Jump to content

Organizational Conflict of Interest


civ_1102

Recommended Posts

Hypothetical situation:

1. An RFP for commercial item support services is issued. Award without discussions is contemplated in the RFP. Instructions to offerors makes no mention of OCIs.

2. An offer that is otherwise free of significant weaknesses presents a significant OCI issue revealed only through presentation of a past performance reference.

3. Is there any legal or regulatory reason I cannot merely consider this a significant weakness or deficiency and therefore not consider the offeror for award due to the OCI?

Link to comment
Share on other sites

Hypothetical situation:

1. An RFP for commercial item support services is issued. Award without discussions is contemplated in the RFP. Instructions to offerors makes no mention of OCIs.

2. An offer that is otherwise free of significant weaknesses presents a significant OCI issue revealed only through presentation of a past performance reference.

3. Is there any legal or regulatory reason I cannot merely consider this a significant weakness or deficiency and therefore not consider the offeror for award due to the OCI?

withdrawn.

Link to comment
Share on other sites

Guest Vern Edwards
Hypothetical situation:

1. An RFP for commercial item support services is issued. Award without discussions is contemplated in the RFP. Instructions to offerors makes no mention of OCIs.

2. An offer that is otherwise free of significant weaknesses presents a significant OCI issue revealed only through presentation of a past performance reference.

3. Is there any legal or regulatory reason I cannot merely consider this a significant weakness or deficiency and therefore not consider the offeror for award due to the OCI?

What I think you're asking is whether you can still award without discussions now that you see the OCI issue.

Question: Would the offeror in question win if it were not for the OCI issue? If not, then go ahead and award without discussion. Document the source selection record to show that the OCI issue came up, but played no role in the source selection decision.

If the offeror would win if it were not for the OCI issue, then I think you have a different situation. See FAR 9.504(e), which provides as follows:

The contracting officer shall award the contract to the apparent successful offeror unless a conflict of interest is determined to exist that cannot be avoided or mitigated. Before determining to withhold award based on conflict of interest considerations, the contracting officer shall notify the contractor, provide the reasons therefor, and allow the contractor a reasonable opportunity to respond. If the contracting officer finds that it is in the best interest of the United States to award the contract notwithstanding a conflict of interest, a request for waiver shall be submitted in accordance with 9.503. The waiver request and decision shall be included in the contract file.

Emphasis added. I think the bold-faced line indicates that you must conduct discussions before you can deny the offeror the award because of the OCI. I think that you would be at risk of a successful protest if you awarded to someone else without conducting discussions first.

Link to comment
Share on other sites

A slight nuance on Vern's comment: I would suggest the organizational conflict of interest is a responsibility issue here, given your RFP's silence on the issue. I would suggest that you are not required to establish a competitive range or enter discussion to address this responsibility issue with the apparent successful offeror. See General Dynamics Ordnance & Tactical Systems, B-295987, 2005 CPD ? 114.

Link to comment
Share on other sites

What I think you're asking is whether you can still award without discussions now that you see the OCI issue.

Question: Would the offeror in question win if it were not for the OCI issue? If not, then go ahead and award without discussion. Document the source selection record to show that the OCI issue came up, but played no role in the source selection decision.

If the offeror would win if it were not for the OCI issue, then I think you have a different situation. See FAR 9.504(e), which provides as follows:

Emphasis added. I think the bold-faced line indicates that you must conduct discussions before you can deny the offeror the award because of the OCI. I think that you would be at risk of a successful protest if you awarded to someone else without conducting discussions first.

Monsieur Vern, I believe Monsieur Jacques may be onto something. See the following from B-401842.2, Cahaba Safeguard Administrators, LLC, January 25, 2010:

Quote

Where an agency holds exchanges with an offeror regarding the offeror's plan to mitigate identified conflicts of interest, we have held that such exchanges do not constitute discussions and, as a consequence, they do not trigger the requirement to hold discussions with other offerors. See Overlook Systems Technologies, Inc., B 298099.4, B-298099.5, Nov. 28, 2006, 2006 CPD para. 185. Rather, such exchanges are more closely related to matters concerning the offeror's responsibility. Id. at 20.

In this regard, the FAR states as follows:

The contracting officer shall award the contract to the apparent successful offeror unless a conflict of interest is determined to exist that cannot be avoided or mitigated. Before determining to withhold award based on conflict of interest considerations, the contracting officer shall notify the contractor, provide the reasons, therefore, and allow the contractor a reasonable opportunity to respond.

