TITLE: B-310100, VRC, Inc., November 2, 2007
BNUMBER: B-310100
DATE: November 2, 2007
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B-310100, VRC, Inc., November 2, 2007

   DOCUMENT FOR PUBLIC RELEASE
   The decision issued on the date below was subject to a GAO Protective
   Order. This redacted version has been approved for public release.

   Decision

   Matter of: VRC, Inc.

   File: B-310100

   Date: November 2, 2007

   Bryant S. Banes, Esq., and Sean D. Forbes, Esq., Neel, Hooper & Banes, PC,
   for the protester.

   Capt. Marlin D. Paschal, Department of the Army, for the agency.

   Kenneth Kilgour, Esq., and Christine S. Melody, Esq., Office of the
   General Counsel, GAO, participated in the preparation of the decision.

   DIGEST

   Protest that contracting agency should not have disqualified the protester
   because of an organizational conflict of interest (OCI) is denied where
   the agency reasonably found that an OCI existed based on the fact that an
   individual employed by a company with ownership ties to the protester was
   assigned to work in the agency's contracting office in connection with the
   procurement at issue.

   DECISION

   VRC, Inc. protests the rejection of its proposal under request for
   proposals (RFP) No. W9133L-07-R-0031, issued by the National Guard Bureau
   (NGB) for personnel services in support of the Joint Combined State
   Strategic Plan. VRC alleges that the agency improperly disqualified it
   based on an organizational conflict of interest (OCI).

   We deny the protest.

   BACKGROUND

   VRC is the incumbent contractor providing the services called for under
   the RFP. Military Personnel Services Corporation (MPSC) is a subcontractor
   to VRC on the incumbent contract and would continue in that role if VRC
   retained the contract. The sole owner of Taylor Consultants, Inc. (TCI)
   owns [DELETED] percent of the total issued and outstanding stock of MPSC.
   Protest at 2 n.1. TCI is a company currently under contract with NGB to
   provide personnel-related services and placed one of its employees in
   NGB's contracting division. That TCI employee was assigned to assist the
   contracting officer with this procurement and had direct access to source
   selection information unique to the procurement, including the source
   selection plan. Agency Report (AR), Memorandum of Law at 2. She also was
   expected to assist evaluators with evaluating competing offers.[1]

   On May 8, 2007, NGB issued the RFP, followed by two amendments, with a
   June 12 proposal due date. The RFP included the following language:

     Offerors are advised that employees of the firm identified below may
     serve as advisors to Source Selection Evaluation Board members in the
     source selection process. These individuals will be authorized access to
     only those portions of the proposal data and discussions that are
     necessary to enable them to perform their respective duties. Such firms
     are expressly prohibited from competing on the subject acquisition and
     from rating proposals or recommending a selection.
     Firm: Taylor Consultants, Inc.
     Contact Name: [TCI employee]

   RFP sect. L. para. 1.4. According to the protester, companies interested
   in competing under this solicitation began contacting TCI, requesting that
   TCI execute non-disclosure agreements with those companies because a TCI
   employee would be working on this procurement. The protester asserts that
   TCI then attempted, unsuccessfully, to contact the contracting officer.[2]

   On June 4, the contracting officer's supervisor, the Chief of the
   Operational Contracting Division, recused himself from all matters that
   might affect MPSC or its related companies. Prior to his recusal, the
   Chief spoke with the owner of TCI and expressed his "opinion that [the
   relationship between TCI, MPSC, and VCR] should not lead to an OCI." AR,
   Tab E, Decl. of Chief of Operational Contracting Division at 1. The
   protester asserts that the Chief "approved TCI's measures designed to
   mitigate any perceived conflict." Protest at 3. The Chief states, however,
   that he does not recall seeing a written mitigation plan and that the
   agency has no record of a mitigation plan having been submitted, let alone
   reviewed and approved, AR, Tab E, Decl. of Chief of Operational
   Contracting Division at 2; the protester has offered no record of any such
   plan.

