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FAR 9.104-1:  Responsibility - General Standards

Comptroller General - Key Excerpts

Relying on our recent decision in FCI Federal, Inc., DynCorp alleges that the agency failed to reasonably consider the impact of the two pending [False Claims Act] FCA cases against KBR, and argues that these cases demonstrate that KBR lacks the requisite satisfactory record of integrity and business ethics to justify an affirmative responsibility determination. See Protest (Apr. 27, 2012) at 32-34. Specifically, the protester argues that the contracting officer here failed to review copies of the complaints filed by the United States in the two FCA cases and “relied exclusively on KBR’s general, self-serving reports to the Army Suspension and Debarment Office (“SDO”) about [the Department of Justice’s] fraud claims against KBR and failed to consider any other information about those claims.” DynCorp Comments (June 8, 2015) at 39.

The Army contends that its affirmative responsibility determination reasonably considered the pending FCA litigation within the broader context of the totality of KBR’s present responsibility. See AR at 37-38. We agree. The Army here convened a team that was responsible for researching and collecting data regarding the LOGCAP IV contractors. See AR, Tab 18-2, Contracting Officer’s Responsibility Determination (Apr. 17, 2015), at 1. The team prepared a Contractor Responsibility Report analyzing KBR’s present responsibility under each of the FAR § 9.104-1 factors and documenting the team’s review of various source materials, including a Defense Contract Management Agency (DCMA) pre-award survey and business system reviews. See AR, Tab 18-1, Contractor Responsibility Report (Apr. 2, 2015).

Regarding KBR’s record of integrity and business ethics, the team found that a September 19, 2014, DCMA pre-award survey, which was prepared after the Department of Justice’s filing of complaints in the two FCA cases, concluded that KBR’s record during the timeframe of the survey was satisfactory and reflected no areas of concern, and that KBR was proactive in this area. Id. at 3. The team also found that KBR has enhanced its government compliance program, including requiring [DELETED] for all employees, increasing, and making voluntary disclosures to the Army SDO. Id. at 4.

The contracting officer prepared and executed a memorandum adopting the Contractor Responsibility Report and making his own affirmative responsibility determination for KBR. AR, Tab 18-2, Contracting Officer’s Responsibility Determination (Apr. 17, 2015). The contracting officer represented that he reviewed KBR’s most recent quarterly report to the Army SDO, which in part addressed the two FCA cases relied upon by the protester. Id. at 3. The contracting officer also represented that he had personal knowledge regarding litigation involving KBR arising from the LOGCAP III contract based on his previous role as the contracting officer of record for LOGCAP III matters, and specifically his role as the contracting officer for KBR’s LOGCAP III closeout activities task order. See AR at 36-37 n.5.

Regarding the matters relating to KBR’s government contracting in Iraq and other theaters, the contracting officer determined that KBR’s cooperation with investigating government agencies and voluntary quarterly disclosures to the Army SDO were positive factors bearing on KBR’s present responsibility. AR, Tab 18-2, Contracting Officer’s Responsibility Determination (Apr. 17, 2015), at 3. The contracting officer also considered that, notwithstanding KBR’s voluntary disclosures to the Army SDO dating back to 2007, KBR has not been suspended or debarred and that KBR continues to vigorously defend itself against the pending litigation. Id. The contracting officer, factoring in these matters and “[g]iven the totality of the information made available” to him, determined that KBR was presently responsible. Id.

On this record, we find that the contracting officer was aware of and reasonably considered the pending litigation relied upon by the protester. For this reason, there is no basis for our Office to review the contracting officer’s affirmative determination of KBR’s responsibility.  (DynCorp International LLC B-411465, B-411465.2: Aug 4, 2015)  (pdf)

With regard to the agency’s responsibility determination, FCi argues that the agency failed to evaluate USIS PSD’s record of integrity and business ethics, as required by Federal Acquisition Regulation (FAR) § 9.104-1(d). FCi contends that this failure is significant because the awardee’s record of integrity and business ethics is unacceptable. In this regard, FCi notes that the Department of Justice’s complaint raises serious allegations of fraud in the performance of a government contract and alleges that USIS LLC management was fully aware of, and participated in the fraud.

Although the offeror here is USIS PSD, not USIS LLC, the protester asserts that USIS PSD is a wholly-owned subsidiary of USIS LLC, that USIS LLC is closely involved in the functioning of USIS PSD, and that USIS LLC will be substantially involved in performance of this contract. FCi contends that, therefore, the contracting officer erred in failing to consider, or failing to give sufficient weight to, USIS LLC’s alleged fraud and the close relationship between USIS LLC and USIS PSD when performing her responsibility determination.

FAR § 9.103(b) provides that “[n]o purchase or award shall be made unless the contracting officer makes an affirmative determination of responsibility.” In making the responsibility determination, the contracting officer must determine, among other things, that the contractor has “a satisfactory record of integrity and business ethics.” FAR § 9.104-1(d). Further, “[i]n the absence of information clearly indicating that the prospective contractor is responsible, the contracting officer shall make a determination of nonresponsibility.” FAR § 9.103(b). In addition, FAR § 9.105-2(b) requires that “[d]ocuments and reports supporting a determination of responsibility or nonresponsibility . . . must be included in the contract file.” FAR § 9.105-2(b).

As a general matter, our Office does not review affirmative determinations of responsibility by a contracting officer. 4 C.F.R. § 21.5(c) (2014); CapRock Gov’t Solutions, Inc.; ARTEL, Inc.; Segovia, Inc., B-402490 et al., May 11, 2010, 2010 CPD ¶ 124 at 26; Navistar Defense, LLC; BAE Sys., Tactical Vehicle Sys. LP, B-401865 et al., Dec. 14, 2009, 2009 CPD ¶ 258 at 20. We will, however, review a challenge to an agency’s affirmative responsibility determination where the protester presents specific evidence that the contracting officer may have ignored information that, by its nature, would be expected to have a strong bearing on whether the awardee should be found responsible. 4 C.F.R. § 21.5(c); see Southwestern Bell Telephone Co., B-292476, Oct. 1, 2003, 2003 CPD ¶ 177 at 8 (sustaining protest of an affirmative determination of responsibility where the contracting officer had general knowledge through various media outlets of allegations of misconduct by the awardee’s parent company but failed to obtain and consider sufficient information about the allegations).

As set forth above, the contracting officer’s determination that USIS PSD is a responsible contractor is documented in a one-page form. AR, Tab 51, Determination of Prospective Contractor Responsibility Form, at 1. With regard to the awardee’s record of integrity and business ethics, the form reflects a finding of “satisfactory,” with the rationale listed simply as “Past Performance Eval/EPLS.” Id. at 1.

When a contracting officer makes a determination of responsibility, as opposed to a determination of non-responsibility, the FAR does not require the contracting officer to “make, sign and place in the contract file a determination of” responsibility which states the basis for the determination. See FAR § 9.105-2(a)(1); Impresa Construzioni Geom. Domenico Garufi v. U.S., 238 F.3d 1324, 1337-38 (2001). In such cases, it may be necessary to consider the contracting officer’s post hoc explanations offered on the record in response to a protest in order to determine whether there is specific evidence that the contracting officer may have ignored information that, by its nature, would be expected to have a strong bearing on whether the awardee should be found responsible. See Impresa Construzioni Geom. Domenico Garufi v. U.S., supra, at 1339 (ordering deposition of contracting officer to determine what information he possessed and considered in making the determination of responsibility).

Here, the statements of the contracting officer in response to the protest indicate that she lacked the facts necessary to make an informed decision about, and thus failed to adequately consider, the specific allegations of fraudulent activity made by the DOJ. As set forth above, the contracting officer testified that her knowledge of the allegations was based primarily on media reports. According to the contracting officer, she did not read DOJ’s civil complaint for details regarding the allegations; she received no information from USIS PSD or USIS LLC regarding the alleged fraud; she did not discuss the allegations with anyone at OPM; she did not seek information from the suspension and debarment officials of OPM or DHS; and she did not contact anyone at DOJ to obtain additional information about the allegations. Tr. at 23, 39, 40-41.

