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Saturday, March 28, 2015

The unmitigated gall of unmitigated conflicts of interest

Hattip to the lawfirm Venable LLP for pointing out this new case. You may prefer to read their explanation of the case here rather than the rendition of the decision below.

MONTEREY CONSULTANTS, INC., vs USA, US Court of Federal Claims, No.14-1164C, Re-filed: March 26, 2015 Read the full decision at the link; this is a capriciously selected and edited version of it.
This is a protest of the Department of Veteran Affair’s recision of a task order to Monterey Consultants, Inc. for services in support of the agency’s program to verify the status of small and veteran-owned businesses. The task order to Monterey was cancelled as a corrective action because the agency concluded that Monterey had a potential or actual organizational conflict of interest. Plaintiff alleges that neither is true.

Monterey Consultants, Inc. (“Monterey”), held a blanket purchase agreement (“BPA”) with the Department of Veteran Affairs (“VA”) under which it provided support services to the VA’s Center for Verification and Evaluation (“CVE”) and Office of Small and Disadvantaged Business Utilization (“OSDBU”). This BPA, called the “IPT”,was the agency’s long-standing contract vehicle for procuring a wide variety of services in support of all of OSDBU’s various missions (e.g., research, verification, analysis, outreach, and training). Monterey was awarded the BPA in February 2013. It did work under a variety of call orders, including processing and verification services for the CVE and administrative support of the OSDBU’s acquisition efforts.

In an effort to reduce the scope of the work procured with a single contracting vehicle, the IPT BPA, the agency let the BPA expire on its terms and sought to replace its acquisition of some of those services through two separate contracts placed as task orders under the GSA’s Federal Supply Schedule (“FSS”). The solicitation at issue in this protest was identified by the agency as a follow-on for two specific BPA call orders, 18 and 19. Call orders 18 and 19 were for support services related to the CVE’s verification of small business status. Monterey had performed under both of those orders pursuant to the BPA. Monterey also provided support for other OSDBU work, including acquisition support under call order 17.

The VA issued a Request for Quote (“RFQ” or “solicitation”) on June 13, 2014, as a 100 percent set-aside for service-disabled veteran owned small businesses holding one or both of two GSA FSS contracts for support services. The RFQ sought “administrative, paralegal, project management, and professional support” for the CVE. Specifically, these services were to be in support of the CVE’s verification processing and management of that processing.

The RFQ addressed Organizational Conflicts of Interest (“OCIs”) in section 18:
It is recognized by the parties that the efforts to be performed by the contractor under this contract are of such a nature that they may create a potential Organizational Conflict of Interest (OCI) as contemplated by Subpart 9.5 of the FAR. It is the intention of the parties that the contractor shall not engage in any contractual activities which may impair its ability to render unbiased advice and recommendations, or in which it may gain an unfair competitive advantage as a result of the knowledge, information and experience gained during the performance of this contract. It does not include the normal flow of benefits from incumbency. 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. (emphasis supplied).
A further condition for bidding on the RFQ was that offerors were required to “agree not to participate . . . in any acquisition wherein: (1) The contractor has participated in the analysis and recommendation leading to the acquisition decision to acquire such services; or (2) the Contractor may have an unfair competitive advantage resulting from information gained during the performance of this contract.”

The solicitation went on to instruct offerors who believed that their participation would cause an OCI to “include in [their] proposal[s] an appropriate discussion and mitigation plan.” The VA would review such materials, make a determination of whether there was an OCI, and, if so, determine whether the mitigation plan was sufficient to allow the offeror to participate.

Three offerors submitted proposals. Monterey was initially awarded the contract on September 8, 2014, based on its higher technical scores, which, in the agency’s eyes, made it a better value despite its higher price.

Loch Harbour filed a protest in this court, the principal ground of which was that Monterey was ineligible for award because it had an OCI stemming from its prior work under the BPA. Upon reviewing the complaint, the Contracting Officer (“CO”), James Boughner, began an investigation into the possible OCI based on Monterey’s prior work for OSDBU and CVE.

The CO recorded his initial findings in a letter to Monterey.  In the letter, he stated his finding that, prior to the solicitation’s public release, all of Monterey’s and its subcontractor’s personnel had access to documents relating to the solicitation, including the requirements, independent government cost estimates, acquisition plan, market research, and evaluation criteria. The CO also found that Monterey personnel provided services directly relating to the preparation of the solicitation. AR 1569. The letter also detailed Mr. Boughner’s communication with Mr. Skinner of OSDBU and Zachary Wilcox of the VA’s Strategic Acquisition Center. Both of those gentlemen informed Mr. Boughner that Monterey did not have, or did not provide, an OCI mitigation plan for its work under the BPA.

Mr. Boughner sent another letter to Monterey informing it of his final conclusions regarding the OCI investigation and the agency’s intent to take corrective action. He found a potential OCI resulting from Monterey employee access to solicitation documents and a lack of mitigation plan in place for Monterey. The CO’s letter stated that Monterey had a potential OCI “at the time [it] submitted its offer and that no efforts were made by either OSDBU or Monterey to avoid or mitigate the conflict of interest prior to award to Monterey.”

