Post-award protest is sustained, where the agency failed to mitigate an unequal access organizational conflict of interest, did not evaluate proposals in accordance with the solicitation’s requirements, and declined to conduct discussions because discussions would be unfair to the awardee.
Ernst & Young LLP protested the Department of Veterans Affairs’ decision to award a contract for the design of a health care delivery system to PriceWaterhouseCoopers, Public Sector, LLP. PwC had worked as a subcontractor on a previous contract to develop a pilot study and methodology for the subsequent health care system contract. Ernst & Young contended that PwC’s work on that previous contract resulted in an unequal access organizational conflict of interest. Ernst & Young also argued that VA failed to evaluate proposals pursuant to the solicitation’s criteria and improperly refused to conduct discussions. PwC intervened in the Ernst & Young’s protest, and all the parties moved for judgment on the administrative record.
The government argued that PwC’s work on the preceding pilot study did not give rise to an unequal access conflict. The government believed it had mitigated any conflicts by giving each offeror a copy of the methodology that PwC had developed during the previous pilot study. Additionally, the government contended, neither PwC nor its prime had been involved in drafting the solicitation. Moreover, although the government did not disclose the pilot study data, which the VA had given to PwC to create the methodology, the government believed that the data was unique to specific health care markets and would not have helped offerors in preparing their quotes.
The court, however, found that the government’s efforts to mitigate the conflict were deficient. The court reasoned that the government’s failure to disclose the underlying pilot study data to offerors created a significant unequal access OCI. While the government tried to downplay the pilot study data as applying to only a few markets, the court found that the data was “very robust” and was actually representative of all markets.
The court also concluded that having this proprietary data prior to submitting its proposal gave PwC a significant competitive advantage. Indeed, the court noted, the competitive significance of this data was evidenced by the fact that every other offeror except PwC had made identical, mistaken staff level assumptions in their proposals. The failure to disclose the pilot study data allowed PwC access to propriety government information resulting in a substantial and unfair competitive advantage in violation of FAR 9.504(a)(2).
The court did, however, find that there was no biased ground rules conflict—that is, a conflict that arises when an offeror has provided input on a solicitation. Ernst & Young alleged in its complaint that PwC’s work on the pilot study meant that it has also drafted key aspects of the statement of work. But the court found that PwC’s work on the pilot study was “development and design” work. While development and design work gives offerors a slight advantage, it is not an unfair advantage. Moreover, the court reasoned, the record did not indicate that PwC was directly involved in the drafting of the solicitation.
The court next determined that VA had, in multiple instances, not evaluated proposals in accordance with the solicitation. For instance, the solicitation required offerors to propose five member teams for each of VA’s Veterans Integrated Service Networks. Ernst & Young proposed five member teams, but VA assigned its proposal a weakness. PwC proposed something other than five member teams (the number is redacted from the decision), which the agency thought was “superb” and demonstrated a thorough understanding of the task. The court found that under the circumstances, the agency had not fairly considered Ernst & Young’s proposal.
Additionally, the solicitation allowed offerors to submit past performance narratives from three previous contracts. These contracts had to have been performed either by the offeror or one of its major subcontractors. PwC submitted three examples performed by a team member who was not a major subcontractor. Despite this, the agency accepted PwC’s past performance narratives. The court found that in doing so the agency had not followed the solicitation and failed to consider proposals in accordance with FAR 8.405-3(b)(2).
The court then turned to VA’s failure to conduct discussions. The CO stated that the agency had declined to conduct discussions because “discussions would only allow the unsuccessful quoters to better their technical and pricing to be more competitive with PwC and not actually provide any real benefit to the [VA].” The court found this unpersuasive, noting that the whole point of the trade-off process is to allow the government to obtain the best technical quotes and prices. Refusing to conduct discussions because it would only result in better technical quotes and prices defeats the whole purpose of a best-value procurement.
In addition, the court continued, it was clear from the offerors’ identical mistaken assumptions on staffing levels that there was a problem with the solicitation. Discussions would have allowed the agency to clarify these issues. Finally, the CO’s belief that conducting discussion would be unfair to PwC indicated that the agency was not treating all prospective offerors equally, which violated FAR 1.102(c)(3).
The court concluded by finding that Ernst & Young satisfied the elements for an injunction setting aside the award to PwC. The company had prevailed on the merits, and it had shown that VA’s conduct had resulted in irreparable harm by denying Ernst & Young a chance to fairly compete. As to the balance of hardships, the court found while VA may suffer some administrative burden, the technical and financial benefits of a fair competition would offset this burden. With regard to the public interest, the court found an overriding public interest in fair procurements.
The court granted Ernst & Young’s motion for judgment on the administrative record as all counts except one—i.e., the biased ground rules OCI. The court denied the government’s and PwC’s cross motions. The case was remanded to VA.
Ernst and Young is represented by Craig Holman of Arnold & Porter Kaye Scholer LLP. The government is represented by Geoffrey M. Long of the U.S. Department of Justice. The Intervenor, PriceWaterhouseCoopers is represented by Philip J. Davis of Wiley Rein, LLP.
