United States Court of Appeals
for the Federal Circuit
__________________________
PAI CORPORATION (DOING BUSINESS AS
PROFESSIONAL ANALYSIS),
Plaintiff-Appellant,
v.
UNITED STATES,
Defendant-Appellee,
AND
INNOVATIVE TECHNOLOGY PARTNERSHIPS,
LLC,
Defendant.
__________________________
2010-5003
__________________________
Appeal from the United States Court of Federal
Claims in Case No. 09-CV-411, Senior Judge John P.
Wiese.
__________________________
Decided: August 5, 2010
__________________________
CYRUS E. PHILLIPS IV, of Arlington, Virginia, argued
for plaintiff-appellant.
CHRISTOPHER L. KRAFCHEK, Trial Attorney, Commer-
cial Litigation Branch, Civil Division, United States
PAI CORP v. US 2
Department of Justice, of Washington, DC, argued for
defendant-appellee. With him on the brief were TONY
WEST, Assistant Attorney General, JEANNE E. DAVIDSON,
Director, and MARTIN F. HOCKEY, JR., Assistant Director.
__________________________
Before BRYSON, GAJARSA, and PROST, Circuit Judges.
GAJARSA, Circuit Judge.
This is a bid protest case filed by a losing bidder com-
plaining of the unfairness of the contract bidding process.
PAl Corporation (“PAI”) filed a bid protest in the Court of
Federal Claims (“trial court”) challenging the award of a
support services contract to Innovative Technology Part-
nerships, LLC (“ITP”) by the Department of Energy’s
Office of Secure Transportation. PAl argues that the
award of the contract to ITP was unlawful because the
Department of Energy failed to mitigate a potential
organizational conflict of interest during the procurement,
which allegedly provided a certain bidder an unfair ad-
vantage in submitting its bid. Specifically, PAl alleges
that ITP held an unfair competitive advantage over other
offerors by gaining access to non-public informa-
tion through: (1) ITP’s proposed employment of the pre-
sent incumbent contractor, Wackenhut Services, Inc.
(“Wackenhut”), as its subcontractor, and
(2) ITP’s concomitant performance as the au-
dits/assessment contractor under the Office of Secure
Transportation’s Program Office of Independent Over-
sight contract. The trial court found that the integrity of
the procurement was not compromised and entered judg-
ment in favor of the government based on the administra-
tive record. PAl Corp. v. United States, No. 09-cv-411,
2009 WL 3049213, at *11 (Fed. CI. 2009). PAI appeals to
this court. Because the trial court did not commit any
errors, as explained and set forth below, we affirm.
3 PAI CORP v. US
BACKGROUND
The Office of Secure Transportation (“OST”), a divi-
sion of the Department of Energy (“DOE”), is responsible
for the safe and secure transportation of all government-
owned nuclear weapons and materials. On December 13,
2007, DOE issued a “Sources Sought Synopsis” notice
seeking qualified small businesses capable of carrying out
certain OST support services. 1 In response to the Sources
Sought Synopsis notice, DOE received twenty responses
from interested bidders. After reviewing their statements
of capability, DOE determined that two or more small
businesses were capable of performing the required
services as outlined by the performance work statement.
DOE then designated the proposed procurement as a
“total small business set-aside” pursuant to 48 C.F.R. §
19.502-2.
On July 11, 2008, prior to the release of the final pro-
posed solicitation, DOE received an agency-level protest
from Global Engineering & Technology (“GET”) alleging
that the draft solicitation created an organizational
conflict of interest. Specifically, GET alleged that any
company partnering with the incumbent contractor,
1 The OST support services were identified in
the performance work statement as the following sixteen
task areas: (1) paramilitary training programs support;
(2) analysis, design, and development of training curricula
and training plans; (3) logistical support of OST pro-
grams; (4) property management; (5) equipment opera-
tors; (6) munitions support; (7) armorer support; (8)
mission related work; (9) shipping, receiving, tagging,
storage, and issuance of equipment and supplies;
(10) contractor transportation and utilization program;
(11) quality assurance program; (12) safety program; (13)
program and management analysis; (14) resources and
business management support; (15) fleet vehicle man-
agement support; and (16) safeguards and security.
PAI CORP v. US 4
Wackenhut, would have an unfair competitive advantage
because that company would gain unequal access to non-
public information as a result of Wackenhut’s perform-
ance of the prior OST support services contract. GET also
alleged that DOE failed to provide sufficient information
regarding the staffing levels necessary to support the
sixteen task areas outlined in the performance work
statement.
