For several years it seemed that the Government Accountability Office (GAO) would deny any protest that challenged a contracting officer's Organizational Conflict of Interest (OCI) determination. Sometimes this meant that contracting officers were getting it right (albeit at times only after taking corrective action). In other instances, GAO heeded the direction provided by the Court of Appeals for the Federal Circuit that "hard facts" (not mere innuendo or suspicion) are required before an OCI should be considered disqualifying or before a contracting officer’s decision should be overturned.
A string of recent GAO protest decisions suggests that this deference may be weakening. The most recent example is GAO’s recent decision in C2C Innovative Solutions, (C2C) B-416289, July 30, 3018, 2018 CPD ¶ ___, where GAO rejected OCI determinations made by the contracting officer both before award and during the protest.
In C2C Innovative Solutions, C2C protested a task order issued by the Center for Medicare and Medicaid (CMS) to MAXIMUS Federal Services (MAXIMUS) under a contract to provide qualified independent contractor (QIC) services related to durable medical equipment. In the Medicare system QICs serve as the second level of review of claims, and are in turn subject to a third level of review by the Office of Medicare Hearings and Appeals (OMHA) or an Administrative Law Judge (ALJ). If the OMHA or ALJ overturns a QIC decision, an administrative QIC (AdQIC) may refer the appeal to the Medicare Appeals Council, a fourth level.
C2C argued that CMS had failed to meaningfully consider whether the issuance of a task order to MAXIMUS would create an OCI as a result of the appeals review role being performed under a separate AdQIC contract held by Q2A, a wholly-owned subsidiary of MAXIMUS. C2C argued that the Q2A AdQIC contract gave MAXIMUS both Impaired Objectivity and Unequal Access OCI's.
As a preliminary matter, GAO rejected the awardee’s argument that the protest was untimely because it was not raised prior to the deadline for receipt of proposals, restating the timeliness requirement applied by GAO (although not necessarily followed by the Court of Federal Claims): "A protest concerning an alleged OCI need only be filed prior to the closing date for receipt of proposals where a solicitation is issued on an unrestricted basis, the protester is aware of the facts giving rise to the potential OCI, and the protester has been advised by the agency that it considers the potential offeror eligible for award." GAO determined that there was no evidence that C2C had been advised, prior to award, that the agency considered MAXIMUS eligible for award.
Impaired Objectivity OCI
FAR 2.101 provides that an "[Impaired Objectivity] OCI exists when, because of other activities or relationships with other persons or organizations, a person or organization is unable or potentially unable to render impartial assistance or advice to the government, or the person's objectivity in performing the contract work is or might be otherwise impaired…"
C2C noted that Q2A, as AdQIC, was in a position to make referrals to the Medicare Appeals Council of administrative decisions that overturn reconsideration decisions made by its parent MAXIMUS or its parent's competitors. C2C argued that Q2A would be financially motivated to withhold issues regarding its parent's processing of QIC reconsiderations while emphasizing any discrepancies in the reconsideration processing of competitors, in order to tarnish the reputation of its competitors and help MAXIMUS's competitive position when the task order is re-competed.
CMS and MAXIMUS, however, contended that no OCI would exist because the AdQIC would be examining only the sufficiency of the intervening level 3 ALJ review. CMS added that there was no potential OCI because the AdQIC would not have formal responsibility for performance evaluation of the QICs, and relied on MAXIMUS' own conclusions as to the absence of any conflict.
GAO disagreed. It found that the contractual structure satisfied the "hard facts" requirement for a potential conflict of interest, since Q2A would be in the position of reviewing requests for further appeal of decisions issued by Q2A's parent. It reiterated the presumption applied by GAO that "once it has been determined that an actual or potential OCI exists, the protester is not required to demonstrate prejudice; rather, harm from the conflict is presumed to occur."
GAO then turned to the agency’s evaluation, repeating (twice) the mantra that GAO would not substitute its judgment for the agency’s decision, absent clear evidence that the agency’s conclusion is unreasonable. It recognized that the agency had conducted OCI reviews on two occasions (before award and during the pendency of the protest), but found that the scope of those reviews was inadequate. Specifically, GAO determined that "[t]he record indicates that the agency did not give meaningful consideration to the potential impaired objectivity OCI involving Q2A's and MAXIMUS' dual roles as the AdQIC and the QIC." It held that the agency, in characterizing the AdQIC role as "merely reviewing ALJ decisions, sidestep[ed] the fact that the ALJ decision is itself a review of the QIC reconsideration." It found that the agency's inquiry was limited to whether the AdQIC participated in the performance evaluation of the QICs, but did not investigate whether the presence of related firms operating within the same chain of review created an impaired objectivity OCI. "Because the record shows that the agency has not meaningfully examined whether Q2A (in essence, MAXIMUS itself) could render objective advice to the agency while simultaneously serving as both the QIC and the AdQIC, we sustain the protest."
