KAR Contracting, LLC
B-310454;B-310537, Dec 19, 2007
KAR Contracting, LLC protests the rejection of its bids under two solicitations to perform construction work at the Department of Veterans Affairs (VA) Medical Center in Huntington, West Virginia. One bid was submitted in response to invitation for bids (IFB) No. VA-249-07-IB-0085, for replacement of the roof on "Building One" at the VA's Huntington Medical Center; the second was submitted in response to IFB No. VA-249-07-IB-0107, for work on the Center's water reservoir and pump house.
We deny the protests.
B-310454; B-310537, KAR Contracting, LLC, December 19, 2007
Protests challenging an agency's decision that the protester is ineligible for the award of two construction projects are denied where the agency reasonably concluded that these awards would create the appearance of an impropriety because of the protester's founder's role in both projects while a government employee, including serving as the contracting officer's technical representative, and participating in the preparation of construction drawings.
KAR Contracting, LLC protests the rejection of its bids under two solicitations to perform construction work at the Department of Veterans Affairs (VA)
These protests involve a single issue--whether the VA's contracting officer (CO) reasonably rejected two bids submitted by a recently retired employee of the VA Medical Center. For these bids--as opposed to two other bids where the protester received awards--the CO concluded that the former employee's involvement with the same projects during his government service was too significant to permit award to his newly-formed company without creating the appearance of an impropriety. For the reasons set forth below, we agree.
Both of these solicitations were issued by the VA on
Bid opening for the roof replacement project (IFB -0085) took place on September 5; bid opening for the work on the water reservoir and pump house (IFB -0107) took place 2 days later, on September 7. On both projects, KAR was ultimately found to be the low bidder.
The CO explains that KAR submitted with both of its bids a copy of a letter to Mr. Reynolds from the VA Regional Counsel, dated July 20, which had been provided upon his retirement. The CO also states that Mr. Reynolds indicated that the letter allowed him to bid on the VA [
In light of concerns about whether the newly-founded company owned by Mr. Reynolds could appropriately perform these contracts--and given Mr. Reynolds' representation to the CO that the letter advised that it could--the CO contacted the Facilities Chief for advice. The Facilities Chief, who was Mr. Reynolds' supervisor at the time of Reynolds' retirement, was asked by the CO to certify that Ken Reynolds would be eligible for award of these projects. AR, exhs. 6 and 7. In response, the Facilities Chief advised the CO that Mr. Reynolds had been involved in both projects, and therefore he was seeking clarification from the VA's Office of Regional Counsel. On September 19, in a letter addressed to the Facilities Chief, a VA attorney provided a 3-page analysis of the situation with the following conclusion:
Based on the foregoing, pursuant to either Section 207(a) or 207(b), it is my opinion that Mr. Reynolds is ineligible for any projects that were assigned to him while he was employed as an Engineering Technician at the Huntington VAMC.
AR, exh. 8, at 3.
Upon receipt of this letter, the Facilities Chief prepared a statement for the CO advising that Mr. Reynolds (and KAR Contracting) was ineligible for award of either of these contracts. AR, exhs. 9 and 10. Two days later, in a letter to KAR, the CO advised
We are unable to accept your bids on these two solicitations. Acceptance would violate post-Government employment restrictions as outlined in the enclosed Office of Regional Counsel . . . letter dated
September 19, 2007.
AR, exh. 11, Letter from CO to KAR, at 1.
These protests followed.
KAR argues that the CO abused her discretion when she excluded KAR's bids from consideration because her decision was based on faulty legal reasoning by the VA's attorney. In addition, KAR argues that agency officials are biased against him.
The basic requirements and procedures for procurements conducted using sealed bids are set forth in the Federal Acquisition Regulation (FAR) at part 14. Within this scheme, subpart 14.404-2 governs the rejection of individual bids, and FAR sect. 14.402'2(h) requires the rejection of any bid received from a person or concern that has been suspended, debarred, proposed for debarment, or declared ineligible for award. The record here shows that, after consultation with counsel, the Facilities Chief provided the CO with a determination that KAR was ineligible for these awards.
