BNUMBER:  B-278771 
DATE:  March 12, 1998
TITLE: J&E Associates, Inc., B-278771, March 12, 1998
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Matter of:J&E Associates, Inc. 

File:     B-278771

Date:March 12, 1998

Barbara S. Kinosky, Esq., and James S. DelSordo, Esq., Kinosky, 
Phillips & Lieberman, for the protester.
Col. Nicholas P. Retson, Capt. Patrick B. Kernan, and Mike Lonsberry, 
Esq., Department of the Army, for the agency.
Henry J. Gorczycki, Esq., and James A. Spangenberg, Esq., Office of 
the General Counsel, GAO, participated in the preparation of the 
decision.

DIGEST

Organizational conflicts of interest exist for educational 
institutions submitting offers under a solicitation for educational 
support services where, as a contractor, the institution could advise 
government personnel to enroll in courses offered by that institution 
or verify billing statements submitted by the institution.  Under such 
circumstances, the solicitation is required to contain a provision 
addressing the conflicts in accordance with Federal Acquisition 
Regulation Subpart 9.5.

DECISION

J&E Associates, Inc. protests request for proposals (RFP) No. 
DABT01-97-R-0019, issued by the Department of the Army for educational 
and technical support services at Fort Rucker, Alabama.  J&E protests 
that the agency did not address organizational conflicts of interest 
in the RFP.

We sustain the protest.

The RFP stated the following:

     C.1.1.  Scope of Work.  The Contractor shall provide all 
     educational and technical support services to include management, 
     supervisory, professional, technical, and administrative 
     personnel to accomplish all tasks described in this contract to 
     operate the Army Continuing Education Center (ACE-C) at Fort 
     Rucker, Alabama.

Educational courses for service members at Fort Rucker are offered by 
educational institutions in the local area and elsewhere.  Such 
courses are taught at the institution, at Fort Rucker, or by mail.  
The Army provides financial assistance to service members enrolling in 
such courses either by reimbursing the service member for tuition 
payments, or by direct payments to the institution.  Among the tasks 
required by the RFP were the following guidance and counseling 
services relating to a service member's selection of, or enrollment in 
such courses:

     C.5.3.2.  The contractor shall assist servicemembers in making 
     first time course and program choices and in planning educational 
     programs.  Assist servicemembers in establishing long and short 
     range goals, and make plans to obtain those goals through 
     guidance and counseling on the availability of ACE-C programs and 
     services, and in enrolling service members in appropriate 
     programs. . . .

     C.5.3.3.  The contractor shall refer servicemembers, after 
     initial guidance session, to an appropriate institution, schedule 
     for necessary testing, and/or direct him/her to [an] appropriate 
     workshop [developed and conducted by the contractor] for 
     additional information or program to begin self-development 
     activities.

In addition to guidance and counseling services, the RFP at section 
C.5.2.2 required the contractor to administer the tuition assistance 
program.  This involved monitoring of the eligibility of service 
members for tuition assistance, and receiving and verifying billing 
statements from institutions for courses in which service members 
enroll.

The agency determined that prospective offerors would include 
educational institutions in the local area, as well as other 
institutions currently offering courses at Fort Rucker.  A conflict of 
interest provision prohibiting such institutions from competing under 
the RFP was included in the draft statement of work.  However, the 
contracting officer recommended deletion of this restriction on 
competition because she determined that these institutions could offer 
objective advice and assistance to service members, and that any 
potential bias in assisting in a service member's selection of courses 
and programs would be mitigated by the Army's direct oversight of the 
contractor.  The final RFP did not restrict the competition.  The only 
provision regarding conflicts of interest included in the RFP was the 
following:

     C.1.7.4.2.  Conflict of Interest.  The contractor shall not 
     employ any person whose employment would result in a real or 
     perceived organizational conflict of interest, [or] violate the 
     requirements of [Department of Defense] 5500.7-Regulation, Joint 
     Ethics Regulation and Fort Rucker employment statutes and 
     regulations or [Federal Acquisition Regulation (FAR)]  sec.  3.104.

J&E's protest alleges that the RFP did not address the organizational 
conflicts of interests of an educational institution, which if awarded 
the contract could advise service members to enroll in its own courses 
and review its own tuition billing statements.  J&E alleges that the 
RFP must have an organizational conflict of interest provision which 
prohibits institutions with such potential for bias from competing 
under this RFP.

We agree that, given the nature of the services to be provided, the 
RFP must contain a provision to address the potential organizational 
conflicts of interest, particularly for educational institutions, and 
sustain the protest on this basis.  However, we do not agree that the 
competition must necessarily be restricted to exclude such 
institutions.

An organizational conflict of interest exists where, because of other 
activities or relationships with other persons, a person is unable or 
potentially unable to render impartial assistance or advice to the 
Government, or the person's objectivity in performing the contract 
work is or might be otherwise impaired, or a person has an unfair 
competitive advantage.  FAR  sec.  9.501; Aetna Gov't Health Plans, Inc.; 
Found. Health Fed. Servs., Inc., B-254397.15 et al., July 27, 1995, 
95-2 CPD  para.  129 at 12.  Contracting officials are to avoid, neutralize, 
or mitigate potential significant conflicts of interest so as to 
prevent an unfair competitive advantage or the existence of 
conflicting roles that might impair a contractor's objectivity.  FAR  sec.  
9.504(a), 9.505; Aetna Gov't Health Plans, Inc.; Found. Health Fed. 
Servs., Inc., supra.  Since the regulatory guidance cannot anticipate 
all situations which pose potential conflicts of interest, contracting 
officers must exercise common sense, good judgment, and sound 
discretion in assessing the existence of significant potential 
conflicts of interest, and in developing appropriate means to resolve 
them.  FAR  sec.  9.505; Aetna Gov't Health Plans, Inc.; Found. Health Fed. 
Servs., Inc., supra.  We will review agency action under this subpart 
for reasonableness.  Aetna Gov't Health Plans, Inc.; Found. Health 
Fed. Servs., Inc., supra.

