TITLE: B-298870.3; B-298870.4, Axiom Resource Management, Inc., July 12, 2007
BNUMBER: B-298870.3; B-298870.4
DATE: July 12, 2007
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B-298870.3; B-298870.4, Axiom Resource Management, Inc., July 12, 2007
DOCUMENT FOR PUBLIC RELEASE
The decision issued on the date below was subject to a GAO Protective
Order. This redacted version has been approved for public release.
Decision
Matter of: Axiom Resource Management, Inc.
File: B-298870.3; B-298870.4
Date: July 12, 2007
James S. DelSordo, Esq., Argus Legal, LLC, for the protester.
LTC Frank A. March, Department of the Army, for the agency.
Linda C. Glass, Esq., and Ralph O. White, Esq., Office of the General
Counsel, GAO, participated in the preparation of the decision.
DIGEST
Contracting agency reasonably determined that the issuance of a task order
to a vendor to provide program management support services to the TRICARE
Acquisitions Directorate did not create an impermissible organizational
conflict of interest (OCI) where the agency reviewed both existing and
future support requirements, and concluded that no OCI exists for current
support contracts, that any potential future OCIs can be mitigated and
that the awardee here will be barred from competing as a prime contractor
or subcontractor on future support contracts to provide healthcare
benefits directly to TRICARE benefit recipients.
DECISION
Axiom Resource Management, Inc. protests the issuance of a task order to
Lockheed Martin Federal Healthcare, Inc. under request for quotations
(RFQ) No. 154160, issued by the United States Army Medical Research
Acquisition Activity (USAMRAA), for program management support services
for the TRICARE Acquisitions Directorate, including support for the
TRICARE Office of General Counsel and TRICARE transition and integration
contracts. The protester argues that the agency failed to recognize, or
properly mitigate, an alleged organizational conflict of interest (OCI)
created by award[1] to Lockheed, erred in deciding not to hold
discussions, and conducted an unreasonable evaluation.
We deny the protests.
BACKGROUND
TRICARE is a managed health care program implemented by the Department of
Defense (DoD) for active duty and retired members of the uniformed
services, their families and survivors. See generally 32 C.F.R. sect.
199.17 (2006). TRICARE is a blend of the military's direct care system of
hospitals and clinics (known as Military Treatment Facilities) and the
Civilian Health and Medical Program of the Uniformed Services. The TRICARE
Management Activity (TMA) is the DoD office that directs the TRICARE
program.
The RFQ, issued July 30, 2006, anticipated the issuance of a fixed-price
task order under the vendors' Federal Supply Schedule contracts; the task
order would be for a base year with four 1-year option periods. The RFQ
advised that the selection decision would be made on a best value basis
considering the following five evaluation factors (in descending order of
importance): technical approach, experience, quality control approach,
past performance and price/cost. With respect to the past performance
evaluation factor, vendors were required to provide a list of at least
three, but no more than five references, for past and present contracts.
The RFQ further provided that the agency did not anticipate holding
discussions before selecting a vendor.
The RFQ provided extensive guidelines regarding potential OCIs.
Specifically the solicitation stated that for purposes of identifying,
avoiding or mitigating against OCIs, the TMA had categorized its
non-purchased care requirements[2] into the following three broad
categories:
Category 1: TMA Internal Support: Services which, by their very nature,
give the Contractor access to extensive data about the contracts of all
other TMA contractors.
Category 2: Program Management Support: Services which assist TMA in
planning and managing its activities and programs. This includes, for
example: requirements analysis, acquisition support, budget planning and
management, business process reengineering, program planning and
execution support, and independent technical management support.
Category 3: Product Support: Services or end items required to meet the
mission requirements of TMA's non-purchased care activities and
programs. This includes, for example: concept exploration and
development; system design; system development and integration; COTS
procurement and integration; internal development testing; deployment;
installation; operations; and maintenance.
RFQ sect. 1.4.
