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January 21, 2020 - Protests & Litigation

2019 Protest Roundup

GAO Finds CIO-SP4 Solicitation Is Unduly Restrictive of Competition

This installment of our Law360 bid protest spotlight examines two protest decisions released in December, provides a year-end review of key bid protest decisions from 2019, and discusses a few takeaways from the U.S. Government Accountability Office‘s fiscal year 2019 report on its bid protest decisions.

December Cases

T3I Solutions, LLC, B-418034, B-418034.2, Dec. 13, 2019, 2019 WL 7370406.

In a classic example of impermissible bait-and-switch, Darton Innovative Technologies, Inc., proposed to use a specific individual for a key position in performing a training services contract for the Department of the Air Force.  Based on Darton’s representation, the agency concluded that Darton’s proposal met requirements.  In reality, however, Darton had not communicated with this particular individual before submitting its proposal and had no reasonable basis to expect that this individual would be available for performance.

The Air Force’s request for proposals (RFP) sought a contractor to provide crew resource management training to the agency’s operators and security forces.  One of the key personnel positions needed to perform the contract was an operators instructor.  The RFP required offerors to submit a personnel plan and explained that the agency’s evaluation would consider whether the qualifications of the proposed personnel met the requirements of the Performance Work Statement.

Darton identified the incumbent instructor by name for the operators instructor position, stated that he “currently serves as the [] instructor and program manager for the incumbent contractor” and “brings the expertise and know-how to conduct this [crew resource management training] program.”  Darton’s proposal also included this individual’s qualifications, experience, and credentials.

In evaluating Darton’s proposal, the agency noted that this particular individual was the only instructor proposed to fill this key position but still found that the proposal met basic requirements and offered the best value to the agency.  Based on these findings, the agency awarded the contract to Darton.

T3I Solutions, LLC, protested the award of the contract to Darton, arguing that Darton’s proposal contained a material misrepresentation concerning the availability of this particular individual.  T3I argued that Darton had not contacted this individual before submitting its proposal and did not obtain the individual’s permission to use his qualifications in its proposal.  To support its argument, T3I submitted a declaration from this individual stating that he had not been contacted by Darton or had any discussions with the awardee regarding employment opportunities before the submission of proposals.

The GAO agreed with the protester that the awardee engaged in an impermissible bait-and-switch by proposing an incumbent employee to serve as the sole operators instructor when the awardee did not have a reasonable expectation that this individual would be available for performance.  The GAO explained:

In order to establish an impermissible “bait and switch,” a protester must show: (1) that the awardee either knowingly or negligently represented that it would rely on specific personnel that it did not have a reasonable basis to expect to furnish during contract performance, (2) that the misrepresentation was relied on by the agency, and (3) that the agency’s reliance on the misrepresentation had a material effect on the evaluation results.

Id. at *4 (emphasis added).  The GAO determined that “Darton represented that it would provide this individual for the operators instructor position.”  Id.  Darton did not have a reasonable basis to believe this individual would be available to work for Darton because it did not contact him regarding potential employment before submitting its proposal.  The GAO determined that this misrepresentation was material because “this individual was the only one that Darton intended to use for this required position, and the agency relied on this to find that Darton’s proposal met the minimum requirements.”  Id. at *6.  Based on these findings, the GAO sustained the protest and recommended that the agency reevaluate Darton’s proposal, taking into consideration the awardee’s misrepresentations, and make a new award decision.

Successful bait-and-switch protests are rare.  Having discussed what a bait-and-switch is, we should also discuss what a bait-and-switch is not.  As we have stated previously, if an offeror intended or hoped to use particular personnel, but did not represent in its proposal that it would, the offeror has not engaged in a bait-and-switch because there was no “baiting.”  Likewise, if an individual proposed to fill a key position becomes unavailable after contract award through no fault of the offeror, such unexpected unavailability is not a bait-and-switch because there was no knowing or negligent misrepresentation.

