Axiom Resource Mgt. Inc. v. The United States (Sept. 28,2007)
The federal government’s increased use of and dependence on outside contractors to perform essential government functions, often entails providing these contractors with governmental, business proprietary, and otherwise private information to perform their duties. This has increased potential and actual conflicts of interest regarding how, and the extent to which, such information is utilized in performing contract services and otherwise. See Ralph C. Nash, Organizational Conflicts of Interest: An Increasing Problem, 20 No. 5 NASH & CIBINIC REPORT ¶ 24 (May 2006). Establishing the parameters of access to and use of this information will be among the most important decisions that the United States Court of Federal Claims and the United States Court of Appeals for the Federal Circuit will make in the next few years – not only for government contract jurisprudence, but to maintain competition in this growing segment of the economy. FAR § 9.504(e) provides the Contracting Officer with no specific guidance about “what type of solicitation restraints are appropriate. Basically, COs are left to figure it out for themselves.” Ralph C. Nash, Conflicts of Interest: The Guidance in the FAR, 15 No. 1 NASH & CIBINIC REPORT ¶ 5 (Jan. 2001). Axiom had filed 3 GAO protests which were all dismissed. They subsequently filed this complaint in the U.S. Ct. of Federal Claims alleging that the Army violated FAR 9.5 by not appreciating the nature of the OCI and relying on Lockheed’s mitigation plan for the CO’s decision. The U.S. Ct. of Federal Claims has jurisdiction to review both pre-award and post-award bid protests pursuant to 28 U.S.C. § 1491(b), enacted as part of the Administrative Dispute Resolution Act of 1996. Axiom met the 2 prong test for filing this claim in the Ct. of Federal Claims (1) that it is an interested party and (2) that is had a direct economic interest in the procurement. The U.S. Ct. of Appeals for the Federal Circuit, however, has held that a protestor can establish prejudice by showing a “substantial chance” that it would have received the award, if the alleged error was corrected. See Bannum, Inc. v. United States, 404 F.3d 1346, 1353 (Fed. Cir. 2005) The CO has the responsibility to identify and evaluate potential COI as early as possible in the acquisition process. Here, the CO did not do so. An organizational conflict of interest may result when factors create an actual or potential conflict of interest on an instant contract, or when the nature of the work to be performed on the instant contract creates an actual or potential conflict of interest on a future acquisition. In the latter case, some restrictions on future activities of the contractor may be required. 48 C.F.R. § 9.502(c). Relying on the Contractor’s OCI assessment in and of itself was also not sufficient. The Ct. also determined that the remedy to split up the work was also not an appropriate mitigation. The FAR specifies that the CO “shall award the contract to the apparent successful offeror unless a conflict of interest is determined to exist that cannot be avoided or mitigated.” 48 C.F.R. § 9.504(e). Therefore, whichever offeror has the superior proposal, based on all factors, should be awarded the contract, unless an OCI cannot be mitigated. [Note - see Keith R. Szeliga, Conflict an 26 d Intrigue in Government Contracts: A Guide to Identifying and Mitigating Organizational Conflicts of Interest, 35 PUB. CONT. L.J. 639, 667-68 (2006) (“‘Impaired objectivity’ OCIs often can be mitigated by recusal of the contractor that possesses the OCI, with the most effective recusal strategies incorporating mechanisms for detecting the OCI in advance so that the work is not assigned to the conflicted contractor.”)]. The Ct. determined that the CO abused his discretion in violation of FAR9.5 by awarding the Task Order to Lockheed Martin, without developing a mitigation plan that does not afford Lockheed Martin any significant competitive advantage. Plaintiff’s July 25, 2007 Motion for Summary Judgment on the Administrative Record was denied. The Ct. thereby requested review by the Bureau of Competition of the Federal Trade Commission on the issued herein as amicus curiae on or before Dec. 15, 2007, after which time the Ct. will issue a Memorandum Opinion and Final Order as to whether a permanent injunction should be entered and the scope thereof.