Moreover, the RFQ identified this procurement as a category 2 requirement
and advised that a contractor's participation in more than one of these
support categories could give rise to an unfair competitive advantage OCI
resulting from access to advance acquisition planning, source selection
sensitive, or proprietary information. Accordingly, the RFQ required that
any offeror/contractor which currently provides, or has previously
provided, support in a different category must provide a comparative
analysis of the potential new work under category 2 and all current and
previous work performed in support of TMA under the other two categories,
as well as an OCI avoidance or mitigation plan. In addition, the RFQ
advised that a similar analysis would be required if the successful
contractor, in the future, competed for work in a different support
category. RFQ App. A.
Quotations were received from Lockheed and Axiom. With respect to the past
performance evaluation of Axiom, the agency contacted three of Axiom's
references, two of which provided positive comments, which led to an
overall rating of good. The third reference, the contracting officer's
(CO) representative for the current procurement and the incumbent
contract, recused himself from submitting a past performance evaluation,
because of a personal conflict of interest. Thus, the agency's evaluation
of Axiom's past performance included information from only two of its
references, but included no information about its performance as the
incumbent providing these services.
At the conclusion of the evaluation, the agency assessed these two
quotations as follows:
+------------------------------------------------------------------------+
|Evaluation Factor | Axiom | Lockheed |
|-----------------------------+---------------------+--------------------|
|Technical Approach | Acceptable | Exceptional |
|-----------------------------+---------------------+--------------------|
|Experience | Exceptional | Exceptional |
|-----------------------------+---------------------+--------------------|
|Quality Control Approach | Exceptional | Exceptional |
|-----------------------------+---------------------+--------------------|
|Past Performance | Good | Acceptable |
|-----------------------------+---------------------+--------------------|
|OVERALL RATING | GOOD | EXCEPTIONAL |
+------------------------------------------------------------------------+
COs Statement of Facts, Apr. 27, 2007, at 1.
Lockheed's initial quotation was priced at $20.2 million and Axiom's at
[DELETED]. By amendment dated September 11, 2006, the agency reduced the
maximum period of performance from 5 years to 3 years, and requested
revised quotations from both vendors. Lockheed submitted a revised
quotation of $11.9 million and Axiom's revised quotation was [DELETED].
Since Lockheed received the highest technical rating and submitted the
lowest-priced quotation, the task order was issued to Lockheed on
September 19.
On September 19, Axiom, the incumbent contractor, filed a protest with our
Office arguing that the evaluation was improper and that the agency failed
to properly mitigate an OCI caused by award to Lockheed. On October 31, we
dismissed the protest after the agency advised our Office that it intended
to conduct further analysis of the potential OCI issues, and issue a new
source selection decision.
During the agency's review of potential OCI issues, including its review
of Lockheed's prior and existing contracts, as well as the company's OCI
representations here, the CO noted that this award could provide Lockheed
with unequal access to information, including procurement sensitive
information and certain proprietary information belonging to current TMA
contractors and future offerors. The CO concluded that an OCI would arise
if Lockheed decided to participate in any future acquisitions for
purchased care services managed by the TMA. Agency Report (AR), Tab 27,
OCI Analysis, Dec. 6, 2006, at 2. In this regard, the CO decided that
although there is a potential future OCI, Lockheed's mitigation plan
provided sufficient protection to the government to allow award to
Lockheed. Id. On December 6, the CO issued a new source selection decision
again selecting Lockheed's highest-rated, lowest-priced quotation. AR, Tab
36, Award Memorandum.
On December 7, Axiom again protested the award, arguing that its quotation
was misevaluated, and raising more detailed challenges regarding the OCI
issue. In response, the agency advised our Office that, as a result of
Axiom's additional concerns with respect to the OCI issue, the agency
would again revisit its OCI review. We therefore dismissed this protest a
second time on January 16, 2007.
