B-181416, NOV 22, 1974, 54 COMP GEN 421

B-181416: Nov 22, 1974

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CONFLICT OF INTEREST STATUTES - CONTRACT VALIDITY AWARD OF CONTRACT TO NATIONAL ASSOCIATION WHICH WILL EVALUATE WORK OF ITS MEMBERSHIP IS NOT ILLEGAL. ARE NOT DIRECTED AGAINST IMMEDIATE KIND OF SITUATION. CONTRACTORS - CONFLICTS OF INTEREST - LOBBYING FOR PROJECT NO LAW OR REGULATION PRECLUDES AN AWARD TO NATIONAL ASSOCIATION WHICH IT IS CONTENDED WILL BE IN CONFLICT OF INTEREST BECAUSE ONE GOAL OF PROJECT UNDER CONTRACT IS TO ENJOIN PARENTS TO LOBBY FOR IMPROVED EDUCATION FOR HANDICAPPED CHILDREN AND FOR INCREASED FUNDS FOR PURPOSE. CONTRACTORS - RESPONSIBILITY - DETERMINATION BY CONTRACTING OFFICER - ACCEPTED - EXCEPT FOR FRAUD ALLEGATION THAT CONTRACTOR MAY NOT BE RESPONSIBLE BECAUSE IT DID NOT PERFORM SATISFACTORILY UNDER PRIOR CONTRACT AND WAS NOT IN COMPLIANCE WITH EQUAL EMPLOYMENT OPPORTUNITY REGULATIONS WILL NOT BE CONSIDERED.

B-181416, NOV 22, 1974, 54 COMP GEN 421

CONFLICT OF INTEREST STATUTES - CONTRACT VALIDITY AWARD OF CONTRACT TO NATIONAL ASSOCIATION WHICH WILL EVALUATE WORK OF ITS MEMBERSHIP IS NOT ILLEGAL, NOTWITHSTANDING POTENTIAL CONFLICT OF INTEREST, SINCE NEITHER REQUEST FOR PROPOSALS NOR FEDERAL PROCUREMENT REGULATIONS CONTAINS PROHIBITION AGAINST CONFLICT OF INTEREST AND STATUTES IN U.S.C. ARE NOT DIRECTED AGAINST IMMEDIATE KIND OF SITUATION. CONTRACTORS - CONFLICTS OF INTEREST - LOBBYING FOR PROJECT NO LAW OR REGULATION PRECLUDES AN AWARD TO NATIONAL ASSOCIATION WHICH IT IS CONTENDED WILL BE IN CONFLICT OF INTEREST BECAUSE ONE GOAL OF PROJECT UNDER CONTRACT IS TO ENJOIN PARENTS TO LOBBY FOR IMPROVED EDUCATION FOR HANDICAPPED CHILDREN AND FOR INCREASED FUNDS FOR PURPOSE, THE RECIPIENTS OF WHICH FUNDS WOULD BE ASSOCIATION MEMBERS. CONTRACTORS - RESPONSIBILITY - DETERMINATION BY CONTRACTING OFFICER - ACCEPTED - EXCEPT FOR FRAUD ALLEGATION THAT CONTRACTOR MAY NOT BE RESPONSIBLE BECAUSE IT DID NOT PERFORM SATISFACTORILY UNDER PRIOR CONTRACT AND WAS NOT IN COMPLIANCE WITH EQUAL EMPLOYMENT OPPORTUNITY REGULATIONS WILL NOT BE CONSIDERED, SINCE NO FRAUD HAS BEEN ALLEGED OR DEMONSTRATED.

IN THE MATTER OF EXOTECH SYSTEMS, INC., NOVEMBER 22, 1974:

ON MARCH 8, 1974, THE DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE, OFFICE OF EDUCATION, REGION I, BOSTON, MASSACHUSETTS (HEW), ISSUED REQUEST FOR PROPOSALS (RFP) NO. 1-74-BH-02 FOR MAINTAINING AND IMPROVING A NATIONAL SPECIAL EDUCATION INFORMATION CENTER (SEIC).