The CO also pointed out that Monterey’s technical proposal in response to the RFQ represented that neither Monterey nor its subcontractors had an OCI. The CO found this to be further support for
his conclusion that Monterey did not have an mitigation plan in place (because one would not have been needed if the bidder felt it had no OCI). Although Monterey employees “signed Non-Disclosure Agreements in the course of their duties in accessing these documents, this was inadequate, because there was no Mitigation Plan . . . to show how their organizational and/or management system or other actions would avoid or mitigation any actual or potential [OCIs]”.

As a result, Monterey’s task order award was rescinded.

Monterey responded to the two letters from the CO with a series of phone calls, emails, and letters over a three week span. Monterey represented to Mr. Boughner both that it had a mitigation plan, dating back to its BPA proposal, and that any solicitation information to which it had access would not have conferred on it any competitive advantage because all the information was eventually released to the other offerors. Monterey and CACI employees claimed in declarations not to have had access to “any information” or “any non-public documents” relating to the solicitation.

During the course of the OCI investigation, OSDBU’s Director of Acquisition Support, Jules Tchoujan became aware of an email exchange between CACI employees Daniel Swart and Kathleen Wilson, both of whom worked under the BPA. From this correspondence it is clear that one of them is advising the other on drafting Monterey/CACI’s proposal in response to the other solicitation for the OSDBU work. As a result, the CO made an additional finding that Monterey had an actual OCI as a result of the involvement of Mr. Swart in both the preparation of Monterey’s proposal for the follow-on work and his work under the BPA in preparing pre-solicitation acquisition documents. The CO noted that this was a violation of Mr. Swart’s NDA, and cited that fact as evidence of the lack of force and effect of the purported mitigation plans in place for Monterey and CACI, in a further letter to Montery.

In the context of an organizational conflict of interest, the Federal Circuit has explained that each situation should be examined “on the basis of its particular facts and the nature of the proposed contract,” and that, “the identification of OCIs . . . requires the exercise of considerable discretion on the part of the agency.” This means that contracting officers must be afforded “great latitude in handling OCIs,” and thus their decisions will not be reversed absent irrationality. It is important also to recognize that the CO need not find an actual organizational conflict. All that is necessary to support agency action in response to an OCI is the potential for impropriety: even one based solely on the appearance of impropriety.

Plaintiff argues that the CO’s decision regarding Monterey’s OCI was irrational because it was both factually unsupported and wrong in the particulars. We examine each of the CO’s findings in turn.

Although the CO's first letter is not specific as to which of the documents investigate were accessed, edited, or otherwise only available for access by plaintiff’s personnel, the problem is clear: prior to public availability, Monterey had access to information that could give it a competitive edge in crafting its proposal for the follow-on procurement.

The CO then identified a compounding problem–that Monterey did not have an OCI risk mitigation plan to alleviate the problem of access to documents. The CO quoted Monterey’s proposal for the IPT BPA in which Monterey represented that it was not aware of any OCI related to the work under that solicitation. The CO recognized that Monterey, and presumably CACI, employees had signed nondisclosure agreements during their work on the BPA and in support of the acquisition, but found this fact to be unavailing for Monterey because of the absence of a risk mitigation plan. He found these measures to be inadequate because Monterey had not shown how the NDAs themselves would “avoid or mitigate any actual or potential [OCIs].”

Plaintiff attacks those findings as unfounded. First, as to the unequal access to information, plaintiff argues that Monterey’s work on the BPA “did not involve the development of requirements/performance work statements.” This is critical in its view because it shows a lack of prejudice to the agency and other offerors from Monterey’s access to information prior to the solicitation’s release. In essence, “no harm, no foul” is plaintiff’s view of the situation.

Plaintiff further directs our attention to evidence provided by the Director of CVE, that CVE “fire walled Monterey from every activity in the requirements preparation” and that Monterey had no role in formulating the performance work statement, costing, or any other contract documents. Plaintiff’s point is that, a CO’s finding of mere access to pre-solicitation documents is not enough to disqualify it here.

Second, plaintiff argues that any document it might have had access to eventually became public anyway, further supporting its notion of lack of prejudice to other offerors.

Third, plaintiff points to the NDAs signed by its employees as evidence of the fire wall maintained by Monterey pursuant to its mitigation plan. It avers that none of its employees with access to the server on which solicitation and other acquisition documents were stored were allowed to work on its proposal for this RFQ. Instead, according to plaintiff, only government employees had a hand in preparing acquisition documents such as the statement of work and other requirements documents. Thus, despite access, Monterey gained no competitive advantage from its incumbency.

Defendant responds by relying on the undisputed facts that 1) Monterey and/or CACI did acquisition support work under several BPA call orders, 2) the RFQ was a follow-on from two BPA call orders performed by Monterey, 3) Monterey personnel had access to all solicitation documents, including confidential documents never shared with other offerors, and 4) Monterey was required by the RFQ to identify any potential OCIs but failed to do so. This, in combination with the RFQ’s stated assumption that anyone who had previously performed CVE verification work was presumed to be ineligible,
provided the necessary backdrop to support the CO’s investigation and conclusion.