Further, the record indicates that the contracting officer misunderstood, and as a result, failed to consider, the close relationship between USIS PSD and its parent USIS LLC with respect to performing the contemplated contract. During the hearing before our Office, the contracting officer emphasized that her responsibility determination was based, in part, upon her understanding that USIS PSD is a separate legal entity from USIS LLC. See, e.g., Tr. at 24, 27, 61, 102. However, USIS PSD informed the agency during the procurement that it would not operate independently of USIS LLC when performing the contract. Specifically, USIS PSD advised the agency that:

USIS LLC operating divisions [such as USIS PSD] do not operate independently or even semi-independently from each other or from the parent company, the LLC. The whole of USIS LLC is managed by [DELETED], our President. We have one integrated command and control structure. We share a set of common policies and procedures across the corporation . . . . Our employees also move across the organization among operating Divisions and the LLC.

AR, Tab 27, Folder 1, USIS Response to Questions, at 11. In addition, the transmittal letters submitting USIS’s first revised proposal (FPR1) and second final revised proposal (FPR2) likewise indicated that USIS PSD and USIS LLC were not operating independently of each other for purposes of this contract effort, since the letters were submitted by the president of USIS LLC, the parent company of USIS PSD. AR, Tab 42, USIS FPR2, at 13 (containing signature of USIS LLC’s president); AR, Tab 27, Folder 1, USIS Response to Questions, at 2 (containing signature of another individual on behalf of USIS LLC’s president).

The record also clearly establishes that the agency accepted, for purposes of the past performance evaluation, USIS PSD’s representation that USIS LLC would be substantially involved in performance of the contract. In this regard, the solicitation provided that the agency would consider the past performance of a parent only if an offeror showed that the parent would be “substantially involved in performance of the [field office support services] effort.” RFP at 102. Among the awardee’s past performance references was a contract performed by its parent, USIS LLC, for investigative fieldwork for the National Reconnaissance Office. In finding this reference relevant, the agency stated that “[f]or those references where USIS submitted past performance of their parent . . . they provided information regarding how they will be substantially involved in performance of the [field office support services] effort.” AR, Tab 44, Folder 5, BEC Consolidated Past Performance Report, at 21. Thus the agency agreed with USIS PSD that USIS LLC would have substantial involvement in the performance of the contract here.

Finally, there is reason to question whether the contracting officer knew that she had the authority to find a contractor nonresponsible in the absence of a suspension or debarment. In response to the protest, the contracting officer submitted a written statement that “[u]nder the standard of ‘innocent until proven guilty in a court of law’ there is no basis for [the agency] to not award a contract to USIS PSD through a de facto debarment.” CO Statement at 5. Likewise, the agency report indicated that finding the awardee nonresponsible would “amount[] to a de facto suspension or debarment of USIS PSD without due process. . . In this case, the suspension and debarment matters are under OPM’s purview, and it has not taken action against USIS LLC.” AR at 8-9. At the hearing, the contracting officer provided the following response regarding her ability to find a contractor non-responsible in the absence of a debarment:

[Hearing Officer]: Could you still find a contractor non-responsible whether or not they’ve been debarred?

[Contracting Officer]: I do not believe I can do so.

Tr. at 100.

On redirect, agency counsel indicated to the contracting officer that she may not have understood the question, and attempted to lead her to a different answer, asking: “do you have the discretion, as the contracting officer, to find someone non-responsible when that person has not been suspended or debarred?” Tr. at 101. In contrast to her earlier answer, Tr. at 100, the contracting officer at this point answered in the affirmative. Tr. at 101. In our view, the weight of the evidence indicates that the contracting officer here was unclear of her authority in this regard. Specifically, the contracting officer’s written statement and the agency report, CO Statement at 5 (“[u]nder the standard of ‘innocent until proven guilty in a court of law’ there is no basis for [the agency] to not award a contract to USIS PSD through a de facto debarment”); AR at 8 (“act[ing] in OPM’s stead by finding USIS PSD non responsible . . . amounts to a de facto suspension or debarment of USIS PSD without due process”), as well as her conflicting testimony at the hearing, indicate that the contracting officer may have believed that, in the absence of a suspension or debarment, she was unable to find USIS PSD nonresponsible.

Moreover, we note that the contracting officer also seemed to be mistaken regarding the presumptions to be applied in a responsibility determination. The FAR states that, “in the absence of information clearly indicating that the prospective contractor is responsible, the contracting officer shall make a determination of nonresponsibility.” FAR § 9.103(b). Thus, a contractor is presumed nonresponsible until the contracting officer affirmatively finds that there is information clearly indicating that the offeror is responsible. However, the contracting officer appears to have shifted the presumption to one of responsibility until “proven” nonresponsible. See Contracting Officer’s Statement at 5; see also Tr. at 28-29, 102-103.

We recognize that, in response to this protest, the agency contends that the services required under the instant solicitation differ markedly from those involved in the OPM contracts under which USIS LLC allegedly committed fraud. As a result, the agency argues that USIS LLC’s alleged fraud under the OPM contracts has no bearing on what the agency can expect in USIS PSD’s performance of the contract here. AR at 2. For example, at the hearing, the SSA stated that the services here involve mostly clerical support, which will have a high level of oversight by agency personnel, while the services under the OPM contract (performing background investigations) involved much less supervision and much more discretion on the part of the contractor’s employees. Tr. at 112.

However, in its proposal, USIS PSD itself characterized the OPM field contract as “particularly relevant” to the company’s ability to complete the solicitation’s requirements. AR, Tab 27, Folder 2, USIS Technical Proposal Changes, at 49. In particular, USIS emphasized that the company’s infrastructure and management oversight on the OPM contract was an indication of what could be expected from USIS PSD in performing the contract here:

USIS LLC: OPM Field - In the 15 years that USIS has supported OPM by providing background fieldwork investigative services, USIS has developed the right infrastructure, management oversight, and efficient processes to support tasks in multiple sites and locations. We currently leverage our financial and organizational resources to support a team of well over [DELETED] individuals dedicated to the OPM program . . . . The relevance to [field office support services] of this corporate experience is that we have the management infrastructure in-place and business processes to manage a dispersed workforce in multiple locations, performing adjudicative work in support of national security goals.

AR, Tab 27, Folder 2, USIS Technical Proposal Changes, at 49. USIS PSD’s proposal repeatedly emphasized that the OPM field contract was a relevant indicator of the quality of performance that could be expected under the requirements of this contract. Id. at 50 (“The relevance to [field office support services] of this corporate experience is that we are able to manage complex activities with potentially significant national security implications, with a largely [DELETED] workforce dispersed across the US”), 58, 60; see also, id. at 4, 6, 8, 43, 46, 47, 48, 51, 52, 57, 59 (referencing USIS LLC’s work on the OPM fieldwork contract), and id. at 12, 43, 44, 46, 50, 51, 53, 58 (referencing USIS LLC’s work on the OPM support services contract).

Moreover, “a satisfactory record of integrity and business ethics” is a prerequisite for a prospective contractor to be determined responsible. FAR § 9.104-1(d). In our view, a company’s record of integrity and business ethics is not task specific. That is, the alleged commission of fraud while performing one type of service is not irrelevant to the company’s integrity and ethics in the performance of different services, even where the agency feels it may be in a better position to catch any potential future fraud more quickly due to the level of agency supervision of contractor employees.

In sum, the record in this case includes ample evidence that the contracting officer may not have considered information that, by its nature, would be expected to have a strong bearing on whether the awardee should be found responsible. Specifically, the contracting officer failed to obtain and consider the specific allegations of fraud alleged by the DOJ, relying instead on general media reports. The contracting officer also failed to consider the close relationship between USIS PSD and its parent, USIS LLC, with respect to the contemplated approach to contract performance, mistakenly believing that the two companies were separate, when USIS itself informed the agency that USIS PSD was not “independent[], or even semi-independent[]” from its parent. AR, Tab 27, Folder 1, USIS Response to Questions, at 11. The contracting officer also apparently misunderstood the legal standards related to affirmative responsibility determinations, mistakenly believing that a finding of nonresponsibility results in a de facto debarment without due process, and thus was unavailable to the contracting officer. As a result, we find the contracting officer’s affirmative determination of responsibility to be unreasonable. See Southwestern Bell Telephone Co., supra. Therefore, we sustain the protest on this basis.  (FCi Federal, Inc., B-408558.4, B-408558.5, B-408558.6: Oct 20, 2014)  (pdf)


  Sygnetics argues that the Army's rejection of its proposal was unreasonable because DCAA's conduct in performing its audit of Sygnetics was improper and because the agency unreasonably relied on DCAA's finding that the protester's [cost accounting system] CAS was unacceptable without considering other information provided by the protester regarding the acceptability of its CAS. For the reasons discussed below, we conclude that these arguments have no merit.

