Link: GAO Opinion
Agency: Department of Health and Human Services
Disposition: Protests denied.
Keywords: Organizational Conflict of Interest
General Counsel P.C. Highlight: The responsibility for determining whether an organizational conflict of interest (OCI) exists rests with the procuring agency. In making this determination, the FAR expressly directs contracting officers to examine the particular facts associated with each situation, paying consideration to the nature of the contracts involved, and further directs contracting officers to obtain the advice of counsel and appropriate technical specialists before exercising their own sound discretion in determining whether an OCI exists.
CIGNA Government Services, LLC (CIGNA) protests the award of a contract by the Department of Health and Human Services, Centers for Medicare and Medicaid Services (CMS), to Palmetto GBA, LLC, pursuant to a request for proposals (RFP) to perform Medicare claims administration services.
CMS published the solicitation at issue, seeking proposals to perform a cost-plus-plus-award-fee contract as the Medicare Administrative Contractor (MAC) in a geographic area identified as “jurisdiction 11” for a 1-year base period and four 1-year option periods. The solicitation also provided that conflict of interest/compliance program proposals would be evaluated “to determine if an offeror is free, to the greatest extent possible of all conflicts of interest,” stating that no adjectival ratings would be assigned. The solicitation stated that, in determining best value, the agency would “assess the relative risks associated with each offeror’s proposal and potential performance.”
CIGNA protested that CMS’s awarding the jurisdiction 11 MAC contract to Palmetto created an OCI between Palmetto and a Palmetto affiliate, Q² Administrators, which had been awarded a contract to perform as the qualified independent contractor (QIC) for jurisdiction 11. Following the protest, CMS advised GAO that it was taking corrective action in response to CIGNA’s protest, and that such action would include reevaluating proposals; reopening discussions, if necessary; and making a new award determination. The agency contracting officer who was responsible for the procurement at that time, prepared a 20-page document titled “Organizational Conflict of Interest Review for Palmetto GBA” identifying three possible areas of conflict of interest.
The agency re-opened discussions with the offerors and requested final proposal revisions from each offeror. Based on information provided, the contracting officer determined that, of the three potential OCIs, two did not create OCIs at all, and that one potential OCI was not considered a significant OCI and could be waived under the provisions of FAR § 9.503. The contracting officer prepared and submitted a written waiver request outlining the extent of the conflict, specifically including a detailed discussion of her bases for concluding that the conflict was not significant and that a waiver would be in the best interests of the government. The requested waiver was subsequently executed by the head of the contracting activity.
CIGNA protested again that Palmetto’s performance created unfair, unmitigated, and unallowable OCIs that the contracting officer failed to reasonably recognize. CIGNA maintained that Palmetto’s prior performance under those contracts mandate its exclusion from this competition.
The situations in which OCIs arise, as addressed in FAR subpart 9.5 and the decisions of GAO, can be broadly categorized into three groups. The first group consists of situations in which a firm has access to nonpublic information as part of its performance of a government contract and that information provides a competitive advantage in a later competition. The second group consists of situations in which a firm, as part of its performance of a government contract has, in some way, set the ground rules for another contract competition, thereby skewing the competition in its own favor. The third group consists of situations where a firm’s ability to render impartial advice to the government would be undermined by the firm’s competing interests.
The responsibility for determining whether a conflict exists rests with the procuring agency. In making this determination, the FAR expressly directs contracting officers to examine the particular facts associated with each situation, paying consideration to the nature of the contracts involved, and further directs contracting officers to obtain the advice of counsel and appropriate technical specialists before exercising their own sound discretion in determining whether an OCI exists. Where an agency has given meaningful consideration to whether an OCI exists, GAO will not substitute our judgment for the agency’s, absent clear evidence that the agency’s conclusion is unreasonable.
GAO cannot conclude that the contracting officer unreasonably determined that Palmetto’s performance created an OCI. That is, the record shows that the contracting officer followed the FAR direction to consider the particular facts involved, including the nature of the contracts at issue, and to obtain the advice of counsel and the assistance of technical specialists before exercising her sound discretion. While GAO agrees that the matters presented raise legitimate concerns regarding Palmetto’s involvement in activities that relate to the performance of the MAC contracts, CIGNA has failed to explain persuasively how any of Palmetto’s activities or access to information pursuant to performance of its contracts provided Palmetto a competitive advantage in competing for the jurisdiction 11 MAC contract. GAO concludes that the contracting officer’s decision did not reflected an abuse of her discretion.
CIGNA also protested that it was improper for the agency to waive the OCI created by the fact that Palmetto will review Medicare claims submitted by UCI?MA, a Palmetto affiliate. Contracting officers must identify potential OCIs as early in the acquisition process as possible, and generally must avoid, neutralize or mitigate significant conflicts prior to award. However, the FAR further establishes that, as an alternative to avoidance, neutralization, or mitigation, an agency head or designee may execute a waiver. Here, the contracting officer prepared and submitted a written waiver request that outlined the extent of the conflict and provided a detailed discussion of the bases for her conclusions that the conflict was not significant and that waiver would be in the best interests of the government. The requested waiver was duly executed by the head of the contracting activity, as authorized by FAR § 9.503. GAO reviewed the record, both with regard to CMS’s compliance with the FAR procedural requirements regarding waiver, as well as the substance of the contracting officer’s waiver request, and find no basis to question the agency’s compliance with the FAR requirements or the reasonableness of the agency’s actions. The protests are denied.