Unequal Access to Information OCI
An Unequal Access to Information OCI arises where, as part of its performance of a government contract, a firm has access to nonpublic information that could provide the firm an unfair competitive advantage in a later competition for a government contract. Here again GAO applies a presumption that to demonstrate prejudice, a protester need not establish that the awardee's access to competitively useful non-public information provided an actual advantage.
C2C argued that MAXIMUS had an unequal access to information OCI, since MAXIMUS' subsidiary Q2A, as an AdQIC, had access to non-public, competitively useful information held in the Medicare appeals system, including CSC's case files. The agency conceded that "[t]he AdQIC contract allows Q2A access to all information within the Medicare Appeals System (MAS) relative to level 2 appeals. This includes access to appeal reconsideration decision letters, case file documents, and any other information regarding appeals within the MAS."
The agency concluded, however, that the AdQIC's access to information in the MAS did not grant Q2A unequal access to information because (a) the information was neither the property of, nor proprietary to, C2C, and (2) C2C's access to its own files was equivalent to Q2A's access to C2C's files. In effect, the agency's determined only that MAXIMUS did not have access to proprietary or source selection information. Again, GAO found the scope of the agency's review insufficient, because it did not address whether Q2A had access to any non-public information that might provide a competitive advantage, even if that information did not fit the definition of proprietary or source selection.
Arguably, GAO was not substituting its judgment for that of the agency. GAO’s rejection of the agency's OCI analysis in C2C was based on the limited scope of the agency's review and the agency’s failure to examine what GAO considered to be important issues, rather than a disagreement with the agency's findings on those issues. In fact, in its Recommendation, GAO made no substantive finding on the merits, but rather urged the agency to consider the issues that had not been considered, and take appropriate action based on its determinations.
Trends and Lessons Learned
As indicated above, for most of the last decade it seemed as if OCI protest challenges at GAO were doomed to fail. For example, in the two-and-a-half years between February 2012 and August 2014, protestors raised 40 OCI challenges at GAO and, with one exception, in every case GAO upheld the contracting officer’s determination that there was no disqualifying OCI. But now the pendulum seems to be swinging back. During the past 18 months, C2C was one of at least seven protesters that cleared the "hard facts" hurdle (or, in one case, challenged the contracting officer's failure to clear that hurdle) and successfully challenged the scope of a contracting officer’s OCI review. Other GAO decisions granting OCI protests include:
Dell Servs. Fed. Gov’t, Inc., Comp. Gen. Dec. B-414461.3, June 19, 2018, 2018 CPD ¶ 213 (Agency did not properly consider whether awardee had unfair competitive advantage from access to competitively useful, non-public information that was not proprietary or source selection sensitive)
Archimedes Global, B-415886, June 1, 2018, 2018 CPD ¶ ___ (Agency exclusion of offeror was not based on "hard facts" but rather on "innuendo and supposition")
Booz Allen Hamilton, Inc. – Costs, B-414822, May 7, 2018, 2018 CPD ¶ ___ (Agency did not address issue of awardee's evaluation of competitors' products and failed to account for the effect of the OCI mitigation plan on awardee's proposed technical approach.)
AdvanceMed Corp., B-415962, November 17, 2017, 2017 CPD ¶ 362 (Agency did not meaningfully considered conflict that arose due to awardee's parent company's performance of MMIS contracts in same jurisdiction.)
Dell Services Federal Government, Inc., B-414461, June 21, 2017, 2017 CPD ¶ 192. (Agency did not meaningfully evaluate whether there was an unequal access to information OCI.)
A-P-T Research, Inc., B-413731.2, April 3, 2017, 2017 CPD ¶ 112 (Record did not reflect assessment of "firewalled subcontractor" mitigation plan by contracting officer.)
So what lessons are to be learned from the swinging OCI pendulum?
First, if you are a contractor and you have "hard facts" that establish a prima facie OCI claim, do not be afraid to pursue it.
Second, if you believe that a competitor has a potential OCI, consider GAO's timeliness rules in deciding whether and when to file a protest.
Third, be sensitive to OCI issues that may be created by the business engaged in by a company's affiliates.
Finally, if you’re a contracting officer, be proactive. Do not limit the scope of your OCI analysis. Address all possible OCI issues, fully and early – do not wait for a protest before doing the analysis.