Air Force Procurement: Protests Challenging Role of Biased	 
Official Sustained (14-APR-05, GAO-05-436T).			 
                                                                 
Darlene Druyun, a former high-ranking Air Force procurement	 
official convicted of violating a post-employment statute,	 
admitted to bias in favor of The Boeing Company on various	 
procurements. GAO subsequently received protests from other firms
challenging the alleged improper influence of Mrs. Druyun	 
regarding contracts awarded by the Air Force under the small	 
diameter bomb program and the C-130 avionics modernization	 
upgrade program. The Competition in Contracting Act of 1984	 
provides statutory authority for GAO's bid protest function.	 
Consistent with standard practices, GAO reviewed all available	 
documentation, held hearings to receive testimony from witnesses,
considered arguments from all interested parties, and issued	 
decisions on each of the protests.				 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-05-436T					        
    ACCNO:   A19516						        
  TITLE:     Air Force Procurement: Protests Challenging Role of      
Biased Official Sustained					 
     DATE:   04/14/2005 
  SUBJECT:   Accountability					 
	     Air Force procurement				 
	     Bias in procurement				 
	     Bid protests					 
	     Conflict of interests				 
	     Evaluation criteria				 
	     Federal regulations				 
	     Legal opinions					 
	     Malfeasance					 
	     Procurement records				 
	     Air Force Small Diameter Bomb			 
	     C-130 Aircraft					 
	     Hercules Aircraft					 
	     KC-767A Aircraft					 

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GAO-05-436T

United States Government Accountability Office

GAO Testimony

Before the Subcommittee on Airland,
Committee on Armed Services,
U. S. Senate

For Release on Delivery

Expected at 2:00 p.m. EDT AIR FORCE

Thursday, April 14, 2005

PROCUREMENT

             Protests Challenging Role of Biased Official Sustained

Statement of Daniel I. Gordon, Managing Associate General Counsel for
Procurement Law

GAO-05-436T

April 14, 2005

AIR FORCE PROCUREMENT
Protests Challenging Role of Biased Official
Sustained

[IMG]

  What GAO Found

The Federal Acquisition Regulation (FAR) provides that government business
shall be conducted in a manner above reproach and, except as authorized by
statute or regulation, with complete impartiality and with preferential
treatment for none. The documents supporting Mrs. Druyun's criminal
conviction establish that she was biased in favor of Boeing. Where, as
here, the record establishes that a procurement official was biased in
favor of one offeror, the need to maintain the integrity of the
procurement process requires that GAO sustain the protests unless there is
compelling evidence that the bias did not prejudice the protesters.

In light of the admission by Mrs. Druyun that she was biased in favor of
Boeing, we sustained the protests challenging the C-130 contract award and
the protest challenging the small diameter bomb because the Air Force
failed to show that her bias did not affect the contract award decisions,
or otherwise prejudice the protesters.

In the case of the C-130, the record established that Mrs. Druyun
functioned as the lead procurement official throughout the procurement.
GAO rejected the Air Force's assertion that there was no evidence that
Mrs. Druyun influenced the source selection evaluation team. Similarly, in
light of the failure to treat offerors fairly during contract
negotiations, GAO rejected the Air Force's assertion that the evaluation
process had been conducted properly. Finally, because (1) the contracting
officer directed the evaluators to destroy portions of the evaluation
record, (2) the agency failed to have meaningful discussions with all of
the offerors, and (3) the evidence showed Druyun's biased influence
throughout the source selection process, GAO could not reasonably
determine which of the four proposals should have been selected for award.
The record therefore failed to establish that any one of the protesters
was not prejudiced as a result of the various procurement flaws.
Accordingly, GAO sustained the C-130 protests.

In the case of the small diameter bomb protest, the position of the Air
Force was that the protester was not prejudiced by Mrs. Druyun's
acknowledged bias in favor of Boeing because she "did not play a
significant role" in the decision to change technical requirements.
Contrary to the position of the Air Force, however, the record showed that
Mrs. Druyun was significantly involved in the decisionmaking process that
culminated in changes to technical requirements and the deletion of
related evaluation criteria. In light of Mrs. Druyun's acknowledged bias
in favor of Boeing and GAO's conclusion that she was materially involved
in the decisionmaking process, GAO concluded that the record failed to
establish that Druyun's bias did not prejudice the protester. Accordingly,
GAO sustained the protest.

