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Morris Manning & Martin, LLP

The Importance of Organizational Conflicts of Interest

09.03.2020

A recent decision by the U.S. Government Accountability Office (GAO) provides a useful and important reminder of the significance of organizational conflicts of interest (OCIs) for government contractors. In AT&T Corporation, B-417107.4 (July 2, 2020), the Social Security Administration awarded Verizon Business Network Systems, Inc. (Verizon) a contract to replace the agency’s legacy telephone systems, referred to as the Next Generation Telephony Project  Contract (NGTP Contract). The NGTP Contract would require Verizon to inform the agency of problems with their network. Importantly, in 2018, the agency awarded Verizon a separate task order contract to support the agency’s network. The protester argued that awarding Verizon the NGTP Contract created an impaired objectivity OCI because the NGTP Contract would require Verizon to evaluate Verizon’s performance under the task order contract.

There are three types of OCIs: unequal access to information, biased ground rules, and impaired objectivity. An impaired objectivity OCI occurs when a contractor’s ability to provide impartial advice to the government would be undermined by the contractor’s competing interests. Here, the NGTP Contract would require Verizon to monitor the health of the agency’s network systems, equipment, and infrastructure; determine if the systems were meeting the agency’s needs; and identify, document, and communicate any performance or quality of service issues. Put another way, Verizon would need to monitor the systems Verizon was operating under the task order contract and report any problems to the agency – something it may not necessarily be inclined or able to do impartially. This scenario is a quintessential impaired objectivity OCI.

The agency raised two arguments to defend the award. First, the agency contended that because the NGTP Contract did not specifically require Verizon to evaluate Verizon’s performance—but rather required Verizon to evaluate the performance of the systems—there was no OCI. GAO summarily rejected this as “a distinction without a difference.” Second, the agency asserted that there was no OCI because the agency would not rely solely on Verizon to identify problems with the network. GAO was not persuaded by this argument either because the NGTP Contract would still require Verizon to evaluate the services Verizon was concurrently providing under the task order contract and may have a conflict reporting any problems that were created by Verizon. GAO sustained the protest and recommended that the agency conduct a new OCI evaluation. At this time, it is uncertain whether Verizon will retain the award or the agency will be compelled to pick another vendor.

This outcome may have been avoidable. It is often possible to mitigate or avoid an OCI—including an impaired objectivity OCI. In this case, there was one task in the statement of work for the NGTP Contract that gave rise to the OCI. In similar situations, GAO has held that using a firewalled neutral subcontractor to perform a task that would otherwise create an impaired objectivity OCI is a viable mitigation strategy. Hindsight is always 20/20, but this decision serves as a good reminder of the importance of proactively identifying and mitigating an OCI before a problem arises. Regular OCI trainings, combined with procedures to screen new opportunities for OCI risk, can help a government contractor identify a potential or actual OCI and take steps to avoid or mitigate the OCI before it puts a contract in jeopardy.  

If you have any questions about this legal update or need assistance on implementing your own OCI mitigation program, please reach out to the Government Contracts group.