This month’s bid protest roundup looks at two GAO protests from August. One examines the risks of using former federal employees to assist with proposal development when their prior access to non-public information might provide an unfair competitive advantage. The second decision considers the restrictions imposed by the Buy American Act (BAA) and the risk to contracts awarded on the basis of an inadequately supported waiver of those restrictions.
Raytheon Intelligence & Space, Electronic Warfare Self Protect Systems, B-421672.1, .2, August 17, 2023
In Raytheon Intelligence & Space, Electronic Warfare Self Protect Systems, the GAO rejected an offeror’s challenge to the exclusion of its proposal from a competition. The procurement involved next-generation dual-band decoys to protect Navy aircraft from adversaries.
Relevant Facts
From 2014 to 2020, Mr. X was a Navy employee, supporting electronic warfare and countermeasure programs in the areas of “threat identification, techniques for detecting those threats, and testing of countermeasures.” During his tenure at the Navy, Mr. X supported the dual-band decoy development program and had access to a Navy network containing source selection sensitive information for the program. Beginning in 2019, he provided technical support for Navy technology demonstration contracts awarded to Raytheon and another company for decoy development.
In late 2019 through early 2020, Mr. X conducted employment discussions with Raytheon. Mr. X went through the standard federal ethics process and received a standard letter instructing him that he was prohibited from representing anyone in communications with the federal government in connection with particular matters in which he had personally and substantially participated or that were pending under his official responsibility. Because Mr. X did not disclose his involvement in the decoy program, his ethics letter did not address it.
In April 2020, Mr. X began his employment with Raytheon. At Raytheon, he helped develop and execute test procedures for Raytheon’s dual-band decoy work, authored related work product delivered to the Navy, and represented Raytheon at meetings with the Navy about the decoy program. In late 2020, Mr. X assisted Raytheon with its response to a Request for Information the Navy issued regarding the upcoming Engineering, Manufacturing, and Development (EMD) phase of the decoy program, and he attended the Navy’s pre-solicitation conference as a Raytheon representative. In May 2021, a month before the Navy issued the decoy EMD solicitation, Mr. X resigned from Raytheon.
After proposals were received from Raytheon and a competitor, Navy personnel raised the question of Mr. X’s tenure at Raytheon. The Navy opened an inquiry and provided Raytheon the opportunity to respond to various questions, including the extent of Mr. X’s work for Raytheon and contribution to its proposal and its decoy development approach. The offeror responded that Mr. X’s decoy-related work at the Navy was “very minor,” and his work at Raytheon on the decoy program was “limited,” with “not significant” contributions to Raytheon’s decoy EMD proposal.
In April 2023, the Navy determined that Mr. X’s work for Raytheon and the company’s failure to firewall him off from the decoy program or take other appropriate mitigation measures created “at minimum” the appearance of a significant unfair competitive advantage for Raytheon. On this basis, the Navy eliminated Raytheon’s proposal from the competition.
GAO’s Analysis
Raytheon filed a timely protest of its exclusion, arguing: (1) Mr. X’s work on the decoy program was “minimal” and any non-public information to which he had access had become publicly available or was otherwise no longer competitively useful; (2) Raytheon acted appropriately in hiring Mr. X to support the decoy program; and (3) Raytheon’s proposal did not contain the proprietary information of its lone competitor.
The GAO observed that the Federal Acquisition Regulation (FAR) directs agencies to “avoid strictly any conflict of interest or even the appearance of a conflict of interest in Government-contractor relationships.” FAR 3.101-1. Under the GAO’s decisional law, when an offeror hires a former government official who had recent access to competitively useful information, and the company uses that official to help prepare the offeror’s proposal, an agency may properly disqualify the proposal based on the appearance of an unfair competitive advantage. See Serco Inc., B-419617.2, B-419617.3, Dec. 6, 2021, 2021 CPD ¶ 382 at 12. The GAO analyzes unfair competitive advantages stemming from former federal employment under FAR 3.101-1 using the same standard applicable to unequal access organizational conflicts of interest (OCI) under FAR subpart 9.5.
The GAO acknowledged that a former government employee’s “mere familiarity with the type of work required” does not, by itself, create an unfair competitive advantage. Rather, there must be “hard facts” establishing the person’s access to nonpublic information (of either the agency or competitors) that could enable the offeror to improve its proposal in a way offerors without that information could not. This is a fact-specific inquiry, and the government enjoys broad discretion in the determinations it makes, as long as the determinations are “reasonable” based on the documented facts.