In its most recent OCI review, the agency conducted an examination of
Lockheed's involvement in providing both purchased care, and non-purchased
care, support services. With respect to non-purchased care support
services, the agency reviewed all non-purchased care category 1, 2, and 3
support contracts (as defined in the solicitation provision quoted
earlier) held by Lockheed. The CO noted that Lockheed does not currently
hold any category 1 non-purchased care support contracts, and the company
has represented that it will not seek such contracts in the future. AR,
Tab 35, CO's OCI Determination, Apr. 2, 2007, at 5. With respect to
non-purchased care category 2 and 3 support work, the CO determined that
Lockheed's current work does not provide access to extensive data
concerning TMA's other non-purchased care contractors. Id. The CO
explained that the agency had reviewed all the approved mitigation plans
Lockheed submitted to mitigate any OCI for non-purchased care contracts,
including a thorough OCI analysis of the Theater Medical Information
Program (TMIP) contract held by a different Lockheed subsidiary. Id. Based
on this analysis, the CO decided that no OCI arises by awarding Lockheed
this contract for category 2 non-purchased care support services. Id.
With respect to purchased care services, the agency concluded that a
potential "unequal access to information" OCI could arise as a result of
awarding this contract to Lockheed. The CO states that the agency has
mitigated the potential OCI by advising Lockheed that it will not be
eligible to compete on any new requirements for purchase care contracts.
Id. at 3. As a result of this analysis, on April 2, the award to Lockheed
was reinstated. Axiom subsequently filed this protest with our Office on
April 3.
As in its previous protests, Axiom alleges that the agency failed to
properly mitigate certain conflicts caused by award to Lockheed, erred in
deciding not to hold discussions, and conducted an unreasonable evaluation
of its quotation.
DISCUSSION
OCI Issues
Axiom contends that the solicitation stipulates that an OCI will arise
where a TMA vendor currently provides either category 1 or 3 services, and
seeks to perform category 2 services, like those required here. Axiom
maintains that Lockheed, by virtue of its involvement in performing these
category 2 services, will gain access to program information, such as,
architectural design and operational systems, long before projects are
listed by the government for category 3 services. Axiom also contends that
Lockheed will gain unequal access to nonpublic information, such as,
planning documents for future health care systems and privileged access to
existing acquisition program efforts. Axiom argues that this access would
allow Lockheed to have a competitive advantage on new initiatives and
future work. It is also Axiom's belief that, given Lockheed's substantive
contributions to the TMIP, including product development, any OCI cannot
be resolved through mitigation plans.
COs are required to identify and evaluate potential conflicts of interest
as early in the acquisition process as possible, and to avoid, neutralize
or mitigate potential significant conflicts of interest so as to prevent
an unfair competitive advantage or the existence of conflicting roles that
might impair a contractor's objectivity. Federal Acquisition Regulation
(FAR) sections 9.504(a), 9.505; PURVIS Sys., Inc., B-293807.3, B-293807.4,
Aug. 16, 2004, 2004 CPD para. 177 at 7. The situations in which OCIs
arise, as addressed in FAR subpart 9.5 and the decisions of our Office,
can be broadly categorized into three groups. The first group consists of
situations in which a firm, as part of its performance of a government
contract, has in some sense set the ground rules for the competition for
another government contract by, for example, writing the statement of work
or the specifications. FAR sect. 9.505-2; Aetna Gov't Health Plans, Inc.:
Found. Health Fed. Servs., Inc., B-254397.15 et al., July 27, 1995, 95-2
CPD para. 129 at 13. The second group, which Axiom alleges is relevant
here, consists of "unequal access to information" situations in which a
firm has access to nonpublic information as part of its performance of a
government contract and where that information may provide the firm an
unfair competitive advantage in a later competition for a government
contract. FAR sect. 9.505-4; Aetna Gov't Health Plans, Inc.; Found. Health
Fed. Servs., Inc., supra, at 12. The third group, which reflects concerns
about a firm's "impaired objectivity," consists of cases where a firm's
work under one government contract could entail its evaluating itself or a
related entity, thus undermining the firms's ability to render impartial
advice to the government. FAR sect. 9.505-3; Aetna Gov't Health Plans,
Inc.; Found. Health Fed. Servs., Inc., supra, at 13.
The responsibility for determining whether an actual or apparent conflict
will arise, and to what extent a firm should be excluded from the
competition, rests with the contracting agency. RMG Sys., Ltd., B-281006,
Dec. 18, 1998, 98-2 CPD para. 153 at 4. COs are to exercise "common sense,
good judgment, and sound discretion" in assessing whether a significant
potential conflict exists and in developing appropriate ways to resolve
it. FAR sect. 9.505; Epoch Eng'g, Inc., B-276634, July 7, 1997, 97-2 CPD
para. 72 at 5. We will not sustain a protest of a contracting officer's
determinations in this area except where they are shown to be
unreasonable. SRS Techs., B-258170.3, Feb. 21, 1995, 95-1 CPD para. 95 at
9.
