DOCUMENT FOR PUBLIC RELEASE
The decision issued on the date below was subject to a GAO Protective Order. This redacted version has been approved for public release.
Decision
Matter of: Nortel Government Solutions, Inc.
File: B-299522.5; B-299522.6
Date: December 30, 2008
James J. Regan, Esq., Daniel R. Forman, Esq.,
John E. McCarthy, Jr., Esq., Puja Satiani, Esq., and Jonathan M. Baker, Esq.,
Crowell & Moring LLP, for the protester.
John
S. Pachter, Esq., D. Joe Smith, Esq., Jonathan D. Shaffer, Esq., and Mary Pat
Gregory, Esq., Smith Pachter McWhorter PLC,
for Systems Research and Applications Corporation, an intervenor.
James
E. Hicks, Esq., Drug Enforcement Administration, for the agency.
Paul
E. Jordan, Esq., and David A. Ashen, Esq., Office of the General Counsel, GAO,
participated in the preparation of the decision.
DIGEST
Where offeror will be required to
review and provide input on designs proposed by itself under separate contract
with same agency, agency unreasonably failed to determine the extent of
offeror’s organizational conflict of interest (OCI) and unreasonably concluded
that offeror’s mitigation plan was acceptable, where it did not avoid, mitigate,
or neutralize the OCI and instead relied on agency’s existing process that made
government responsible for final decisions.
Nortel Government Solutions,
Inc. (NGS) of Fairfax, Virginia, protests the award by the Drug Enforcement
Administration (DEA), Department of Justice, of a contract to Systems Research
and Applications Corporation (SRA) of
Fairfax, Virginia, under request for proposals (RFP) No. DEA-06-R-0013, for
enterprise management services (EMS)
in support of DEA’s information technology (IT) infrastructure. NGS asserts that the agency failed to
properly consider SRA’s potential
organizational conflict of interest (OCI) and challenges the evaluation of
proposals.
We sustain the protest.
BACKGROUND
The RFP, initially issued on July 10, 2006, sought proposals to provide
consolidated IT operations and maintenance (O&M) services for all DEA
offices. The requirement covered four
core enterprise management functions:
customer support, IT security, network operations, and change management. NGS was one of six offerors responding to the
initial RFP and it was awarded a contract in January 2007. In response to protests from three other
offerors, DEA took corrective action and the protests were withdrawn.
The RFP, as then amended by the agency, included a new
statement of work (SOW) detailing the agency’s requirements in the same four
enterprise management functions. With
regard to scope, the RFP explained that the DEA enterprise which the contractor
would support was comprised primarily of the Firebird IT System (FITS) but that
the contractor also would be responsible for supporting all DEA IT and
IT-related systems and components worldwide whether FITS or not. The resulting contract was intended to
improve efficiencies, performance, and cost effectiveness by consolidation of
various existing contract requirements under a single O&M contractor. Additional functions and services currently
performed under separate contracts--including field relocations, cabling and
headquarters support, and depot services--were to be added to the EMS
contractor’s responsibilities as those contracts expired.
The amended RFP contemplated award of a
cost-plus-award-fee contract, for a base period with 4 option years, to
the offeror whose proposal represented the “best value” based on four
evaluation factors (in descending order of importance): technical/management
solution (35 points), transformation approach (30 points), initial
performance enhancement plan (20 points), past performance (15 points),
and cost. Cost was evaluated for
realism. Non-cost factors, when
combined, were of significantly greater importance than cost.
NGS and SRA were the
only offerors to submit proposals under the amended RFP. After conducting written and face-to-face discussions
with the offerors, DEA requested final proposal revisions (FPR). Prior to making the award, the agency amended
the RFP to require additional customer support administrator positions, and
obtained revised proposals. Based upon
the evaluation of proposals, the source selection authority (SSA) determined
that SRA had submitted the “most
advantageous” proposal.
NGS then filed a protest with our Office challenging the
evaluation of its proposal and the source selection decision, and asserting the
existence of a possible OCI associated with SRA’s
review of designs prepared by itself as the FITS contractor. After developing the record, including a
hearing on the issues, the GAO attorney responsible for the protest conducted
an “outcome prediction” alternative dispute resolution (ADR) telephone
conference.[1] Based on the GAO attorney’s assessment of the
issues, DEA decided to take corrective action, and our Office dismissed the
protest as academic (B-299522.4, May 13,
2008).
