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Competitive sourcing
Army Lawyer, Jan-Feb, 2003
Does competitive sourcing ever have an "off" year? The rules of competitive sourcing remain in constant flux because of the high stakes in jobs and dollars, and the broad initiative for practitioners in this field. The process of conducting public-private cost-comparison studies under Office of Management and Budget (OMB) Circular A-76 (1) and the Revised Supplemental Handbook (RSH) (2) is certainly as much a political issue as a legal issue. Competitive sourcing continues to be a topic of important concern to many contract attorneys.
The Never-Ending Tale of Jones-Hill Joint Venture
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Some cost-comparison studies never seem to end; instead, they go on like bad daytime soaps, providing an unending stream of drama and suspense, but no finality. One such example is Jones/Hill Joint Venture. At the time of writing of last year's Year in Review, (3) the GAO had decided the issue of Jones/ Hill's entitlement to protest costs, including attorneys' fees, for an earlier protest in which the agency took corrective action. (4) The Navy then reviewed its original determination that it would be more economical to perform its own base operations, real property maintenance, and operations services for the Naval Air Station, Lemoore (NASL), California, using government employees rather than contracting with Jones/Hill for these services. (5) When the agency's review ended with the same cost-comparison determination, the Jones/Hill Joint Venture protest returned with a vengeance. (6)
Jones/Hill's protest raised several allegations, including some that it had raised in its original protest action. (7) The critical and novel issue, however, was Jones/Hill's contention that the agency's use of both a private-sector consultant and a Navy employee to prepare the solicitation s performance work statement (PWS) and to draft the in-house proposal constituted an impermissible conflict of interest. This occupied the bulk of the GAO's decision.
As one of the first steps in the NASL cost-comparison study process, the Navy organized a commercial activities (CA) team to plan the study. (8) Included among the CA team's functions was the development of the PWS, which represented the agency performance requirements that it required both the private sector and in-house proposals to meet. Several CA team members--including the CA team leader and employees of the consultant contractor--subsequently became members of the most efficient organization (MEO) team responsible for developing the in-house management plan. In its protest, Jones/Hill argued that the Navy employee and private-sector consultants who served in these multiple roles had a conflict of interest which violated applicable standards of conduct and gave the MEO team an unfair competitive advantage. (9) The GAO agreed. (10)
In setting out the standards of conduct that apply to government business, the GAO noted that the Federal Acquisition Regulation (FAR) requires agencies to conduct such business in a manner above reproach. (11) While the FAR does not provide specific guidance regarding situations where job positions or relationships with particular government organizations create conflicts of interest for government employees, the GAO noted that FAR subpart 9.5 addressed analogous situations involving contractor organizations. (12) Here, the FAR broadly categorizes organizational conflicts of interest into three groups: "unequal access to information" cases, (13) "biased ground rules" cases, (14) and "impaired objectivity" cases. (15) The GAO found that, "given the use of the competitive system in Circular A-76 studies and the MEO team's status as essentially a competitor in the study," the FAR provisions at subpart 9.5 served as useful guidance in determining the presence of conflicts of interest. (16)
Because the facts were not in dispute, the GAO also determined that the record was "consistent with the circumstances attendant to both 'unequal access to information' and 'biased ground rules' conflicts of interest." (17) Finding no reason to treat government employee conflicts of interest differently than contractor-employee conflicts of interest, the GAO concluded that "the appearance of impropriety resulting from the conflicts of interest here has tainted the integrity of the process," (18) and sustained this part of Jones/Hill's protest. Regarding the resulting remedy, the GAO recommended that the agency essentially start over--that it should issue a new PWS, drafted by individuals who would not subsequently draft the in-house management plan; prepare a new in-house management plan; solicit new proposals for private-sector offerors; and conduct a new cost comparison. (19)
Jones/Hill Joint Venture--One More Time?
The impact of the Jones/Hill decision, including the GAO's recommendation for an appropriate remedy, stood to affect not only the Navy's cost-comparison study at NASL, but as many as 160 ongoing agency competitive sourcing studies. The Navy, therefore, requested reconsideration of the GAO's decision to the extent that it concluded that a conflict of interest existed. (20) The GAO affirmed its decision, but it modified the recommended corrective action to apply the conflict of interest portion of the decision prospectively only. (21)