First, the GAO found Mr. X had access to non-public information from the Navy’s dual-band decoy program, including the proprietary information of Raytheon’s competitor. The GAO afforded great weight to the Navy’s long and thorough investigation report, which detailed the extent of Mr. X’s access. The GAO also accepted the Navy’s finding that, although that access largely related to the technology demonstration phase of the program, the information remained useful for and interrelated with the requirements of the pending EMD phase of the procurement. Although some of the information had been released to offerors already, the Navy found the information that had not been released remained useful and was not stale, contrary to Raytheon’s assertions. On this question of judgment, the GAO “decline[d] to substitute [its] judgment for that of the contracting officer.”
Second, the GAO rejected the protester’s argument that its exclusion was improper because the Navy did not identify any specific portion of its proposal that contained its competitor’s proprietary information. The GAO observed that the mere appearance of impropriety is a sufficient basis for exclusion. Under the GAO’s precedents, “the rebuttable presumption flowing from the facts here reflects the reality that judgments involved in preparing a proposal may be shaped, consciously or subconsciously, by knowledge of the restricted information.” There is, in other words, no need for an agency to identify some particular part of a proposal that clearly reflects another entity’s proprietary information.
Third, with respect to the protester’s objections that Mr. X’s ethics letter did not restrict him from supporting Raytheon’s decoy program work, the GAO found that Mr. X had not informed the ethics official of his decoy work for the Navy. The GAO also rejected the protester’s argument that the contracting officer was “fixated” on post-government employment restrictions under the revolving-door statute rather than unfair competitive advantage under FAR 3.101-1. The GAO found the contracting officer appropriately considered both the potential revolving-door violations and the question of unfair advantages.
Finally, the protester objected that the Navy deprived it of “due process” by not raising the issue sooner. Although the Navy allegedly knew as early as May 2020 that Mr. X was supporting Raytheon’s decoy program, it did not raise any concerns until August 2022 and did not exclude the proposal until the following year. The GAO observed that Raytheon was aware of the issue even earlier and failed to raise it at all until the Navy asked. The GAO found no basis to question the Navy’s timing and no reason to find it violated the protester’s “due process rights.”
Thus, the GAO found the Navy sufficiently justified its decision to eliminate the proposal for the appearance of an unfair competitive advantage. The GAO found this was reasonable even though this exclusion meant only one offeror was left in the running for the EMD contract.
Takeaways
• Companies should exercise great care when hiring former federal employees or engaging them as consultants. From a procurement perspective, the greatest risks relate to any proposal or capture efforts for which they might have competitively useful non-public information. If new employees are not entirely candid about the scope of their prior work, companies are at risk of triggering an unfair advantage concern without even knowing it.
• Similarly, companies should not simply accept a clean agency ethics letter as definitive proof a former federal employee may work on everything. Ethics letters are only as good as the information on which they are based and the analysis of the individual ethics officials who write them. These letters frequently focus on the revolving-door restrictions and often do not opine on conflicts of interest or unfair advantage concerns under FAR 3.101-1.
• Like unequal access OCIs, unfair advantage concerns are relatively easy to neutralize or avoid with a decent firewall plan. This requires, however, that one institute the firewall before the new employee begins contributing to a capture effort. As this case shows, even if the employee contributed to a proposal or technical approach in arguably minor ways over a short time, that will not necessarily save the infected proposal from elimination.
• As with OCIs, unfair advantage concerns under FAR 3.101-1 are entrusted to the sound discretion of contracting officers. As long as the contracting officer has adequately documented the relevant facts and a “reasonable” resolution of the concern, the GAO will largely defer to the contracting officer’s judgment.
Unico Mechanical Corporation, B-420355.6, .7, August 1, 2023
Unico Mechanical Corporation is one of the relatively few GAO decisions addressing an agency’s violation of the FAR’s BAA requirements. This case involved the BAA provisions specific to construction contracts.