The agency then reopened discussions with the offerors and
requested revised proposals including submission for the first time of OCI
mitigation plans. After review of these
proposals, the agency conducted a further round of discussions. The contracting officer, after review of the
offerors’ OCI mitigation plans and consultation with the technical evaluation
panel (TEP), determined that there were sufficient safeguards in place to
mitigate and/or resolve potential OCIs for both offerors.
SRA’s FPR received an
overall consensus evaluation score of [deleted] and NGS’s FPR received a score
of [deleted]. Although NGS’s proposed
costs [deleted] were lower than SRA’s
[deleted], the agency found there was cost risk associated with NGS’s proposal
while SRA’s proposed costs were realistic as
proposed. However, while DEA, as part of
the cost realism analysis, quantified the risk associated with NGS’s proposal
(calculating additional costs of [deleted]), in making her source selection,
the SSA based her best value decision on her conclusion that SRA’s
technical superiority justified the proposed cost premium of its proposal over
NGS’s as calculated using the proposed costs of the offerors. Upon learning of the selection of SRA
for award, and after a debriefing, NGS filed this protest.
ORGANIZATIONAL CONFLICT OF INTEREST
As before, NGS asserts the existence of a possible OCI
associated with SRA’s review of designs
prepared by SRA itself as the FITS
contractor. In this regard, FITS, the
major IT infrastructure system at DEA, provides a desktop environment from
which DEA users access applications and network resources. SRA
currently holds a contract with DEA to provide engineering support for this
system, including deployment, development support, integration and performance
support, as well as infrastructure engineering.
SRA Mitigation Plan at 1. Further, as the EMS
O&M contractor, SRA will be required to
participate in integrated project teams (IPT)
which are intended to bring together all involved parties (DEA and contractor)
to ensure that a delivered IT capability is aligned with DEA’s business and
functional requirements. SRA
Mitigation Plan at 3. In this regard,
the EMS contractor
would provide input from the “O&M perspective” on design solutions crafted
by the FITS and other DEA contractors. [2] Supplemental Agency Report (SAR) at 5; GAO
Hearing Transcript (Tr.), Apr. 23,
2008, at 136. In addition to
participation in IPTs, the record indicates that the EMS
contractor’s work will include review of proposed designs outside of IPT
meetings.[3] Tr. at 274.
The FITS contractor does not produce the hardware or software for its
proposed design solution or otherwise receive additional work implementing its
proposed solution. SAR at 7.
As in its original protest, NGS asserts that SRA,
in its dual roles as the EMS
contractor and FITS contractor, would have a substantial and inadequately
mitigated OCI. Specifically, it asserts
that the EMS
contractor will be called upon to review and provide input on engineering
designs proposed by the FITS contractor and provide configuration reviews of
equipment furnished by the FITS contractor.
In NGS’s view, it would not be in SRA’s
interests as the EMS
contractor to provide negative feedback to the agency based on its review of
solutions proposed by SRA as the FITS
contractor, since repeated criticism could adversely affect SRA’s
standing with its customer, affecting past performance evaluations and how SRA
fares in future competitions. NGS SAR
Comments at 9-10. Under these
circumstances, NGS suggests that SRA could
“subconsciously pull its punches” when providing the DEA with the EMS
perspective on SRA’s FITS designs. NGS SAR Comments at 4. NGS also asserts that the agency failed to
evaluate the technical and cost consequences of SRA’s
OCI, including, for example, the potential need to use additional government or
other contractor resources to review SRA’s
designs. NGS Initial Comments at 21‑24.
The contracting officer (who was the SSA) determined, and
DEA continues to maintain, that “SRA’s
performance of the FITS contract [does] not create an ‘impaired objectivity’
OCI” with regard to SRA’s performance of the
EMS O&M contract. Contracting Officer’s Statement at 32. In explaining her position that no OCIs will
result from SRA’s performance of both
contracts, the contracting officer asserts that: (1) SRA
will not be in a position to evaluate or assess its own work on the FITS
contract, nor will SRA benefit from SRA’s
input as the EMS contractor since neither
the EMS nor FITS systems engineering
contractor will furnish any system or software that will be necessary to
implement systems engineering solutions proposed by the FITS contractor; (2)
all systems engineering work and implementation of systems engineering
initiatives are subject to oversight and control by DEA personnel, with
government personnel chairing any IPTs involved in the initiatives and all
systems engineering work under the FITS contract subject to review and approval
of DEA’s government-led configuration control board (CCB); (3) the input from
the EMS contractor regarding systems
engineering solutions proposed by the systems engineering FITS contractor will
be essentially limited to participating in meetings involving the
implementation of systems engineering initiatives, with such meetings occupying
only a relatively small portion of the EMS
contractor’s overall contract effort; and (4) SRA
committed that, in the event of a change in these processes or if the
government concluded that additional measures were necessary, it would adopt
additional mitigation items including organizational/financial and
informational separation of the EMS work
from the FITS work (a firewall).
