Every year the General Accounting Office publishes statistics regarding bid protests filed with GAO the previous fiscal year. Yesterday, GAO released those statistics for FYs 2007-2011. These statistics show some interesting trends.
There was an 2% increase in protests filed in FY 2011 – 2,353 as compared to 2,299 in FY 2010. The number of protests filed has increased every year since GAO began collecting these stats in 2007. The 2% increase for FY 2010 is the smallest increase yet and somewhat surprising as the increase from FY 2009 to FY 2010 was significantly more than that – 16% and the increase from FY 2008 to FY 2009 was even greater – 20%. It’s hard for this Northern Virginia government contracts lawyer to say what this means – the steady increase in protests over the last few years was easy to interpret as a signal that our industry was getting more competitive, that businesses were more comfortable using protests to keep or seek business and, in a recession, that companies were more willing to fight to keep existing business. The fact that the increase was minimal this year is unusual to me. I’d be interested to hear y’all thoughts on this.
From my perspective, the most important statistic published by GAO is the sustain rate; that is, the percentage of protests that are granted by GAO. I generally tell clients that the average sustain rate is about 20% or 1 in 5. The FY 2011 statistics, however, are bringing this average down. In FY 2011, only 16% of the protests filed were sustained. Compare this sustain rate with rates for FYs 2010 (19%), 2009 (18%) and 2008 (21%). This statistic does not surprise me and is consistent with both my personal experience and experience of others in my field. But it is worrisome. As budgets shrink and the acquisition workforce is thinned out or overworked, mistakes will be made. I just do not believe that the quality or merit of protests filed in FY 2011 is substantially different than those filed in previous years; accordingly, I have to conclude that GAO is just less inclined to grant protests.
Another statistic is worth noting: the percentage of protests that resulted in hearings. For FY 2011, GAO held hearings in 8% of the protest cases filed, down from 10% in FY 2010 and 12% in FY 2009. It used to be that in close cases or when something in the record looked suspicious, GAO would hold a hearing. The downward trend in the percentage of hearings held suggests that GAO is giving the agencies the benefit of the doubt in close cases, which seems consistent with the lower sustain rate for FY 2011.
What do these statistics mean as a whole? Well, it’s a bit like reading tea leaves and I’m no psychic, but I know for sure GAO attorneys’ rosters are very full. I suspect GAO has not increased its hiring practices to reflect the growing number of protests filed over the last five years. With limited resources and a statutory deadline for resolving protests, GAO cannot hold a hearing in every case. The statistics could also reflect the economy. While a tighter economy often means more litigation because companies want to keep what they have, sometimes it means that other companies will not expend the additional resources necessary to get another bite at the apple. More companies are willing to walk away from protests or not press to have a hearing.
Ultimately, I don’t think the statistics matter much because the decision to file a protest is different for each company and depends on the situation in which the company finds itself at the time. There are many reasons to file a protest and many reasons to walk away. These statistics are just one factor to consider, but as a whole they are not very instructive. GAO, in fact, may be more likely to sustain a certain type of case in a certain context. If a company has that type of challenge and is in that type of position, these statistics are meaningless.
Instead, I think this area is truly an area where a company will benefit from consulting a government contracts attorney familiar with protests. After participating in nearly 100 protests over 20+ years, I know which protests are likely to succeed and am familiar with the issues a company considers in taking this route. And, of course, I am not alone. In these situations, experienced protest attorneys can help make you make a more informed decision (which is well worth the paltry fees you will pay us for this invaluable advice!).
Yesterday, a DC District Court ordered VA/CVE to go back and reconsider a SDVOSB verification application that it had denied. This appears to be the first known court challenge of a VA SDVOSB verification denial. The court held that VA failed to provide a satisfactory explanation for the denial. The judge found that “the defects in the VA’s written decisions are so many and so significant that they affect the whole, and preclude the Court from effecively exercising its review function.” Ultimately, the court concluded that CVE’s denial did not have a rational basis. It’s a good read – you can find the decision here: VA-Court-Decision
On Friday, March 2, the DoD IG issued a controversial report regarding DoD’s use of the SDVOSB set-aside program. In particular, the IG concluded that DoD did not have adequate controls preventing fraud in the program. Interestingly, the report has been taken down from DoD’s website. I’ve attached it here and will blog on it once I have a chance to thoroughly review the report.
Click here for the report.
