Contractors are all too familiar with teaming agreements, joint ventures, and prime/subcontractor arrangements. In the highly competitive government contracts market for information technology (“IT”) services, such agreements can offer significant leverage. Contractors are winning more contracts by offering the government superior capabilities––and value––through strategic partnerships which unite their unique strengths. Nevertheless, these partnerships create increased contractual obligations so contractors must exercise caution to prevent them from souring.
There are many safeguards that protect fairness in government contracting. Two of them are the Procurement Integrity Act (“PIA”) and organizational conflicts of interest (“OCI”) rules. One goal of the PIA and OCI rules is to prevent contractors from obtaining an unfair advantage. For example, issues sometimes arise in teaming relationships where a contractor obtains sensitive information about a competitor while working on a prior government contract. This scenario recently happened in a Government Accountability Office (“GAO”) protest by Dell Services Federal Government (“Dell”) against the Department of Education (“DOE” or “Agency”) and SRA International, Inc. (“SRA”), an intervenor (protest referred to as “Dell”).
Dell expressed two concerns: (1) it claimed that there was a violation of the PIA and that the Agency failed to adequately consider the impact on the procurement stemming from SRA obtaining two of Dell’s proposals from a prior IT contract, and (2) it claimed that SRA had an “unequal access to information” or “biased ground rules” OCI relating to the information it received from from its teaming partner, ClearAvenue, LLC. Dell is instructive because it highlights risks that can arise in teaming scenarios.
In 2007, DOE awarded Dell a 10-year IT services contract called the Education Department’s Utility for Communications, Applications and Technology Environment (“EDUCATE”). Dell has been the incumbent on this all-inclusive, tip-to-tail IT services contract for the past ten years and is required to perform at least through November 2017. DOE decided to shift away from an all-inclusive IT contract and instead utilize multiple task or delivery order contracts to fulfill its IT needs. These requirements are now being be procured under the Portfolio of Integrated Value Oriented Technologies (“PIVOT”) program. Unlike the comprehensive EDUCATE contract, PIVOT contemplates a suite of six solicitations to obtain its IT needs. The solicitation being protested is referred to as PIVOT I.
In 2011, the Agency hired Bowhead Systems Management, Inc. (“Bowhead”) to analyze Dell’s EDUCATE contract. The Agency had provided Bowhead with Dell’s original 2007 proposal, its 2011 contract modification proposal, and other sensitive information. At that time, Bowhead employed someone whom GAO referred to as “Mr. X.” At the time Dell filed its protest, Mr. X was an employee of ClearAvenue LLC, a contractor teaming with SRA to bid on PIVOT.
On February 8, 2017, Mr. X sent both of Dell’s proposals to SRA. Dell’s proposals contained confidential bid information relating to Dell’s staffing approach, labor rates, level of effort, and pricing. On February 16, SRA’s counsel notified the contracting officer (“CO”) that Mr. X had provided the company with Dell’s proposals. The CO then conducted an investigation to determine how Mr. X obtained Dell’s proposals but was unable to reach a firm conclusion and forwarded the matter to the Office of Inspector General. In addition, the CO considered what impact, if any, that SRA’s receipt of Dell’s proposals had on PIVOT I and the other PIVOT procurements. On February 23, the Agency notified Dell that SRA had obtained two of its proposals. On February 27, Dell emailed the CO and alleged violations of the PIA.
On February 27, the CO started preparing a document called a Procurement Impact Determination (“PID”). On March 2, the Agency notified Dell that it had concluded its impact determination, noting that it would continue to investigate a possible PIA violation. The Agency’s letter failed to mention the outcome of PID. Soon thereafter, Dell filed a protest alleging violations of both the PIA and OCI rules.
Procurement Integrity Act
The PIA was enacted, in part, to prevent the unauthorized disclosure of sensitive, nonpublic information to contractors during the procurement process. Relevant here, it prohibits contractors from “knowingly obtain[ing] contractor bid or proposal information or source selection information before the award . . . to which the information relates.” Contractor bid or proposal information encompasses cost or pricing data, indirect costs and direct labor rates, proprietary contractor information, and information marked as “contractor bid or proposal information.” Source selection information covers a wide range of information, including, bid prices and proposed costs, source selection and evaluation plans, evaluations, rankings, and other information labeled “source selection information.”
When a CO receives information concerning an alleged PIA violation, the CO must “determine if the reported violation or possible violation has any impact on the pending award or selection of the contractor.” If the CO determines that there is no impact on the procurement, the CO must forward the information about the alleged violation “to an individual designated in accordance with agency procedures.”
In Dell, GAO determined that the PID only contained a brief comparison about how DOE had previously fulfilled its IT requirements with how it planned to obtain those requirements in the future. DOE argued that there would be no impact because technology has evolved since 2007. Specifically, the Agency argued that the technical solutions available in 2007 would be considered stale if they were proposed today. Dell’s concerns, however, were more extensive as they related to sensitive information in its proposals.
Dell alleged that SRA had access to its pricing methodology, labor rates, staffing strategies, and level of effort. Dell also took issue with SRA’s attempt to downplay Mr. X as a low-level administrative employee. According to ClearAvenue’s website, Mr. X was listed as the company’s chief technology officer. SRA argued that it terminated its teaming agreement with ClearAvenue but GAO found that argument to be unpersuasive.
GAO ultimately sustained Dell’s protest. GAO found unreasonable the Agency’s conclusion that ClearAvenue’s disclosure of Dell’s proposals to SRA did not adversely impact the PIVOT I procurement because the Agency did not consider important aspects of the disclosure. Specifically, GAO noted that SRA had Dell’s proposals for some period of time and that, based on the record, there was no way for GAO to determine whether Mr. X had also shared competitively useful information with SRA. Notwithstanding GAO’s conclusions regarding the PIVOT I procurement, it further concluded that the Agency’s actions were similarly unreasonable to the extent that Agency relied on those conclusons for the remaining PIVOT acquisitions.
