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When an agency makes an award to the incumbent, the disappointed offerors often believe that the incumbent’s performance of the previous contract must have given it an impermissible leg up on the competition in the form of an organizational conflict of interest (“OCI”). However, as the recent Government Accountability Office (“GAO”) decision in Lukos-VATC JV III, LLC, B-418427.9; B-418427.11 (December 22, 2020), makes clear, in and of themselves, the natural advantages of incumbency do not  constitute an impermissible OCI—and aspirational arguments to the contrary will be unavailing.

This protest involved the award of a contract for training support services to be provided in conjunction with the Special Operations Forces Requirements Analysis, Prototyping, Training, Operations and Rehearsal (SOF RAPTOR) IV requirement. The SOF RAPTOR IV contract would provide special operations forces (SOF) training for counter terrorism, counter narco-terrorism, counter proliferation and unconventional warfare missions using a mix of live, virtual, and constructive simulation scenarios.

The protester, Lukos VATC JV III, LLC (“Lukos”), was one of ten offerors, along with the awardee, F3EA, Inc. (“F3EA”). After taking corrective action in response to other protests of the initial award to F3EA, the agency reevaluated the proposals and again awarded to F3EA after finding F3EA’s proposal offered the highest technical rating and the lowest price of eligible offerors.

After requesting and receiving a debriefing, Lukos protested the decision, asserting among other things that an OCI rendered F3EA ineligible for award. More specifically, Lukos argued generally that F3EA has either an unequal access to information OCI or a biased ground rules OCI because F3EA allegedly wrote the performance work statement (“PWS”) for the predecessor RAPTOR III contract. According to Lukos, F3EA’s alleged creation of the earlier solicitation’s PWS put F3EA in a position to favor its own products or capabilities under the current requirement, thereby creating an unfair competitive advantage.

The agency’s response explained that the government itself prepared the PWSs under both the RAPTOR III and IV contracts. While F3EA was a member of the incumbent joint venture and was involved in helping to refine the customer’s needs on task orders performed under the RAPTOR III contract, F3EA did not author those requirements, and the agency purposefully and significantly changed the requirements when developing the RAPTOR IV requirements and so it denied the existence of an OCI. Lukos contended that the changes were insufficient to mitigate the OCI.

However, the GAO disagreed with the protester and found that absent “hard facts” to evidence preferential treatment or unfair action by the agency, it would uphold the agency’s reasonable consideration of F3EA’s situation and action to prepare the RAPTOR IV requirements itself.

In its decision, the GAO reiterated the well-established guidance that contracting officers must exercise “common sense, good judgment, and sound discretion” in assessing whether a potential conflict exists and in developing appropriate ways to resolve it, and that the primary responsibility for determining whether a conflict is likely to arise, and the resulting appropriate action, rests with the contracting agency. The GAO then noted the equally well-established requirement that OCI determinations be based on “hard facts” indicating the existence or potential existence of a conflict. Mere inference or suspicion of an actual or potential conflict is not enough. The GAO reviews agency OCI determinations for reasonableness and, so long as the agency has given meaningful consideration to whether a significant conflict of interest exists, the GAO will not substitute its judgment for the agency’s absent clear evidence that the agency’s conclusion is unreasonable.

Here, the GAO found that Lukos’s protest arguments lacked the necessary hard facts, characterizing them instead as essentially the contention that F3EA was the incumbent contractor, and thus, had a competitive advantage in the competition. Lukos did not, provide any evidence that F3EA prepared the PWS for the RAPTOR IV procurement or set its ground rules, had unequal access to non-public information of the nature that gives rise to an OCI, or otherwise had impaired objectivity in its performance of the RAPTOR IV contract. Nor did the GAO find F3EA’s role in “refining” requirements under the RAPTOR III contract to equate to preparing the PWS under the RAPTOR IV contract, based in part on the fact that the agency did provide hard facts demonstrating the opposite.

The GAO also voiced its consistent refrain that (i) the mere existence of a prior or current contractual relationship between a contracting agency and a firm does not create an unfair competitive advantage; and (ii) an agency is not required to compensate for every competitive advantage gleaned by a potential offeror’s prior performance of a particular requirement. For example, an incumbent contractor’s acquired technical expertise and firsthand knowledge of the costs related to a requirement’s complexity are not generally considered to constitute unfair advantages the procuring agency must eliminate. There must be more.

Here, Lukos alleged only general assertions and no hard facts. That, along with the absence of any evidence of preferential treatment or unfair action by the agency, led the GAO to conclude that the agency’s OCI determination concerning F3EA reflected a reasonable conclusion that F3EA has only the normally occurring advantage that any incumbent may possess—and no OCI problem. The protest was denied.

The lesson here is simple: if you want to challenge a contract award on OCI grounds, you need to make sure that you have some hard facts indicating that an OCI exists or may exist. Without that, the protest will likely result in more disappointment for you.

If you have questions about this blog, protests, OCIs, or other government contracting questions, contact the author or your Stinson counsel.