Government Contracts Update
Government contractors should take note that the Court of Federal Claims recently extended the waiver rule under Blue & Gold Fleet L.P. v. United States to a protester's untimely filing of organizational conflicts of interest (OCI) allegations. 492 F.3d 1308, 1313-14 (2007). The court's decision, granting a motion to dismiss in The Concourse Group LLC v. United States and RER Solutions, Inc., highlighted that in a procurement where facts contributing to an OCI are "easily recognizable or obvious" to an offeror, the offeror waives its OCI argument if it waits to raise it until after an award is made. See id., No. 17-129C, March 13, 2017. In the wake of the Concourse ruling, government contractors must pay keen attention to the timeliness of protests raising OCI claims or risk waiving their OCI claims.
Prior to deciding Blue & Gold Fleet in 2007, the Federal Circuit applied the patent ambiguity doctrine in circumstances where the party challenging the government was a party to the government contract. Blue & Gold Fleet, 492 F.3d at 1313. As explained by the Federal Circuit, the doctrine of patent ambiguity creates an affirmative duty on contractors to seek clarification from the government where a government contract solicitation contains a patent ambiguity. Stratos Mobile Networks USA, LLC v. United States, 213 F.2d 1375, 1381 (Fed. Cir. 2000) (quoting Statistica, Inc. v. Christopher, 102 F.3d 1577, 1582 (Fed. Cir. 1996)). Further, a contractor's failure to seek clarification precludes the acceptance of the contractor's interpretation in an action against the government. Id. One of the purposes of the patent ambiguity doctrine was to require that "ambiguities be raised before the contract is bid, thus avoiding costly litigation after the fact." Cmty. Heating & Plumbing CO. v. Kelso, 987 F.2d 1575, 1580 (Fed. Cir. 1993).
The Waiver Rule
The patent ambiguity doctrine, along with the doctrines of laches and equitable estoppel led to the creation of the waiver rule. See A.C. Akurman Co. v. R.L. Chaides COnstr. Co., 960 F.2d 1020, 1032 (Fed. Cir. 1992). In 2007, in a matter of first impression, the Federal Circuit in Blue & Gold Fleet recognized and applied a waiver rule in bid protests brought before the Court of Federal Claims under 28 U.S.C. § 1491(b). See Blue & Gold Fleet, 492 F.3d at 1313. The waiver rule states that "a party who has the opportunity to object to the terms of a government solicitation containing a patent error and fails to do so prior to the close of the bidding process waives its ability to raise the same objection afterwards in a § 1491(b) action in the Court of Federal Claims." Id. at 1308. In creating the waiver rule, the Federal Circuit acknowledged that although there is no requirement that solicitations be challenged prior to the close of bidding in the jurisdictional grant of 28 U.S.C. § 1491(b), "the statutory mandate of § 1491(b)(3) for courts to "give due regard to . . . the need for expeditious resolution of the action" and the rationale underlying the patent ambiguity doctrine" favored recognition of the waiver rule. Id. The waiver rule has since been more broadly expanded to bid protests situations where the protesting party had the opportunity to raise its claim not just before the deadline for proposals, but also before the contract award. COMINT Sys. Corp. v. United States, 700 F.3d 1377, 1382 (Fed. Cir. 2012).
Expansion of the Waiver Rule and the Importance of Early Filing
Against the backdrop of Blue & Gold Fleet, and indeed relying on the bases for the waiver rule promulgated in that decision, the Court of Federal Claims explained its reasoning for expanding the applicability of the waiver rule to situations where protesters fail to raise OCI claims before the close of a bidding process, or even before contract award. In The Concourse Group, the plaintiff raised multiple OCI claims based on an alleged "unusually close" relationship between the Army and Jones Lang LaSalle ("JLL"), an incumbent contractor that, in the procurement at issue, served as a subcontractor to the awardee, RER Solutions, Inc. ("RER"). These allegations, however, were not raised until after Concourse brought both a pre- and post-award protest at the Government Accountability Office ("GAO") prior to going to the Court of Federal Claims. According to Concourse, its allegations were based on a publicly available 2012 Army publication entitled "A History of the U.S. Army's Residential Communities Initiative, 1995-2010," and the JLL website biography of a former Army employee turned government contractor. These were facts Concourse indicated it was unaware of until after the award, and after the GAO protest matters were concluded.
RER, an intervenor in the protest, moved for partial dismissal, arguing that Concourse waived its OCI claims by failing to raise them prior to the award of the contract.
The court, citing similarities in an earlier decision, CRAssociates, Inc. v. United States, 102 Fed. Cl. 698 (2011), found that (1) Concourse was neither ignorant nor unable to access the public documents referenced in its complaint prior to the contract award; (2) JLL's interest in the procurement was publically displayed and Concourse was on notice of its possible involvement when JLL filed three separate pre-award protest at the GAO before the award; and (3) Concourse admitted its awareness of JLL's direct participation with RER prior to the contract award, yet failed to raise an OCI claim in its pre-award GAO protest. Accordingly, the court granted RER's motion and held that Concourse waived its OCI claims when it failed to timely raise them prior to the award of the contract "despite the opportunity to do so and its easy access to the knowledge upon which it now relies." Concourse Group LLC v. U. S. and RER Solutions, Inc., No. 17-129C, March 13, 2017. (March 14, 2017).
The Court of Federal Claims ruling in The Concourse Group illustrates potential pitfalls that awaits any contractor that sits on claims raising OCI issues. A contractor is expected—and indeed required—to speak up early in the procurement process and raise facts that it has access to or knowledge of prior to the contract award. To prevent claims of unfairness and exploitation of other bidders and the government, a contractor cannot wait to bring its OCI claims; otherwise it risks waiving its claims altogether.