TITLE:  Science Applications International Corporation, B-293601.5, September 21, 2004
BNUMBER:  B-293601.5
DATE:  September 21, 2004
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   Decision

   Matter of:   Science Applications International Corporation

   File:            B-293601.5

   Date:              September 21, 2004

   James J. McCullough, Esq., Deneen J. Melander, Esq., Steven A. Alerding,
Esq., and Abram J. Pafford, Esq., Fried, Frank, Harris, Shriver &
Jacobson, for the protester.

   Thomas L. McGovern, III, Esq., Michael J. Vernick, Esq., and Todd R.
Overman, Esq., Hogan & Hartson, for Lockheed Martin Services, Inc., an
intervenor.

   Jonathan S. Baker, Esq., Environmental Protection Agency, for the agency.

   Glenn G. Wolcott, Esq., and Michael R. Golden, Esq., Office of the General
Counsel, GAO, participated in the preparation of the decision.

   DIGEST

   Where agency previously failed to give any consideration to potential
conflicts of interest between awardee's performance of contract
requirements and awardee's involvement in environmentally-regulated
activities, agency's corrective actions adequately remedy prior
procurement flaws where agency has reviewed additional information
regarding the ongoing, environmentally-regulated activities of the
awardee, has considered that information in the context of the scope of
work reasonably contemplated under this contract, and has procedures in
place for the agency's independent assessment of potential conflicts
between each task order's requirements and the awardee's ongoing
activities.

   DECISION

   Science Applications International Corporation (SAIC) protests the
corrective action taken by the U.S. Environmental Protection Agency (EPA)
in response to this Office's decision in Science Applications Int'l Corp.,
B-293601 et al., May 3, 2004, 2004 CPD P 96, wherein we sustained SAIC's
earlier protest challenging the award of a contract to Lockheed Martin
Services, Inc. pursuant to request for proposals (RFP) No. PR-HQ-02-11750.
SAIC protests that the agency's corrective actions are insufficient to
address the procurement flaws identified in our earlier decision.

   We deny the protest.

   BACKGROUND

   The solicitation at issue here was released in May 2003 and sought
proposals to provide various systems engineering services to be performed
in identified "task areas."[1]  The solicitation identified various cost
and non-cost evaluation factors, and provided that award would be based on
the proposal offering the best value to the government.  As part of the
non-cost evaluation factors, offerors were required to submit a "corporate
conflict of interest plan" to be evaluated on a pass/fail basis, but were
advised that such plans need not be "contract or program specific." 
RFPA atA Ma**4.

   Proposals were submitted by five offerors, including Lockheed Martin and
SAIC.      Based on the agency's evaluation of cost and non-cost factors,
Lockheed Martin's proposal was selected for award in January 2004. 
Thereafter, SAIC filed a protest with our Office.[2]  Among other things,
SAIC's protest challenged the award decision on the basis that the agency
failed to properly consider potential organizational conflicts of
interests created by the involvement of Lockheed Martin affiliates in
performing various activities, nationwide, that are subject to
environmental regulations.[3] 

   In defending against SAIC's earlier protest, the agency maintained that it
had no obligation to--and that it did not--consider the impact that the
environmentally-regulated activities of Lockheed Martin or its affiliates
could have on Lockheed Martin's performance of this contract.  The agency
maintained that it gave no consideration to such activities because "this
procurement is for computer support/systems engineering services, not
enforcement or regulatory advice."  Agency Post-Hearing Brief at 2. 
However, during the hearing conducted by this Office in connection with
SAIC's earlier protest, SAIC established that, in at least a few
instances, performance of the prior contract had required SAIC to perform
tasks that could create conflicts of interest for a contractor involved in
activities subject to environmental regulations.[4]  Although the agency
questioned the quantity and relative significance of such work under the
prior contract, there was no dispute that at least a portion of the task
orders issued under the prior contract involved work that could create
conflicts of interest for Lockheed Martin.[5] 

   Since the record was clear that the agency had given no consideration to
the ongoing environmentally-regulated activities of Lockheed Martin or its
affiliates and, similarly, that the agency had given no consideration to
the impact such activities could have on Lockheed Martin's judgment and
objectivity in performing certain tasks that had been required under the
predecessor contract and appeared to be within the scope of the current
contract, we sustained the earlier protest and recommended that the agency
perform a thorough assessment of Lockheed Martin's
environmentally-regulated activities in the context of the entire scope of
work to be performed under this contract. 

