Contracting While Impaired: Court Rejects Overbroad Finding of OCI Based on Impaired Objectivity

Contracting agencies, and contractors, must always be aware of potential organizational conflicts of interest (OCIs). An OCI can result in a contractor being kicked off a federal procurement. One type of OCI is an impaired objectivity OCI, typically resulting from a contractor evaluating its own offer or its own performance. In a recent decision, the United States Court of Federal Claims (COFC) said that an agency was overly cautious in rejecting an offeror based on a perceived OCI.

In Dist. Commc’ns Grp., LLC v. United States, 169 Fed. Cl. 538 (2024), the Court of Federal Claims reviewed a Department of Veterans Affairs (VA) decision to exclude a joint venture from a competition to provide support suicide prevention services for the VA. The procurement was called the “White House Priority Goal Support to Safeguard Against Veteran Suicide” (WHPG solicitation).

As part of the evaluation process, the VA began to investigate potential OCIs. The procuring officials reviewed existing and future contracts for potentials OCIs involving the WHPG solicitation. Then, the VA issued an amendment to the WHPG solicitation that included a list of companies excluded from the procurement due to an “actual and/or potential significant conflict of interest.” And the protester, District Communications Group (DCG) was on that list due to its involvement working on a contract with J.R. Reingold & Associates (Reingold).

The VA asserted that work under the Reingold contract would result in Reingold “could be put in a position to advise and/or recommend [the] VA employ any of the outreach efforts/methodologies Reingold currently implements on [the] VA’s behalf under its existing task order, to include conducting pilots that may be run under [the WHPG solicitation].” Similarly, the agency argued that “performance requirements and/or deliverables under Reingold’s [existing task] order are all examples of the types of tasks and services VA seeks advisory support for in considering its best course of action to meet the White House Priority Goals set forth in [this] solicitation ….” 

The court summarized the VA’s position by writing that the potential OCI could stem from “improper crossover” between Reingold’s existing task order and the WHPG solicitation.

An impaired objectivity OCI can occur where a contractor is tasked with “evaluat[ing] its own offers for products or services, or those of a competitor.” FAR 9.505-3. The court noted that for purposes of determining if there is an impaired objectivity OCI, “it is wholly irrelevant whether the two efforts are same or similar in scope or size; instead, what is relevant is whether the contractor would be in a position of reviewing its own work or otherwise unable to perform its obligations in an impartial manner.”

The court looked closely at the WHPG solicitation language. One aspect of it was an OCI clause, which stated:

Please be advised that any Contractor, including its team members, that receives the award may be subject to an OCI. The prime and any/all subcontractor(s) on this contract shall, for the contract’s entire period of performance, plus three years after completion of the contract be restricted from participating in any procurements and/or requirements which stem and/or arise from any recommendations developed under this contract.

Interpreting this language, the court wrote:

The contracting officer based her OCI determination on the concern that if Reingold was awarded the WHPG contract, it could potentially recommend or advise the VA to purchase optional services from the existing Reingold task order. However, if the VA decided to purchase any of those services based on a recommendation from the plan submitted as part of the WHPG contract, they would constitute “requirements which stem and/or arise from any recommendations developed under this contract”; thus, Reingold would be “restricted from participating” in supplying those services. Therefore, by the contracting officer’s own reasoning, there could not be an actual or potential OCI because Reingold would have no obvious incentive to recommend its own services because it would be prohibited from providing them even if recommended. Accordingly, the contracting officer’s OCI determination is irrational.

The court also noted that the agency failed to properly explain its conclusions regarding the OCI. “For instance, there is no real explanation as to why a subcontractor of Reingold, like DCG, has an actual or potential OCI that requires its exclusion from competition under the WHPG solicitation.” The agency simply repeated that for Reingold and subcontractors, “there is the potential … that the vendor performing this existing task order will be in a position to recommend the strategies and/or services it already provides under [the existing] task order, when advising [the] VA on potential methods to meet the goals and objectives [under the WHPG contract].”

Normally, agencies are given quite a bit of discretion when it comes to evaluating potential OCIs. This case shows that there is some limit to this discretion. An agency must properly explain the basis for its OCI concerns. The agency cannot rest its fears of an OCI on a possibility that is unlikely to occur. To do so goes beyond reasonableness in evaluating an OCI.

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