GovCon Expert Alan Chvotkin: Family Ties Create Contract Conflicts – And More

Alan Chvotkin, a partner at government contracts law firm Nichols Liu, published his latest article as a part of Executive Mosaic’s GovCon Expert program on Thursday.

In his latest featured article, GovCon Expert Alan Chvotkin explores the pending legislation regarding the issue of acquisition conflicts of interest. In addition, he also discussed the potential for these GAO bid protests that are coming based on family conflicts and other personal conflicts in the future.

You can read Alan Chvotkin’s full GovCon Expert article below:

Family Ties Create Contract Conflicts – And More

By GovCon Expert Alan Chvotkin

It is often said that you can’t pick your family. But sometimes, family relationships can affect whether a federal agency can pick a company in a competition because of a conflict of interest.

Two recent Government Accountability Office (GAO) protest decisions looked at whether there were “hard facts” – not just innuendo and suspicion – necessary for GAO for determine whether a family relationship created a conflict of interest sufficient to sustain a protest of the agency’s award decision.

Plus, here’s an update on pending legislation relating to the broader issue of acquisition conflicts of interest. On July 6, 2022, GAO issued its opinion in KOAM Engineering Systems. KOAM protested an award to McKean Defense Group for a Navy support services contract.

One of the protest grounds was that McKean gained an unfair competitive advantage based on an apparent conflict of interest where one of the awardee’s key persons was married to an agency contracting officer’s representative (COR) on the protestor’s incumbent contract.

KOAM asserted that, given their marriage, that both worked in close proximity at home, and that they shared a financial interest, there is an “irrefutable presumption of impropriety than cannot be overcome by the Navy’s after-the-fact investigation.”

However, the Navy contended that its investigation found no evidence that the COR participated in the procurement or that the COR disclosed competitively useful information. GAO concluded that the unique facts here do not establish any impropriety requiring the exclusion of the awardee or reflect that the alleged conflict prejudiced the protestor.

On July 25, 2022, GAO issued its opinion in Deloitte Consulting/ManTech Advanced Systems. The Defense Health Agency hired a consultant to help the agency with its acquisition planning. The consultant had a brother who worked for a company on the awardee’s team.

The DHA contracting officer twice investigated the allegations and, after the second investigation, concluded that the award was not affected by the two brothers’ relationship. GAO concluded that the record before it did not support the allegations that a non-governmental advisor improperly influenced the procurement in favor of the awardee.

In addition, GAO concluded that the protestors did not present the “hard facts” necessary to refute the agency’s conclusion.

Companies that become aware of a family relationship are well advised to take immediate action to separate the company employee from future action pending an internal review. It is often advisable to notify the government contracting officer as early in the procurement cycle as possible to allow the government to undertake its own review.

You can be sure that competitors are going to know of, or discover, the relationship and potentially challenge any award decision as being tainted by that family relationship.

But potential post-award protestors need to be wary, as well. As these two, and other, GAO decisions affirm, protestors must provide “hard facts” to show that the family relationship created a conflict.

Even then, however, a thorough analysis by the agency of the totality of the circumstances may still be enough to sustain the agency’s award decision even if a protest is filed.

Legislative Update

In my June 2022 column titled “Stretching the Limits of FAR OCI Rules,“ I wrote about proposed legislation introduced in both the House and Senate that would require the FAR Council to clarify the rules regarding organizational and personal conflicts of interest.

Subsequently, on August 1, 2022, the United States Senate passed a modified version of the “Preventing Organizational Conflicts of Interest in Federal Acquisition Act.” Under that Senate-passed bill, among other things, the FAR Council must revise the FAR to provide and update:

  • definitions related to specific types of organizational conflicts of interest;
  • definitions, guidance, and illustrative examples related to relationships of contractors with public, private, domestic, and foreign entities that may cause contract support to be subject to potential organizational conflicts; and
  • illustrative examples of situations related to the potential organizational conflicts identified.

The House Oversight and Reform Committee approved two similar conflict-of-interest reform bills on July 20, 2022 with substitute amendments.

Under H.R. 7602, also titled “Preventing Organizational Conflicts of Interest in Federal Acquisition Act”, the bill directs the Federal Acquisition Regulatory Council to identify contracting methods, types and services that raise heightened concerns for potential organizational conflicts of interest beyond those currently addressed in the FAR; and revise the FAR to address organizational conflicts of interest and require executive agencies to take certain actions.

Under H.R. 8325, titled “Preventing Personal Conflicts of Interest in Federal Acquisition Act,” the FAR Council is directed to expand the scope of rules relating to personal conflict of interest, including providing improved definitions and examples, and requiring the OFPP Administrator to issue policy to prevent personal conflicts of interest in certain type of federal functions.

Finally, in my June 2022 column, I mistakenly noted that the FAR Council acted in March 2022 to close out one of the oldest unresolved open FAR cases – also dealing with conflicts of interest. In fact, the FAR Council withdrew the proposed rule without further action on March 19, 2021. I regret the error.

I doubt we have seen or heard the last of these GAO bid protests on family conflicts of interest or reached the end of the legislation on organizational or personal conflicts of interest. I’ll use future editions of this column to keep you up to date.

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