Organizational Conflicts
of
Interest:
Government* Perspective
Wayne Davis
Air Force Electronic Systems Center Legal Office
781-377-4077
wayne.davis@hanscom.af.mil
*The views expressed are the views of the presenter and not
the official position of the Department of Defense
Definition of OCI

FAR 2.101 OCI definition –
Because of other activities or
relationships … , a person is unable or
potentially unable to render impartial
assistance or advice to the
Government, or the person’s objectivity
… is or might be otherwise impaired, or
a person has an unfair competitive
advantage.
Types of OCI

Unequal access to information – Contractor’s access to
nonpublic (i.e., source selection or proprietary) information in
contract performance may give it an unfair advantage in future
competitions
Ktech Corp., B-285330, B-285330.2, 2002 CPD 77

Biased ground rules – Contractor involved in defining
requirements, preparing work statements , developing business
cases, etc. could skew a competition in its own favor and/or gain
an unfair advantage in the competition for the underlying
requirements

Impaired Objectivity – Contractor’s judgment/ objectivity in
performing under one contract may be impaired because its
performance has the potential to affect other of its activities or
interests
Governing FAR Provisions

FAR Subpart 9.5, Organizational and
Consultant Conflict of Interest
– Likely to occur in:
 management support services
 engineering and technical direction work
 But not applicable to FFRDC work
[FAR 35.017(a)(2)]
Governing FAR Provisions
FAR 9.504(a)(1) –
 Contracting officers should identify and
evaluate potential OCIs as early as possible
 FAR 9.504(a)(2) –
Contracting officers need to avoid, neutralize,
or mitigate significant conflicts of interest
before contract award
Overlook Systems Technologies, Inc., B298099.4, B-298099.5, November 28, 2006

Governing FAR Provisions

FAR 9.504(b) –
Contracting officers should obtain the
advice of legal counsel and technical
experts in evaluating potential OCIs, as
well as drafting necessary solicitation
provisions and contract clauses
Governing FAR Provisions

FAR 9.504(d) –
Contracting officers should identify and
mitigate significant potential OCIs
without creating unnecessary delays,
burdensome information requirements,
or excessive documentation
Governing FAR Provisions

FAR 9.505 –
Contracting officers shall examine each
potential OCI individually on the basis of its
particular facts and the nature of the
proposed contract
Will there be impaired objectivity?
Access to non-public information?
Biased ground rules?
Governing FAR Provisions

FAR 9.505 –
Contracting officers are to exercise common
sense, good judgment, and sound discretion
J&E Associates, Inc., B-278771, 98-1 CPD 77
Governing FAR Provisions

FAR 9.505 –
This section lists four situations that should
always be closely examined for an OCI
– Systems engineering and technical direction
– Preparing specifications or work statements
– Providing evaluation services
– Obtaining access to proprietary information
Current GAO View

Caution: Don’t delay OCI resolution postdiscussions because it may affect proposal
evaluation and rating (e.g., change sub)
First Coast Service Options, Inc., B401429, July 31, 2009 (released on 28
January 2010)
– Proposal rejected; protest denied
Current GAO View
The Analysis Group, LLC, B-401726, B401726.2, 2009 CPD 237
 GAO held that the agency failed to
adequately consider the possibility of an
“impaired objectivity” OCI, or whether it
could be avoided, neutralized or
mitigated

– Contract awarded; protest sustained
Current GAO View

L-3 Services, Inc., B-400134.11, B400134.12, 2009 CPD 171
 If a firm is in a position to affect the
competition, intentionally or not, in favor of
itself, look for a “biased ground rules” OCI.
 There is a presumption of prejudice to
competing offerors where an OCI, if not de
minimis, is unresolved.
- Contract awarded; protest sustained
Current GAO View
Raydar & Associates, Inc., B-401447,
2009 CPD 180
 Waiting to see if a competitor that you
know has an OCI wins the competition
before deciding to protest may be a
recipe for disaster
- Contract awarded; protest denied