                 United States Government Accountability Office

Mr. Chairman and Members of the Subcommittee:

Thank you for the opportunity to be here today to discuss the bid protest
decisions recently issued by the Government Accountability Office (GAO) in
response to protests challenging the actions of the Air Force under two
programs-the C-130 avionics modernization upgrade (AMP) program and the
small diameter bomb program. The protests were based on information
disclosed by Darlene Druyun, formerly the Air Force's Principal Deputy
Assistant Secretary for Acquisition, in connection with her October 2004
criminal conviction for violation of the statutory conflict of interest
provisions codified at 18 U.S. C. S: 208(a) (2000).

The Competition in Contracting Act of 1984 (CICA) provides statutory
authority for GAO's bid protest function. GAO has issued implementing
regulations establishing the procedural framework for our bid protest
forum in Title 4, Part 21, of the Code of Federal Regulations. GAO
provides an objective, independent, and impartial forum for the resolution
of disputes concerning the awards of federal contracts. Our procedures
provide all interested parties-the protester, the awardee and the
contracting agency-an opportunity to present their positions prior to
GAO's resolution of the protest.

GAO's bid protest decisions differ from the reports GAO issues in
connection with its program audits and reviews. In this regard, our
protest decisions do not address broad programmatic issues such as whether
or not a weapons program is being managed effectively or consistent with
best practices; instead, our bid protest decisions address specific
allegations raised by unsuccessful offerors challenging particular
procurement actions as contrary to procurement laws and regulations. Our
protest decisions are necessarily limited to the record as we developed
it, largely shaped by the allegations raised by the protesters and the
responses but forward by the agency and awardee.

With that background, my testimony today will summarize our two recently
issued decisions concerning allegations of improper influence by Darlene
Druyun. Our testimony is based on the public version of our decisions. A
limited amount of information that is proprietary to the protesters,
source selection sensitive, or law enforcement sensitive has been redacted
from these decisions, but none of the redacted information is critical to
understanding the decisions.

  The Protest Decision
  Regarding the
  C-130 Avionics
  Modernization
  Program (AMP)

                                   Background

As was widely publicized, in October 2004 Darleen Druyun pled guilty to
violating the conflict of interest provisions of 18 U.S.C. S: 208(a) based
on the fact that she engaged in employment negotiations with The Boeing
Company while she was negotiating on behalf of the Air Force for the lease
of 100 Boeing KC 767A tanker aircraft. In addition to her employment
negotiations, documents submitted by Druyun in connection with the
criminal proceedings establish that, in 2000, Druyun contacted Boeing
personnel to request that Boeing provide employment for both Druyun's
daughter and the daughter's boyfriend (who subsequently became Druyun's
son-in-law). In response to these requests, Boeing created a position for
Druyun's daughter and hired both her daughter and future son-in-law in the
fall of 2000. In the documents filed in the criminal proceedings, Druyun
further states that her decisions in matters affecting Boeing were
"influenced by her perceived indebtedness to Boeing for employing her
future son-in-law and daughter," and that with regard to the contract
awarded in the C-130 AMP procurement, "an objective selection authority
may not have selected Boeing."

Following Druyun's disclosures in October 2004, agency-level protests were
filed at the Air Force by the three offerors who unsuccessfully competed
for the C-130 contract: Lockheed Martin Aeronautics Company, L-3
Communications Integrated Systems, (the successor-in-interest to Raytheon
Company Aircraft Integration Systems), and BAE Systems Integrated Defense
Solutions, Inc. The Assistant Secretary of the Air Force for Acquisition
subsequently advised each of the protesters that "the Air Force is of the
opinion that the protest is more appropriately considered by the
Government Accountability Office," and that "the Air Force will not decide
the protest." Each of the companies subsequently filed protests with our
Office maintaining that Druyun's recently disclosed bias in favor of
Boeing, along with the information previously disclosed to the protesters
regarding the agency's purported bases for rejecting their proposals,
demonstrated that their proposals were not evaluated in a fair and
unbiased manner.

In response to the protests, the Air Force argued that notwithstanding
Druyun's acknowledged bias in favor of Boeing, the award to Boeing was
proper because "there is no evidence that Mrs. Druyun influenced the SSET
[source selection evaluation team]" and that, overall, "the evaluation
process was conducted properly and in accordance with the evaluation
criteria."

                               The Legal Standard

The Federal Acquisition Regulation (FAR), S: 3.101-1, provides that:

Government business shall be conducted in a manner above reproach and,
except as authorized by statute or regulation, with complete impartiality
and with preferential treatment for none. Transactions relating to the
expenditure of public funds require the highest degree of public trust and
an impeccable standard of conduct. The general rule is to avoid strictly
any conflict of interest or even the appearance of a conflict of interest
in Government-contractor relationships.