There are some interesting legal nuances regarding subcontracting plans of which most government contractors are not aware. Most contractors know that, in negotiated acquisitions, each solicitation of offers to perform a contract or contract modification, that individually is expected to exceed $650,000 ($1.5 million for construction) and that has subcontracting possibilities, must include FAR clause 52.219-9, Small Business Subcontracting Plan. The clause requires contractors to submit a “Subcontracting Plan” to the Contracting Officer during a procurement that must be negotiated and found acceptable by the Government prior to any contract award. The subcontracting plan must address how the prime contractor will distribute subcontracting dollars under the contract award to various types of small businesses.
According to the FAR, the Contracting Officer must require the “apparently successful offeror” to negotiate an “acceptable” subcontracting plan and if it fails to do so, the apparently successful offeror “will be ineligible for award.” FAR 19.702(a)(1). Seems simple enough. This language appears to suggest that if a contractor submits an unacceptable subcontracting plan, its proposal will be found to be unacceptable. Under standard protest law, a technically unacceptable proposal cannot form the basis for a contract award.
A recent GAO, case, however, reminds this Northern Virginia government contracts lawyer that this analysis is not so straightforward. As reflected in a recent GAO case, MANCON, B-405663, (February 9, 2012), GAO has interpreted the language above, regarding the “ineligibility” of the apparent successful offeror, as an issue of “responsibility” and not “acceptability,” even though the subcontracting plan may be submitted with an offeror proposal and the submission is considered in the evaluation of proposals. InMANCON, the RFP informed offerors that the award would be made on a best value basis and that “socio-economic” was a factor that would be considered. This factor required offerors to submit a subcontracting plan. Offerors were informed that the socio-economic factor would be evaluated on a pass/fail basis. The agency initially found MANCON’s proposal to be “unacceptable” under the socio-economic factor and the agency informed MANCON of the plan’s deficiencies during discussions. After reviewing final proposal revisions, the agency still considered MANCON’s proposal to be considered unacceptable and made a contract award to another offeror.
MANCON challenged the award to the other offeror arguing that the agency unreasonably determined that its subcontracting plan was unacceptable. In reviewing this allegation, GAO explained that because the FAR subcontracting plan language applies to the “apparent successful offeror,” the FAR subcontracting plan requirement relates to an offeror’s responsibility, even where the solicitation requests the offeror to submit its plan with its offer. The GAO acknowledged that an agency may make “responsibility criteria,” such as a subcontracting plan, part of a technical evaluation, but noted that such a responsibility criterion will only be considered part of a proposal evaluation if the evaluation criterion allows for a “comparative assessment” among offerors. Stated another way, if the offerors are graded or scored on the content of the subcontracting plan, then a deficient plan will be considered to render a proposal unacceptable instead of making an offeror not responsible. Because in MANCON the agency reviewed subcontracting plans on a pass/fail basis, rather than a comparative basis, the GAO held that the issue in this case addressed MANCON’s responsibility.
Okay, so you say toe-may-toe and I say toe-ma-toe, what’s the difference between finding a contractor not responsible vs. finding its proposal unacceptable? Either way, the contractor is not going to get the award. Well, there are some important differences, particularly in the protest context. First, the standard of review is different. The GAO affords broad discretion to Contracting Officers on issues of responsibility. It is very hard to overturn a Contracting Officer’s determination that a contractor is not responsible (unless it is a small business) and it’s even harder to dispute a Contracting Officer’s affirmative determination of responsibility. In contrast, if a Contracting Officer finds a subcontracting plan is technically unacceptable, then a protester need only show that the determination is unreasonable given the evaluation criteria, solicitation requirements, statements in the proposal etc.
Second, there is a difference regarding the effect of communications in which the agency and a contractor may engage with respect to each issue. MANCON argued that the agency should have discussed the remaining deficiencies in its subcontracting plan with MANCON before determining that MANCON was not eligible for award. The agency countered that, if it had made such inquiries with MANCON after receipt of final proposal revisions, those exchanges would have amounted to discussions and the agency would have been obligated to open discussions again with all offerors. The GAO disagreed with the agency. The GAO explained that where the acceptability of a small business subcontracting plan is a responsibility issue, exchanges between an agency and an offeror concerning such plans are not discussions but rather “clarifications.” Under standard protest law, an agency can seek clarifications from one or more offerors anytime up until award without having to engage in “clarifications” with all offerors.
It gets a bit tricky, however, if the subcontracting plan is an “comparative” evaluation factor. The FAR allows a Contracting Officer to engage in “clarifications” or “discussions” with offerors regarding areas of their proposals subject to evaluation. Because a Contracting Officer doesn’t have to hold “clarifications” with all offerors but does have to hold “discussions” with all offerors, in a protest context, one is often alleged as the other. That is, the agency will state that it requested a “clarification” from an offeror, but a protester will allege that the alleged “clarification” was really discussions, thereby requiring the Contracting Officer to have had discussions with all offerors (especially the protester who now claims it was unfairly left out). Traditionally, GAO resolves these disputes by looking at whether the offeror was allowed to amend its proposal following the exchange. If the proposal was amended, the exchange was likely more than a “clarification” and really “discussions.” Therefore, in that case, all offerors should have had discussions and the opportunity to revise their proposals.
