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On The Regulatory Front- OCI:

Organizational Conflicts of Interest (OCI) New Developments in the U.S. and Abroad A Panel Discussion including:. Richard C. Bean, Attorney at Law Peter J. Camp, Counsel, U.S. Air Force ESC Joseph J. Kelley, Senior Counsel, Raytheon. On The Regulatory Front- OCI:.

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On The Regulatory Front- OCI:

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  1. Organizational Conflicts of Interest (OCI)New Developments in the U.S. and AbroadA Panel Discussion including: Richard C. Bean, Attorney at Law Peter J. Camp, Counsel, U.S. Air Force ESCJoseph J. Kelley, Senior Counsel, Raytheon

  2. On The Regulatory Front- OCI: FAR Case 2011-001: where are we now? Public comments from December 2010 still under review by FAR Acquisition Ethics and International Law Team Team tasked September 1, 2011 with drafting final rule by October 26, 2011 Second extension of due date has been issued: March 28, 2012 2

  3. On The Regulatory Front – PCI: Another related area in the regulatory arena has been personal conflicts of interest (PCI) for contractor employees performing acquisition functions FAR Case 2008-025, effective December 2, 2011, see 76 Fed. Reg. 68017-68026, November 2, 2011 http://edocket.access.gpo.gov/2011/pdf/2011-27780.pdf 3

  4. On the Regulatory Front – PCI: • Some companies are merging OCI and PCI policies (and awaiting new OCI final rules) • May be appropriate for contractors providing support services, but maybe not for systems or supply contractors • However, inclusion of both OCI and PCI compliance processes in an OCI mitigation plan may show an agency that the company has both areas addressed and resolved!

  5. On the Regulatory Front – PCI: • Final rule makes contractors responsible for: • Having procedures to screen for potential PCI • Informing covered employees of their obligations with regard to these policies • Maintaining effective oversight to verify compliance • Reporting any PCI violations to the contracting officer • Taking appropriate disciplinary action with employees who fail to comply with these policies

  6. On the Regulatory Front – PCI: • Affects contractor employees supporting an “acquisition function closely associated with inherently governmental functions” means providing advice or recommendations with regard to: • Planning acquisitions, evaluating proposals • Developing SOWs, evaluation criteria • See FAR 3.1101 for comprehensive listing of affected efforts and FAR 52.203-16 for new mandatory clause for acquisitions exceeding the simplified acquisition threshold for services

  7. On the Regulatory Front – PCI: • PCI - a situation in which a covered employee has a financial interest, personal activity or relationship that could impair the ability to act impartially and in the best interest of the Government when performing under the contract • Contractors must prohibit covered employees from using non-public information for personal gain

  8. On the Regulatory Front – PCI: • Requires use of nondisclosure agreement • Violations will require not just reporting of the incident but also the proposed actions to be taken (implying contracting officer input into those proposed actions) and follow-up reports of corrective actions • If contracting officer determines matter not resolved, must consult with agency legal counsel and take “appropriate” action

  9. On the Regulatory Front – PCI: • PCI policies are yet another compliance issue for contractors which will require: • Workforce training • Implementing clearly understood PCI policies • Tracking of executed NDAs of covered employees • Tracking of disciplinary actions to establish proportionality and reasonableness of actions taken (to persuade contracting officer)

  10. GAO Decisions AdvanceMed Corporation; TrustSolutions, LLC B-404910.4; B-404910.5; B-404910.6; B-404910.9; B-404910.10 January 17, 2012.Protest that the award was tainted by an impaired objectivity OCI is denied where the record showed that the agency reasonably concluded that the potential areas of concern either did not constitute significant conflicts that warranted disqualification of the awardee, or were significant conflicts that were adequately mitigated. 10

  11. AdvancedMed Decision • HHS acquisition for Medicaid/Medicare fraud prevention support; best value award • Corrective action taken on first protest which alleged OCI concerns – awardee was wholly owned subsidiary of BC/BS • Plan for divestiture was sufficiently detailed to satisfy GAO that agency acceptance was not arbitrary (26 page GAO decision)

  12. GAO Decisions • TriCenturion, Inc.; SafeGuard Services, LLC B-406032; B-406032.2; B-406032.3; B-406032.4 January 25, 2012.Protest that the award was tainted by organizational conflicts of interest was denied where the record shows that the agency reasonably concluded that the potential areas of concern were adequately mitigated.

  13. TriCenturion Decision • Another HHS acquisition for similar services in a different geographical region • The protest was sustained on other grounds involving the evaluation process (recommended reading!) • Complex and detailed divesture process contingent on contract award was identical to that set forth in AdvancedMed decision

  14. GAO Decisions • Raytheon Technical Services Company LLC B-404655.4; B-404655.5; B-404655.6, October 11, 2011.Protest that awardee had “unequal access to information” type of organizational conflict of interest is denied where allegations were based upon suspicion and not “hard facts,” agency’s investigation was meaningful, and agency reasonably concluded that awardee did not have access to nonpublic information that would provide firm a competitive advantage in procurement.

