Court stands tough on conflict of interest

During the last week of February, the U.S. Court of FederalClaims ordered the Defense Department not to exerciseany future options that extend a support services contractwith Lockheed Martin Corp. for DOD's Tricare medicalservices program. The order follows a decision last year that thecontract award violated organizational conflict of interest (OCI) rules.The court held that the government hadbeen unable to provide it with an enforceableplan to mitigate the OCI. The court hadgiven the government four months to developa suitable plan, an invitation the governmentdeclined. Termination of contracts forOCI is not a common occurrence, and thisaction on such a visible contract will getattention. It also shows that the court considersOCI a serious threat to competitionfor government contracts that needs to beclosely monitored.Last year, the court held that the award ofthe Tricare support contract to LockheedMartin violated the Federal AcquisitionRegulation by not identifying a potentialimpaired-objectivity conflict and the contractingofficer had neglected to develop anOCI mitigation plan to correct an unequalaccess-to-information conflict. The courtfound that, as a result, Lockheed Martinhad unfair competitive advantages forfuture Tricare-related procurements.The government and Lockheed Martinproposed a mitigation plan that would havebeen incorporated into a contract modification.Not good enough, the court said. The"offer to incorporate the proposed mitigationplan as a modification to the contract,without affording the court the ability to[ensure] compliance by an independentauditor, likely will prove illusory. Given thefact that the [contracting officer] repeatedlyfailed properly to identify or mitigate theOCIs at issue in this case, the court has littleconfidence that the [contracting officer] willidentify and properly mitigate potential oractual OCIs in the future."The court acknowledged that the governmentcould rescind the contract if it was notsatisfied with Lockheed Martin's mitigationefforts but expressedconcern that aspectsof the plan were notlegally enforceableor were anticompetitive.The courtwanted a mitigationplan that includedoversight by an outside auditor.The government balked at any oversight.It told the court it would rather have thecontract terminated and resolicit offers forthe Tricare support services than have anindependent auditor oversee compliancewith a mitigation plan. Perhaps to the goverment'ssurprise, the court called its bluffand entered the injunction.The court's injunction barring extensionof the contract is significant also because itillustrates a policy rift between theGovernment Accountability Office and thecourts on a significant policy issue. Beforebeing litigated, the contract award had beenprotested unsuccessfully three times toGAO, which repeatedly found that therewas either no OCI or that the OCI couldbe mitigated by the contracting officer.The court not only disagreed but made itclear that contractors and the governmentshould expect to see more attentionbeing paid to OCI: The continuedexpansion of outsourcingto contractorsof functionstraditionally performedby governmentemployees has led to heightened congressionalattention to OCI. Now, at leastone bid protest forum also has given noticethat it will be paying close attention.