August 2019 Bid Protest Roundup

security-600This installment of our monthly bid protest Law360 spotlight takes a look at three protest decisions from August, highlighting the most noteworthy aspects of the decisions for companies competing for contracts and agencies seeking procurement.

The first examines the Government Accountability Office’s (“GAO”) decision to deny a protest challenging an agency’s decision to withhold proprietary data from prospective offerors in a solicitation.  GAO had to closely review the terms of the solicitation and evaluation scheme to determine if the data was necessary for offerors to submit intelligent and responsive proposals.

Our second decision is a case involving information security requirements and whether a contractor could wholly rely on its subcontractor to meet the requirements under the terms of the solicitation.  This decision also serves as an important reminder that the GAO has strict timeliness rules regarding challenges to improprieties of solicitations.

The final summary looks at another GAO rejection of a protest that challenged both the agency’s classification of the procurement on Federal Business Opportunities (“FBO”), and the short response time to submit offers.

United Aeronautical Corp., B-417560, August 7, 2019:

GAO denied this protest challenging an agency’s withholding of proprietary data from offerors, finding the data was not required for offerors to submit intelligent and responsive proposals.

Facts:

 The Air Force solicited proposals for a hybrid fixed-price and cost-reimbursement contract for the demilitarization and retrofitting of seven HC-130H aircraft with aerial retardant delivery systems (“RDS”).  The HC-130H aircrafts at issue, a multi-role variant of the C-130 cargo aircraft, was to be transferred from the U.S. Coast Guard to the State of California for firefighting operations.  For over a decade, the government had used C-130 aircrafts outfitted with a modular airborne fire-fighting system (“MAFFS”) to deliver fire retardant.  The original equipment manufacturer (“OEM”) for the C-130 collected flight data during C-130 missions employing the MAFFS delivery system.

The Request for Proposal (“RFP”) included a contract line item number (“CLIN”) requiring the offeror, after award of the contract, to subcontract with the OEM of the C-130 aircraft to receive data, analysis, and validation work.  Specifically, the RFP indicated that the OEM would be responsible for supporting the engineering certification requirement of the statement of work (“SOW”), and provide validation for various analyses. The OEM was to use the data it had collected on the C-130 missions for these analyses.  The offerors were thus only required to propose add-on factor rates for this CLIN, such as general and administrative rates, which would be applied to the OEM support proposal and incorporated after contract award.  The CLIN was to be paid for on a cost-plus-fixed-fee basis.

United Aeronautical Corporation (“UAC”) lodged a pre-award protest contending that the RFP lacked “critical information” by not providing offerors with the OEM’s C-130 MAFFS performance data.  Therefore, UAC argued the RFP did not afford offerors the opportunity to prepare intelligent and responsive proposals to compete on an equal basis.

Analysis:

The GAO disagreed with UAC’s argument that withholding the MAFFS data rendered the RFP lacking adequate information.  While it is true that the government must provide offerors sufficient detail in a solicitation, it is not required to provide a level of detail so as to “eliminate all risk” or “remove every uncertainty” prospective offerors might have.    Looking at the terms of the RFP, the GAO explained that although aircraft integration was part of the Statement of Work, it did not require offerors to propose detailed integration approaches.  Furthermore, aircraft integration was not an evaluation factor in the RFP.  Additionally, the Agency successfully argued that the MAFFS data would only be used in later stages of the design work during contract performance.  Therefore, offerors did not need the MAFFS data to prepare responsive proposals.

UAC also claimed that not providing the MAFFS data unduly restricted competition and gave entities more familiar with Air Force needs an advantage.  Rejecting this argument, the GAO first noted that the MAFFS data was proprietary to the OEM and could not be provided to offerors in a usable format.  This is why the RFP required offerors to subcontract with the OEM after award, and why the government would pay the CLIN on a cost-reimbursement basis.  Therefore, all offerors were put on equal footing.  Second, even if other entities had more familiarity with Air Force’s specific needs, UAC failed to prove how this was an unfair advantage.  GAO reminded UAC that “[t]he government has no obligation to equalize a legitimate competitive advantage that a firm may enjoy be virtue of its incumbency . . . or because it gained experience under a prior government contract.”

Thus, GAO denied the protest.