Current GAO View
Honeywell Technology Solutions, Inc.,
B-400771, B-400771.2, 2009 CPD 49
 Waiting to see if a competitor that you
know has an OCI wins the competition
before deciding to protest may be a
recipe for disaster
- Contract awarded; protest denied

Current GAO View
Nortel Government Solutions, Inc., B299522.5, B-299522.6, 2009 CPD 10
 “However, while a firewall arrangement
may resolve an ‘unfair access to
information’ OCI, it is virtually irrelevant
to an OCI involving potentially impaired
objectivity.”
- Contract awarded; protest sustained

Current GAO View
Detica, B-400523, B-400523.2, 2008
CPD 217
 If you allege an OCI in a GAO protest,
you must be prepared to prove it
- Contract awarded; protest denied

Current GAO View

C2C Solutions, Inc., B-401106.5, January 25,
2010
 Cahaba Safeguard Administrators, LLC, B401842.2, January 25, 2010
 An OCI Mitigation Plan must be sufficiently
detailed to enable the Contracting Officer to
reasonably assess the viability of the
mitigation approach
- Contract awarded; protest sustained
Earlier GAO Precedent
Nelson Erection Company, Inc., B217556, April 29, 1985
 A contracting agency may impose a
variety of restrictions, whether or not
explicitly addressed in applicable
procurement regulations, where the
needs of the agency or the nature of the
procurement dictates such restrictions.

ESC Process

ESC/CC Policy Memos #04-005, 19
Mar 04 and #08-005, 16 Jun 08
– The policy memos establish and refine the
ESC OCI Review Panel process to ensure
ESC OCI policy is consistently applied
throughout the Center
– Chaired by senior representative from
ESC/PK, with membership of ESC/JA,
ESC/AQ, and if A&AS support is involved,
ESC/PKE
ESC Process
JA briefs OCI at Industry Days
 OCI is a mandatory topic at ASP
 HERBB serves as resource for Industry
 ESC OCI Review Panel focus on
consistency and compliance with FAR
 ESC OCI Review Panel will consist of
senior representatives

ESC Process
Industry submits OCI Mitigation Plan to
Contracting Officer (PCO)
 PCO makes determination whether OCI
exists, and if so, is mitigation adequate
 Program attorney performs legal review
of plan and PCO determination

ESC Process
If the mitigation plan is not adequate,
PCO requests plan revisions and we
repeat prior steps until it is adequate, or
PCO decides the OCI cannot be
mitigated
 If all OCIs are adequately mitigated,
PCO requests ESC/AQ convene the
ESC OCI Review Panel

ESC Process
Copies of proposed mitigation plan,
PCO review and legal review provided
to all members of the Panel as read
aheads
 ESC OCI Review Panel meets at least
once, and may meet multiple times

– Program team participates (PCO, PM, Atty)
– May ask Industry member (Offeror) to
participate to explain mitigation approach
ESC Process
The Panel makes recommendation for
approval of the plan, or suggests
changes
 The PCO considers any
recommendations from the Panel
 The PCO ultimately determines whether
the mitigation plan is acceptable –
Panel only advises

ESC Process
The PCO may request additional legal
review before deciding acceptability of
mitigation plan
 If mitigation plan is unacceptable, may
request further revisions from Offeror
 If mitigation plan is acceptable, PCO will
approve the plan and finalize the
process

Final Government Thoughts:

Companies may have existing, binding contractual commitments
to provide A&AS support which cannot be abandoned to pursue
new conflicting work

An agency should review all prime contractor OCI mitigation
plans to determine if a workable mitigation structure can be
accepted

Agency is not the “integrator” of a prime’s OCI plans

Communication on any proposed OCI mitigation plan should be
expected

Remember: FAR Part 9.5 is the only part of the FAR where the
phrases “common sense” and “good judgment” are used!
OCI:
Industry Perspective
Dick Bean
Associate General Counsel
General Dynamics C4 Systems*
richard.bean@gdc4s.com 781-455-3051
*Views expressed are those of the presenter and not those of General Dynamics
Preliminary Considerations

