GAO Clarifies Rules For Conflict Of Interest Waiver Protests
OCI Regulatory Framework
Before turning to a discussion of the GAO’s decision in ARES Technical Services Corporation, it is helpful to have a basic understanding of the OCI regulatory framework.
The Federal Acquisition Regulation states that “[o]rganizational conflict of interest means that because of other activities or relationships with other persons, 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.” FAR subpart 9.5, in turn, “[p]rescribes responsibilities, general rules, and procedures for identifying, evaluating, and resolving” OCIs, and also “[p]rovides examples to assist contracting officers in applying these rules and procedures to individual contract situations.”
Interpreting FAR subpart 9.5, the GAO and the U.S. Court of Federal Claims have identified three general categories of OCIs: (1) “unequal access to information” OCIs, (2) “biased ground rules” OCIs, and (3) “impaired objectivity” OCIs. An “unequal access to information” OCI exists where a firm has access to nonpublic information as part of its performance of a government contract, and where that information may provide the firm an unfair competitive advantage in a later competition for a government contract. A “biased ground rules” OCI exists where a firm, as part of its performance of a government contract, has in some sense set the ground rules for the competition for another government contract and could therefore skew the competition, whether intentionally or not, in favor of itself. An “impaired objectivity” OCI exists where a firm’s ability to render impartial advice to the government would be undermined by the firm’s competing interests.
Of particular relevance here, FAR § 9.503 addresses OCI “waivers,” stating:
ARES Technical Services Corporation filed a bid protest with the GAO, alleging, among other things, that the contract-awardee, Millennium Engineering and Integration Company (MEI), had an “impaired objectivity” OCI, and that OCI had not been adequately addressed by the contracting agency. In a prior protest, ARES alleged that MEI’s performance under the “currently-awarded contract could potentially involve MEI performing a review of work it or one of its subcontractors performed under other contracts.” Accordingly, ARES “maintain[ed] that the award to MEI was improper.”
In response to ARES’ prior protest, “the agency performed a detailed investigation of possible OCIs on the part of both firms, and also solicited and obtained mitigation strategies from both.” Based on the OCI “mitigation strategy” submitted by MEI, the agency concluded that “award to MEI would be unobjectionable, and therefore the agency affirmed its earlier selection decision.”
In response to the agency affirming its earlier selection decision, ARES filed a new protest, alleging, among other things, that “MEI’s mitigation strategy was inadequate to address its impaired objectivity OCI.” The agency then “presented a detailed defense of its actions in its initial agency report, but subsequent to the submission of that report, the agency also executed a waiver of any residual OCI that MEI might have, notwithstanding its mitigation strategy.” ARES, thus, also challenged “the reasonableness of the agency’s waiver.”
In analyzing ARES’ challenge to the agency’s OCI waiver, the GAO first noted that agencies “properly may waive an OCI, provided that their waiver is executed in accordance with [FAR] § 9.503,” which, as noted above, states:
The GAO then noted that, while it “will review an agency’s execution of an OCI waiver,” its review is “limited to consideration of whether the waiver complies with the requirements of the FAR, that is, whether it is in writing, sets forth the extent of the conflict, and is approved by the appropriate individual within the agency.”
The GAO went on to state that, “[h]ere, ARES does not argue that the agency’s waiver is deficient under the terms of FAR § 9.503.” According to the GAO, there “is no dispute that the waiver is in writing, sets forth the extent of the potential OCI on MEI’s part, and was signed by the agency’s Assistant Administrator for Procurement, the individual authorized to execute such a waiver.” Instead, the GAO noted, “ARES argues that the agency’s decision to execute the waiver is inconsistent with internal [agency] policy guidance.”
The GAO then held that, as an initial matter, “compliance with internal agency guidance is not a matter subject to [the GAO’s] review through the bid protest process.” In any case, the GAO held, “compliance with such internal agency guidance is not one of the enumerated requirements of FAR § 9.503 to properly execute a waiver, and thus does not provide a basis for [the GAO] to object to the agency’s execution of the waiver here.” Accordingly, the GAO “dismiss[ed] this aspect of the protest.”
The GAO’s decision in ARES Technical Services Corporation is noteworthy because it clarifies the rules regarding bid protests that challenge agency OCI waivers. In particular, the GAO made clear that, while it will review protests challenging OCI waivers, the GAO’s review will be limited to determining whether the agency’s OCI waiver is in writing, sets forth the extent of the OCI, and is approved by the appropriate individual within the agency. In this regard, the GAO’s decision provides useful guidance to GAO protesters in that it makes clear where they should (and should not) focus their OCI waiver challenges. The GAO’s holding in this case is also useful to agencies and intervenors in GAO protests, as it reinforces the reality that, in the OCI waiver context, agencies have a fairly low bar to clear before the GAO, and, conversely, GAO protesters have a fairly high bar to clear.
Furthermore, the GAO’s decision in ARES Technical Services Corporation is noteworthy in that it indirectly highlights the comparative lack of guidance by the U.S. Court of Federal Claims on OCI waiver protests. Given that most bid protests are filed with the GAO, it is not particularly surprising that the Court of Federal Claims’ case law in this area is less well-developed than the GAO’s case law. However, in light of the recent uptick in protests being filed at the Court of Federal Claims, it appears almost certain that the court will have an opportunity, in the fairly near future, to hear and fully address an “OCI waiver” protest. When this seemingly inevitable occurrence actually happens, it is likely that the Court of Federal Claims protester will attempt to downplay the GAO’s holding in ARES Technical Services Corporation (and other similar cases) regarding the GAO’s limited review of OCI waivers. It is also likely that the government and the intervenor will urge the court to adopt the GAO’s narrow standard of review regarding OCI waiver protests.
Accordingly, regardless of the protest forum — the GAO or the U.S. Court of Federal Claims — it is important for protesters, agencies and intervenors alike to be familiar with the GAO’s OCI waiver holding in ARES Technical Services Corporation.
 ARES Technical Services Corporation, B-415082.2, et al. (May 8, 2018).
 See FAR § 2.101.
 See FAR § 9.500.
 See, e.g., CACI, Inc.,-Fed., et al., B-413860.4, et al., 2018 CPD ¶ 17 at 4.
 See FAR §§ 9.505(b), 9.505-4.
 See FAR §§ 9.505-1, 9.505-2.
 See FAR § 9.505-3.
Republished with permission. The original article, "GAO Clarifies Rules For Conflict Of Interest Waiver Protests," first appeared on Law360 on May 18, 2018.