Legal Meets Practical

In a recent decision, the U.S. Court of Federal Claims (“CoFC”) upheld the VA’s decision to cancel an award to the incumbent contractor on the basis of a conflict of interest and exclude that contractor from the follow-on order.

This case sounds a little garden variety, doesn’t it? Organizational conflict of interest (“OCI”) has its own section in the Federal Acquisition Regulation, and it’s a common bid protest ground. When you look at the facts, however, this becomes one of the most interesting (and important) bid protests in recent months.

First of all, the incumbent’s prior contract and the follow-on work at issue are vital to the Veteran-Owned Small Business (“VOSB”) community. These contracts are integral to determining who receives VA set-aside work for VOSBs and Service-Disabled VOSBs (“SDVOSBs”). As such, it’s important the contract is in the right hands.

In support of the VA’s Center for Verification and Evaluation (“CVE”), Monterey Consultants, Inc. (“Monterey”) acted as a gatekeeper to the VA’s set-aside program (the Veterans First Contracting Program). If you’re listed in its database, the VetBiz Registry, you can do set-aside work for the VA as a VOSB or SDVOSB. If you’re not, you can’t. Simple as that. In performing under its initial contract (a Blanket Purchase Agreement, or “BPA”), Monterey played a big role in reviewing and processing the applications to the program.

Second of all, the OCI was blatant. If you want to read more about the CoFC’s finding, you can access the full case here, but here are a few facts relating to the OCI:

• The RFQ included a specific section covering OCIs. In relevant part, that section stated that “Contractors performing on other contracts in support of Verification shall be presumed to have an OCI with respect to this contract and are ineligible to quote on this requirement, due to the integrated nature of work perform[ed] under this solicitation and existing contracts.” Monterey submitted its proposal – and won the award – although it was clear that it had previously provided verification services under its BPA.

• When the contracting officer investigated the OCI, he discovered that, prior to the Request for Quotation’s (“RFQ”) public release, all of Monterey’s and its subcontractor’s personnel had access to non-public information regarding the RFQ, including the requirements, independent government cost estimates, acquisition plan, market research, and evaluation criteria.

• The contracting officer also discovered that Monterey personnel provided services to the Office of Small and Disadvantaged Business Utilization directly relating to the preparation of the solicitation. Notably, one employee of Monterey’s subcontractor both prepared pre-solicitation documents and was involved in the development of Monterey’s proposal.

• Monterey had not provided an OCI mitigation plan with its proposal.

When the VA informed Monterey of its intention to rescind its contract, Monterey didn’t take this lying down. It filed suit in the CoFC, challenging not only the VA’s decision, but the eligibility of the second contractor in line for the award. (Only three proposals from responsible offerors were received for the contract). When a size determination by the Small Business Administration (“SBA”) sided with the second contractor – Loch Harbour Group, Inc. – Monterey went full throttle with attacking the OCI allegations.

In the end, the CoFC was unswayed by Monterey’s arguments. In particular, it noted Monterey’s access to acquisition documents – including ones not released to the public – holding that these facts, as well as others in the record, created “on its face, the potential for an OCI.” Monterey “therefore had a duty to mitigate that conflict or face ineligibility to bid on the follow-on solicitation.” The CoFC continued:

“The CO reasonably viewed the facts as establishing a potential OCI. Plaintiffs thus had a duty to mitigate that conflict prior to bidding on the follow-on work. The CO found its efforts in that regard to be inadequate in view of the absence of a mitigation plan. Given the discretion we afford on review of agency action in this regard, we cannot say that the CO acted arbitrarily and capriciously with regarding to his conclusion of a potential, unmitigated OCI.”

The lesson here isn’t to pick your battles, as I wouldn’t have wanted to lose this contract either. In my opinion, the lesson here is to carefully choose your weapons for battle – the existence of OCI was indisputable, but maybe an airtight mitigation plan would have resulted in a victory.

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