Supplemental Contracting Officer’s Statement at 2-4; SRA
Mitigation Plan at 3-5, 7.
Contracting officers are required to identify potential
conflicts of interest as early in the acquisition process as possible. Federal Acquisition Regulation (FAR)
sections 9.505, 9.508. Situations that
create potential conflicts of interest include situations in which a firm’s
work under a government contract entails evaluating itself. The concern in such “impaired objectivity”
situations is that a firm’s ability to render impartial advice to the
government will be undermined by its relationship to the product or service
being evaluated. PURVIS Sys., Inc.,
B‑293807.3, B‑293807.4, Aug. 16,
2004, 2004 CPD para. 177 at 7.
The primary responsibility for determining whether a conflict is likely
to arise, and the resulting appropriate action, rests with the contracting
agency. FAR sect. 9.505; RMG
Sys., Ltd., B‑281006, Dec.
18, 1998, 98‑2 CPD para. 153 at 4. Once an agency has given meaningful
consideration to potential conflicts of interest, our Office will not sustain a
protest challenging a determination in this area unless the determination is
unreasonable or unsupported by the record.
Alion Sci. & Tech. Corp., B‑297022.4, B-297022.5, Sept. 26, 2006, 2006 CPD para. 146
at 8.
The record indicates that the agency did not give
meaningful consideration to the potential impaired objectivity OCI involving SRA’s
dual roles. Contrary to the agency’s
assertion that SRA will not be in a position
to evaluate or assess its own work on the FITS contract, the record shows that SRA,
as the EMS contractor, is expected to review
and offer input from the O&M perspective regarding systems engineering
solutions proposed by itself as the FITS contractor. SAR at 5.
Moreover, that input will involve SRA’s
subjective judgment. In this regard, we
note that when asked if DEA sought the O&M (EMS)
contractor’s “subjective opinions of the design,” the TEP chair testified that
“[t]hey can be subjective . . . depending on the level of detail of the
design.” Tr. at 49. In our view, this provides an opportunity for
biased advice. See PURVIS
Sys., Inc., supra, 2004 CPD para. 177 at 9 (agency improperly
failed to consider impaired objectivity OCI where same contractor was expected
to provide subjective input on its own products and services). Further, we find persuasive the protester’s
position that, while the advice may not result in implementation work for SRA
under either contract, input from and review by SRA
as the EMS contractor regarding systems
engineering solutions proposed by SRA as the
FITS contractor could have a potential impact on SRA’s
relationship with the government including past performance evaluations and
future competitions. In these
circumstances, we believe that it is clear from the record that the performance
by SRA of both the EMS
and FITS contracts presents a potential impaired objectivity OCI.
Our conclusion that a potential impaired objectivity OCI
exists is not altered by DEA’s assertion that it does not rely on the EMS
contractor alone for advice, nor by its reliance on the fact that the
government retains the ultimate decisionmaking authority. The record indicates that obtaining input
from a contractor with the O&M perspective was considered important. According to the testimony of the TEP chair,
it would be “negligent” not to have the EMS
contractor’s perspective on FITS designs and so the agency would still seek the
input of SRA even when it fulfills both
roles. Tr. at 166‑68. In this regard, the EMS
contractor will replace multiple former O&M contractors with a single
O&M contractor (Tr. at 166), arguably giving it a more important role. Thus, the possibility of obtaining O&M
perspective from other DEA contractors may necessarily be somewhat
limited. Further, the agency broadly
asserts that under its process “[a]ny contractor input” in an IPT
is “vetted by the DEA personnel” and that the CCB reviews and approves all IT
changes making the government the “final decision authority.” AR at 20. However, it is not clear from the record that
this review will address the impaired objectivity concern arising from SRA’s
dual roles where, as here, the contractor is expected to have a potentially
significant role in providing input with regard to SRA’s
system design. For example, neither SRA
in its OCI mitigation plan, nor the agency, provides any specifics on how the
agency will accomplish its vetting of SRA’s
input before making its final decisions. [4] As we explained in Johnson Controls World
Servs., Inc., B-286714.2, Feb. 13, 2001, 2001 CPD para. 20 at 11-12, an
approach based upon ad hoc mitigation activity such as discounting the weight
given to the firm’s recommendations, even if feasible, is not a substitute for
the preaward deliberation contemplated under FAR sect. 9.504.
