GAO: Agency Didn’t Reasonably Evaluate a Potential OCI

In all competitive procurements, agencies must identify and analyze, as soon as possible, whether a potential contractor has an actual or potential organizational conflict of interest. (OCIs come in three general varieties: unequal access to information, biased ground rules, and impaired objectivity.) If the agency finds one, it must avoid, neutralize, or mitigate the potential OCI to ensure fairness.

As one recent GAO decision illustrates, an agency’s failure to reasonably investigate a potential OCI can lead to a sustained protest.

In Safal Partners, Inc., B-416937 et al. (Comp. Gen. Jan. 15, 2019), the Department of Education issued a fixed-price task order under the awardee’s GSA FSS contract to support the Charter Schools Program with technical assistance and disseminating best practices. The TO was referred to as the National Charter School Resource Center (NCSRC) contract.

Among other grounds, the protester, Safal, asserted that the awardee’s subcontractor, WestEd, had an impaired objectivity OCI. (In general, an impaired objectivity OCI exists when a contractor’s ability to provide impartial advice to the government might be undermined by its competing interests.)

WestEd, under its DCM contract (a separate contract it has with DOE) conducts on-site monitoring to gather information and data to ensure project performance by DOE grantees. From information gathered from these visits, WestEd develops a comprehensive report that may recommend technical assistance for grantees. Then, the NCSRC contractor (who, here, had subcontracted with WestEd) provides individualized assistance to address the findings identified by WestEd under the DCM contract.

Given this relationship between the DCM contract and the NCSRC contract, Safal understandably argued that WestEd could benefit itself by recommending grantees for technical assistance, under the DCM contract, and then providing that assistance under the NCSRC contract.

Only after the protest was filed did the contracting officer analyze the potential impaired objectivity OCI. Nonetheless, the agency defended its award decision. In doing so, the contracting officer stressed that the agency, not WestEd, made the final decisions related to monitoring and technical assistance. So, while the contracting officer didn’t explicitly find that there wasn’t an OCI, he concluded that WestEd, in performing the DCM contract, couldn’t funnel work to itself under the NCSRC contract.

GAO was unconvinced. It noted that it reviews an agency’s OCI analysis for reasonableness and doesn’t substitute its judgment for the agency’s when an agency gives meaningful consideration to whether an OCI exists. But here, GAO found that the agency’s conclusion–regarding WestEd’s supposed inability to funnel work to itself–didn’t hold water. In fact, it reasoned:

It is well settled that, where, as here, a contractor is expected to offer its input to the agency, the contractor may have an OCI, even where the agency is not relying solely on the contractor’s input, and where the government retains the ultimate decision-making authority. . . . As discussed above, WestEd had substantial involvement in the monitoring processes under the DCM contract that would lead, eventually, to technical assistance services being provided to grantees under the NCSRC contract.  The contracting officer’s assertion that WestEd’s lack of final authority mitigates the subcontractor’s impaired objectivity OCI is unsupported.  Because the contracting officer’s OCI analysis applied an improper legal standard to the facts of this case, we have no basis on which to conclude that the finding of no OCI was reasonable, and we sustain the protest on this basis.

Ultimately, GAO recommended that the agency conduct a new OCI analysis, and it recommended the reimbursement of Safal’s protest costs for its trouble.

How could this protest have turned out differently? Could WestEd have taken some proactive step to help protect its award from an OCI attack? Yes! It could have, and should have, foreseen the potential OCI and tried to preempt it through a comprehensive OCI mitigation plan.

This plan, which it could have submitted with its proposal, would, first, have alerted the contracting officer to the potential OCI (apparently, here, the contracting officer first heard of the potential OCI during the protest). But also, the agency could have used the mitigation plan as a basis to defend the award decision, despite the potential OCI.

There’s no guarantee that this strategy would have worked: unlike “unequal access to information” OCIs, a conflict of interest based on impaired objectivity can be difficult to mitigate. Nevertheless, GAO has held that, under appropriate circumstances, impaired objectivity OCIs can be mitigated with a strong mitigation plan.

It is unclear from GAO’s decision whether WestEd’s prime contractor, the awardee itself, was aware of its subcontractor’s OCI when it submitted its proposal. For prime contractors, this case is a good reminder to require prospective subcontractors to disclose actual or potential OCIs before proposal submission.

For a company like WestEd, the best takeaway from this case is this: implement a general OCI mitigation plan for your firm and adapt it to specific procurements when needed.