March 27, 2015

"No Harm, No Foul" Is Not Good Enough – Lack of OCI Mitigation Plan Costs Contractor

3 min

Yesterday, the U.S. Court of Federal Claims issued a notable decision in a growing body of organizational conflicts of interest (OCI) cases. The decision offers a helpful reminder to federal contractors of the risks and consequences associated with potential OCIs, particularly the caution that must be exercised when you think that only a potential OCI exists. In Monterey Consultants, Inc. v. United States, No. 14-1164C (March 26, 2015), Judge Bruggink upheld a contracting officer's decision to rescind a contract awarded to Monterey Consulting on the basis that Monterey and its subcontractor had unequal access to solicitation documents as a result of the team's prior work related to the predecessor contract effort. Specifically, the team had access to what became the solicitation, performance work statement, government estimate and other acquisition documents, and provided administrative support relating to them, such as editing.

Monterey attempted to downplay the significance of its prior work, arguing that it did not actually develop the requirements and thus gained no competitive advantage—an argument that the Court characterized as essentially claiming, "no harm, no foul." Monterey further argued that all of the documents to which it had early access were eventually released publicly, and insisted that its employees had, in any event, signed non-disclosure agreements (NDAs), thus reiterating Monterey's view that its team was never in a position to gain an unfair competitive advantage.

Despite these contentions, the Court noted that Monterey never submitted an OCI mitigation plan with its proposal—a fact that was central to the contracting officer's rationale for rescinding the contract award on the basis of an unmitigated OCI. In fact, Monterey took the position in its proposal that it did not even have a potential OCI and, therefore, did not submit a mitigation plan because it believed there was nothing to mitigate. This omission appears to have been the contractor's fatal misstep. Without a mitigation plan in place as a precaution (and submitted for evaluation as part of the proposal), the contracting officer could not evaluate whether the NDAs would achieve their intended purpose since there were no plans or procedures in place to assess. The Court observed that the contracting officer was simply "unprepared to supply, by force of imagination or otherwise, the details of how non-disclosure agreements would actually operate to prevent, at a minimum, the appearance of impropriety."

Key Takeaways:

  • It is important that you recognize the broad potential for an OCI. The Court found, for example, that even though all of the documents to which Monterey had early access eventually became public and were available to the other bidders, Monterey had access to them first, which "creates, on its face, the potential for an OCI."
  • Contractors should take proactive steps to implement mitigation procedures whenever there is the potential for an OCI and submit a mitigation plan with your proposal. Instead of following the "no harm, no foul" approach, a more advisable approach would be, "better to be safe than sorry."
  • The Court's decision underscores the broad discretion afforded to contracting officers, as well as the highly deferential standard of review, particularly when considered "in light of the government's interest in safeguarding the integrity of the procurement process."