   In response to our decision, the agency requested, received and considered
additional information regarding Lockheed Martin's past and ongoing
environmentally-regulated activities.  Thereafter, the agency performed
and documented an analysis regarding whether such activities would
reasonably affect the objectivity with which Lockheed Martin will perform
the work contemplated by this contract.  In a memorandum dated June 9,
2004, the agency summarized the additional information it had considered
and concluded:  "[I]t has been determined that no actual or potential
conflicts of interest exist due to Lockheed Martin's
environmentally-regulated activities in the context of the entire scope of
work to be performed under [this contract]."  Agency Report, Tab 9,
Conflict of Interest Analysis Memorandum, atA 2.  Despite the agency's
assertion that "no . . . potential conflicts of interest exist," the
agency's analysis, nonetheless, provides that, prior to issuing any task
order under this contract, the agency's project officer will "ascertain
that no [conflicts of interest] exist within the assigned tasks, or that
adequate mitigation strategies are in place and have been discussed with
the contracting officer."  Id. at 8. 

   By letter to our Office dated June 10, with a copy to SAIC's counsel, the
agency stated that, as a result of its analysis and conclusions, it was
proceeding with contract performance by Lockheed Martin.  This protest
followed.  

   DISCUSSION

   SAIC's protest first challenges the agency's determination that "no actual
or potential conflicts of interest exist due to Lockheed Martin's
environmentally-regulated activities."  SAIC notes that Lockheed Martin
affiliates are involved in various environmentally-regulated activities
across the country and, in light of the undisputed record established
during the prior protest that at least a limited amount of work performed
under the prior contract could create conflicts of interest for a
contractor involved in widespread environmentally-regulated activities,
the agency's assertion that "no . . . potential conflicts of interest
exist" is unreasonable.  

   Although it is clear that Lockheed Martin affiliates are involved in
widespread environmentally-regulated activities, it is also clear that a
significant majority of the tasks reasonably contemplated under this
contract have no potential to create conflicts of interest.  As noted in
our prior decision, the significant majority of work reasonably
contemplated under this contract relates to "administrative" systems
engineering services related to payroll, personnel, and grants
management. 

   In our prior decision we sustained SAIC's protest since it was clear the
agency gave no consideration to potential conflicts of interest--despite
the fact that some of the work performed under the prior contract
presented potential conflict of interest concerns. 

   Contracting officers are required to identify potential conflicts of
interest as early in the acquisition process as possible, and to avoid,
neutralize or mitigate such conflicts to prevent the existence of
conflicting roles that might impair a contractor's objectivity. 
Contracting officers are to exercise "common sense, good judgment, and
sound discretion" in assessing whether a potential conflict exists and in
developing appropriate ways to resolve it; the primary responsibility for
determining whether a conflict is likely to arise, and the resulting
appropriate action, rests with the contracting agency.  Federal
Acquisition Regulation (FAR)A SA 9.505; RMG Sys., Ltd., Ba**281006, Dec.
18, 1998, 98-2 CPD P 153 at 4; Epoch Eng'g, Inc., B-276634, July 7, 1997,
97-2 CPD P 72 at 5.  Once an agency has given meaningful consideration to
potential conflicts of interest, our Office will not sustain a protest
challenging a determination in this area unless the determination is
unreasonable or unsupported by the record.  SRS Techs., B-258170.3, Feb.
21, 1995, 95-1 CPD PA 95A atA 9.