Once the agency concluded that KAR was ineligible for award, it rejected KAR's bids. While the analysis set forth below is drawn largely from cases involving negotiated procurements, the same rules apply to procurements conducted using sealed bids: an agency can reasonably reject a bid to avoid even the appearance of an impropriety. See Revet Env't & Analytical Labs., Inc., B-221002.2, B'221003.2,
An agency's decision to exclude an offeror from a competition in order to remedy a problem related to the integrity of a particular procurement requires a balancing of competing interests set forth in the FAR. On the one hand, contracting officers are granted wide latitude in their business judgments to safeguard the interests of the
It has long been the case that where there is an apparent conflict of interest, an agency may exclude an offeror from a procurement to protect the integrity of the federal procurement system, even if no actual impropriety can be shown, provided that the agency's determination is based on fact and not mere innuendo and suspicion. See, e.g., Lucent Techs. World Servs. Inc., B-295462, Mar. 2, 2005, 2005 CPD para. 55 at 10; Electronic Design, Inc., B-279662.5, May 25, 1999, 99-1 CPD para. 103 at 6; IGIT, Inc., supra; KPMG Peat Marwick, supra; Compliance Corp.--Recon., supra; MDT Corp., B-236903, Jan. 22, 1990, 90-1 CPD para. 81 at 3. Holmes & Narver Servs., Inc./Morrison-Knudson Servs., Inc., a joint venture; Pan Am World Servs., Inc., B'235906, B-235906.2, Oct. 26, 1989, 89-2 CPD para. 379 at 8, aff'd, Brown Assocs. Mgmt. Servs., Inc.--Recon., B-235906.3, Mar. 16, 1990, 90-1 CPD para. 299 at 3; Laser Power Techs., Inc., B-233369, B-233369.2, Mar. 13, 1989, 89-1 CPD para. 267 at 7.
In those cases where an agency has decided to exclude an offeror (or bidder) from a competition, we will review the record to determine whether the agency had a reasonable basis for its decision in the face of an allegation, or indication, of an apparent conflict of interest or appearance of impropriety. See Lucent Techs. World Servs., Inc., supra; IGIT, supra; KPMG Peat Marwick, supra; Naddaf Int'l Trading Co., B-238768.2, B-238768.3, Oct. 19, 1990, 90-2 CPD para. 316 at 5; Holmes & Narver, Inc., B'239469, Sept. 14, 1990, 90-2 CPD para. 210 at 10 (all involving an agency decision to exclude an offeror); see also Friends of the Waterfront, Inc., B-225378, Jan. 6, 1987, 87-1 CPD para. 16 at 2; Revet Env't & Analytical Labs., Inc., supra (involving an agency decision to exclude a bidder).
During this protest, KAR has raised detailed challenges to the legal memorandum provided by the VA attorney, including assertions that certain portions of the analysis are flawed, and do not accurately interpret the regulations implementing this criminal statute. We need not take a position on KAR's challenges to the VA's analysis of a criminal statute to reach our conclusion here; 18 U.S.C. sect. 207 is a criminal statute whose interpretation and enforcement is a matter for the Department of Justice, not our Office. Science Pump Corp., B-255737,
In our view, the restrictions of 18 U.S.C. sect. 207 do not set the outer boundaries for a CO's reasonable exercise of discretion about whether the award of a contract will create the appearance of impropriety. Specifically, even if KAR can argue that the facts here would not support a criminal conviction for violation of the post-employment restrictions, that would not mean there was no reasonable basis for concluding that KAR was ineligible for award.
