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Court of Federal Claims: GAO's OCI Decision Not Rational

The government's decision to follow the Government Accountability Office's recommendation in two bid protests was arbitrary and capricious, according to the Court of Federal Claims, because the GAO's findings regarding organizational conflicts of interest lacked a rational basis. Prior to and shortly after the award to the protester of a design-build contract to renovate a hospital, the protester's design subcontractor engaged in merger negotiations with a firm that owned a partner in a joint venture that had a contract with the government for preparing the design concept and technical review of the proposals. When the merger was announced about a month after the award, two unsuccessful offerors filed GAO protests alleging the existence of OCIs. The contracting officer submitted to the GAO a comprehensive investigation report concluding no OCIs existed prior to award. However, the GAO found the firms "effectively were aligned," and it was unreasonable for the CO to conclude there were no "unequal access to information" and "biased ground rules" OCIs (25 CGEN 113,078, 25 CGEN 113,081). After being contacted by several members of Congress, the government did not follow its own recommendations to waive the OCIs and instead followed the GAO's recommendation to strip the protester of the initial award and bar it from a reprocurement.

Suspicion or Innuendo

On cross-motions for judgment on the administrative record, the court explained the GAO was required to give the CO's analysis and conclusions due deference and base a finding of OCIs on "`hard facts' that showed an' appearance of impropriety.'" Instead, the GAO conducted a de novo review and overturned the CO's findings based on "suspicion or innuendo." The GAO disregarded the CO's conclusion the parties were merely "potential merger partners, with no community of interests." The GAO's "cursory inquiry" also failed to highlight "any hard facts that indicate[d] a sufficient alignment of interests," such as the closeness of the connection between the firms, the directness of a financial relationship, and specific facts that could have indicated whether a relationship was close enough or too attenuated to support an OCI. In determining there was a biased ground rules OCI and presuming prejudice, the GAO ignored the CO's numerous findings regarding the precise state of negotiations, exact dates of critical exchanges, and other specific facts that led the CO to conclude design firm employees assisting the government were unaware of the negotiations and would have been unable to skew the procurement to favor the subcontractor. Instead, the GAO relied solely on the existence of the design contract to find the record "suggested" the owner of the design firm had "special knowledge" that would have given the protester an unfair advantage. Similarly, in finding an unequal access to information OCI, the GAO ignored the CO's analysis of information in terms of its competitive utility, disclosure, and access. The GAO's reliance on vague allegations and its failure to cite hard facts showing the possession of nonpublic and competitively useful information made it irrational to overturn the CO's OCI determination.

Independent Review Not Required

The CFC ordered the government to restore the contract to the protester because the government was arbitrary and capricious in implementing a GAO decision that was not rational, a reprocurement would be costly, and the balance of other factors favored a permanent injunction. However, the CFC also held the government was not required to conduct a "full and independent" evaluation of a GAO recommendation before implementing it. A review requirement would conflict with the court's precedent and the reporting to Congress of agency failures to fully implement GAO recommendations (31 USC 3554). In addition, the government's decision not to waive the OCIs was a matter of discretion. (Turner Construction Co. v. U.S., et al., FedCl, 54 CCF 79,385)




(The news featured above is a selection from the news covered in the Government Contracts Report Letter, which is published weekly and distributed to subscribers of the Government Contracts Reporter. )


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