Here, as noted by the protester, if an educational institution which 
otherwise offers courses and programs to Fort Rucker service members 
receives award under this RFP, this would place it in a position to 
recommend that service members take courses offered by that 
institution and to verify billing statements submitted by its own 
institution.  In accomplishing these contract responsibilities, it is 
possible that the contractor's judgment might be impaired to favor its 
own institutional interests, and therefore a significant 
organizational conflict of interest exists.  See Radiation Safety 
Servs., Inc., B-237138, Jan. 16, 1990, 90-1 CPD  para.  56 at 3-4 
(significant organizational conflicts of interest exist where contract 
performance could create additional commercial work for the offeror).  
Given that four[1] of the nine potential sources who attended the 
pre-proposal conference and site visit were educational institutions, 
there is a significant possibility that one could receive the award.

The agency's contention that no organizational conflict of interest 
would arise because the terms of the solicitation require the 
contractor to act in the interests of the service member and/or the 
government, not in the interests of its own institution, misses the 
point of regulations governing organizational conflicts of interest.  
The regulations contemplate that a potential organizational conflict 
of interest arises from a person's (including a contractor's) 
relationship to other entities, regardless of the person's good faith 
and adherence to contract requirements.  FAR  sec.  9.501; see Aetna Gov't 
Health Plans, Inc.; Found. Health Fed. Servs., Inc., supra, at 18.  
The agency has not explained why an educational institutional which is 
awarded this contract does not have at least a potential 
organizational conflict of interest when it advises service members as 
to what courses they should take, including courses given by that 
institution, and when it reviews vouchers submitted by itself for 
educational services.
    
To the extent the agency recognizes that an organizational conflict of 
interest may exist, it contends that agency oversight during contract 
administration would sufficiently mitigate such conflicts.  However, 
the contract does not state how such conflicts will be mitigated, 
avoided, or neutralized.  Mere oversight of such a contractor's 
activities would, at best, only identify specific instances of 
apparent conflicts of interest as they arise (e.g., when a service 
member is advised to enroll in a course with the contractor's 
institution).  Such oversight would do nothing to avoid, mitigate, or 
neutralize such conflicts.  Specifically, the contract would not 
prohibit the contractor from advising a service member to take a 
course with the contractor's institution.  Nor does the agency state 
that it intends to object to such advice or enrollment, or otherwise 
state any guidelines identifying under what conditions such objections 
might be made.  The contracting officer's determination that any 
potential conflict is mitigated through contract administration is, 
therefore, not reasonable.

Where, as here, significant organizational conflicts of interest 
reasonably can be expected, FAR  sec.  9.507-1 states that the 
solicitation:

     shall contain a provision that--
        (a) Invites offerors' attention to this subpart;
        (b) States the nature of the potential conflict as seen by the 
     contracting officer;
        (c) States the nature of the proposed restraint upon future 
     contractor activities; and 
        (d) Depending on the nature of the acquisition, states whether 
     or not the terms of any proposed clause and the application of 
     this subpart to the contract are subject to negotiation.

FAR  sec.  9.507-2 states the requirement and conditions for including such 
terms of restraint in a contract clause.  

The current RFP does not address the significant organizational 
conflicts of interest discussed here[2] and the mitigation proposed by 
the contracting officer is not reasonable.  We sustain the protest on 
these bases.  However, FAR subpart 9.5 does not state a general 
requirement for elimination from the competition of offerors with 
potential conflicts of interest.  Here, it may be that these 
organizational conflicts of interest can be avoided or otherwise 
mitigated by appropriate restraints on contract performance in the RFP 
and contract, short of eliminating educational institutions from the 
competition.  One possible restraint is a contract clause that 
precludes an educational institution awarded the contract from 
advising service members to enroll in its courses and from reviewing 
its billing statements.  Moreover, FAR  sec.  9.503 provides for the 
possibility of the waiver of any organizational conflict of interest 
in accordance with agency procedures. 

We recommend that the agency determine how to address the 
organizational conflicts of interest present here, appropriately amend 
the RFP, and resolicit.  We also recommend that the protester be 
reimbursed the reasonable costs of filing and pursuing its protest, 
including attorneys' fees.  4 C.F.R.  sec.  21.8(d)(1) (1997).  The 
protester's certified claim for costs, detailing the time spent and 
costs incurred, must be submitted to the agency within 60 days of 
receiving this decision.  4 C.F.R.  sec.  21.8(f)(1).

The protest is sustained.

Comptroller General
of the United States

1. These four institutions were Troy State University, Embry-Riddle 
Aeronautical University, Enterprise State Junior College, and Wallace 
Community College.

2. The conflict of interest provision included in the RFP addresses 
potential conflicts of interest of contractor employees, not those of 
the contractor itself, and is thus insufficient to comply with FAR 
subpart 9.5.  Aetna Gov't Health Plans, Inc.; Found. Health Fed. 
Servs., Inc., supra, at 16.