Gimme Some Money! – Recent GAO Cases on Recovering Bid Protest Costs

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Although the film This Is Spinal Tap was released in 1984, a bid protest attorney whose client has gotten corrective action or had a protest sustained might still hum along with that film’s song, Gimme Some Money, when thinking about the recovery of protest costs. A protester’s urge to “turn it up to eleven” when trying to get payback for a flawed procurement decision, however, can result in some disappointment unless the protester had a very strong case in the first place, as three recent Government Accountability Office (GAO) cases remind us. In BluePath Labs, LLC—Recon., Sumaria Systems, Inc.—Costs, and Harmonia Holdings Group, LLC—Costs, the GAO largely denied or limited all three requests for reimbursement.

How does it usually work?

When a protest is successful, because either the GAO sustains the protest or the agency decides to take corrective action, the Competition in Contracting Act (31 U.S.C. § 3554) and the GAO’s Bid Protest Regulations (4 C.F.R. § 21.8) allow the recovery of the reasonable costs of filing and pursuing a protest, including attorneys’ fees, as well as consultant and expert witness fees. For large business protesters, the statute caps attorneys’ fees at $150 per hour, subject typically to a partial upward cost-of-living adjustment. The GAO also caps the recovery of costs for consultants retained by large business protesters at the daily rate of pay of a GS-15/10 federal employee, which was $446.64 in 2006, but would be higher now based on annual cost-of-living increases to the Civil Service since that time (Dep’t of the Army et al.—Costs, et al.).

For a sustained protest, the GAO generally “recommends reimbursement of “the costs incurred with respect to all the issues pursued, not merely those upon which it has prevailed,” unless an unsuccessful protest issue is “clearly severable” from a successful issue (BluePath Labs, LLC—Costs). In corrective action cases, the potential for cost recovery is more limited, with the GAO recommending reimbursement of protest costs when “the agency unduly delayed taking corrective action” in a clearly meritorious protest (Sumaria Sys., Inc.). This rule means that there cannot have been a close question on the merits of the protest argument. If the agency has any defensible legal position, then the GAO will not recommend the reimbursement of costs for that protest allegation. In addition, when an agency takes corrective action before the agency report due date, that corrective action is considered prompt and cost reimbursement is not merited (CloudFirstJV, LLC—Costs).

In Markit! Forestry Management, LLC—Costs, for example, the protester obtained a GAO recommendation for cost reimbursement. There, the agency only took corrective action after the protester filed a supplemental protest, as well as comments on the agency report. In effect, the GAO then determined via the cost request that it would have sustained the protest had the agency not taken corrective action. Thus, the GAO recommended protest cost reimbursement because the initial protest grounds were clearly meritorious, and the agency had unduly delayed taking corrective action.

What happened in the recent cases?

In BluePath, the GAO stated that it was likely to sustain an unequal discussions protest ground but that the other allegations lacked merit. The agency then took corrective action, and the protester requested reimbursement of its protest costs. The agency did not contest the costs relating to the unequal discussions issue but refused to pay costs relating to the other arguments. The GAO agreed, reasoning that the meritless protest grounds were not clearly intertwined with the meritorious argument regarding unequal discussions. BluePath then requested reconsideration of the decision denying recovery of costs, arguing that it was legally and factually erroneous. The GAO denied the request for reconsideration, finding no error.

In Sumaria, the protester originally made four protest arguments, three of which were dismissed or withdrawn. After seeing the agency report, Sumaria filed a supplemental argument. In response, the agency took corrective action before the supplemental agency report was due. Sumaria then requested reimbursement of all its protest costs. The GAO denied the request, stating that the single, surviving initial protest ground was not clearly meritorious, and that the agency did not unduly delay taking corrective action in response to the supplemental protest allegation because the agency did so before the due date of the supplemental agency report.

In Harmonia, the GAO sustained some protest allegations and recommended the reimbursement of protest costs. The agency offered to pay less than half of what the protester requested. The protester then took the matter to the GAO, requesting approximately $73,000 — nearly $55,000 in attorneys’ fees and more than $18,000 for consultant fees. The GAO denied the attorneys’ fees request for amounts above the statutory $150-per-hour cap because Harmonia was no longer a small business when it protested, the cap applied to large businesses, and Harmonia failed to justify an increase in the cap for cost-of-living or for other reasons. The GAO also denied the request for consultant fees because the GAO had dismissed the only protest issue on which the consultant worked. Finally, because the agency had acted promptly to respond to the cost request, there was no basis to recommend reimbursement of the costs of pursuing the cost claim.

What are the takeaways?

A protester that prevails on the merits is likely to recoup at least some of its bid protest costs. The amount of any recovery will depend on the degree to which the successful protest grounds are intertwined with the unsuccessful grounds and on how close its attorneys’ and consultant fees are to the applicable fee caps, as augmented by any cost-of-living calculations.

For protesters who benefit from agency corrective action, the recovery is likely to be lower unless the GAO’s analysis shows that it would have sustained the protest, if it had been decided on the merits.

In either case, the black-line rule that agencies need not deal with repayment requests at all – if they take corrective action before an agency report is due – means that there are powerful incentives for the agency to act promptly when taking that corrective action, a factor that potential protesters should keep in mind when deciding whether to protest in the first place.

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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