1 / 41

Thomas P. Humphrey, Crowell & Moring LLP July 26, 2007

ORGANIZATIONAL CONFLICTS OF INTEREST AND THE BLENDED WORK FORCE. Thomas P. Humphrey, Crowell & Moring LLP July 26, 2007. ORGANIZATIONAL CONFLICTS OF INTEREST (OCIs) ISSUES HIGHLY VISIBLE. Point of Emphasis for GAO in Bid Protests Congressional Interest through Lead Systems Integrators

gayle
Download Presentation

Thomas P. Humphrey, Crowell & Moring LLP July 26, 2007

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. ORGANIZATIONAL CONFLICTS OF INTEREST AND THE BLENDED WORK FORCE Thomas P. Humphrey, Crowell & Moring LLP July 26, 2007

  2. ORGANIZATIONAL CONFLICTS OF INTEREST (OCIs) ISSUES HIGHLY VISIBLE • Point of Emphasis for GAO in Bid Protests • Congressional Interest through Lead Systems Integrators • DoD Merger and Acquisition Review and Other Business Planning

  3. WHY OCI ISSUES ARISE MORE FREQUENTLY • Consolidation in Defense and Information Technology Industries • OCI Principles Generally Treat The Entire Corporate Family As A Single Entity • Trend to Extremely Broad Task Order Statements of Work • OCIs measured by work that may be performed

  4. WHY OCI ISSUES ARISE MORE FREQUENTLY (cont’d) • Protesters’ Success in GAO Protests • OCIs apply to proposed subcontractors • Trend to Government Outsourcing

  5. GOVERNMENT OUTSOURCING – THE BLENDED WORK FORCE • Government Lack of Experience/ Expertise • Government Shortage of Contracting Professionals • SETA Contractors • Lead Systems Integrators

  6. BLENDED WORK FORCE ISSUES • OCIs • Personal Service Contracts • Personal Conflicts of Interest • Inherently Governmental Functions

  7. OCI PRINCIPLES • An OCI Arises When, Because Of Other Relationships Or Circumstances, An Offeror May Be Unable, Or Potentially Unable To Render Impartial Advice Or Assistance To The Government, The Offeror’s Objectivity In Performing The Contract Work Is Or Might Be Impaired, And/Or Offeror Would Have An Unfair Competitive Advantage. Far 2.101

  8. OCI PRINCIPLES (cont’d) • Three Broad Types • Unequal Access To Information • Generally by reason of performance of another Government contract • Can be proprietary or source selection • Biased Ground Rules • Pursuant to one contract, help write the ground rules – statement of work, specifications – for another competition

  9. OCI PRINCIPLES (cont’d) • Impaired Objectivity • Not necessarily arise from performance of another contract, any business interest that might affect judgment

  10. RED FLAG ACTIVITIES • OCIs Can And Do Arise In Many Types Of Contracts; FAR Recognizes Greater Risk In: • Management Support Services • Consultant Or Other Professional Services • Assistance In Technical Evaluation

  11. RED FLAG ACTIVITIES (cont’d) • Systems Engineering And Technical Direction When Contractor Does Not Have Overall Responsibility For Development Or Production. FAR 9.502(b) • OCI Significance Of Outsourcing And Blended Work Force Is Clear

  12. MITIGATION • When OCI Arises, CO Obligated To Attempt To Devise A Mitigation Plan. FAR 9.504 and 9.506 • Some OCIs Cannot Be Mitigated

  13. MITIGATION (cont’d) • The Mitigation Plan Must Be Tailored To Specific Facts And Address The Type Of OCI By Removing The Risk To The Government; Some OCIs Easier To Mitigate Than Others • Firewalls may be sufficient for unequal access to information; rarely satisfactory for others • Release of information to all

  14. MITIGATION (cont’d) • Mitigation Plan May Significantly Reduce Value Of Contract, Financial Or Strategic • Mitigation Plans In Discretion Of Contracting Officer; Difficult To Anticipate Eventual Mitigation Impacts During Planning • Agency Over-Reaction • Waiver – Agency Head