   Five proposals, including the protester's, were received on the due date.
   The agency's intent was to make a single award to the offeror whose
   proposal represented the best value to the government.

   Two days after receipt of proposals, on June 14, the contracting officer
   learned of the relationship between TCI, MPSC, and VRC and removed the TCI
   employee from further work on this procurement. By letter dated June 19,
   the contracting officer provided notice to VRC that the contracting
   officer was considering rejecting VRC's proposal due to a conflict of
   interest and invited VRC's response. The protester responded by letter
   dated June 21; the contracting officer considered the response inadequate
   and rejected the protester's proposal on July 21.

   DISCUSSION

   The protester alleges that there was no OCI here and that the agency
   improperly rejected its proposal.

   The Federal Acquisition Regulation (FAR) states that an "organizational
   conflict of interest may result when factors create an actual or potential
   conflict of interest on an instant contract." FAR sect. 9.502(c).
   Contracting officers are to avoid, neutralize or mitigate potential
   significant conflicts of interest so as to prevent unfair competitive
   advantage or the existence of conflicting roles that might impair a
   contractor's objectivity. FAR sections 9.504, 9.505; Snell Enters., Inc.,
   B-290113, B-290113.2, June 10, 2002, 2002 CPD para. 115 at 3. Contracting
   officers must exercise "common sense, good judgment, and sound discretion"
   in assessing whether a potential conflict exists. FAR sect. 9.505. 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. Science Applications Int'l Corp., B-293601.5,
   Sept. 21, 2004, 2004 CPD para. 201 at 4.

   The situations in which OCIs arise, as addressed in FAR subpart 9.5 and
   the decisions of our Office, can be broadly categorized into three groups:
   "unequal access to information" cases; "biased ground rules" cases; and
   "impaired objectivity" cases. See Aetna Gov't Health Plans, Inc.;
   Foundation Health Fed. Servs., Inc., B-254397.15 et al., July 27, 1995,
   95-2 CPD para. 129 at 12-13. This protest concerns the first type, unequal
   access to information.

   The record shows that an employee of TCI had access to source selection
   information, including the independent government estimate, the source
   selection plan, and other offerors' proposals. The owner of TCI, as noted,
   owns [DELETED] percent of the stock of MPSC, Protest at 2 n.1, a
   subcontractor of VRC under the current contract and a proposed
   subcontractor under the current solicitation. In our view, these
   relationships, considered together, indicate that VRC was in a position to
   benefit competitively as a result of the TCI employee's position in NGB's
   contracting office, which gave her access to source selection information
   regarding this procurement. Contracting agencies are admonished to avoid
   any conflict of interest, even the appearance of a conflict of interest,
   in government procurements, FAR sect. 3.101-1; see Lancaster & Co.,
   B-254418, Dec. 14, 1993, 93-2 CPD para. 319; on the record here, we find
   reasonable the agency's conclusion that VRC had a conflict of interest.

   The protester asserts that, regardless of the business relationships among
   the three companies, the Chief of the Operational Contracting Division
   (the contracting officer's supervisor) had the authority to decide whether
   the relationships in question constituted an OCI, and the agency was bound
   by the Chief's opinion that they posed no conflict of interest. We
   disagree. With regard to conflicts of interest, the FAR assigns certain
   duties and responsibilities specifically to the contracting officer, some
   of which are noted above. The FAR, without exception, places
   responsibility for determining the existence of an OCI on the contracting
   officer and makes no provision for the contracting officer to delegate her
   authority. Here, the contracting officer simply exercised her authority
   under the FAR, notwithstanding the Chief's apparent view of the matter.[3]