New business analysis must include
examination of potential effect of OCIs
 May preclude more lucrative future work
 Lack of an OCI provision in a solicitation
is not dispositive. Lucent Technology
World Services, B-295462, March 2, 2005
 Requires multi-disciplinary analysis
Preliminary Considerations
“Every OCI can be mitigated (except my
competitor’s).” False! Aetna Government
Health Plans, Inc., B-254397.19, July 27,
1995
 Agencies can impose a wide variety of OCI
restrictions. Nelson Erection Company, B217556, April 29, 1985

Important GAO Decisions

Incumbency is not an OCI! Agency is not
required to neutralize competitive
advantage. DRS C3 Systems, B-310825,
February 26, 2008
 Exclusion of proposal without evaluation of
OCI mitigation plan or opportunity to
respond was improper. AT&T Government
Solutions, B-400216, August 28, 2008
Important GAO Decisions

Resolution of OCI issue can take place
during agency corrective action. It is
“analogous to a responsibility
determination” according to the GAO.
Overlook Systems Technologies, Inc., B298099.5, November 28, 2006; Cahaba
Safeguard Administrators, B-401842.2,
January 25, 2010 (but different result if it
had altered proposal?)
Case-by-Case Analysis

Consistency in the process is the goal, using
standard mitigation “tools” where possible

Requires considerable contract administration
resources, both pre- and post-award

Assures objectivity and informed decision making
Firewalls

Consists of a combination of procedures and physical
security to establish organizational restrictions to avoid
potential, real, or perceived OCIs from impacting the
business activities of either party.
 Should be at a level low enough in the contractor’s
organization so as not to deprive the Government of
necessary products and services
 The lower the level, the easier to facilitate adequate
administration of the mitigation plan.
 Not a panacea, however! GAO decisions indicate
impaired objectivity may not be adequately addressed
No Sharing of Resources

By eliminating communication between personnel from the conflicted
entity and the organization, the potential for bias is effectively
eliminated

Separate IT networks/storage of data

Separate badging and access restrictions for different business units

Separate personnel hiring systems

Any indicia of separate business entities will be helpful
Accountability - Separation

Organizational accountability for OCI mitigation
should be at a high level for consistent assured
enforcement authority.
 Organizational separation should be at a low
level.
– Reduces administrative burden (affect only the
employees working the specific program)
– Allows business to use all its other expertise to support
many programs – a “win-win!”
Common Issue

The Government often asks for organizational
separation of the entire organization

May result in staffing difficulties
– Best employees may not want to participate due to
potential future career limitations
– May limit employee professional development
– May make the employee less competitive for promotion
opportunities
Potential Solution

Matrix structure for employees:
– For payroll and other administrative purposes
Employee would remain an employee of Division A
– But for work assignment purposes she would report to
Division B Program Manager

He/she would remain subject to NDAs and other
terms of the Plan.
 Management would include him/her in its OCI
Plan compliance efforts.
 Does not disrupt employee’s career path.
How Low Can You Go?

If all of these criteria have been met:
–
–
–
–

nondisclosure agreements
Information protection/segregation,
No financial incentives to encourage Plan violation,
Management accountability;
Then the level of the firewall should have no
significant impact on accomplishing the goals of
the OCI Mitigation Plan.
 Placing the firewall at a lower level would allow
the many benefits highlighted earlier.
Method of Last Resort?

Divestiture - creation of a new company
with a completely separate board of
directors to perform the conflicted work is
an effective strategy, but it is a complex and
time-consuming process
 Cahaba decision discussed earlier
 May also require novation of existing
contracts
Upcoming Changes!

