Agency Faces Sanctions For Backdating Market Research

An agency backdated a market research memorandum to justify its set-aside decision–and when the backdating came to light, the Court of Federal Claims was none too pleased.

In a recent decision, the Court held that the backdated memorandum resulted in a “corrupted record,” which undermined a “fair and equitable procurement process,” and agreed that the agency’s self-imposed sanctions were appropriate.

I’ve said it many times before, and I’ll say it again: in my experience, the vast majority of agency procurement officials, at all levels, act honestly and ethically.  But that’s not true 100% of the time.  Just last week, I posted on the case of Starry Associates Inc. v. United States, in which the Court held that an agency had engaged in “intransigence and deception” during its evaluation and the following bid protests.  Now comes another example of agency misbehavior, again in an apparent effort to undermine a bid protest.

The Court’s decision in Gallup, Inc. v. United States, No. 16-1656C (2017) involved a U.S. Special Operations Command procurement for its Global Research and Assessment Program.  On May 31, 2016, the agency issued an RFI seeking information regarding “small business’ ability to support GRAP while ensuring compliance with FAR 52.219-14, Limitations on Subcontracting.”

After reviewing responses from interested contractors, the agency concluded that 14 respondents were capable of supporting the GRAP requirements and “the majority of respondents addressed FAR 52.219-14.”  On November 14, the agency issued the solicitation as a small business set-aside.

Gallup, Inc., a large business, filed a pre-award bid protest with the Court.  Gallup argued that the agency’s set-aside determination was irrational.  According to Gallup, a small business could not perform the GRAP requirements while maintaining compliance with the limitations on subcontracting.

On January 6, 2017, the agency filed its Administrative Record responding to the protest.  The Administrative Record contained a document entitled “Market Analysis (June 24, 2016).”  The Market Analysis memorandum was the only record of the agency’s evaluation of RFI responses.  The Market Analysis memorandum stated that a majority of RFI respondents addressed the limitations on subcontracting and that three small businesses “provided the most extensive and detailed information regarding compliance with the clause.”  The memorandum concluded: “As such, the GRAP acquisition will be processed as a small business set-aside.”

After briefing on the case had been completed in March, the Government (USSOCOM was represented both by its own attorneys and those of the Department of Justice) filed a Notice of Corrective Action, stating that the agency would cancel the set-aside solicitation.  The Government also informed the Court that it had learned, on March 23, that the Market Analysis memorandum “had been prepared on or about December 15, 2016 . . . after the agency had proceeded with the procurement as a small business set-aside and had received [Gallup’s] pre-filing notice” regarding its protest.

The Court issued an order for an oral hearing, and required all individuals who had participated in the production of the Administrative Record to attend.  At the hearing, the Contracting Officer testified that she had prepared the Market Analysis memorandum in December, after the acquisition was underway.  She had used the June 24 date in an effort to make sure that the record was “in good shape” to defend the protest.  The Contracting Officer was contrite, saying that she had made a “huge mistake” and was “deeply sorry” for it.

Following the hearing, Judge Thomas Wheeler asked the Government to explain why the agency should not be sanctioned for its actions.  The Government did “not dispute the appropriateness of sanctions in this case,” and agreed to pay Gallup’s attorneys’ fees and litigation costs.  The Government also stated that the agency would issue guidance to its contracting staff “emphasizing the importance of completeness, accuracy, and integrity in preparing records and accompanying certifications,” and would conduct training focusing on “accuracy and ethics in preparing and certifying administrative records.”  Gallup agreed that these self-imposed measures would be satisfactory.

Given the agreement between the Government and Gallup, the Court found that formal sanctions were unnecessary.  The Court ordered the Government to file a status report by May 17 regarding its implementation of the agreement.  Judge Wheeler concluded with a warning:

The integrity of the administrative record, upon which nearly every bid protest is resolved, is foundational to a fair and equitable procurement process.  While the Government has accepted responsibility for its misconduct, the importance of preventing a corrupted record cannot be overstated.  The Court encourages USSOCOM to take all reasonable steps to ensure that its contracting office appreciates the necessity of conducting a well-documented, well-reasoned procurement and producing a meticulous and accurate record for review.  The Court will not tolerate agency deception in the creation of the administrative record.

That’s twice in one week that I’ve covered Court decisions in which the presiding judge used the word “deception” to describe agency conduct.  As Judge Wheeler noted–and as Judge Bruggink forcefully stated in Starry Associates–the fairness and integrity of the procurement process rest on the assumption that agencies will act fairly and honestly.  Conduct like the backdating that occurred here undermine the fairness of the process, and just as importantly, undermine the perception that the process is fair–which is, after all, why contractors are willing to compete in the first place.

That said, I don’t want to give the impression that the misconduct in Gallup rose to the level of that described in Starry Associates.  Here, the Government’s attorneys appeared to have unilaterally disclosed the backdating when they discovered it–which was the right and ethical thing to do.  The Contracting Officer expressed remorse for her actions, and USSOCOM agreed to reasonable corrective measures without being forced to do so by the Court.  Those actions are worthy of acknowledgment, just like the improper backdating is worthy of criticism.

I won’t get up on my soapbox again about why good faith bid protests are such an important part of the competitive process (although you can read my musings on that subject in the Starry post). Perhaps Starry Associates and Gallup will be good lessons for those few agency officials who could be tempted to cross the line.  Hopefully, this is the last time for awhile that I’ll be writing about agency “deception.”