TO 

FROM 

SUBJECT 

UNITED STATES GOVERNMENT 

MEMORANDUM 

Michael S. Schwartz 

Chairman 

} /~ 

Karl T. Blank 7 ~ z_ 

General Couns✓ 

FORM G-1151 (1-92) 

RAILROAD RETIREMENT BOARD 

July 1, 2015 

L-2015-04.1 

Limitations to Procurement Process for Independent Medical Exam (IME) 

Contract 

This is in response to your memorandum of June 3, 2015, requesting my analysis often 

recommendations by the Inspector General of the Railroad Retirement Board regarding disability 

annuity entitlement under the Railroad Retirement Act. These recommendations generally fall 

into three broad categories: Contract and procurement law; Questions not directly relating to 

evaluation of medical evidence and which recommend or require statutory or regulatory changes; 

and Questions relating to weight and evaluation of medical evidence. This memorandum 

provides my analysis of contract and procurement law as it applies to the following 

recommendation: 

The RRB' s contract for Independent Medical Examination should be awarded to a 

different company at least every three years. 

In preparing this response, I note that in Legal Opinion L-2015-04 ( copy attached), I addressed 

several similar issues including conflict of interest and non-competitive bidding (sole source 

contracts) associated with the Disability Quality Assurance Review Contract. Because awarding 

the Independent Medical Examination (IME) contract to a different company every three years 

would, by definition, exclude the current contractor from bidding on the new contract each time 

the IME contract is posted for procurement, the first issue addressed by L-2015-04 directly 

relates to the present question. The United States Code, under Title 41, Public Contracts and the 

Federal Acquisition Regulation (FAR) contain additional options for ensuring that a current 

contractor is not awarded the same procurement contract immediately upon completing a current 

contract, should the Board choose to adopt the Inspector General's recommendation. This 

response references research from that opinion specifically tailored to the issue raised by the 

Inspector General. 

Generally, an executive agency in conducting a procurement for services shall: "(l) obtain full 

and open competition through the use of competitive procedures in accordance with the 
2 

requirements of this division and the Federal Acquisition Regulation; and (2) use the competitive 

procedure or combination of competitive procedures that is best suited under the circumstances 

of the procurement." 41 USC §3301(a). However, there are certain exceptions to full and open 

competition in Title 41 and the FAR. 41 USC §3303 states that an executive agency may 

provide for the procurement of services using competitive procedures but excluding a particular 

source in very limited circumstances. The agency may do so to establish or maintain an 

alternative source of supply for that service if the agency head determines that to do so would-

(A) increase or maintain competition and likely result in reduced overall cost for the 

procurement, or for an anticipated procurement, of the property or services; 

(B) be in the interest of national defense in having a facility (or a producer, manufacturer, 

or other supplier) available for furnishing the property or service in case of a national 

emergency or industrial mobilization; 

(C) be in the interest of national defense in establishing or maintaining an essential 

engineering, research, or development capability to be provided by an educational or 

other nonprofit institution or a Federally funded research and development center; 

(D) ensure the continuous availability of a reliable source of supply of the property or 

service; 

(E) satisfy projected needs for the property or service determined on the basis of a history 

of high demand for the property or service; or 

(F) satisfy a critical need for medical, safety, or emergency supplies. 

41 USC §3303(a)(l). 

The FAR also states that every proposed contract action excluding sources under this provision, 

"shall be supported by a determination and findings (D&F) signed by the head of the agency or 

designee. This D&F shall not be made on a class basis." FAR 6.202(b )(1 ). In addition, technical 

and requirements personnel are responsible for providing all necessary data to support their 

recommendation to exclude a particular source and when a reduction of overall costs is cited as 

the reason for excluding a particular source, the findings shall include a description of the 

estimated reduction in overall costs and how the estimate was derived. FAR 6.202(b )(2)-(3). 