FOUR FIRMS SUBMITTED PROPOSALS IN RESPONSE TO THE RFP, TWO OF WHICH ARE RELEVANT TO THE INSTANT PROTEST, THOSE OF THE NATIONAL ASSOCIATION OF STATE DIRECTORS OF SPECIAL EDUCATION (NASDSE) AND EXOTECH SYSTEMS, INC. (EXOTECH). EXOTECH FILED A PROTEST WITH OUR OFFICE ON MAY 31, 1974, AGAINST AWARD BEING MADE TO NASDSE ON VARIOUS GROUNDS. ON JUNE 28, 1974, PURSUANT TO FEDERAL PROCUREMENT REGULATIONS (FPR) SEC. 1 2.407-8(B)(4)(II) (1964 ED. AMEND. 68), A DETERMINATION WAS MADE BY HEW TO MAKE AWARD NOTWITHSTANDING THE PROTEST. AWARD WAS MADE TO NASDSE ON JUNE 29, 1974.

THE FOLLOWING CONTENTIONS ARE ADVANCED BY EXOTECH IN SUPPORT OF ITS PROTEST AGAINST THE AWARD TO NASDSE:

1. THAT THE PROCUREMENT PROCESS WAS A "SHAM" AS NASDSE HAD ALREADY BEEN SELECTED BY HEW;

2. AWARD TO NASDSE RESULTS IN VARIOUS CONFLICTS OF INTEREST;

3. NASDSE HAS FAILED TO PERFORM SATISFACTORILY AS THE INCUMBENT CONTRACTOR; AND

4. NASDSE IS NOT IN COMPLIANCE WITH EQUAL EMPLOYMENT OPPORTUNITY (EEO) REGULATIONS.

REGARDING THE FIRST CONTENTION THAT NASDSE HAD BEEN CHOSEN AS THE CONTRACTOR PRIOR TO THE ISSUANCE OF THE RFP AND, THEREFORE, THE PROCUREMENT PROCESS WAS A "SHAM," WE HAVE REVIEWED THE RECORD OF THE EVALUATIONS PERFORMED BY THE PANEL SELECTED BY HEW AND ARE OF THE OPINION THAT THE PROCUREMENT WAS CONDUCTED IN A PROPER MANNER. THE EVALUATION PANEL WAS COMPOSED OF INDIVIDUALS OUTSIDE OF HEW AND INCLUDED AN ATTORNEY WITH A BACKGROUND IN EDUCATION AND LAW; THE PARENT DIRECTOR OF A STATE COALITION FOR SPECIAL EDUCATION; THE CHAIRMAN OF A SPEECH AND HEARING DEPARTMENT AT A MAJOR UNIVERSITY; A PROFESSOR OF MENTAL RETARDATION AT A MAJOR UNIVERSITY AND THE ASSOCIATE DIRECTOR OF THE COMPUTER CENTER AT THE SAME UNIVERSITY. THE PANEL WAS UNANIMOUS IN RECOMMENDING NASDSE AND THE CONTRACTING OFFICER FOLLOWED THE RECOMMENDATION IN MAKING THE AWARD. THEREFORE, THE SELECTION OF NASDSE APPEARS TO HAVE BEEN BASED UPON AN EVALUATION OF PROPOSALS BY AN INDEPENDENT PANEL OF EXPERTS OUTSIDE OF HEW RATHER THAN UPON ANY PREDETERMINATION BY HEW THAT NASDSE WOULD BE THE SUCCESSFUL CONTRACTOR.

SECONDLY, EXOTECH ARGUES THAT AWARD TO NASDSE RESULTS IN A CONFLICT OF INTEREST BECAUSE OF THE VERY NATURE OF THE PROGRAM INVOLVED. NASDSE IS THE NATIONAL ORGANIZATION OF STATE DIRECTORS OF SPECIAL EDUCATION. EXOTECH ARGUES THAT IN PERFORMING THE EVALUATIONS REQUIRED UNDER THE INSTANT CONTRACT, NASDSE WILL, IN EFFECT, BE EVALUATING THE WORK OF ITS OWN MEMBERS. HEW HAS RESPONDED TO THIS ALLEGATION BY STATING THAT THE CONTRACTOR IS NEITHER REQUIRED NOR EXPECTED TO EVALUATE THE PERFORMANCE OF STATE DIRECTORS OR STATE EDUCATIONAL AGENCIES BUT MERELY TO DISSEMINATE INFORMATION TO THE PARENTS OF HANDICAPPED CHILDREN.

