This month’s Law360 Bid Protest Roundup focuses on one recent U.S. Court of Federal Claims decision, as well as two Government Accountability Office (GAO) decisions. All three involve solicitations issued by the Department of Veterans Affairs (VA), but each serves as a different, important reminder for disappointed offerors seeking to have their own protests sustained.
Land Shark Shredding[1]
In Land Shark Shredding, an instructive case for government contractors regarding the impact transactions can have on pending protests, the Court of Federal Claims dismissed a protest for lack of standing because the party bringing the protest was not a valid successor-in-interest to the party that submitted the proposal at issue.
Underlying the protest was the VA’s solicitation for a contract seeking commercial document shredding for its medical center in Boston, Massachusetts. Ultimately, the VA received only three proposals in response to the solicitation; of these, only the proposal of Land Shark Shredding, LLC (“Land Shark”) was timely. Upon a determination that Land Shark’s pricing proposal was not “fair and reasonable” and that its technical proposal was unacceptable, the VA cancelled the procurement. Land Shark then filed a protest at the Court of Federal Claims on May 14, 2019, arguing that the VA lacked a rational basis for the cancellation decision and was required to award Land Shark the contract under the “Rule of Two.” Both parties moved for judgment on the administrative record, and the government sought to dismiss the complaint. However, in December 2019, the court stayed the case to await the Federal Circuit’s decisions on two subsequent bid protest appeals that Land Shark had filed. After the Federal Circuit rejected both of those appeals in January 2021, the court ordered supplemental briefing in the instant case.
When the court conducted oral arguments regarding the supplemental briefing in June 2021, Land Shark informed the court that it had recently undergone several transactions. Specifically, the organization known as Land Shark at the time it submitted its proposal sold its assets and business interests related to existing, uncontested government contracts to Dunlap Government Services, LLC in December 2020. Land Shark’s remaining assets related to its commercial shredding business, as well as its name, were then sold to Underground Vaults and Storage, Inc. later that same month. Contested government contract interests, like the one at issue here, were retained by the original organization, which changed its name from Land Shark Shredding, LLC to Disabled Veterans Security, LLC. This organization, like the original Land Shark organization, was a single-member limited liability corporation owned by the same individual.
After oral argument, Land Shark moved to substitute Disabled Veterans Security as the protester, or change the caption of the protest to reflect Land Shark’s new name on the basis that there was no actual change in organizational structure since the complaint had been brought. However, the government argued that Disabled Veterans Security lacked standing to bring the protest because after the sale of Land Shark’s assets, “no entity remains in a position where it could fill the shoes of the former Land Shark Shredding, LLC with respect to the quotation it submitted in March 2019.”
To have standing, a protester must demonstrate that it was an “interested party” by virtue of both being an actual or prospective bidder and having a direct economic interest in the procurement. The court noted that, “where a plaintiff is not an ‘actual bidder’ on the solicitation, a plaintiff may nonetheless possess standing as a ‘complete successor-in-interest’ that can ‘stand in the shoes’ of the actual bidder.” The court noted the factors utilized to determine “successor-in-interest” status, including “whether the actual bidder and the entity asserting standing are the same legal entity or business unit…and whether the change in corporate structure or sale at issue affected the ‘operational’ or ‘financial’ resources that the entity asserting standing could devote to the subject contract.”[2]
Land Shark, now reorganized as Disabled Veterans Security, admitted that it was not an actual bidder on the solicitation, nor a complete successor-in-interest, but argued that it could “step into the shoes” of Land Shark because its corporate structure remained the same. It also argued that although Land Shark sold all of its assets, Disabled Veterans Security could purchase the assets to perform as required by the solicitation. However, the court disagreed, finding that precisely because Land Shark no longer owned the assets or employed the individuals it had identified in its proposal, it could not prove it had the ability to perform. Specifically, the court stated that the same corporate structure and an ability to purchase equipment or subcontract certain services was not sufficient for the plaintiff to stand in the shoes of the original party that had responded to the solicitation. Therefore, the Court found Land Shark lacked standing and dismissed the protest.
Takeaways
This decision provides important guidance for contractors considering undergoing transactions while maintaining bid protests. Even if the same individual or group of individuals owns and operates an entity following reorganization, that organization is unlikely to be a complete successor-in-interest, and therefore will lack standing to protest, unless the entity maintained the same relevant assets and employees as it possessed and relied upon to demonstrate capability to perform at the time it submitted its proposal.
Primary Care Solutions[3]
After taking corrective action as a result of a protest filed by Primary Care Solutions, Inc. (PCS) in April 2021, the VA again issued a contract for a community-based outpatient clinic to Clinovators, LLC. Unsatisfied with the results of the renewed award decision, PCS filed a new protest alleging that the VA’s evaluation during corrective action was flawed for multiple reasons. Of particular interest is PCS’s argument that the VA improperly failed to consider its alternate price proposal, which was only slightly higher than Clinovator’s price.
To better understand why PCS submitted an alternate price proposal in the first place, it should be noted that the solicitation used combined procedures from FAR Part 12 and Part 15 for award. Accordingly, the solicitation included FAR 52.212-1, which in pertinent part, states as follows:
(e) Multiple offers. Offerors are encouraged to submit multiple offers presenting alternative terms and conditions, including alternative line items (provided that the alternative line items are consistent with subpart 4.10 of the Federal Acquisition Regulation), or alternative commercial items for satisfying the requirements of this solicitation. Each offer submitted will be evaluated separately.