Before turning to the specifics of Axiom's challenges, we note two areas
where this protest appears to be based on incorrect assumptions. First,
Axiom seems to argue that if a conflict can be shown to exist, the agency
cannot properly make award to that entity. As set forth above, the FAR
specifically anticipates that there will be instances when a CO can
properly neutralize or mitigate conflicts, see FAR sect. 9.504(a); there
is no basis to assume that Lockheed must be automatically disqualified as
a result of the conflicts raised here. Second, we note that many of the
conflicts identified by Axiom in its pleadings involve conflicts that
arise not with this award, but with subsequent awards. In our view,
conflicts that might arise from subsequent awards can properly be analyzed
as part of those subsequent award decisions, and need not be addressed at
this juncture. See Overlook Sys. Techs., Inc., B-298099.4, B-298099.5,
Nov. 28, 2006, 2006 CPD para. 185 at 18.
With respect to Axiom's specific arguments, the protester contends that
the agency's analysis of the OCI issue here is inadequate because it is
based on Lockheed's "self-serving and totally unauditable mitigation
plan," which the protester contends will not resolve the OCI issue.
Protester's Comments at 15. The protester also generally disagrees with
the CO's determination about whether actual or potential OCIs exist. For
the reasons set forth below, we think the agency did an extensive analysis
of Lockheed's comparative analysis and mitigation plan, and reasonably
reviewed other relevant documentation, such as Lockheed's current
contracts and the requirements of the solicitation.[3]
As previously stated, at the start of this procurement TMA categorized all
its non-purchased care requirements into three broad categories for
purposes of identifying, avoiding or mitigating against OCIs. The earlier
award decision document concluded that Lockheed's involvement in providing
both purchased care and non-purchased care support services would give the
company unequal access to data concerning TMA's other non-purchased care
contractors. AR, Tab 26, Award Memorandum, Dec. 6, 2007, at 7. The CO
further concluded that a subsequent OCI would arise if Lockheed were to
compete on any acquisitions for purchased care services, such as managed
care, dental care, retail pharmacy or mail order pharmacy services.
However, the CO decided that, despite the possibility of a future OCI,
Lockheed had provided a mitigation plan that provided sufficient
protection of the government interests to allow the current award to
Lockheed. Id.
As a result of Axiom's second protest, the agency revisited and revised
its earlier views, and performed a more detailed evaluation of the OCI
issue--including a review of a comparative analysis prepared by Lockheed
which set forth the procedures the firm would use to avoid or mitigate any
real or perceived OCIs associated with this work.
With respect to the contracts the agency terms "non-purchased care"
support contracts, the agency noted that Lockheed currently holds no
category 1 contracts, and the company states that it will not seek
category 1 work in the future. Additionally, the agency reviewed all prior
and existing TMA contracts with Lockheed. Specifically, the agency noted
that Lockheed employees would be placed in several TMA offices (such as
the Office of General Counsel and the acquisitions office), and it
analyzed both the type of data to which the company would have access, and
the effect this access might have on other TMA contracts. AR, Tab 35, CO
OCI Determination. The agency also reviewed the procurement request and
the OCI certification completed by Lockheed, the revised statement of
work, relevant portions of Lockheed's quotation describing pertinent work
and experience as well as the resumes of the firm's key personnel. This
review also encompassed other relevant disclosure and representation
statements, and other OCI-related documentation, such as Lockheed's risk
mitigation plan. Based upon this detailed analysis, the agency concluded
that Lockheed would not have access to extensive data concerning other
non-purchased care TMA contractors, and that an OCI does not arise for
non-purchased care services under this contract. Further, the agency
specifically concluded that should a future procurement raise the
possibility of an OCI, the matter can be addressed at that time.
