A hard line on organizational conflicts

Infotech and the law | Commentary: Courts crack down on organizational conflicts

Richard Rector

Organizational conflicts of interest
continue to be a hot topic in federal acquisition
and a potential risk area for contractors.
Federal courts have confirmed in
two recent decisions the importance of
scrupulously following OCI rules for competitive and
compliance reasons.

The first decision, which
affects competitive viability,
was issued in late September
by Judge Susan Braden of the
U.S. Court of Federal Claims.
Braden sustained a post-award
protest that claimed Lockheed
Martin Corp. had an impermissible
OCI in performing program
management services for
the Defense Department's
Tricare programs. The court
held that the department violated
OCI regulations because
it failed to identify a potential
conflict and exercise sound discretion
in developing a mitigation plan.

The case is noteworthy for three
reasons. First, the Government
Accountability Office had previously
denied the same protest after DOD
twice took corrective action to fix the
alleged OCI issues. Thus, the case
demonstrates that an agency cannot
always correct its way out of an OCI
protest. It also illustrates the court's
independence and the potential value
to contractors of seeking judicial
review.

Second, the judge prefaced the
decision by opining on the broad significance
of the OCI issues facing the
court. "The federal government's
increased use of and dependence on
outside contractors to perform essential
government functions often
entails providing those contractors
with governmental, business proprietary
and otherwise private information
to perform their duties. ... Establishing the parameters of access
to and use of this information will be
among the most important decisions that the [courts] will make in the
next few years ? not only for government
contract jurisprudence, but to
maintain competition in this growing
segment of the economy."

Third, the court elected not to
decide whether performance of the
contract should be enjoined. Rather,
the court asked the Federal Trade
Commission to provide its views, as
amicus curiae, on the competitive
issues in the case. Although not
unprecedented, this step is highly
unusual in bid protest cases and
reflects the court's view of the complexity
of the issues. This is a case to
watch in the future ? in the Court of
Federal Claims and, almost certainly,
on appeal.

In another recent OCI decision,
Judge Richard Roberts of the D.C.
District Court declined to dismiss a
case in which the government
claimed a contractor had violated the
False Claims Act by failing to disclose
an OCI. The decision was important
for two reasons.

For one, it linked a contractor's
OCI representations with potential
liability under the False Claims Act.
This was not a first, but it was a
sobering reminder that OCI representations
and certifications must be
taken seriously and can be the source
of thorny compliance issues.

Second, the decision was notable
because the undisclosed conflict did
not stem from a contractual relationship
but rather from the contractor's
dealings with a trade association. The
court found that, under the applicable
definition of an OCI, the contractor
was required to disclose not only
contracting and consulting relationships
but also "any relationship which
may have compromised its neutrality
under the contracts."

The court concluded that, by working
directly with a trade association
whose goal was to advocate for a certain
policy position, the contractor's
ability to provide impartial assistance
to the government could be called
into question. Accordingly, the court
found that the failure to disclose the
relationship was improper and created
the basis for a claim under the
False Claims Act.

These cases are vivid reminders
that contractors must know the ropes
on OCIs to protect their competitive
positions and avoid potentially significant
liability.

Richard Rector is chairman of the
government contracts practice at DLA
Piper US LLP. He can be reached at
richard.rector@dlapiper.com.

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