The Toothpaste Has Left the Tube - Navigating Procurement ...

Perkins Coie LLP

The Toothpaste Has Left the Tube - Navigating Procurement Integrity Act Issues and Protecting Your Information

ACC National Capital Region: Government Contractors Forum

Andrew E. Shipley, Partner

Seth H. Locke, Counsel

Zachary Stewart, Assistant General

Counsel, Serco Inc.

March 16, 2016

Perkins Coie LLP | PerkinsCoie.com

Presenters

2

ANDREW E. SHIPLEY | PARTNER |

WASHINGTON, DC

Andrew Shipley serves as the chair of

Perkins Coie’s Government Contracts

practice group. His practice focuses

primarily on government contract

litigation, bid protests, counseling, and

commercial litigation. He has litigated in

state and federal courts across the

country, as well as various government

Boards of Appeal and administrative

agencies. He regularly advises clients on

claims, contracts, regulatory and data

rights matters. Prior to his return to

private practice, Andrew managed an in-

house litigation/bid protest group for a

FORTUNE 100, multinational government

contractor. He has a Top Secret (TS)

Security Clearance.


Presenters

3

SETH LOCKE | COUNSEL |

WASHINGTON, DC

Seth Locke is a Counsel with the

firm's Government Contracts

practice. Seth focuses his practice

on contract performance issues,

claim preparation, bid protests, cost

and pricing disputes, False Claims

Act cases, internal investigations,

technical data and computer

software rights, and FOIA matters.


Presenters

4

ZACHARY J. STEWART |

ASSISTANT GENERAL COUNSEL |

SERCO, INC. | RESTON, VA

Zack Stewart is the lead attorney

supporting Serco’s Defense business,

where he manages bid protests, leads

internal investigations, drives negotiations

to closure, and counsels clients on a

variety of government contract and

employment compliance issues. Zack

came to Serco from CA Technologies,

where he won a Law Department

Achievement award for his authorship of

the company’s first comprehensive U.S.

Public Sector compliance plan.

Previously, he served as government

procurement counsel for the U.S. Marine

Corps, and as an associate with the law

firm of Arent Fox. He is a graduate of

Rutgers University and Emory Law

School.


Agenda

5

• Procurement Integrity Act

• History

• Statute and regulations

• Violation or no violation

• Case law scenarios

• Summary and best practices


History of PIA

• “Operation Ill Wind”

• PIA enacted in 1988, became fully effective in

1991

• Purpose to provide clear requirements for

contractor and Government employees

• Regulates

• Disclosure or receipt of procurement information

• Employment contacts

• Acceptance of compensation by former federal officials

6


Disclosing or Obtaining Procurement Information

7

41 U.S.C. § 2102.

• A person cannot knowingly disclose contractor

bid or proposal information or source selection

information before award of a federal agency

procurement contract to which the information

relates. 41 U.S.C. § 2102(a).

• A person cannot knowingly obtain contractor bid

or proposal information or source selection

information before award of a federal agency

procurement contract to which the information

relates. 41 U.S.C. § 2102(b).



8

• Contractor bid or proposal information

• Submitted to federal agency

• Not previously available in public

• Cost or pricing data

• Indirect costs and direct labor rates

• Marked proprietary information about

manufacturing, operations or techniques

• Information properly marked as “contractor

bid or proposal information”

41 U.S.C. § 2101.



9

41 U.S.C. § 2101.

• Source selection information

• Not publicly available and includes: • Bid prices in sealed bids

• Proposed costs or prices

• Source selection plans

• Technical evaluation plans

• Technical, cost or price evaluations

• Competitive range determinations

• Rankings

• Reports and evaluations of source selection panels, boards or

advisory councils

• Other information marked “source selection information” considered

on case-by-case basis as jeopardizing integrity of procurement



10

41 U.S.C. § 2101.

• Federal agency procurement

• Using appropriated funds to acquire, by

competitive procedures, good or services

from non-federal sources. 41 U.S.C. §

2101.


Penalties and Administrative Actions

11

• Criminal and civil penalties

• Administrative actions

• Cancel procurement

• Rescind the contract

• Suspension and debarment

• Adverse personnel action

41 U.S.C. § 2105.


Savings Provisions

12

41 U.S.C. §2107.

PIA does not apply:

• To the disclosure or receipt of information by authorized

personnel

• When a contractor discloses its own information

• When a procurement has been canceled before award

(unless plan to resume)