FAR sect. 9.504(e).

As explained in Overlook, this provision contemplates a review after evaluations are completed and after an apparent awardee has been identified--it does not suggest reopening discussions with all offerors.

Here, after identifying AdvanceMed as the apparently successful offeror but for concerns regarding unmitigated conflicts, the agency gave AdvanceMed an opportunity to respond to the concerns in this regard. CMS's actions, while ultimately flawed, were consistent with the process outlined in FAR sect. 9.504(e). To the extent the protester argues that the agency provided AdvanceMed with additional information regarding the timing of the agency's issuance of future task orders (specifically, when it intended to issue task orders for Medicare Parts C and D work) during its exchanges, which necessitated opening discussions with all offerors, this information related solely to the need for and viability of AdvanceMed's amended mitigation strategy, and did not result in AdvanceMed making any changes to its proposal in terms of its technical approach or price.[8] Accordingly, we conclude that CMS's exchanges with AdvanceMed regarding its OCI plan, did not constitute discussions.

Unquote

I agree that the contractor must address the issue of an OCI with the apparently successful offeror, but it seems that the exchange with the contractor would not be discussions.

Link to comment
Share on other sites

Guest Vern Edwards

The GAO has never held that OCI is a matter of responsibility. What is has said is that it is "analogous" to a matter of responsibility for purposes of conducting discussions, such that the FAR 9.504(e) requirement to discuss OCI with one offeror does not trigger a requirement to establish a competitive range and conduct discussions with other offerors therein. GAO explains its reasoning in this regard in most detail in the Overlook decision cited by napolik. GAO (1) found that the agency did not give the offeror a chance to revise or modify its proposal and (2) argued that FAR 9.504(e) provides separate authority to engage in an exchange about OCI and does not trigger the requirements of FAR 15.306? and (d).

However, to the best of my knowledge, OCI has never been found OCI to be a matter of responsibility. If it is a matter of responsibility, an OCI issue might have to be referred to the SBA for certificate of competency determination.

As for discussions, avoidance or mitigation of an OCI might entail negotiation of contract terms, which would require an offeror to revise or modify its proposal, which would entail "discussions" in the FAR 15.306(d) sense. In Overlook, GAO found that the agency did not allow or require the offeror to revise or modify its proposal. GAO's strongest stance is that FAR 9.504(e) stands independent of FAR 15.306(d). GAO probably will not require agencies to establish a competitive range and conduct discussions with all offerors therein, but the Court of Federal Claims, which has disagreed with GAO with increasing frequency of late, might not go along.

The lowest risk course of action would be to establish a competitive range and conduct discussions. Next would be to have an exchange with the offeror in question without talking to the others, which would almost certainly trigger a protest about the conduct of discussions if the offeror with the OCI is chosen and had to include terms in its contract to avoid or mitigate the OCI. If the protest goes to the GAO, it looks like it would work out well for the agency, but if it goes to the COFC, who knows?

It's civ_1102's call. I'd probably conduct discussions with the one offeror and not with the others, but I'd do so knowing that there's a good chance that I'll get a protest if it comes out that I did it and that if the protest goes to the COFC there is some question about how it will come out.

Link to comment
Share on other sites

Vern,

Point taken that an OCI determination is not a responsibility determination, but the rules for discussions are largely analogous. While the SBA example is a good one, another is the GAO's deference to the agency on affirmative responsibility determinations, compared to its treatment (for instance) of a CO's failure to identify a potential OCI. As it relates to discussions, though, if a responsibility determination required a proposal revision, then the only way the offeror could be found responsible is if the Contracting Officer opened discussions.

I also agree with your description of the various prudent courses of action. I would add that government COs should have the discretion to control exchanges, and to affirmatively decide whether the government wants to open discussions. It should not be within a single offeror's power to force open discussions, and COs should be careful to craft their prompts during exchanges to make clear when the government is or is not inviting discussions.

Link to comment
Share on other sites

Guest Vern Edwards
Vern,

While the SBA example is a good one, another is the GAO's deference to the agency on affirmative responsibility determinations, compared to its treatment (for instance) of a CO's failure to identify a potential OCI. As it relates to discussions, though, if a responsibility determination required a proposal revision, then the only way the offeror could be found responsible is if the Contracting Officer opened discussions.

Jacques:

I don't understand what you've said in the above. Please clarify.

