Congress passed the PIA in 1988 following the well-publicized investigation into corruption by government officials and defense contractors in the 1980s. Pub. L. 100-679 § 6(a), Nov. 19, 1988. The PIA prohibits certain conduct by government officials and contractors and is an important part of the legal and ethical landscape in which government officials and contractors operate. The PIA, as amended, currently restricts disclosing or obtaining procurement information, engaging in employment discussions with government officials, and the payment to and receipt of compensation by a former government official.
The PIA provides a daunting list of potential criminal, civil and/or administrative penalties. For offerors and contractors, violations of the PIA may result in bid protests and investigations leading to the cancellation of the solicitation, disqualification of an offeror, contract rescission, profit recapture, suspension and debarment, monetary penalties, or imprisonment.
In CLC Construction, the contractor appealed the termination for default of its contract to design and construct a courthouse in Afghanistan. After the contractor filed the appeal, the Army sought summary judgment on the theory that the contractor had improperly received procurement information during the competition in violation of the PIA. The Army argued that, as a remedy, it could rescind the contract and that the contract was void. The Board rejected the Army’s arguments on summary judgment, but it did not foreclose the possibility that the Army could prove a PIA violation during trial.
The relevant PIA restriction states: “Except as provided by law, a person shall not knowingly obtain contractor bid or proposal information or source selection information before the award of a Federal agency procurement contract to which the information relates.” 41 U.S.C. § 2102(b). This restriction is also found in the Federal Acquisition Regulation (FAR) at 48 C.F.R. § 3.104-3(b).
In this case, the Army contracting officer found that the contractor had received two pieces of information during the procurement: (1) the government’s internal cost estimate, and (2) the price of the lowest cost proposal. The main legal issue was whether these two items of information constituted either “contractor bid or proposal information” or “source selection information.” The PIA defines “contractor bid or proposal information” as one of several listed types of information or any information marked by a contractor as “contractor bid or proposal information.” Notably, the PIA includes in its list of types of “contractor bid or proposal information,” “[p]roposed costs or prices submitted in response to a Federal agency solicitation, or lists of those proposed costs or prices.” Similarly, “source selection information” is defined as one of several listed types of information or any information marked as “source selection information.” 41 U.S.C. § 2101(2), (7).
Initially, the Board ruled on the meaning of “knowingly obtained” information. For this PIA requirement, the Board adopted a low threshold, finding that all the government must show to meet the “knowingly” requirement of the PIA is evidence that the contractor understands the information was received. Thus, according to the Board, it does not matter whether the contractor knows the information is contractor bid or proposal information or source selection information. Nor does it matter whether the contractor knows it is impermissible to have the information. All that matters, to satisfy the “knowingly obtained” test, according to the Board, is that that the contractor knows it received the information.
Turning to the two items of information at issue, the Board ruled that the government’s internal cost estimate does not fit within the PIA definition of “source selection information.” The government’s internal cost estimate is not listed in the PIA as one of the specific types of protected source selection information nor was the estimate in this procurement marked in that manner.
The Board also ruled, however, that it could not determine on summary judgment whether the contractor’s alleged receipt of the price of the lowest cost proposal violated the PIA. Although the proposed price of another offeror is one of the types of information that expressly falls within the definition of “contractor bid or proposal information,” the record did not support a finding that the contractor had received such information. Specifically, the contractor had received an email from the government five days before the proposals were due that stated that “the lowest so far is $2,399,835.54,” but the figure did not match any of the prices listed in the abstract of proposals. Because the Board could not resolve the fact issue based on the evidence before it, the Board denied the Army’s request for summary judgment. The Army presumably can still attempt to prove a PIA violation on this issue at trial with additional evidence.
The PIA provides for a variety of criminal, civil, and administrative remedies, and not every violation warrants contract rescission. In this respect, the Board issued two other important rulings. First, the Board ruled that, in order for the Army to rescind the contract, the information received also would have to have been in exchange for payment, an offer of employment, or to gain a competitive advantage. 41 U.S.C. § 2105(c)(1)(B). The Board stated that the government did not establish the facts necessary to justify rescission.
Second, the Board ruled that, in order to rescind the contract, FAR 3.104-7(b)(5) requires that the head of the contracting activity recommend that the agency head determine that the contractor has engaged in conduct constituting an offense punishable under the PIA. Here, there was no evidence that the Army’s head of contracting activity had made such a recommendation.
CLC Construction thus provides guidance on the contours of the PIA, and serves as a reminder to contractors of the importance of understanding the PIA and of having an effective compliance program, as well as of the powerful remedies potentially available to the government if it can prove a PIA violation.