United States: January 2019 Bid Protest Roundup

Despite the shutdown that impacted much of the federal government for the month, the Government Accountability Office (GAO) was fully funded and issued several decisions of note in January, including its decision in Wyle regarding the impact of transactions on pending procurements, which we wrote about in another post here.  This month's roundup addresses three other noteworthy GAO decisions from this month. Regarding Miltope, we discuss a possible expansion of GAO's "diligent pursuit" doctrine. Regarding PTC, we discuss the difficulties of challenging an agency's sole-source justification, even where the justification is based on a non-applicable exception to competition requirements.  Finally, in MIRACORP, GAO and the Small Business Administration (SBA) provide helpful clarity on 8(a) program graduates' eligibility to compete on task order contracts after graduation.

Miltope, B-416859.2, January 8, 2019

Miltope represents a potentially significant shift in GAO's interpretation of its timeliness rules and may indicate an expansion of GAO's diligent-pursuit doctrine. Miltope involved a U.S. Army procurement for multipurpose standard automatic test equipment kits.  In support of their proposals, offerors were required to submit correctly configured bid samples, which would then be subjected to a variety of performance testing.  This included computer performance testing using publicly available PassMark Benchmark software.

On August 2, 2018, Miltope was notified that its proposal had been excluded from the competitive range. Miltope was provided a telephonic debriefing on August 10, 2018, in which it was notified that its exclusion was based on its low PassMark scores.  Miltope requested the return of its bid sample several times, but did not receive it until September 13, six days after the Army had announced its final award decision.  On September 21, after performing a forensic evaluation on its returned bid sample, Miltope concluded that agency personnel must have improperly changed its display resolution settings prior to testing.  Miltope filed its protest with GAO on October 1, almost two months after its debriefing.

The Army moved to dismiss Miltope's protest, arguing that Miltope had been aware of its disagreements with the Army's reasoning for its exclusion from the competitive range after its August 10 debriefing. Relying on GAO's decision in Atlantic Marine, Inc., B-239119.2, Apr. 25, 1990, the Army noted that Miltope did not need to determine a specific basis of protest, i.e., the cause of its low scores, in order to protest; its disagreement with the Army's test scores was sufficient to trigger the timeliness clock.

Although the GAO ultimately denied the protest on the merits, the GAO disagreed with the Army's timeliness argument. The GAO did not view Miltope's protest as a broad challenge to its elimination from the competitive range, but rather a "specific allegation of either mistake or misconduct on the part of the agency when it tested Miltope's sample."  The GAO distinguished Atlantic Marine on these grounds, explaining that Atlantic Marine involved a post-award protest of the protestor's exclusion from the competitive range that "did not make a specific allegation of mistake or misconduct that could only be discovered later."  The GAO instead pointed to its decision in Lockheed Martin Corp., B-295402, Feb. 18, 2995, in which it found a protest filed 14 months after award timely because it was based on public disclosure of documents relating to the criminal conviction of a high-level procurement official.

Accepting for timeliness purposes Miltope's factual allegation that its sample was tested at the incorrect screen resolution, the GAO explained that Miltope had not become aware of this specific fact until September 21st. Accordingly, the GAO concluded: "Miltope explains that the record shows that it sought diligently to determine the cause for its sample's failure to meet the objective score, and did so within eight days of receiving its sample back.  In circumstances such as here, we will resolve doubts over issues of timeliness in favor of protesters . . . On this record, we find the protest is timely."

Miltope an important reminder that contractors and their counsel should not assume that a GAO a protest will be untimely even when filed after the ten-day and five-day triggers in the FAR.  If material events are not known until well past those dates, and the contractor proceeds diligently, the protest may still be timely.  Viewed differently, a carefully crafted allegation can put the timeliness clock in the hands of would-be protestors.

PTC, Inc., B-416863, December 20, 2018

Our next case, PTC, offers valuable insight into the uphill battle would-be protestors face in attempting to challenge sole-source justifications.

