United States: October 2017 Bid Protest Roundup

This month's bid protest roundup discusses five decisions covering corrective action, an agency's evaluation discretion, the "late-is-late" rule, intervening at the Court of Federal Claims (COFC), and Small Business Administration (SBA) status protests.  These cases serve as important reminders for protesters and awardees, and identify a few issues that continue to change at the various protest fora.

Booz Allen Hamilton, Inc., B-414822.5

Booz Allen protested a General Services Administration (GSA) task order award to Raytheon asserting unmitigated organizational conflicts of interest (OCIs) and a flawed technical evaluation.  Following outcome prediction, during which the Government Accountability Office (GAO) indicated it would likely sustain the protest, GSA took voluntary corrective action.  GSA's notice of corrective action noted the potential issues concerning OCIs and its evaluation, but, as is customary in such notices, GSA did not bind itself to any particular course of action.  The protester objected to the scope of the corrective action, but GAO dismissed the protest as academic, noting the protester's right to protest again if it is "dissatisfied with the results of the agency's corrective action."

The protester filed another protest the next business day following GAO's dismissal, arguing that GSA's proposed corrective action can be interpreted as allowing the agency to ignore the OCI and evaluation flaws identified in its initial protest.  GAO disagreed and dismissed the follow-on protest because: (i) GAO does not consider unsupported allegations of bad faith against government officials and (ii) the protest is in anticipation of adverse agency action and is therefore premature.

This case highlights the sometimes untenable position protesters find themselves in following an agency's decision to take corrective action.  Often concerned with the breadth of discretion and vagueness of the scope of an agency's announced corrective action, the protester must assess whether, by not protesting immediately, it is waiving its opportunity to object to the scope of corrective action.  By immediately protesting, however, the protester also risks being summarily dismissed as premature.  Oftentimes, as may have been the case with Booz Allen, the risks of being dismissed as untimely in a protest of a re-award to Raytheon outweighed the risks of its pre-award protest being dismissed as premature.  These types of protective protests are, unfortunately, sometimes necessary to ensure the protester's right to protest is preserved until after the agency completes its corrective action.

McCann-Erickson USA, Inc., B-414797

Protesters frustrated by an agency's overly mechanical or finicky evaluation often feel they have been treated unfairly and that the agency has traded substance for form.  Such protesters are usually disappointed at GAO because GAO often rejects arguments that agencies' evaluations were based on minor or clerical errors in the protesters' proposals.  GAO has held for time immemorial that it is the offeror's responsibility to submit a well-written and compliant proposal.  GAO's decision in McCann-Erickson is a departure from this precedent.

In this case, the Army eliminated McCann's proposal from phase one of the two phase competition for various supposed noncompliances with the RFP.  At least two of the Army's reasons were erroneous, but the third noncompliance finding was true:  McCann had submitted its cost/price proposal in PDF format, rather than in MS Excel, as required by the RFP's instructions.  Notwithstanding recent precedent (see Herman Constr. Grp., Inc., B-408018.2; B-408018.3), GAO here concluded that the Army's evaluation was unreasonable.  First, GAO found that the RFP did not notify offerors that the Army would reject proposals without performing a substantive evaluation (although the RFP included the boilerplate language that award would be made to an offeror that "conforms to the solicitation requirements").  Second, GAO placed the onus on the Army to "establish" why it was unable to use the PDF version to evaluate McCann's cost/price proposal, which the Army failed to do.  Finally, the Army did not adequately explain why allowing McCann to substitute an Excel version would be improper.  It is unusual to place the burden on an agency in a post-award posture to provide a substantive basis for its RFP's instructions, and this decision is likely to provide fodder for potential protesters that are disappointed in evaluations based on hyper-mechanical or superficial proposal defects.

Lastly, it is noteworthy that this case, like SAIC, B-413501 from last year, notes that it may be possible in certain DoD procurements to successfully challenge an agency's decision not to initiate discussions.  Under a 2016 DFARs provision, DoD "should" conduct discussions if it is acquiring goods or services valued at more than $100 million.  See DFARs § 215.306(c).  As a result of this provision, GAO seems willing to assess the reasonableness of an agency's decision to forego discussions in such circumstances.

