Did GAO narrow agencies’ ability to mitigate a potential organizational conflict of interest (OCI) that may be created when a contractor hires a former government employee? And how will this affect contractor hiring decisions? In a little noticed GAO decision released in late 2017, Northrop Grumman Systems Corporation, B-412278.7 et al., Oct. 4, 2017, GAO addressed potential conflicts of interest created by the employment of a former government employee by an offeror. Based on its reading of the regulations in FAR Subpart 3.1 and FAR Subpart 9.5, GAO found that agencies do not have the power to waive OCI issues in such situations, regardless of the type of information the former government employee might possess. While GAO ultimately upheld the agency’s investigation of the alleged conflict and agreed with the agency that no conflict existed, based on the facts uncovered in the investigation, the finding that the agency lacked authority to waive such a conflict was entirely new.

The key to the decision is GAO’s apparent regulatory interpretation, which reads, in relevant part:

[A]s the FAR and our decisions regarding unequal access to information OCIs make clear, such OCIs arise where a contractor has access to non-public information as part of its performance of a government contract, or where the contractor possesses information improperly provided by a government employee. FAR §§ 9.505(b), 9.505-4; CapRock Gov’t Solutions, et al., B-402490 et al., May 11, 2010, 2010 CPD ¶ 124 at 25. In contrast, an unfair competitive advantage arising from the hiring of a former government employee does not implicate the contractor’s access to information through that contractor’s performance of a government contract or from a current government employee. For this reason, our decisions have distinguished between the concerns arising under FAR subpart 3.1 and FAR subpart 9.5.

To the extent any of our prior decisions suggest a contrary conclusion, we clarify that because FAR subpart 3.1 does not permit the agency to waive concerns arising under that subpart, a waiver executed pursuant to FAR § 9.503 does not warrant dismissal of an argument that the hiring of a former government employee violates the principles of FAR subpart 3.1

Northrop Grumman Systems Corporation, B-412278.7 et al., Oct. 4, 2017 at 8-9 (emphasis added). In short, GAO appears to be saying that because the regulations in FAR Subpart 9.5 are not broad enough to apply to conflicts created by information possessed by former government employees, the waiver provisions in FAR Subpart 9.5 do not apply. Absent an ability to waive the conflict, agencies are left with the very general guidance in FAR 3.101-1 that conflicts of interest should be “strictly avoided.”

GAO’s reading appears to be based on a narrow reading of language that does not apply to the specific facts at issue in the protest. GAO’s decision distinguishes an “unfair competitive advantage arising from the hiring of a former government employee” from an OCI created by a contractor’s access to information improperly provided “from a current government employee” (emphasis added). But the regulatory guidance in Subpart 9.5 that underlays this distinction does not refer to “current” government employees – rather, it refers to information obtained without authorization from a “government official.”

Moreover, the full regulatory guidance, found in FAR 9.505(b), reads in full:

(b) Preventing unfair competitive advantage. In addition to the other situations described in this subpart, an unfair competitive advantage exists where a contractor competing for award of any federal contract possesses ---

(1) Proprietary information that was obtained from a government official without proper authorization; or

(2) Source selection information (as defined in 2.101) that is relevant to the contract but is not available to all competitors, and such information would assist that contractor in obtaining the contract.

Thus, while this regulation addresses two categories of information – “proprietary information” in (b)(1) and “source selection information” in (b)(2) – the highlighted language on which GAO relies is contained only in FAR 9.505(b)(1), which only applies to contractor proprietary information, and not in the reference to “source selection information” in 9.505(b)(2).

The curious part of the GAO reasoning is that the information at issue in the NGSC protest was source selection information, not contractor proprietary information. See NGSC, B-412278.7 et. al. at 10 (“Northrop argues as a general matter that the roles of the two former DHS employees gave them ‘unlimited access’ to all information concerning DHS’s requirements and plans for the DOMino procurement at the time of their departure from the agency.”) (emphasis added). The other FAR provision cited by GAO in the excerpt above, FAR 9.505-4 (“Obtaining access to proprietary information”), is likewise focused on proprietary contractor data.

Thus GAO’s decision did not address the regulatory language in Subpart 9.5 relating to the second category of information (source selection information) identified at FAR 9.505(b)(2). The language in 9.505(b)(2) does not include any words of limitation, so it would seem to extend to a contractor’s access to source selection information from any source, even if the contractor received the information from a current or former government employee and regardless of their authorization to obtain the information. Thus, FAR 9.505(b)(2) is arguably broad enough to encompass the information at issue in the NGSC protest – source selection information obtained from a former government employee based on the employee’s prior authorized access to such information. If so, it follows that the waiver authority in FAR 9.503 could be applied in this situation.

More generally, FAR 9.505 is only one part of the rules for how to handle OCIs and specifically states that “[i]n addition to the other situations described in this subpart, an unfair competitive advantage exists where . . . .” Thus, to determine the full scope of situations where a waiver would be an available tool for an agency to cure an OCI, GAO would need to look at how unfair competitive advantages are described throughout FAR Subpart 9.5 to determine whether certain situations are excluded.

GAO’s decision in NGSC is important because it suggests that agencies may not be able to use other OCI mitigation tools suggested by FAR 9.505 – not just waivers – to deal with OCIs in situations involving former government employees. That could restrict agencies’ use of other techniques that have been approved by GAO pursuant to FAR 9.505 to avoid, neutralize or mitigate “unequal access to information” OCIs, such as firewalls. It remains to be seen whether GAO intended such a broad exclusion of mitigation measures for contractors to use (and agencies to approve) to address potential OCIs when hiring former government employees. In the meantime, contractors should be sensitive to the issue when hiring former government employees, especially when the former government employee was involved in a program or solicitation for which the contractor intends to compete. If the rule in NGSC is applied more broadly, approval of OCI mitigation plans addressing potential OCIs involving a former government employee may face a higher hurdle.