Policy.

(a) Except as specified in 3.602, a contracting officer shall not knowingly award a contract to a Government employee or to a business concern or other organization owned or substantially owned or controlled by one or more Government employees. This policy is intended to avoid any conflict of interest that may arise between the employees’ interests and their Government duties, and to avoid the appearance of favoritism or preferential treatment by the Government toward its employees.

(b) For purposes of this subpart, special Government employees (as defined in 18 U.S.C. 202) performing services as experts, advisors, or consultants, or as members of advisory committees, are not considered Government employees . . . .

FAR § 3.601.

On June 12, the agency awarded the contract to Cross and notified Metro of the award. Metro requested a debriefing via email on June 13. In its email to the agency, Metro stated that the owner of Cross lists his employer--on the website LinkedIn--as the “Under Secretary of Defense (Intelligence).” Protest, Exh. 5, Request for Debriefing (June 13, 2013), at 1-2. Metro’s email referred the agency to FAR § 3.601, and requested that the agency provide as part of its debriefing the agency’s rationale for the award of a “government contract using appropriated funds to a government employee.” Id. Finally, Metro’s email requested that the matter be brought to the attention of the contracting officer. Id.

The VA states that the contracting officer first “became aware of [Cross’ owner’s] employment with the Office of the Under Secretary of Defense on June 13, 2013;” that is, after the award of the contract. AR, Tab 17, Agency Response to GAO Interrogatory (August 23, 2013), at 1. Upon receipt of the protester’s debriefing request alleging that Cross’ owner was a government employee, the contracting officer “reviewed the status of [the owner]” and found that he is not a “government employee per FAR 3.601(b) and in accordance with 18 U.S.C. 202.” Id., Exh. 6, Debriefing (June 14, 2013), at 2. The contracting officer included these findings as part of Metro’s written debriefing on June 14.

We find that the record here clearly establishes that, prior to award, the contracting officer was not aware of the building owner’s employment with the Office of the Under Secretary of Defense. Thus, the contracting officer cannot be said to have “knowingly” awarded a contract to a firm owned by a government employee in violation of FAR § 3.601. Maywood Closure Co., LLC, B-408343, et al., Aug. 23, 2013, 2013 ¶ 199 (protest denied where neither the selection official nor the contracting officer knew that the awardee was partially owned by a government employee at the time of award); TPMC-Energy Solutions Envtl. Servs. 2009, LLC, B-408343.2, et. al, Aug. 23, 2013, 2013 CPD ¶ __ (reaching same conclusion); see, e.g., Biosystems Analysis, Inc., B-198846, Aug. 25, 1980, 80-2 CPD ¶ 149 at 4 (reaching same conclusion as under the Federal Procurement Regulations, which were applicable to civilian agencies prior to implementation of the FAR, which became effective in 1984). On this record, we find no basis to conclude that the agency awarded the contract to Cross in violation of FAR § 3.601.

In addition, on September 3, 2013, Metro filed a supplemental protest with our Office asserting--for the first time--that the contracting officer had “reason to believe” that award to Cross would be in violation of FAR § 3.603 because Cross’ offer states that the owner and managing member is a Captain in the U.S. Navy (Reserve Component). In relevant part, FAR § 3.603 provides:

(a) Before awarding a contract, the contracting officer shall obtain an authorization under 3.602 if: (1) [t]he contracting officer knows, or has reason to believe, that a prospective contractor is one to which award is otherwise prohibited under 3.601; and (2) [t]here is a most compelling reason to make an award to that prospective contractor.

FAR § 3.603.

Here, Metro argues that, even if the contracting officer did not know at the time of award that Cross’ owner was employed by the Department of Defense, the contracting officer should have known based on the awardee’s proposal that the owner listed himself as a Captain in the U.S. Navy Reserves.

We find that Metro’s supplemental protest is untimely. See Bid Protest Regulations, 4 C.F.R. § 21.2(a)(2) (2013). In this regard, Metro was provided Cross’ proposal in the agency report on July 25, and thus became aware at that time that the awardee’s owner and managing member is a Naval Reserve Officer. Metro argues, however, that it first became aware of the basis for its supplemental protest on August 23--upon receiving the contracting officer’s statement that he was unaware of any information regarding Cross’ owners’ alleged status as a government employee until after the award. We disagree. Metro was aware that the owner of Cross was a Naval Reserve Officer upon receipt of the agency’s report. Because Metro did not file its protest alleging that the contracting officer had reason to believe Cross’ owner was a government employee and that the award would be in violation of FAR § 3.603 within 10 days of discovery that Cross’ proposal listed its owner as a Naval Reserve Officer, we dismiss this portion of the protest.  (Metro Offices, Inc. B-408477, B-408477.2, Sep 27, 2013)  (pdf)

Finally, the protester argues that Cabrera should have been excluded from the competition since an employee of the Baltimore District of the Corps of Engineers, has a 10 percent ownership interest in Cabrera. In this regard, Maywood argues that the award was in violation of Federal Acquisition Regulation (FAR) § 3.601, which prohibits a contracting officer from “knowingly” awarding a contract “to a Government employee or to a business concern or other organization owned or substantially owned or controlled by one or more Government employees.” Maywood further argues that the agency failed to reasonably consider whether the employee’s dual roles as a government official and as a business owner with a personal stake in the outcome of a procurement created a conflict of interest.