Where, as was the case here, the record establishes that a procurement
official was biased in favor of one offeror, we believe that the need to
maintain the integrity of the procurement process requires that we sustain
the protests unless the agency demonstrates that the bias did not affect
the contract award decision--in legal terms, that the bias did not
prejudice the protesters.

GAO's Review of the Record

As discussed above, the documents supporting Druyun's criminal conviction
establish that she was biased in favor of Boeing. In reviewing the protest
allegations, GAO conducted a 3-day hearing on the record during which
testimony was provided by nine government witnesses. The record developed
by GAO, including the hearing testimony, established the following key
points. First, Druyun functioned as the lead procurement official
throughout this procurement and employed a forceful management style. In
this particular procurement, she left no doubt about who was in control
from the outset. Before the evaluators had even completed their initial
proposal review, Druyun requested that they come to Washington, D.C. to
discuss the "status" of their evaluations; this meeting was subsequently
referred to as the "15 September massacre." From September 15, 2000
through the first request for final proposal revisions in February 2001,
Druyun had the evaluators come to Washington five times to brief her on
the ongoing evaluations; during these briefings, Druyun expressly or
implicitly directed multiple changes to the evaluators' ratings, many of

which favored Boeing. In our decision, we identify specific examples of
Druyun's directions regarding each of the offerors' proposals.

Also, the record shows that following the request for final proposal
revisions, but before the source selection process was complete, the
contracting officer sent an e-mail to a recipient list that included
virtually everyone involved in the source selection process, directing
that the recipients "clean up" and "delete" various portions of the
evaluation record. Specifically, this e-mail directed the recipients to
"delete any comments where evaluators/advisors have suggested ratings,"
explaining that "[i]f the rating doesn't match the suggestion, we have
protest fodder." The e-mail also specifically directed the evaluators to
"[d]elete any derogatory or exceedingly glowing comments."

The first round of final proposal revisions was submitted on March 2. On
March 9, the contracting officer reopened discussions and requested a
second round of proposal revisions. At the GAO hearing, the contracting
officer unambiguously testified that discussions were reopened to permit
Boeing to "take care of" a "problem" in its cost proposal, explaining
that, at that point, Boeing's proposal failed to comply with instructions
the agency had previously given the offerors. No substantive questions
were asked of any other offeror during these discussions. Nonetheless,
during the GAO hearing, agency witnesses identified specific aspects of
the protesters' final proposals that should have been brought to their
attention, including aspects of the protesters' proposals that appear very
similar to the "problem" Boeing was permitted to "take care of."

The second round of final proposal revisions was submitted on March 19.
Thereafter, the source selection evaluation team briefed Druyun on the
evaluations of final proposals. During this briefing the cost team was
directed to review their analysis to "assure its accuracy." Upon receiving
that direction, the cost team reduced Boeing's evaluated price and
increased Lockheed's evaluated price. Additionally, in a subsequent
meeting with Druyun, the source selection evaluation team described a
specific approach to performance that Boeing had proposed as one "which
tends to induce problems." Druyun directed that this description be
crossed out of the evaluation record and replaced with the words: "Boeing
will work out details post award."

Based on the record discussed above, we rejected the Air Force's assertion
that there was no evidence that Mrs. Druyun influenced the source
selection evaluation team. Similarly, in light of the failure to treat
offerors fairly regarding discussions, we rejected the Air Force's
assertion that the

evaluation process had been conducted properly. Finally, because the
contracting officer directed the evaluators to destroy various portions of
the evaluation record and the agency failed to conduct meaningful
discussions with all of the offerors, along with the evidence of Druyun's
influence throughout the source selection process, we could not reasonably
determine which of the four proposals should have been selected for award.
We concluded that the record failed to establish that any one of the
protesters was not prejudiced by the various procurement flaws.
Accordingly, we sustained the protests.

                                 Recommendation

Ordinarily, where our Office finds fundamental flaws in an agency
procurement, we will recommend that the agency reopen negotiations with
all competitive range offerors, conduct meaningful discussions, request
final revised proposals, and evaluate those proposals in a fair and
unbiased manner. Here, however, the contract was awarded more than 3 years
ago, and performance has been ongoing since that time. In the course of
developing the protest record, the Air Force reported that while
recompetition of the installation phase of the contract is feasible,
recompetition of the entire contract would not be in the best interests of
the taxpayer or consistent with national security concerns.

