This month’s bid protest roundup highlights two decisions from the U.S. Court of Federal Claims (“Court”), one addressing an offeror’s loss of key personnel and a second addressing organizational conflicts of interest (“OCIs”) arising out of an offeror’s reliance on former government employees in preparing its bid. A third decision from the U.S. Government Accountability Office (“GAO”) provides a helpful reminder on protest timeliness when no debriefing is required.
KPMG LLP v. United States, No. 22-886 (Fed. Cl. July 3, 2023)
The Court’s decision in KPMG is the latest in a growing body of case law about the loss of key personnel prior to award, supported by a growing body of protest lawyers subscribed to LinkedIn. The key issue for bidders is this: What happens when my proposal names a particular individual as key personnel, and that person becomes unavailable – e.g., resigns – while my proposal is still being evaluated by the government? Contradicting guidance from the Court and GAO makes this question frustratingly difficult to answer with any certainty. The split between the two is well illustrated by KPMG, a protest that went through GAO before landing at the Court, with the two reaching opposite conclusions.
The sequence of events in KPMG is important. In September 2021, KPMG submitted a proposal to continue providing financial support services to the National Reconnaissance Office (“NRO”), as it had for years under an incumbent contract. In its proposal, KPMG named “Mr. H” as its Senior Financial Consultant, one of four key personnel positions required by the solicitation. At the time, Mr. H was working as a senior manager on the incumbent contract, under the employ of one of KPMG’s subcontractors. He was also identified in a competing proposal submitted by Deloitte, and had signed separate letters of commitment for both KMPG and Deloitte, declaring his intent to work on the new contract for either company if selected as the successful bidder.
In mid-January 2022, while proposals were still under evaluation, Mr. H announced his resignation and intent to accept a new position with Deloitte. KPMG promptly informed the contracting officer for the incumbent contract—who also happened to be the Source Selection Evaluation Team chair for the ongoing solicitation—while separately resolving with its subcontractor to persuade Mr. H to stay. When the contracting officer asked KPMG how it would handle losing Mr. H as proposed key personnel, KMPG stated it would have “options on [Mr. H] for the follow-on contract if we are successful.” Shortly thereafter, on January 25, 2022, NRO decided to award the follow-on contract to KPMG as the highest‑ranked (but also highest-cost) bidder, with a rating of Exceptional in the most important factor, Key Personnel. On January 27, 2022, KPMG was notified that it was selected for award, with performance set to begin on February 1, 2022.
The day following the award announcement, Mr. H left for Deloitte as planned, despite one last attempt by KPMG’s subcontractor to keep him. The next week, KPMG—then the awardee—proposed a replacement for Mr. H, whom the agency promptly approved. Then, on February 15, 2022, a protest was filed at the GAO arguing, among other things, that NRO had misevaluated Mr. H’s availability in KPMG’s proposal.
GAO sustained the protest, finding NRO had unreasonably concluded Mr. H was available despite having “unambiguously resigned to take a position with a different firm, thereby making it clear that [he] would not be available to perform” for KPMG under the follow-on contract. The GAO concluded that because Mr. H announced he would resign before performance was scheduled to begin on February 1, NRO could not rely on the fact he was still employed by KPMG’s subcontractor when the award decision was made on January 25. GAO recommended NRO either evaluate KPMG’s proposal as submitted, without Mr. H, or open discussions and allow the offerors to submit revised proposals. NRO chose the former and, based on GAO’s determination that Mr. H was unavailable, deemed KPMG’s proposal technically unacceptable for failing to meet the solicitation’s key personnel requirement. After eliminating KPMG from the competition, NRO instead awarded the contract to Deloitte, Mr. H’s new employer.
This time, KPMG filed a protest with the Court challenging the new award decision. And the Court, in effect, overruled the GAO’s decision, finding it – and NRO’s election to follow it – irrational. The Court disagreed with GAO’s conclusion that Mr. H was “unavailable” to KPMG based on the facts in the record. To the Court, KPMG’s ongoing attempts to change Mr. H’s mind about leaving, which persisted after the initial contract award, undermined the “definitive nature” of Mr. H’s resignation. Citing a selection of prior decisions, the Court declared: “[W]ithout more, key personnel are unavailable when they are, in fact, no longer working with their employer.” To hold otherwise—“concluding that a key personnel’s plan to resign post-award renders then unavailable at the time of award,” as GAO did—was “untenable” to the Court, and “would give the whims of proposed key personnel outsized influence over government contract award decisions.”
