Lack of OCI processes sinks CACI's bid for $8B Army contract

Protests involving allegations of organizational conflicts of interest are not unusual in the world of government contracting.

That said: it is unusual when the Government Accountability Office rules that an actual conflict existed.

GAO goes one of two ways most of the time: finding there either was no conflict, or that the agency or company took steps to mitigate the conflict and generally through an organizational firewall.

But in the case of a recent decision against CACI International, GAO found there was indeed a conflict or at least the appearance of one.

GAO said that was enough to find the Army was justified in eliminating the company from the competition for a $7.9 billion IT hardware supply contract.

The decision offers a harsh reminder of the importance of having controls in place that are well-documented when it comes to hiring former government officials to pursue particular contracts.

CACI was pursuing the sixth iteration of the Common Hardware Systems contract, which the Army uses to buy hardware for multi-domain networks and the Joint All-Domain Command and Control system. General Dynamics' mission systems unit is the longtime incumbent.

The Army eliminated CACI because through a subcontractor, it used a consultant who was a former Army official and the former source selection advisory council chair. As the chair, the unidentified person was involved in awarding the CHS-5 to GDMS. He also was the product lead on CHS-3 and CHS-4.

That person retired in November 2019 and began consulting with CACI in March 2021, according to the GAO decision that was unsealed Jan. 23.

Identified as X in the decision, the person attended a meeting with the Army in October 2021 as part of CACI’s team. X then attended an event at Aberdeen Proving Ground, Maryland in November 2021.

General Dynamics Mission Systems officials also attended the event. Wen they learned X was working with CACI, GDMS sent a letter to the contracting officer asking for an investigation because X had access to proprietary GDMS information during his previous role.

While that took place, X reached out to the Army ethics counselor to ask about working for CACI through the subcontractor. X ultimately decided not to work with the subcontractor or CACI any longer. At this point, he had worked with the subcontractor and CACI for nine months.

In response to the Army investigation, CACI said that X worked on technical solutions. That included items such as program and data management, technical assistance, and quality assurance. X also would help clarify requirements.

X did not work on pricing or costs and recused himself from conversations where GDMS was discussed.

CACI told GAO and the Army that X provided no proprietary or non-public information.

But the Army determined that X’s work with CACI created “at a minimum, the appearance of an unfair competitive advantage.” CACI was therefore eliminated from the competition.

In response to that ruling, CACI provided statements from its capture manager and others to reiterate their position that X provided no proprietary or non-public information. X also declared that in his role at the Army, he had limited access to non-public and proprietary information involving GDMS that included pricing.

The contracting officer still decided to eliminate CACI from the competition, which led the company to file a protest at GAO in November.

CACI may have argued that X had limited access to proprietary information, but the Army gave documentation to GAO that showed X did have access and used that information as part of his job.

CACI also argued that changes between the current CHS-5 contract and future CHS-6 made the proprietary data less relevant. But the Army said the pricing under CHS-5 is valid through August 2023.

GDMS was the only bidder on CHS-5, but multiple companies are pursuing CHS-6. CACI claimed that means pricing information for CHS-5 is not relevant.

However, the Army contracting officer determined there are enough similarities between both contracts that make the CHS-5 information useful.

What really won the day for the Army and sunk CACI was the extent of the contracting officer’s investigation that showed X had broad access to information that was competitively useful.

CACI and X may disagree with the contracting officer’s conclusions. But GAO wrote in its decision that “on the record presented here, we decline to substitute our judgment for that of the contracting officer."

In most of the organizational conflict-of-cases we have followed, the company facing the allegation of an OCI can show that it had processes in place that firewalled the person away from many of the activities involved in preparing a proposal that would create a conflict.

But in this case, CACI did not present any evidence that it put procedures in place to firewall or exclude X from the proposal process.

GAO said that to show the conflict of interest was mitigated, CACI needed to provide and explain the processes it had in place.

In a slight twist, the Army made its determination with the thinking that GDMS would be the prime.

But GAO's ruling indicates that for CHS-6, General Dynamics' IT services unit will be the prime and GDMS will be a subcontractor.

CACI argued the contracting officer’s concerns were based on X’s knowledge of GDMS' overhead, administrative costs and direct labor rates. GDIT has differences on all three items, according to CACI.

“There is no reason to assume that GDIT would have the same technical information, such as processes and solutions for achieving CHS-6’s goals as GDMS,” CACI told GAO in its filing.

The contracting officer said that did not matter because GDMS would be a major subcontractor to GDIT “to ensure retention of key program staff and continuity of institutional knowledge…[and] to leverage proven processes, facilities, and tools.”

The contracting officer also said it was not relevant who the prime contractor was because the presence of X on CACI's team gave them an advantage.

GAO agreed and said that any bidder that hires a former government official who has recently retired and had access to non-public information, can be disqualified from a competition “based on the appearance of impropriety.”