But that “acid test” is not going to work in the case of subcontracting plans. Whether or not an agency’s exchanges with an offeror regarding its subcontracting plan during a procurement qualifies as “clarifications” or “discussions” depends only on whether the RFP treats the subcontracting plan submission requirement as a responsibility criterion or a evaluation criterion. If it is a responsibility criterion, the exchange will still be considered a “clarification” even if the offeror submits a revised subcontracting plan. If it is an evaluation criterion, the agency’s exchanges, depending on their nature, could be either a clarification or discussions, but if a new subcontracting plan is submitted or the old one amended, then the agency has definitely engaged in discussions and everyone gets another bite at the apple.
Got it? The bottom line is that the type of exchanges regarding a subcontracting plan permitted under the FAR is determined by how the subcontracting plan will be considered by the agency. If its a responsibility issue, the agency can talk with the offeror and get information from the offeror without the other offerors knowing. However, if it is an evaluation criterion, clarifications are only appropriate with one offeror if the exchange is truly a clarification – and no additional information is submitted to the agency following the exchange.
Ok – if your head hasn’t exploded yet – consider another case – Central Texas College, B-309947 (October 12, 2007). The RFP advised that the contract award would be made to the lowest-priced, technically-acceptable offeror with an acceptable subcontracting plan. The subcontracting plan was a specific evaluation criterion, but it was scored on an “acceptable” “non acceptable” basis. The agency found that CTC’s subcontracting plan to be unacceptable and awarded the contract to another offeror, without holding discussions or having any clarifications with any offerors. CTC protested the agency’s failure to hold discussions and GAO found that the agency was not required to hold discussions with CTC. Makes sense, right ? The subcontracting plan was an evaluation criterion, so discussions would occur if there were substantive exchanges regarding the plan.
But, wait. Remember MANCON? In MANCON, the subcontracting plan appeared to be part of the evaluation as well, but the GAO rejected that idea on the basis that the agency was going to evaluate the subcontracting plan on a “pass/fail” basis. In CTC, the subcontracting plan was also part of the evaluation and was evaluated on an “acceptable/non acceptable basis.” In MANCON, the exchanges were held to be “clarifications;” in CTC, the GAO considered the exchanges to qualify as “discussions”.
Seems inconsistent, no? While not addressed in CTC, I think another case provides the answer as to why both cases might be right. In Computer Sciences Corp., B-298494.2 (May 10, 2007), the subcontracting plan was an identified evaluation criterion and was scored as acceptable/unacceptable. The agency found many offeror submissions unacceptable, held “clarifications” with those offerors regarding same, and those offerors revised their subcontracting plans, rendering them acceptable. A protest was filed challenging this action. The GAO agreed with the protesters that the exchanges with a few of the offerors on the subcontracting plans were discussions, not clarifications. Seems consistent with CTC but not with MANCON, right? Here’s the difference – although in CSC the subcontracting plan evaluation factor was graded on an acceptable/not acceptable basis, in fact, the strengths/weaknesses of each subcontracting plan were identified by both the evaluators and the SSA. So there was a “comparative assessment” of the subcontracting plan, although you wouldn’t necessarily know that where “acceptable”/”unacceptable” are the grades/scores given offerors.
Fascinating, isn’t it? Just don’t bring this up at cocktail parties; for some reason other people don’t share our industry’s enthusiasm for the legal nuances of GAO protests.
On March 16, 2011, SBA posted for public comment proposed changes to the size standards for Sector 54, Professional, Technical and Scientific Services. SBA received nearly 1,500 comments on the proposed rule, the majority of which addressed the proposed increase in the size standards applicable to NAICS 541310, Architectural Services and NAICS 541320, Landscape Architectural Services.
The only changes in these standards were increases; SBA did not lower any size standards. SBA, however, did not increase all size standards for Sector 54. Here is what happened to the most popular size standards:
541330, Engineering Services 4.5 million to 14 million
541511 through 541519, Computer Services stayed at 25 million
541611 through 541690, Management/Consulting Services 7 million to 14 million
541990, All Other Professional, Scientific and Technical Services 7 million to 14 million
The final rule is effective March 12, 2012.
Contact me if you would like a copy of the final rule (which addresses the comments filed).