  15. RECENT SIGNIFICANT DECISIONS • Science Applications Int’l. Corp.,B-293601, 2004 CPD Par. 96 • GAO Sustained Protest Against EPA Award to Lockheed Martin For Support Services Contract Under Very Broad Statement of Work Because Services Could Impact Regulatory Policy and Enforcement and Lockheed Martin Was Regulated by EPA

  16. RECENT SIGNIFICANT DECISIONS (cont’d) • EPA – “No Conflict” • Not A Contract-Based OCI – “Other Circumstances” • Statement of Work Too Broad – Agency Wins Round 2 – B-293601.5, 2004 CPD Par. 201

  17. RECENT SIGNIFICANT DECISIONS (Cont’d) • Purvis Sys. Inc., B-293807.3, 2004 CPD Par. 177 • GAO Sustained Protest Against Award To Northrop Grumman Under Which Northrop Grumman Would Evaluate Performance Of Its Own And Its Competitors’ Undersea Warfare Systems

  18. RECENT SIGNIFICANT DECISIONS (Cont’d) • Agency – “No Conflict” • Note: OCI Not Only For Self-Evaluation

  19. RECENT SIGNIFICANT DECISIONS (Cont’d) • Filtration Development Co. v. United States, 60 Fed. Cl. 371 (2004) • Court Enjoined Contract Performance (After A Period of Time for Which Contract Had Been Sole Source Justified Under Urgent and Compelling Circumstances) Because The SETA Contractor’s Affiliate Was Providing A Component

  20. RECENT SIGNIFICANT DECISIONS (Cont’d) • Contract Was To Provide Engine Inlet Barrier Filters To Keep Sand Out of The Engines of Blackhawk Helicopters In Iraq • Held SETA Contractors Were “Categorically Precluded From Supplying” The Components For This Program Even Though Agency Claimed Contractor Had Never Provided Services With Respect To This Component • Subsequent OCI Waiver

  21. RECENT SIGNIFICANT DECISIONS (Cont’d) • Lucent Technologies World Services, Inc., B-295462, 2005 CPD Par. 55 • GAO Denied Protest By Offeror Excluded From Competition, Recognizing Broad Discretion Of Contracting Officer In Dealing With OCIs

  22. RECENT SIGNIFICANT DECISIONS (Cont’d) • Lucent Was Design/Build Contractor For Army IRAQ Communications Sector. Had Designed Network System and Architecture For Network Of Wireless Radios, Done Cost Benefit Analysis of Competing Technologies, And Drafted What Became The Statement of Work. • Lucent’s Proposal To Provide The Radios Excluded From The Competition

  23. RECENT SIGNIFICANT DECISIONS (Cont’d) • Far 9.5 OCI Rules Are Only Examples; Contracting Officer Must Make Factually Intensive Case-By-Case Analysis And Apply The OCI Principles; If That Done, Contracting Officer’s Conclusion Will Be Given Great Deference • Agency Did Not Have To Show Lucent In Fact Obtained An Unfair Competitive Advantage Because Contracting Officer Can Deal With “Apparent OCIs”

  24. RECENT SIGNIFICANT DECISIONS (Cont’d) • THREE ALION CASES: • B-297022.3, 2006 CPD Par. 2; • B-297342, 2006 CPD Par. 1; • B-297027.4, 2006 CPD Par. 146 1&2. PROTESTS SUSTAINED • Electro-Magnetic Spectrum Engineering Services • Subjective judgments and policy recommendations • Awardee had major business in electro-magnetic spectrum dependent products

  25. RECENT SIGNIFICANT DECISIONS (Cont’d) • Impaired objectivity – • Agency underestimated amount of work subject to such OCI • Firewalled subcontractor mitigation plan not approved • Magnitude of work • Difficulty of prediction • After further agency analysis and consideration, new protest denied • Firewalled subcontractor mitigation plan approved • Evaluation issues

  26. RECENT SIGNIFICANT DECISIONS (Cont’d) • GREENLEAF CONSTRUCTION, B-293105.18, 2006 CPD Par. 19 • Lender type of financial interest in continuing financial health of another firm to be overseen is sufficient to create impaired objectivity OCI • Impact of mitigation on evaluation

  27. WHAT IS NOT AN OCI • No judgment involved • Additional contractor knowledge the result of incumbency • Developer preparation of specifications and work statements. FAR 9.505-2(a)(3); 9.505-2(b)(1)(ii)

  28. FIREWALLED SUBCONTRACTORS • New, but GAO will probably accept • Risk of impaired objectivity • Principle of prime contractor responsibility • Evaluation issues • Pragmatic Solution to Government’s Lack of Expertise?

