Bid Protester Wins Protest Where the Agency Improperly Awards Contract to Company with an “Organizational Conflict of Interest”

The Department of Defense Unites States Special Operations Command (“USSOCOM”) awarded their Information Technology Service Management (“ITSM”) contract to Jacobs Technology, Inc. instead of IBM.  IBM complained that Jacobs had an “organizational conflict of interest” since it had been the incumbent contractor for USSOCOM’s service desk and had non-public information related to the agency’s service desk user requirements that provided it an improper competitive advantage.  The case is Jacobs Technology, Inc. v. United States and IBM Global Business Services, 2011 U.S. Claims LEXIS 1708.

An “organizational conflict of interest” (“OCI”) occurs where one offeror (bidder) has an unfair competitive advantage over other offerors.  Three types of OCI are (1) unequal access to information, (2) biased ground rules, and (3) impaired objectivity.  The bans on OCI exist in order to maintain the integrity of the procurement system.

“Unequal access” may arise in situations where an offeror, by virtue of its performance on a government contract, obtains access to non-public information that other offerors do not have, which provides it an unfair competitive advantage on a new procurement.  A “biased ground rules” OCI may occur in situations where an offeror, as part of its performance of a government contract, has provided input to the statement of work or specifications of a Request for Proposals in such a way as to provide the firm a competitive advantage in responding to the RFP.  An “impaired objectivity” OCI may occur in situations where an offeror’s work under one government contract could entail evaluating itself, either through an assessment of performance under another contract or through an evaluation of proposals.

When OCI exists, the government can resolve the conflict by either (1) excluding the conflicted firm from the procurement or (2) mitigating the OCI, such as by providing the competitively useful information to all offerors so that they may compete on a fair and equal basis.

IBM successfully persuaded the Court that Jacobs Technology might have an OCI.  The Court reversed the award to Jacobs and ordered that the agency re-investigate the possible OCI before any reprocurement.

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Dave Albo – Attorney are government contract attorneys and procurement law lawyers.