  15. Raytheon Decision • Protest was sustained on other grounds (and a prior protest resulted in corrective action) • The Department of State contracting officer conducted a post-protest investigation which concluded that certain named individuals did not have access to any current nonpublic information • Rare GAO support for post-protest agency investigation

  16. GAO Decisions • Enterprise Information Services, Inc. B-405152; B-405152.2; B-405152.3 September 2, 2011.Protest that the awardee’s subcontractor had an unmitigated “unequal access” OCI arising from its contract with the procuring agency is denied where the contracting officer investigated the matter and determined that the subcontractor’s work under its contract did not directly involve the subject matter implicated by the protested procurement and NDAs were used in any event.

  17. Enterprise Decision • Air Force contracting officer concluded that a subcontractor of the awardee was working in a separate support area and even if it may have had access to protester’s labor information, each employee executed an NDA • GAO held that while the NDA was not “company-to-company,” this error was not sufficient to sustain this issue without more facts

  18. GAO Decisions • PCCP Constructors, JV; Bechtel Infrastructure Corporation B-405036; B-405036.2; B-405036.3; B-405036.4; B-405036.5; B-405036.6 August 4, 2011.An agency’s investigation of the awardee’s alleged unequal access to information organizational conflict of interest was unreasonable, where the agency concluded that the awardee’s hiring of a high-level government employee from the office responsible for the project being procured created a potential conflict, but limited its review to what responsibility and role the government employee had in the procurement prior to his retirement without any consideration of the employee’s access to non-public, source selection information, and where the record establishes the employee’s continued daily contact with members of the source selection team and access to inside information concerning the agency’s build-to-budget concept.

  19. PCCP Decision • Army Corps of Engineers acquisition; protest sustained on several grounds • Agency investigation overlooked some aspects of Corps former employee’s access to source selection information • Testimony of other Corps employees showed his access to SSI outside of the source selection in management meetings

  20. GAO Decisions • Unisys Corporation B-403054.2 February 8, 2011.Protest that awardee's use of a former government employee in the preparation of its proposal provided the firm with an unfair competitive advantage due to the employee's access to proprietary information of the protester is denied where the record reflected that the information at issue was not competitively useful

  21. Unisys Decision • Prior protest alleging OCI resulted in corrective action being taken – investigation • DISA contracting officer investigation concluded that former employee had only limited (1/3 of total requirement) and outdated labor rate information and no access to evaluation plans • GAO found OCI allegation too speculative

  22. GAO Decisions • QinetiQ North America, Inc. B-405008; B-405008.2 July 27, 2011.Protest that awardee has “biased ground rules” type organizational conflict of interest (OCI) is denied where record does not establish that awardee’s prior contract performance put awardee in position to materially affect competition. Allegation that awardee has “unequal access to information” type OCI is denied where record reflects that any advantage arising from awardee’s prior contract performance was normally occurring incumbent advantage.

  23. QinetiQ Decision • DoT acquisition for IT services • Technical Evaluation Team chair testified that neither awardee or any other contractor had involvement in requirements definition based upon prior contract effort • Great reliance by the GAO on two-day hearing process with testimony by contracting officer and other Government personnel

  24. GAO Decisions • The Analysis Group, LLC B-401726.3 April 18, 2011.Protest that agency failed to give adequate consideration to awardee’s potential impaired objectivity OCI is denied, where record shows that agency extensively investigated potential OCIs and, after completing its investigation and concluding that there was a remote possibility of an OCI, properly executed a waiver of the residual OCI

  25. Analysis Group Decision • Prior sustained protest on multiple grounds resulted in corrective action and OCI investigation by GSA and Air Force • Awardee was involved in selling certain technology which would be evaluated to some degree under proposed new support contract • Increased agency oversight was deemed sufficient as mitigation

  26. Some Industry Perspectives • Management support of OCI avoidance/mitigation (and PCI as appropriate) through educational awareness. Everyone in contracts, business development, sales, engineering, administration, etc. can benefit from OCI training (note - especially new hires!). • Make training attendance 'MANDATORY‘ • For those who are on travel or at remote locations, provide an alternate date or also consider a web-based training process. • Establish realistic deadlines for the OCI sweep process so organizational POCs have time for an appropriate review and allow time for comprehensive OCI mitigation plan preparation

  27. Some Industry Perspectives • OCI sweep process and internal OCI training should be addressed in the OCI mitigation plan to give the government agency assurance of thoughtful, ingrained OCI compliance • Success or failure of OCI training (and new PCI training?) may mean the difference between being able to sustain a defense to a protest allegation or jeopardize a contract award!

  28. ERS

  29. Litigation History • Turner v. United States • GAO • B.L. Harbert-Brasfield & Gorrie, JV, B-402229, February 16, 2010, 2010 CPD 69. • McCarthy/Hunt, JV, B-402229.2, February 16, 2010, 2010 CPD ¶ 68. • Court of Federal Claims • Turner Const. Co. v. U.S., 94 Fed. Cl. 561 (Fed. Cl. 2010) • Court of Appeals for the Federal Circuit • Turner Const. Co. v. U.S., 645 F.3d 1377 (Fed. Cir. 2011) 

  30. Business Relationships in Turner AECOM FINAL DESIGN & CONSTRUCTION CONTRACT PRELIMINARY DESIGN CONTRACT Turner Construction Business Relationship Negotiations Sub K HSMM Joint Venture Partner Ellerbe Becket Joint Venture Partner 30

  31. GAO Decisions • Ellerbe-Becket & AECOM interests aligned in August 08 • Sustained “unequal access” OCI. • No mitigation plan. • Sustained “biased ground rules” OCI. • Prejudice presumed. • Denied “impaired objectivity.” • Record established lack of prejudice. • Footnote noted Agency’s authority to waive OCIs.