Earlier this week, the Air Force issued a Notice of Proposed Debarment to Booz Allen Hamilton, Inc. The basis for the debarment is set forth in a memorandum attached to the notice (contact me if you would like a copy). According to the memorandum, the proposed debarment occurred because of the conduct of an employee in Booz Allen’s San Antonio branch, Mr. Joselito Meneses. Mr. Meneses formerly was a Lt. Colonel in the Air Force and previously served as the Deputy Chief, Information Technology Division, Office of the Surgeon General, Air Force Medical Support Agency, at Brooks Air Force Base, Texas.
Mr. Meneses joined BAH on April 4, but underwent several weeks of orientation at BAH before reporting to work at the San Antonio branch on April 11. That day he brought to the office an external hardrive that contained non-public information regarding an Air Force IT services contract. BAH intended to submit a proposal for the follow-on procurement for this requirement. On April 11, Mr. Meneses apparently emailed his superiors in the San Antonio office information regarding the prior contract award, including CLIN pricing data, labor mix and labor rates by labor category. That information subsequently was forwarded to others in the San Antonio office. At some point between April 12 and April 27, an employee in BAH’s pricing department received the information and realized that it was non-public information that should not have been disclosed to BAH. That employee contacted BAH’s legal department.
BAH let Mr. Meneses go on June 28, 2011 and the Air Force proposed to debar Mr. Meneses on September 30, 2011.
The Notice of Proposed Debarment served on BAH earlier this week also was served on other BAH employees in the San Antonio office. The notice stated that the employees violated the Procurement Integrity Act. The other employees were proposed for debarment because they failed to stop or report the disclosure of the non-public information in the branch office. The memorandum explains that BAH was proposed for debarment because Mr. Meneses and the other employees’ conduct was “imputed” to BAH. The memorandum further explains that BAH was proposed for debarment also because it was “affiliated” with the San Antonio office employees.
Some observations by this government contracts lawyer in Virginia:
It is not clear whether BAH in its entirety has been proposed for debarment or just the San Antonio office of BAH. The Notice of Proposed Debarment was served on BAH and BAH is now listed in EPLS. However, the memorandum supporting the notice states that only the San Antonio branch of the office is proposed for debarment
How did the Air Force learn of this improper conduct? Was this the topic of a “mandatory disclosure”? The memorandum notes that the BAH legal department was contacted and that the legal department issued a “document hold and retention order” to the employees involved on May 27, 2011. Was a disclosure in fact mandatory? Many people forget that the mandatory disclosure rule only applies to covered conduct “in connection with the award, performance, or closeout” of a Government contract. It’s not clear that the follow-on procurement had even started at this point. Does that make a difference?
Assuming that BAH made some type of disclosure, why did the Air Force come down on BAH so hard? Assuming that the entire company has been proposed for debarment, the proposed debarment is catastrophic for a company like BAH. Now, if only the BAH San Antonio branch is involved, maybe that is the compromise reached between BAH and the Air Force.
This is a bit ironic: the many weeks of orientation Mr. Meneses received before starting in the San Antonio branch included ethics training. Before you rush to criticize the training, remember that pricing employee. Presumably he or she received the same training – and practiced what was preached.
The proposed debarment serves as a warning to government contractors hiring former government contract employees. As the GAO implies in the VSE case, it is not enough for a government contractor to ensure that a former government employee hired by the company complies with the “revolving door” regulations, the government contractor must also ensure that the former government employee does not bring or disclose non-public information to his or her new employment. Otherwise, the situation could create an OCI of the “appearance of impropriety” variety discussed in VSE. In this case, that was not an issue as BAH, smartly, decided not to submit a proposal in the follow-on procurement.
How does the BAH experience fit in with the proposed changes to the FAR OCI regs? A number of significant changes were proposed last April and still are under review and comment. Among the proposed revisions is a proposal to separate OCI issues from issues where an government contractor has an unfair competitive advantage by having unequal access to non-public information. In the proposed rules, the concern was about non-public information received by a contractor during contract performance, but doesn’t this situation also fit the bill? See also GAO Report (GAO-10-693) “Contractor Integrity: Stronger Safeguards Needed For Contractor Access to Sensitive Information.”
What about the new DoD certification rule included in 252.203-7000, Requirements Relating to Compensation of Former DoD Officials. It was effective November 18, 2011. Did BAH violate this rule? Did anyone read my blog on this topic? Did you?Finally, this case reminds us that it takes only one skunk to stink up a room (or a branch office, as the case may be).