Tom & Jerry, Inc.—Costs, B-417474.2, Nov. 20, 2019, 2019 WL 6696761.

As part of the remedies available to a protester, the GAO may recommend that the procuring agency reimburse the protester for the costs of filing and pursuing its protest if the agency unduly delayed taking corrective action in the face of a “clearly meritorious” protest.  In this protest, Tom & Jerry, Inc., requested that GAO recommend the company be reimbursed the costs it incurred in challenging the terms of a request for quotations (RFQ) issued by the Department of the Army.

The RFQ for services in support of a Yellow Ribbon event was set aside for economically disadvantaged, women-owned small businesses.  Tom & Jerry, an 8(a) small business, filed a protest at GAO arguing that the Army violated 13 C.F.R. § 124.504(d) by not setting aside the solicitation for 8(a) small businesses.  The regulation 13 C.F.R. § 124.504(d) requires that once a procurement has been awarded as an 8(a) contract, any follow-on or renewable acquisition must remain in the 8(a) program unless the Small Business Administration (SBA) agrees to release it.  The SBA Kansas City, Kansas District Office had informed the Army that Yellow Ribbon work had previously been awarded under the 8(a) program and advised the Army that any future Yellow Ribbon work must be awarded to 8(a) small businesses or be released for non-8(a) procurement by the SBA.

The Army responded that the procurement did not need to be set aside for 8(a) small businesses and that the Army did not need the SBA’s permission to issue the solicitation outside of the 8(a) program because the Yellow Ribbon work had not been solely awarded under the 8(a) program.  The Army further argued that “the current requirement was not a follow-on contract to a previous 8(a) requirement because each Yellow Ribbon event is considered a stand-alone event, unrelated to any past Yellow Ribbon event.”  Id. at *2.

After reviewing the parties’ filings, the GAO requested additional information on the matter from the SBA.  The SBA explained that a number of procurements in support of Yellow Ribbon events had been awarded under the 8(a) program and concluded that the Army should have either sought release from the SBA pursuant to FAR 19.815 or sought further guidance regarding the upcoming event before issuing the solicitation outside the 8(a) program.

The Army requested that the GAO conduct outcome prediction alternative dispute resolution (ADR).  The GAO declined to engage in outcome prediction ADR and instead offered litigation risk ADR, during which the GAO attorney provided the parties with her assessment of risk in the protest.  The GAO attorney indicated that “based on the information before her, the protest would likely be sustained because it was unreasonable for the agency to disregard SBA’s guidance regarding the program, which SBA is responsible for administering.”  Id. at *3.

After the GAO’s litigation risk assessment, the Army decided to take corrective action by canceling the RFQ, reassessing the Army’s needs, and coordinating with the SBA.  The GAO then dismissed the protest as academic.

The only issue remaining concerned whether Tom & Jerry should be reimbursed the costs of filing and pursuing its protest.  “When a procuring agency takes corrective action in response to a protest,” the GAO “may recommend reimbursement of protest costs” if it determines that “the agency unduly delayed taking corrective action in the face of a clearly meritorious protest, thereby causing the protester to expend unnecessary time and resources to make further use of the protest process in order to obtain relief.”  Id. at *3 (citing 4 C.F.R. § 21.8(e); Herren Assocs., Inc.—Costs, B-414792.4, Nov. 21, 2017, 2018 CPD ¶ 122 at 3).  “A protest is clearly meritorious where a reasonable agency inquiry into the protester’s allegations would reveal facts showing the absence of a defensible legal position.”  Id. (citing Yardney Tech. Prods., Inc., B-297648.3, Mar. 28, 2006, 2006 CPD ¶ 65 at 4).

