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“Hard Facts” Are Required To Establish a Significant Potential Organizational Conflict of Interest

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In Turner Construction Co., Inc. v. United States, et al., Fed Cl. No. 10-195C, July 16, 2010, the United States Court of Federal Claims overturns the Army’s adoption of a “Recommendation,” of the United States Government Accountability Office (GAO), 31 U.S.C. § 3554(b)(1), and the Court Orders the restoration of a $333 million Contract to construct a hospital at Fort Benning, Georgia. That Contract had been previously challenged before GAO, McCarthy/Hunt, JV, B-402229.2, February 16, 2010.

Upon finding an unmitigated unequal access to information Organizational Conflict of Interest, GAO had “recommended” that the Contractor be stripped of the Contract and that the Contractor be barred from a new Award determination. The Head of the Army Contracting Activity had decided not to waive the Organizational Conflicts of Interest which GAO had found, this although the Army’s Contracting Officer had concluded in an extensive Post-Award, Post-Protest review that the claimed unequal access to information Organizational Conflicts of Interest did not exist. And the Army had decided to adopt the GAO “Recommendation.” It was this action which precipitated the Contractor’s filing of its own Post-Award Procurement Protest with the Court.

The Organizational Conflicts of Interest problems with the Acquisition had arisen from on-again, off-again merger discussions between one of the Contractor’s subcontractors and another private-party firm which was under contract with the Army to provide acquisition support services for the hospital Acquisition.

But while GAO concluded that this private-party support services Contractor had “special knowledge” which would had given the Contractor’s subcontractor an unfair advantage, GAO could point to only one piece of information, the support services Contract itself, which “suggested” that the Contractor’s subcontractor had gained access to this “special knowledge.” Likewise, GAO concluded that the support services Contractor’s employees “may have had access to competitively useful information” and that the support service Contractor which engaged in on-again, off-again merger discussions with one of the Contractor’s subcontractors, was “in a position to obtain information regarding the agency’s priorities, preferences, and dislikes.”

As it turned out, the Army’s Contracting Officer had not conducted a comprehensive, documented review of potential Organizational Conflicts of Interest prior to Contract Award in September 2009. After Contract Award and the filing of the Post-Award Procurement Protest with GAO in October 2009, the Army’s Contracting Officer conducted a one-hundred fifty page review which was supported by forty-two declarations from the people involved with the claimed Organizational Conflicts of Interest.

The Army insisted that the Contracting Officer’s failure to conduct such a comprehensive, documented review prior to Contract Award was itself sufficient reason supporting the Army’s decision to adopt the GAO “Recommendation,” here citing Federal Acquisition Regulation 9.504(a)(2), which requires Contracting Officers to “[a]void, neutralize, or mitigate significant potential conflicts before contract award.”

Per Contra. The Turner Construction Court held that Contracting Officers:

are not required, in every single procurement, to review and document whether OCIs [Organizational Conflicts of Interest] exist prior to award. Instead, a CO [Contracting Officer] must evaluate OCIs as early in the process as possible, and, for significant potential OCIs, a CO must mitigate them prior to award. In some cases, the earliest time to evaluate an alleged OCI might be post-award, such as when a bid protest is brought that alleges theretofore unknown OCIs. In other cases, . . ., evidence of a “significant” OCI will exist before contract award and require a CO to evaluate and mitigate it then . . . .

“Hard Facts” are required to establish a significant potential Organizational Conflict of Interest. This means that a fact-specific inquiry must demonstrate that there is an appearance of impropriety, in this Case, unequal access to nonpublic information. That is, there must be a potential conflict even though its precise impact cannot be determined. If the conflict can be established only by suspicion or innuendo, this is insufficient. On the other hand, the precise impact of the conflict on the evaluation of Competitive Proposals need not be established.

More is required if the claimed Organizational Conflict of Interest stems from unequal access to nonpublic information. Here not only must it be established that there was a conflict, unequal access to nonpublic information, and but also it must be shown that this nonpublic information was competitively useful. That is, possession of this nonpublic information could benefit an Offeror’s Competitive Proposal.

Per the Turner Construction Court, McCarthy/Hunt, JV was irrational because GAO dismissed the Army Contracting Officer’s Post-Award, Post-Protest review of the claimed Organizational Conflicts of Interest as nothing more than a “post-protest” rationalization, forgetting that a non-contemporaneous fact-specific inquiry addressing claimed Organizational Conflicts of Interest has been held sufficient in other GAO matters.

And the larger problem is that McCarthy/Hunt, JV cites to no hard facts showing the Contractor’s subcontractor had access to anything of competitive worth. Per the Turner Construction Court, “GAO pointed only to vague allegations that someone ‘may have had access’ to unidentified information or that someone ‘was familiar with the details.’” The Court observed that the Army Contracting Officer had “specifically discussed how each type of information to which . . . may have had access not only lacked competitive utility but also was disclosed to all of the offerors.”

Ultimately, the Turner Construction Court concludes:

The GAO decision here, in contrast, only points to “familiar[ity] with the details” and potential “access to competitively useful information” and being “in a position to obtain information.” This is not specific enough to have overturned the agency’s OCI determination, and it was irrational for the GAO to do so. Because the GAO decision was irrational, the Army was not justified in relying on it.

(Emphasis added).