United States: 2016 Protest Roundup

Last Updated: January 17 2017
Article by Locke Bell

In addition to our regular recap of key protest decisions by the Government Accountability Office (GAO) and Court of Federal Claims this month, we have compiled a year-end recap of key bid protest decisions from 2016.  The number of protests, merits decisions, and sustained protests increased significantly in 2016 from years past, yet the overall protest effectiveness rate — that is, the percentage of protests that either were sustained or resulted in the agency voluntarily taking corrective action — remained flat around 45 percent.  As we look forward to 2017, aware of the uncertainty that comes with a changing Executive Branch, we expect this uptick in protest activity to continue as federal agencies shift, however significantly or insignificantly, their purchasing goals, motivators, and policies.

December

GAO Recovers Jurisdiction Over Civilian Task Order Protests

As we wrote earlier this year, GAO's jurisdiction over task orders awarded by civilian agencies sunset on September 30, 2016.  This jurisdiction was doubly restored (our Legislature being never shy of redundancy), first on December 14 with enactment of the GAO Civilian Task and Delivery Order Protest Authority Act of 2016 (Pub. L. 114-260) and then again in the National Defense Authorization Act (NDAA) for FY 2017, signed into law on December 23, 2016.  Unfortunately, Congress offered no remedy to those unlucky would-be protesters left without a forum in the two and a half months in between.

Target Media Mid Atlantic, Inc., B-412468.6, Dec. 6, 2016

An agency awarding a cost-reimbursement contract has an obligation to the taxpayer to question an offeror's estimated costs and perform its own analysis to reach a cost estimate that is realistically grounded in the offeror's proposed technical approach.  In Target Media, GAO found that, where a contractor proposes to rely on external sources such as new hires and incumbent personnel to staff a contract, this cost realism analysis must look beyond that contractor's internal cost data and include consideration of prevailing market rates and salaries paid to incumbent personnel.1

At issue in Target Media was the U.S. Navy's award of a cost-plus-incentive-fee, level-of-effort task order to provide engineering and professional services in support of ship maintenance systems information technology under the Navy's SeaPort-e multiple-award contract.  The awardee, Imagine One, in its proposal provided a staffing plan including a list of proposed personnel, some of whom were named and others who were unnamed and listed as "pending."  Imagine One intended to fill these latter positions by hiring from the marketplace and recruiting incumbent personnel.

For named personnel, the Navy's cost realism analysis simply involved an examination of internal payroll data or payroll data provided in letters of intent.  For unnamed personnel, the Navy compared Imagine One's proposed rates first to payroll data provided for similarly experienced named personnel in a given labor category, or to company-wide data if the payroll data did not substantiate the rate or were not available for the relevant position.  GAO found the Navy's approach to be unreasonably limited to Imagine One's internal cost data.  GAO suggested that the Navy instead should have compared the proposed rates to the prevailing market rates, the rates paid to incumbent employees, or the rates proposed by other offerors.  Because the Navy failed to do so, GAO sustained the protest and recommended that the agency reevaluate proposals after performing a proper cost realism evaluation.

Offerors commonly propose to fill positions with incumbent or other personnel who will be recruited and retained after a contract has been awarded.  The Target Media decision instructs agencies that such an offeror's own cost data do not provide a comprehensive picture of the rates that offeror is likely to charge for newly hired personnel if awarded a contract.  Instead, an agency must look to prevailing market rates, incumbent rates, and rates proposed by other offerors to reasonably analyze the realism of the offeror's proposed cost.

Year in Review

GAO was busy this past year.  According to GAO's Bid Protest Annual Report, GAO received 2,621 protests in fiscal year 2016.  GAO produced 616 merits decisions, nearly 23 percent of which sustained the protest, a rate almost double that of years past.  Notably, the effectiveness rate, which takes into account sustains as well as voluntary corrective actions, remained relatively flat at 46 percent, suggesting this increase in sustained protests may be a result of agencies approaching protests differently rather than a change in GAO's perspective.