T Square Logistics Services Corp., COFC No. 17-744

The late-is-late rule provides that proposals received after the date and time set in an RFP may be rejected, and there is notoriously little wiggle room on the application of the rule.  The Court of Federal Claims' decision in T Square represents the type of factual circumstances necessary for an offeror to overcome the rejection of a late proposal.

In this case, FedEx notified T Square that delivery of its proposal would be delayed due to weather.  The offeror immediately contacted employees to prepare a paper copy for hand delivery to the Air Force.  The offeror also contacted the contracting officer and contract specialist by email to notify the agency of the possible delay, and attached an electronic copy of its proposal to the notification.  The contract specialist responded that the delay was "not a problem" and that the agency "will be able to accept the hard copies when they arrive, even if FedEx delivers them after" the delivery deadline.  Relying on these assurances, the offeror directed its employees not to print or deliver another hard copy.

FedEx did not deliver the proposal until three days later and the Air Force rejected the proposal as late.  The contracting officer explained that the contract specialist's email, "while good intentioned . . . lacked the authority to materially alter the proposal submission requirements" in the RFP.  T Square pleaded with the Air Force to extend the deadline, but did not receive a response, and filed its protest with the court as a result.

The court found in favor of T Square and enjoined the agency from making award without first re-evaluating the plaintiff's proposal.  The court concluded that the Air Force's decision to reverse course from the contract specialist's direction lacked a rational basis.  The court also noted the consequences of the plaintiff's reliance on the specialist's email, and viewed the initial message from the agency as an indication to the plaintiff that the agency viewed the late delivery as a waivable "informality" or "minor irregularity."

Offerors must ensure the timely delivery of proposals in strict accordance with the RFP's terms.  Offerors should also have contingency plans in place if the primary mode of delivery is delayed or disrupted.  In addition, offerors should follow T Square's example by keeping the agency abreast of any difficulties.  No offeror wants to resort to litigation with a potential customer, but having a record of such communications probably saved T Square in this case.

Sonoran Technology and Professional Services, LLC v. United States, COFC No. 17-711C

Sonoran filed a protest at the COFC challenging the Air Force's decision to terminate its contract with Sonoran and award the contract to Spectre Pursuit Group, LLC (SPG).  The facts and the legal consequences provide significant reminders to awardees about the importance of intervening in a bid protest, and the possible consequences of declining to intervene.

The solicitation required the awardee to have the requisite facility clearance at the time of contract award.  In its proposal, SPG acknowledged that it did not have a facility clearance, which prompted the contracting officer to eliminate SPG from consideration.  SPG filed a protest at GAO that was dismissed.  SPG subsequently filed the first of two protests at COFC arguing that the decision to eliminate SPG amounted to a negative responsibility determination, which required the Air Force to refer the matter to SBA for a Certificate of Competency (COC) review.  In response to the first COFC protest, the Air Force took corrective action by referring the responsibility to SBA for a COC review.  Notably, Sonoran did not request to intervene in the first COFC protest.

SBA notified the Air Force it could not make a responsibility determination because it had already awarded the contract to Sonoran, prompting SPG to file a second protest at COFC.  Once again, Sonoran chose not to request to intervene.  In response to the second COFC protest, SBA agreed to conduct a COC review because SPG's case presented "unique circumstances," which included SPG's filing of a protest, and the Air Force's commitment in writing to SBA that it would terminate the award to Sonoran once the SBA issued a COC to SPG.

After having its contract terminated and awarded to SPG, Sonoran filed its protest at COFC.  A number of Sonoran's claims were rejected as untimely, but the challenge to the Air Force's corrective action and COFC's corresponding response may have ramifications for awardees going forward.  The Air Force argued that Sonoran's challenges to corrective action were untimely because Sonoran raised the claims after the Air Force had made its final award.

Sonoran argued that it had no knowledge of the Air Force's intent to take corrective action or the scope of such corrective action.  According to Sonoran, had it known the details of the corrective action prior to the Air Force's award to SPG, it would have filed a protest.