IN COMMENTS FURNISHED OUR OFFICE BY NASDSE, THE RELATIONSHIP OF THE NATIONAL ASSOCIATION AND THE PROJECT STAFF WHICH ACTUALLY PERFORMS THE CONTRACT WAS EXPLAINED AS FOLLOWS:

*** IT IS IMPORTANT AT THE OUTSET TO UNDERSTAND THE RELATIONSHIP BETWEEN NASDSE AND CLOSER LOOK PROJECT STAFF. NASDSE IS A NON-PROFIT ASSOCIATION COMPRISED OF 57 STATE DIRECTORS WHICH HOLDS A CONTRACT TO OPERATE THE CLOSER LOOK PROJECT. TO DO THAT JOB, NASDSE HAS ENGAGED AN EXPERIENCED PROFESSIONAL STAFF. THE LIAISON BETWEEN THE STATE DIRECTORS OF SPECIAL EDUCATION AND THE CLOSER LOOK PROJECT STAFF TAKES PLACE THROUGH AN EIGHT MEMBER COMMITTEE WHICH ACTS IN AN ADVISORY AND CONSULTATIVE CAPACITY TO THE PROJECT. AT NO TIME HAS THE NASDSE EXECUTIVE COMMITTEE EVER EXERTED PRESSURE TO SUPPRESS THE DISSEMINATION OF INFORMATION OF ANY KIND. TO THE CONTRARY, THEY HAVE SUPPORTED AND ENCOURAGED US IN THE DEVELOPMENT OF INFORMATION, ESPECIALLY IN THE AREA OF RIGHTS AND LAW.

A REVIEW OF THE RFP SHOWS THAT WHILE THE MAJOR PORTION OF THE WORK TO BE PERFORMED UNDER THE CONTRACT IS RESPONDING TO INQUIRIES FROM PARENTS OF HANDICAPPED CHILDREN FOR INFORMATION ON EDUCATIONAL OPPORTUNITIES FOR THEIR CHILDREN, THERE ARE ALSO OTHER TASKS TO BE COMPLETED. THESE INCLUDE PREPARATION OF A CHECKLIST OF CRITERIA FOR EVALUATING SPECIAL EDUCATION SERVICES OFFERED BY AGENCIES AND INSTITUTIONS SERVING HANDICAPPED CHILDREN AND ALSO EVALUATION OF INFORMATION AND REFERRAL SYSTEMS THAT STATES HAVE DEVELOPED FOR REFERRING CHILDREN TO PROGRAMS.

WHILE HEW CONTENDS THAT THERE IS NO CONFLICT OF INTEREST, WE NOTE THAT DURING THE NEGOTIATIONS LEADING TO THE AWARD OF THE CONTRACT, ONE OF THE AREAS WHICH THE EVALUATION PANEL WANTED CLARIFIED DEALT WITH A POSSIBLE CONFLICT OF INTEREST. THE QUESTION POSED WAS:

DESCRIBE THE NATURE AND EXTENT OF CONTROL OVER DECISIONS OF THE STAFF OF SEIC WHICH IS ASSERTED BY NASDSE WITH SPECIFIC REFERENCE TO POTENTIAL CONFLICT OF INTEREST WHICH COULD RESULT IF THE SEIC STAFF OR ITS PAG (PARENT ADVISORY GROUP) FOUND REASON TO CRITICIZE THE POLICIES OR EFFECTIVENESS OF PUBLIC SCHOOL PROGRAMS OR ANY OTHER PROGRAMS UNDER THE CONTROL OR RESPONSIBILITY OF ANY STATE DIRECTOR OF SPECIAL EDUCATION.

NASDSE ADDRESSED THE PROBLEM AND INDICATED THE PROCEDURES THAT IT RECOMMENDED BE FOLLOWED WITHIN NASDSE IN THE EVENT OF AN ACTUAL OR POTENTIAL CONFLICT OF INTEREST. MOREOVER, THE HEW ASSISTANT REGIONAL ATTORNEY REVIEWED THE SITUATION AND DECIDED THAT THE PROBLEM WAS ADMINISTRATIVE RATHER THAN LEGAL. FROM THE FOREGOING, IT IS APPARENT THAT SOME EVALUATION IS NECESSARY UNDER THE CONTRACT, THAT THE POTENTIAL CONFLICT OF INTEREST WAS RECOGNIZED AND CONSIDERED BEFORE AN AWARD WAS MADE AND THAT THE SITUATION WAS RESOLVED IN FAVOR OF NASDSE.

