Organizational Conflicts of Interest: The U.S. Court of Federal Claim’s Take

By Grace Mahan

Among the reasons why a governmental agency might disqualify an offeror from consideration for a procurement is the existence of an organizational conflict of interest (OCI). Indeed, according to FAR § 9.504(a)(2), a contracting officer must act to avoid or mitigate a potential OCI. If an OCI cannot be neutralized, an agency may disqualify the offeror from consideration. In the recent case, A Squared Joint Venture, the U.S. Court of Federal Claims clarified the factual showing required to disqualify a bidder from a government contract on the basis that it poses an OCI.

In the case, a disqualified offeror, A2JV, asserted that the government’s finding that it posed a potential significant OCI was not supported by “hard facts.” A2JV argued that merely because two of its employees worked on the incumbent contract and may have had access to sensitive information did not mean that they in fact used their positions to gain access to information that could give rise to a significant potential OCI. Accordingly, A2JV argued that there were insufficient facts to prove that its proposal had been prepared by individuals with unequal access to information or that A2JV benefited from an improper competitive edge.

Rejecting A2JV’s arguments, the court held in favor of the government. It determined that there were two “hard facts” showing the existence of a significant potential OCI. First, the incumbent contractor’s files had confidential business information regarding an A2JV competitor. Second, the incumbent contractor had failed to take action to prevent its managers from having access to that information. The court noted that it was the ability of the two employees to access sensitive information coupled with the fact that information relevant to an A2JV competitor was present in these files that created a significant potential OCI.

With this holding, the court highlighted that a showing of actual receipt and use of sensitive information to gain an improper competitive edge is not required for the government to disqualify an offeror on the grounds that it poses an OCI. Rather, a finding that hard facts exist in the circumstances surrounding an offeror’s proposal, which result in the opportunity for an OCI to occur, is sufficient.

The potential harm that OCI allegations can pose to a company’s reputation and its relationship with Government customers – and the cost to a company in lost bid and proposal costs if it finds itself ousted from a procurement – make OCI something that should be considered and addressed as part of your company’s regular compliance program.  If you would like assistance with this, please contact us.

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