The court rejected this contention because, in addition to Sonoran being able to access the notice of corrective action, it could have obtained the necessary information by intervening in both SPG protests.  According to the court:

Sonoran had both ample notice of the proposed corrective action and ample time to challenge it.  For example, Sonoran surely would have learned that corrective action was on the horizon if it had intervened in SPG's initial bid protest before this Court on November 28, 2016, after the Air Force declined to refer SPG to the SBA for a responsibility determination. . . .   Sonoran also could have intervened in SPG's second bid protest before this Court on January 6, 2017, after the SBA notified the Air Force and SPG that it could not make a responsibility determination because the contract had already been awarded to Sonoran. . . .  Why Sonoran chose not to intervene in either of these protests is beyond the Court's comprehension, as Sonoran should have known that its award was at risk of being rescinded and granted to SPG instead as a result of potential corrective action.

An awardee's intervention in a protest challenging its contract award has always been critical to ensuring that the award and the evaluation are fully protected.  Sonoran serves as a reminder of that, but goes a bit further to suggest that awardees risk waiving certain legal rights if they do not intervene.  The government will defend its award and evaluation, but it will not defend the awardee's legal interests, particularly when the government's interests diverge from those of the awardee.  In addition to the motivation to defend a contract award, awardees considering intervening should also consider the risk that they may be imputed with knowledge of agency action occurring during the pendency of the protest.

Sonoran raises additional questions.  For example, can a contractor be charged with knowledge of information that is disclosed under a protective order that is later released as part of the public decision document?  If so, when is the offeror charged with such knowledge?  Also, how does this impact other offerors (i.e., beyond the awardee and protester)?  What if the scope of corrective action adversely affects other offerors' interests, and how does the court's holding impact them when, typically, other offerors are not permitted to intervene in protests?

Yard Masters, Inc., SBA No. WOSB-109

Yard Masters serves as a cautionary reminder that a company claiming status as a woman-owned small business (WOSB) must ensure that its corporate documents match its structure, and that the documents and the structure are compliant with the applicable regulations.

The Army set aside a contract for maintenance services for WOSBs, and awarded the contract to Yard Masters, Inc. (YMI).  A competitor filed a WOSB status protest with SBA arguing that YMI was ineligible for award because YMI was not majority-owned and controlled by a woman, but was instead majority-owned and controlled by the woman's husband.

YMI admitted that the woman's husband was previously the majority owner, but contended that YMI currently qualified as a WOSB because he sold stock to his wife, giving her 51% of the outstanding ownership interests.  To refute the allegation regarding control, YMI proffered the wife's résumé and corporate meeting minutes demonstrating that she was the chief executive officer.

SBA's review of YMI's corporate documents revealed that no CEO position was ever created and no duties were assigned to the CEO.  Rather, the corporate documents designated a President of the company – a position that was held by the woman's husband – as the "chief executive and administrative officer of the corporation."  SBA had additional evidence to undermine YMI's contention that the wife controlled the company, but it largely served to confirm SBA's finding that the husband had the right to control the company as its president.  The SBA Area Office concluded that YMI did not qualify as a WOSB because it was not controlled by a woman.

YMI appealed the decision to SBA's Office of Hearings and Appeals (OHA) and argued that YMI's meeting minutes demonstrated that the wife had ultimate control over the company as its CEO.  OHA disagreed because "the Board did not formally create a position of CEO" and "[t]he Bylaws were never changed to add the position of CEO."  Instead, "[t]he Bylaws clearly state that the President is the corporation's 'chief administrative and executive officer,'" which was a position held by the husband.  In addition to citing the ancillary evidence presented by SBA, OHA also noted that the husband had communicated with the SBA Area Office in response to the protest.  OHA denied the appeal and upheld the SBA Area Office's decision.

YMI is a reminder that accurate and compliant corporate documentation is as important as the day-to-day company operations.  Contractors and their advisers must have a complete understanding of the regulations that govern a company's pursuit, receipt, and performance of set-aside government contracts.  Furthermore, the company and its board must adopt resolutions that are consistent with the corporate documents and day-to-day management.

Lastly, YMI reminds us that the individual in control of the company should be signing important corporate documents and controlling communications with outside entities.

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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