After consideration of GET’s protest, DOE determined
that GET could not protest the draft solicitation before it
had been approved for final release. However, in the
interest of promoting competition and to level the playing
field for all potential bidders, DOE agreed to provide
offerors with additional information regarding the former
OST support services contract, previously performed by
Wackenhut. Accordingly, DOE launched the OST support
services contract website to provide specific information to
the public regarding the procurement. The website
included the former OST support services contract that
was being performed by the incumbent contractor, Wack-
enhut. It also provided information regarding OST com-
mand structure, mission, logistics, property management,
and specialized training for OST Federal Agents. In
addition, DOE released a twelve-month overview of the
direct labor hours for each of the task areas and an esti-
mated training calendar required to implement the OST
support services.
On August 29, 2008, DOE issued a final competitive
contract solicitation to provide support services for OST.
The solicitation would result in a single indefinite-
delivery, indefinite-quantity cost-plus-award-fee type
contract for a base period of two years and two eighteen-
month option periods. The guaranteed minimum amount
of designated services under the contract was $3 million
and the maximum ordering limit was $95 million.
5 PAI CORP v. US
DOE received nine timely proposals from small busi-
nesses, including ITP, PAI, and Advanced Technologies
and Laboratories International, Inc. (“ATL”).
ITP’s proposal announced its intention to partner with
Wackenhut, the incumbent for the OST support services
contract, to perform the current OST contract.
The contracting officer conducted an initial review of the
proposals to determine whether they included all informa-
tion required by the solicitation. The contracting officer
also ensured that the organizational conflict of interest
disclosures submitted by the bidders revealed no actual or
potential conflicts. On December 22, 2008, the Source
Selection Authority selected ITP as the bidding offeror
that provided the best value to the government in terms
of cost and technical capabilities. On December 29, 2008,
the contracting officer awarded the contract to ITP.
On January 12, 2009, ATL filed a protest with the
Government Accountability Office alleging (1) organiza-
tional conflicts of interest involving ITP, Wackenhut, and
DOE that were not properly mitigated or disclosed prior
to the procurement, (2) improper evaluation of ATL’s and
ITP’s proposed costs, and (3) improper evaluation of ITP’s
and ATL’s technical proposals. In response to ATL’s
protest, an Integrated Project Team of DOE agreed to
take corrective action to clarify and resolve, where appro-
priate, the raised organizational conflict of interest issues,
the cost realism evaluation, and the past performance
evaluation. The Integrated Project Team further agreed
to document its findings and issue a new source selection
decision. Accordingly, ATL withdrew its protest on Feb-
ruary 19, 2009. As part of its corrective action, the Inte-
grated Project Team reevaluated proposals for past
performance and cost and reconsidered potential organ-
izational conflicts of interest.
PAI CORP v. US 6
In response to ATL’s protest, the contracting officer
completed an additional comprehensive organizational
conflict of interest investigation and provided her conclu-
sions in a memorandum entitled “Organization Conflict of
Interest Analysis,” issued on June 8, 2009. First, the
contracting officer noted that she had reviewed the offer-
ors’ submissions regarding any potential organizational
conflicts of interest and determined that no significant
potential conflict existed. In particular, the contracting
officer determined that, although ITP and Wackenhut had
access to non-public information through their existing
contracts, such information had no competitive value in
the present procurement. The contracting officer also
found that, with respect to ITP, the information to which
it had access involved constantly changing requirements,
was quickly outdated, and was therefore of little value.
With respect to Wackenhut, the contracting officer also
determined that the information to which it had access
was not relevant to the requirements addressed in the
solicitation’s first two sample task orders. In the case of
the third sample task order, the contracting officer found
that Wackenhut’s access to non-public information had
been effectively offset by other information disclosed in
the solicitation.
Next, the contracting officer noted that DOE’s re-
leased information was sufficient to guide offerors in
preparing an effective technical proposal. Thus, the
contracting officer concluded that no significant potential
conflict existed that would preclude an award to ITP for
the OST support services contract. On June 4, 2009, the
Integrated Project Team briefed the Source Selection
Authority which then selected ITP because the company’s
bid represented the best value to the government due to
its highest technical rating and lowest probable cost.
7 PAI CORP v. US
Shortly thereafter, PAI filed a complaint in the Court
of Federal Claims alleging, inter alia, that the integrity of
the procurement was compromised by an alleged unequal
access to information relating to an organizational conflict
of interest. 2 The parties filed cross-motions for judgment
on the administrative record. The Court of Federal
Claims denied PAI’s motion, granted the government’s
and ITP’s motions, and dismissed PAI’s complaint. See
PAl Corp., 2009 WL 3049213, at *11. PAI timely ap-
pealed to this court. We have jurisdiction to review final
decisions of the Court of Federal Claims pursuant to
28 U.S.C. § 1295(a)(3).
DISCUSSION
We review rulings on motions for judgment on the
administrative record de novo. Norfolk Dredging Co. v.