First, with regard to the alleged violation of FAR § 3.601, the record here clearly establishes that prior to Maywood’s protest, neither the contracting officer nor the SSA was aware of the Baltimore District employee’s ownership interest in Cabrera. Indeed, according to the agency, neither was even aware that the individual in question was a Corps employee, an unsurprising circumstance given that the SSA and the contracting officer are both employees of the Corps’ Kansas City District, which is over a 1,000 miles from the Baltimore District. Thus, without addressing the issue of whether the employee’s 10 percent ownership interest constitutes substantial ownership, neither can be said to have “knowingly” awarded a contract to a firm substantially owned by a government employee. See, e.g., Biosystems Analysis, Inc., B-198846, Aug. 25, 1980, 80-2 CPD ¶ 149 at 4 (reaching same conclusion as here under the Federal Procurement Regulations, which were applicable to civilian agencies prior to implementation of the FAR, which became effective in 1984).

Second, with regard to the alleged conflict of interest, while we have recognized that an actual or apparent conflict of interest may arise when an agency employee has both an official role in the procurement process and a personal stake in the outcome, TPL, Inc., B-297136.10, B-297136.11, June 29, 2006, 2006 CPD ¶ 104 at 8, the record demonstrates that the agency conducted a thorough investigation, once this situation was brought to the contracting officer’s attention through Maywood’s protest. This investigation established that the employee in question had no role in the procurement process here. The investigation also established that none of the individuals who were involved in the procurement had any contact with this employee during the course of the procurement. As a result, we disagree with Maywood’s assertion that Cabrera should have been excluded from this competition.  (Maywood Closure Company, LLC, B-408343, B-408343.3, B-408343.4, B-408343.6, Aug 23, 2013)  (pdf)

The current contract with a base year and 4 option years was awarded to Rockhill on August 21, 2012.

This protest followed.

DISCUSSION

TranLogistics complains that Rockhill’s owner is a federal government employee, and is therefore ineligible to receive a government contract. The Federal Acquisition Regulation (FAR) prohibits an agency from knowingly awarding a contract to a federal employee or a firm owned or controlled by a federal employee (except in circumstances not applicable here). FAR § 3.601(a).

The agency responds that Rockhill’s sole owner, who acquired the business in September, 2007, served on active duty in the Air Force until 2004 when he retired. The Air Force also states that he was a civilian employee of the Air Force from January 2011 to February 2012, and that the contracting officer was unaware of this civilian employment until the protest was filed. Contracting Officer’s Statement, at 9; Agency Report, Tab 19, Rockhill Emails of September 19 and 20, 2012.

Because the record shows that Rockhill was not owned or controlled by a government employee when the contract at issue was awarded, the award did not violate FAR § 3.601(a). Accordingly, we deny this basis of protest.  (TranLogistics, LLC, B-407215, Nov 30, 2012)  (pdf)

ARP argues that its proposals were improperly rejected. In support of its contentions, ARP argues that Mr. Hertz’s wife works in a different building from the CO for these two procurements, and that she has had no role in either procurement. ARP also argues that any appearance of impropriety could be mitigated using computer security measures to restrict access to electronic files relating to these two procurements.

The Air Force responds that it has an obligation, reiterated in the FAR, “to avoid strictly any conflict of interest or even the appearance of a conflict of interest,” in the conduct of agency procurements. FAR sect. 3.101-1. Consistent with this, the Air Force also notes that the FAR prohibits an agency from knowingly awarding a contract to a federal employee or a firm owned or controlled by a federal employee (except in circumstances not applicable here). FAR sect. 3.601(a). Finally, the Air Force notes that Mr. Hertz’s ownership of ARP is imputed to his wife, an Air Force CO at the same base.

The Air Force argues that the appearance of impropriety arises here not only because Mr. Hertz’s wife is an Air Force CO, but also because she had access to shared computer storage drives and databases “that contain significant nonpublic information on prospective and current acquisitions.” AR at 5. And the Air Force contends that, even after award, the administration of the contracts could continue to create an appearance of favoritism, based on presumed collegial relationships between COs within the 18th Contracting Squadron. As a result, and because these procurements were already underway when the Air Force learned of the connection between ARP and an Air Force CO at the same base, the agency contends that the only way to avoid the appearance of impropriety at this juncture is to exclude ARP from both procurements.

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. Accordingly, an agency can reasonably reject a proposal to avoid even the appearance of an impropriety. KAR Contracting, LLC, B‑310454, B-310537, Dec. 19, 2007, 2007 CPD para. 226 at 4. We 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. Id. at 4‑5.

In our view, the actions taken by the Air Force here were based on facts, and were reasonable. Even though ARP argues that the record does not suggest that the firm obtained any nonpublic information or other advantage, or expected to benefit from favoritism in these procurements, and even though Mr. Hertz’s wife works in a different building, and in a different contracting office at the base, we believe that the Air Force reasonably concluded that this situation created an appearance of impropriety.  (Asia Resource Partners K.K., B-400552, November 5, 2008) (pdf)