On February 14, the Government Accountability Office (GAO) dismissed a protest by Marathon Medical Corporation, an unsuccessful bidder, concluding that its protest was untimely.
GAO reasoned that its strict timeliness requirements prohibited it from hearing a protest filed less than 10 days after the closing of quotation submissions and following an agency-level protest. The GAO’s interpretation of “adverse agency action” should be understood by any government contractor or risk missing an opportunity to protest a procurement.
The Procurement at Issue
The Department of Veterans Affairs (VA) issued an RFQ on August 28, 2023, seeking to establish Blanket Purchase Agreements to procure medical and surgical supplies. The VA set aside the procurement for service-disabled veteran-owned small businesses (SDVOSBs). The RFQ incorporated FAR 52.219-23, the non-manufacturer rule (NMR), but explained that if no SDVOSBs met those requirements, the VA would withdraw the set-aside designation, opening the competition to non-SDVOSB bidders.
The NMR requires the SDVOSB to obtain a waiver or meet a four-prong test, which includes:
- “provid[ing] an end item that a small business has manufactured, processed, or produced in the United States or its outlying areas;”
- “[n]ot exceed[ing] 500 employees, or 150 employees for information technology value-added resellers” under the relevant NAICS code;
- “primarily engag[ing] in the retail or wholesale trade and normally sell the type of item being supplied;” and
- “[t]ak[ing] ownership or possession of the item(s) with its personnel, equipment, or facilities in a manner consistent with industry practice.”
On November 14, Marathon submitted a timely quotation. Approximately two weeks later, it filed a pre-award protest with the agency objecting to the RFQ’s inclusion of the non-manufacturer rule. The company argued that it would eliminate small businesses from competing and, therefore, was improper. Quotations were due by December 1.
On January 17, 2024, the VA notified Marathon that its agency-level protest has been denied. Less than 10 days later, Marathon filed a protest with the GAO, arguing that the RFQ’s incorporation of the nonmanufacturer rule was improper as it ran counter to 38 U.S.C. 8127, FAR 19.505(c)(5), and the VA’s procurement regulations.
Discussion
The procurement regulations set strict timeliness requirements on the submission of GAO protests in order to strike a balance between providing parties with a fair opportunity to argue their cases and ensuring that the procurement system runs efficiently.
The procurement regulations provide: “[i]f a timely agency-level protest was previously filed, any subsequent protest to GAO must be filed within 10 days of actual or constructive knowledge of initial adverse agency action.” 4 C.F.R. §§ 21.2(a)(3) (emphasis added). “Adverse agency action” refers to “any action or inaction on the part of a contracting agency that is prejudicial to the position taken in a protest filed with the agency, including the ‘opening of bids or receipt of proposals.’” MLS-Multinational Logistic Servs., B-415782, B-415708.2, Mar. 7, 2018, 2018 CPD ¶ 105.
The VA argued that the GAO protest was untimely because the closing date of the quotations, not the denial of the agency-level protest, constituted “initial adverse agency action.” Accordingly, the VA moved to dismiss Marathon’s protest on timeliness grounds.
Marathon argued that the closing date for quotations could not have been the adverse agency action because it was not prejudicial to its protest grounds. Marathon pointed to the fact that it had submitted a quotation and had no objection to the submission deadline. The company contended that its GAO protest was timely because it was filed within 10 days of being informed the agency-level protest was denied.
The GAO agreed with the VA, explaining that “our Bid Protest Regulations and our decisions are consistent in treating the closing date for receipt of quotations as adverse agency action, at which point the protester with an agency-level protest pending at the closing time has 10 days to file a timely protest with our Office raising those challenges.” GAO also held that the inclusion of the non-manufacturer rule at the deadline affected which products the offerors could quote and whether a firm could even represent itself as an SDVOSB.
Key Lessons and Takeaways for Contractors
The Marathon Medical decision explains that an agency’s receipt of proposals following a pre-award agency-level protest constitutes adverse agency action and begins the 10-day clock for filing a subsequent GAO protest. For contractors considering filing agency-level protests, this and other protest timeliness rules must be carefully examined when developing your litigation strategy.