Moreover, although DEA asserts that the review work
constitutes only a small portion of the EMS
contractor’s effort, the agency’s position is not supported by the record. In this regard, in response to NGS’s protest,
the agency now asserts that only 2 percent of the contractor’s time is
spent in IPT meetings and those meetings are
not solely for design reviews. AR at 21
n.8; Supplemental Contracting Officer’s Statement at 4. However, not only did a representative of NGS
offer persuasive testimony to the effect that 5 of 60 NGS engineers spent at
least 25 percent of their time working on reviews and IPT
meetings, but in addition, the TEP chair testified that the EMS
contractor was spending 10 to 15 percent of its time on reviews. Tr. 158-61. Given this testimony, and the fact the 2
percent figure is not supported by any meaningful contemporary assessment, we
find unpersuasive the agency’s attempt to portray the review work giving rise
to an impaired objectivity OCI as insignificant in terms of the EMS
contractor’s overall level of effort.
More significantly, even if the review work took little of the EMS
contractor’s time, there is no showing in the record that this review process
is not important to the agency’s mission, and it would not obviate the fact
that a potential impaired objectivity OCI existed which needed to be avoided or
mitigated.
Finally, SRA’s proposal
to separate its EMS
and FITS personnel through use of a firewall appears to be of little, if any,
help in resolving the OCI here. In this
regard, the proposed firewall provides for SRA
to manage the two contracts using “separate organizations with separate
interests” and “distinct business objectives.”
SRA Mitigation Plan at 5. It also prohibits SRA
and subcontractor personnel working on one contract from providing support
under the other contract, without written approval from the contracting
officer. SRA
Mitigation Plan at 7. However, while a
firewall arrangement may resolve an “unfair access to information” OCI, it is
virtually irrelevant to an OCI involving potentially impaired objectivity. See Aetna
Gov’t Health Plans, Inc.; Found. Health Fed. Servs., B‑254397.15 et
al., July 27, 1995, 95‑2 CPD
para. 129 at 16. This is because the
conflict at issue pertains to the organization, and not the individual
employees. Id. Thus, while the firewall proposed by SRA
may create the appearance of separation to mitigate the OCI, the fact remains
that personnel under both contracts will be working for the same organization
with an incentive to benefit SRA
overall. Accordingly, the firewall does
not avoid, mitigate or neutralize the impaired objectivity OCI resulting from SRA’s
performance of dual roles reviewing and providing input on its own designs.
We sustain the protest on the basis that the record does
not support DEA’s conclusion that there was no potential OCI involving SRA’s
dual roles, but instead indicates that the agency did not give meaningful
consideration to this potential impaired objectivity OCI.[5] Since the agency needs to address the extent
of the OCI and what mitigation is appropriate, and because the impact that
mitigation may have on SRA’s technical and cost
proposals is unknown, we believe that the agency will need to reopen
discussions in order to address these matters.[6]
EVALUATION OF NGS PROPOSAL
NGS challenges numerous
aspects of the agency’s evaluation of its proposal.[7] In considering a protest of an agency’s
proposal evaluation, our review is confined to determining whether the
evaluation was reasonable and consistent with the terms of the solicitation and
applicable statutes and regulations. United
Def. LP, B‑286925.3 et al., Apr. 9, 2001, 2001 CPD para. 75 at 10‑11. Here, we have reviewed each of NGS’s
challenges to the evaluations and find that none has merit. We discuss several of NGS’s assertions below.
