When a government employee moves from a federal agency to a private contractor, this sort of revolving door can lead to concerns that contractor hiring the ex-agency employee is getting special treatment. To avoid this concern, the ex-agency will sometimes bar the contractor from competing. In a recent case, the Navy did just that and a court had to review if the Navy made a reasonable decision.
In Raytheon Co. v. United States, No. 23-1657C, 2024 WL 1341079 (Fed. Cl. Mar. 29, 2024), the Court of Federal Claims (COFC) reviewed the decision by the Navy to eliminate Raytheon Company (Raytheon) from a procurement to develop countermeasures against radar-guided missiles for the F/A-18 fighter jet. The Navy based its decision on “Raytheon’s employment of a retired Navy technical expert” that “gave rise to the appearance of impropriety.” The Navy employee is referred to as VK.
Appearance of Impropriety Standard
COFC relied on the standard set forth in NKF Engineering, Inc., v. United States, 805 F.2d 372 (Fed. Cir. 1986), meaning that “the government may eliminate an offeror from a procurement based on the mere appearance of impropriety” and there is no requirement for showing that the “alleged impropriety had an actual (or even likely) impact on the procurement, or even that the outcome of the procurement suggests that it was tainted or unfair.” This standard is based on the FAR, which notes in several places that the appearance of a conflict should be avoided.
For instance, the “general rule is to avoid strictly any conflict of interest or even the appearance of a conflict of interest in Government-contractor relationships.” FAR 3.101-1. Per COFC: “the appearance of impropriety (or conflict of interest), by definition, means that an objective observer might believe there is an impropriety, even where the facts, when fully investigated, would not support a finding of an actual legal violation or impropriety in the procurement.”
This is a very deferential standard: “Raytheon cannot win this case unless the Navy’s fact findings lack support in the record or its conclusion based on those facts is arbitrary, capricious, or otherwise contrary to law.” Raytheon attempted to get around this standard and read NKF in a narrow manner, but COFC was having none of it. The court noted that there must be “hard facts,” meaning “that inferences and innuendo will not suffice.”
In addition, the standard in NKF means that “[w]hether or not inside information was actually passed from [the former government employee] to NKF, the appearance of impropriety was certainly enough for the CO to make a rational decision to disqualify NKF.” There is no rule “that an agency must find evidence of an actual impact to the procurement,” and a “CO has wide latitude to make a finding of the appearance of impropriety and to exclude an offeror on that basis; as long as such a finding is rational, this Court must uphold it.” A contracting officer has “nearly unlimited discretion to exclude bidders for appearance of impropriety” and the decision must be based on “reasonable factual predicates” and not be irrational.
Facts in this Case
With respect to the facts, the court found that the Navy did base its finding on the record and came to a logical conclusion, despite Raytheon’s arguments to the contrary. The court would find in Raytheon’s favor if the “facts amount to no more than a hill of beans” but here there was more than a hill.
For instance, the employee in question:
- Helped to “define techniques for a towed decoy”
- Provided “inputs on the DBD DET Statement of Objectives as well as the scope of testing to be conducted in support thereof” as providing VK “with unique insight regarding the Government’s future DBD requirements.”
- “VK did not recuse himself from DBD work, did not provide written notice to his supervisors, and clearly violated his NDA during this period.”
- Accepted an offer from Raytheon, then continued to work for the Navy and “actively participated in secure email chains discussing DBD EMD requirements and how to address those requirements at an upcoming [NARG] event.”
- The employee, while working at Raytheon, “authored work products . . . [and] proposed changes to the DBD Goals Document, provided contributions to the RFI that resulted in changes to the Government’s documents, and represented Raytheon at a number of recurring and nonrecurring events with the Government[.]”
The court summarized it this way: “The fact that VK helped define what the government would be looking for in its DBD effort is reasonably characterized as substantial, important, more-than-minimal involvement, which, combined with the fact of VK’s subsequent employment with a potential offeror on the same procurement, a third-party observer would consider fishy.”
Conclusion
This case leaves us with two reminders about the appearance of impropriety. First, the standard for review by the government in these cases is very low. If the federal agency finds an appearance of impropriety, that is enough, and no actual impact to the procurement need be found. Second, the decision must be linked to facts showing appearance of impropriety, that is enough. Again no facts showing impact on a specific procurement is necessary. Contractors should take care to be mindful of these prohibitions to avoid the perception of unfairness that can result from government employees moving straight to a federal contractor.
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