Takeaways:

This case is an illustration of the balance the GAO must strike between ensuring the government has provided sufficient information to offerors, while also ensuring it does not establish a standard requiring the government to provide unnecessary information.   The terms of the solicitation and the evaluation scheme therein are critical tools for the GAO in determining how to strike this balance.  Therefore, if it appears that the government has withheld critical information, carefully review the solicitation to determine whether that information is necessary for aspects of the proposal that will actually be evaluated.

Additionally, this decision is yet another reminder to offerors and their counsel that to successfully raise an argument a solicitation does not allow offerors to compete on relatively equal terms, it must prove how an advantage other offerors might have is unfair.  Fair does not necessarily mean a completely level playing field.  Instead offerors must show that a competitor’s advantage “results from improper preferential treatment or unfair action.” Foley Co., B-253408, Sept. 14, 1993, 93-2 CPD ¶ 165.  The GAO has consistently found that an incumbent possessing unique capabilities due to its prior performance under a contract does not meet this standard.

American Justice Solutions, Inc., dba Corrective Solutions, B-417171.2, August 16, 2019:

The GAO denied this protest challenging the release of an offeror’s prior pricing information during a debriefing for a cancelled award, and found the agency’s evaluation of proposals regarding information security systems was proper where the offeror wholly relied upon its proposed subcontractor to meet information security requirements.

Facts:

 On November 6, 2018, the Court Services and Offender Supervision Agency, Pretrial Services Agency for the District of Columbia (“PSA”) issued a Request for Quotations (“RFQ”) for commercial services to monitor defendants electronically.  Part of this work included the contractor exchanging data about defendants and their whereabouts with PSA through PSA’s secure web interface.  Thus, the Performance of Work Statement (“PWS”) required the contractor to comply with minimum information security standards such as the Federal Information Security Modernization Act of 2014 (“FISMA”) and National Institute of Standards and Technology (“NIST”).

In August 2018, PSA awarded American Justice Solutions, Inc., d/b/a CorrectiveSolutions (“American”) a contract under a similar solicitation.  In a debriefing with a disappointed offeror for that solicitation, Sentinel Offender Services (“Sentinel”),  PSA disseminated American’s pricing information.  Sentinel subsequently protested the award to American.  As a result, PSA took corrective action, cancelled the award to American, and issued the instant RFQ in November 2018.

American again submitted a proposal and participated in several rounds of discussions with PSA.  Because American did not have an information system compliant with FISMA and NIST standards, American’s proposal and answers to PSA’s questions identified its subcontractor as the entity meeting the RFQ’s security requirements.  However, PSA assigned several weaknesses and deficiencies related to American’s information security approach because American could not wholly rely upon a subcontractor to meet these requirements.  Yet, PSA did not assign the same deficiencies and weaknesses to the awardee which similarly did not have FISMA and NIST standards in place.

American lodged the instant protest raising three grounds: (1) PSA’s release of American’s previous pricing information rendered the competition unfair; (2) PSA misevaluated American’s proposal regarding the information security requirements; and (3) PSA unequally evaluated proposals.

Analysis:

GAO first dismissed American’s protest ground challenging the release of American’s pricing information.  It found that American had been informed as early as October 2018, through correspondence from PSA, that PSA disclosed American’s previous pricing information to Sentinel during debriefings.  Additionally, American knew, or should have known, that the RFQ at issue here was therefore unfair when it was released on November 9, 2018.  In other words, American knew all the facts that it raised in this protest ground six months prior to submitting this protest, and approximately a month prior to the RFQ’s due date for proposals.  GAO’s timeliness rules require protests based upon alleged improprieties in a solicitation that are known prior to the due date for offers to be filed before that time.  Therefore, without reaching the merits of American’s first argument, GAO dismissed it as untimely.

While GAO did reach the merits of American’s second and third protest grounds, it ultimately denied the protest.  American’s argument that it could rely on its proposed subcontractor to meet information security requirements in the RFQ was unsupported by the terms of the RFQ.  Nothing in the RFQ indicated that a prime contractor could delegate the compliance entirely to its subcontractor.  Furthermore, PSA explained that the RFQ required dissemination of sensitive information between the prime contractor and PSA.  Therefore, American could not avoid the requirement to have adequate information security systems in place.  Thus, the Agency’s evaluation of American’s proposal was reasonable.

