Agency’s Superficial and Conclusory OCI Investigation Results in a Sustained Protest; Inquiries, Inc., GAO B-417415.2


Protest challenging agency’s OCI analysis and evaluation of awardee’s proposal is sustained in part and denied in part. GAO found that the agency failed to properly analyze an impaired objectivity OCI. The awardee and one of its subcontractor had worked on or were working on other contracts that could impact the objectivity of their performance. GAO determined that the contracting officer had not meaningfully analyzed this conflict. The protester also objected to the agency’s evaluation of key personnel, price realism, and the awardee’s staffing plan. But GAO found the agency’s evaluation of these issues reasonable. The protester further alleged that the agency’s evaluation of professional compensation was flawed. GAO agreed, finding that the agency should have evaluated the compensation actually proposed instead of burdened labor rates.

The Defense Security Service (DSS) issued a solicitation seeking support for its background investigation and security clearance activities. Four offerors submitted proposals, but DSS found two of them unacceptable. This left Inquiries Inc. and iWorks Corporation in the competition. DSS awarded the contract to iWorks. Inquiries protested, alleging that DSS failed to properly investigate an organizational conflict of interest and misevaluated iWorks’ proposal.

Inquiries contended that iWorks had an OCI due to its work on another contract Specifically, iWorks had developed the Defense Information System for Security (DISS), which DOD uses to track the credentials of military personnel, civilians, and contractors. DSS uses the DISS system as part of its background and security clearance activities. Inquiries argued that as part of its contract with DSS, iWorks would be required to analyze current business processes and make recommendations for efficiencies. Inquiries contended that iWorks would have a problem providing unbiased feedback concerning the DISS system that it designed.

The contracting officer had found that this potential conflict was not a problem because DISS was used by multiple DoD entities. What’s more, the contracting officer found, there was no OCI because any advice iWorks gave about the system would be given to DOD personnel, so iWorks would not evaluate its on performance.

GAO found the agency’s reasoning wanting. DSS had not explained why other DoD entities’ use of the of the DISS negated the potential conflict. To the extent iWorks had a conflict, that conflict would impact the advice given to DSS regardless of whether other agencies use the system. Also, the fact that other agency officials must approve iWorks’ recommendations did not inherently mitigate the risk that the advice received could be biased. Simply stated, iWorks had a requirement to give advice about tasks it would be performing using a system that it developed. DSS had failed to meaningfully address this conflict.

Inquiries also alleged that iWorks’ subcontractor, Xcelerate. also had a conflict due to work on another contract. Xcelerate had a contract to provide consultation and support services to DSS. Inquiries contended that under that contract Xcelerate would provide advice about DSS’s investigation and vetting process at the same time that it would be working as a subcontractor for iWorks to support DSS’s background and vetting activities.

The contracting officer’s OCI analysis downplayed this conflict, reasoning that Xcelerate’s work under the other contract was high-level programmatic support that would not impact its work as a subcontractor for iWorks.

GAO again found the agency’s reasoning deficient. While referring to high-level programmatic support, the contracting officer’s analysis did not detail what kind of work Xcelerate actually performed. The analysis stated that the contracting officer had reviewed reports and had discussions with agency leadership in conducting the OCI analysis. But the analysis did not meaningfully describe the reports and provided no information about the discussions. In light of these lacunae, GAO had no basis to conclude that the contracting officer had meaningfully considered the OCI.

Aside from the OCI, Inquiries argued that DSS should have found iWorks’ proposal unacceptable because its proposed key program manager did not meet the minimum experience requirements for the solicitation. The solicitation required the program manager to have experience managing staff of 40 or more people. Inquires noted that iWorks’ proposed manager had only begun managing 40 or more people in August 2016 and thus did not have the requisite three years of experience when iWorks submitted in its proposal in 2018.

But GAO reasoned that the solicitation did not state that resumes would be evaluated as of the date of proposal submission. Rather, the solicitation was silent as to when a key individual’s resume had to reflect compliance. Accordingly, it was reasonable for DSS to conclude that iWorks’ program manager demonstrated the required qualifications at the time of evaluation in September 2016.

Inquiries further contended that iWorks proposal should have been found unacceptable due to problems with its staffing plan. In particular, Inquires argued there were discrepancies between iWorks’ estimated labor hours required for its proposed technical approach and the hours in the government estimate. But DSS understood that iWorks had proposed to achieve efficiencies by consolidating tasks. Although iWorks argued that DSS should not have accepted these proposed efficiencies, GAO found that iWorks’ complaint simply amounted to disagreement with DSS’s judgment.

Next, Inquires contended that DSS botched the price realism analysis. DSS relied on a standard deviation calculation to assess realism. Inquiries claimed the standard deviation calculation was flawed because it included the price of one of the offerors whose proposal had been found unacceptable. If that offeror was removed the calculation, Inquiries contended, then iWorks price would have been more than one standard deviation from the average price and thus unrealistically low.

GAO, however, noted that if Inquiries were correct and that unacceptable proposals should not have been included in the standard deviation calculation, then the agency should have not considered the price from the other unacceptable offeror in the calculation. If that offeror’s price was removed from the calculation, then iWorks’ price was back within one standard deviation of the average price.

Finally, Inquiries argued that DSS’s evaluation of iWorks’ professional compensation was unreasonable because it examined burdened labor rates instead of the actual compensation and fringe benefits that would be paid. GAO agreed. The contract contained FAR 52.222-46. The purpose of that provision is to assess the realism of compensation paid to professional employees. In light of this, the agency could not ignore compensation information provided by offerors and only evaluate the burdened labor rates.

Inquiries is represented by Craig A. Holman and Michael E. Samuels of Arnold & Porter Kaye Scholer, LLP. The intervenor, iWorks, is represented by Jonathan T. Williams, Kathryn V. Flood, Patrick T. Rothwell, and Samuel S. Finnerty of Piliero Mazza PLLC. The agency is represented by SoCheung Lee of the Department of Defense. GAO attorneys Jonathan L. Kang and Laura Eyester participated in the preparation of the decision.

GAO - Inquiries, Inc.