• To meetings between agency official and potential offeror,

provided no unauthorized disclosure

• To restrict sharing information with Congress, GAO, a

Federal agency or an IG

• To limit a requirement, sanction, contract penalty or remedy

established under another law or regulation


Protest PIA Violation

13

• Must report PIA violation within 14 days of

discovery to maintain protest

• Report to agency responsible for

procurement

41 U.S.C. § 2106.


PIA Regulations

14

• FAR 3.104-1 Definitions

• FAR 3.104-2 General

• FAR 3.104-3 Statutory and related

prohibitions, restrictions and requirements

• FAR 3.104-4 Disclosure, protection, and

marking of contractor bid or proposal

information and source selection

information


PIA Regulations

15

• FAR 3.104-7 Violations or possible

violations

• CO that obtains information of a violation or

possible PIA violation must determine if

violation or possible violation has impact on

award

• If CO concludes no impact – second level

agency review

• If CO concludes there is impact – HCA must

review and take action


Scenario 1: Inadvertent Disclosure

16

• The agency inadvertently emails an offeror

involved in a competitive procurement the

agency’s Business Case and underlying

market research data.


The Facts

17

• Business Case marked “Pre-Decisional Source

Selection Material and is not releasable.”

• Attachments contained market research

• Some labeled as proprietary responses

• Notes from interviews marked “Proprietary and

Confidential”

• Evidence that the contractor shared information

with some offerors, but not all of them


Violation or No Violation

18


No Prejudice, No Protest

19

Nexagen Networks, Inc.; LinTech Global, Inc., B-408685.15, B-

408685.17, July 28, 2014, 2014 CPD ¶ 223.

• Protesters argued prejudice because offerors

could tailor their proposal

• GAO disagreed, saying agency set up objective,

evaluation system – disclosure had no impact

• Disclosure may have violated PIA, but no

prejudice to protesters.

• “An unfair competitive advantage is a necessary element

of a procurement integrity allegation since it relates to the

resulting prejudice.”


Scenario 2: More Inadvertent Disclosure

20

• Agency inadvertently disclosed proprietary

information from the incumbent contractor

in RFP documents and on agency

webpages


The Facts

21

• Offeror unlocked a password protected pricing

matrix in an RFP document that included

incumbent’s cost information from the prior

program

• Agency investigated, found evidence of additional

disclosures on agency website

• Disclosures contained incumbent’s historical

contract information

• Agency promptly removed proprietary information



22


History Lessons

23

S&K Aerospace, LLC, B-411648, Sept. 18, 2015, 2015 CPD ¶

336.

• Release of information regarding prior incumbent

contract does not violate PIA.

• See Eng’g Support Personnel, Inc., B-410448, Dec.

24, 2014, 2015 CPD ¶ 89 at 6.

• Historical data not deemed to be related to

procurement at issue

• Not released in connection with award of a

Federal agency procurement contract to which the

information relates


Knowing Disclosure

24

• Protester could not show that agency

“knowingly” disclosed information

• “knowingly” equals “intentionally”

• No evidence that other offeror “knowingly”

obtained information


Unfair Competitive Advantage

25

• Addressed separately from PIA claim

• Inadvertent disclosure must result in

competitive prejudice (unfair advantage)

• No competitive prejudice

• The two procurements differed in several

aspects


Actions After Disclosure

26

• Kellogg Brown & Root Services, Inc., B-400787.2,

B-400861, Feb. 23, 2009, 2009 CPD ¶ 54.

• Program Manager (PM) claimed to delete

Army’s inadvertent disclosure of source

selection information

• PM actually opened information

• KBR refused to isolate PM from ongoing

proposals

• Agency reasonably determined that the integrity

of procurement was at risk

• Agency reasonably disqualified KBR from open

RFPs


Scenario 3: Even More Inadvertent Disclosure

27

• Air Force inadvertently disclosed source

selection sensitive information to contractor

• Without reviewing, employee forwarded to

proposal team

• Air Force tried to recall within 10 minutes

and issued containment instructions


The Facts

28

• Contractor took 2 days to properly

quarantine information

• Additional employees exposed to the

information while contractor addressed

disclosure



29


The SDO View

30

MCR Federal, LLC Suspension (2011-2013)

• Suspension and debarment officials may apply PIA

slightly differently than GAO or Court of Federal

Claims

• Air Force suspended MCR for its wrongdoing –

found policies and procedures were insufficient

• MCR instituted Business Ethics program

• Questionable if “knowingly obtained”

• MCR received unsolicited email

• Alleged failure to quarantine properly led to harsh

results


SDO View Cont. - Fulsome Investigations

31

• Booz Allen limited investigation to

misconduct of one employee

• Former Government official used

Government information to help secure

contracts

• Broad investigation would have uncovered

systemic ethical problems

• Administrative Agreement with significant

outside monitoring


Scenario 4: Bad Teammates

32

• A subcontractor helps prepare a proposal

with a prime contractor under a teaming

agreement

• Subcontractor then submits own proposal

for follow-on contract, using the prime

contractor’s proprietary information.