Organizational Conflicts of Interest (“OCI”) has been a “hot topic” in government contracts ever since new DoD OCI regulations for Major Defense Acquisition Programs were published in December of 2010. While the final regulations were far narrower than anticipated, the original scope of revisions contemplated troubled many Government contractors which considered the proposed revisions a harbinger of things to come. And they were correct. In April 2011, the FAR Council published proposed revisions to the FAR’s OCI provisions which are similar in scope to the broad and extensive revisions initially contemplated by DoD.
In addition to these regulatory developments in the world of OCIs, the Government Accountability Office has issued a number of significant OCI decisions in the last couple of years. OCI now is a popular protest count and an even a more popular lightening rod of discontent for federal contractors. With the contraction of the industry, many contractors are convinced that some larger federal contractors have unfair competitive advantages in important procurements.
It is against this backdrop that the GAO issued an interesting OCI protest decision at the end of 2011. The case is VSE Corporation, B-404833.4 (November 21, 2011). In my opinion, the decision is interesting because of two things: (1) the decision focuses on the “appearance of impropriety” of VSE’s consulting relationship with a former Government employee and (2) the decision addresses OCI in the context of the government’s post-employment regulations. In this blog post, I discuss the first point.
Here are the facts (abridged). The decision concerns an Army procurement for “alternative staffing.” The incumbent is CACI. In mid 2010, the Army plans to resolict the contract. The Deputy Program Manager at that time participates in a number of acquisition planning meetings regarding the procurement. He also participates in a board meeting determining the award fee owed CACI, the incumbent. Later in the year, the DPM reviews and comments on the draft SOW. In December he resigns, but his official termination date is January 31, 2011. On February 4, 2011, he signs a consulting agreement with VSE, which intends to submit a proposal in response to the new solicitation for the Army’s alternative staffing contract. The former DPM advises VSE with regard to its proposal. VSE is awarded the contract, but the Contracting Officer ultimately decides to terminate the contract award because she believes VSE’s consulting arrangement with the Army’s former DPM creates “an appearance of impropriety.”
Most federal contractors are aware of the OCI regulations and restrictions. Per FAR Part 9, an OCI exists where certain factors create “an actual or potential conflict of interest” on an existing contract or when the nature of the work performed on an existing contract creates “an actual or potential conflict” on a future acquisition. FAR 9.502(c). The FAR expresses a policy of avoiding, neutralizing or mitigating actual or potential OCIs because of two underlying principles: (1) preventing the existence of conflicting roles for contractor that might bias its judgment in performing a contract and (2) preventing a contractor from having an unfair competitive advantage – for example, when the contractor may have had unequal access to proprietary information or source selection information. FAR 9.505.
Many contractors, however, are not aware that a mere “appearance of impropriety” can endanger a proposal or a contractor’s chance of contract award, with good reason. The term or phrase “appearance of impropriety” does not appear in FAR Part 9. Instead, the concept appears in FAR Part 3, which addresses Improper Business Practices and Personal Conflicts of Interests (emphasis added by me). Specifically, FAR 3.101-1, discussing Standards of Conduct for Government employees, states that “The general rule is to avoid strictly any conflict of interest or even the appearance of a conflict of interest in Government-contractor relationships.” This provision, however, addresses standards of conduct for Government employees, whereas FAR Part 9 addresses the conduct of contractors. Notwithstanding this distinction, the GAO has linked FAR Part 3 and FAR Part 9 by holding in prior cases that, where a firm gains an unfair competitive advantage through its hiring of a former government official, the firm may be disqualified from the competition based upon the “appearance of impropriety” this relationship can create. In a footnote to the VSE decision, the GAO explains that a contractor’s hiring of a former government employee is “virtually indistinguishable” from the considerations that arise in a situation where a contract awardee has gained an unfair competitive advantage in a procurement from its unequal access to proprietary or source selection information. See Health Net Fed. Servs., LLC, B-401652.3 and .5, Nov. 4, 2009.
In the VSE case, the GAO reiterates this precedent and makes another point most contractors miss – disqualification of a contractor may be upheld on the basis of an “appearance of impropriety” – even if no actual impropriety can be shown. The “appearance of impropriety” standard, however, is not defined in the FAR. According to the GAO, an “appearance of impropriety” depends on the facts and circumstances of each case.
At first glance, this sounds very much like a “I’ll know when I see it” analysis. In the VSE case, the Contracting Officer used this analysis. The Contracting Officer stated a number of reasons supporting her determination that VSE’s use of the former Deputy Program Manager in preparing its proposal created an “appearance of impropriety.” She cited his participation in the acquisition planning meetings, his review of the draft SOW, his access to government files until his termination of employment, his participation in award fee meetings regarding the incumbent, and his role in advising VSE in the actual procurement conducted by the Army. During the hearing held in the protest, the Contracting Officer admitted that she had no real proof that the Deputy Program Manager actually had access to non-public, proprietary or source selection information. She stated that she based her determination instead on all these factors combined and her belief that “something was going on that just wasn’t adding up.”
