February 27, 2017 | Law360

The GAO Affirms the Navy's Belt-and-Suspenders, and Another-Set-of-Suspenders, Approach to OCI Waivers, and Highlights Timing Considerations in Alleging PIA Violations

9 min

This article was republished in Law360 on March 2, 2017.

The Government Accountability Office's (GAO's) recent decision in Concurrent Technologies Corporation, B-412795.2, B-412795.3, Jan. 17, 2017, 2017 CPD ¶ 25, featured what can best be described as a belt-and-suspenders, and-another-set-of-suspenders, approach to waivers of organizational conflicts of interest (OCIs), and reminds would-be protesters of key timing issues in alleging violations of the Procurement Integrity Act (PIA). A review of the turbulent history of the Navy procurement at issue in the Concurrent Technologies protest sheds light on the procedural challenges that contractors face in protesting OCIs (and subsequent agency waivers of the same) and the timing considerations involved in PIA violations.

GAO Declines to Dismiss an OCI Protest, But Ultimately Affirms the Navy's OCI Waiver

In Concurrent Technologies, the protester, CTC, challenged a Navy award of a contract in support of an advanced manufacturing technology and processing program, arguing that the awardee Advanced Technology International (ATI) had an unequal access to information OCI. There are, of course, three broad categories of OCIs: unequal access to information, biased ground rules, and impaired objectivity. An unequal access to information OCI exists where a firm has access to nonpublic information as part of its performance of a government contract, and where that information may provide the firm an unfair competitive advantage in a later competition for a government contract.

In response to CTC's initial protest, the Navy took corrective action by amending the solicitation to require offerors to disclose any actual or potential OCIs. After offerors submitted revised proposals containing OCI statements, the Navy contracting officer concluded that neither CTC nor ATI had a disqualifying OCI. In doing so, the contracting officer noted that ATI identified in its OCI statement contracts in which ATI believed there were actual or potential OCIs. The contracting officer, however, found that although ATI had received access to CTC's proprietary information, the information did not give ATI a competitive advantage. One would think that would be the end of the story, with the contracting officer investigating actual or potential OCIs and concluding there were none. The Navy, however, appears to have employed a belt-and-suspenders approach to OCIs, with the contracting officer seeking a waiver of any potential OCIs. The head of the contracting activity (HCA) executed the waiver and the Navy reaffirmed the award to ATI. An OCI waiver is contemplated by the FAR. An agency head or designee, not below the level of the HCA, may, as an alternative to avoiding, neutralizing, or mitigating an OCI, execute a waiver determining that the application of the FAR's OCI provisions in a particular circumstance is not in the government's interest. In executing the waiver following CTC's initial protest, the HCA reviewed the contracting officer's OCI investigation report.

CTC filed a second protest challenging the award to ATI, this time asserting not just an unequal access to information OCI, but also a biased ground rules and impaired objectivity OCI (collectively referred to in the protest as a "biased advice" conflict). In a biased ground rules OCI, a firm, as part of its performance of a government contract, has in some sense set the ground rules for the competition for another government contract, raising the concern that the firm could skew the competition, whether intentionally or not, in favor of itself. Under an impaired objectivity OCI, a conflict arises where the firm's ability to render impartial advice to the government could be undermined by the firm's competing interests.

Importantly, CTC in its second protest also challenged the HCA's OCI waiver. This is key, because the Navy sought dismissal of the OCI allegations as academic due to the OCI waiver. The GAO declined to dismiss because CTC had challenged the adequacy of the waiver for failing to address CTC's OCI allegations and as unreasonable.

The Navy then applied yet another set of suspenders to its belt-and-suspenders approach to CTC's OCI allegations. In response to this second protest, the Navy HCA issued a far-reaching supplemental OCI waiver, stating that "it is not in the Government's interest to apply such OCI rules and procedures to any, each, every, and all actual, potential, or alleged [OCIs] that do or might exist" under the solicitation. The HCA further explained that he "'further considered the risks associated with waiving [the] OCI here as well as CTC's allegations,' specifically those raised in CTC's first and second protests" and therefore "'approve[d] the [contracting officer's] request for a waiver of those OCI rules and procedures, and do hereby waive each and every one of them for this [] solicitation and contract.'"

The GAO denied CTC's OCI allegations, concluding that "[t]he second OCI waiver shows that the HCA considered all of the allegations raised by the protester" (emphasis added) and that the waiver was reasonable because the Navy complied with the procedural requirements of FAR 9.503. In determining the waiver to be reasonable, the GAO noted that the HCA specifically cited the following:

  1. the contracting officer's OCI waiver request setting forth the extent of the conflict;
  2. the contracting officer's August 2016 OCI investigation report; and
  3. CTC's allegations in the second bid protest alleging all three categories of OCIs.

