Government Contracts: Company's Key Personnel Rendered “Unavailable” Because of Denied Security Clearance

Jones Day

In Short

The Situation: The U.S. Government Accountability Office ("GAO") recently sustained a bid protest concluding that a company was ineligible for award because of "key personnel unavailability." Although the employee remained employed by the company and was willing to work on the contract, he had been denied a security clearance needed to perform the key position.

The Result: If a company has actual knowledge that a key person will not be able to perform the duties of the key position, the company has an obligation to inform the agency of the unavailability of its proposed key personnel. In such situations, the agency must either reject the proposal as unacceptable or open discussions to allow the offeror to revise its proposal.

Looking Ahead: Offerors should work to decrease the likelihood of key personnel becoming unavailable. For positions requiring a security clearance, offerors may want to consider only proposing key personnel who are already cleared. In the case of security clearance denials, companies and proposed key personnel should consider filing an appeal of the denial and documenting all bases for a reasonable belief that the appeal or negotiated settlement will be resolved successfully before the date of contract award.

The issue of key personnel unavailability has presented problems for companies and government procurement officials for several years. As we discussed in a prior Alert, "Key Personnel Departures: The Death Knell for Pending Federal Agency Proposals," GAO decisions (such as Paradigm Technologies, Inc. and URS Federal Services, Inc.) have made clear that departures of key personnel can be fatal to an offeror's chances of winning a contract award. A solicitation's requirements for key personnel are material requirements and an awardee's failure to satisfy one of these requirements, due to the unavailability of one of its proposed key personnel, renders the proposal unacceptable (and therefore unawardable). In such a situation, the agency must either reject the company's proposal as technically unacceptable or open/reopen discussions to permit the firm to remedy the deficiency.

The Latest Development

GAO's recent decision in M.C. Dean, Inc. demonstrates another way in which key personnel unavailability can manifest. The National Security Agency ("NSA") sought a contractor to provide maintenance, installation, and distribution services for the agency's comprehensive enterprise class physical security system. The solicitation required that the program manager (a key position) possess a top secret/sensitive compartmented information (TS/SCI) clearance with a full scope polygraph at the time of award.

The individual proposed as the awardee's program manager was still employed by the awardee at the time of award, and he remained willing and available to work on the contract. However, prior to award of the contract, NSA denied the proposed program manager's security clearance.

NSA and the awardee argued that the deadline for filing an appeal of the denial remained open until approximately a month after the date of award, and "as a result, the proposed program manager had not yet exhausted his legal remedies" at the time the contract was awarded. As a result, they argued, the awardee could not be charged with actual knowledge of the program manager's unavailability because "additional avenues of recourse remained available to him at the time of award to appeal his initial access denial."

The Outcome

GAO rejected these arguments, finding that nothing in the record supported a belief that an appeal would be successful or that it would be successfully adjudicated prior to contract award. GAO also noted that the program manager never, in fact, actually appealed the denial. In addition, GAO rejected NSA's argument that the unavailability of its key person should have no impact on the award because the key person was not material to NSA's award decision. Instead, GAO noted that it was "irrelevant" whether the program manager's resume was material to the agency's evaluation of the proposed key personnel because the availability of key personnel is always considered to be a material requirement of the solicitation.

Points for Consideration

As we have previously noted, given the limited ability of companies to remedy key personnel unavailability, offerors should take proactive steps to attempt to avoid this type of situation. First, offerors should review solicitations carefully and consider requesting that the agency amend the solicitation's personnel requirements to require offerors to demonstrate the ability to recruit and hire qualified personnel, rather than requiring a company to identify a specific person to fill a key position.

Second, when responding to a proposal that has key personnel requirements, offerors may want to consider providing retention incentives for employees proposed as key personnel to discourage departure prior to contract award. For personnel who need to hold a security clearance, a safer approach is to propose an individual who already holds the required clearance.

Finally, in a situation where there may be doubt about the individual's continued availability, the company (and the individual proposed) should take all possible steps to minimize or eliminate the doubt about the availability, or to increase the likelihood that the individual will be viewed as "available." In M.C. Dean, the result might have been different if the individual had actually filed an appeal of the denial (or negotiated with NSA to resolve the concerns) and the company documented the reasons why it believed the employee would have the required clearance by the time of award.

Three Key Takeaways

  1. GAO decisions illustrate the vulnerability of companies whose key personnel availability comes into question after a proposal is submitted.
  2. The company and the individual proposed for a key position should take all possible steps to minimize or eliminate doubt about the availability of the individual, or to increase the likelihood that the individual will be available at the time of award.
  3. If an employee proposed for a key position is denied a necessary security clearance, the employee and contractor (and their counsel) should attempt to favorably resolve the denial―either through negotiation and settlement of the denial or through a formal appeal process―as quickly as possible. Where the company believes the issue will be resolved by the time of contract award, it should document the basis for that belief.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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