Weapon Systems Acquisition Reform Act
Section 207 on OCI
 FAR Case 2007-018 (prior to WSARA)
 May 2008 Defense Science Board Task
Force Report on Developmental Test and
Evaluation
Potential Regulatory Changes

FAR Case 2007-018
– Greater emphasis on contractor disclosure
– Broad definition of “contractor”
– OCI rules application to task/delivery orders
– Contracts include process for resolving OCIs
during performance
– Greater emphasis on avoidance and limitations
on future contracting rather than
mitigation/firewalls
Potential Regulatory Changes

DFARS revisions upcoming on MDAP programs?
– Business units performing systems engineering and
technical assistance (SETA) functions, professional
services, or management support services may be
prohibited from competing as a prime or supplier of a
major subsystem or program component
– May preclude prime from awarding major subsystem to
a business unit or other affiliate of the same company
Potential Regulatory Changes
Contractor’s other business units/affiliates
may be prohibited from any involvement
with MDAP program’s technical evaluation
 FFRDCs and other independent sources
may be called upon to provide more advice
on systems architecture and systems
engineering on MDAP programs

Potential Regulatory Changes

Dec. 8, 2009 hearing on Section 207
regulatory implementation
 Awaiting Federal Register notice of
proposed rulemaking
 More OCI restrictions likely! Stand by for
more updates
DSB Task Force Report

DoD supplier base has consolidated over
the past decade
 Industry needs to focus on competition at all
levels of the product lifecycle to enhance
innovation and cost savings
 Control anti-competitive behavior (outsourcing versus in-sourcing)
DSB Task Force Report
Utilize “disruptive innovation” by engaging
small-to-medium firms and universities
 Does not invalidate the competition
requirements of CICA or “best value”
evaluation principles

OCI Issues for Debate

What about OCI waivers under FAR 9.503?
– Why do you not see them mentioned or used?

Has FAR 9.5 outlived its usefulness?
– Is the OCI problem too pervasive to fix?
– Vertical integration so great that neutralization
at one level inadvertently overlooks it at
another? (e.g., fixed at Service level, but not
OSD – many support contractors everywhere)
OCI Issues for Debate

FAR 9.5 sets forth some “bright lines” but
still has the qualifying language about use
of “good judgment” and “common sense”
– Where does that leave us – no “black letter”
rules?
– Will WSARA Section 207 implementation or
FAR Case 2007-018 impose a better “bright
line?”
OCI Issues for Debate

Contractor-developed specifications – How
much is too much to raise OCI exclusion?
(Lucent decision)
– FAR 9.505-2(b)91)(iii) sets forth OCI
exclusion if more than one contractor has been
involved in preparing work statement
– Is this still viable guidance?
OCI Issues for Debate

The Aetna Health GAO decision: How far
is the reach of FAR 9.5 – does it restrict
only other business units in the same profit
center or other business units of
subcontractors or joint venture partners as
well (term “affiliates” is used in the
decision, but not in FAR 9.5)?
OCI Issues for Debate

AT&T Government Solutions GAO
decision: Exclusion w/o OCI analysis and
exchange improper
– What if the proposal is otherwise materially
defective?
– What if the contracting officer wants to make a
competitive range determination before opening
discussions?
OCI Issues for Debate

FAR 9.505-3: Contracts for the evaluation
of offers for products or services shall not
be awarded to a contractor that will evaluate
its own offers for products or services, or
those of a competitor, without proper
safeguards to ensure objectivity to protect
the Government’s interests.
 How can this be addressed?
OCI Issues for Debate

Can impaired objectivity ever be mitigated?
OCI Issues for Debate

U.S. v. SAIC, 653 F.Supp.2d 87 (D.D.C.
2009) – At what point is failure to disclose a
potential OCI a crime? If a contract is
awarded to an Offeror that falsely certified
that it had no potential OCIs, and the
Government testifies that it would not have
awarded the contract but for the false
certification, how much could the damages
be?
Thank you for participating in our
OCI discussion today!
ANY QUESTIONS?