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Blameless Contractor Loses Contract After Agency Botches Conflict Inquiry

| Nov 20, 2020 | Government Contracts

Blameless Contractor Loses Contract After Agency Botches Conflict Inquiry

A friendly foosball game between long-time friends — employees from a contractor and federal agency — led to a contractor losing a contract even though the contractor broke no laws. The Government Accountability Office recently sustained a protest because the awarding agency had not sufficiently protected the solicitation process from a personal conflict of interest on the part of an agency employee with an employee of a proposed major subcontractor. The decision shows that contractors need to make sure their employees know the risk that long-standing friendships between current and former agency employees can create personal conflicts of interest.

For over ten years, a group of former and current NASA employees got together weekly for a social gathering. A current NASA employee, that GAO referred to as “Mr. X,” described the gathering as “amongst ten long-time friends of various occupations” for camaraderie, friendship, dinner, and to engage in competitive foosball.”

One problem was that the group’s “various occupations” included Mr. X who was deeply involved in a pending NASA solicitation and an employee of a major subcontractor (“Subcontractor Y”) proposed for the same NASA procurement by prime contractor SGT, LLC.

As for Mr. X, GAO described his job on the pending solicitation as follows:

He exercised an ongoing, continuous leadership role in the development of virtually every aspect of the agency’s acquisition, from formulating procurement strategy, contracting approaches, and cost estimates, to evaluating risks, to developing the central acquisition documents, such as the RFP and source selection plan. In addition, Mr. X participated extensively in the evaluation of proposals, was a voting member of the SEB responsible for assigning scores to the proposals, and participated in briefing the SSA on the results of the agency’s evaluation.

As for the employee working for Subcontractor Y, GAO described him as “a senior-level employee” for Subcontractor Y.

The bigger problem was NASA’s apparent tolerance to what seemed to be a personal conflict of interest between NASA employee Mr. X and Subcontractor Y employee. After Mr. X refused to stop these weekly meetings, NASA still allowed him to remain heavily involved in the solicitation process. For example, NASA allowed Mr. X to all proposals except the proposal involving Subcontractor Y’s prime contractor and he could remain involved in the scoring of all proposals including the proposal involving Subcontractor Y’s prime.

After SGT won, a competitor challenged the award to GAO that sustained the protest on the basis that the agency’s failed to adequately investigate a personal conflict of interest:

where an agency knowingly fails to investigate and resolve a question concerning whether an agency employee who actively and extensively engaged in procurement-related activities should have been recused from those activities, the existence of an actual or apparent a conflict of interest is sufficient to taint the procurement.

Teledyne Brown Eng’g, Inc., B-418835, B-418835.2, Sept. 28, 2020, 2020 WL 5760360.

There was no suggestion that either person broke any law so there was no claim of an actual personal conflict of interest. It’s simply that there was the appearance of a personal conflict of interest.

The appearance of a conflict of interest is perhaps the toughest conflict of interest to deal with. An actual conflict often involves wrong doing and therefore can be more easily identified in advance and mitigated. But the appearance of a conflict is often in the eye of the beholder and, therefore, more subject to second-guessing.

Because an appearance of a conflict can be so subjective, contractors need to make their employees aware of the risks these conflicts pose. A helpful guide to how contractor employees should relate to government employees is the Office of Government Ethics publication, ETHICS AND WORKING WITH CONTRACTORS – QUESTIONS AND ANSWERS.

Terry O’Connor is a Partner and Director of Government Contracts at Berenzweig Leonard. 

Berenzweig Leonard  is teaming up with  Red Team Consulting  for a monthly newsletter featuring reports on recent contract decisions, recent upcoming contracts, key protest decisions, events, and more. This post was published in the November 2020 newsletter. To sign up for our govcon newsletters, please email [email protected]