The GAO held that the Contracting Officer did not have a legitimate basis for terminating contract. The GAO found that the facts cited by the Contracting Officer in support for her opinion did not show that the Deputy Program Manager actually had access to proprietary or source selection information that he could have passed on to VSE and that could have provided VSE with an unfair competitive advantage. Her determination only reflected her assumptions that, because his prior involvement in the program and procurement, that the Deputy Program must have had access to proprietary and source selection information.
Do you see the fine line here? A protester doesn’t have to show that a contractor actually had unequal access to protected information in this type of situation, only that the contractor could have had unequal access to protected information because its consultant/former government employee had access to the protected information. The fact that the contractor could have had access to protected information is enough to create “an appearance of impropriety.” But the GAO held that in order to show “an appearance of impropriety” there must be “hard facts’ and not just “innuendo and suspicion”. In this case, since the Contracting Officer failed to cite any “hard facts” demonstrating that the Deputy Program Manager had access to protected information, the GAO found she unreasonably determined that his relationship with VSE created “an appearance of impropriety.”
What this decision stands for is that, while the “appearance of impropriety” standard seems like a mushy, I’ll-know it-when-I-see-it standard, in fact, it’s not. Yes, the standard is met just by showing the possibility of an unfair competitive advantage vs. actual competitive advantage. But, on the other hand, you have to have “hard facts” demonstrating such a possibility.
Interesting, no? My next blog post will talk about the second aspect of this case that I find interesting – the intersection of these OCI rules with the government post-employment rules. Here is a teaser: in this case, the Deputy Program Manager got an opinion from an Army ethics counselor that stated he could provide “behind-the-scenes” assistance to contractors participating in the procurement.
In my earlier blog post on the GAO’s decision in VSE Corporation (B-404833.4, November 21, 2011), I commented on GAO case law holding that “an appearance of impropriety” can justify the disqualification of a contractor from a procurement. In the VSE case, the GAO, in fact, did not uphold the Contracting Officer’s determination that VSE’s consulting relationship with a former Army Deputy Program Manager created “an appearance of impropriety.” Much of the case discussed the facts cited by the Contracting Officer to support her finding of “an appearance of impropriety.” Much of the case also addressed one fact the Contracting Officer ignored: the opinion provided by an Army ethics counselor stating that the former Deputy Program Manager could work “behind the scenes” with contractors submitting proposals for work on the program.
Most contractors are aware that there are “post-employment restrictions” for Government employees, also known as “revolving door” rules. Us government contract lawyers know that, when in doubt, a contractor should have a former government employee get an ethics opinion from the agency before establishing a consulting/employment relationship with the contractor who does, or intends to do, work for the same agency. In this case, it appears VSE did the right thing and that the Deputy Program Manager was permitted to assist VSE in developing its proposal for the Army requirement. That opinion should have been pretty persuasive in this case, don’t you think?
The Contracting Officer did not think so. Apparently, she was troubled by the term “behind the scenes.” At the hearing during the protest, she testified that she didn’t know what that term meant and that it was “vague” and “undefined” in the ethics opinion. The GAO did not share her concern and concluded that the Contracting Officer’s understanding of the government post-employment restrictions was not consistent with the applicable statutes and regulations.
Here are the issues. Generally speaking, former government employees at certain levels and that have participated “personally and substantially” in certain procurement matters are prohibited from taking employment with a Government contractor for a prescribed period where they will be communicating with the Government on behalf of the contractor. The reason for these rules is fairly obvious – the former employee’s status makes it more likely that he or she will unfairly influence government action in favor of the contractor. (I know what you cynics out there are saying – isn’t that the reason the former government employee was hired in the first place?)
The conduct prohibited by the post-employment restrictions is “communication” with the Government on behalf of another entity. Communication in this regard includes transmission of information of any kind, orally, in written correspondence, by electronic means and by any other means. Notably, the post-employment restrictions include the “physical presence” of the former Government employee before a Government employee, even if the former Government employee does not make any verbal or written communication.
The post-employment restrictions, however, do not prohibit “behind-the-scenes” work by a former Government employee for a contractor – provided that such employment does not include “communications” or an “appearance” before a Government employee – at least for the period prescribed by the regulations. The regulations actually list various examples of the types of communications and post-employment activities that fall within and outside the post-employment rules. Some of these examples include examples of “behind-the-scenes” work. Had the Contracting Officer looked at the actual post-employment rules and read these examples, she likely would have realized that the ethics opinion from the Army was right on point.