Tom & Jerry argued that its protest was clearly meritorious because in previous decisions the GAO recommended reimbursement where the GAO attorney informed the parties through outcome prediction ADR that the underlying protest was likely to be sustained.  Generally, “a GAO attorney will conduct an outcome prediction ADR conference only if he or she has a high degree of confidence regarding the outcome; therefore, the willingness to do so is generally an indication that the protest is viewed as clearly meritorious, and may satisfy the ‘clearly meritorious’ requirement for purposes of recommending reimbursement of protest costs.”  Id. at *4.

In response, the Army argued that GAO “should not use statements made during litigation risk as the basis to satisfy the clearly meritorious requirement for purposes of recommending costs because ‘formal outcome prediction’ is a type of ADR distinct from ‘informal litigation risk.’”  Id. at *5.

The GAO concluded that because it specifically declined to engage in outcome prediction, and instead offered litigation risk ADR, Tom & Jerry’s reliance on prior outcome prediction ADR decisions to show that the protest was clearly meritorious is misplaced.  However, the GAO stated:

[W]hile the agency properly recognizes a distinction between these two forms of ADR, any argument that a protest allegation cannot be clearly meritorious where the GAO attorney offers an assessment of its litigation risk, rather than outcome prediction ADR, lacks support in GAO decisions.  Similarly, while there may be instances where our Office offers ADR to the parties after identifying a clearly meritorious protest issue, it does not follow that ADR is only offered when a protest is clearly meritorious. In this regard, the offer of ADR does not automatically translate to the conclusion that the protester should be awarded costs.  Instead the determination of whether to recommend the reimbursement of costs rests on the factual and legal posture of each individual protest, which must be analyzed on a case-by-case basis.

Id. at *4.  Therefore, the GAO concluded that “even if we agreed that the agency’s corrective action was not prompt, we conclude that the protest was not clearly meritorious.”  Id. at *5.  Importantly, the GAO “could not determine which party’s position was correct from the record and pleadings provided by the parties.”  Id.  Instead, the GAO was required to obtain assistance from the SBA in assessing the merits of the protest grounds.  In sum, because it presented a close question, this protest claim was not clearly meritorious.

This case is helpful in that it clarifies the circumstances in which a protester may successfully petition the GAO for protest costs and the role formal outcome prediction and informal litigation risk play in that determination.  It also illuminates the meaning of “clearly meritorious.”

Year in Review

The following summary provides a snapshot of GAO’s activity over the past year.  According to GAO’s Bid Protest Annual Report to Congress for Fiscal Year 2019, GAO received 2,198 cases in fiscal year 2019 (“FY 2019”).  Of those 2,198 cases, there were 2,071 protests, 60 cost claims, and 67 requests for reconsideration.  This was a significant decrease from the 2,474 protests filed at GAO in FY 2018.  The 35-day partial government shutdown, discussed below, may account for this decrease.  Additional commentary on GAO bid protest statistics for FY19 is available here.

Between December 2018 and January 2019, parts of the United States Government ceased operations for 35 days.  While GAO was not subject to the lapse in appropriations and remained open during the partial government shutdown, many procuring agencies were impacted.  As a result, all deadlines for affected agency filings were tolled during the partial shutdown and the bid protest decision deadlines for eight protests were extended.  Despite the shutdown, “GAO decided all protests within 100 calendar days for the period the relevant portion of the government was funded.”  Annual Report at 4.

GAO’s Annual Report offered the following list of the most prevalent reasons for sustaining protests in FY 2019:

  1. Unreasonable technical evaluation
  2. Inadequate documentation of the record
  3. Flawed selection decisions
  4. Unequal treatment
  5. Unreasonable cost or price evaluation.

With this in mind, here are five key protests to remember from 2019, ordered by date and not by significance.

Miltope, B-416859.2, Jan. 8, 2019, 2019 CPD ¶ 53, 2019 WL 157738.

The first thing disappointed offerors should always consider is timeliness.  Generally, protests must be filed within 10 days of when the basis of protest is known or should have been known.  Miltope offers an important interpretation of the GAO’s timeliness rules and the diligent-pursuit doctrine.

