An incumbent contractor performing VA CVE SDVOSB verification functions was ineligible to be be re-awarded an order for those services because of an unmitigated organizational conflict of interest.

In a recent decision, the U.S. Court of Federal Claims upheld the VA’s decision to cancel the award to the incumbent contractor and exclude that contractor from the follow-on order.

The Court’s decision in Monterey Consultants, Inc. v. United States, No. 14-1164C (2015) involved a VA RFQ for CVE support functions.  Those functions included supporting the CVE’s SDVOSB and VOSB verification processing.

The verification functions in question had been performed by Monterey Consultants, Inc. under a VA BPA.  Under its BPA, Monterey did work under a variety of call orders, including processing and verification services for CVE.  Monterey also provided support for the VA OSDBU’s acquisition efforts.

The RFQ included a specific section covering OCIs.  In relevant part, that section stated that “Contractors performing on other contracts in support of Verification shall be presumed to have an OCI with respect to this contract and are ineligible to quote on this requirement, due to the integrated nature of work perform[ed] under this solicitation and existing contracts.”

Monterey submitted a proposal.  Despite the solicitation’s OCI restrictions, the VA initially awarded the order to Monterey.  An unsuccessful competitor, Loch Harbour Group, Inc., filed a protest with the Court.  Loch’s principal argument was that Monterey was ineligible for award because of its prior work under the BPA.

After reviewing the protest, the Contracting Officer investigated the possible OCI.  In the course of the investigation, the Contracting Officer discovered that, prior to the RFQ public release, all of Monterey’s and its subcontractor’s personnel had access to non-public information regarding the RFQ, including the requirements, independent government cost estimates, acquisition plan, market research, and evaluation criteria.  The Contracting Officer also discovered that Monterey personnel provided services to the OSDBU directly relating to the preparation of the solicitation.  Notably, one employee of Monterey’s subcontractor both prepared pre-solicitation documents, and was involved in the development of Monterey’s proposal. Additionally, Monterey had not provided the VA with an OCI mitigation plan.

Based on these findings, and over Monterey’s strenuous objections, the Contracting Officer informed Monterey of the VA’s intent to rescind the award.  Monterey then filed suit in the Court, challenging the VA’s OCI investigation.

The Court found that it was “undisputed” that Monterey “had access to all of the acquisition documents, and at least one or two Monterey/CACI employees did access them when providing editing and other quality control services in support of the acquisition efforts of OSDBU/CVE.”  In fact, Monterey “admitted at oral argument that it did have access to some documents never released to the public, such as the internal government cost estimates.”

The Court held that these facts, as well as others in the record, created “on its face, the potential for an OCI.”  Monterey “therefore had a duty to mitigate that conflict or face ineligibility to bid on the follow-on solicitation.”  The Court continued:

The CO reasonably viewed the facts as establishing a potential OCI.  Plaintiffs thus had a duty to mitigate that conflict prior to bidding on the follow-on work.  The CO found its efforts in that regard to be inadequate in view of the absence of a mitigation plan.  Given the discretion we afford on review of agency action in this regard, we cannot say that the CO acted arbitrarily and capriciously with regarding to his conclusion of a potential, unmitigated OCI.

The Court directed judgment in the VA’s favor.

For SDVOSBs and VOSBs, the Monterey Consultants case will no doubt be of interest because of Monterey’s prior role as a provider of verification services to the CVE.  All contractors, however, can learn an important lesson from this case about the critical importance of strong, effective OCI mitigation plans–especially when a contractor is involved in acquisition support functions.