Conflicts of Interest & Breaches of Confidentiality as Threats to the Integrity of Procurement

As a recent big acquisition by the Department of Education (ED) for IT services shows, GAO takes the integrity of the procurement system very seriously. The case sheds light on how agencies and contractors should respond when they believe the integrity of the procurement process may be threatened. Specifically, contractors may need to self-report breaches of the integrity rules, affected competitors need to act promptly to preserve their rights, and agencies must investigate problems and take appropriate action to ensure a fair procurement.

 

The Department of Education (ED) sought a recompetition of its IT service needs. Dell, the incumbent, had previously fulfilled ED’s IT needs in a single contract for the last 10 years. ED decided to move to multiple orders, so Dell and various competitors all bid for the first of several new deals.

 

When A Competitor’s Documents Are Leaked

During the acquisition, one competitor, SRA International, self-reported to ED that they possessed information they should not have had. It turns out that a subcontractor working with SRA possessed copies of two past bid proposals by Dell related to ED’s prior contract. And these weren’t insignificant documents. After all, they contained current pricing, outlined staffing strategies, and detailed levels of efforts that were part of both the old contract and the new task order.

The notified Dell about the breach. Dell knew that had to act fast. Once a contractor learns about a potential violation of the Procurement Integrity Act, they have 14 days to report it or else forfeit the right to protest the infraction to GAO. Acting decisively, Dell wrote back to ED confirming that they considered possession of this information to be a violation of procurement integrity rules.

Meanwhile, ED investigated. It took them only two weeks to reach a determination that the violation did not impact the procurement and allow SRA to resume competing for the contract. When Dell learned that the party in possession of its information might still be in the competition, it filed a protest at GAO.

In the protest, Dell theorized as to how SRA’s subcontractor had come to improperly possess their proposals. An executive at the subcontractor had previously worked with another contractor hired by ED for advisory and assistance services. On that assignment, the executive got access to Dell’s proposals, and apparently retained them. ED’s investigation never looked into this issue, and so GAO found Dell’s theory plausible.

 

How One Violation of Procurement Integrity Unearthed Another

Given the breach, Dell raised the possibility of an organizational conflict of interest, as well an integrity violation. Specifically, its competitor had unequal access to information. GAO agreed and held in favor of the protestor and against the agency on both the issue of the breach and the organizational conflict. GAO determined that ED’s analysis of the impact of the breach was too superficial. The proposals in SRA’s possession were relevant to the competition, and held significant utility. Ultimately, the GAO held that there wasn’t a thorough examination as to what happened with Dell’s proposals, how they were used, who saw them, and what the impact was on the procurement. And there was no analysis of the apparent organizational conflict of interest.

The lessons learned from this case are twofold. First, when an agency learns of a procurement integrity violation, it needs to perform a thorough investigation and analysis. Here it appears ED prematurely decided the proposals were outdated and thus wouldn’t impact the procurement. Second, when a competitor learns of a procurement integrity violation, it needs to bring the violation promptly to the attention of the agency, or forfeit its right to protest that issue.

 

Recommendations for Contractors When it Appears Procurement Integrity is Threatened

The examples set for by both SRA and Dell are valuable. Deciding when you have to disclose problems like SRA did is tricky. Here, although they might ultimately be disqualified from this opportunity, they probably avoided serious collateral consequences. Likewise, Dell acted smartly in their swift response once the matter came to light. This case highlights that contractors should remain diligent in maintaining and policing procurement integrity.

 

Dell Services Federal Government, Inc., B-414461; B-414461.2 June 21, 2017

 

For more on this topic, listen to my interview with Tom Temin from Federal News Radio‘s “Federal Drive” here.

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