Curiously, the GAO did not focus on an aspect of the regulation that I think is critical in this case and for contractors seeking to comply with these post-employment restrictions. The Contracting Officer testified that the alleged prohibited communication to the Government was the proposal submitted by VSE. The communications that are prohibited by the post-employment restrictions, however, are those by a former Government employee to another Government employee. That did not occur here. More importantly, the restrictions only apply to communications which are intended to be attributed to the former Government employee. Without such attribution, there really isn’t the potential of improper influence.
In this context, with or without an Army ethics opinion, it is fairly clear, at least to this government contracts attorney in Northern Virginia, that VSE’s proposal, unless it quoted or otherwise highlighted VSE’s relationship with the former Deputy Program Manger (which it didn’t), does not qualify as a prohibited “communication.”
The Contracting Officer should have reviewed the post-employment restrictions. Even if she wasn’t going to do so, she should have checked with her Army counsel. In fact, FAR Part 9 advises Contracting Officers to “obtain advice of counsel and the assistance of appropriate technical specialists in evaluating potential conflicts.” FAR 9.504(b). Which brings me to this question – why wasn’t the Army ethics opinion dispositive (assuming, or course, that the former Deputy Program Manager acted in accordance with the opinion)? And why didn’t the CO try to discuss the issue with him? Seems like the right hand didn’t know what the left hand was doing here. And why did Army lawyers go on to defend the protest when she was pretty clearly in the wrong? Shocking. Not.
In 2010, the Government implemented the Federal Awardee Performance and Integrity Information System (FAPIIS). FAPIIS consolidates information from various federal databases such as the Excluded Parties List System (EPLS), the Past Performance Information Retrieval System (PPIRS) and the Contractor Performance Assessment Reporting System (CPARS). Contracting Officers are required to report in FAPIIS non responsibility determinations, contract terminations for default or cause, agency defective pricing determinations, and administrative agreements executed pursuant to a suspension or debarment proceeding. Per contract clause 52.209-9, Updates of Publicly Available Information Regarding Responsibility Matters, a contractor who submits a proposal for a contract valued at greater than $500,000 and has $10 million or more in active contracts must report in FAPIIS information regarding civil, criminal and administrative proceedings involving the contractor or its principals. Contracting Officers must review FAPIIS in making responsibility determinations for every contract award above the Simplified Acquisition Threshold ($150,000).
When FAPIIS was initially implemented in April 2010, the contractor information included in the system was to be available only to the Government, primarily acquisition personnel. However, per an amendment to the Supplemental Appropriations Bill of 2010, the Government was required to make information included in FAPIIS, except past performance reviews, available to the public. The final rule making FAPIIS information available to the public was published about a year ago, on January 24, 2011. While the rule was “final” in that it applied to contracts or solicitations issued after April 15, 2011, it was also published as an interim rule so that the Government could receive comments on the rule.
And there were comments. The interim rule raised a number of concerns within the government contracting community. The interim rule makes clear that contractor past performance review information will not be included in FAPIIS, but does not otherwise define or limit the type of contractor information that may be reported in FAPIIS. Indeed, in discussing the interim rule, the Government acknowledged that FAPIIS could include source selection information or other information that may not be subject to release to the public under other avenues, such as the Freedom of Information Act (also known as FOIA). The interim rule, however, did not place any controls regarding inclusion of such protected information in FAPIIS other than stating that Contracting Officers should ensure “they do not post information in the system . . . that would create a harm protected from disclosure exemption under FOIA.” Critics, including this government contracts lawyer in Northern Virginia, pointed out that this offered little protection to contractors as Contracting Officers were not well equipped nor trained to determine the applicability of FOIA exemptions to the different types of information that could be included in FAPIIS. In fact, most agencies have positions dedicated to the task of processing FOIA requests.
On January 3, 2012, the Government published the final (really, truly, final) rule regarding public access to contractor information in FAPIIS which responds to the concerns raised following publication of the interim final rule last year. In the preamble to the rule, the Government states that it recognizes the risks involved if contractor information is made available to the public without first being screened in some fashion. Accordingly, under the final rule, contractors will be given the opportunity to review and comment on information reported in FAPIIS prior to the information being made available to the public.
