We have previously addressed the challenges and legal risks of an offeror being the subject of a major transaction while it has a proposal pending for a Federal procurement. In numerous bid protest decisions, the U.S. Government Accountability Office (GAO) has sketched the outlines of when a transaction does, and when it does not, call into question the continued eligibility of a proposal for award. A recent GAO decision shows there is little or no risk from one kind of common transaction: conversion to a limited liability company (LLC) and a corresponding change of name.
In DynCorp International, LLC, B-417611.7 et al., CACI Technologies, Inc. held a multiple-award Indefinite Delivery, Indefinite Quantity (IDIQ) contract, which identified the contractor by the Commercial and Government Entity (CAGE) code 8D014. As we’ve discussed before, the U.S. Government assigns CAGE codes to discrete business entities, and numerous GAO decisions have held these codes dispositively establish the identity of a legal entity for contract purposes.
On December 31, 2017, CACI Technologies, Inc. filed the necessary paperwork in the Commonwealth of Virginia to convert from a corporation to an LLC and became CACI Technologies, LLC. CACI then began a long process of working with the Defense Contract Management Agency to effect a change of name in accordance with Federal Acquisition Regulation (FAR) 42.1205 for all of CACI’s numerous Government contracts, including the IDIQ contract at issue here. The Government did not finalize CACI’s change-of-name agreement until April 2020. Through it all, CACI kept 8D014 as its CAGE code.
As it waited for approval of its change-of-name application, CACI submitted a task order proposal to the Army under the IDIQ contract. Consistent with the fact that the Government had not yet recognized the change of name, CACI submitted the proposal using its prior name, CACI Technologies, Inc., and identified itself using the same CAGE code on its IDIQ contract, 8D014. In May 2019, the Army awarded the task order to CACI Technologies, Inc. (CAGE code 8D014). Following two protests and corrective action, the Army reawarded the task order to CACI Technologies, Inc. (CAGE code 8D014). By that time, the Government had approved CACI’s change of name and CACI had updated its System for Award Management (SAM) profile to reflect its “new” name under the same CAGE code.
A disappointed offeror protested the task order award, arguing “that CACI Technologies, Inc. is ineligible for award because it does not hold the underlying [IDIQ] contract and no longer exists as a company, the agency was uncertain as to what company was the offering entity, and CACI’s information in SAM was not accurate and current when CACI submitted its proposal.”
The GAO disagreed with the protester’s contention that CACI Technologies, Inc. ceased to exist in December 2017, when it converted to an LLC. The GAO found that CACI promptly requested the change of name soon after its conversion and, for purposes of Federal contracting, appropriately continued to use its prior name until the Government formally recognized the change of name and modified CACI’s contracts to reflect it. The GAO also found it reasonable for CACI to wait to update its SAM entry until the Government had approved the change-of-name agreement, even though the change-of-name process took over two years to complete.
The GAO likewise rejected the protester’s argument that the awardee (which was CACI Technologies, LLC in fact if not in name) did not hold the underlying IDIQ contract (which was still in the name of CACI Technologies, Inc.). The GAO noted that, at the time of task order issuance, both the IDIQ contract and the task order award were in the name of CACI Technologies, Inc., and it was reasonable for CACI to avoid confusion by continuing to use its old name.
The GAO also found that there could be no confusion regarding CACI’s identity as offeror, contract holder, and awardee: the IDIQ contract, the task order, and CACI’s SAM profile (both before and after recognition of the change of name) all reflected the same CAGE code 8D014. Under the GAO’s longstanding precedents, a company’s CAGE code removes all doubt as to the identity of a specific legal entity. Here, the CAGE code made clear that CACI Technologies, Inc. and CACI Technologies, LLC were the same entity: the only thing that had changed was the company’s name and corporate form. Moreover, although the GAO did not note this in its decision, the fact that the Government executed a change-of-name agreement rather than a novation of contracts further underscored that CACI remained the same company as before, despite the conversion.
Based upon these findings, the GAO denied these grounds of the protest.
Companies are right to be nervous when corporate transactions occur during the pendency of a proposal. Sound legal counsel can go a long way toward reducing risk and making sure that procuring agencies understand what will and will not change as a result of a contemplated transaction. Some level of risk, however, often remains. This GAO decision provides welcome clarity about one kind of transaction that poses very little risk when properly handled: LLC conversions and the corresponding name changes.
This decision also highlights the importance of CAGE codes in conclusively demonstrating the identity of a company when an outside party calls it into doubt. Offerors should be sure that their proposals and contract documents contain the correct CAGE codes, as any discrepancies could be quite costly.
UPDATE: After we published this post, the protester filed a second-bite protest at the Court of Federal Claims and recently lost again. The Court, after deciding that it lacked jurisdiction over this task order protest, added that, even if it had jurisdiction, it would have ruled that CACI and the Agency acted appropriately, and the protester’s various arguments were without merit. The Court’s decision is available here.