Helping individuals, companies, and organizations understand key legal and practical considerations for promoting compliance and making better business decisions in these types of federal, state, and local government contracting matters MORE

For anyone who’s ever doubted or downplayed the importance of avoiding organizational conflicts of interest (OCIs), a recent settlement announced by the Department of Justice in Colorado should serve as a wake-up call.

Last month, the U.S. Attorney for the District of Colorado announced that Progressive Technology Federal Systems, Inc. (PTFS) and its President and CEO, John Yokley, had entered into a $110,000 settlement to resolve allegations of false claims. The allegations concerned a contract awarded to PTFS by the National Institutes of Health’s Information Technology Acquisition and Assessment Center (NITAAC). NITAAC administers three Government-Wide Acquisition Contracts (GWACs) for information technology (IT) regularly used by federal agencies to acquire information technology.

The subject contract was awarded by NITAAC on behalf of the Army and the Air Force. According to the United States, Mr. Yokley participated in preparing project specifications for a contemplated contract in 2014. When NITAAC issued a solicitation seeking proposals for that contract, PTFS responded with a proposal to take on the contract. Unfortunately, PTFS stated in its proposal that it had no OCI relating to the contract. This statement was false because it ignored the fact that Mr. Yokley had provided input on project specifications that were included in the solicitation and contract, which created a “biased ground rules” OCI under Federal acquisition Regulation (FAR) 9.505-2. In addition, the contract required security clearances, and PTFS falsely stated in its proposal that an individual who would participate in the project as a key “Subject Matter Expert” had an active Top Secret clearance.

Presumably in part because of these proposal statements, PTFS was awarded the contract. But the real facts were discovered and NITAAC terminated the funding before PTFS could invoice more than $30,000.  The United States alleged that PTFS’ conduct violated the False Claims Act (FCA).

In entering into this civil settlement, PTFS and Mr. Yokley did not admit liability.  Under the agreement, however, PTFS paid $65,000, and Mr. Yokley paid $45,000, to resolve the allegations. It is important to remember that the settled claims are only allegations—and also that there is always another side of the story and often complicating factors.

Still, the case serves as an important reminder that OCI issues should not be taken lightly by contractors because they are taken very seriously by the Government. In addition to the United States Attorney’s Office, the National Reconnaissance Office’s Office of the Inspector General, Defense Criminal Investigative Services, and the Air Force Office of Special Investigations were all involved in uncovering and responding to the alleged FCA violation here. In order to avoid such an outcome, contractors should carefully consider all the relevant facts in light of the FAR OCI rules before they claim in a proposal that no OCI exists.