Organizational Conflict of Interest - Facts Required to Sustain a Bid Protest, Not Mere Speculation - Part 3

For the past two days, we have been discussing a GAO (Government Accountability Office) bid protest decision involving OCI (Organizational Conflict of Interest) assertions by Accenture against IBM. If you missed Parts 1 and 2 of this series, go here to begin reading. Also, if you want to read the decision yourself, you can find the entire bid protest decision here.

Generally, OCIs fall into three broad categories (i) biased ground rules, (ii) unequal access to information and (iii) impaired objectivity. Accenture argued all three of these categories in its bid protest. Monday we discussed Accenture's arguments alleging biased ground rules. Yesterday we looked at Accenture's unequal access to information arguments (both its biased ground rules and unequal access to information relied on the same speculation. Today we will conclude this short series by trying to understand what the Accenture meant by alleging that IBM acted with impaired objectivity.

Impaired Objectivity

Impaired objectivity exists where a firm's ability to render impartial advice to the Government will be undermined by the firm's competing interests, such as a relationship to the product or service being evaluated.

Recall that IBM is the support contractor for another Army system, the FSPS (Financial Statement Production Services) contract and was awarded the GFEBS (General Fund Enterprise Business System) - the subject of this protest. One of IBM's duties under the FSPS contract is to conduct annual compliance reviews of source systems to determine whether they comply with Treasury and DoD guidance. Accenture contends that IBM could tailor its recommendations in such a way as to generate more work under the GFEBS contract, or to prevent a reduction of work.

The contracting officer considered this possibility and essentially concluded that IBM would not have the level of discretion implicit in the protester's argument, or the requisite decision-making authority to direct that changes be made. The contracting officer noted that the FSPS and the GFEBS contracts were managed by different contracting officers and program managers. IBM's recommendations would be vetted by the Government to determine whether they would result in proper implementation and the ultimate decision to require a changed to GFEBS would be made by the Government.

Once again, the GAO found that the contracting officer gave meaningful consideration to the protester's allegation and found no basis to conclude the contracting officer's determination was unreasonable.

Like the previous two OCI allegations, the GAO also denied this portion of Accenture's bid protest. In all three cases, Accenture provided no factual evidence to support its OCI claims; only conjecture.

Organizational Conflict of Interest - Facts Required to Sustain a Bid Protest, Not Mere Speculation - Part 2

Yesterday we began unpacking a GAO (Government Accountability Office) bid protest decision involving OCI (Organizational Conflict of Interest) assertions by Accenture against IBM. If you missed Part 1, go here to read it. Also, if you want to read the decision yourself, you can find the entire bid protest decision here.

Generally, OCIs fall into three broad categories (i) biased ground rules, (ii) unequal access to information and (iii) impaired objectivity. Accenture argued all three of these categories in its bid protest. Yesterday we discussed its arguments alleging biased ground rules. Today we look at unequal access to information and tomorrow we will complete the series looking at impaired objectivity.

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 where that information may provide the firm a competitive advantage in a later competition for a Government contract.

Accenture argued that IBM had an unequal access to information because, as the contractor for the Army's FSPS (financial statement publication service) system, it had access to data from all of the Army's varied ERP (Enterprise Resource Planning) systems - systems that fed the Army's GFEBS system (General Fund Enterprise Business System) - the contract being protested.

The contracting officer considered whether IBM might have unequal access by focusing on the type of information available to IBM in the course of FSPS contract. The contracting officer concluded that the information that IBM receives is financial information would not permit IBM to have unequal access to information. The contracting officer further noted that the information received by IBM is raw financial data that IBM must consolidate into general financial ledgers for the Army.

The GAO ruled that, based on the contracting officers consideration of the allegation, coupled with the protester's failure to explain how the type of data available to IBM could give it a competitive advantage, there was no basis to conclude that IBM had unequal access to information.
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The GAO denied this portion of Accenture's bid protest.

Organizational Conflict of Interest - Facts Required to Sustain a Bid Protest, Not Mere Speculation - Part 1

The Army issued a task order contract to IBM Corporation to support, sustain, and maintain its General Fund Enterprise Business System. Accenture Federal Services, LLC (Accenture) protested the award to IBM for a number of reasons including the argument that IBM had an impermissible organizational conflict of interest that should render it ineligible for award.

The Army's General Fund Enterprise Business System (GFEBS) is an integrated Army-wide business management system that enables General Fund financial and real property management capabilities, including funds distribution, execution, reporting, and accounting and real property accountability, maintenance, and asset accounting. Think of it as QuickBooks on steroids. It takes a lot of manpower to keep the thing running smoothly.