The evaluation of an offerors' CAS is a matter of responsibility. McKissack+Delcan JV II, B-401973.2, B-401973.4, Jan. 13, 2010, 2010 CPD para. 28 at 6. FAR sect. 9.104(e) provides that "to be determined responsible, a prospective contractor must . . . have the necessary organization, experience, accounting and operational controls, and technical skills, or the ability to obtain them." FAR sect. 16.301-3(a)(1) requires that cost-reimbursement contracts are only used when a contractor's accounting system is adequate for determining costs applicable to the contract.

Offeror responsibility is to be determined based on any information received by the agency up to the time award is proposed to be made. FAR sect. 9.105-1(b)(3); American Tech. & Analytical Servs., Inc., B-282277.5, May 31, 2000, 2000 CPD para. 98 at 3. The determination of a prospective contractor's responsibility rests within the broad discretion of the contracting officer, who, in making that decision, must necessarily rely on his or her business judgment. We therefore will not question a negative determination of responsibility unless the determination lacked a reasonable basis. McKissack+Delcan JV II, supra. In this regard, however, while an agency may rely on a reasonable DCAA audit finding, an agency's reliance upon the advice of DCAA does not insulate the agency from responsibility for error on the part of DCAA. See ASRC Research & Tech. Solutions, LLC, B-400217, B-400217.2, Aug. 21, 2008, 2008 CPD para. 202 at 11 n.12.

DCAA's Actions in Conducting Audits

First, Sygnetics argues that DCAA acted improperly in conducting the audit that was the subject of the January 20, 2011, report. In this regard, the protester argues that DCAA should have limited its review to the Sygnetics' responses to the audit deficiencies identified in November 2009, instead of conducting a new audit. The protester, however, provides no support for its argument that DCAA must limit its review to those deficiencies identified in prior reports, nor does the protester provide support for its argument that DCAA acted improperly by identifying new deficiencies. Indeed, DCAA identification of additional legitimate concerns with Sygnetics' accounting system was entirely consistent with that agency's responsibility for verifying that the system was adequate to support the award of a cost-reimbursement contract. FAR sect. 16.301-3(a)(1).

Sygnetics' also argues that DCAA's delay in addressing the protester's responses to the November 2009 audit report was unreasonable, and that if DCAA had addressed Sygnetics' responses to that audit more quickly, Sygnetics may have also been able to better address the six deficiencies raised in the January 2011, audit report. Again, however, the protester does not cite any support for its argument that the timeframes here constitute a violation of a procurement law or regulation. Although there may have been a delay in DCAA's consideration of Sygnetics' responses to its November 2009 audit, the Army took corrective action in response to protest B-404535.2 in order to ensure that DCAA considered those responses and updated its audit of the protester's CAS. The fact that new deficiencies were identified does not demonstrate, as discussed above, that DCAA or the Army acted improperly. Furthermore, there is no requirement that an agency permit an offeror with unlimited opportunities to correct or address concerns regarding its responsibility, prior to making award. See Kilgore Flares Co., B-292944 et al., Dec. 24, 2003, 2004 CPD para. 8 at 10-11 (agency is not required to continue to discuss the protester's responsibility where protester had provided inadequate response to agency's concerns); Commerce Funding Corp., B-236114, Oct. 2, 1989, 89-2 CPD para. 287 at 4 (same). On this record, we find no basis to sustain the protest.

Army's Actions in Reviewing DCAA's Audit Report

Next, Sygnetics argues that the Army unreasonably relied on the DCAA audit report in concluding the protester did not have an approved CAS, and unreasonably failed to consider the protester's additional information stating that it had addressed all of the deficiencies. The record shows, however, that the SSA and CO considered the information provided by DCAA in its audit report, as well as the information provided by Sygnetics to DCAA. CO Statement at 4-5; AR, Tab 9, Revised Source Selection Decision, at 4. Aside from its January 19, 2011, response to DCAA's initial findings, which was addressed in DCAA's report, the protester does not identify any other substantive information provided to the CO that demonstrates that the protester had addressed the deficiencies identified by DCAA. For example, the protester's February 14 and March 10 letters to the CO merely repeat the protester's arguments that it had or was in the process of addressing the deficiencies, in the same manner set forth in the January 19 response.

In any event, to the extent that Sygnetics argues that the information it provided to the Army demonstrates that its CAS was acceptable, we do not agree. While Sygnetics argues that the January 20, 2011, audit report indicates that it had addressed all of the deficiencies identified by DCAA, the audit report in fact stated that Sygnetics disagreed with the G&A finding; for this reason, the report stated that DCAA did not consider this issue to have been addressed. Tab 7, DCAA Audit Report, Jan. 20, 2011, at 9. The report also stated that while Sygnetics had agreed to correct five of the deficiencies, DCAA recommended future monitoring of the protester's responses to these deficiencies. Id. at 5, 7, 10-12. For these reasons, the DCAA concluded that, notwithstanding Sygnetics' responses, "the six current conditions listed above are outstanding, and, as a result, the accounting system is considered inadequate." Id. at 3.

With regard to the G&A allocation deficiency, the protester does not explain why DCAA's concern was incorrect, or how it has otherwise addressed this deficiency. DCAA expressed concern in its initial report and exit interview that Sygnetics' CAS applied G&A rates in a manner that did not reflect an "equitable distribution of indirect costs." Id. at 8. DCAA recommended that the protester "allocate G&A expenses over a base that is representative of benefits realized in accordance with FAR [sect.] 31.203," and that "Sygnetics should be properly tracking and classifying labor spent directly managing specific subcontracts as direct in accordance with FAR [sect.] 31.202." Id. While Sygnetics argued to DCAA that "setting up a separate indirect rate for subcontractor labor will not result in a more accurate allocation of costs," so that no corrective action was required, id., app. 1, Sygnetics Response, Jan. 19, 2011, at 3, the DCAA disagreed and reiterated the recommendation that the protester "revise their allocation practices to result in an equitable distribution of indirect costs to cost objectives." AR, Tab 9, DCAA Audit Report, Jan. 20, 2011, at 9. On this record, we conclude that the Army reasonably relied on DCAA's advice that the protester's CAS was not acceptable, in light of Sygnetics' failure to acknowledge or correct this evaluated deficiency.

As to the five remaining deficiencies cited in DCAA's January 2011 report, Sygnetics does not dispute that these deficiencies required correction. Instead, the protester's response merely indicated that the protester would comply with the recommendations. Based on this stated intention to comply, however, the DCAA report recommended further review to determine whether compliance had been achieved. Id. at 5, 7, 10-12. We conclude that although Sygnetics stated that it would comply with the remaining recommendations, the CO could rely on DCAA's recommendation that further review of the protester's CAS should be completed prior to finding the CAS acceptable for those issues.

In sum, we see nothing unreasonable in the Army's conclusion that, based on the DCAA audit report and the information provided by Sygnetics, the protester did not have a CAS that was approved by DCAA, as required by the RFP.

The protest is denied.  (Sygnetics, Inc., B-404535.5, August 25, 2011)  (pdf)

Comptroller General - Listing of Decisions

For the Government For the Protester
DynCorp International LLC B-411465, B-411465.2: Aug 4, 2015  (pdf) FCi Federal, Inc., B-408558.4, B-408558.5, B-408558.6: Oct 20, 2014  (pdf)
Sygnetics, Inc., B-404535.5, August 25, 2011  (pdf)  

U. S. Court of Federal Claims - Key Excerpts

On March 4, 2016, the Court issued an opinion and order setting aside the Navy’s October 7, 2015 award to Louis Berger Aircraft Services for air terminal and ground handling services at Naval Station Rota, Spain. Algese 2 s.c.a.r.l.v. United States, 125 Fed. Cl. 431 (2016). In its opinion, the Court permanently enjoined contract performance based on Louis Berger Aircraft Services’ intentional and material misrepresentations to the Contracting Officer. Louis Berger Aircraft Services made false certifications under FAR 52.209-5 and FAR 52.209-7 regarding criminal proceedings against the family of Louis Berger companies and its executives for bribery and fraud. As a result, the Navy’s reliance on Louis Berger Aircraft Services’ representations rendered its responsibility determination arbitrary and capricious.