   Here, notwithstanding the agency's broad assertion that "no . . .
potential conflicts of interest exist," the record clearly demonstrates
that the agency recognizes the potential that conflicts may arise during
contract performance, and has in place procedures to safeguard against
such occurrences.  As noted above, the agency states that, prior to
issuing each task order under this contract, the agency project officer
will independently consider whether that task order's requirements create
a conflict of interest for Lockheed Martin.  Specifically, the project
officer will "[either] ascertain that no [conflicts of interest] exist
within the assigned tasks, or that adequate mitigation strategies are in
place and have been discussed with the contracting officer." [6]  Agency's
Conflict of Interest Analysis, June 9, 2004, at 8. 

   In summary, the record establishes that the agency has requested and
received information regarding Lockheed Martin's environmentally-regulated
activities, has reasonably considered that information in the context of
the solicitation's anticipated requirements, and has accepted
responsibility for performing an independent and ongoing assessment of
potential conflicts of interest each time a task order is issued.  On this
record, we deny SAIC's protest that the agency's corrective actions
regarding potential conflicts of interest were inadequate.[7] 

   Anthony H. Gamboa

   General Counsel

   ------------------------

   [1] The following task areas were listed in the solicitation:  systems
development, maintenance, and operation; application security support;
information technology architectural support; data management support;
training; statistical services; geographic information systems support;
high performance computing and visualization support; and scientific
application and computational science support. 

   [2] SAIC was the incumbent contractor.

   [3] There is no dispute that Lockheed Martin or its affiliates have
interests in multiple activities and facilities that are subject to state
and federal environmental regulations.  See, e.g., Lockheed Martin
Corporation 2003 Annual Report.

   [4] For example, under the task area "statistical surveys," SAIC had been
tasked with developing a series of questionnaires to elicit information
concerning the testing and sampling practices used by certain public
drinking water systems.  Similarly, in addressing this task area of the
solicitation, Lockheed Martin's proposal referenced Lockheed Martin's
experience with the design and implementation of surveys stating:  "We
[Lockheed Martin] [have] evaluated information collected from anglers
along a potentially contaminated river to determine long-term contaminant
ingestion and corresponding health effects."  Lockheed Martin Proposal, at
III.2-32.  At the hearing conducted by GAO in connection with the prior
protest, agency personnel acknowledged that it would be inappropriate for
Lockheed Martin to be tasked with conducting this type of survey under the
contract at issue if there were a Lockheed Martin production facility in
the area being surveyed.    

   [5] The contracting officer stated that the work under the current
contract is expected to be similar to that performed under SAIC's prior
contract.

   [6] In the context of the record as a whole, we understand that, rather
than categorically asserting that there is no potential for a conflict of
interest to arise, the agency's position is that, based on its
consideration of Lockheed Martin's ongoing environmentally-regulated
activities, it is unlikely that a conflict will arise and that the
agency's independent review process will identify such a conflict if and
when it is created by specific task order requirements. 

   [7]  In our prior decision we also noted various concerns regarding the
agency's evaluation of Lockheed Martin's proposed indirect rates,
including the fact that, although the contracting officer believed that
the Defense Contract Audit Agency (DCAA) had verified all of Lockheed
Martin's proposed rates, this was not the case.  In light of our
recommendation that the agency perform additional assessments regarding
potential conflicts of interest, we suggested that the agency also review
its earlier assessment of Lockheed Martin's proposed indirect costs.  In
response, the contracting officer personally contacted the cognizant DCAA
auditor, discussed each of Lockheed Martin's indirect rates with that
auditor--including the specific cost elements that DCAA had not previously
reviewed--and concluded that Lockheed Martin's proposed rates were
reasonable and realistic.  Although SAIC protests that the contracting
officer's independent review was insufficient, we disagree.  Based on  the
entire evaluation record, including the prior evaluation along with the
actions taken by the contracting officer in response to our decision, we
find no basis to question the agency's conclusion that Lockheed Martin's
proposed indirect rates are reasonable and realistic.