Is collaborating with vendors a conflict of interest?

A company official raised the following topic: Sometimes agencies ask companies for information on products and services that they or others may sell for use in connection with an impending procurement. Can providing such information to an agency create an organizational conflict of interest (OCI)?

As discussed in the last column the possibility of an OCI arises whenever "a person is unable or potentially unable to render impartial assistance or advice to the government or the person's objectivity in performing the contract work is or might be otherwise impaired or a person has an unfair competitive advantage."

An OCI can occur in many scenarios. The most common problem area however involves the preparation of materials leading directly and predictably to use in specifications or work statements.

According to the Federal Acquisition Regulation a contractor that prepares and furnishes specifications to the government may not furnish that item either as a prime contractor or as a subcontractor unless the contractor is furnishing specifications or data regarding a product that it provides.

If a contractor prepares or assists in preparing a work statement for a system or services that will be acquired competitively or provides material leading directly predictably and without delay to a work statement that contractor may not supply the system major components of the system or the services unless the contractor is the sole source it has participated in the development and design work or more than one contractor has been involved in preparing the work statement.

There are many bid-protest decisions interpreting this rule. In GIC Agricultural Group (B-249065 Oct. 21 1992 92-2 CPD Paragraph 263) the General Accounting Office found that an offeror had an OCI and was ineligible for award because it provided material that led directly predictably and without delay to a statement of work where "the agency over the course of eight months used a contractor to write a draft project paper adopted most of the analysis in its own project paper and then used the two documents to prepare a statement of work for which the same contractor is now the successful awardee and where the agency failed to take any action to mitigate the conflict."

As a remedy for the agency's failure to recognize and address the conflict GAO recommended that the agency "reopen the competition after attempting to mitigate the organizational conflict of interest." At a minimum according to GAO the agency had to provide a copy of the contractor's project report to the protester and request a second round of best and final offers.

In Hawthorne [72 Comp. Gen. 88 93-1 CPD Paragraph 62 (1993)] GAO found improper an agency's decision to terminate the protester's contract for archaeological documentation services because the protester had prior involvement in the survey and design of the project.

According to GAO "While the agency is correct in its assertion that Hawthorne was involved in the preliminary work on the project prior to issuance of the [request for quotes] the agency has provided no information to support its contention that this involvement created an apparent conflict of interest.

In contrast Hawthorne has provided a detailed explanation of her participation in the project along with corroborating statements of two agency archaeologists who were directly responsible for the project and resultant RFQ. These materials indicate that her activities related to the project were so minimal that they could not reasonably be construed as giving rise to a conflict of interest."

These cases reflect an understanding of the realities of the market. But in Basile Baumann Prost & Associates Inc. (B-274870 Jan. 10 1997 97-1 CPD Paragraph 15) GAO found that the contracting officer had properly eliminated the protester from the competition to develop and implement an outreach program because the protester had developed the statement of work and the government estimate for the specific tasks to be performed.

According to the decision those documents initially were prepared for the legitimate purpose of modifying the protester's prior contract to incorporate this work. Even so according to GAO the agency's use of the materials in connection with the new procurement required the protester's elimination from the competition.In the Basile case GAO was unusually hostile toward an apparently innocent contractor.

It is difficult to reconcile that decision with the many others in which GAO appears more generous. It is a good reminder that nothing is completely predictable in government contracting. Clearly companies need to be cooperative with buyers who are seeking information from them but they should temper their desire to cooperate with a healthy dose of caution where potential conflicts may arise.

-- Peckinpaugh is a member of the government contracts section of the law firm of Winston & Strawn in Washington D.C. This column addresses legal topics that arise in government acquisition and management of ADP resources. Readers are encouraged to submit topics by e-mail to carl@carl.com. This column is not intended to provide legal advice.