Based on the information available, there is not a national defense interest in the IME contract 

nor is there a history of high demand for IME providers. Excluding the RRB's current IME 

contractor would not satisfy exceptions (B), (C), or (E). Exception (A) under § 3303 involves a 

determination that excluding the current contractor would result in maintaining competition in 

the IME marketplace and potentially lower costs associated with the procurement. It is 

noteworthy that the Social Security Administration (SSA) utilizes contract services for IMEs in 

the adjudication of disability cases under SSA jurisdiction. There is no question that the SSA 

disability program is much larger than the RRB's disability program. The greater demand by 

SSA for IME's impacts competition in the marketplace far more than the relatively few number 

ofIMEs contracted through the RRB. It is unlikely the RRB IME contract would significantly 

impact either competition or cost in the overall IME marketplace. 

Similarly, exception (D) would not apply to the RRB's IME contract. Exception (D) is used to 

ensure a continuous availability of a reliable source of supply of the service. As indicated with 

exception (A), SSA already performs the vast majority ofIME contracted exams and SSA's 
3 

contracts already preserve a reliable source of supply of doctors performing IMEs under 

government contracts. 

Finally, an example of exception (E) would be where only two or three pharmaceutical 

companies manufacture a specific vaccine. In order to guarantee that one of the companies does 

not stop producing the vaccine, the government could exclude the other company from bidding 

on a vaccine contract to make sure that both companies continue to produce the vaccine in 

anticipation of an epidemic breaking out where both companies will be called upon to produce 

the vaccine. It is critical to maintain two or three sources of supply of the vaccine, which creates 

the medical exigency. It is clear that exception (E) would not apply because contracted IMEs 

are not critical emergency medical events. 

The Inspector General recommends periodic rotation in the IME contractor to reduce the 

likelihood of fraud in the RRB's disability program. While the FAR does not provide a fraud 

prevention exception per se, the most viable basis for exclusion would be that under exception 

(A) of§ 3303, the RRB IME marketplace is separate from the SSA IME marketplace and that 

excluding the current contractor would result in maintaining competition in the IME marketplace 

and potentially the lower RRB's costs associated with the procurement. Under this theory, the 

Chairman as Agency head for the purpose, or his designee, would be required to make a written 

determination and finding in support of the decision. 

As an alternative to excluding a particular source, 41 USC §3304 provides for the use of a 

noncompetitive procedure for procurement. Many of the same exceptions apply to using §3304 

as apply when using exclusion procedures under §3303, however, §3304 also allows for the use 

of noncompetitive procedures when the head of the agency determines that there is a necessary 

public interest to use procedures other than competitive procedures and notifies Congress in 

writing that such a determination has been made (see 41 USC §3304(a)(7)). Use of this 

exception requires the head of an executive agency to make a written determination to use this 

authority and that the authority to make the written determination may not be delegated (see 

FAR 6.302-7(c). If required by the head of the agency, the contracting officer shall prepare a 

justification to support the determination (FAR 6.302-7(c)(3)). 

Addressing the present recommendation in the context of §3304, the Chairman could make a 

written finding based on Congressional concern, that it is in the public interest to rotate the 

contract from one provider to another every three years in order to reduce the risk of fraud in the 

RRB IME marketplace. It would appear unlikely that Congress would object to a notice on this 

basis. However, in order to use §3304, an IME contract provider must be identified and willing 

to take the IME contract and provide these services to the RRB. Moreover, the fraudulent 

medical evidence in the Long Island Railroad prosecutions was not provided by physicians under 

the IME contract. 

Finally, I note that an additional option may also be available to the RRB to fulfill the intent of 

the Inspector General's recommendations. As you know, the current IME contractor does not 

employ any of the doctors that perform the exams. Therefore, a new contractor could be 

awarded the contract for IME services by the RRB and that new contractor could potentially 

award subcontracts for the IMEs to the same individual doctors who were performing IMEs for 
4 

the current contractor. It is important to note that IME provider contractors do not directly 

employ doctors. Rather, providers receive requests for an IME from the RRB and then locate a 

doctor willing to do the IME and subcontract the IME to the individual doctor within a certain 

mileage radius of the disability applicant. 

Consequently I suggest another method of rotating the doctors performing the exams. The next 

IME contract could be posted for full and open competition; however, the contract would specify 

that the successful offeror would be required under some protocol to rotate doctors that provide 

the exams under the contract. If feasible this method would both allow for full and open 

competition in the procurement process and ensure that the same doctors are not utilized over 

and over again for RRB IMEs. A contract provision requiring the rotation of doctors performing 

the exams would address the Inspector General's concern of fraud or collusion in the RRB's 

disability process while maintaining the statutorily required full and open competition for the 

IME provider contract. I should add however, this limitation may be subject to availability of 

doctors or of specialists in a particular location. 