Legal Background
Under the BAA solicitation provision at FAR 52.225-10 and the accompanying contract clause at FAR 52.225-9, contractors generally are prohibited from using foreign construction materials in performance of a federal construction contract. Among the exceptions to this general prohibition are circumstances where the government permits foreign materials after determining the cost of domestic construction material exceeds the cost of foreign material by more than 20 percent, or where the government grants an offeror’s request for a waiver of the BAA on a similar basis. In the absence of one of the listed exceptions or a valid waiver, a proposal including foreign construction materials is unawardable.
Relevant Facts
The Army solicited a contractor for construction at the Cougar Dam power plant. The solicitation contained the usual BAA clause and solicitation provision for construction contracts. One offeror submitted a proposal containing non-domestic construction materials: two valves and one hydraulic power unit. The offeror had sought a waiver of the BAA for these materials, supported by limited market survey information. The Army did not grant the waiver prior to award, but instead awarded the contract to the non-compliant offeror and added exemptions for the foreign materials to the awarded contract. Another competitor filed a bid protest, and the Army took voluntary corrective action. In a follow-on request for payment of the protester’s protest costs, the GAO found that the protester’s BAA arguments were “clearly meritorious” because the information the awardee submitted to support its waiver request was plainly inadequate to support one, even if the Army had attempted to grant one prior to award (which the record did not indicate it had done).
During corrective action, the Army reconsidered the awardee’s original waiver request and the market survey information it previously submitted in support of its request. Based on this information, the contracting officer determined that only one domestic firm offered BAA-compliant materials, and that firm’s price for the materials was so much higher than competing foreign materials that a waiver was justified. The market information did not address the protester as a potential domestic source of the valves, despite the initial protest’s representation that the protester domestically manufactured them. The contracting officer, however, considered this assertion and determined to exclude the protester from further consideration as a potential domestic source because its “proposal” lacked component pricing for the valves and other allegedly necessary information concerning them.
Based on these findings, the contracting officer granted the waiver request. A new best value decision found the original awardee had the most highly rated proposal at the lowest cost and should be re-awarded the contract. The original protester again protested the award to the GAO.
GAO’s Analysis
The GAO first observed that, prior to initial proposal submission, the agency considered a third offeror’s waiver request for the valves. In response, the agency performed its own market survey, which identified multiple domestic sources for the valves, including the protester. The record showed the agency requested and obtained rough order magnitude pricing from the protester and another domestic firm for the valves. On this basis, the agency originally determined “there are sufficient resources existing to allow contractors to comply with Buy American [Act] requirements for the 90 [inch] butterfly valves.” At that time, the agency documented no concerns with the protester’s estimated pricing and sought no additional information from it.
The GAO also noted the agency rejected the awardee’s first waiver request because the contracting officer determined the supporting information was insufficient: it comprised merely a high lump-sum price for valves and the hydraulic power unit from one unidentified domestic supplier and a low lump-sum price from one unidentified foreign supplier. The contracting officer previously found this information was inadequate to support a waiver request.
The GAO observed that the Army supported the new waiver with the same information the Army itself previously found to be insufficient—the same information that, during the cost request proceedings, the GAO had informed the Army was inadequate to support a BAA waiver. The GAO held that the original determination of insufficiency was correct, and the subsequent reversal based on the same information was unreasonable.
As for the Army’s contention that the protester could not be considered a domestic source as its “proposal” lacked pricing information for the valves, the GAO found that proposals submitted for the procurement were not required to provide that information, and there was no basis for finding the protester’s prior rough order magnitude estimate was inadequate. Nor was there any record the Army sought additional information from the protester as part of market research with respect to any waiver request. As a result, the GAO found it was unreasonable for the Army not to consider the protester as a known domestic source for purposes of its most recent BAA waiver analysis.
Because the awardee did not adequately support its waiver request with a reasonable market survey, as required by regulation, and because the agency’s waiver decision was premised on insufficient market information (and exclusion of a known domestic source), the GAO found the waiver lacked a reasonable basis. Therefore, the GAO sustained the protest. The GAO left open the possibility that a more reasonable and thoroughly documented process might find a waiver was appropriate, but the existing factual record made that impossible to predict.
Takeaways
• Offerors seeking a waiver of BAA restrictions should assemble the best market information they can to support any waiver requests. As the GAO noted, the requester bears the burden of demonstrating a waiver is justified.
• Submission of robust supporting information is all the more important given the heightened scrutiny BAA waiver requests are receiving in the current Administration.
[View source.]