   The protester also asserts that there was no conflict of interest because
   the agency has not shown "hard facts," that is, that VRC was in possession
   of source selection information as a result of the TCI's employee's work
   for the agency. We disagree. It is true that a determination to exclude an
   offeror must be based on facts, rather than mere suspicion. Clement Int'l
   Corp., B-255304.2, Apr. 5, 1994, 94-1 CPD para. 228 at 4; see also CACI,
   Inc.-Fed. v. United States, 719 F.2d 1567 (Fed.Cir. 1983). The facts that
   are required, however, are those which establish the existence of the OCI,
   not the specific impact of the conflict. Aetna Gov't Health Plans, Inc.;
   Foundation Health Fed. Servs., Inc., supra, at 18. Once the facts
   establishing the existence of an OCI are present, reasonable steps to
   avoid, mitigate, or neutralize the conflict are required without further
   need for "hard facts" to prove the conflict's impact on the competition.
   Where, as here, the facts demonstrate that an OCI exists, the harm from
   that conflict, unless it is avoided or adequately mitigated, is presumed
   to occur. Id.

   The protester asserts that it had measures in place, in the form of
   "firewall arrangements" between the TCI employee and TCI and between TCI
   and MPSC/VRC, that the contracting officer should have found sufficient to
   mitigate any OCI. Protest at 6-7. The contracting officer states that, had
   TCI made her aware of the ownership relationships earlier in the
   procurement process, mitigation of the potential conflict of interest
   might have been possible. AR, Contracting Officer's Statement of Facts
   at 4. Because the relationships were not brought to her attention until 2
   days after proposals had been received, the contracting officer saw no way
   to successfully mitigate the actual OCI and instead chose to avoid the OCI
   altogether by rejecting VRC's proposal. Again, we see no basis in the
   record to question the reasonableness of the contracting officer's
   decision.

   In sum, even the appearance of an unfair competitive advantage may
   compromise the integrity of the procurement process, thus justifying a
   contracting officer's decision to err, if at all, on the side of avoiding
   the appearance of a tainted competition. Lucent Techs. World Servs. Inc.,
   B-295462, Mar. 2, 2005, 2005 CPD para. 55 at 10. Here, the fact that an
   individual employed by TCI, a company with ownership ties to the
   protester, was assigned to work in the agency's contracting office,
   together with the fact that the agency was not notified of those ownership
   relationships until after receipt of proposals, created a conflict of
   interest that the contracting officer reasonably determined could only be
   avoided by rejecting the protester's proposal.[4]

   The protest is denied.

   Gary L. Kepplinger
   General Counsel

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

   [1] The protester asserts that the "only contact" between TCI and the TCI
   employee in NGB's contracting division has been that the employee receives
   her paycheck from TCI. Protest at 3. In addition to paying the employee,
   the protester states that if there were performance issues with this
   employee, TCI would counsel her. Id. at 2.

   [2] Besides this assertion, the record lacks any evidence that the
   protester or TCI attempted to contact the contracting officer. Indeed, the
   agency challenges that assertion, noting that, although the contracting
   officer and TCI's owner had communicated numerous times by e-mail, the
   protester has produced no e-mail messages suggesting that TCI attempted to
   contact the contracting officer by e-mail concerning the conflict of
   interest issue. The record shows that TCI's owner, in communications with
   the contracting officer, used an e-mail address of the subcontractor,
   MPSC.

   [3] In any event, it is well-settled that the government is not bound
   beyond the actual authority conferred upon its agents. Federal Crop Ins.
   Corp. v. Merril, 332 U.S. 380, 384 (1947); DBA Sys., Inc.--Recon.,
   B-212101, B-212101.2, Aug. 23, 1983, 83-2 CPD para. 244 at 1.

   [4] On August 14, the agency awarded a contract under the RFP to
   Engineering Systems Consultants, Inc. In its protest, VRC challenged the
   award without offering any elaboration. This unsupported challenge fails
   to state a valid basis of protest. See Bid Protest Regulations, 4 C.F.R.
   sect. 21.1(c)(4) and (f) (2007).