Contracting officers are required to identify and evaluate potential OCIs (Organizational Conflict of Interest) as early in the acquisition process as possible, and avoid, neutralize, or mitigate significant potential conflicts of interest before contract award (see FAR 9.504 and 9.505). The responsibility for determining whether an actual or apparent conflict of interest will arise, and to what extent the firm should be excluded from the competition, rests with the contracting officer.

In a bid protest situation involving OCIs, the GAO does not try and second guess the contracting officer when he/she has given meaningful consideration to whether a significant conflict of interest exists unless there is clear evidence that the agency's conclusion is unreasonable. Contractors must and are required to exercise considerable discretion. To be successful, 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 OCI is not enough.

OCI's typically fall into three broad categories: (i) biased ground rules, (ii) unequal access to information, and (iii) impaired objectivity. Accenture argued all three of these categories in its bid protest. We will discuss Accenture's arguments concerning biased ground rules today and the other two conditions tomorrow and Wednesday.

Biased Ground Rules

A biased ground rules OCI exists where a firm, as part of its performance of a Government contract, has in some sense set the ground rules for another Government contract by, for example, writing the statement of work or the specifications. The primary concern is that the firm could skew the competition, whether intentionally or not, in favor of itself.

In this case, Accenture argued that IBM has OCIs with respect to this new contract  because IBM is also under contract to provide financial statement publication services (FSPS) for three of the Army's funds. In its role as the FSPS contractor, IBM is required to collect and process routine financial data including data pulled from the accounting system under appeal.It is the interplay of these two systems that are the focus of the OCI allegations. IBM is required to review, at least annually, the most current guidance from Treasury and DoD regarding the U.S. Standard General Ledger and identify any additions or removals which should be made to ensure the source systems' compliance with the standards.

Accenture argues that IBM has the ability to choose which recommendations to make or not make and speculates that such recommendations may have impacted the statement of work that favored IBM. Accenture did not, however, provide any hard facts regarding recommendations made by IBM that impacted the GFEBS requirements nor has it even provide a description of the type of recommendation IBM could have made in its FSPS role that would have skewed the competition in its favor.

The GAO denied this portion of Accenture's bid protest.

You can read the entire bid protest decision here.

Organizational Conflicts of Interest (OCIs) - Definition and Meaning

The purpose of the Organization Conflicts of Interest rules that were established in the Federal Acquisition Regulations (FAR) back in 2010 were to avoid, neutralize, or mitigate organization conflicts of interest that might otherwise exist in some contracting situations (See Organization Conflicts of Interest (OCI) for further background).

The situations in which OCIs arise, as described in FAR 9.5 can be broadly categorized into three groups: biased ground rules, unequal access to information, and impaired objectivity. Since adoption, unsuccessful bidders have had another weapon at their disposal to use when protesting awards to competitors and there have already been a plethora of protests that have included OCI challenges (See for example Organizational Conflicts of Interests (OCIs) - Strong and Direct Linkage Needed).

Many of the OCI protest decisions so far have involved unequal access to information. Unequal access to information OCI exists where a firm has access to nonpublic information as part of its performance of a Government contract, and where that information may provide the firm a competitive advantage in a later competition for a Government contract. This is rather difficult for a protestor to prove however. The identification of conflicts of interest is a fact-specific inquiry that requires the exercise of considerable discretion. A protestor 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.

In a recent bid protest case, Unsuccessful Bidder (UnB) protested a Department of Labor (DOL) contract because the Winning Bidder (WB) had previously performed contract work in DOL Headquarters which provided WB with intimate details of a wide range of information that was highly relevant to the procurement. This familiarity, UnB alleged, gave WB an unfair competitive advantage that DOL failed to identify and mitigate.

The problem with the allegation is that UnB had no specific facts to back its claim. When the Comptroller General looked into the situation, it found that the contracting officer had indeed looked into the matter prior to awarding the contract and determined that there was no potential of a significant OCI arising from the work that WB had performed. Absent specific facts, the Comptroller General is not going to second-guess the determination.

Organizational Conflicts of Interests (OCIs) - Strong and Direct Linkage Needed

FAR (Federal Acquisition Regulations) 9.5 provide rules for avoiding organization conflicts of interest (OCIs) and where the potential or OCIs exist, procedures for neutralizing and mitigating those risks. For example, a contractor that provides systems engineering and technical direction to the Government cannot be awarded a contract to supply the system or a contractor that prepares and furnishes specifications to be used in a competitive acquisition cannot be allowed to furnish those items. And there are more examples - see FAR 9.505-1 through 9.505-5.