PTC involved an Air Force procurement for standard, enterprise-wide product lifecycle management software.  During procurement planning, it was discovered that the Air Force had purchased significant quantities of software licenses for various lifecycle management software solutions under several contracts.  Replacing these licenses with new standard software was estimated at over $300 million.  So, the Air Force instead reviewed its existing licenses and determined the most cost-effective option was to reuse and/or reactivate a significant number of the Teamcenter software product licenses it already had, which would require it to purchase a much smaller number of new licenses.  Reactivation of these licenses could only be done with the original software manufacturer, Siemens, so the Air Force issued a Justification & Authorization (J&A) for a sole-source award.

The J&A relied on the exception to full and open competition for situations in which supplies or services are only available from one responsible source, and no other supplies or services will satisfy agency requirements. Specifically, the Air Force relied on the exception for sole-source awards to the original source in a follow-on contract for the continued provision of highly specialized services, where the services are only available from the original source when it is likely that award to any other source would result in, among other things, substantial duplication of cost to the government that is not expected to be recovered through competition. See FAR 6.302-1(a)(2)(iii).  According to the J&A, the licenses from Siemens were highly specialized services because the series of previous contracts for the Teamcenter software license represented a significant investment in the Siemens product and, since Siemens is the only source for reactivation services for those licenses, the services are highly specialized.

PTC protested the Air Force's J&A, arguing that the J&A was unreasonable because the contract would not be a follow-on contract, as required by the FAR, because the original licenses were purchased from several different authorized resellers and, further, all of those contracts ended more than five years ago. GAO agreed, noting that, under the Air Force's interpretation of the FAR, any later purchase of services from an original equipment manufacturer could be considered a follow-on, regardless of the circumstances of the original purchase.

Despite the significant flaws in the Air Force's interpretation of its sole-source authority, GAO declined to disturb the J&A simply because it relied on an inapplicable exception to the requirement for full and open competition. Instead, GAO found that the underlying facts in the J&A supported a finding of only one responsible source, even if the circumstances did not fall into any of the specific examples set forth in FAR 6.302-1(a)(2).  GAO noted that the agency's reasonable need for standardization and interoperability with existing software is a standalone basis for a sole-source award.  The Air Force's demonstrated cost savings by using Siemens over another vendor further supported the sole source.

GAO's decision demonstrates its willingness to uphold defective J&As where the underlying facts provide support for the sole source. Protestors should keep this principle in mind when deciding whether to protest a J&A that is deficient on its face if the underlying facts establish a reasonable basis for a sole source.

MIRACORP, Inc., B-416917, January 2, 2019

In MIRACORP, GAO and the SBA clarified an ambiguity related to 8(a) program graduates' eligibility to compete for 8(a) task orders under existing contracts after graduation.

MIRACORP involved a Department of Energy task order for administrative support services.  The solicitation was issued as a set-aside for 8(a) Business Development Program participants holding a Federal Supply Schedule Professional Services Schedule contract.  MIRACORP, a recent 8(a) graduate, was the incumbent.

After award was made to another 8(a) offeror, MIRACORP protested. The Department of Energy responded that MIRACORP was not an interested party to protest because the solicitation had been set aside for 8(a) participants, and MIRACORP had graduated from the program.  MIRACORP argued that it was still eligible to compete because it was an 8(a) participant at the time it was awarded its Schedule contract, and SBA rules allow 8(a) participants to retain their 8(a) status for the remaining duration of their existing contracts.

GAO invited SBA to comment and adopted SBA's reasoning in its decision. SBA stated that MIRACORP should be deemed ineligible because the underlying Schedule contract had not been initially set aside exclusively for 8(a) participants.  Accordingly, eligibility for each 8(a) set-aside task order award under the Schedule must be determined at the time of submission of the task order quotation, not at the time of submission of the Schedule quotation (which would have been the case had the initial Schedule competition been an 8(a) set-aside).

MIRACORP offers a useful clarification for both recent 8(a) graduates attempting to determine their eligibility to bid on task orders and for current 8(a) participants planning for graduation.

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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