            Miltope involved a U.S. Army procurement for multipurpose standard automatic test equipment kits.  In support of their proposals, offerors were required to submit correctly configured bid samples, which would then be subjected to a variety of performance testing.  On August 2, 2018, Miltope was notified that its proposal had been excluded from the competitive range.  Miltope was provided a debriefing on August 10, 2018, in which it was notified that its exclusion was based on its low test scores.  Miltope requested the return of its bid sample several times, but did not receive it until September 13, six days after the Army had announced its final award decision.  On September 21, after performing a forensic evaluation on its returned bid sample, Miltope concluded that agency personnel must have improperly changed its display resolution settings prior to testing.  Miltope filed its protest with GAO on October 1, almost two months after its debriefing.

The Army moved to dismiss Miltope’s protest as untimely, arguing that Miltope had been aware of its disagreements with the Army’s reasoning for its exclusion from the competitive range after its August 10 debriefing.  Although the GAO ultimately denied the protest on the merits, the GAO disagreed with the Army’s timeliness argument. The GAO did not view Miltope’s protest as a broad challenge to its elimination from the competitive range, but rather a “specific allegation of either mistake or misconduct on the part of the agency when it tested Miltope’s sample.”  Id. at *4.

The GAO explained that Miltope had not become aware that its sample was incorrectly tested until September 21. Accordingly, the GAO concluded: “Miltope explains that the record shows that it sought diligently to determine the cause for its sample’s failure to meet the objective score, and did so within eight days of receiving its sample back.  In circumstances such as here, we will resolve doubts over issues of timeliness in favor of protesters . . . On this record, we find the protest is timely.”  Id. at *4.

Miltope is an important reminder that contractors and their counsel should not assume that a GAO protest will be untimely even when filed after the 10-day and five-day deadlines in the FAR.  If material events are not known until well past those dates, and the contractor proceeds diligently, the protest may still be timely.  More details on this case and GAO’s timeliness rules are available in our January 2019 Bid Protest Roundup.

Wyle Laboratories, Inc., B-416528.2, Jan. 11, 2019, 2019 CPD ¶ 19.

Wyle Labs is an important example of how corporate transactions can pose a risk to pending and future procurements.  In Wyle Labs, the GAO held that the agency could reasonably eliminate Wyle Labs from a procurement when, because of a pending novation, the entity actually proposed to perform was its subcontractor (and the prospective buyer of its OASIS contract), Grant Thornton.

Wyle Laboratories entered into an asset purchase agreement with Grant Thornton on June 5, 2018, for the sale of all assets required to perform Wyle’s GSA OASIS contract.  On June 14, 2018, as part of the sale, Wyle requested novation of its OASIS contract to Grant Thornton.  GSA, however, took its time responding, meaning that Wyle was still the holder of its OASIS contract when the June 28, 2018 deadline for an OASIS order to be issued by the Department of Homeland Security was approaching.  Wyle submitted a proposal, designating Grant Thornton as its subcontractor doing 100% of the work.  Although Wyle’s quote was technically excellent, the agency found considerable risk in the fact that the agency would not be in privity of contract with the entity actually performing.  Although Wyle and Grant Thornton were completely transparent about the process, and the fact that Grant Thornton would lead the work, their quote was found ineligible for award.  The GAO upheld this decision, finding that the agency acted reasonably.

Contractors should be aware of the risks to pending procurements when conducting a transaction and should, to the extent possible, plan around significant procurements.  More details on this case are available here.

OGSystems, LLC, B-417026, et al., Jan. 22, 2019, 2019 CPD ¶ 66.

As mentioned above, the second-most-prevalent reason GAO sustained protests in FY 2019 was inadequate documentation.  In OGSystems, LLC, the protester challenged the evaluation of the awardee’s technical proposal and the GAO sustained the protest because the agency did not adequately document its basis for concluding that the risks assigned to the awardee’s initial proposal were resolved.  Agencies are required to document and support their findings, especially when an offeror’s ratings drastically change between revisions.  More details on this case are available in our March 2019 Bid Protest Roundup.