I trust this will be of assistance to you. 

Attachment 
UNITED STATES GOVERNMENT 

MEMORANDUM 

TO The Board 

-Z~ 

FORM G-115f (1-92) 

RAILROAD RETIREMENT BOARD 

January 28, 2015 

L-2015-04 

FROM Karl T. Blank /J V 

General CounseV 

SUBJECT: Current Contractor Bids on a New Solicitation 

This memorandum is in response to the request by Chairman Michael Schwartz for my advice as 

to whether companies (specifically QTC and/or CEL) which have current contracts with the 

Railroad Retirement Board may be allowed to bid on a new Disability Quality Assurance Review 

Contract. There are several laws and regulations which may affect this decision and this 

memorandum lays out the issues before the Board. 

Generally, an executive agency in conducting a procurement for services shall: "(1) obtain full 

and open competition through the use of competitive procedures in accordance with the 

requirements of this division and the Federal Acquisition Regulation; and (2) use the competitive 

procedure or combination of competitive procedures that is best suited under the circumstances 

of the procurement." 41 USC §3301(a). This is true except for the provisions of sections 3303 

and 3304(a) which are discussed below. 

Exclusion of a Particular Source- 41 USC §3303 

An executive agency may provide for the procurement of services using competitive procedures 

but excluding a particular source in very limited circumstances. The agency may do so to 

establish or maintain an alternative source of supply for that service if the agency head 

determines that to do so would-

(A) increase or maintain competition and likely result in reduced overall cost for the 

procurement, or for an anticipated procurement, of the property or services; 

(B) be in the interest of national defense in having a facility ( or a producer, manufacturer, 

or other supplier) available for furnishing the property or service in case of a national 

emergency or industrial mobilization; 

(C) be in the interest of national defense in establishing or maintaining an essential 

engineering, research, or development capability to be provided by an educational or 

other nonprofit institution or a Federally funded research and development center; 
2 

(D) ensure the continuous availability of a reliable source of supply of the· property or 

service; 

(E) satisfy projected needs for the property or service determined on the basis of a history 

of high demand for the property or service; or 

(F) satisfy a critical need for medical, safety, or emergency supplies. 

41 USC §3303(a)(l). 

The Federal Acquisition Regulation (FAR) also states that every proposed contract action 

excluding sources under this provision, "shall be supported by a determination and findings 

(D&F) signed by the head of the agency or designee. This D&F shall not be made on a class 

basis." FAR 3.202(b)(l). In addition, technical and requirements personnel are responsible for 

providing all necessary data to support their recommendation to exclude a particular source and 

when a reduction of overall costs is cited as the reason for excluding a particular source, the 

findings shall include a description of the estimated reduction in overall costs and how the 

estimate was derived. FAR 3.202(b)(2)-(3). 

Based on the information provided, it does not appear that excluding QTC and/or CEL would 

satisfy one of the provisions which would allow for exclusion of a particular source. If there is 

information I am unaware of and the Board finds that exclusion would satisfy one of these 

provisions, the Chairman would have to make a formal determination and finding supporting 

such a conclusion. 

This statute also allows for the categorical exclusion of "other than small business concerns" in 

furtherance of the Small Business Act (15 USC §638). If the RRB were to use this and 

accompanying FAR provision, it would have to identify small businesses in the market place that 

have the capacity to perform the work requested, most probably resulting in delay of issuance of 

the solicitation. 

