV contractors. The team prepared a Contractor Responsibility Report analyzing KBR's present responsibility under each of the FAR 9.104.1 factors and documented its review with source materials including a DCMA (Defense Contract Management Agency) pre-award survey and business system review.

Regarding KBR's record of integrity and business ethics, the team found that a September 2014 DCMA pre-award survey, which was prepared after DoJ filed complaints in the two FCA cases, concluded that KBR's record during the time frame of the survey was satisfactory and reflected no areas of concern, and that KBR was proactive in this area. The team also found that KBR had enhanced its government compliance program, including requiring training and implementing a voluntary disclosure program.

The GAO found that the Army contracting officer was aware of and reasonably considered the pending litigation relied upon by the protestor. For this reason, the GAO concluded that there was no basis to review the contracting officer's affirmative determination of KBR's responsibility.

The key take-away here is that the Government only needs to consider the negatives within the "totality" of the prospective contractors "present responsibility".

You can read the entire (lengthy) GAO decision here.