Meeting SLAs
NGS challenges the agency’s evaluation of offerors’
integrated performance enhancement plans (IPEP), including their proposals for
meeting the various service level agreements (SLA) DEA’s
Office of Information Systems has with other DEA activities.[8] In its revised proposal, NGS included a list
of 21 assumptions “as necessary to successfully meet the proposed
SLAs.” First Revised NGS Proposal at
D-13. The proposal warned that
“[p]otential impacts such as schedule delay may occur if these assumptions are not
met.” Id. The TEP determined that 19 of the assumptions
related to items that in the TEP’s experience, an IT support contractor would
normally take responsibility for under this contract. For example, in order to meet SLA
Nos. 8 (antivirus update file deployment time) and 9 (software
patch deployment time), NGS assumed that all servers and workstations would be
responsibilities associated with service levels, NGS stated that it understood
that it was “solely responsible” for achieving DEA’s required service
levels. NGS Final Revised Proposal at
8. However, since NGS also stated that
it knew there were events beyond its control that would influence
implementation of the SLAs, and its proposal continued to include the
21 “assumptions,” all but two of which concerned matters for which the
agency reasonably believed an IT support contractor would normally address in
contract performance, the TEP found that NGS’s response did not mitigate its
concerns with regard to NGS’s commitment to meeting the SLAs. Final NGS Technical Evaluation at 9. In our
view, the agency could reasonably conclude that the continued presence in NGS’s
proposal of the 21 assumptions called into question NGS’s general
acknowledgment of its responsibility for meeting the SLAs and thus represented
a risk to achieving the SLAs and a weakness in the proposal. Cf. Contingency Mgmt. Group, LLC;
IAP Worldwide Servs., Inc., B‑309752 et al., Oct. 5, 2007,
2008 CPD para. 83 at 11 (agency’s technical evaluation must take into account
any assumptions underlying an offeror’s proposed approach); recon. den.,
Kellogg, Brown & Root Servs., Inc.--Recon., B‑309752.8, Dec. 20, 2007, 2008 CPD para. 84.
Escalation Rate
NGS asserts that the agency unreasonably assessed risk as a
result of NGS’s proposal of a labor escalation rate of only [deleted] percent
in the option years, a reduction from its previously proposed [deleted] percent
escalation rate. In this regard, when
the agency asked NGS during discussions to address the adequacy of the rate,
NGS Discussions, Question 2, NGS responded that while it expected its personnel
raises to continue in accordance with the industry average of 3.7 percent,
it also assumed that attrition and personnel career growth (employees moving to
more senior positions) would result in the replacement of more experienced
personnel with highly skilled, but less costly personnel. NGS Final Revised Proposal at 2. The agency found this plan likely would
result in a lack of continuity in the EMS
project resulting in risk to performance.
We find the agency’s concern to be reasonable. Although NGS asserts that the agency misread
its proposal, noting that its discussion response referred to “career growth
within the program,” id., the response also referred to its corporate
policy for “employees to grow and move forward within the company,” thus
suggesting the possible loss to the program of experienced personnel moving
elsewhere in the company. Id. Further, NGS’s asserted plan for experienced
personnel to move upward within the program would necessarily be dependent upon
sufficient higher level positions to open up in the program. NGS’s proposal, however, did not explain the
basis for the assumption that such higher level positions would open up and, in
any case, if there were significant turnover at higher levels of the program,
this would appear likely to result in the very lack of continuity about which
the agency was concerned. [9]
RECOMMENDATION
We recommend that the agency reconsider its determination
that SRA’s performance of both the FITS and EMS
contracts would not present a significant impaired objectivity OCI, taking into
consideration the actual scope of any review/input tasks for which the EMS
contractor would be responsible. The
agency’s review should include an evaluation of the reasonable impact on SRA’s
technical approach in the event that its OCI mitigation plan relies on having
the review performed or augmented by government personnel and/or other
contractors. See Meridian Corp., B-246330.4, Sept. 7, 1993, 93-2 CPD para. 129 at
5 (an agency should consider the effect of an offeror’s OCI avoidance plan on
its technical proposal). We further
recommend that the agency reopen discussions with the offerors to obtain
revised OCI mitigation plans and to address any remaining technical or cost
concerns. The agency should then request
revised proposals, sufficiently document its evaluation including any cost
adjustments, and then make a new, properly documented source selection. Finally, we
recommend that the protester be reimbursed its costs of filing and pursuing the
protest, including reasonable attorneys’ fees.
4 C.F.R. sect. 21.8(d)(1).
The protester should submit its certified claim, detailing the time
expended and costs incurred, directly to the contracting agency within 60 days
of receiving this decision. 4 C.F.R.
sect. 21.8(f)(1).
The protest is sustained.
Gary L. Kepplinger
General Counsel