On March 28, 2016, the Government filed a motion for reconsideration of the Court’s opinion and order or, alternatively, a stay of judgment pending appeal. The Government based its request on new information not included in the Administrative Record. Based on the new information and after a hearing on March 29, 2016, the Court vacated its judgment and remanded the case to the Navy for 45 days to permit the Navy to make an updated responsibility determination and to consider issuing a new business clearance memorandum in light of the Court’s March 4, 2015 opinion and order. The Court kept the permanent injunction in place. In remanding to the Navy for further consideration, the Court left open the possibility that the Navy, after considering the newly presented evidence, would disagree with the Court’s conclusions. In this circumstance, the Court instructed the Navy that it would have to explain why it came to a different conclusion from the Court.

On June 1, 2016, the Government filed a status report informing the Court that the Navy had updated its responsibility determination, and assessed the Court’s legal and factual determinations based upon 2,500 pages of new information included in the remand Administrative Record. Administrative Record (“AR”) 1752-80. The Navy concluded that Louis Berger Aircraft Services is a responsible offeror and should be awarded the contract. As discussed below, the Navy weighed and considered each of the Court’s principal reasons for finding that Louis Berger Aircraft Services had made material misrepresentations. Now, the sole question before the Court is whether the Navy’s determinations in its updated responsibility determination are arbitrary and capricious, or lack a rational basis. Even though the Court may not have reached the same conclusion as the Navy, the Court cannot say that the Navy’s determinations are unreasonable or unlawful.

A. Former Chairperson Derish Wolff’s 2014 Plea Agreement

In its previous opinion and order, the Court concluded that Louis Berger Aircraft Services falsely certified that neither it nor “any of its principals . . . within five years, in connection with the award to or performance by the offeror of a Federal contract or grant, have been the subject of a proceeding . . . that resulted in . . . a conviction.” AR 419. Derish Wolff, the former chairperson of Louis Berger Aircraft Services’ parent corporation, had been indicted for and pleaded guilty to defrauding the U.S. Agency for International Development within five years of Louis Berger Aircraft Service’s proposal. AR 1432. Relying on language in the Department of Justice indictment, the Court concluded that Mr. Wolff was a “principal” as he owned 25 percent of Louis Berger Aircraft Services’ parent corporation at the time of his guilty plea. Louis Berger Aircraft Services asserted that the company had converted Mr. Wolff’s stock to non-voting trust certificates before his guilty plea, extinguishing Mr. Wolff’s ownership interest.

On remand, the Navy fully developed the record on this issue. The Navy considered whether: (1) Derish Wolff was a principal under FAR 52.209-7; and (2) his criminal conviction was in connection with the award to or performance by Louis Berger Aircraft Services of a Federal contract or grant under FAR 52.209-7. AR 1765. The Navy answered both of these questions negatively and concluded that Louis Berger Aircraft Services did not provide false certifications. 1. Mr. Wolff’s Status as a “Principal” Under FAR 52.209-7 The Navy determined that Mr. Wolff had no stock ownership after 2010, five years before his guilty plea, in Berger Group Holdings, the parent corporation of Louis Berger Aircraft Services. Mr. Wolff’s 2010 separation agreement required him to sell half of his shares to Berger Group Holdings and exchange the remaining shares for non-voting trust certificates within 30 days of executing the agreement. AR 1764; AR 3759 (Separation Agreement). On September 20, 2010, Mr. Wolff and Berger Group Holdings executed a promissory note selling half of his shares to the company. AR 3765-70 (Promissory Note). On September 28, 2010, Mr. Wolff and Berger Group Holdings entered an agreement exchanging his remaining shares of voting stock for non-voting trust certificates. AR 1764; AR 3785-87 (Exchange Agreement).

Algese asserts that the Contracting Officer should have viewed any indicia of ownership conferred by the non-voting trust certificates as sufficient to make Mr. Wolff an owner, and thus, a principal under FAR 52.209-7. In essence, Algese argues that actual stock ownership is not necessary for the Contracting Officer to conclude Mr. Wolff was an owner: non-voting trust certificates are sufficient to require Louis Berger Aircraft Services to disclose Mr. Wolff’s 2015 plea agreement. The Contracting Officer disagreed.

Based on this new evidence, the Navy concluded that the promissory note and non-voting trust certificates did not give Mr. Wolff an ownership interest in Louis Berger Aircraft Services’ parent company. AR 1766; see AR 3778-84. Regarding the trust certificates, the Navy concluded that while they convey “‘indicia of ownership,’ the trust certificates do not confer ownership . . . as it is a debt or financial instrument and a trustee controls the rights associated with the trust certificate.” Id. As shown in the trust agreement, only the trustee can vote the shares of the trust, not Mr. Wolff. AR 4024-25; AR 2836. While the trustee has voting rights, his vote does not allow him to affect the outcome of a vote. See id. (explaining that the shares must be voted in proportion with the votes of the remaining shareholders, to ensure that the trustee’s vote has no impact on the outcome of any matter being voted upon). Although, Mr. Wolff maintained a passive financial interest in Berger Group Holdings through the trust certificates, he had no ability to control or influence the Louis Berger family of companies either directly or indirectly.

Further, the trust “is intended to dissociate ownership of the economic interest in the shares . . . from any of the elements of control or influence ordinarily associated with actual record ownership.” AR 4024. Thus, under the terms of the trust and shareholders’ agreements, Mr. Wolff retained no title in any company shares and by transferring ownership of his shares to a trust, his remaining financial interest was severed from any ownership rights. He had no remaining contingent interest as the trust agreement would never permit him to own stock. AR 3778 (shareholders’ agreement explaining that only active employees may own stock); AR 3785 (Mr. Wolff “hereby transfers, assigns and delivers all of his right, title and interest in the Deposited Shares free and clear”). Even assuming that incidental benefits of ownership are sufficient to make Mr. Wolff a principal, he redeemed all of his trust certificates prior to his guilty plea. AR 1765, n.5. Therefore, it was reasonable for the Contracting Officer to conclude that the trust certificates do not confer ownership and that Mr. Wolff is not an owner.

(paragraphs deleted)

B. Berger Group Holdings and the 2015 Deferred Prosecution Agreement

Addressing another of the Court’s primary concerns, the Navy considered whether Berger Group Holdings was “otherwise criminally charged” in connection with a 2015 deferred prosecution agreement against Louis Berger Aircraft Services’ sister corporation Louis Berger International. Previously the Court concluded that Berger Group Holdings was “otherwise criminally charged” under FAR 52.209-5 for two reasons: (1) the Department of Justice formally accused Berger Group Holdings of engaging in a long-term scheme to bribe foreign officials to win public contracts; and (2) the company’s conduct presented adequate evidence of irregularities seriously reflecting on the propriety of further Federal Government dealings. In the briefs leading to the Court’s March 2016 opinion, the parties contested the scope of the 2015 deferred prosecution agreement. The disagreement arose from the agreement’s definition of “company.” The deferred prosecution agreement defined “company” to include Berger Group Holdings. Then, it detailed the alleged misconduct perpetrated by the “company.” See, e.g., AR 1372-73. After analyzing new evidence not previously before the Court, the Contracting Officer concluded that Berger Group Holdings was not included in the definition of “company” and therefore Berger Group Holdings was not otherwise criminally charged under either definition.