GAO offered the following list of the most prevalent reasons for sustaining protests in FY 2016:

  1. Unreasonable technical evaluation
  2. Unreasonable past performance evaluation
  3. Unreasonable cost or price evaluation
  4. Flawed selection decision

With this in mind, here is our list of key protests to remember from 2016, ordered by date and not by significance:

AllWorld Language Consultants, Inc., B-411481.2, Jan. 6, 2016, 2016 CPD ¶ 12

GAO's decision in AllWorld created some consternation in the contracting community early in 2016, as many were concerned that it could upend agencies' regular practice of issuing task and delivery orders under Federal Supply Schedule (FSS) contracts with options to be exercised well beyond the ordering period of the underlying contract.  After GAO sustained the protest based on an unreasonable technical evaluation, GAO additionally considered whether the awardee even could perform the task order at issue given that the awardee's FSS contract was set to expire just days after the task order was executed.  GAO concluded that, although the awardee could perform the full base period of the contract, the agency would be unable to execute any options under the task order because doing so would create "new contractual responsibilities" which would require a valid underlying FSS contract.

For our examination, and debunking, of GAO's analysis, see the article by W. Jay DeVecchio, Ethan Marsh, and Jim Tucker published earlier this year in The Government Contractor, which can be found here.  More information on GAO's decision to sustain the protest based on its finding that the agency had unreasonably found the awardee technically acceptable where its proposed labor category did not align with the requirements of the solicitation is available here.

MILVETS Sys. Tech., Inc., B-409051.7; B-409051.9, Jan. 29, 2016, 2016 CPD ¶ 53

Agencies are granted a significant amount of leeway in their evaluations, and an agency's evaluation of a proposal at one time does not always have to match the agency's evaluation of that same (or similar) proposal at a later date.  GAO reaffirmed this rule in MILVETS, where a series of protests, corrective actions, and technical evaluations through the course of a procurement, conducted at different times by two different technical evaluation panels (TEPs) and source selection authorities (SSAs), resulted in differing technical evaluations of the protester's relatively unchanged proposal.  GAO found that these differences were reasonable without explanation from the TEP or SSA, distinguishing the case from GAO's previous decision in eAlliant, LLC, B-407332.6; B-407332.10, Jan. 14, 2015, 2015 CPD ¶ 229, in which GAO found that a single source selection official confronted with different evaluation results of essentially the same proposal is required to seek some sort of explanation.  More on the GAO's decision in MILVETS is available here

MacAulay Brown, Inc. v. United States, 125 Fed. Cl. 591 (2016)

The MacAulay-Brown decision issued by Judge Firestone at the Court of Federal Claims this past February reiterates the court's check on unreasonable corrective actions taken by agencies in the wake of unfavorable GAO protests.  In MacAulay-Brown, the United States Special Operations Command (SOCOM) took corrective action voluntarily in response to several post-award protests filed with GAO alleging, among other things, that SOCOM failed to consider potential OCIs specifically related to one of three task orders awarded.  SOCOM's corrective action, rather than consider potential OCIs or mitigation plans, was to cancel this task order.  The court found this corrective action, without more analysis of how to address the issues in the procurement than that provided in the record, was unreasonable.  More information on the court's decision in MacAulay-Brown is available here

Arcadis U.S., Inc., B-412828, June 16, 2016, 2016 CPD ¶ 198

Cost risk in a fixed-price contract falls squarely on the contractor.  In Arcadis, GAO found that the agency's focus on cost risk in the context of its technical evaluation for a fixed-price contract was unreasonable, particularly where the contractor's technical approach otherwise was viewed as favorable to the government.  Because the agency had not adequately documented its decision to assign a marginal rating to the protester's technical proposal outside unreasonable cost-related weaknesses, GAO sustained the protest.  More on the GAO's decision in Arcadis is available in our August 2016 Protest Roundup.

Valor Healthcare, Inc., B-412960; B-412960.2, July 15, 2016, 2016 CPD ¶ 206

In contrast to a "cost realism" analysis like the one performed in Target Media, supra, where agencies must analyze whether an offeror's proposed costs are indicative of the actual costs likely to be incurred in the performance of a cost-reimbursement contract, agencies may perform a "price realism" analysis to determine whether an offeror's proposed price for a fixed-price contract is unrealistically low.  The term "price realism" does not appear anywhere in the FAR, and an agency that intends to perform a price realism analysis must state so clearly in the solicitation.  And where an agency says in a solicitation that it will perform a price realism analysis, it must actually perform — and document — such analysis, as GAO reiterated in Valor Healthcare.  More information on GAO's decision in Valor Healthcare, and the distinction between cost realism and price realism is available here

National Air Cargo Grp., Inc. v. United States, 126 Fed. Cl. 281 (Apr. 28, 2016), 127 Fed. Cl. 707 (Aug. 19, 2016).