THEREFORE, THE QUESTION IS WHETHER A NATIONAL ASSOCIATION IS ALLOWED TO PERFORM A GOVERNMENT CONTRACT UNDER WHICH SOME EVALUATION OF THE WORK OF ITS MEMBERS MAY BE REQUIRED.

THERE ARE NO PROVISIONS IN THE RFP OR FPR REGARDING CONFLICT OF INTEREST. ALTHOUGH THERE ARE CONFLICT OF INTEREST STATUTES CODIFIED IN THE U.S.C. NONE ARE DIRECTED AGAINST THE IMMEDIATE KIND OF SITUATION. THEREFORE, SINCE THERE IS NO VIOLATION OF ANY LAW OR REGULATION, WE ARE UNABLE TO CONCLUDE THAT THE AWARD WAS ILLEGAL.

EXOTECH ALSO CONTENDS THAT A CONFLICT OF INTEREST IS GENERATED BY THE FACT THAT NASDSE, THROUGH ITS WORK ON THE PROJECT, IS LOBBYING FOR MORE FUNDS FOR ITS MEMBERS, NAMELY, STATE DIRECTORS OF SPECIAL EDUCATION. EXOTECH STATES THAT ONE OF THE GOALS OF THE PROJECT IS TO ENJOIN PARENTS TO LOBBY FOR IMPORVED EDUCATION FOR HANDICAPPED CHILDREN AND FOR INCREASED FUNDING FOR THIS PURPOSE. THE RECIPIENTS OF THIS FUNDING WOULD BE THE STATE DIRECTORS. EXOTECH HAS SUBMITTED TO OUR OFFICE A PROGRAM SOLICITATION FROM THE NATIONAL SCIENCE FOUNDATION (NSF) WHICH RECOGNIZES THIS PROBLEM AND DISCOURAGES PROPOSALS FROM ORGANIZATIONS WHICH MIGHT BE EXPECTED TO TAKE A STAND BASED ON THE SPECIAL INTERESTS OF ITS MEMBERS, SPECIFICALLY IN THE FIELD OF REVENUE SHARING.

WHILE NSF DOES HAVE THIS CAVEAT IN ITS SOLICITATION, THE RFP ISSUED BY HEW DID NOT CONTAIN A SIMILAR NOTICE AND THEREFORE IS NOT FOR CONSIDERATION IN CONNECTION WITH THE HEW PROCUREMENT. MOREOVER, WE ARE AWARE OF NO LAW OR REGULATION THAT PRECLUDES AN AWARD TO NASDSE IN THE CIRCUMSTANCES.

FINALLY, EXOTECH SUGGESTS THAT NASDSE MAY NOT BE A RESPONSIBLE CONTRACTOR BECAUSE IT ALLEGEDLY FAILED TO PERFORM CERTAIN REQUIRED TASKS DURING PERFORMANCE OF THE PRIOR YEAR CONTRACT FOR THIS SERVICE AND WAS NOT IN COMPLIANCE WITH EEO REGULATIONS. THE DETERMINATION OF A PROPOSED CONTRACTOR'S RESPONSIBILITY IS LARGELY WITHIN THE DISCRETION OF THE CONTRACTING OFFICER. THE CONTRACTING ACTIVITY MUST HANDLE THE DAY-TO-DAY ADMINISTRATION OF THE CONTRACT AND BEAR THE BRUNT OF ANY DIFFICULTIES EXPERIENCES BY REASON OF THE CONTRACTOR'S LACK OF ABILITY. IF, PURSUANT TO THE APPLICABLE REGULATIONS, THE CONTRACTING OFFICER FINDS THE PROPOSED CONTRACTOR RESPONSIBLE, AS HERE, WE DO NOT BELIEVE THE FINDING SHOULD BE DISTURBED EXCEPT ON THE BASIS OF FRAUD. SINCE NO FRAUD HAS BEEN ALLEGED OR DEMONSTRATED, WE MUST DECLINE TO FURTHER CONSIDER THE MATTER. MATTER OF WILKINSON MANUFACTURING COMPANY, B-181076, JUNE 5, 1974.

FOR THE FOREGOING REASONS, THE PROTEST IS DENIED.