In a new declaration, one of the Assistant U.S. Attorneys who oversaw the drafting of the criminal complaint and deferred prosecution agreement stated that Berger Group Holdings was not included in the definition of “company.” In fact, the Department of Justice did not “accuse Berger Group Holdings of any . . . crimes.” AR 1821-22. Also, the prosecutorial team evaluated Berger Group Holding’s reorganization of its subsidiaries that led to creation of the Louis Berger International. Contrary to the Court’s finding, the team concluded that Berger Group Holdings did not create Louis Berger International as a shell company in which to dump its criminal liabilities. AR 1821-22. The Department of Justice’s Criminal Division confirmed the prosecutorial team’s contentions. AR 3546.

Algese argues that the Assistant U.S. Attorney’s explanation of the definition of “company” should be dismissed because other parts of the deferred prosecution agreement contradict it. Algese asserts that “company” encompasses more than just Louis Berger International because the deferred prosecution agreement mentions two Louis Berger Group executives’ culpable acts. However, the Contracting Officer decided that the executives’ actions were properly attributable to Louis Berger International. Due to corporate restructuring, Louis Berger Group was collapsed into Louis Berger International. AR 1770; AR 3095, 3098. As the Department of Justice explained, it prosecuted Louis Berger International because it assumed all liability for the previous entity during the restructuring process. As previously explained, the Department of Justice did not intend to implicate Berger Group Holdings in its description of Louis Berger International’s misconduct.

In vacating its prior judgment and remanding for further consideration, the Court expressly invited the Navy to reconsider the facts surrounding the 2015 deferred prosecution agreement. The Court instructed that if the Navy reached a different conclusion from that of the Court, the Navy must fully explain its basis for doing so. The Navy has complied with this instruction. While the Court may disagree if it were in the shoes of the Contracting Officer, it will not substitute its judgment for that of the Navy, recognizing that reasonable minds could reach differing conclusions. Watts-Healy Tibbitts, 84 Fed. Cl. at 258 (citing another source). Relying on new facts, the Contracting Officer considered relevant factors and articulated a rational basis for his conclusions that Berger Group Holdings was not formally charged and the parent corporation’s conduct did not present irregularities seriously reflecting on the propriety of further Federal Government dealings. Thus, Louis Berger Aircraft Services may not have had an obligation to certify that it or one of its principals was “otherwise criminally charged.” As a result, the Court must stay its hand and not disturb the Navy’s determination. See, e.g., PricewaterhouseCoopers Public Sector, LLP v. United States, 126 Fed. Cl. 328, 350-51 (2016) (collecting cases).

Relatedly, the Contracting Officer’s revised responsibility determination properly weighed Louis Berger Aircraft Services’ misleading statement that Berger Group Holdings was not, and has not been, investigated, accused, or charged with any misconduct by the Government and is not subject to the 2015 deferred prosecution agreement. AR 1413. In its previous opinion, the Court concluded that this was a material misrepresentation. Algese, 125 Fed. Cl. at 443-44. Here too, the Contracting Officer carefully examined the facts surrounding the Court’s determination. The Navy asked Louis Berger Aircraft Services to address the issue on remand, and the awardee did so in a March 31, 2016 letter. AR 1971-72. The Contracting Officer concluded that Louis Berger Aircraft’s statement was “not viewed as misleading or a misrepresentation as the Navy already knew what the respective roles of the parties were in the 2015 [deferred prosecution agreement] from the prosecuting attorneys.” AR 1772-73. While the Navy’s explanation appears to address materiality instead of truthfulness, the Court “will uphold a decision of less than ideal clarity if the agency’s path may reasonably be discerned.” Colo. Interstate Gas Co. v. Fed. Power Comm’n, 324 U.S. 581, 595 (1945).

(paragraph deleted)

C. Past Performance Evaluation

On remand, the Navy reconvened its Past Performance Evaluation Board to evaluate the factual bases for the Court’s and Algese’s stated concerns with an award to Louis Berger Aircraft Services. After reviewing all available information, the Evaluation Board concluded that Louis Berger Aircraft Services is capable of successfully performing the Rota contract, and that any concerns for affiliated corporations’ bad acts are irrelevant to the awardee’s performance capabilities. Ultimately, the Evaluation Board awarded Louis Berger Aircraft Services a substantial confidence rating. AR 1754.

Regarding the integrity of Louis Berger Aircraft Services’ affiliates, the Evaluation Board reviewed the Court’s prior decision, Algese’s April 15, 2016 letter to the Navy raising integrity concerns, and the awardee’s responses to the Navy’s requests for information. See generally AR, Tab 36, 43(1) (USAID Administrative Agreement), 43(2) (letter from the Army Suspension & Debarment Office), 43(4) (deferred prosecution agreement). After its review, the Evaluation Board concluded that the additional information did “not affect [its] confidence in [Louis Berger Aircraft Services’] ability to successfully perform the required effort at Naval Station Rota,” the criterion by which the Board was to evaluate past performance. AR 1754. The historical conduct of other Louis Berger companies, according to the Evaluation Board, is not relevant to this contract. AR 1755. The Court must afford the Navy wide deference in reviewing its past performance evaluation. See, e.g., Glenn Defense Marine (Asia), PTE Ltd. v. United States, 105 Fed. Cl. 541, 564-65 (2012) (collecting cases). Where, as here, the Evaluation Board’s past performance rating is reasonable and consistent with the stated evaluation criterion and applicable regulations, the Court will not disturb it. Todd Constr., L.P. v. United States, 88 Fed. Cl. 235, 247 (2009) (quoting another source).

Conclusion

Although the Court’s inquiry into the facts supporting the Navy’s decision is to be searching and careful, the ultimate standard of review is a narrow one. Bowman Transp. Inc., 419 U.S. at 285. It is neither the task nor the desire of the Court to conduct the Navy’s procurement process. Despite its reservations, the Court defers to the Government’s assertion that the Navy’s contract award is consistent with the goals of its anti-corruption program. As this case demonstrates, where the Court may disagree with the ultimate award determination, it will not substitute its judgment for that of the agency. Watts-Healy Tibbitts, 84 Fed. Cl. at 258 (citing another source). Thus, the Court hereby LIFTS the permanent injunction. The Clerk of Court shall enter judgment in favor of the Government. No costs. (Algese 2 s.c.a.r.l.v. United States and Louis Berger Aircraft Services, Inc., No. 15-1279C July 29, 2016)


C. Louis Berger Aircraft Services’ Material Misrepresentations

Material, intentional misrepresentations in a proposal disqualify an offeror from competing for the contract award. Microdyne Outsourcing, Inc. v. United States, 72 Fed. Cl. 230, 233 (2006) (citing Northrop Grumman Corp. v. United States, 50 Fed. Cl. 443, 468 (2001)). As material, intentional misrepresentations taint the award process, “prevent government officials from determining the best value to the government and retard the competitive bidding process,” an offeror who is found to have made such a misrepresentation “will lose its right to execute the solicited work or bid on the reprocurement of the contract.” Microdyne, 72 Fed. Cl. at 233 (2006).

A misrepresentation is material if the contracting officer relied on it in forming his opinion. See Acrow Corp. of Am. v. United States, 97 Fed. Cl. 161, 175 (2011) (citing Tucson Mobilephone, Inc. B-258408, 1995 WL 335101 (Comp. Gen. June 5, 1995) and PPATHI, Inc., B-249182, 1993 WL 25128 (Comp. Gen. Jan. 26, 1993) (“The contracting official need only show that the impropriety ‘might have affected the award decision.’”)). The offeror must intend to make the statement. Northrup Grumman, 50 Fed. Cl. at 468. Proof of intent may come from circumstantial evidence. Planning Research Corp. v. United States, 971 F.2d 736, 742 (1992). Where, as here, a contracting officer relies on an offeror’s misstatement, the award is arbitrary and capricious. See Acrow, 97 Fed. Cl. at 175-76 (2011).

1. Former Chairperson Derish Wolff’s 2014 Plea Agreement

Louis Berger Aircraft Services certified under FAR 52.209-7 that neither it nor “any of its principals . . . within five years, in connection with the award to or performance by the offeror of a Federal contract or grant, have been the subject of a proceeding . . . that resulted in . . . a conviction.” AR 419. This statement was false.

