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Protesting Procurements Involving Biased Ground Rules

The Federal Acquisition Regulation (FAR) § 9.5 generally requires the Government to avoid, address, or mitigate significant conflicts of interest to prevent giving unfair competitive advantage to offerors. Contracting officers (CO) are responsible for avoiding and addressing potential conflicts of interest. The Government Accountability Office (GAO) will generally uphold a CO’s determination involving a potential conflict of interest unless the determination is unreasonable or otherwise unsupported by the record. A conflict of interest involving biased ground rules exists when a contractor performing on a government contract sets the ground rules for competition for that government contract. In doing so, the contractor knowingly or unknowingly gives itself a competitive advantage. An example of a procurement involving biased ground rules is a contractor competing for a contract for which it helped develop the statement of work. Depending on the specific facts, contractors may prevent companies who set the ground rules for a procurement from competing in that procurement through a pre or post-award protest. In bringing such protests, the protestors must present evidence that the ground rules for the competition were biased, giving an unfair advantage to a bidder or an awardee.

In B-402324, the GAO barred a company from bidding on a requirement for which it helped develop the statement of work. The GAO determined that the CO reasonably excluded the potential offeror from the competition due to the existence of biased ground rules. In that protest, the agency issued a task order under a General Services Administration (GSA) IDIQ contract to a utility company to perform a feasibility study for an energy efficiency project. The utility company, together with a subcontractor, conducted the feasibility study. This study later formed the basis for the development of the SOW for a subsequent energy services contract. As additional background, the agency had initially contemplated procuring energy efficiency services through a utility energy service contract (UESC). An exception to full and open competition requirements, a UESC contract permits agencies to award sole-source contracts to a utility company for services where energy cost savings are shared between the government and the contractor. However, after the feasibility study was complete, the government received sufficient funding from government sources for the work phase of the requirements. Due to this funding, the government no longer required the utility company to finance the project and decided to compete the requirement on a full and open basis. Since the utility company and the protestor as its subcontractor had conducted the feasibility study forming the basis for the SOW used in the solicitation, they were both excluded from the competition. The subcontractor protested its exclusion at the GAO.

In its protest, the subcontractor took the position that when conducting the feasibility study, it was unaware of the possibility that the requirement would be competed on a full and open basis. It emphasized that since the previous UESC contract was awarded to its prime contractor on a sole-source basis, the protestor, as the subcontractor, had no reason to believe that the contract would later be competed on a full and open basis. Therefore, it could not have conducted the feasibility study in a way that would later benefit the subcontractor as an offeror. In other words, since the protestor did not know that the study would be used to draft a competitive solicitation, it could not have skewed the competition in its favor. The GAO dismissed this argument by stating that it was inconsequential whether the utility company and its subcontractor were aware that the requirement would be competed in the future. The fact that the utility company and the subcontractor had conducted the feasibility study that later formed the basis of the competed procurement was sufficient basis for the agency to find that a conflict of interest existed based upon biased ground rules. Additionally, in finding the protestor’s argument meritless, the GAO reiterated that in a competitive procurement, it was the agency’s responsibility to assess whether using contractor-prepared SOW materials created a biased ground rules organizational conflict of interest (OCI).

The protestor then argued that biased ground rules OCI could not exist because it was the agency that ultimately decided which portions of the feasibility study would be used in the SOW. The protestor maintained that it gained no competitive advantage from its position as the draftee of the feasibility study. However, the GAO reminded the protestor that the relevant concern for a biased ground rules OCI is whether the firm that drafted the requirements was ever in a position to skew the competition to its benefit. It was not relevant whether or not the feasibility study ultimately skewed the competition in the protestor’s favor. In dismissing the protest, the GAO also pointed out that approximately 80% of the SOW requirements were based on the feasibility study. This further legitimized the agency’s concerns that the protestor may have described the work in a way that was advantageous for itself to perform on a sole-source basis.

Contractors seeking to protest procurements based on the existence of a biased ground rules OCI should note that the FAR generally prohibits contractors from performing on contracts they helped develop the requirements for. By carefully reviewing solicitations and inquiring about its development process, contractors can identify potential biased ground rules conflicts. While it may ultimately be the agency’s decision to waive such a conflict, agencies rarely exercise that discretion. Furthermore, when such conflicts arise, adjudicative forums will likely uphold the agency's decision to exclude the involved contractor, even if it was not the contractor's intent to obtain an advantage. If a contractor has suspicions or concerns about the existence of such an OCI, proactive communication with the contracting officer is key, as the potential for bias alone may be sufficient to warrant exclusion.

This Bid Protests Insight provides a general summary of the applicable law in the practice area and does not constitute legal advice. Contractors wishing to learn more are encouraged to consult the TILLIT LAW PLLC Client Portal or Contact Us to determine how the law would apply in a specific situation.