Organizational Conflict of Interest
As defined in the Federal Acquisition Regulation (FAR), an OCI is described as a scenario where a contractor is “unable or potentially unable to render impartial assistance or advice to the [g]overnment, or the [contractor’s] objectivity in performing the contract work is or might be otherwise impaired, or a [contractor] has an unfair competitive advantage.” The FAR requires contracting officers to “[a]void, neutralize, or mitigate significant potential conflicts before contract award.” Where an OCI occurs, GAO has indicated that it is broadly classified into three groups: (1) unequal access to information, (2) biased ground rules, and (3) impaired objectivity. While these three categories generally fall under the OCI umbrella, each presents a distinct problem in government contracting.
First, an unequal access to information OCI exists where a contractor obtains access to nonpublic information that affords the contractor an unfair competitive advantage. Second, a biased ground rules OCI exists where a contractor, as part of its performance of a government contract, has helped set the ground rules for the competition for another government contract, which may skew the competition in its favor. Third, an impaired objectivity OCI arises where a contractor’s ability to give impartial advice to the government would be undermined by the contractor’s self interests. In such cases, the FAR requires contracting officials to mitigate, neutralize, or avoid possible conflicts before award to prevent an unfair advantage in the procurement process. Dell protested violations of the first two OCI rules.
In Dell, GAO expressed concern that SRA had information regarding Dell’s prices, labor rates, and staffing strategies and believed that the Agency failed to meaningfully address these issues. The record didn’t reflect any effort by the Agency to investigate these issues, or to avoid, neutralize or mitigate, any possible OCI. Also, GAO was not persuaded by the Agency’s argument that it did not use Bowhead’s findings from EDUCATE to formulate the PIVOT requirements. GAO ultimately sustained the protest on this issue because of SRA’s relationship with ClearAvenue and because it had copies of Dell’s proposals.
During GAO’s review of Dell’s biased ground rules challenge, the Agency argued that it did not use information from Bowhead’s EDUCATE analysis to formulate PIVOT. Yet, Dell pointed out that Bowhead identified four alternatives that the Agency could use to satisfy its IT services going forward. Dell further argued that Bowhead suggested a hybrid, multi-contract approach, which mirrored the PIVOT acquisition scheme, and that Bowhead’s contract prohibited the company or its employees from working on any acquisitions logically connected with, or a replacement to, services under EDUCATE. Ultimately, GAO did not render a decision on this issue but pointed out that it would be prudent for the Agency to conduct further review as part of its overall OCI analysis.
Teaming agreements, joint ventures, and prime/subcontractor arrangements allow contractors to expand their capabilities and compete for more government contracts. But these relationships can be problematic where contractors don’t understand the PIA and OCI rules. Therefore, contractors must exercise caution because PIA and OCI violations can derail your procurement efforts.
Before entering any teaming relationship, contractors should think about the following:
Do any of your teaming partner’s employees have access to the incumbent’s proposal or to the agency’s source selection information from a similar or follow-on procurement?
Did your teaming partner perform––or currently is it performing––on a contract where they it had the responsibility to evaluate the awardee on the new procurement?
Does your teaming partner have any employees that have previously worked for the incumbent or the procuring agency?
Is there a chance that a PIA or OCI issue may arise out of the relationship?
Are you prepared to implement a detailed mitigation plan for any potential conflicts?
Are you prepared to implement a firewall for any employee who may present OCI issues?
Where GAO finds a violation of the PIA or OCI rules, contractors may face devastating consequences. It it is not uncommon for GAO to recommend that a contractor be removed from competition. While not exhaustive, a review of the questions above can guide your company’s process to mitigate potential PIA or OCI issues. Teaming contractors who take diligent steps to avoid these issues early will not only reap the benefits from uniting their unique strengths but also will avoid wasting time and resources––a lost procurement opportunity––stemming from PIA or OCI problems.
 See 41 U.S.C. §§ 2101–2107 (Procurement Integrity Act); see FAR 3.104 (Procurement Integrity); see also FAR subpart 9.5 (Organizational and Consultant Conflicts of Interest).
 Dell Services Federal Government, Inc., B-414461; B-414461.2, June 21, 2017.
 The contract was originally awarded to Perot Systems Government Services, Inc., which was later purchased by Dell, Inc.
 41 U.S.C. § 2102(b).
 41 U.S.C. § 2101(2).
 41 U.S.C. § 2101(7).
 FAR § 3.104-7(a).
 FAR § 3.104-7(a)(1).
 FAR § 2.101.
 FAR Subpart 9.504.
 See Cyberdata Techs., Inc., B-411070 et al., May 1, 2015, 2015 CPD ¶ 150 at 6; see also Organizational Strategies, Inc., B-406155, Feb. 17, 2012, 2012 CPD ¶ 100 at 5; see also FAR § 9.505-4 (unequal access to information); FAR § 9.505-1, 9.505-2 (biased ground rules); FAR § 9.505-3 (impaired objectivity).
 See FAR §§ 9.505(b), 9.505-4; see also Cyberdata, supra note 11.
 Energy Sys. Grp., B-402324, Feb. 26, 2010, 2010 CPD ¶ 73 at 4; FAR §§ 9.505-1, 9.505-2.
 Diversified Collection Servs, Inc., B-406958.3, B-406958.4, Jan. 8 2013, 2013 CPD ¶ 23 at 5–6; see also FAR §§ 9.505(a), 9.505-3.
 FAR §§ 9.504(a), 9.505.
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