Derish Wolff, the former chairperson of Louis Berger Aircraft Services’ parent corporation, had been indicted for and pleaded guilty to defrauding USAID within five years of Louis Berger Aircraft Service’s proposal. Mr. Wolff pleaded guilty in December 2014, four months before Louis Berger Aircraft Services submitted its proposal. AR 1432. The Government and Intervenor assert that Louis Berger Aircraft Services had no duty to disclose Mr. Wolff’s guilty plea because he was not a principal within the meaning of FAR 52.209-7 at the time of his plea agreement. Mr. Wolff retired in August 2010 after Louis Berger Group admitted to fraudulently overcharging USAID and agreed to fire executives involved in the misconduct. This argument belies the factual record and the purposes of the disclosure requirements.

At the time of his plea, Mr. Wolff owned 25 percent of Berger Group Holdings, the parent corporation which wholly owns Louis Berger Aircraft Services. Retired or not, owning a quarter of the parent corporation, Mr. Wolff was an owner and thus a principal in 2014. These facts triggered Louis Berger Aircraft Services’ reporting obligations. Setting aside his ownership interest in the parent corporation, Mr. Wolff pleaded guilty to fraud in connection with his activities as chairperson of Berger Group Holdings. Undoubtedly, he was a principal when he committed the misconduct. If the Court were to accept the Government’s argument, offerors seeking to avoid certification requirements could simply extricate any employees, or in this case, chairpersons, engaging in misconduct before submitting a proposal. Allowing this type of loophole in the certification process would significantly undermine the government’s anti-corruption regime and reduce confidence in the competitive procurement process. See Planning Research Corp. v. United States, 971 F.2d 736, 741 (Fed. Cir. 1992).

At a minimum, the Contracting Officer ignored contradictory information which should have put him on notice of Louis Berger Aircraft Services’ misstatement in its certifications. Planning Research Corp., 971 F.2d at 739. This failure rendered his determination arbitrary and capricious. Louis Berger Aircraft Services represented that Mr. Wolff was “separated” from the company in August 2010 and his shares were “redeemed and converted to non-voting trust certificates to be redeemed in November 2015.” AR 1414-15. However, the Department of Justice’s indictment plainly stated that Mr. Wolff owned a quarter of the stock in Berger Group Holdings at the time of his plea agreement. Perplexingly, the Contracting Officer noted that Mr. Wolff was “formally separated” from Louis Berger Group in August 2010 but failed to discuss his 25 percent ownership. AR 1119. More problematically, the Contracting Officer’s failure to recognize Mr. Wolff’s ownership interest meant that he also neglected to assess whether Mr. Wolff was a “principal” at the time of his plea agreement. The Contracting Officer arbitrarily relied on Louis Berger Aircraft Services’ certification under FAR 52.209-7 despite contradictory information in the record. See Acrow, 97 Fed. Cl. 161, 175-76 (2011).

2. Parent Company Berger Group Holdings’ 2015 Deferred Prosecution Agreement

Under FAR 52.209-5, Louis Berger Aircraft Services certified that neither it nor its principals were “presently indicted for, or otherwise criminally or civilly charged by a governmental entity with commission of” fraud or other specified bribery and public integrity offenses. AR 429. However, Louis Berger Aircraft Services’ parent corporation Berger Group Holdings was, and is currently, a party to a deferred prosecution agreement. Berger Group Holdings entered into the deferred prosecution agreement in July 2015, in the midst of the procurement at issue here. Berger Group Holdings was not a named defendant, and therefore, not “indicted” under FAR 52.209-5. However, Berger Group Holdings was explicitly accused of engaging in a conspiracy to bribe foreign officials. See, e.g., AR 1372-73 (“Company [defined to include Berger Group Holdings, subsidiaries and affiliates] engaged in a scheme to pay bribes to various foreign officials. . . .”).

The Court must determine if Berger Group Holdings was “otherwise criminally . . . charged,” triggering disclosure requirements on Louis Berger Aircraft Services’ part. FAR 52.209-5. The FAR does not define “charge”. The Government and Algese offer different definitions: one grounded in a dictionary definition and the other in the regulatory scheme governing suspension and debarment. Under either definition, Berger Group Holdings was “charged” for the purposes of FAR 52.209-5 requiring disclosure.

For its part, the Government relies on Black’s Law Dictionary’s definition, a “formal accusation of a crime as a preliminary step in prosecution,” to argue that Berger Group Holdings was not charged. Def. Mem. at 21 (quoting Black’s Law Dictionary (9th ed. 1999)). However, under this definition Berger Group Holdings was in fact charged. The Department of Justice formally accused Berger Group Holdings of engaging in a longterm scheme to bribe foreign officials to win public contracts. Berger Group Holdings agreed to the accuracy of the allegations and agreed not to contest them. AR 1347. The corporation acknowledged that it may be subject to criminal prosecution based on the allegations in the deferred prosecution agreement. Id.

Turning to Algese’s definition, as the “regulations concerning responsibility determinations are cryptic,” this Court “may look to the more extensive debarment regulations for guidance, at least on questions related to the ‘integrity and business ethics’ requirement.” Impresa, 238 F.3d at 1335 (citing Steptoe & Johnson, Comp. Gen. Dec. B- 166118, 1969 WL 4287, at *5 (Mar. 28, 1969); Secretary of the Army, 39 Comp. Gen. 868, 872, 1960 WL 1741 (1960)); see also NEIE, Inc. v. United States, No. 13-164, 2013 WL 6406992, at *19 (Fed. Cl. Nov. 26, 2013) (“In reviewing a responsibility determination based on the ‘integrity and business ethics’ requirement, the court may look to the more extensive debarment regulations for guidance[.]” (quoting another source, internal quotation marks omitted).) Indeed, the regulators who drafted FAR 52.209-5 noted that the certification requirement was “consistent with guidelines recently promulgated by [the U.S. Office of Management & Budget] for agency use in nonprocurement actions [for suspension and debarment]. . . .” 52 Fed. Reg. 28642 (July 31, 1987) (citing 52 Fed. Reg. 20360 (May 29, 1987) (describing Guidelines of Nonprocurement Debarment and Suspension)). The Office of Management & Budget guidelines instruct that suspension may be appropriately based “on an indictment, conviction, or other adequate evidence that the respondent has committed irregularities seriously reflecting on the propriety of further Federal Government dealings with the respondent.” Id. at 20368. As FAR 52.209- 5(a)(1)(B) already requires disclosure of an indictment and thus a conviction, the Court adopts the latter definition. See FAR 52.209-5(a)(1)(B) (requiring disclosure if the offeror or its principal has “been convicted of or had a civil judgment rendered against them” in the past three years). The Court is satisfied that the irregularities-seriously-reflectingon- propriety standard is not unduly burdensome and is properly applied to disclosure requirements.

Berger Group Holdings’ conduct presented adequate evidence of irregularities seriously reflecting on the propriety of further Federal Government dealings. Louis Berger Aircraft Services’ parent corporation was accused of, and admitted to, engaging in a twelve-year conspiracy to “pay bribes to various foreign officials in Indonesia, Vietnam, India and Kuwait to secure contracts with government agencies and instrumentalities. . . .” AR 1372-73. Although not named in the criminal case, Berger Group Holdings was very much a part of the activities upon which the criminal conviction was based. When assessing a prospective contractor’s record for integrity and business ethics under FAR Part 9, the contracting officer is considering the reputational and performance risks the offeror may pose. Here, the offeror’s principal participated in a decade-long international bribery scheme to obtain public contracts. Id. This is precisely the type of information that an offeror should put before the contracting officer so he can assess reputational risk posed to the government. See J.E.T.S., Inc. v. United States, 838 F.2d 1196, 1201 (Fed. Cir. 1988) (finding a false certification after attributing a parent corporation’s conviction to the wholly-owned subsidiary). Under both definitions, Berger Group Holdings was otherwise criminally charged. Having determined that Louis Berger Aircraft Services’ certification to the contrary was a false statement, the Court now considers whether Berger Group Holdings was Louis Berger Aircraft Services’ principal.

Quoting Louis Berger Aircraft Services, the Contracting Officer found that Berger Group Holdings does not “exert operational or managerial” control over Louis Berger Aircraft Services or its direct parent, Louis Berger Services. AR 1117. He observed that Berger Group Holdings was not a “principal” and thus Louis Berger Aircraft Services did not have to disclose the deferred prosecution agreement. Id. This conclusion both disregards the full definition of “principal” and ignores contradictory information in the administrative record.