Additionally, PSA did not evaluate American’s and the awardee’s proposals unequally.  PSA pointed out that although the awardee was not currently compliant with FISMA and NIST standards, the awardee’s proposal specifically addressed how it would bring its security system into compliance within 120 days.  This approach was acceptable under the RFQ, whereas American wholly relying upon a subcontractor’s system was not.  Therefore, PSA did not treat the offerors unequally, and GAO denied the protest.

 Takeaways:

The takeaways here are a mix of both established principles and new lessons.  The first portion of the GAO’s decision serves as a reminder to contractors that GAO has strict timeliness rules.  If you believe there are improprieties in a solicitation, you must lodge your protest before the deadline for submitting offers closes.  Otherwise GAO will not even consider the merits of your argument.

Additionally, the government has recently started focusing more attention on contractors’ compliance with information security standards.  Often, complying with these standards can be costly and burdensome for contractors.  However, this decision serves as a lesson that unless expressly permitted by the solicitation, contractors should not expect to be able to rely on subcontractors for meeting information security requirements.  That said, if you are not compliant at the time proposals are due, do not automatically discount your ability to submit a winning proposal.  Carefully read the terms of the solicitation to determine whether you can address how you can become compliant by a specified time period.

Warrior Service Company, B-417574, August 19, 2019:

 The GAO denied a protest challenging the agency’s assigned classification of a solicitation and found that less than seven days to submit quotes was a reasonable amount of time.

 Facts and Analysis:

 On May 8, 2019, the VA issued a RFQ for the procurement of five Hill-Rom brand LIKO overheard lift systems and related supplies and services.  The RFQ was set-aside for small businesses, and followed the commercial items and simplified acquisition procedures in FAR parts 12 and 13.  When the VA posted the RFQ on Federal Business Opportunities (“FBO”), it classified the RFQ as a solicitation for supplies rather than services.  Additionally, the VA only gave offerors until May 14, 2019, i.e. less than week, to submit proposals.

Warrior Service Company (“Warrior”) filed a protest challenging the solicitation on grounds that, inter alia, the VA misclassified the RFQ on FBO, and did not allow offerors a reasonable time to submit quotations.

Specifically, Warrior argued the RFQ required installation and training for the lift systems, and therefore, should have been classified as a procurement for services.  However, the GAO explained that it will only overturn a classification determination where it is shown to be unreasonable.  Here, Warrior failed to meet this standard.  Although the RFQ included installation and training requirements, those services were ancillary to the procurement for the overhead lifts.  Additionally, the lifts, not the related services, constituted a majority of the cost for the procurement.  Therefore, the lifts were the primary component of the procurement. Consequently, GAO found the VA’s determination to classify the RFQ as a procurement of supplies was reasonable.

GAO also denied Warrior’s argument that the response time for submitting quotations was unreasonable.  Warrior proclaimed that nearly seven days was insufficient due to the “complexity, commerciality, availability, and urgency of this particular procurement.” Normally, the FAR requires agencies to allow offerors at least 30 days from the date of the issuance to submit offers.  However, in instances where the agency is procuring commercial items or the procurement is below the simplified acquisition threshold, such as the RFQ here, the agency may allow fewer than 30 days.  In setting the response time, the agency need only show it provides a reasonable opportunity to respond considering various factors.   The VA explained that its market research identified six small businesses that could readily meet the requirements, and because the lift systems were commercial items, it should not take a potential offeror long to determine whether it could supply the lifts.  Therefore, the GAO confirmed the VA’s determination that nearly seven days was a reasonable amount of time to respond to the RFQ.

After denying Warrior’s final argument that the RFQ was ambiguous, the GAO denied the protest.

Takeaways:

Although less than a week seems to be an unreasonable amount of time to submit offers, on its face, this decision is an illustration of the deference afforded to agencies in determining reasonable response times.  Therefore, contractors must be diligent in assessing just how much time it has to put together an offer when first spotting an opportunity on FBO.  Additionally, contractors be aware that when a procurement calls for both supplies and services, it cannot assume the agency will classify the opportunity in FBO how it thinks the opportunity should be classified.  Warrior argued it was unable to find the opportunity on FBO because the VA classified the RFQ as one for supplies rather than services.  However, if it had also checked other, clearly related, classification codes, it might have been able to find the opportunity in time.