Turning to public policy, the Court noted some of its prior decisions had concluded “an offeror is not obligated to notify an agency of the departure of key personnel post‑proposal submission, absent an affirmative requirement to do so in the solicitation.” The Court applauded KPMG for demonstrating “good and prudent behavior” by “voluntarily” notifying NRO of Mr. H’s departure and proposing a replacement. Unmentioned by the Court, however, is that GAO follows an entirely contrary rule. Well established GAO case law obligates bidders to notify the procuring agency as soon as they become aware that key personnel are no longer available, whether or not the solicitation imposes any affirmative requirement to do so. To GAO, this duty is grounded in a commitment to the integrity of the procurement system, and based on the notion that a bidder should not receive a contract award based on a knowing material misrepresentation in its offer. And when a bidder comes forward about a loss in key personnel, the agency has one of two choices according to the GAO: (1) evaluate proposals as submitted, without considering the unavailable individual, or (2) open discussions and allow bidders to submit revised proposals. The public policy dicta in KPMG suggests at least some judges at the Court may consider the former to produce unfair results for a well-meaning bidder, although its holding is limited to the facts of the case and does not adopt any broad indictment of GAO’s rule.
The Court’s decision in KPMG does little to illuminate how bidders should act when proposed key personnel leave (or announce they won’t be around for performance), or to guide procuring agencies when they receive such news. If anything, it adds a murkiness to the analysis by introducing a new consideration: Should a bidder disclose the departure as soon as it becomes aware, as required by GAO, or wait until the employee’s termination date, when the departure is absolute, which very well could be after an award? How much optimistic “hope” of reversing a resignation must a bidder have to delay providing notice? For now, perhaps a bidder’s best outcome is to notify the procuring agency immediately upon receiving a two-weeks’ notice and hope the agency is able to make an award in the meantime, as in KPMG, while it still can pretend as though the resignation might not happen.
CACI, Inc.-Federal v. United States, No. 23-324C (Fed. Cl. July 6, 2023)
Our second bid protest decision featured this month, CACI, examines potential OCIs arising out of an offeror’s chosen proposal consultant. Usually, we practitioners think of OCIs primarily as organizational conflicts created by contracts—that is, they arise when an organization (e.g., offeror, contractor, subcontractor, or affiliated family of companies), by fact of performing one contract, is placed, or is situated to be placed, in a role that might, under another contract, impair the organization’s impartiality or provide an unfair competitive advantage. Yet, in some circumstances, an OCI can arise when a competitor receives access to information through extracontractual channels—such as through a proposal consultant.
As relevant to this case, CACI hired a proposal consultant for its bid on the U.S. Army’s 10-year, $8 billion Common Hardware Systems 6th Generation (“CHS-6”) contract for commercially available off-the-shelf (“COTS”) computer hardware and related services. CACI did not hire just any proposal consultant: it hired the former product lead in charge of the Army’s CHS program, who also had chaired the Source Selection Advisory Council (“SSAC”) for the predecessor contract, CHS-5. The CHS-5 contract was held by a General Dynamics company, as was CHS-4 before it, CHS-3 before that, and CHS-2 before that. Indeed, General Dynamics Mission Systems (“GDMS”) was the only offeror for CHS-5.
When he was the Army’s CHS product lead, CACI’s consultant oversaw GDMS’s performance and reportedly interacted with GDMS employees almost daily on matters involving proprietary cost, rate, schedule, and technical information. As SSAC chair for the CHS-5 contract, he had access to GDMS’s proposal, although he claimed to recall reading only the pricing section, and even that for no more than “a minute or two.” He said he never read the other sections, despite having signed the SSAC memo containing GDMS’s proprietary information. Still, the Court found he was involved in many emails negotiating the CHS-5 contract with GDMS.
This individual’s involvement with CACI’s bid lasted about 10 months, until the CHS-6 contracting officer launched an investigation into his involvement and the individual contacted an Army ethics lawyer to inquire about his responsibilities as a former government official before retiring shortly thereafter. The Army’s investigation continued. In October 2022, after trading with CACI a notice of concern, letters, and a preliminary determination, the CHS-6 contracting officer issued a final decision excluding CACI from the competition. CACI submitted a bid anyways and protested its exclusion, first at GAO and then, when denied, at the Court, arguing both the Army’s process and its ultimate decision to exclude CACI were flawed.
In its protest at the Court, CACI complained that the Army’s process was unduly delayed, lacked a meaningful opportunity for CACI to respond to the Army’s specific concerns, and deprived CACI of due process required by the Administrative Procedure Act. The Court disagreed, finding the agency’s investigation – which lasted several months and apparently involved 442 pages of interviews, emails, letters, declarations, meeting minutes, and memoranda—was “appropriate” and timely, and included multiple opportunities for CACI to provide input, including detailed responses addressing the contracting officer’s concerns one-by-one. Furthermore, the Court criticized CACI’s failure to propose a formal mitigation plan, despite requests by the contracting officer to do so.
