RULE: A contracting officer’s focus during the solicitation stage is on mitigating significant potential organizational conflicts of interest and not simply any type of conflict of interest. Proof of a significant potential conflict requires “hard facts.”

Reducing a contracting officer’s workload is one result arising from a recent decision of the U.S. Court of Appeals for the Federal Circuit (CAFC). The decision involved the difficult and increasingly-contentious protest issue of a contracting officer’s consideration of organizational conflicts of interest (OCIs). The appeals court endorsed FAR’s focus on “significant potential conflicts” and not more generally on any type of conflict, including apparent conflicts and non-significant conflicts. The appeals court also reiterated the requirement of “hard facts” and not speculation nor wishful thinking needed to establish an OCI.

The Office of Secure Transportation (OST) in the Department of Energy (DOE) makes sure that all government-owned nuclear weapons and materials are safely transported. To help it carry out its job, the office had a support contract with Wackenhut Services, Inc. (WSI). As that contract was nearing its end, the agency decided to set aside the follow-on contract to a small business. But before it issued the final solicitation, the agency received a protest from one of the competing small businesses, arguing that any small business that would team with incumbent WSI would have an impermissible OCI. To settle that agency-level protest, DOE tried to level the playing field and avoid an impermissible OCI by putting a copy of the incumbent contract with WSI on a website available to the public.  In addition, according to the appeals court, DOE “also provided information regarding OST command structure, mission, logistics, property management, and specialized training for OST Federal Agents. In addition, DOE released a twelve-month overview of the direct labor hours for each of the task areas and an estimated training calendar required to implement the OST support services.”

DOE then released the solicitation and received a number of offers from small businesses, including one from Innovative Technology Partnerships, LLC (ITP), which had teamed up with WSI. 

As part of her evaluation process, the contracting officer looked for potential OCIs in the offerors’ OCI disclosure materials.  She eventually awarded the contract to ITP, leading to a second protest to the Government Accountability Office (GAO) by PAI Corporation, which argued that, among other things, there were OCIs involving ITP, Wackenhut, and DOE that were not properly mitigated or disclosed prior to the procurement.

After the agency agreed to take corrective action, the protest became moot. Part of the agency’s corrective action was another review of potential OCIs.  This review resulted in the contracting officer’s preparation of an “Organization Conflict of Interest Analysis,” in which, according to the appeals court, “the contracting officer noted that she had reviewed the offerors’ submissions regarding any potential organizational conflicts of interest and determined that no significant potential conflict existed. In particular, the contracting officer determined that, although ITP and Wackenhut had access to non-public information through their existing contracts, such information had no competitive value in the present procurement. The contracting officer also found that, with respect to ITP, the information to which it had access involved constantly changing requirements, was quickly outdated, and was therefore of little value. With respect to Wackenhut, the contracting officer also determined that the information to which it had access was not relevant to the requirements addressed in the solicitation’s first two sample task orders. In the case of the third sample task order, the contracting officer found that Wackenhut’s access to non-public information had been effectively offset by other information disclosed in the solicitation.” She concluded that there was no significant potential conflict of interest preventing award of the contract to ITP.

The agency again awarded the contract to ITP and PAI again protested, this time to the U.S. Court of Federal Claims (CFC). That court denied the protest, leading PAI to appeal to the CAFC.

Before the appeals court, PAI argued that the FAR required the contracting officer to focus on any OCI, regardless of whether it was only an apparent conflict, a minor potential conflict, or a significant potential conflict. Specifically, PAI argued that a contracting officer had to (1) analyze any type of conflict, and (2) write a plan to neutralize any type of conflict before a solicitation is issued.

The appeals court concluded that PAI was imposing too great a burden on a contracting officer, a burden not required by FAR.

First, the appeals court provided a good definition of the critical phrase “significant potential conflict”: “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.”

Second, FAR 9.504(a) requires mitigation only of significant potential conflicts and “does not require mitigation of other types of conflicts, such as apparent or potential non-significant conflicts. The contracting officer does have considerable discretion in determining whether a conflict is significant.”

Third, documentation from a contracting officer is needed only if a significant potential conflict exists: “the contracting officer is not required to document in writing or submit for approval a plan to neutralize apparent or potential conflicts, which in her discretion and judgment are deemed not to be significant.”Applying these principles to the case before the court, the appeals court concluded, first, that the contracting officer “fully complied with the FAR requirements.”

She had considered OCIs after the first agency-level protest before the solicitation had been issued. She also had

… pursued a number of steps to resolve any potential conflicts, including narrowing the technical scope of the solicitation, providing to the potential offerors additional information regarding the OST support services contract, and requiring that each potential offeror certify that its participation in the procurement did not create any organizational conflicts of interest. The contracting officer also completed an additional and comprehensive conflicts investigation in June 2009. In a written memorandum, the contracting officer noted that she had thoroughly reviewed the offerors’ submissions regarding any potential organizational conflicts of interest. The contracting officer determined that no significant potential conflict existed that would preclude an award of the OST support services contract to ITP. Furthermore, because the contracting officer determined that no significant potential conflict existed, she was not required to submit a written analysis pursuant to § 9.506(b[.]

Clearly, the contracting officer had done her job thoroughly.

Moreover, PAI just did not have “hard facts” to back up its OCI arguments. It had “failed to introduce any evidence before the trial court showing that ITP gained a substantial and unfair competitive advantage through unequal access to information.” In addition, “PAI’s bare allegation that ITP and Wackenhut had a prior contractual relationship with OST is insufficient to show a significant potential conflict.” The appeals court quoted precedent that “The mere existence of a prior or current contractual relationship between a contracting agency and a firm does not create an unfair competitive advantage, and an agency is not required to compensate for every competitive advantage gleaned by a potential offeror’s prior performance of a particular requirement.”