  29. TEACHINGS FROM RECENT PROTEST DECISIONS • Contracting Officer Discretion • Biased Ground Rules OCI’s strictly enforced • Many different circumstances give rise to impaired objectivity OCIs • Not in FAR • Regulated status • Commercial Business Interest Affected by Policy • Self-evaluation or Evaluation of Competitors

  30. TEACHINGS FROM RECENT PROTEST DECISIONS (CONT’D) • Contractors and Agencies Need Expertise, Understanding of Principles • If Agency Misses the Issue or Fails to Analyze Correctly, Protest Will Be Sustained • If Agency Analyzes the Issue Thoroughly, Its Determination and Mitigation Plan Will Be Accorded Significant Deference – Cuts Both Ways

  31. PRACTICAL CONSIDERATIONS • DOD MERGER/ACQUISITION APPROVAL • Increasing Level of Scrutiny • Mitigation • General Dynamics – Anteon divestiture • Services vs. Supplies

  32. PRACTICAL CONSIDERATIONS • OCI CONSIDERATIONS IN MERGER AND ACQUISITION PLANNING • Business Analysis Must Take OCI Into Account, Particularly If Services Involved • OCIs Will Be Analyzed Based On Combined Entity

  33. PRACTICAL CONSIDERATIONS • Must Consider Possible Loss of Contracts • Must Consider OCI Constraints on Future Business Opportunities for Both Entities • OCIs Complicate Due Diligence • Scope of statement of work vs. work actually performed • Analysis must extend beyond contracts of two entities

  34. PRACTICAL CONSIDERATIONS • Policy ramifications of contracts • Other interests that may create OCIs • Future business plans • Approval of Mitigation Uncertain

  35. RAMIFICATIONS FOR GOVERNMENT CONTRACTORS OF INCREASED FREQUENCY OF ISSUES, AND INCREASED GOVERNMENT EMPHASIS ON OCI PREVENTION AND ENFORCEMENT • Increased Expertise And Vigilance Necessary • Disqualification from future competitions • Termination of existing contracts • Key Principles That Drive Significance of OCIs, not the FAR

  36. OCI Identification in Advance Planning for Targeting Opportunities • OCIs Apply To Subcontractors • OCI Mitigation Plans Required By RFP • “No OCI” Certifications And False Claims Act Harrison v. Westinghouse Savannah River Co., 352 F.3d 908 (4th Cir. 2003) • Bid Protest Possibilities

  37. OCI RAMIFICATIONS FOR GOVERNMENT AGENCIES • NEED SIGNIFICANT OCI EXPERTISE AND UNDERSTANDING OF PRINCIPLES • Analysis of Risks of Impaired Objectivity – Other Contractor Interests • Planning for Future Competitions – Work With Present Contractors to Avoid Disqualifying Them

  38. OCI RAMIFICATIONS FOR GOVERNMENT AGENCIES • Analysis Of Proposed Mitigation Plans • Adequacy to resolve the risk • Solve the problem without imposing additional, unnecessary costs • Include In Evaluation Factors?

  39. LEAD SYSTEMS INTEGRATORS • RELIANCE ON CONTRACTORS TO MANAGE HIGH DOLLAR, HIGHLY COMPLICATED WEAPONS SYSTEMS ACQUISITION • Coast Guard – Deepwater Program • Joint venture between Lockheed Martin and Northrop Grumman • Army – Future Combat System • Boeing

  40. LEAD SYSTEMS INTEGRATORS • HOW CLOSE TO INHERENTLY GOVERNMENTAL FUNCTIONS • Congressional Proposals • OCI’s – • Procurements In Which LSI’s Subs Can Compete • Biased Ground Rules • Evaluations of self and competitors both for award of work and adequacy of performance • Mitigation – Preclude LSI from participation in choosing subcontractors if it is competing • FUTURE RE-COMPETITIONS UNLIKELY

More Related