FAR 52.212-1(e). Therefore, consistent with this provision, PCS submitted an alternate price proposal, which appears to have included additional individual startup contract line items (CLINs) beyond those in the solicitation’s price schedule.[4] However, the solicitation required offerors to submit their prices using the price schedule in the solicitation. It also required the prices to “be listed as an all-inclusive per member per month rate for services under each [CLIN]. If needed calculate the [build-out] into [CLIN] 0001.”
The VA found PCS’s alternate price proposal failed to conform to the solicitation’s requirements because it deviated from the price schedule, and included individual startup CLINs, rather than including startup costs in CLIN 0001. The GAO found the VA’s decision to be reasonable, and denied PCS’s protest.
While the GAO recognized that FAR 52.212-1(e) encourages alternate proposals, it explained that there is no requirement that an agency consider offers that do not conform to a solicitation’s requirements. Furthermore, FAR 52.212-1 also requires that offers be submitted “as otherwise specified in the solicitation,” and specifically warns offerors that proposals that “fail to furnish required representations or information, or reject the terms and conditions of the solicitation may be excluded from consideration.” FAR 52.212-1(b). The GAO agreed with the VA that PCS’s alternate price proposal failed to conform to the solicitation’s requirements, and thus was properly excluded from the VA’s evaluation.
Takeaways
Primary Care Solutions serves as an important lesson for offerors to not get carried away with alternate proposals when FAR 52.212-1 is included in a solicitation. Although the provision allows alternate proposals, and even allows alternate line items to be proposed, an agency will not be required to consider those alternatives where they are not consistent with the requirements of the solicitation. When in doubt, potential offerors should seek clarification from the agency before spending the bid and proposal costs to develop an alternate proposal that the agency will not even consider in its evaluation.
Marquis Solutions[5]
In Marquis Solutions, the GAO sustained the post-award protest of Marquis Solutions, LLC (“Marquis”) asserting that the VA improperly evaluated quotations and ultimately made an unreasonable source selection decision. The VA’s solicitation contemplated the award of a fixed-price indefinite-delivery, indefinite-quantity contract for medical courier services in the New York City metropolitan area. The acquisition was conducted under the simplified acquisition procedures of FAR Part 13 and resulted in an award to FG Management Group, LLC (“FG Management”).
During evaluation of proposals, the VA assigned an “outstanding” rating to FG Management’s performance capability subfactor (one of two subfactors under the technical capability evaluation factor), and an “unacceptable” rating to Marquis’ proposal under the same. As a result of this “unacceptable” rating, the VA did not further consider Marquis’ proposal in its evaluation, resulting in only FG Management and another offeror being included in the VA’s best-value tradeoff analysis.
Following award, the VA provided a very brief and vague explanation of its award decision to Marquis. Marquis subsequently filed the instant protest, alleging the VA failed to meaningfully consider its quotation, and failed to evaluate the offerors equally. The GAO agreed.
Specifically, the GAO noted that the language directing offerors’ responses in the technical capability portion of the RFQ was vague – a single sentence asked offerors for “detailed” descriptions of their relevant capabilities. While arguments over vague solicitation criteria normally do post-award protesters little to no favors, here, because the remarks in the evaluation record were also vague, the GAO could not ascertain exactly what the evaluators’ complaints related to. Specifically, the explanations in the evaluation record focused on vague remarks regarding formatting and level of detail included in the Marquis quotation, such as “[d]ocument lacks the details to be properly evaluated,” and “Offeror’s proposal fails to follow the instructions as per posted evaluation criterions.” Yet, as the GAO pointed out, the technical evaluators made no mention of which required details had been omitted from the Marquis quotation, nor offered further rationale for their findings.
The GAO found this lack of detail was especially problematic given that the VA failed to criticize other offerors for similar shortcomings noted in Marquis’ quotation. Specifically, the GAO pointed out that in certain instances, FG Management copied language from the solicitation’s statement of work verbatim, yet the evaluation made no mention of this. Additionally, the VA assigned strengths to FG Management for features that had also been included in Marquis’ quotation, but not mentioned at all by the VA in its review of Marquis’ offering. Nor did the evaluation record contain any explanation for these disparate conclusions.
In sustaining the protest, the GAO maintained that, even under the simplified acquisition procedures of FAR Part 13, an agency must document the rational bases for its conclusions and assess competing offerors fairly and equally. It emphasized that there must be sufficient detail in the record to allow review of protests on the merits. Where an agency fails to do so, it bears the risk of the GAO sustaining a protest.
Takeaways
This decision serves as a reminder that, even where a procurement uses simplified acquisition procedures, the GAO will nonetheless uphold the principle that the government must make logical, well-documented source selection decisions. Protesters that receive particularly vague or poorly reasoned explanations from agencies during debriefing should consider raising their concerns in a protest. In the event the record does not uncover more concrete agency analysis behind the vague assertions, or if the record suggests that the agency did not make the same broad conclusions regarding the awardee, the protest might be successful.
[1] Land Shark Shredding, LLC, No. 19-711C, 2021 WL 4099667 (Fed. Cl. Sept. 9, 2021).
[2] Id. at *6.
[3] Primary Care Sols., Inc., B-418799.3 et seq., Sept. 8, 2021.
[4] The exact nature of PCS’s alternate price proposal is redacted in the decision.