The Facts

33

• Subcontractor helped prime prepare

proposal for predecessor contract, then

used identical passages to submit own

proposal as a prime for follow-on contract

• Agency noticed similarity and investigated

• Only sought explanation from the

subcontractor



34


No Violation for Private Dispute

35

DynCorp International, LLC, B-408516, et al.,

Oct. 29, 2013, 2013 CPD ¶ 243.

• GAO found no PIA violation

• Prime contractor voluntarily shared information

with subcontractor

• Savings provision of PIA – voluntary disclosure

• Use of proprietary information in contravention of

teaming agreement = private dispute


Compliance with Investigatory Requirements

36

• DynCorp alleged violation of FAR 3.104-

7(b) and (c)

• Agency review all information available

• Take appropriate action

• Request information from appropriate

parties regarding violation or possible

violation


Compliance with Investigatory Requirements

37

• Agency did not need to comply with FAR 3.104-

7(b) and (c) because no PIA violation

• But see Satellite Tracking of People LLC, B-

411845, B-411845.2, Nov. 6, 2015, 2015 CPD ¶

347

• Protester’s proprietary information in awardee’s

proposal

• CO investigated possible conflict of interest, but

ignored PIA

• GAO recommended that agency address

conflict and investigate possible PIA violation


Scenario 5: Bad Employees

38

• Company executive worked extensively on

proposal until one week before due

• Left to work full time for company he had

started years before

• Submitted proposal virtually identical to

one submitted by former employer

• Agency noticed similarity and conducted

investigation



39


No Violation for Private Disputes

40

GEO Group, Inc., B-405012, July 26, 2011, 2011 CPD ¶ 153

• Allegation former employee inappropriately used GEO

information at new company

• Protester argued that savings clause should not apply

because of former employee’s breach of duty and

outright lies.

• “We have repeatedly determined that the PIA’s savings

provisions apply notwithstanding the fact that the

voluntarily provided information is subsequently misused

or not properly safeguarded.”


PIA Takeaways

41

Red Flags Legends

• Close Hold

• Pre-decisional

• Procurement Sensitive

• Source Selection Information

• Competition Sensitive

• Company Proprietary

• Business Sensitive

• Not for Public Release

• Not for Release to Contractors

• For Official Use Only / For Internal Use Only


Potentially Sensitive Information

42

• Minutes or notes from internal Government

meetings

• Internal Government briefing or

presentation documents to Government

officials

• Unreleased drafts of Government

documents, including briefing documents

• Contractor information marked with

restrictive legend


Best Practices

43

• Be aware that some Government officials

may not understand the rules – up to you

to take precautions

• Information may have been improperly

disclosed to you during a procurement - if

you are not sure if others have the

information, ask


Best Practices – Potential Disclosure

44

Red Flags

• Source of information does not want to be

identified

• Source indicates that information should

not be publicly shared


Best Practices – Receipt of Information

45

• Taking action after receipt of potentially

restricted information

• STOP READING, and think about whether

you may have received it in error

• Immediately notify your superior or legal

counsel

• Quarantine information – limit disclosure

within company

• Do not speak to or share the information

with anyone else


Best Practices – Receipt of Information

46

• Investigate circumstances

• Firewall tainted personnel until

investigation is completed

• Review whether disclosure to Government

is necessary

• Ability to continue with competition

• Potential protest

• Suspension and debarment concerns


Best Practices – Avoiding Problems

47

• Always mark own information with appropriate

restrictive legends

• Maintain training program that includes PIA

guidance

• Maintain records of training and employees that

have gone through process

• Regularly review written policies related to PIA and

receipt of restricted information

• Make sure employees know who to contact with

questions about PIA and in case of potential

violation


Best Practices – Protecting Rights

48

• Timely act to comply with 14 day notice

requirement for protests

• Information voluntarily shared with private

party, i.e. dispute between private parties

• Bring action in court to enforce employment

agreement, teaming agreement, subcontract,

NDAs, breach of contract, etc.

• Misappropriation of trade secrets

Perkins Coie LLP | PerkinsCoie.com 49

Questions?

All rights reserved. This seminar handout is not intended to be and should not be used as a substitute for specific legal advice, since legal opinions

may be given only in response to inquiries regarding specific factual situations. Subsequent legal developments after the date of specific seminars

may affect some of the legal standards and principles discussed. If legal advice is required, the services of counsel should be sought.

Copyright © Perkins Coie LLP 2016.

The Toothpaste Has Left the Tube - Navigating Procurement ...

Documents

Transcript of The Toothpaste Has Left the Tube - Navigating Procurement ...