Link to comment
Share on other sites

Examples of when discussions might make an otherwise "irresponsible" offeror responsible would include downscoping the effort or extending the period of performance. Obviously this would not be common. I would suggest, though, that the circumstances under which the government is required to accept an OCI mitigation plan that requires changes in the terms and conditions in an RFP is also limited (though arguably less so than in matters of responsibility).

Link to comment
Share on other sites

Thanks for the comments, all. In the hypothetical case, the offeror in question is not necessarily in line for award (we don't know as the technical eval. is not completed). However, we are on a tight schedule and wanted to see what our options were in the event the one offeror with the potential OCI ended up being the prospective awardee.

Link to comment
Share on other sites

Hold on. An offeror that had an OCI that could not be mitigated or avoided would not be responsible because they would fail to meet the standard at FAR 9.104-1(g): "Be otherwise qualified and eligible to receive an award under applicable laws and regulations." FAR 9.504(e) effectively disqualifies such an offeror. A nonresponsibility determination on this basis is not referable to the SBA. See FAR 19.602-1(a)(2)(i).

If such an offeror could still be responsible, then on what basis could they be excluded from competition? FAR Subpart 6.2 does not authorize the exclusion of a source because that source has an OCI that cannot be mitigated or avoided.

Link to comment
Share on other sites

Guest Vern Edwards
Hold on. An offeror that had an OCI that could not be mitigated or avoided would not be responsible because they would fail to meet the standard at FAR 9.104-1(g): "Be otherwise qualified and eligible to receive an award under applicable laws and regulations." FAR 9.504(e) effectively disqualifies such an offeror. A nonresponsibility determination on this basis is not referable to the SBA. See FAR 19.602-1(a)(2)(i).

If such an offeror could still be responsible, then on what basis could they be excluded from competition? FAR Subpart 6.2 does not authorize the exclusion of a source because that source has an OCI that cannot be mitigated or avoided.

Don:

I understand what you are saying and it makes sense, logically. However, I cannot find a single decision, law review article, Briefing Paper, etc., in which OCI has been treated as or referred to as a matter of contractor responsibility under FAR 9.104. It appears that FAR 9.504 is a stand-alone ground for withholding award when an OCI cannot be avoided or mitigated.

There are important differences between responsibility and OCI. First, in the absence of positive evidence of responsibility, a CO must find a firm to be nonresponsible. The CO does not have to prove that the firm is nonresponsible. The burden is on the contractor to show that it is responsible. See FAR 9.103?. However, a CO must positively establish an OCI before he or she can withhold award on that basis. Second, if a CO finds a firm to be nonresponsible at the time of award, he or she is not obligated to give the firm a chance to "mitigate" the nonresponsibility. However, the CO must give a firm a chance to avoid or mitigate an OCI.

As GAO has said, responsibility and OCI are "analogous," i.e., comparable in some respects, but they are not the same. If an offeror has an OCI that it cannot avoid or mitigate, then the CO can disqualify the offeror under the authority of FAR 9.504. That does not violate FAR Part 6. Can you cite anything showing that GAO or the COFC have considered an OCI to be a matter of responsibility under FAR 9.104?

Link to comment
Share on other sites

Vern, I agree in general with all you've said, but there may be some circumstances where the general rule does not apply. Does the government have to give a contractor awarded a contract that expressly restrains its eligibility for future awards a chance to avoid or mitigate the OCI? While it might be a good idea for a government CO to seek a contractor's opinion as to whether or not the new contract is within the scope of the prohibition contained in the old, I doubt this is required.

Obviously both responsibility and OCI involve questions of eligibility. Whether or not OCI is a subset of responsibility is an academic question beyond my ken, but this may be too high a level of abstraction to be helpful in answering CO questions. OCI, because it relates to unfair competitive advantage, because it involves relationships, is not your typical responsibility issue, which does not usually relate to an adverse impact on third parties. Perhaps not well articulated, but there might be a kernel of an idea in there somewhere...

Link to comment
Share on other sites

Guest Vern Edwards
OCI, because it relates to unfair competitive advantage, because it involves relationships, is not your typical responsibility issue, which does not usually relate to an adverse impact on third parties. Perhaps not well articulated, but there might be a kernel of an idea in there somewhere...

Actually, that's well said.