Our review of the record shows a CO, and other officials, questioning whether it was appropriate to award construction work for the
In addition to the listing as COTR, the VA officials noted that engineering technicians prepare drawings for various construction projects to be performed at the
During this protest, KAR has argued that Mr. Reynolds did not prepare many of the drawings here (in some instances, KAR explains that Mr. Reynolds only copied drawings prepared years earlier), and KAR has submitted a statement from another engineer buttressing his assertions. As stated above, we think the record here supports the agency's conclusion that government employees involved in projects this close to design completion, and designated as technical participants in the upcoming procurement, can reasonably be excluded from competitions when they leave government service and, soon thereafter, attempt to win contracts for the same projects they worked on while in the government.
KAR pointed out during this protest that it had received two other awards from the VA's
In response, the Facilities Chief submitted a sworn declaration explaining that the differing conclusions were due to a different level of involvement by Mr. Reynolds, as reflected in documents the agency calls blue sheets. These so-called blue sheets listed the status of all approved construction projects for the Huntington VA Medical Center. In the two projects under challenge here, the agency explains that Mr. Reynolds was identified as the COTR, and the project design had reached, or passed, the 50 percent design completion point. While Mr. Reynolds was also listed as the COTR for one of the projects where he was allowed to receive an award--involving site preparation for R/F equipment--the design of the project was still listed as 0 percent completed because equipment plan drawings had not yet been received from the equipment vendor. Declaration of VA
As a final matter, we turn to KAR's complaint that certain of the officials at the
In short, the record here reflects that KAR's founder had a role in the development of the requirements for these projects, and that he held this role until shortly before issuance of the solicitations. When KAR then submitted the lowest responsive bids as of the bid openings on September 5 and 7, the CO decided that KAR would not be eligible for these awards. On these facts--and in particular, the very brief time between the involvement of KAR's founder and bid opening--we conclude that the CO reasonably excluded KAR's bids for these projects.
The protests are denied.
Gary L. Kepplinger
 For the roof replacement project five bids were received. The apparent low bid was rejected for reasons not relevant to this dispute (bid bond issues), and the bid submitted by KAR became the lowest responsive bid. For the water reservoir project, KAR submitted the only bid. Agency Report (AR), exhs. 3 & 4.
 The CO's Statement, while signed, is undated, but was provided to our Office on October 25.
 In broad terms, 18 U.S.C. sect. 207(a)(1) imposes criminal penalties on former government employees for representing any other person before a federal agency in connection with a particular matter . . . in which the [former employee] participated personally and substantially . . . and  which involved a specific party or specific parties at the time of such participation. In contrast, sect. 207(a)(2) imposes a 2-year bar under parallel facts for matters under a former employee's official responsibility, during the final year of federal service (i.e., even where the employee was not personally and substantially involved).
 Since the letter does not elsewhere mention or explain the application of sect. 207(b), we infer that the intended references were to sections 207(a)(1) and 207(a)(2), which were the subject of the analysis of the letter.
 As stated above, since most recent decisions interpreting conflict of interest requirements have involved negotiated procurements, rather than procurements using sealed bids, we will describe those cases using the term offeror, rather than bidder.
 Specifically, we reach our conclusion that the decision to exclude KAR was reasonable even accepting KAR's allegations that there were flaws in the legal analysis of the post employment restriction statute performed by the agency attorney.
 With respect to his role as the COTR, KAR does not dispute that Mr. Reynolds had been listed as the COTR on these projects, but contends that he did not have official responsibility for them (because others did) and because the projects did not become particular matters under the rubric of 18 U.S.C. sect. 207 until release of the solicitations on August 1--12 days after his retirement. As stated above, we will not parse the application of this criminal statute to this situation. We think the CO could reasonably conclude that Mr. Reynolds's involvement in preparing the design documents for these projects--even if he was supervised by others with more authority for the projects than him, and even if others did more of the design work than he did--created the appearance of an impropriety. We also recognize that at some point prior to the release of a solicitation, an agency must identify the people who will have technical responsibilities in the upcoming procurement.