GAO: Multiple Contracts With Single Agency May Increase Conflict Risk

As federal contractors begin to become engaged in multiple programs for a particular agency, the potential for the firm to encounter a situation where it finds itself involved in an organizational conflict of interest (OCI) may increase. This is particularly true with respect to “impaired objectivity” OCI, which is when a firm’s ability to render impartial advice to the government is or might be undermined by the firm’s competing interests. These OCIs often arise in service contracts where the contractor is placed in a position of evaluating its own performance on other contracts.  

In a recent case, GAO found that an agency’s award of a contract created an impermissible impaired objectivity OCI for a contractor from two different perspectives for services that the contractor provided in the capacity as both a prime and subcontractor for an agency. The case is Steel Point Solutions, LLC B-419709,B-419709.2 (July 07, 2021).

Steel Point Solutions, LLC, of Calverton, Maryland, protested the award of a contract to Deloitte Consulting, LLP, of Arlington, Virginia, under an RFP issued by the National Geospatial-Intelligence Agency (NGA). The RFP was for an award of a contract to design, build, and operate a corporate automation implementation center (CAIC). The agency received several proposals and, although Steel Point submitted a superior technical proposal, the agency ultimately awarded the CAIC contract to Deloitte. After being advised of the agency’s decision and receiving a debriefing from the agency, Steel Point filed a protest.

Steel Point argued that Deloitte had three other contracts with the agency that created an impermissible impaired objectivity OCI when considered in light of the award of the CAIC contract. The three contracts Steel Point identified were Deloitte’s cybersecurity risk management and assessment (CRMA) contract, Deloitte’s human resource management contract and a contract performed through various task orders issued under the agency’s contracting program where Deloitte served as a subcontractor.  Steel Point maintains that the OCIs created by these contracts were impermissible and should have resulted in the agency concluding that Deloitte was ineligible for award of the CAIC.

In making its determination, GAO recognized that an impaired objectivity OCI may exist in two possible situations. The first situation is where a firm may be called upon to evaluate the work it has performed under another contract, and the other is a situation where a firm is called upon to perform analysis and make recommendations regarding products manufactured by it or by a competitor. The main concern to evaluate is whether a firm is in a position to make judgments or recommendations that would have the effect of directly influencing its own well-being. 

GAO agreed that, in this matter, Deloitte had a potential impaired objectivity OCI with respect to one of the task orders and also with the CRMA contract when either of the contracts are performed together with the CAIC contract.

With respect to the task order, Deloitte served as a subcontractor and in this role was tasked with providing support to the agency’s IT Portfolio and Resources Integration Division in making investment and divestment decisions regarding the agency’s IT resources.  Under the CAIC contract, Deloitte was required to recommend, design, deploy, monitor and maintain IT products that the agency would ultimately purchase from Deloitte.  As a result, Deloitte had influence over decisions relating to investments in IT products under the task order and, in its role under the CAIC contract, was in a position to recommend that the NGA purchase IT products which Deloitte would in turn sell.

The contracting officer for the CAIC actually considered whether performance of the task order and the CAIC contract would give rise to an impaired objectivity OCI on the part of Deloitte. The prime contractor for the task order even provided the contracting officer a mitigation strategy that would require it to implement a firewall in the event that Deloitte was faced with an OCI situation.  The contracting officer also indicated that, given the structure of the contracts, Deloitte would not evaluate its work under the CAIC contract in connection with performing the task order, and conversely,  it would not be evaluating its work under task order in performing the CAIC contract.  On this basis, the contracting officer concluded that Deloitte did not have an impaired objectivity OCI.

However, GAO found no evidence that such a firewall had, in fact, been implemented. GAO also found nothing in the record to show that the contracting officer ever considered whether Deloitte’s performance under the task order presented the second type of impaired objectivity OCI, a situation where Deloitte would be required to perform analysis and then, from that analysis, make recommendations regarding products that it might manufacture and sell to the agency. 

GAO determined that the confluence of the CAIC contract and the task order amounted to a textbook example of a situation where Deloitte was in a position to make judgments or recommendations that would have the effect of directly influencing its own well-being.  GAO found that the agency failed to adequately consider the question of impaired objectivity OCI, especially because there was no evidence that the prime contractor implemented a firewall under the task order as it said it would.

With respect to the CRMA contract, Deloitte was involved in reviewing, assessing and approving the agency’s information systems.  Deloitte recognized that performance under both the CRMA contract and the CAIC contract presented a potential OCI because it could be in the position of having to review any request for the purchase of products furnished under the CAIC contract as part of its responsibilities under the CRMA contract.   Although Deloitte was aware of the potential OCI in performing both contracts, it did not submit a mitigation plan with its proposal for the CAIC contract. Instead, Deloitte included only the “sample” mitigation plan that was provided to offerors with the solicitation.

The agency did not perform a review of potential OCIs before awarding the CAIC contract to Deloitte and the contracting officer only decided to investigate the matter after Steel Point filed its protest. The contracting officer recognized that performance of the two contracts together could present an impaired objectivity OCI but concluded that Deloitte could recuse itself from performing under the CRMA contract in those instances where it may be called on to review its work under the CAIC contract.  In reaching this conclusion, the contracting officer relied on language found in a portion of Deloitte’s prior proposal submitted in response to the CRMA solicitation that provided Deloitte would recuse itself in the event of a conflict.

GAO concluded that Deloitte also had an impaired objectivity OCI from the award of both the CRMA and CAIC contracts and expressed several concerns in the agency’s review.  First, GAO discovered no evidence that a mitigation plan was ever actually included in the CRMA contract awarded to Deloitte.  In addition, GAO also found no evidence to show that Deloitte made a specific commitment under the CRMA contract to recuse itself from reviewing any activities that may be performed under the CAIC contract.

Also, Deloitte’s CRMA  proposal contained a separate commitment on the part of Deloitte not to pursue other contracting opportunities, such as the CAIC contract, involving NGA systems development activities. GAO found that Deloitte’s pursuit of the CAIC contract was inconsistent with this representation.

In sustaining Steel Point’s protest with respect to two of the contracts Steel Pointe identified as causing a potential OCI, GAO determined that while the agency gave some consideration to certain aspects of potential OCIs under those relationships, there were remaining concerns that were simply never considered or addressed by the agency in its analysis of each of the situations. 

The takeaway from this case is that when a contractor has multiple contracts with an agency, the potential for an impaired objectivity OCI may come from analysis of different situations from the same relationships.  This is important from the perspective of the firm awarded multiple contracts with a particular agency, as it should be proactive in taking steps to mitigate potential conflicts. This would include making sure that any mitigation plan is included in the award contract or would otherwise be recognized in a protest.

From the standpoint of an unsuccessful bidder, this case demonstrates that when a firm suspects the award of a contract potentially causes an OCI, it may broaden its inquiry in a debriefing to possibly discover different types of OCIs from the same situation.

This case demonstrates that the potential for an OCI may not occur from just the evident situation where a contractor may be called upon to review its own work. When such a firm suspects the award of a contract potentially causes an OCI for the winning bidder, the firm may broaden its inquiry in a debriefing to gain information that may reveal other aspects of the winning firm’s relationship that put it in a position to make judgments or recommendations that would have the effect of directly influencing its own well-being.

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