Link to comment
Share on other sites

Don:

I understand what you are saying and it makes sense, logically. However, I cannot find a single decision, law review article, Briefing Paper, etc., in which OCI has been treated as or referred to as a matter of contractor responsibility under FAR 9.104. It appears that FAR 9.504 is a stand-alone ground for withholding award when an OCI cannot be avoided or mitigated.

Can you cite anything showing that GAO or the COFC have considered an OCI to be a matter of responsibility under FAR 9.104?

No, I can't. However, I don't see how that would come up in litigation. The GAO and COFC would look at whether an OCI existed or not, if an OCI existed was it properly mitigated or not, etc. The issue of whether an offeror that has unavoidable OCI is also nonresponsible doesn't have to be resolved to do that. Like Jacques said, the issue is academic. I also am not surprised that nobody has written about the issue because it is academic and uninteresting.

Let's assume that you are correct-it is possible for an offeror to be responsible even though they had an OCI that cannot be mitigated or avoided. Consider the following scenario:

Offeror A has an OCI that cannot be mitigated or avoided. The OCI is identified before you release the solicitation. The offeror did not agree to refrain from competing for any future contracts in any of its current or past contracts. You have no reason to believe that Offeror A is nonresponsible. You want to exclude Offeror A from competition.

Now you must comply with FAR Part 6. However, your procurement does not meet the definition of "full and open competition" because you are not permitting a responsible offeror to compete. From FAR 2.101:

?Full and open competition,? when used with respect to a contract action, means that all responsible sources are permitted to compete.

You need authority for not using full and open competition. What authority do you cite? FAR Subpart 6.2 permits full and open competition after the exclusion of sources in certain circumstances, none of which apply to the exclusion of a source because of an OCI. FAR Subpart 6.3 permits other than full and open competition in seven circumstances--which one applies to OCIs?

Link to comment
Share on other sites

Guest Vern Edwards
Let's assume that you are correct-it is possible for an offeror to be responsible even though they had an OCI that cannot be mitigated or avoided.

I did not say that an offeror is responsible even though they had an OCI. If I determined that an offeror had an OCI that could not be mititgated or avoided their responsibility would not come into question, because I would disqualify them under FAR Subpart 9.5. There would be no need for me to determine their responsibility one way or the other.

Consider the following scenario:

Offeror A has an OCI that cannot be mitigated or avoided. The OCI is identified before you release the solicitation. The offeror did not agree to refrain from competing for any future contracts in any of its current or past contracts. You have no reason to believe that Offeror A is nonresponsible. You want to exclude Offeror A from competition.

Now you must comply with FAR Part 6. However, your procurement does not meet the definition of "full and open competition" because you are not permitting a responsible offeror to compete.

You need authority for not using full and open competition. What authority do you cite? FAR Subpart 6.2 permits full and open competition after the exclusion of sources in certain circumstances, none of which apply to the exclusion of a source because of an OCI. FAR Subpart 6.3 permits other than full and open competition in seven circumstances--which one applies to OCIs?

The flaw in your scenario is that you assume I would want to prevent the prospective offeror from submitting a proposal. I would do no such thing. FAR 9.504(a)(2) requires that OCIs be avoided or mitigated before award, not before proposal submission. If an OCI came up with a prospective offeror I would warn them that if they submitted a proposal I would comply with FAR Subpart 9.5. I would let them submit a proposal and I would consider their proposal. If I thought that there was still an OCI I would proceed accordingly. If the OCI could not be avoided or mitigated, I would disqualify them accordingly. FAR Part 6 would not be an issue.

Link to comment
Share on other sites

Guest Vern Edwards

Don:

See NFK Engineering, Inc., 65 Comp. Gen. 104, B-220007, 85-2 CPD ? 638. In that case, the agency disqualified the protester because of an organizational conflict of interest. The offeror complained that the agency should have referred the matter to SBA for a certificate of competency. The protester was supported in this by the SBA's Chief Counsel for Advocacy. Here is the pertinent language from the GAO's decision:

Certificate of Competency

The FAR, 48 C.F.R. ? 19.602?1, requires a contracting officer, upon determining that a responsive small business lacks certain elements of responsibility (including ?competency, capability, capacity, integrity, perseverance, and tenacity?), to refer the matter to the SBA. NKF argues that the Navy is required to refer the determination to exclude NKF to the SBA. The protester is joined in its opinion by SBA's Chief Counsel for Advocacy, who filed comments with our Office on this issue.