With respect to "purchased care" contracts, the agency reached a different
conclusion. In this area, the agency concluded that there was a potential
for future OCIs involving contracts for purchased care services because
contractor employees performing the work here would likely have access to
extensive data pertaining to purchased care contractors. This access
includes agency source selection information, contract administration
information, contract performance information and contract litigation
information for purchased care procurements. The agency reports that it
will avoid these potential conflicts by barring Lockheed from competing
for any purchased care contracts. AR, Tab 36, Award Memorandum.
In our view, once an agency has given meaningful consideration to
potential conflicts of interest, our Office will not sustain a protest
challenging a determination in this area unless the determination is
unreasonable or unsupported by the record. Alion Science & Tech. Corp.,
B-297022.4, B-297022.5, Sept. 26, 2006, 2006 CPD para. 146 at 8; SRS
Techs., supra. In this regard, COs are expected to exercise "common sense,
good judgment, and sound discretion" in assessing whether a potential
conflict exists and in developing appropriate ways to address it. FAR
sect. 9.505. While the protester disagrees with the agency's
determinations here, we have reviewed the extensive analysis and
comprehensive approach used to addressing any conflicts that may arise,
and we find no basis to conclude that the contracting officer's
determination was unreasonable.[4]
Award Without Discussions
Axiom next argues that the agency erred in not opening discussions here,
and specifically, in not advising the company that the evaluators viewed
its price as overstated. We disagree. First, the solicitation here
expressly provided for award without discussions; in such cases, an agency
need not open discussion unless they are determined to be necessary. See
Sierra Military Health Servs., Inc.;Aetna Gov't Health Plans, B-292780 et
al., Dec. 5, 2003, 2004 CPD para. 55 at 6-7 n.5; Facilities Mgmt. Co.,
Inc., B-259731.2, May 23, 1995, 95-1 CPD para. 274 at 8. In addition,
Axiom's quotation received an overall rating of good, including a rating
of acceptable for its technical approach, and a rating of good for past
performance; there were no weaknesses or deficiencies identified by the
agency. On this record, we think the agency reasonably concluded it did
not require further information to determine which quotation represented
the best value to the government.
Evaluation Issues
Finally, Axiom argues that the agency's evaluation of its proposal under
the technical factor, and the agency's assessment of its past performance,
were unreasonable. As mentioned above, Axiom's quotation received an
overall rating of good, including a rating of acceptable for its technical
approach, and a rating of good for past performance. Axiom contends that
since, according to the CO, its quotation had no weaknesses, other than
that its costs were allegedly overstated, it should have received the
highest available technical rating, rather than a rating of acceptable.
While the agency agrees that Axiom submitted a good quotation with no
weaknesses, and agrees the technical quotation satisfactorily addressed
how Axiom proposed to perform the statement of work, it counters that
there was nothing about Axiom's quotation that warranted a rating higher
than acceptable. Based on our review of the record, we have no basis to
conclude that the agency's evaluation of Axiom's quotation under the
technical factor was unreasonable.
Axiom also protests its past performance rating of good. It notes that as
the incumbent providing these services, it has never received any negative
feedback concerning its performance. Through the course of this protest,
Axiom learned that its reference for the current contract elected to
recuse himself because of an apparent conflict of interest. Axiom contends
that it should have been notified of the recusal and been given the
opportunity to provide another reference or have another TRICARE manager
provide a reference.
While we have concerns about how the agency handled this evaluation of
past performance,[5] we think the record shows that Axiom cannot establish
that it was prejudiced by the agency's actions. Even if Axiom's past
performance rating were adjusted upward to a rating of exceptional, its
quotation would, at best, be viewed as essentially equal to Lockheed's.[6]
In this regard, we note that the evaluation factors were listed in
descending order of importance, and past performance was listed last among
the rated factors (price was not rated). In the situation where quotations
are reasonably regarded as being essentially equal technically, price
becomes the determining factor in making an award, notwithstanding that
the evaluation criteria assigned price less importance than technical
factors. See Language Serv. Assocs., Inc., B-293041, Dec. 22, 2003, 2004
CPD para. 6 at 5. Given Lockheed's lower price, we have no reason to
conclude that Axiom's, at best, equally-rated, but higher-priced quotation
would have received the award here.[7] This is especially true, given that
Axiom does not specifically challenge the evaluation of Lockheed's
quotation.
