United States: When Is A Bait-and-Switch Not A Bait-and-Switch? When Key Personnel Ignore Their Non-Compete Agreements

Can a disappointed offeror successfully challenge an award by demonstrating that it had signed non-compete agreements with the awardee's proposed key personnel? Not necessarily. As the Government Accountability Office (GAO) recently explained in Strativia, LLC,¹ it will reject a protest ground that employees were unavailable to the awardee based solely on the existence of signed non-competes because the enforceability of such agreements constitutes a "private dispute" between their signatories. For a proposed key employee to be considered unavailable to the awardee, thereby rendering the awardee's proposal misleading, GAO case law makes clear that the proposed employee must also reject or ignore the prospective awardee's contingent offer of employment and not give any indication that he or she would be amenable to accepting the position if the prospective awardee won the contract.

In Strativia, LLC, GAO denied a protest that asserted the awardee materially misrepresented who would be available to work on the contract because the employees identified had signed non-competes. GAO brushed this ground aside, saying that the enforceability of a non-compete is a private dispute it doesn't review. GAO cited two cases in support of its refusal to entertain this protest ground: ASRC Federal Data Solutions, LLC,² and AVER, LLC.³

The key distinction between the two cited cases is whether the employees who signed the non-competes also indicated to the prospective awardee that they intended to honor them. If the employees: 1) did not inform the prospective awardee of the non-compete; and/or 2) acted as if they would work on the awardee's contract despite the non-compete, then GAO refuses to consider the protest ground because it is predicated on the enforceability of the non-compete. In other words, only if the employee declines to allow the prospective awardee to include his or her resume in its proposal does GAO entertain the protest ground that the awardee had no reasonable basis upon which to propose the employee as a key person and examine whether the situation was a bait-and-switch.

In ASRC Federal Data Solutions, LLC, where GAO sustained the protest, the prospective awardee proposed two employees as key personnel. One employee unequivocally told the prospective awardee that she had signed a non-compete and it could not include her resume in its proposal. The prospective awardee included her resume anyway, and that was the protest ground upon which the protest was sustained. The other employee also signed a non-compete but accepted the prospective awardee's contingent offer and provided his resume to the awardee—indicating that he intended to work for the prospective awardee and not informing them that he had signed a non-compete. GAO refused to get involved in whether the awardee's inclusion of the second employee in its proposal as a key person was a bait-and-switch or material misrepresentation because the employee had not given a clear indication that he would not work for the awardee.

AVER, LLC is consistent with this precedent. In AVER, LLC, GAO dismissed the protest where the key employee had signed a non-compete with a subcontractor of the protester and then breached it to go work for the awardee. The protester argued that the key employee was not available, so the awardee did not comply with material requirements of the solicitation. GAO would not decide on this protest ground because the argument was predicated on the enforceability of the non-compete, which is a private dispute. The employee(s) in AVER, LLC did not give the prospective awardee any indication that they did not intend to work for it or that it did not have their permission to propose them as key personnel.

The Strativia, LLC decision adheres to the logic of these decisions. In Strativia, LLC, "vendors were to provide a resume and letter of commitment for the project manager position, and to identify an alternate project manager."⁴ Field Data Technology (FDT)'s quotation included a signed letter of commitment from its proposed project manager as required by the RFQ, and the RFQ did not require any proof of commitment for other staff. Thus, it was not a material misrepresentation on FDT's part to include the project manager in its proposal even though he or she had signed a non-compete agreement with the protester. As GAO explained, the enforceability of the non-compete agreement constituted a private dispute between the project manager and Strativia, not a material misrepresentation by the awardee.

Accordingly, government contractors should be aware that non-compete agreements in and of themselves do not create a basis for a protest ground that key personnel or a workforce is unavailable to an awardee. The key personnel must also act in accordance with the non-compete and not allow their inclusion in a competitor's proposal.

Footnotes

1. Strativia LLC, B-421511, June 14, 2023, 2023 CPD ?144.

2. ASRC Federal Data Solutions, LLC, B–421008, Dec. 2, 2022, 2022 CPD ¶294.

3. AVER, LLC, B–419244, Nov. 2, 2020, 2020 CPD ¶360.

4. Strativia LLC, B-421511, at 3.

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