As with Berger Group Holdings, a “principal” can be an owner, not only a person having “primary management or supervisory responsibilities” as the Contracting Officer suggested. FAR 52.209-5(a)(2). Despite discussing the Louis Berger family of companies’ corporate structure, the Contracting Officer failed to realize that Berger Group Holdings owns 100 percent of Louis Berger Aircraft Services. He noted that Louis Berger Services is Louis Berger Aircraft Services’ direct parent corporation. AR 1117. Berger Group Holdings is Louis Berger Services’ direct parent corporation. Louis Berger Services owns 83 percent of Louis Berger Aircraft Services and Berger Group Holdings owns the remaining 17 percent. Id. In fact, Berger Group Holdings owns 100 percent of Louis Berger Services. Thus, Berger Group Holdings wholly owns Louis Berger Aircraft Services. This makes Berger Group Holdings a “principal” of Louis Berger Aircraft Services prompting the certification requirements. The Contracting Officer bypassed this fact adopting wholesale, and without explanation, Louis Berger Aircraft Services’ false statement. This fact alone made the Contracting Officer’s determination arbitrary and capricious.

Louis Berger Aircraft Services’ false statement that it does not control its subsidiaries was both self-serving and obvious. At a minimum, the Contracting Officer ignored evidence of the misrepresentation. Planning Research, 971 F.2d at 739 (upholding a finding of a material misstatement and decision to terminate the contract award). To be sure, there was clear evidence in the record that Berger Group Holdings held “supervisory responsibilities” over its subsidiaries, including Louis Berger Aircraft Services. FAR 52.209-5(a)(2). For example, despite not being indicted in either investigation, Berger Group Holdings “fully cooperated with Government investigations and took substantial remedial measures to address both the violations [in the 2010 and 2015 deferred prosecution agreements] as well as the misconduct related to over-allocating overhead charges to USAID.” AR 1118. As part of these efforts, Berger Group Holdings set up an independent compliance monitor for all Berger Group companies, and “terminated employees responsible for the misconduct.” AR 1118-19. Berger Group Holdings terminated its subsidiary’s chief executive officer, chief financial officer, and two senior vice presidents. AR 1118-19. By establishing and monitoring company-wide compliance efforts and controlling the staffing of its subsidiaries, Berger Group Holdings assumed supervisory responsibilities for its subsidiaries. In the corporate law context, courts have found the very conduct at issue here sufficient to determine the parent corporation exercised control over its subsidiary. See, e.g., Richard v. Bell Atl. Corp., 946 F. Supp. 54, 62 (D.D.C. 1996) (explaining where a parent controls hiring and firing of subsidiary employees, the parent exercises control over the subsidiary) (collecting cases).

The final problem plaguing the Contracting Officer’s conclusion is that it is internally inconsistent. The Contracting Officer concluded that “[Berger Group Holdings] does not assert any direct operational, managerial or supervisory role over any of the first-tier subsidiaries.” AR 1117. He concluded also that Louis Berger Services “operates independently from BGH [Berger Group Holdings]. . . .” AR 1119 (Responsibility determination). Yet, a mere one page later, the Contracting Officer concluded “LBS [Louis Berger Services] . . . and BGH [Berger Group Holdings] are affiliates of one another as BGH wholly owns and legally controls all entities.” AR 1120 (emphasis added).

The Court fails to understand how Berger Group Holdings can “wholly own[] and legally control[] all entities” but not exert power over them so that each is a “standalone business.” Compare AR 1120 with AR 1119. The Contracting Officer failed to justify or explain this patently inconsistent finding.

3. Louis Berger Aircraft Services Misrepresented the 2015 Deferred Prosecution Agreement.

Quoting Louis Berger Aircraft Services, the Contracting Officer asserted, “Berger Group Holdings was not, and has not been, investigated, accused, or charged with any misconduct by the government, and is not otherwise subject to the DPA [deferred prosecution agreement].” AR 1413. Thus, he concluded that Louis Berger Aircraft Services was not required to disclose the 2015 deferred prosecution agreement because Berger Group Holdings is merely a guarantor. AR 1117. Contrary to the factual record, this conclusion lacks a rational basis and cannot stand. Cf. Bender Shipbuilding & Repair, Co. v. United States, 297 F.3d 1358, 1362 (Fed. Cir. 2002) (“When [responsibility determinations] have a rational basis and are supported by the record, they will be upheld.”).

In fact, Berger Group Holdings was subject to an extensive government investigation, as described in the 2015 deferred prosecution agreement. AR 1346-1407. The Contracting Officer concluded that Berger Group Holdings had not been accused of misconduct. This statement also is untrue. The deferred prosecution agreement and criminal complaint expressly included Berger Group Holdings as one of the parties engaging in a decade-long conspiracy “to make and conceal corrupt payments to foreign officials in India, Kuwait, Vietnam and elsewhere. . . .” Compl. at 2, 4, United States v. Louis Berger Int’l, Inc., Mag. No. 15-3624 (MF) (D.N.J.).

 * * * *

The record before the Court leaves no doubt that Louis Berger Aircraft Services intended to make false statements in its proposal. This entity is part of a family of corporations that has intentionally hidden its history of public corruption scandals through misrepresentations, false certifications, and a scheme to avoid reporting requirements. As part of its scheme, the corporation created a new subsidiary in which to dump its criminal liability problems. In the 2015 deferred prosecution agreement, the only named defendant, Louis Berger International, had not been formed until two years after the end of the bribery at issue. This subsidiary was formed to assume “responsibility for all international operations and liabilities of [Berger Group Holdings and its subsidiaries]. . . .” AR 1372. Indeed, essentially none of the Louis Berger companies have disclosed the many criminal investigations, charges, and convictions in SAM or FAPIIS. The scheme was so effective that the Navy was not even aware of this history of public corruption until Algese brought its bid protest at the GAO in the Sigonella, Italy procurement.

The Court agrees with both the U.S. Assistant Attorney in charge of the 2015 deferred prosecution agreement and the Navy officer in charge of this procurement: Berger Group Holdings was “very careful not to be a named defendant and to avoid reporting requirements” for itself and its subsidiaries. AR 1507 (email from Scott E. Miller); accord Id. (reporting that the U.S. Assistant Attorney believed Berger Group Holdings did not want to be a defendant “to avoid any requirement that its numerous subsidiaries have to disclose the FCPA matter”). Louis Berger Aircraft Services’ actions were not simply deficient or unknowing. They were willful and intentional. Cf. Northrop Grumman, 50 Fed. Cl. at 468-69 (“Without some proof that [awardee’s] actions in preparing its proposal were sinister, not just deficient . . . , [Plaintiff’s] claim that [awardee] wrongfully misrepresented its ability to perform the contract fails.”). The protection of the integrity of the federal procurement process from the “fraudulent activities of unscrupulous government contractors” requires rejection of an award founded on material misstatements. K & R Eng’g v. United States, 616 F.2d 469, 476 (Ct. Cl. 1980).  (Algese 2 s.c.a.r.l. v U. S. and Louis Berger Aircraft Services, Inc, No. No. 15-1279C, March 14, 2016)  (pdf)


BTM’s centrl argument in this case is that the agency committed legal error when it refused to consider BTM’s proffer of a loan commitment letter that BTM contends would have established that it had the ability to obtain adequate financial resources to perform the contract. As described in greater detail below, this argument is unpersuasive. Considering the broad leeway afforded to contracting officers to decide how much information is needed to make a responsibility determination, the contracting officer’s decision here to eliminate BTM from the competition was well within the bounds of her discretion and was neither unreasonable nor contrary to law.

Thus, when the contracting officer made her determination that BTM was nonresponsible, both the DCMA and the SBA had concluded from their thorough audits of BTM’s books, including a meticulous review of its capital and credit, that BTM’s lack of financial resources rendered it unable to perform the contract. See CAR 702 (observing that “both DCMA and the SBA have found that BTM has not demonstrated adequate financial capacity to perform the contract at two separate occasions”). Moreover, at the time that the contracting officer decided to eliminate BTM from the competition, BTM could at best state its expectation that it could cure its working capital issues “[ ],” and, as the contracting officer observed, FAR 9.104-3(a) requires that “all working capital issues must be resolved at time of award to be considered responsible.” CAR 703.

