COFC Effectively Affirms GAO Decision Finding that Offeror’s Participation in Prior Development Contract Did not Create Conflict in Procurement for Production Contract; AAR Manufacturing v. United States, COFC No. 20-459

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Protest alleging various organizational conflicts of interest is denied. The protester argued that another offeror who had participated in the development contract for the item being procured should, due to conflicts, be excluded from competing for the production contract. The protester alleged the other offeror had a biased ground rules OCI. The court found that while the other offeror had a biased-ground-rules conflict, an offeror that participates in a development contract is not barred from competing in a subsequent production contract. Here, the other offeror had clearly participated in the development and thus fell under this exception to the biased-ground-rules bar. The protester also alleged the offeror had an unequal access OCI. The court, however, found that this argument was based on speculation. Finally, the protester contended the offeror had an impaired objectivity OCI. The court rejected this argument, finding that the contracting officer had thoroughly investigated and found that the offeror did not have access to non-public, competitively advantageous information.

The Air Force awarded a contract to the University of Dayton Research Institute to develop a new pallet for transportation of air cargo. The University of Dayton subcontracted with Taber Extrusions LLC to fabricate some of the pallet components. Dayton completed the contract and gave the Air Force a new pallet design call the Next-Gen pallet.

The Air Force then issued a solicitation for the production of the Next-Gen pallets. A prospective bidder, AAR Manufacturing, filed a GAO protest, arguing that Taber should not be allowed to bid on the production contract. AAR claimed that Taber’s participation on the development created several unmitigable OCI’s. GAO, however, denied the protest, finding that there were no conflicts that could preclude Taber’s participation in the procurement.

AAR then filed a protest with Court of Federal Claims. Once again, AAR alleged that Taber had significant contracts that precluded it from participating in the procurement, and that the contracting officer had not properly investigated these conflicts. Taber intervened in the protest. All the parties moved for judgment on the administrative record.

AAR first alleged that Taber had a biased-ground-rules conflict. A biased ground rules OCI arises when a company participates in setting the procurement ground rules and thus has special knowledge of the agency’s future requirements that will skew the competition in its favor. AAR alleged that due to its participation in the development of the pallets, Taber had special knowledge of the agency’s requirements.

The contracting officer, in investigating the conflict, had found that Taber had materially contributed to the development of the pallets and that it was possible that Taber would try to the skew the competition to itself. Nevertheless, while a contractor with a biased-ground-rules conflict must be excluded from the competition, there are exceptions to this rule when (1) more than one contractor helped prepare the work statement, or (2) the conflicted contractor participated only in development and design work. The contracting officer had found that both of these exceptions applied. Multiple contractors had participated in the preparing the pallet specifications, and Taber had been involved in the development of the pallets.

The court did not believe that the contracting had reasonably applied the multiple contractor exception. While it was true that multiple contractors participated in the preparation of the pallet specifications, each of them had been involved in a different aspect of the design. The court reasoned that the multiple contractor exception down not apply when a single subcontractor is responsible for a discrete and distinct portion of the contract. Even if those subcontractors are working on the same end product, the exception will not apply if one subcontractor alone can review and influence its own work. Here, Taber was the sole subcontractor involved in developing aluminum-extrusion for the specifications. The contracting officer could not have reasonably found there were multiple aluminum extruders. The multiple contractor exception was inapposite.

The court did, however, agree that the development exception applied. The record revealed that Taber participated in the development by developing an initial four panel pallet design and by participating in meetings with the Air Force and Dayton.

AAR argued that the development exception did not apply because the pallet that came out of the process was not, in fact, new. Rather, it was more akin to the refurbishing of an existing product. But the court found that this ignored the plain terms of Dayton’s development contract. The contract included line items for prototyping and testing pallets as well as coming up with drawings and models. Taber was very involved in the many of the processes. Indeed, FAR 35.001 specifically defines “development” as including the use of technical knowledge in the design and testing of an improvement in an existing product.

AAR further contended that Taber did not perform development and design because its design was ultimately not accepted. The court was unpersuaded, reasoning that even though Taber’s design had been rejected, the fact of its rejection was itself evidence that Taber contributed to the design process.

AAR also attempted to argue that Taber role in the development was really akin to a systems-engineering and technical-direction contractor and thus Taber did not qualify for the design and development exception. But the court found that Taber’s role did not involve systems-engineering or technical-direction. Contractors, like Taber, that manufacture the system being acquired are not considered systems-engineers.

Aside from the biased-ground-rules conflict, AAR alleged that Taber had an impaired objectivity conflict. An impaired objectivity conflict arises when a contractor’s work under one government contract could entail evaluating itself under another government contract. AAR asserted that if Taber were awarded the production contract, it would be disincentivized to improve the pallet or perform quality control.

But the court found this argument was based on speculation. Protesters must support conflict allegations with hard facts. Nothing in the record indicated that Taber would mail it in on quality control and improvements.

Finally, AAR contended that Taber had an unequal-access-to-information conflict. An unequal access conflict occurs when a company has access to non-public information that gives it a competitive advantage. AAR argued that the contracting officer had failed to properly evaluate the information Taber had access to.

The court rejected this argument, reasoning that the contracting officer had reviewed the contract file, interviewed Air Force, Dayton and Taber employees, reviewed the scope of the development and reasonably determined that Taber did not have access to non-public information. To the extent Taber had access to information, it would not, at this stage of the procurement, result in a competitive advantage.

AAR is represented by Paul R. Hurst, Fred W. Geldon and Caitlin T. Conroy of Steptoe & Johnson LLP. The intervenor, Taber, is represented by Anthony H. Anikeeff and Shayn Allen Fernandez of Williams Mullen PC. The government is represented by Stephen C. Tosini of the Department of Justice and Captain Seiji Ohashi of the Air Force.

COFC - AAR Manufacturing