In light of the government’s interest in safeguarding the integrity of the procurement process, the facts on this record establish the rationality of the CO’s conclusion. We begin with the undisputed
facts. Plaintiff had access to all of the acquisition documents, and at least one or two Monterey/CACI employees did access them when providing editing and other quality control services in support of the acquisition efforts of OSDBU/CVE. Plaintiff admitted at oral argument that it did have access to some documents never released to the public, such as the internal government cost estimates.
With regard to other documents, regardless of whether they later became public, it is not disputed that Monterey had access to them first. This creates, 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 solicitation stated a presumption that offerors who had performed support of CVE verification in the past would be ineligible for award and also required any offeror who identified a potential OCI to provide and implement a mitigation plan to alleviate the possibility of unfair competitive advantage.

The CO found Monterey not to have had a mitigation plan in place during its performance of the BPA. Several agency officials told the CO that they were unaware of any mitigation plan during Monterey’s performance under the BPA. The CO took into account the representation by Monterey in its BPA proposal that it had no actual or potential OCIs as evidence that it did not have a mitigation plan in place, along with the fact that it did not present a plan with its bid for the follow-on RFQ. He took both of those facts at face value as indications of plaintiff’s then-belief that it had nothing to mitigate. He thus gave no credit to the after-the-fact plan provided by Monterey.   Our own examination of the plan provided to the CO provides us with little confidence that it was related specifically to the work performed by Monterey under the BPA.

The CO reasonably concluded that the NDAs signed by Montery employees were insufficient mitigation measures without a working mitigation plan. He was unprepared to supply, by force of imagination or otherwise, the details of how non-disclosure agreements would actually operate to prevent, at a minimum, the appearance of impropriety.

Given the discretion we afford on review of agency action in this regard, we cannot say that the CO acted arbitrarily and capriciously with regard to his conclusion of a potential, unmitigated OCI. Here, the CO found very recent potential access to presolicitation documents and no plan for mitigation. The information that might have been gleaned was neither stale nor irrelevant. The CO’s finding of an unmitigated potential conflict of interest was thus neither arbitrary, capricious, nor contrary to law.

Lastly, the CO sent an additional letter to Monterey, informing it of a further basis for the recision of Monterey’s award. In this letter, he found an actual OCI existed. He relied on emails between Mr. Swart and Ms. Wilson, two CACI employees working under Monterey’s BPA. The CO found in these email exchanges a violation of Mr. Swart’s NDA. This is then cited by the CO as evidence that any mitigation plan alleged by plaintiff to have been in place by Monterey or CACI was either not implemented or not followed by their employees.

It is important to understand that the solicitation referenced by the CO in this letter is not the present solicitation. It instead relates to other work in support of OSDBU, separately solicited. This work for OSDBU was, however, previously consolidated under the single BPA held by plaintiff prior to the solicitation at issue. Plaintiff’s primary argument in this regard is thus that the actual OCI is irrelevant to the issues at bar and could not have presented a reasonable basis for the CO’s conclusion to rescind Monterey’s task order award. Plaintiff also presents the three unsworn statements of Mr. Swart to argue that the CO was factually incorrect in his findings of an actual OCI.

Defendant answers that the OCI resulted from related work under the same prior contract and thus is highly relevant to Monterey’s eligibility to bid on the solicitation at issue here. The fact that the same alleged mitigation plan should have prevented Mr. Swart’s disclosure of pre-solicitation information is important, asserts defendant, because it shows the irrelevance of that plan to Monterey’s OCI. Although the CO’s conclusion was reasonable even absent this evidence of actual impropriety, we agree that it provides further support for his conclusion and recision of Monterey’s award. Plaintiff reads too much into the letter and relies too heavily on an arbitrary division of the two solicitations. The CO cited this information as illustrative of what it identified as the primary problem he found with regard to Monterey’s potential OCI for the CVE solicitation: "[whatever] Mitigation Plans were in place by Monterey and CACI to avoid OCI is unfounded, as the mplementation of any alleged plan was clearly not followed by Monterey employees.”

He found the disclosure to be evidence of the lack of an effective mitigation plan. The mitigation plan alleged to have been in place for this solicitation is the same as that which should have prevented the actions of Mr. Swart with regard to the OSDBU work solicitation. Because it was the same purported mitigation plan at issue in both instances, it was proper for the CO to have considered the actions of Mr. Swart regarding the related solicitation. The CO’s conclusion was thus not irrational in this regard.


We find that the contracting officer’s decision to rescind the award to Monterey was rational and supported by the record. The CO correctly identified a potential OCI on the part of plaintiff as the incumbent contractor and a bidder for the follow-on procurement. The CO further found that plaintiff had no effective, implemented risk mitigation plan, leading him to conclude that Monterey should not have been awarded the contract. We find no irrationality in his conclusion.

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