FAR obligates an agency to conduct an organization conflict of interest analysis for significant conflicts, and contracting officers are given broad discretion in determining whether the potential conflict of interest is significant. A significant potential conflict is one which provides the bidding party a substantial and unfair competitive advantage during the procurement process on information or data not necessarily available to other bidders.

In a recently published bid protest decision by the U.S. Court of Federal Claims, an unsuccessful bidder protested the award of a contract to a competitor on the grounds that an OCI existed between the winning bidder and the Governmental agency awarding the contract (see Vion Corporation v. The United States and World-Wide Technology, Inc.)

The plaintiff, ViON Corporation, argued that the Defense Information Systems Agency (DISA) failed to properly evaluate a potential organization conflict of interest regarding the winning bidder, World Wide Technology or WWT. ViON contended that an OCI arose because another DISA contractor, the Evaluator Group, has a strong financial relationship with Hewlett Packard (HP), one of the subcontractors for WWT. An employee (and co-founder) of the Evaluator Group conducted training for DISA employees. The Evaluator Group also recommended HP products on its website. And so, ViON contended that the Evaluator Group's work with HP may have affected the contract award process by influencing DISA's expectations.

The Court ruled that ViON's allegation of a potential OCI was not substantiated by the facts. The administrative record shows that the alleged connection between the Evaluator Group and the ultimate contract was tenuous, at best. ViON provided no evidence to show that the Evaluator Group employee had any impact on the procurement process. In fact, DISA did not use the Evaluator Group as a consultant for any aspect of the procurement process.

Organizational Conflicts of Interest (OCI)

We have discussed Organizational Conflicts of Interest (OCIs) a few times. Sometimes contractors find themselves in situations where OCIs can give them an unfair advantage in bidding on contracts. OCIs include impaired objectivity, access to non-public information, and biased ground rules. If a contracting officer determines that an OCI exists, the contractor must develop an adequate and acceptable mitigation plan or choose not to bid on the solicitation in question. Refer to FAR 9.5 for the regulatory coverage of OCIs.

There have been a few GAO decisions involving OCIs. A decision from last May helps illustrate the difficulty of successfully challenging an award on the basis that the winner had an unfair advantage. In this case, the Navy wanted to purchase some communications capabilities that included terminals on land and on ship plus satellite resources owned by a company called Intelsat. All of the bidders had to use the Intelsat systems for the satellite portion of the contract. Intelsat also bid on the contract and won. One company protested on the basis that Intelsat knew the price they had proposed to all of the competing bidders and that gave them an unfair advantage because it could price its bid accordingly.

Well, that did seem a little unfair to us but the GAO ruled that the situation did not constitute an OCI as currently defined by the FAR regulations. Intelsat did not gain a competitive advantage based on its possession of proprietary information that was obtained from a Government official without proper authorization, or source selection information . . . that is relevant to the contract but is not available to all competitors, and such information would assist that contractor in obtaining the contract. The GAO concluded that negotiations between competitors do not give rise to an OCI, within the meaning of FAR part 9.5.

Organizational Conflicts of Interst (OCI)

Last December, we reported on proposed regulations from DoD regarding Personnel Conflicts of Interest (PCI). DoD is also proposing revised regulations regarding Organizational Conflicts of Interest (OCI). The comment period for responding to these proposed regulations was recently extended to July 21, 2010. The Weapons System Acquisition Reform Act of 2009 requires DoD to revise its regulations to provide uniform guidance and tighten existing requirements for OCIs by contractors in major defense acquisition programs. The law set out situations that must be addressed and allows DoD to establish some "exceptions" to ensure that it has continued access to advice on systems architecture and systems engineering matters from highly qualified contractors, while ensuring that such advice comes from sources that are objective and unbiased. This seems like a very tall order.

Under the proposed regulations, there are three types of OCI

• Impaired objectivity
• Unfair access to non-public information
• Biased ground rules

In the solicitation phase of the procurement process, contracting officers must examine the nature of the work to determine whether it may create a conflict. The contracting officer will obtain the assistance of the program office, appropriate technical specialists and legal counsel to identify potential conflicts of interest. His determination must be written and included as part of the contract file. The guidance also cautions the contracting officer from relying only on information provided by the contractor. The regulations provide a listing of other sources of information.

If there is a determination of a potential conflict of interest, things get interesting from a contractor's perspective. The contractor must come up with a formal mitigation plan and submit it for approval to the contracting officer. A mitigation plan could include any number of actions including firewalls that prevent contractor personnel knowing what other contractor personnel are doing to an agreement to limit contracting for some future period. Given the well documented cases of OCIs, we suspect that review and approval of mitigation plans will be anything but perfunctory.