The protest is denied.
Gary L. Kepplinger
General Counsel
------------------------
[1] We recognize that this protest involves an RFQ; however, the agency
throughout its procurement record uses award language to refer to its
issuance of a task order. For consistency with the underlying record, we
will refer to the issuance of this task order as an award.
[2] Throughout the record here, including the solicitation and the OCI
analyses, the agency draws a distinction between what it terms "purchased
care" and "non-purchased care" support requirements. In the agency's
nomenclature, non-purchased care requirements are support services needed
to help the agency fulfill its mission (such as requirements analysis,
identified in category 2 above); purchased care requirements refer to
medical care and services (such as dental services, or prescription mail
benefits) that are provided directly to recipients of TRICARE benefits.
See Contracting Officer's Statement of Facts, Apr. 27, 2007, at 6, 8-9;
Agency Memorandum of Law, May 3, 2007, at 17. While we recognize that
these terms are somewhat unusual, we adopt them for purposes of this
review of the agency's analysis.
[3] Among other things, Axiom argues that the agency improperly allowed
Lockheed to include a firewall as one element of its OCI mitigation plan;
in this regard, Axiom contends that any decision accepting the use of this
firewall will violate our prior decision in Aetna Gov't Health Plans,
Inc.: Found. Health Fed. Servs., Inc., supra. The protester misinterprets
our prior decision. In Aetna, we expressed concerns about the use of a
firewall to address an impaired objectivity-type OCI; at the same time, we
explained that a mitigation plan that includes a firewall may be
sufficient to address an "unequal access to information"-type OCI, which
is the type of OCI at issue here. See Aetna Gov't Health Plans, Inc.:
Found. Health Fed. Servs., Inc., supra, at 16. Moreover, we think the
agency has reasonably concluded that the mitigation plan prepared by
Lockheed will be adequate to address the unequal access to information OCI
alleged here.
[4] The protester also argued in a supplemental filing that the agency's
response to a document request during the course of this protest
established that the agency's OCI review was inadequate. Specifically,
when the protester sought additional documentation, such as other Lockheed
contracts, the agency advised (even as it provided the documents) that
these documents were not in the CO's possession when the agency submitted
its report. Axiom contends that if the CO did not possess these documents,
he could not have reviewed them. In answer, the agency advises that one of
the contracts provided was expired, and the agency's review relied upon
the follow-on contract. In another case, the contract provided in response
to the supplemental document request was a follow-on contract, and the
review was based on a description of the services provided under that
contract. Based on our review, we think the record here shows that the
agency performed an extensive review of the OCI issue, including a
detailed analysis of the relevant documents, and we have seen no basis to
conclude that this review was, in any way, unreasonable.
[5] For the record, we are troubled by the agency's decision to forego
evaluating Axiom's prior performance as the incumbent providing these
services. While the CO's representative may have appropriately recused
himself from the evaluation, someone at TRICARE could have provided an
assessment of Axiom's performance providing this work. Axiom contends that
it has performed well, and has never received any negative performance
feedback; the agency does not contest this representation. In our view,
this information was simply too close at hand for TRICARE to reasonably
ignore it in conducting this evaluation. International Bus. Sys., Inc.,
B-275554, Mar. 3, 1997, 97-1 CPD para. 114 at 5; see also Johnson Controls
Sec. Sys., LLC, B-296490.3 et al., Mar. 23, 2007, 2007 CPD para. 100 at
3-5.
[6] In fact, even after raising Axiom's past performance, and overall,
ratings to exceptional, Lockheed's quotation could yet be seen as the
stronger of the two quotations given its ratings of exceptional under the
three more-heavily weighted evaluation factors--technical, experience,
quality control approach.
[7] Our Office will not sustain a protest unless the protester
demonstrates a reasonable possibility of prejudice, that is, unless the
protester demonstrates that, but for the agency's actions, it would have
had a substantial chance of receiving the award. McDonald-Bradley,
B-270126, Feb. 8, 1996, 96-1 CPD para. 54 at 3.