GAO Holds that the Government Cannot Ignore the Effects of COVID-19 and the CARES Act in Soliciting Future Work

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On October 26, 2020, the Government Accountability Office (GAO) published its decision in the Matter of Chronos Solutions, LLC, in which the GAO sustained several pre-award protests of a Department of Housing and Urban Development (HUD) solicitation due to HUD’s failure to take into account the impact of COVID-19 and the CARES Act on its estimates of future work. HUD is responsible for the resale of homes that become the property of the government as a result of foreclosures on government-guaranteed mortgages. HUD hires asset management companies to manage and sell these properties.

HUD’s latest solicitation for such work sought proposals for an IDIQ for asset management in every U.S. state and territory, and was published as a total small-business set-aside. HUD provided estimates for the volume of foreclosures, and therefore the volume of properties to be managed and marketed in each location, based on historical data through 2019. HUD required offerors to fill out pricing sheets based on these estimates.

However, HUD failed to account for the impact of the CARES Act, which placed a moratorium on foreclosures for 60 days and provided for an additional 180 – 360 days of mortgage forbearance for borrowers who have experienced financial hardship related to COVID-19. The protestors argued that there would be a significant decline in foreclosures during the moratorium and forbearance period, followed by a deluge of foreclosures when the forbearance period ends. This would obviously make HUD’s estimates, based on data through 2019, wildly inaccurate.

HUD argued that since this was an IDIQ, they had no obligation to provide accurate estimates. The GAO held that while estimated quantities in an IDIQ procurement need not be precise, such estimates must be “based on the best information available,” and be “reasonably accurate representations of the agency’s anticipated needs.” The agency’s failure to account for the obvious and significant impact of COVID-19 and the CARES Act on its future need for asset management services meant that its estimates were not based on the best information, and were not reasonably accurate and failed to provide a “meaningful basis” for the evaluation of proposals. Consequently, the GAO sustained the protest.

An important note: several of the protestors argued that the solicitation should not have been a small-business set-aside due to its national scope and the potential difficulties of dealing with the impacts of COVID-19 and the CARES Act. While the GAO did not specifically hold that the solicitation should not have been a small business set-aside, it did recommend that HUD re-evaluate its decision to set the solicitation aside for small business. The GAO pointed out that HUD had based its decision to set the solicitation aside on the same 2019 volume estimates that the GAO rejected as no longer current and accurate.

If you believe the government is failing to take into account the impact of COVID-19 and the CARES Act on your business, give us a call and we will help you explore your options.

DISCLAIMER: 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.

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