Chromalloy San Diego v. United States, No. 19-974C, 2019 U.S. Claims LEXIS 1780, (Fed. Cl., Nov. 8, 2019).

This protest highlights the importance of technical data rights.  The protester challenged terms of a solicitation for marine engine overhaul services.  The engines at issue were manufactured by defendant-intervenor General Electric Company (GE).  After GE successfully persuaded the Government that the Government could not provide technical data to any offeror without the required license, the Navy revised its solicitation to require the offeror to have either a current GE license or independent access to GE technical manuals and service bulletins, and access to special GE tools, in order to be technically acceptable.

Chromalloy challenged access to the technical manuals on two grounds: first, the requirement exceeded the government’s “minimum needs” because adequate research would have revealed the engines were developed with public funds, granting the Navy sufficient rights to allow disclosure of the manuals to its contractors, and second, requiring independent access was a non-competitive procedure that the government failed to properly justify.  The Court found that the Navy had conducted more than a de minimis investigation into its data rights, and therefore could reasonably require offerors to demonstrate either GE Level IV licensure or independent access to the technical manuals.  On the second point, the Court held that independent access was a technical requirement, not a noncompetitive procedure.

Chromalloy also contended that the GE special tool requirement violated the Competition in Contracting Act (CICA) as being unduly restrictive of competition; however, the Court held this argument abandoned because the protester failed to pursue it in the protester’s motion on the record.  When Chromalloy next argued that the requirement for special tools was inconsistent with standard commercial practices in violation of the Federal Acquisition Streamlining Act of 1994 (FASA), the Court held it dispositive that Chromalloy had failed to satisfy the protester’s burden of establishing the existence of such a customary commercial practice.

Finally, the court found that, even if the protester had succeeded on the merits, national security concerns would have prohibited the injunctive relief it sought.

This case covers a lot of ground.  Most importantly, it demonstrates the importance of knowing and protecting intellectual property rights.  GE swiftly contacted the Navy when GE heard the solicitation considered awarding the maintenance contract to an unlicensed offeror, reminding the Navy of contractual commitments to protect GE’s IP.  Additionally, protesters should ensure that they are following up on arguments from their claims to their motions on the administrative record.  As this case shows, failure to do so will result in an argument being deemed abandoned.  Lastly, the decision is a reminder of the high degree of deference the court shows the military concerning the importance of military interests in deciding whether to grant protesters injunctive relief.  More details on this case are available in our November 2019 Bid Protest Roundup.

Blue Origin Florida, LLC, B-417839, Nov. 18, 2019, 2019 WL 6250708.

Solicitations must contain sufficient information to allow offerors to compete intelligently and on equal terms.  In this case, the agency contemplated awarding two contracts for launch services.  The agency did not propose a typical source selection, where the agency would rank proposals and conduct individual tradeoff determinations for the first and second contract awards.  Instead, the solicitation stated that awards would be made to the two offerors that, “when combined, represent the overall best value to the Government.”  Id. at *4.  In other words, the agency intended to conduct tradeoffs not based on individual proposals, but based on paired proposals.

An offeror filed a pre-award protest challenging this methodology of evaluating two independently developed proposals together to determine best value, rather than evaluating each proposal on its own merits against the evaluation criteria, claiming that this methodology was ambiguous and inconsistent with the solicitation’s evaluation criteria.  The GAO sustained the protest because the solicitation failed to provide an intelligible and common basis for award.

Offerors should always read solicitations carefully to understand how proposals will be evaluated and to identify any ambiguities.  Ambiguities should first be raised in the question and answer (Q&A) portion of the procurement process.  If that fails, pre-award protests must be filed with GAO prior to the deadline for receipt of proposals.  More details on this case are available in our November 2019 Bid Protest Roundup.