OCI and FCA: Two Acronyms You Never Want to See Together…

Organizational Conflicts of Interest (OCI) are a well-known fixture of government contracting. OCI has its own FAR subsection, FAR part 9.5, and figures prominently in several GAO bid protests every year. OCIs can be waived by the Government, and mitigated by contractors, with the Government’s approval.

OCIs are situations where a contractor either has an unfair competitive advantage from previous work done, has impaired objectivity, or has other prohibited items.

I spend a fair amount of my professional life advising clients on how to mitigate or avoid OCIs, and in protesting OCIs during competitive procurements.

Bad News

Everyone agrees that OCIs are bad. But until a recent False Claims Act settlement (FCA) between the Department of Justice (DOJ) and a contractor, we didn’t know just how bad.

In recent years, many if not all solicitations require contractors to certify that they do not have an OCI or identify any potential OCIs. This certification certainly seems like a material certification under the Supreme Court’s Escobar standard, because FAR part 9.5 generally prohibits the award of a contract to an offeror with an un-waived and unmitigated OCI.

Violations

For false OCI certifications, the Government would not award a contract, and certainly not pay invoices submitted under the contract. A clear FCA violation.

But until now, most contractors assumed that the worst thing that could happen with an OCI is that they lost a contract after a GAO bid protest.

Sending a message

A recent DOJ announcement of a $110,000 False Claims Act settlement with a Colorado-based IT company, stemming from false statements regarding the lack of an OCI, surprised many. To say the case landed with a loud bang is an understatement.

The danger to contractors is obvious. OCIs can be tough to identify, particularly because they can be created by subcontractors or even individual employees based on their prior positions. Failure to properly screen for OCIs can lead to false statements and false claims based on the “reckless disregard for accuracy” standard that Courts and DOJ use as an alternative to intentional violations.

The takeaway from this recent OCI case is straightforward but urgent. Contractors should implement a formal OCI screening process as part of their proposal preparation and should document both the methodology and the result. That process should also be integrated into their formal Government Contract Compliance Program.