The Defense Health Agency publicly called out seven companies who are ineligible to bid on a $1.5 billion IT contract because those firms won a spot on a differ...
Concerns about organizational conflicts of interest among vendors providing, for instance, technology planning services and technology implementation services, is as old as federal acquisition itself.
But over the last few weeks, OCI has received more attention and consideration among agencies, and it should be seen as a warning sign to batten down those OCI hatches.
First, Senate Homeland Security and Governmental Affairs Committee members introduced the Preventing Organizational Conflicts of Interest in Federal Acquisition Act and it passed out of the full Senate on Aug. 2. The bill is a direct response about a potential OCI between McKinsey and Associates, drug development companies and the Food and Drug Administration — more on that later.
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A day later, the Defense Health Agency issued a notice under its Military Health System Enterprise Information Technology Geographic Service Provider (GSP) requirement that calls out seven companies who are conflicted out of bidding on the potential $1.5 billion contract.
Federal procurement experts and lawyers say a notice like this has rarely been seen publicly and gave DHA a lot of credit for taking these public steps.
The third example of an OCI issue impacting the federal acquisition community came Aug. 12 when the Government Accountability Office sustained a protest by Guidehouse over an award by the Secret Service and the Department of Homeland Security to Deloitte.
The $20 million task order through the OASIS vehicle run by the General Services Administration focused on CFO support services, including conducting budget and financial management operations.
Guidehouse alleged the Secret Service made several mistakes, but GAO upheld two of the complaints with the biggest one focused on OCI.
The three of these taken separately don’t really amount to much — a single piece of legislation that may not make it into law; a specific instance of a contract notice; and a random GAO decision.
But when you bring the different pieces together, it starts to create a picture of OCI issues gaining more attention across the federal sector.
“Companies that receive taxpayer dollars from federal contracts should not turn around and advise clients to take actions that are against the interests of the American people,” said Sen. Gary Peters (D-Minn.), chairman of the committee and one of the lead sponsors of the bill, in a statement. “This bipartisan, commonsense legislation will require federal contractors to disclose any potential conflicts of interest before they are awarded a federal contract to ensure they are effectively serving taxpayers.”
Rep. Carolyn Maloney (D-N.Y.), chairwoman of the Oversight and Reform Committee, introduced a companion bill in April. The committee approved a substitute amendment in July that matches the Senate’s version of the bill, clearing the way for a full vote by the House.
“Avoiding OCIs is particularly important for consulting contracts where government is paying for expert advice for sensitive matters,” Malone said during the July 14 markup. “This bill would make long overdue revisions to strengthen rules on OCIs. The rules on OCIs have not changed significantly since they were issued in the early 1990s despite many major changes in the government contracting landscape.”
Maloney added that the regulations across government vary and the bill would help bring some standardization to how agencies apply the tenets of OCI.
More specifically, the Preventing Organizational Conflicts of Interest in Federal Acquisition Act would require agencies to identify potential conflicts for specific contracts early in the process.
Federal contractors would have to disclose other business relationships with entities that conflict with the specific work that an agency has hired them to do and would also have to disclose new potential business that opposes ongoing services they are providing to agencies.
The legislation also would require federal agencies to assess and update their procedures for determining whether contractors could have a conflict of interest.
This just the latest attempt by Congress to address OCI challenges.
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The law firm Miller & Chevalier wrote in April about bids to improve how agencies deal with conflicts. The firm wrote that in 2007, the Advisory Acquisition Panel released a report that indicated that “the potential for OCIs has increased significantly in recent years” and “[t]he contracting community needs more expansive and detailed guidance for identifying, evaluating, and mitigating OCIs.”
Then in the 2009 Defense authorization bill, lawmakers called for the Federal Acquisition Regulations Council to review conflicts of interest rules and contract clauses. This led to a proposed rule to address OCI issues in 2011.
Miller & Chevalier said that proposed rule, was withdrawn in March 2021 based on the “amount of time that has passed since publication of the proposed rule and potential changed circumstances.”
Now despite this rule never coming to fruition, DHA took steps to get in front of any potential conflicts with his mega IT services contract.
The reason why DHA called out companies including Perspecta Enterprise Solutions, Capgemini Government Solutions, Guidehouse and Tenacity Solutions was the team won the $2 billion MHS Enterprise IT Services Integrator (EITSI) blanket purchase agreement (BPA), where they are providing program manager support services and working on the government side to help DHA manage the follow-on contracts for geographic service providers.
DHA says these companies would be conflicted out of bidding on any “work for the duration of the BPA and for 18 months after the final day of performance under the BPA or any call orders thereunder.”
For these companies, the OCI notice likely wasn’t surprising, but the fact DHA issued it publicly definitely raised some eyebrows in a good way.
The third piece to this puzzle came on Aug. 12 when GAO sustained Guidehouse’s protest.
The GAO lawyers didn’t hold back on just how poorly the Secret Service did in addressing potential OCI issues.
“First, the record reflects a fundamental misunderstanding on the part of the contracting officer regarding the legal standards related to impaired objectivity OCIs. Further, contrary to the arguments of agency counsel, the record reflects that the contracting officer did not in fact take a ‘close look,’ or carefully consider, whether Deloitte’s ability to render impartial advice to the agency under the CFO support services task order would be undermined by the firm’s competing interests under the TOPS/FRED task order,” GAO wrote. “The analysis demonstrates that the agency failed to give meaningful consideration to whether a significant organizational conflict of interest exists here.”
Deloitte also holds the TOPS/FRED task order, which is for financial data and reports that are utilized for the agency’s budget analysis and management functions and also for services such as program management; operations and production support; software and hardware performance; information system security officer support; system utilization/performance/improvement; software maintenance; training; and enhancements.
GAO found that the contracting officer’s failed to properly consider whether Deloitte could objectively do the work under the CFO Support Services contract given its work on TOPS/FRED.
“For purposes of an impaired objectivity OCI analysis, however, it is wholly irrelevant whether the two efforts are same or similar in scope or size; instead, what is relevant is whether the contractor would be in a position of reviewing its own work or otherwise unable to perform its obligations in an impartial manner. Consequently, we find the contracting officer improperly substituted similarity (or lack thereof) between the two efforts for a reasonable determination of whether Deloitte’s work on the CFO support services task order could be objectively performed in light of its work on the TOPS/FRED task order,” GAO wrote. “Additionally, the record does not support the agency’s assertion that the contracting officer conducted a detailed review of the requirements for the two efforts. To the contrary, the record reflects that the contracting officer’s assessment was limited to reviewing the top-level/overall objectives of the CFO support services without any analysis or consideration of the many hundreds of work activities required for the two efforts. Absent a consideration of these requirements here, the agency’s OCI analysis lacked a reasonable foundation.”
Those were pretty strong words from GAO.
While the bill is far from guaranteed to becoming law, the fact is Congress is paying more attention to OCI and that will have a trickledown effect on agencies and vendors alike. Given DHA’s notice and GAO’s most recent protest decision, it seems logical for agencies to ensure contracting officer under how best to determine OCI and for vendors to do more than say they have put up a “firewall.”
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