Government Contracts Monitor
A Tale Of Two Protests: Cost Claims at the GAO
October 11, 2016
Two recent decisions highlight the importance of the record to GAO’s consideration of claims for protest costs where the agency takes corrective action before GAO issues a decision. In such circumstances, a protestor can prevail on its cost claim if the agency’s corrective action is unduly delayed and the protestor’s claim is “clearly meritorious.” But the consideration of a protest’s merit is based on the facts in the record so that a lack of requisite facts means no recovery of costs. These decisions demonstrate how fine the line between “clearly meritorious” and “not clearly meritorious” can be.
On August 31, GAO released its decision regarding costs in East Coast Nuclear Pharmacy, B-412053.5 (August 31, 2016). The original protest by East Coast Nuclear Pharmacy (East Coast) concerned the Veterans Administration’s (VA) award of a fixed price contract for delivery of radiopharmaceuticals to Medi-Physics, Inc. (Medi-Physics). The solicitation called for a Lowest Price Technically Acceptable award based on three factors: price, technical and past performance. The agency received 5 proposals and, pursuant to the solicitation, ranked them in order of price, then evaluated the lowest priced proposal for technical acceptability. The Source Selection Evaluation Team (SSET) found the lowest priced proposal, submitted by Medi-Physics, to be technically acceptable, so none of the more expensive proposals were evaluated for technical acceptability and the contract was awarded to Medi-Physics.
East Coast protested the award, alleging that Medi-Physics’ proposal was not technically acceptable. In its response, the agency included the one-page Source Selection Decision Document (SSDD) leading to Medi-Physics’ award. The SSDD referred to the SSET’s report, but the record did not include the report itself. East Coast supplemented its protest twice, arguing that the agency had not provided all the documents necessary for GAO’s review of the procurement, and that the documents it had turned over were provided in a piecemeal fashion. GAO requested that the VA provide all the relevant documents, and its response to all issues by March 2. On that date, however, the agency notified GAO that it would take corrective action by cancelling Medi-Physics’ award and the solicitation, and re-evaluating its needs.
East Coast then filed a claim for its protest costs. Having determined that the corrective action was unduly delayed, the award of fees hinged on whether GAO found that at least one of East Coast’s protest grounds was clearly meritorious. GAO noted that a protest is “clearly meritorious where a reasonable agency inquiry into the protest allegations would have shown facts disclosing the absence of a defensible legal position.”
While GAO does not reevaluate an agency’s technical determination, it will review that determination for reasonableness and consistency with the terms of the solicitation. Here, GAO found that, based on the record, the protest allegation that Medi-Physics’ proposal was technically unacceptable was clearly meritorious. According to GAO, the record showed that the VA failed to reasonably determine, or to document its determination, that Medi-Physics could deliver emergency doses within the timeframe required by the solicitation, particularly since the agency did not even dispute the fact that Medi-Physics lacked a local radiopharmacy where such doses could be prepared. GAO viewed East Coast’s protest allegation as clearly meritorious because a reasonable agency inquiry into the protest allegations would have disclosed the absence of a defensible legal position.
The decision in Cape Environmental Management, B-412046.3 (September 29, 2016) came to a different conclusion on costs. The protest involved a challenge by Cape Environmental Management, Inc. (Cape) to the Army Corps of Engineers’ (Corps) award of a construction contract to MEB General Contractors, Inc. (MEB). The solicitation called for a best value award based on four factors of varying importance. The agency received three proposals. MEB’s proposed price was approximately $1 million more than Cape’s, but the Source Selection Authority performed a trade-off analysis and determined that MEB’s higher rating in one of the factors warranted the price premium. Cape protested, focusing on the Corps’ technical evaluation of proposals. As in East Coast, the agency filed its report, a supplemental protest followed, the agency again responded, and the Protestor submitted comments. In its supplemental protest, Cape abandoned its original protest grounds, choosing instead to pursue a similar argument aimed at the agency’s technical evaluations. GAO requested further information from the agency regarding the technical evaluations and asked the Corps to respond to several specific questions about the record. Again as in East Coast, rather than respond to these pointed inquiries, the agency notified GAO that it would take corrective action by reevaluating the proposals and making a new source selection decision.
Cape filed a request for reimbursement of its protest costs, alleging that the corrective action was unduly delayed and that its protest was clearly meritorious. The agency countered that Cape’s protest was not clearly meritorious because further development of the record was required to make such a determination—as evidenced by GAO’s questions and request for further documentation. The agency then revealed that the underlying subjective documentation of the technical evaluations had been accidentally destroyed.
GAO sided with the Corps in this case and found that Cape’s protest was not clearly meritorious. It drew the distinction between “merit” and “clear merit”: clear merit exists where there is “not a close question.” Here, the agency’s decision to take corrective action instead of responding to GAO’s further inquiries rendered a finding of a “close question” impossible. Because the record had not been fully developed in this protest, GAO could not determine whether the protestor’s arguments raised a close question and, therefore, were clearly meritorious.
These two decisions, published within a month of each other, appear to reach starkly different conclusions. At first glance, it may not be clear why. However, there are important distinctions between the two. In East Coast, the protestor had filed three protests in total, which presumably resulted in more development of the record. On the other hand, because Cape abandoned its original protest allegations, it makes sense that the protest record was not as developed as it otherwise would have been. In addition, underlying evaluation documentation requested by GAO could not be provided because it had been destroyed by the agency. The evaluation scheme in Cape was also more subjective than that in East Coast, and Cape involved a trade-off decision whereas East Coast was awarded on an LPTA basis. The corrective actions differed as well: while in Cape the agency planned to re-evaluate submitted proposals, the VA in East Coast announced it was taking the procurement all the way back to its beginning.
Nevertheless, the final action preceding corrective action in both protests was GAO’s request for more information. One protestor walked away with its costs covered; the other didn’t. Taken together, these cases remind us that the ability to recover protest costs depends in large part on how well the record is developed before the agency decides to pull the plug. Protesters need to keep this in mind from the outset of their protest and do whatever they can to maximize evidence in the record showing their cause to be clearly meritorious.
© 2016 Jackson Kelly PLLC