The specifics are as follows. FAPIIS consists of two “segments”: a public and non-public segment. Contracting officials and contractors report information to the non-public segment of FAPIIS. The non-public segment may only be viewed by Government personnel and authorized users performing business on behalf of the Government or by an offeror or contractor who seeks to view its own information. Under the final, final rule, Contracting Officers are still instructed to ensure that information that is otherwise exempted from release under FOIA is not reported in FAPIIS. Contracting Officers should seek assistance in applying and interpreting the FOIA exemptions from agency FOIA officials. The new rule, however, now provides an additional level of screening. The contractor now has to be notified each time new information is reported in the non-public segment of FAPIIS. The notification must inform the contractor that information included in the nonpublic segment will be transferred to the public segment of FAPIIS within 14 calendar days unless the contractor requests withdrawal of the information on the basis that such information cannot be released under FOIA. The notification will be sent to the contractor’s Government business point of contact identified in the Central Contractor Registration (CCR) database unless the contractor specifies a “past performance point of contact” in the CCR record.
If a contractor believes information posted in FAPIIS would not be subject to release under FOIA, a contractor must file a request for withdrawal of the information within seven calendar days of the posting of new information in FAPIIS. A Contracting Officer that receives such a request must remove the information from the non-public segment of FAPIIS within seven calendar days and decide whether the information should be released to the public pursuant to the agency’s FOIA procedures.
In addition to these screening procedures, the final, really final rule allows contractors to post comments regarding information that has been posted by the Government in FAPIIS. Information in FAPIIS is retained for six years and a contractor’s comments on that information will be retained for the same period unless revised by the contractor.
After the many rules, comments and commentary on the implementation of FAPIIS, there should be little left to say. However, I still see some unresolved issues in this final, yes we mean it, final rule:
The rule states that the contractor must request withdrawal of information reported in FAPIIS within seven calendar days of theposting of the information to FAPIIS. The rule also states that the contractor will receive notification when the Government posts new information in FAPIIS. The assumption made in this language is that the contractor will be notified the same day the information is posted in FAPIIS. If that happens, no problem, the rule makes sense. If there is any gap between the posting of the information and the notification of same to the contractor, there could be trouble because the seven calendar day for requesting withdrawal runs from posting, not notification.
The rule states that the contractor can request withdrawal of information from the non-public segment of FAPIIS only if the contractor believes the information is exempted from release under FOIA. But what if the contractor believes the information is past performance review information? Is it permitted to request withdrawal of contractor information in FAPIIS on that basis?
The rule states that a Contracting Officer must remove information posted in FAPIIS if a contractor advises the Contracting Officer (or other agency official that reported the information) within seven calendar days of the posting that the information falls within a FOIA exemption. Does the contractor have to specify which exemption? In the traditional FOIA case, the agency informs a contractor that there has been a request for contractor information included in an agency record. The agency then allows the contractor to make the case that the information is protected from release to the public under a specific FOIA exemption. Typically, this claim appears in a “reverse FOIA” letter submitted by the contractor, or more likely, the contractor’s attorney. At what point and in what depth will these reverse FOIA arguments need to be made? If the contractor only needs to assert that the information falls within a FOIA exemption and nothing more, won’t a contractor make the withdrawal request where it legitimately believes the information falls within an exemption and also in cases where it believes it doesn’t fall within an exemption but the contractor wants to go through the process to delay the public’s access to the information in question?
We’ll see what happens. The final rule applies to solicitations and contracts issued after January 17, 2012.
Yesterday, the GAO issued a decision in Kingdomware Technologies, B-405727, in which it found that the Department of Veterans Affairs improperly sought to fulfill a requirement for subscription and support services from a non-mandatory FSS contract rather than conducting market research to determine if there existed two or more SDVOSB/VOSBs that could perform work. Sound familiar? Yes, its another Aldevra type case. Citing Aldevra, the GAO held that the Veterans Benefits, Health Care and Information Technology Act of 2006 and implementing regulations require the VA to use SDVOSB/VOSB set asides where the statutory prerequisites are met (i.e., the “rule of two”). (You can find the case on GAO’s website).
The VA attempted to argue that the protester, Kingdomware Technologies was not “an interested party” entitled to protest the FSS task order award because it did not submit a quote in response to the RFQ. The GAO disagreed. The GAO held that where a protester is challenging the terms of solicitation and the remedy sought is the opportunity to compete under a revised solicitation, the protester is an interested party even if it did not submit a quote in response to the original solicitation.
This has got to be getting expensive for the VA. The GAO recommended the VA reimburse the protester the costs of filing and pursuing the protest. In both Aldevra and in this protest, those costs are likely to be minimal as businessmen and women do not charge hourly rates or record their time like attorneys do. Had Kingdomware hired a government contracts attorney, (by the way, I know a good one in Northern Virginia), then the VA would have to pay some real money out. And if they had to do this each time. . . , maybe they would reconsider this approach. Because, after all, isn’t this all about money?
