Should the Kimono be Opened? – Organizational Conflicts of Interest (OCI) Best Practices

FAR Part 9.504 requires contracting officers (CO’s) to identify and evaluate potential OCI’s early in the process, but puts no time pressure (other than the award deadline) on the need to resolve (i.e., avoid, neutralize, or mitigate) significant organizational conflicts.   Following this timeline, CO’s will often require that proposals include relevant OCI-related information, including mitigation plans, and then defer consideration and resolution of an offeror’s potential OCI until (and unless) the offeror’s proposal is found to offer the “best value.”

There are understandable reasons for this procrastination.  First, the facts may not be known initially (and may evolve, especially if the statement of work is amended).  Second, a CO’s plate is always full; where will they find the time to address potential OCI’s that won’t even ripen unless the offeror is chosen for award?  Third, why provoke a potential pre-award protest by excluding an offeror who would not have received the award anyway.

I want to argue for two best practices that go in a contrary direction:  First, I believe it is in all parties’ interest to resolve (not just identify) OCI’s early in the process to the greatest extent possible, particularly when the OCI cannot be mitigated and the offeror must be excluded.  Second, I believe it is in everybody’s interest to publish OCI determinations (subject to protection of proprietary information) in the RFP or otherwise as early as possible.

1.            Why spend time resolving issues that may never become “ripe”?

Several factors may outweigh the CO’s understandable workload concern.  First, early attention will provide the most flexibility to resolve an OCI.  There may be a need for multiple back-and-forth communications and plan reviews between the offeror and the agency, and time may be needed to develop a satisfactory plan – e.g., a mitigation plan that involves the possible corporate divestiture will require careful planning and multi-party discussions.  Second, early resolution will let the offeror know whether it will ultimately be considered eligible for award and allow it to make a sensible bid/no-bid decision before it incurs unrecoverable bid and proposal costs.  It benefits no one for a contractor to incur costs that later prove to be pointless (and for the government to pay a portion of those unnecessary costs in higher indirect rates).  Instead, the excluded offeror can concentrate on competitions for which it has a chance of award.

Ah, but will excluding an offeror provoke a pre-award protest?  Perhaps, but a protest is far less likely if the contractor has not yet “invested” in the program.  A contractor told early in the process that it has an unmitigatable OCI may try to persuade the agency otherwise, but if it fails it will likely walk away and look elsewhere for new opportunities.  In fact, it may conclude that “the agency didn’t really want us; if they did, they would figure out a way to mitigate the potential OCI.  So the agency did us a favor by giving us this message.”  In contrast, the contractor who is excluded only after sinking hundreds of thousands of dollars into B&P, and whose sales and management leadership may have significant political capital riding on the procurement, will have less to lose and will be more likely to file a protest.  It is not irrelevant that protests by excluded offerors constitute less than 10 percent of all reported GAO OCI protests.

2.            Why open the kimono in the RFP?

Sometimes, early in the process, an agency will make a decision that a particular offeror (or class of offerors) does not have a disqualifying OCI, or that any OCI’s can be satisfactorily mitigated.  If this decision relates to a contractor known by its competitors to be heavily involved in agency contracts, I believe it will benefit everyone for the agency to publish this decision in the RFP.

Why?  Because it will flush out the competition, and give their objections time to be resolved.  Perhaps a competitor will disclose facts of which the agency was unaware, or raise issues that the agency has not considered.  Isn’t it better for the agency to learn those facts and consider those issues early, rather than after it makes a challengeable award?  Or, perhaps, the agency will remain un-persuaded by the competitor’s arguments.  If so, the agency still benefits from hearing and responding to them.  Even if the competitor continues to believe that the OCI issue is a problem – and it is possible that it will be persuaded otherwise – the competitor should respect that the agency has given the issue serious consideration.

But couldn’t this disclosure provoke a pre-award protest?  Sure, but not likely.  A competitor who understands that the agency has given the issue reasonable consideration is not likely to challenge it in an adversary process, particularly pre-award.  Offerors who are in a competition do not lightly file pre-award protests that might “rock the boat,” fearing that any victory might be Pyrrhic because it would alienate the customer agency.

Worst case – the competitor files a pre-award protest, which is far less disruptive and burdensome than the post-award protest that the competitor would almost certainly have filed if award were made to the challenged company.

Oh – that’s the final benefit.  Disclosing the relevant facts during the procurement will make a post-award protest untimely!

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