Based on the Air Force's acknowledgment that recompetition of the
installation phase of the contract was feasible, we recommended that the
agency recompete those requirements. In light of the broader concerns
raised by the Air Force, we were reluctant to recommend recompetition of
the entire contract effort. Nonetheless, we had some concern that the Air
Force's position regarding recompetition of the entire effort was forged
in the heat of litigation, and may not reflect a completely objective
review. Accordingly, we recommended that the agency conduct and document a
thorough analysis of the competing concerns and provide that analysis to
our Office. In the event the agency ultimately determines that the broader
concerns preclude recompetition of the entire contract effort, we
recommended that each of the protesters be reimbursed the costs incurred
in preparing and submitting their proposals. We also recommended that the
protesters be reimbursed for their costs of filing and pursuing the
protests.

  The Protest Decision Regarding the Small Diameter Bomb

We turn now to the Air Force's award of a contract to Boeing under the
small diameter bomb program. Lockheed Martin Corporation was the only
competitor for this effort, and following the October 2004 disclosure of
Druyun's bias, filed a protest alleging that Druyun improperly manipulated
certain program requirements and the related evaluation factors in a
manner that favored Boeing.

In addition to Druyun's feeling of "indebtedness" to Boeing due to
Boeing's employment of her daughter and future son-in-law, the record we
developed, which included a hearing at GAO during which five government
witnesses and one Lockheed Martin witness testified, established the
following key points. The small diameter bomb program initially
contemplated an evaluation of offerors' capabilities against both fixed
and moving targets; early in the procurement process (during the first few
months of 2002), Lockheed Martin was perceived as having a "strength" with
regard to the moving target requirements and Boeing was considered "weak"
in this area; in May 2002, most of the requirements associated with moving
targets and the associated evaluation factors were deleted; thereafter,
Boeing was selected for award without consideration of its capabilities
regarding the deleted moving target requirements. At the time our decision
was issued, the Air Force was in the process of adding the previously
deleted requirements to Boeing's contract on a sole-source basis.

The Agency's Position and GAO's Conclusion

In responding to Lockheed's protest, the Air Force maintained that Druyun
"did not play any significant role" in the decision to change the small
diameter bomb's technical requirements and, therefore, Lockheed was not
prejudiced by Druyun's acknowledged bias in favor of Boeing.

Contrary to the agency's assertion, the contemporaneous record established
that Druyun was significantly involved in the decisionmaking process that
culminated in the May 2002 changes to the technical requirements and
deletion of the related evaluation criteria. As discussed in our decision,
Druyun was the de facto lead acquisition official during the period in
which the changes were made. In that capacity, she received briefings from
the competing offerors, directed the source selection evaluation team to
perform various activities, directed an independent technical review of
Lockheed Martin's technology applicable to moving targets, was directly
involved in other changes made to the requirements for fixed targets, and
contacted Raytheon to request that Raytheon communicate with Boeing.
Following Druyun's contact, Raytheon

provided support to Boeing in its efforts to meet the small diameter bomb
requirements.

On the basis of our review of the protest record, we rejected the Air
Force's assertion that Druyun was not materially involved in the process
culminating in the May 2002 changes to the technical requirements.

The Legal Standard and Conclusion

As discussed above, the FAR provides that procuring agencies must strictly
avoid conflicts of interest or even the appearance of conflicts in
Government-contractor relationships and, where, as here, the record
establishes that a procurement official was biased in favor of one
offeror, the need to maintain the integrity of the procurement process
requires that we sustain the protest unless the agency demonstrates that
the bias did not prejudice the protester.

In light of Druyun's acknowledged bias in favor of Boeing and our
determination that she was materially involved in the decisionmaking
process culminating in deletion of the moving target requirements, along
with the fact that Lockeed Martin was perceived as having a "strength" and
that Boeing was "weak" regarding the deleted requirements, we concluded
that the record failed to establish that Druyun's bias did not prejudice
the protester. Accordingly, we sustained the protest.

                               Our Recommendation

At the time our decision was issued, the Air Force had not yet amended
Boeing's contract to add the previously deleted requirements regarding
moving targets. Accordingly, we recommended that the Air Force conduct a
competitive procurement to meet those requirements. Consistent with the
provisions of CICA, we also recommended that Lockheed Martin be reimbursed
its costs of filing and pursuing the protest.

Finally, Lockheed requested that we recommend reimbursement of the
proposal preparation costs Lockheed incurred in competing for the contract
awarded to Boeing. As discussed in our decision, we deferred ruling on
that request, pending the Air Force's review of certain concerns regarding
potential conflict of interest issues relating to a former Brigadier
General who, after leaving the Air Force, was involved in Lockheed's
proposal preparation efforts.

Mr. Chairman, this concludes our prepared statement. I would be happy to
respond to any questions regarding our bid protest decisions that you or
other Members of the Subcommittee may have.

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