  32. COFC Decision • Standard of Review: • Agency decision irrational if GAO decision irrational. • Findings: • Actual or potential OCI must be established by “hard facts.” • Contracting Officer’s duty is to evaluate OCIs “as early as possible” …but the earliest time might be post award. • GAO should have considered post-protest representations when looking for “hard facts.” • GAO finding of alignment of interests was cursory and not based on “hard facts.” • GAO finding of “unequal access” and “biased ground rules” not based on “hard facts.” • Remedy: • Agency ordered to “restore the Hospital contract to Turner”

  33. Federal Circuit Decision • CAFC held: • Standard of review used by COFC was correct. • COFC did not conduct de novo review but gave proper deference to the Contracting Officer’s judgment. • Post award investigation can remove “any OCI taint” if no significant OCI found. • GAO should have assessed the reasonableness of the investigation. • Affirmed application of “hard facts” requirement. • Challenge to COFC remedy could only be raised by the Government.

  34. Netstar-1 Gov’t Consulting, Inc. • __ Fed. Cl. __, NO. 11-294C (Oct. 17, 2011) • Allegation: awardee used its previous access to agency data – including Protester’s labor categories, job categories, and labor rates – to improperly craft a winning proposal • Deficient mitigation/corrective action • CO failed to enforce FAR mitigation procedures • Mitigation plan grossly inadequate • Plain error in CO investigation • Awardee’s “willful blindness” + CO’s “blithe assumptions”

  35. OCI is a Way to Become Unpopular at Work OCI PIA PGE

  36. OCI is a Way to Become Unpopular at Work • ALLEGATIONS (case is not yet proved/decided) • Lt Col M, USAF Dep. Chief, IT Division, AF Medical Support Agency • Retires, hired by BAH 4 Apr 11 (Sr. Associate); orientation 4-8 Apr 11 • 11 Apr 11: First day of work, meets his 2 bosses & 2 coworkers • BAH interested in IT Modernization Services (ITMS) Contract • 12 Apr 12: Emails boss incumbent’s contract (CLIN pricing, labor mix, labor rates by labor category) • Boss’ Reaction: forwards email, promotes Mr. M to ITMS Capture Lead • BAH Pricing Department Reports Incident, BAH Self Reports • SAF Suspends BAH’s San Antonio Office, Proposes for Debarment

  37. OCI is a Way to Become Unpopular at Work San Antonio, TX Office OCI PIA PGE

  38. OCI is a Way to Become Unpopular at Work Take Away: OCI & Ethics Plans, Superficial Compliance with Revolving Door Restrictions are Insufficient Ensure New Employee is not an SSI Typhoid Mary!!!

  39. OCI Mitigation at ESC Electronic Systems Center Office of the Staff Judge Advocate Hanscom AFB, MA

  40. ESC OCI Review Panel • ESC/CC Policy Memo #08-005, 16 Jun 08 - Established ESC OCI Review Panel to ensure ESC OCI policy is consistently applied throughout the Center - Chaired by Senior members of Contracting (ESC/PK), the Legal Office (ESC/JA), the Acquisition Center of Excellence (ESC/AE), and the Chief of Contracting for Plans and Programs (ESC/XPK)

  41. OCI Mitigation • OCI Firewalls (5 Factor Mitigation) - Isolate Work in Separate Business Unit - Geographic & Physical Separation - Independent Management & Reporting Chains - Prohibition Against Transfer of Personnel - Prohibition Against Transfer of Information

  42. Common Elements of OCI Plan • Non-Disclosure agreements • Controlled access to sensitive information • Establishment of an employee OCI awareness/compliance program • Physical separation of contract employees from sensitive data • Organizational separation • Management separation • Limitation on personnel transfers

  43. OCI Mitigation at ESC

  44. ESC OCI Review Process • OCI Plan from prime contractor to Contracting Officer (prime contractor incorporates all subcontractor OCI plans) • Contracting Officer to program team • Those inputs go to Program Attorney • Consolidated comments go to ESC OCI Review Panel

  45. OCI Mitigation • Organization Charts (Prime & Subcontractors) - One chart showing current organization and reporting chain up through parent company - Second chart showing new corporate structure and reporting chain if restructure of Organization is proposed as mitigation - Organization chart needed for each member of your team (Prime & Subcontractors)

  46. OCI Mitigation Plans • Administrative Section - Definitions - OCI Training for new and existing employees - Employee Transfer Rules - Information Transfer Rules - OCI Enforcement • Employee OCI reporting requirements • Consequences for OCI violations • Disclosure of violations to Government - OCI Certification - Nondisclosure Agreement

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