GAO’s recent FCi Federal, Inc. decision is an important reminder of the risks that can arise when purchasing a government contractor – specifically, the risk that the sale will negatively impact pending bids or proposals.
Following last year’s Edward Snowden scandal and Department of Justice allegations of fraud against U.S. Investigative Services, LLC, the company’s Professional Services Division (USIS-PSD) won a contract award to provide field office support services to U.S. Citizenship and Immigration Services field offices throughout the United States. A disappointed offeror, FCi Federal, filed a successful protest at GAO on the grounds that the agency’s responsibility determination failed to consider the fraud allegations against USIS as well as the “close relationship” between the USIS-PSD and the parent company.
While the agency was undertaking the required corrective action following GAO’s decision, PAE Shield Acquisition Company, Inc. (PAE), decided to purchase USIS-PSD through a stock purchase and rename the company PAE Professional Services, Inc. PAE notified the contracting officer of the purchase, and shortly thereafter, the contracting officer determined PAE Professional Services to be responsible, lifted the stop work order in place, and directed the company to begin performance.
During the subsequent protest from FCi Federal, the agency argued that it was only required to assess the responsibility of the new company, PAE Professional Services, and that it had no duty to re-evaluate proposals or make a new award determination, as nothing in the original USIS-PSD proposal had changed. GAO rejected this view and explained that under FAR § 9.103(b), there can be no award until after an affirmative determination of responsibility is made. Accordingly, the agency could not merely review the new company’s responsibility and affirm the existing award decision based on the prior company’s existing proposal.
Moreover, GAO found that the agency “could not reasonably ignore the impact” of the sale of USIS-PSD on the procurement. Following the reasoning of the seminal 2014 Wyle Labs decision, B-408112.2, GAO found that USIS-PSD’s proposal relied on resources from its parent company, including management capability, corporate resources and experience, past performance, and finances. As the parent company’s resources and expertise were no longer available to PAE Professional Services following the purchase of USIS-PSD, GAO found that the sale of the company “significantly and materially altered the approach to contract performance” from that set forth in the outdated USIS-PSD proposal.
The takeaway from FCi Federal for contractors is that they should carefully consider the impact that any sale of a government contractor will have on existing bids and proposals. Where the sale results in a material change from the existing proposal regarding how the contract will be performed, the agency will be required to solicit revised proposals and may be justified in excluding the existing proposal from the competition.
A copy of GAO’s opinion is available here.