The Court similarly endorsed the Army’s ultimate decision to exclude CACI. The consultant’s involvement had a “certain aroma that is hard to purify,” according to the Court, and the mere appearance of an unmitigated conflict warranted CACI’s exclusion. According to the Court, the operative question was whether the individual “had access to non-public information during his tenure with the Army that was still competitive valuable for the CHS-6 procurement.” And, the Court found, the contracting officer reasonably concluded he did. It did not matter that he recalled little of GDMS’s CHS-5 proposal, that he took no information with him when leaving the government, or that there was no direct evidence that any GDMS proprietary information had been shared with CACI. “The standard is access,” the Court held, “and [he] had it.” The Court rebuffed CACI’s complaints that the contracting officer failed to rely on “hard facts” establishing an OCI, clarifying that such “hard facts can (and, here, do) include evidence of information access and participation in prior competitions.” In response to CACI’s and its consultant’s objections that it had not involved him in any pricing discussions or discussions related to GDMS, the Court pointed to presentations and correspondence in the record suggesting otherwise, and generally backed the contracting officer’s doubts regarding the consultant’s credibility in making such statements. Finding the contracting officer had rationally excluded CACI from the competition for a conflict of interest or at least appearance thereof, the Court denied CACI’s protest.
It is not uncommon for government officials, after years of public service, to seek a post‑retirement career in industry consulting, and there is nothing inherently wrong in their doing so. But CACI is a good reminder of the many pitfalls that might await a former government official or a prospective client if they do not pay close attention to ethical limitations and potential conflicts of interest.
Beckman Coulter, Inc., B-421748, July 28, 2023
Our final case this month serves as a reminder: When a debriefing is not required, you should not delay filing your protest in hopes that the agency will provide additional information.
At issue in Beckman Coulter was a U.S. Army request for quotations to purchase commercial flow cytometry testing equipment and maintenance services, issued under the simplified acquisition procedures in FAR subpart 13.5. Among other things, the solicitation required all testing materials to be FDA-approved platforms and stated award would be made on a lowest-priced, technically acceptable (“LPTA”) basis. When the disappointed bidder, Beckman Coulter, learned on May 3, 2023, that a contract had been awarded to Sysmex, it emailed the contracting specialist to ask a few questions about the award, including whether Sysmex’s testing equipment “offer[ed] the required FDA-cleared . . . testing solutions.” On May 11, 2023, the contract specialist responded to Beckman Coulter’s questions, in relevant part confirming Sysmex had “complied with all the terms and conditions of [the] Solicitation.” Beckman Coulter then requested a phone call to discuss the award, stating its belief that Sysmex did not hold any FDA approvals for flow cytometry testing. The agency held that phone call with Beckman Coulter on May 15, 2023, and the contracting officer reiterated the agency’s position that Sysmex complied with the solicitation, while stating the Procurement Integrity Act precluded sharing any additional information about Sysmex’s proposal. Beckman Coulter then filed an agency-level protest on May 19, 2023, before filing at GAO on June 13, 2023, after the agency-level protest was denied.
When a protest is filed first with an agency, being timely at GAO depends on having been timely at the agency. Absent any more stringent rules at the agency (none of which existed here), this means the initial protest must be filed “not later than 10 days after the basis of protest is known or should have been known (whichever is earlier),” unless a debriefing is both requested and required. Because the solicitation in Beckman Coulter was issued under FAR part 13, rather than FAR part 15, no debriefing was required. This meant Beckman Coulter was required to file its protest challenging Sysmex’s technical acceptability within 10 days of when it knew or should have known about the basis for its protest – i.e., that the agency had deemed Sysmex’s proposal technically acceptable notwithstanding its (alleged) inability to propose FDA-approved equipment.
The Army argued this should have been known to Beckman Coulter on May 3, when it received the initial notice of award. In response, Beckman Coulter argued its basis for protest was not known until May 11, at the earliest, when it received the response from the agency stating Sysmex’s testing solution “complied with all the terms and conditions of the solicitation.” According to Beckman Coulter, until the Army responded to its question, it could not tell “whether the Army decided to relax the requirements” of the solicitation or whether there was something else explaining the award decision that Beckman Coulter did not understand based on the facts provided.
The GAO was not persuaded. According to GAO, in light of the solicitation requirement for all proposed equipment and materials to be FDA compliant and notice that award would be made on an LPTA basis, “the fact that the agency selected Sysmex for award clearly put the protester on notice that the agency found Sysmex’s offer to be technically acceptable, i.e., compliant with the requirements of the solicitation.” Because Beckman Coulter’s questions to the agency “did not elicit any new information that was not already apparent from the agency’s notice of award,” and its email correspondence and phone call with the agency “served only to restate the agency’s initial determination – implicit in the unsuccessful offeror notice – that the agency had made award to the lowest-priced technically acceptable offeror,” Beckman Coulter’s protest was required to be filed within 10 days of that initial unsuccessful offeror notice. Because Beckman Coulter did not file at the agency until May 19, 16 days after receiving the notice, its protest was dismissed as untimely.
When it comes to timeliness, it is always better to err on the side of caution. Or, stated differently, when the agency has provided minimal information about its award decision, it is better to file a timely if sparse protest – which can later be supplemented– than it is to wait in hopes the agency might explain itself in informal post-award debriefings. You should assume – because it is more likely than not – that the agency will respond to any questions with a less-than-informative deferral to the solicitation’s evaluation criteria, giving little insight into how the agency actually evaluated proposals.
 This is to say nothing of any requirement KPMG might have had to notify NRO of staffing changes under its incumbent contract.