Use of Noncompetitive Procedures- 41 USC §3304 

Rather than exclude a particular source from an otherwise competitive bid, the Board may use 

noncompetitive procedures for obtaining bids. Again, this can only be done in limited 

circumstances and many of them are similar to §3303 referring to national security and critical 

need. But §3304 also allows for the use of noncompetitive procedures when, "the head of the 

executive agency (who may not delegate the authority under this paragraph): (A) determines that 

it is necessary in the public interest to use procedures other than competitive procedures in the 

particular procurement concerned; and (B) notifies Congress in writing of that determination not 

less than 30 days before the award of the contract." 41 USC §3304(a)(7). FAR provisions state 

that "a written determination to use this authority shall be made ... by the head of any other 

executive agency. This authority may not be delegated." FAR 6.302-7(c). If required by the 

head of the agency, the contracting officer shall prepare a justification to support the 

determination. FAR 6.302-7(c)(3). Any justification for a contract awarded under this authority, 

regardless of dollar amount, shall be considered approved when the determination by the head of 

the agency is made. FAR 6.304(b). 
3 

Under this provision, the Board may go forward with a noncompetitive bid for the Disability 

Quality Assurance Review Contract if the Chairman determines that it is necessary in the public 

interest to use procedures other than competitive procedure for the contract. He must also notify 

Congress in writing of such a determination not less than 30 days prior to the awarding of the 

contract and may request that the Chief Contracting Officer prepare justification to support the 

determination. Again, I do not have sufficient information regarding the solicitation to give 

conclusive advice as to whether the Chairman should exercise this provision but if the Board 

makes the determination to go forward with noncompetitive procedures, the above-referenced 

process must be followed. 

It should be noted that if the RRB were to go forward with a non-competitive bid, it would result 

in a single source procurement and the Bureau of Acquisition Management would have to 

determine what the appropriate source would be. If the Board is concerned with the appearance 

of a conflict of interest, this single source procurement may not accomplish this goal. 

Conflict of Interest 

The above-referenced authorities are regarding the preclusion of companies from the bidding 

process. Once bids are solicited, the FAR also states that there is an underlying principle of 

preventing the existence of conflicting roles that might bias a contractor's judgment. FAR 

9.505(a). Under the FAR, the contracting officer has discretion to make proposals for avoiding 

or neutralizing conflicts of interest and such concerns may be addressed in the solicitation, 

negotiations, or in the contract clauses. In addition, the contracting officer shall award the 

contract to the apparent successful offeror unless a conflict of interest is determined to exist that 

cannot be avoided or mitigated. FAR 9.504(e). 

Specifically in the situation at hand, contracts for the evaluation of offers for services shall not be 

awarded to a contractor that will evaluate its own services without proper safeguards to ensure 

objectivity to protect the Government's interests. FAR 9.505-3. If the Board believes that QTC 

and/or CEL may bid on the solicitation and that a conflict of interest may exist at that time, a 

solicitation provision addressing this issue should be considered. For example, in the . 

Consultative Medical Opinion Contract that was awarded to CEL, the following Conflict of 

Interest provisions are included: 

Conflict of Interest 

a. Contracts involving advisory and assistance services shall not generally be 

awarded to contractors that would evaluate or otherwise advise the 

Government concerning their own products or activities without proper 

safeguards to ensure objectivity and protect the Government's interests. 

The Contracting Officer has determined that this particular acquisition 

involves a significant potential organizational conflict of interest and that 

Federal Acquisition Regulation (FAR) Subpart 9.5 shall apply to this 

procurement action. 

b. This solicitation requires the successful offeror to -
4 

1. Review medical evidence received in support of disability-based 

claims; 

2. Consider residual functional capacity (RFC) assessments from 

treating or consulting physicians; and 

3. Prepare advisory medical opinions based on that review. 

Medical evidence may be obtained from many sources including the providers 

of disability examination services under the Board's current Contract 

No.RRB08C003 with QTC Medical Services, Inc. The participation of the 

providers of medical evidence could substantially conflict with the Contractor's 

duties under the contract resulting from this solicitation. 

c. Offerers who have provided medical evidence or RFC assessments (as 

certified under Section V.R.) shall include with their business proposal a 

discussion of the potential conflict of interest participation under this 

acquisition could create. The discussion must include a comprehensively 

supported statement as to whether the potential for a conflict exists and, if 

so, a clear and compelling explanation as to how the offerer would be able 

to furnish impartial assistance or advice to the Government and how the 

offerer's objectivity in performing contract work would not be otherwise 

impaired. 

As you can see, the potential conflict of interest between consultative opinions and consultative 

medical exams was identified in the solicitation and addressed in the contract through conflict of 

interest provisions. Similar language should be considered for this solicitation and final award.