BTM insists nonetheless that the findings of the DCMA and the SBA do not reflect BTM’s ability to obtain resources because they “indicate[] working capital issues that have already been cured.” Pl.’s Resp. & Reply 4, ECF No. 18. It argues that, by denying BTM the opportunity to submit its loan commitment letter on January 21, 2014, the contracting officer entirely failed to consider whether BTM could obtain adequate resources through outside funding. Pl.’s Mot. for J. on Admin. R. 5, ECF No. 9 [hereinafter Pl.’s Mot.]. This failure, BTM contends, was arbitrary, capricious, and contrary to law.

BTM’s arguments are meritless. As the administrative record reflects, the agency had before it and considered evidence of BTM’s ability to obtain additional resources before it eliminated BTM from the competition. Def.’s Mot. 9-10 (citing, e.g., CAR 825). Specifically, the SBA financial specialist’s report shows that she spoke with an official from BTM’s [lender], who indicated that “the [ ] will not be able to approve a new LOC [line of credit],” that an SBA International Trade Specialist advised that a loan through the EWCP loan program “was not possible,” and that “the company is currently at capacity on their existing [ ].” CAR 825.

Similarly before the agency and considered by it was BTM’s January 9, 2014 letter, in which it stated that it expected to cure its working capital issues by [ ]. CAR 701. The agency found this assurance inadequate under FAR 9.104-3, which lists as exemplary of “acceptable evidence” of an ability to obtain financial resources “a commitment or explicit arrangement, that will be in existence at the time of contract award.” FAR 9.104-3(a) (emphasis added).

BTM argues that despite the fact that the agency considered BTM’s ability to secure resources through outside funding before eliminating it from the competition, the contracting officer was required by FAR 9.104-3(a) to consider any evidence of responsibility that BTM might offer up until the time of a contract award. It notes that the provision states that the contracting officer “shall require acceptable evidence of the prospective contractor’s ability to obtain required resources.” Pl.’s Resp. & Reply 2 (emphasis BTM’s) (quoting FAR 9.104-3(a)). According to BTM, “[b]ecause FAR 9.104-3(a) uses the word ‘shall’ instead of ‘may’, the contracting officer was without any authority to unilaterally reject the Plaintiff’s attempt to provide [a loan commitment letter] prior to award.” Pl.’s Resp. & Reply 2.

BTM’s interpretation of FAR 9.104-3(a) conflicts not only with the considerable discretion given to contracting officers, which BTM itself acknowledges in its Motion at 4, but also with Federal Circuit case law that rejects a virtually identical argument in John C. Grimberg Co., 185 F.3d at 1303. In that case, the contracting officer had determined that the protester was nonresponsible, and the protester argued that the contracting officer erred when he “decided not to afford [the protester] the opportunity to cure” the problems related to its responsibility. Id. at 1300. Like BTM, the protester in John C. Grimberg Co. argued that “the contracting officer had a legal obligation to obtain further information” before making a nonresponsibility determination. Id. at 1303. Also like BTM, the protester cited the use of the word “shall” in the FAR—here, FAR 9.105-1(a)—for the proposition that the contracting officer has a duty, not discretion, to request additional evidence of responsibility. John C. Grimberg Co., 185 F.3d at 1303 (quoting FAR 9.105-1(a)). The Federal Circuit disagreed. Although “shall” indeed connotes a duty, the Federal Circuit acknowledged, the contracting officer’s duty is only “to have, or to obtain, enough information to make a responsibility determination.” Id. But what constitutes “enough information” is a question within the contracting officer’s discretion to answer. Id. In short, “the contracting officer is the arbiter of what, and how much, information he needs.” Id.

The Federal Circuit’s interpretation of FAR 9.105-1(a) in John C. Grimberg Co. is highly instructive in determining the appropriate interpretation of FAR 9.104-3(a), the provision that BTM cites. Thus, although the contracting officer has the duty under that provision to “require acceptable evidence of the prospective contractor’s ability to obtain required resources,” FAR 9.104-3(a), she has the discretion to decide what constitutes evidence sufficient to make her determination.

BTM’s reliance upon several decisions by the Government Accountability Office (GAO), is also unavailing. Pl.’s Mot. 6-7. BTM observes that responsibility is a matter distinct from responsiveness or acceptability, which must be fulfilled at proposal opening. Pl.’s Mot. 6. See also Centech, 554 F.3d at 1034 nn.2-3. It notes that the GAO has several times issued decisions articulating the principle that “[a] requirement that relates to responsibility may be satisfied at any time prior to award.” Integrated Prot. Sys., Inc., B-254457 et al., 94-1 CPD ¶ 24 (Comp. Gen. Jan. 19, 1994). See also 3DAV Dev., Inc., B-274933 et al., 97-1 CPD ¶ 24 (Comp. Gen. Jan. 16, 1997); NFI Mgmt. Co., 69 Comp. Gen. 515 (1990). BTM argues that the contracting officer here improperly converted a matter of responsibility into one of acceptability by refusing to consider its proffer of a loan commitment letter when no award had yet been made. Pl.’s Mot. 6-7; Pl.’s Resp. & Reply 4.

The GAO decisions that BTM cites, however, stand only for the proposition that a contracting officer may, in his or her discretion, consider evidence of responsibility submitted any time before award; they do not support BTM’s very different (not to mention highly impractical) contention that the contracting officer must consider additional evidence submitted by an offeror up until the time of the contract award, even after the offeror has already been excluded from the competition. Integrated Protection Systems, for example, was a post-award bid protest in which a disappointed bidder argued that “the award . . . was improper because the [awardee] failed to submit, as required by the solicitation, a copy of its license with its bid documents.” 94-1 CPD ¶ 24 at 2. The GAO rejected this argument, ruling that because a license requirement “involves the firm’s responsibility rather than the responsiveness of the bid,” that requirement “may be satisfied at any time prior to award,” and “[c]onsequently, [there is] no basis to question the agency’s decision to allow [the low bidder] to submit proof of its license after bid opening.” Id. Similarly, the other GAO decisions that BTM cites, also post-award protests, hold that an agency may consider information beyond the proposal documents when determining an offeror’s responsibility; they do not support BTM’s contention that the agency must leave open the question of responsibility until it awards the contract. See 3DAV Dev., Inc., 97-1 CPD ¶ 24 at 2; NFI Mgmt. Co., 69 Comp. Gen. at 518.

In short, the agency was under no legal obligation to reconsider its nonresponsibility determination in this matter up until the contract award date. Further, its decision not to permit BTM to submit further evidence after it had already been found nonresponsible and eliminated from the competition was neither arbitrary and capricious, nor an abuse of discretion. To the contrary, it was eminently reasonable not to give BTM yet another bite at the apple. As noted, by January 17, 2014, when BTM advised the contracting officer that it expected to submit a written loan commitment on January 21, there had already been two independent findings based on thorough audits that BTM was not financially responsible. In addition, BTM had told the SBA only a month earlier that its [ ] was considering providing it with a loan guarantee, but that loan never materialized. In fact, the [ ] advised the SBA that it would not be providing BTM with a [ ]. Under these circumstances, and given the Court’s narrow scope of review, the contracting officer’s decision not to reopen the matter again was clearly reasonable and must be upheld. See Bender Shipbuilding & Repair Co. v. United States, 297 F.3d 1358, 1362 (Fed. Cir. 2002) (“When [nonresponsibility] decisions have a rational basis and are supported by the record, they will be upheld.”).  (Bailey Tool & Manufacturing Company v. U. S., No. 14-216C, August 28, 2014)  (pdf)

U. S. Court of Federal Claims - Listing of Decisions
For the Government For the Protester
Algese 2 s.c.a.r.l.v. United States and Louis Berger Aircraft Services, Inc., No. 15-1279C July 29, 2016 Algese 2 s.c.a.r.l. v U. S. and Louis Berger Aircraft Services, Inc, No. No. 15-1279C, March 14, 2016  (pdf)
Bailey Tool & Manufacturing Company v. U. S., No. 14-216C, August 28, 2014  (pdf)  
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