United States, 375 F.3d 1106, 1108 (Fed. Cir. 2004). We
also review factual findings based on the administrative
record for clear error. Blue & Gold Fleet, L.P. v. United
States, 492 F.3d 1308, 1312 (Fed. Cir. 2007). In a bid
protest case, an agency’s decision to award a contract
must be upheld unless it is “arbitrary, capricious, an
abuse of discretion, or otherwise not in accordance with
law.” Bannum, Inc. v. United States, 404 F.3d 1346, 1351
(Fed. Cir. 2005). The court must determine whether “(1)
the procurement official’s decision lacked a rational basis;
or (2) the procurement procedure involved a violation of
regulation or procedure.” Weeks Marine, Inc. v. United
States, 575 F.3d 1352, 1358 (Fed. Cir. 2009).
Contracting officers “are entitled to exercise discretion
upon a broad range of issues confronting them in the
procurement process.” Impresa Construzioni Geom.
2 PAI also challenged at the trial court DOE’s
technical and price evaluation; however, those issues are
not raised on this appeal.
PAI CORP v. US 8
Domenico Garufi v. United States, 238 F.3d 1324, 1332
(Fed. Cir. 2001) (internal quotation marks omitted).
Accordingly, procurement decisions are subject to a
“highly deferential rational basis review.”
CHE Consulting, Inc. v. United States, 552 F.3d 1351,
1354 (Fed. Cir. 2008) (internal quotation marks omitted).
Applying this highly deferential standard, the court must
sustain an agency action unless the action does not
“evince[ ] rational reasoning and consideration of relevant
factors.” Advanced Data Concepts, Inc. v. United States,
216 F.3d 1054, 1058 (Fed. Cir. 2000) (alterations added).
The issue before us is whether an organizational con-
flict of interest is so pervasive as to have created an
advantage to one bidder over the others, and whether the
contracting officer failed to exercise proper discretion and
to follow proper procedures in making the determination
that no organizational conflict of interest existed. The
Federal Acquisitions Regulations (“FAR”) recognize that
“the identification of [organizational conflicts of interest]
and the evaluation of mitigation proposals are fact-
specific inquiries that require the exercise of considerable
discretion.” Axiom Res. Mgmt. v. United States, 564 F.3d
1374, 1382 (Fed. Cir. 2009) (citing 48 C.F.R. § 9.505).
FAR requires that “[e]ach individual contracting situation
should be examined on the basis of its particular facts and
the nature of the proposed contract. The exercise of
common sense, good judgment, and sound discretion is
required in both the decision on whether a significant
potential conflict exists and, if it does, the development of
an appropriate means for resolving it.” 48 C.F.R. § 9.505
(2004); see also Axiom, 564 F.3d at 1382 (citing ARINC
Eng’g Servs. v. United States, 77 Fed. Cl. 196, 202 (2007)
(“The responsibility for determining whether such un-
equal access exists and what steps should be taken in
9 PAI CORP v. US
response thereto rests squarely with the contracting
officer.”)).
This court will not overturn a contracting officer’s de-
termination unless it is arbitrary, capricious, or otherwise
contrary to law. John C. Grimberg Co. v. United States,
185 F.3d 1297, 1300 (Fed. Cir. 1999). To demonstrate
that such a determination is arbitrary or capricious, a
protester must identify “hard facts”; a mere inference or
suspicion of an actual or apparent conflict is not enough.
C.A.C.I., Inc.-Fed. v. United States, 719 F.2d 1567, 1581
(Fed. Cir. 1983); Filtration Dev. Co., LLC v. United States,
60 Fed. Cl. 371, 380 (2004) (holding that the disappointed
bidder failed to provide “any factual basis” to establish the
existence of an organizational conflict of interest).
PAI’s sole argument of legal error on appeal is that
the contract award to ITP is unlawful because the con-
tracting officer failed to comply with the applicable FAR
in issuing the solicitation. Specifically, PAI alleges
that the contracting officer’s organizational conflict of
interest analysis violates 48 C.F.R. §§ 9.504(a) and
9.506(b). PAI asserts that, in order to comply with these
regulations, the contracting officer is required to (1)
analyze any type of conflict that may arise during the
procurement, including apparent or potential conflicts,
and (2) document in writing a plan to neutralize any type
of conflict before a solicitation is issued. However,
PAI’s argument conflates the requirements of the two
regulations.