The Navy responds that FAR, 48 C.F.R. ? 19.602?1(a)(2)(i), excludes from the certificate of competency program determinations that a small business concern is not responsible because it is ?unqualified or ineligible? to receive an award under applicable laws and regulations. The Chief Counsel for Advocacy points out that we have questioned whether this regulatory exception overcomes a small business concern's right to a certificate of competency referral under the Small Business Act, 15 U.S.C. ? 637(B)(7) (1982), when compliance with a traditional element of responsibility is at issue. International Business Investments, Inc., et al., 60 Comp.Gen. 275 (1981), 81?1 CPD ? 125.

We do not believe that the Navy's exclusion of NKF involves a question of responsibility. Some conflict of interest issues, such as whether an offeror's performance on a contract will be influenced by conflicting economic interests, involve the offeror's capability to perform and are, therefore, matters of responsibility. In this case, however, no one has questioned NKF's capability. Rather, the Navy believes that it is so likely that NKF received an improper advantage that the integrity of the competitive process in general and of this procurement in particular require exclusion of the firm. This question is not related to any of the traditional elements of responsibility, and it therefore, in our view, need not be referred to the SBA.

The protest is denied.

Emphasis added.

As a side issue, note that GAO has questioned the validity of FAR 19.602-1(a)(2)(i), to which you referred in an earlier post. See, e.g., International Service Assocs., Inc., Comp. Gen. Dec. B-253050, 1993 WL 306202 (Comp. Gen.) and Small Business Administration--Request for Reconsideration, Comp. Gen. Dec. B-219654, 86-1 CPD P 420. 15 USC 637(a)(7) gives SBA authority under the COC program with respect to "all elements of responsibility, including, but not limited to, capability, competency, capacity, credit, integrity, perseverance, and tenacity, of any small business concern or group of such concerns to receive and perform a specific Government contract." The statute makes no exceptions; neither do SBA regulations, see 13 CFR. See Tolle, 99-11 Briefing Papers 1, Small Business Contracting--Part I at 11 ("Neither the SBA nor the contracting agency may create exceptions to the statutory requirement for referral to the SBA.") However, it has long been held that when an agency has statutory authority to decide a particular issue, e.g., Department of Labor debarment of a firm for violation of the Service Contract Act, SBA cannot overrule that agency by issuing a certificate of competency, so the CO need not refer such cases to SBA. Even assuming that a OCI were a matter of responsibility, it is not clear that FAR 19.602-1(a)(2)(i) would apply to matters of OCI. As we know, the FAR has been found to be in conflict with statute on more than one occasion and overruled accordingly. In any case, however, it appears that GAO does not consider OCI to be a matter of responsibility under FAR 9.104.

Link to comment
Share on other sites

Vern,

From what you quoted, it seems that the GAO will view some OCIs as a matter of responsibility ("such as whether an offeror's performance on a contract will be influenced by conflicting economic interests") and other OCIs not as a matter of responsibility (unfair competitive advantage). Interesting.

For what it's worth, Formation of Government Contracts, Third Edition, categorizes OCIs under "Collateral Requirements" in the discussion of "Standards of Responsibility" in Chapter 4. Other collateral requirements discussed include EEO, Small Business Subcontracting, Award to Government Employees, and Contracts with Pinkerton Detective Agencies. In the beginning of the discussion of "Collateral Requirements" it states (p. 428):

Offerors that do not meet specific requirements imposed by statute or regulation may be excluded from contracting even though they appear otherwise fully able and willing to perform the work specified in the solicitation. These requirements are termed "collateral" because they are not involved with the performance of the work called for by the contract. In some cases, they are closely related to the responsibility issue, while in others they are separate eligibility considerations. See, however, FAR 9.104-1(g), apparently making all such issues matters of responsibility.

The GAO seems to be viewing any consideration of responsibility as necessarily performance-related. However, given the broad language of FAR 9.104-1(g), I don't believe this is correct. FAR 9.104-1(g) states:

Be otherwise qualified and eligible to receive an award under applicable laws and regulations.

I believe that this means that prospective contractors are also nonresponsible if they were disqualified or ineligible under applicable laws and regulations for reasons related to performance or not.

Link to comment
Share on other sites

Guest Vern Edwards

Don:

I understand your reasoning, but I'm going to stick with my position, which is not based entirely on the language in FAR, but also on what appears to have been long-standing practice. It's been an interesting discussion.

Vern

Link to comment
Share on other sites

Guest
This topic is now closed to further replies.
×
×
  • Create New...