In a case that tests traditional understandings of conflicts of interest, the Government Accountability Office has ruled that Alexandria-based VSE should not necessarily have had its contract terminated for hiring a former government employee as a consultant.

The decision is the latest move in a long-running fight over a $68 million Army Rapid Equipping Force contract first awarded to VSE in early summer. The company beat out Arlington-based CACI, the incumbent, as well as Falls Church-based General Dynamics, among others.

CACI subsequently filed a protest with the agency, arguing that VSE gained an improper advantage by hiring a former deputy project manager as a consultant .

The contracting officer on the effort sided with CACI, concluding that the former Army Rapid Equipping Force employee created the appearance of a conflict of interest by helping to develop the original acquisition strategy, and then reviewing VSE’s proposal before submission. The contracting officer terminated VSE’s contract in August, and the award went to General Dynamics, which was next in line.

VSE countered with its own protest to the GAO. In a decision released earlier this month, the GAO backed VSE, sustaining the protest, and arguing that the contracting officer did not rely on facts when terminating the contract. While not arguing that VSE or the former government employee’s actions were permissible, the GAO calls on the Army’s contracting office to take another look at the case.

The GAO concludes that the contracting officer based the contract termination on a perception that the hiring looked bad, rather than on facts.

The GAO is “unable to unravel or segregate the effects of the unsupported assumptions and incorrect legal conclusions from the reliance on otherwise reasonable conclusions,” the decision read.

In particular, the GAO said the contracting officer did not find any specific information that the former deputy project manager might have accessed that would have given VSE a competitive advantage.

It was legal for the former Army Rapid Equipping Force employee to offer “behind-the-scenes” assistance to a company, if not to represent the company to the federal government, the GAO said.

The contracting officer’s conclusion “was based on her incorrect understanding of the applicable post-employment statutes and regulations.”

In a statement, the Army’s contracting office said it has reviewed the decisions and accepted the GAO’s finding and recommendations.

The Army “is in the process of implementing those recommendations,” the statement added.

Michael R. Golden, an attorney with Pepper Hamilton’s government contracts practice, was quick to note that the GAO didn’t come to a conclusion on whether the former government employee overstepped the legal boundaries.

“It just reflects the conclusion that the findings [the contracting officer] relied on were based on assumptions rather than hard facts,” Golden said. But he acknowledged that the decision might surprise some contractors.

“Generally, contracting officers’ determinations are given deference,” Golden said. In this case, “GAO was not persuaded.”

VSE declined to comment.