The National Air Cargo case made headlines twice this year:  first, when Judge Lettow of the Court of Federal Claims refused dismissal and held that a contractor awarded an indefinite delivery, indefinite quantity (IDIQ) contract has standing to protest an agency's decision to award additional contracts under the same solicitation; and second, when Judge Lettow denied the protest on its merits.  Of the two decisions, the initial decision to deny dismissal for lack of standing is more notable, as it signals a stark divide between the court and GAO, which has traditionally found that awardees lack the direct economic interest necessary for standing to protest.  In fact, National Air Cargo Group ended up in the court after GAO dismissed its protest because the additional award would not reduce the total volume of orders issued and "to constitute a cognizable protest when a solicitation contemplates multiple awards, an existing contract holder must credibly allege direct economic harm in order to challenge the award of another contract."  The court disagreed and, viewing the facts as most favorable to National Air Cargo Group, found that the introduction of competition into the IDIQ pool created "a non-trivial competitive injury which can be redressed by judicial relief," the court's bar for standing to protest.

Our comparison of the GAO and Court of Federal Claims decisions related to standing is available here.  We also covered the court's decision on the merits previously, in our August 2016 Protest Roundup.

Palantir Techs. Inc. v. United States, 128 Fed. Cl. 21 (Aug. 22, 2016)

Nearly a decade has passed since the Federal Circuit's seminal decision on protest timeliness in Blue & Gold Fleet, L.P. v. United States, 492 F.3d 1308 (Fed. Cir. 2007), and yet both the Circuit and the Court of Federal Claims continue to work through its holding, with many judges reaching conflicting results.  By way of contrast, GAO operates on strict timeliness rules set forth in regulation that are (generally) easy to follow.  Palantir represents the latest installment in which the court refused to adopt GAO's rules.  Instead, the court, in a decision by Judge Horn, found that the protester had diligently pursued its protest during the 43 days between receiving a denial of its pre-award protest from GAO and filing its protest in the court.  Further, the court rejected the government's argument that the protester's failure to submit a proposal after filing its GAO protest stripped the protester of standing.  More on the court's decision in Palantir is available in our September 2016 Protest Roundup.

Areaka Trading & Logistics Co., B-413363, Oct. 13, 2016, 2016 CPD ¶ 290

Much of GAO's role in the protest process is ensuring full and open competition in contracting.  In Areaka Trading, GAO denied a pre-award protest arguing that the Department of Defense should have restricted competition under a solicitation to only those offerors who could demonstrate that they had been authorized by the Royal Jordanian Air Force to sell jet fuel in Jordan.  Though the protester argued that such a requirement was consistent with Jordanian law and would prevent undue delay, GAO denied the protest as "essentially an allegation that the solicitation should be more restrictive of competition."  More on GAO's decision in Areaka Trading is available in our October 2016 Protest Roundup.

Great Southern Eng'g, Inc. v. United States, 128 Fed. Cl. 739 (Oct. 27, 2016)

The U.S. Supreme Court's decision in Kingdomware Technologies, Inc. v. United States, 136 S. Ct. 1969 (2016), promises to have a lasting effect in many facets of the contracting community.  In the world of bid protests, we saw the potential for this effect in Great Southern Engineering, where the protester argued that Kingdomware stands for the general proposition that task orders are contracts as a matter of law, allowing the protester to present ten task orders under the same contract as ten separate contracts for the purposes of past performance.  The court, in a decision by Judge Wheeler, rejected this argument outright, holding that "Kingdomware does not stand for the general proposition that all task orders are considered contracts as a matter of law," and denied the protest based on its finding that the agency reasonably determined that the task order past performance reports were of limited relevance given their similarity in source and content and the agency's discretion to decide what it considers relevant past performance information.  More on GAO's decision in Great Southern Engineering is available in our November 2016 Protest Roundup.

Footnotes

1. The protester also alleged that the agency improperly evaluated the awardee's professional employee compensation plan, failed to account for the cost impact of a corporate acquisition by the awardee's proposed subcontractor, conducted an unreasonable evaluation of the awardee's past performance, misevaluated the protester's technical capability, conducted a flawed best-value determination, and that the awardee engaged in a "bait and switch" by misrepresenting the availability of its proposed key personnel.  GAO found that the flaws in the agency's cost realism analysis similarly undermined the agency's evaluation of the awardee's professional employee compensation plan, and GAO sustained the protest on this ground as well.  GAO denied the rest of the protest grounds.

Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Morrison & Foerster LLP. All rights reserved

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