Agency Properly Rejected Otherwise Favorable Offer Because of Conflict of Interest

The GAO found that the agency properly rejected an offeror when the offeror would have had a conflict of interest in performing the contract.

In this case, the agency was seeking proposals from qualified independent contractors to review initial medicare payment determinations by MAC contractors.  MAC stands for Medicate Administrative Contractor.  The problem for the protester was that it was also the MAC contractor for a third of the region, meaning that it could be reviewing its own initial determinations.

Before award, the protester attempted, unsuccessfully, to resolve the conflict.  For example, it offered to novate the MAC contractor side of the business to a sister company owned by the same parent.  The agency did not buy this approach, reasoning that the protester and the sister company are both working for the same overall entity, i.e., the parent corporation.  Later, the protester offered to perform the review services for the conflicted areas via a “firewalled subcontractor.”  The agency still was not satisfied, and it rejected the protester’s offer.

The GAO noted that under FAR § 9.505 the primary responsibility for assessing whether a conflict likely is to arise and then deciding what appropriate action should be taken rests with the contracting agency.   Once the agency has given meaningful consideration to potential conflicts of interest, the GAO will not sustain a protest challenging the agency’s decision unless the agency’s decision is unreasonable or unsupported by the record.

First Coast Service Options, Inc., B-401429, July 31, 2009.