Section 9.504(a) requires that a contracting officer “(1)
[i]dentify and evaluate potential organizational conflicts
of interest as early in the acquisition process as possible;
and (2) [a]void, neutralize, or mitigate significant poten-
tial conflicts before contract award.” 48 C.F.R. § 9.504(a)
(emphasis added). This regulation requires a contracting
PAI CORP v. US 10
officer to identify and evaluate potential conflicts in the
early stages of the acquisition process. Section § 9.504(a)
does not require that this preliminary analysis be docu-
mented in writing, but if a potential conflict is identified,
the regulation specifies that the contracting officer must
avoid, neutralize, or mitigate any “significant potential
conflicts” before the contract award. Id. § 9.504(a).
A significant potential conflict is one which provides the
bidding party a substantial and unfair competitive advan-
tage during the procurement process on information or
data not necessarily available to other bidders. See
ARINC, 77 Fed. CI. at 202. Section 9.504(a) therefore
requires mitigation of “significant potential conflicts,” but
does not require mitigation of other types of conflicts,
such as apparent or potential non-significant conflicts.
The contracting officer does have considerable discretion
in determining whether a conflict is significant. More-
over, the FAR provides a contracting officer with consid-
erable discretion to conduct fact-specific inquiries of
acquisition proposals to identify potential conflicts and to
develop a mitigation plan in the event that a significant
potential conflict exists. 48 C.F.R. § 9.505; see also Axiom,
564 F.3d at 1382.
In contrast to § 9.506(a), § 9.506(b) specifies a unique
documentation requirement once a “significant potential
organizational conflict” is deemed to exist.
48 C.F.R. § 9.506(b). This regulation requires that, in the
event “the contracting officer decides that a particular
acquisition involves a significant potential organizational
conflict . . . , the contracting officer shall, before issuing
the solicitation, submit . . . [a] written analysis, including
a recommended course of action for avoiding, neutralizing,
or mitigating the conflict . . . .” Id. (emphasis added).
Moreover, § 9.506(b) requires that, if the contracting
officer makes such a determination, the written analysis
11 PAI CORP v. US
be approved by the chief of the contracting office. Id.
This regulation requires a written analysis, but only for
“significant potential conflict[s].” Id. (alteration added).
Thus, the contracting officer is not required to document
in writing or submit for approval a plan to neutralize
apparent or potential conflicts, which in her discretion
and judgment are deemed not to be significant.
In this case, the contracting officer fully complied with
the FAR requirements. First, the contracting officer
timely identified and evaluated any potential conflicts in
compliance with § 9.504(a). After GET filed the agency-
level protest in July 2008, the contracting officer pursued
a number of steps to resolve any potential conflicts, in-
cluding narrowing the technical scope of the solicitation,
providing to the potential offerors additional information
regarding the OST support services contract, and requir-
ing that each potential offeror certify that its participa-
tion in the procurement did not create any organizational
conflicts of interest. The contracting officer also com-
pleted an additional and comprehensive conflicts investi-
gation in June 2009. In a written memorandum, the
contracting officer noted that she had thoroughly re-
viewed the offerors’ submissions regarding any potential
organizational conflicts of interest. The contracting
officer determined that no significant potential conflict
existed that would preclude an award of the OST support
services contract to ITP. Furthermore, because the con-
tracting officer determined that no significant potential
conflict existed, she was not required to submit a written
analysis pursuant to § 9.506(b), nor was she required to
obtain approval from the chief contracting officer for
adjustments to the solicitation. In light of the consider-
able discretion given to contracting officers in identifying
and mitigating significant potential conflicts, we agree
PAI CORP v. US 12
with the trial court that the contracting officer in this case
complied with the FAR requirements.
Moreover, PAI failed to establish that there was any
significant potential conflict that provided ITP with an
unfair competitive advantage during the procurement.
See ARINC, 77 Fed. Cl. at 202. PAI failed to introduce
any evidence before the trial court showing that ITP
gained a substantial and unfair competitive advantage
through unequal access to information. See C.A.C.I.,
719 F.2d at 1581 (stating that a disappointed bidder must
identify “hard facts” to overturn an agency’s award of a
contract). Moreover, PAI’s bare allegation that ITP and
Wackenhut had a prior contractual relationship with OST
is insufficient to show a significant potential conflict. Id.
“The mere existence of a prior or current contractual
relationship between a contracting agency and a firm does
not create an unfair competitive advantage, and an
agency is not required to compensate for every competi-
tive advantage gleaned by a potential offeror’s prior
performance of a particular requirement . . . .” ARINC, 77
Fed. Cl. at 203; see also Ala. Aircraft Indus. Inc.-
Birmingham v. United States, 83 Fed. CI. 666, 686 (2008)
(holding that incumbent status by itself is insufficient to
create an organizational conflict of interest). Accordingly,
we find that PAI failed to establish the existence of a
significant potential conflict and thus failed to show that
the integrity of the procurement was compromised.
AFFIRMED