Based on these details, GAO concluded that the HCA's second waiver clearly addressed all of the allegations raised, and was consistent with and reasonably supported by the record. Thus, although CTC had challenged the adequacy of the Navy's OCI waiver, and therefore avoided dismissal of its OCI allegations due to the waiver, the GAO, in denying CTC's OCI allegations, nonetheless relied on the supplemental waiver from the Navy that was executed after CTC protested the initial waiver. Adding another set of suspenders to its "belt-and-suspenders" approach to CTC's OCI challenges ultimately proved effective for the Navy.

Timing Considerations for PIA Allegations

In its second protest (after the Navy reaffirmed the award to ATI), CTC further alleged that the Navy failed to investigate whether ATI's access to CTC's proprietary information violated the PIA. Under the procurement integrity provisions of the Office of Federal Procurement Policy Act as amended, 41 U.S.C. §§ 2101-2107, known as the Procurement Integrity Act, a federal government official "shall not knowingly disclose contractor bid or proposal information or source selection information before the award of a Federal agency procurement contract to which the information relates." 41 U.S.C. § 2102(a)(1). The PIA also provides that "[e]xcept as provided by law, a person shall not knowingly obtain contractor bid or proposal information before the award of a Federal agency procurement contract to which the information relates." 41 U.S.C. § 2012(b). Agency investigations of PIA violations fall under FAR subpart 3.1.

The Navy requested dismissal of CTC's PIA allegations because they relied on the same facts as the OCI allegations in its initial protest (filed months earlier), and therefore such allegations were not timely because they should have been raised in CTC's initial protest. Noting that the GAO's Bid Protest Regulations state that the GAO "will not review an alleged violation of [the PIA] where the protester failed to report the information it believed constituted evidence of the offense to the Federal agency responsible for the procurement within 14 days after the protester first discovered the possible violation," see 4 C.F.R. § 21.5(d), the GAO dismissed CTC's PIA argument.

Although it sought dismissal of CTC's PIA argument, the Navy nonetheless conducted an investigation of the PIA allegations, thus prompting CTC to file a supplemental protest challenging the Navy's PIA investigation, specifically the procedural sufficiency of the investigation. Under FAR subpart 3.1, a contracting officer who "receives or obtains information of a violation or possible violation of [the PIA] must determine if the reported violation or possible violation has any impact on the pending award or selection of the contractor." FAR 3.104-7(a). If there is a determination that there is no impact on the procurement, the contracting officer must forward the "information concerning the violation or possible violation and documentation supporting a determination that there is no impact on the procurement to an individual designated in accordance with agency procedures." FAR 3.104-7(a)(1). The GAO, citing FAR 3.104-7, reported that "[i]f that individual agrees with the contracting officer's analysis, the procurement may proceed; if the individual does not agree, the individual must forward the information to the HCA and advise the contracting officer not to proceed with the award." In the procurement at issue, the Navy chief of the contracting office responsible for the procurement was briefed by the contracting officer regarding the PIA allegations, and concurred with the conclusion that there was no evidence of a PIA violation. The GAO concluded that the PIA investigation complied with the FAR's procedural requirements.

Notably, though CTC protested the procedural sufficiency of the Navy's PIA investigation, the protester failed to challenge the reasonableness of the agency's conclusions in its PIA investigation until nearly six weeks later. As a result, the GAO dismissed this challenge as untimely, stating that CTC did not raise the issue until more than 10 days after it received the Navy's PIA investigation report. The GAO determined that the Navy's PIA investigation complied with the procedural requirements of the FAR and denied CTC's protest on this ground.

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While the GAO ultimately denied CTC's protest by finding that the Navy HCA's second OCI waiver was adequate and reasonable and that the Navy's PIA investigation complied with the procedural requirements of the FAR, the GAO's decision offers some important reminders for contractors with respect to the hurdles faced when challenging OCI waivers and PIA violations:

  • OCI waivers, while not necessarily common, provide little room for protesters to successfully mount OCI-based challenges to agency contract awards. Although the GAO in Concurrent Technologies declined to dismiss CTC's protest due to the waiver because CTC challenged the waiver's adequacy, the Navy was able to execute a second waiver (after CTC protested the initial waiver) that formed the basis for the GAO's eventual denial of CTC's OCI protest allegations.
  • PIA violations must be raised with the agency responsible for the procurement within 14 days after the protester first discovered the possible violation in order for the GAO to review such allegations. Though CTC was able to challenge the Navy's actual PIA investigation when it learned about it in an agency report, the lesson to be taken from Concurrent Technologies is that CTC's initial PIA arguments were dismissed as untimely due to failure to raise the allegations within 14 days of discovering a possible violation. Contractors should be acutely vigilant of any possible PIA violations that they become aware of during the course of a procurement so as to avoid being untimely at the GAO.
  • When protesting an agency's PIA investigation, it is important to raise both the procedural sufficiency of the investigation and also the reasonableness of the agency's conclusions at the same time (if warranted). Failing to do so could trigger yet another dismissal for untimeliness, as was the fate of the protester in Concurrent Technologies.