November 2017 Bid Protest Roundup

by Morrison & Foerster LLP - Government Contracts Insights

This roundup of interesting bid protest decisions issued in November 2017 highlights two decisions, both at the Government Accountability Office (“GAO”).  The first reminds contractors that competitors can work together when failing to do so will result in bad procurement precedence that will cause them future competitive harm.  The second reminds contractors that it may be ill advised to rely on industry day materials, especially if marked that they are subject to change.  This decision also shows that, between an original contract and a bridge contract, the original contract is more important in the Small Business Administration’s analysis of whether the award of an 8(a) contract will harm a small business.

Global SuperTanker Services, LLC (“GSTS”), a provider of very large air tankers used to fight fires, successfully challenged the terms of a solicitation that excluded it from the competition.  The Department of Agriculture, Forest Service (the “Agency”) sought to enter into a “call when needed” basic ordering agreement with contractors for air tanker services.  Under a “call when needed” agreement, the Agency would issue orders to one or more contractors, each of which would decide whether it will accept the order.  This type of contract allows the Agency to have several contractors available to provide firefighting services in emergencies at predetermined rates.

The solicitation was for both the initial and extended attack phases of wildland firefighting and included a requirement that the proposed air tankers must have a minimum tank capacity of 3,000 gallons of retardant and a maximum capacity of 5,000 gallons.  GSTS’s air tanker had a capacity of up to 19,200 gallons of retardant.  The Agency contended that for a variety of reasons, tankers with a capacity greater than 5,000 gallons were not suitable for deployment in the initial attack phase of firefighting operations.  The Agency claimed that as the solicitation was for both initial and extended attack services, if the tankers were not suitable for the initial attack phase, GSTS was not qualified to compete for the contract.

The GAO examined all of the reasons presented by the Agency and was not persuaded.  Not only did GAO disagree with the claim that the excess capacity tankers were unsuitable for the initial attack phase operations, but GAO also disagreed that even if true, this did not qualify GSTS from performing the extended attack phase services.

Notable in this case, GSTS used statements, affidavits, and documents provided by one of its competitors, 10 Tanker Air Carrier, LLC (“10 Tanker”), in support of GSTS’ own argument – even though 10 Tanker did not even intend to bid on the offer.  GSTS used 10 Tanker materials to rebut the Agency’s arguments that very large air tankers suffer operational limitations and to demonstrate that the 5,000-gallon limitation on retardant was contrary to the Agency’s established practice of using tankers with capacities greater than 5,000 gallons.  GSTS did not have any current contracts with the any government entity, but 10 Tanker had been providing the same “call when needed” services to the Agency for over a decade using air tankers that exceeded the 5,000 gallon limitation.  10 Tanker wanted to intervene in the protest because, were the GAO to rule in favor of the Agency, the Agency would likely include a similar capacity limitation in future solicitations, which would disqualify 10 Tanker from those competitions for the same “too large” reasons.  The GAO denied 10 Tanker’s request to intervene because 10 Tanker was neither a protester nor an intervenor under GAO’s regulations.  However, GSTS “was not precluded from consulting with 10 Tanker on matters not subject to the protective order.”  Global SuperTanker at 3, fn.3.

Among the documents that GSTS was able to use to support its protest was a statement from 10 Tanker and an affidavit from the 10 Tanker President.  GSTS noted that the Agency had recently awarded 10 Tanker three contracts for air tankers with capacities greater than 5,000 gallons for initial attacks operations.  10 Tanker aircraft had been used in over 700 missions in 2017 alone, including initial attack missions.  GSTS further notes that the Agency had recently modified the 10 Tanker contracts to allow the Agency to use these very large air tankers daily.

Cooperation in bid protest is common between the government and the intervenor, but is not as common between competitors, especially when one is not even competing for award of the contract.  While a contractor may not have standing to intervene, it is not precluded from assisting another contractor.  This is something to consider when failing to assist will result in bad procurement precedence.

In this protest, SKC, LLC (“SKC”), a service-disabled, veteran-owned small business, challenged the Defense Intelligence Agency’s (“DIA”) sole source award of a contract to iKun, LLC (“iKun”), an Alaska Native Corporation, under the Small Business Administration (“SBA”) 8(a) program.  SKC was the incumbent contractor under the original contract and the follow-on bridge contract.  SKC protested the award of the new contract to iKun on two grounds.  GAO agreed with DIA and denied the protest.

Under SBA regulations, the SBA cannot accept a contract offer under the 8(a) program (i) if the procuring agency previously issued a solicitation or publicly expressed a clear intent to award the contract as a small business set aside or to use any of the other SBA programs or (ii) if doing so would have an adverse impact on another small business.  13 C.F.R. § 124.504(a) and (c).  SKC argued that at several industry engagement days, DIA represented that the follow-on contract for the work then being performed by SKC would likely be set aside for small businesses.  SKC also argued that as the incumbent, the award to iKun was necessarily an adverse impact on SKC, the incumbent small business.

DIA and SBA countered both SKC arguments.  With respect to intent to award argument, DIA noted that the industry day attendees were advised that its intentions were subject to change.  SBA commented that the industry day documents included a disclaimer that the documents were subject to change and that DIA issued no pre-solicitation notice or solicitation for a set aside contract.  The GAO agreed with DIA and SBA that there was no clear intent to award a small business set aside contract.

More interesting for our clients that may be squeezed out of an award is the DIA and SBA’s second argument that the sole source contract was for new requirements.  An existing requirement is considered a new requirement “where the magnitude of change is significant enough to cause a price adjustment of at least 25 % (adjusted for inflation) or to require significant additional or different types of capabilities or work.”  13 C.F.R. § 124.504(c)(1)(ii)(A).  DIA argued, and SBA agreed, that the comparison should be between the new contract, valued at $17,221.933, and the original contract, which was valued at $49,545,651 – a much more than 25% difference.  SKC argued that the comparison should between the bridge contract, which was valued at $16,600,000, and the new contract – a difference of less than 25%.  According to SBA, it was reasonable to use SKC’s contract as the basis of comparison as the bridge contract was only a temporary solution while DIA was working on a new procurement strategy.  The GAO accepted the SBA’s interpretation of its own regulation.

There are two lessons learned from this protest.  First, industry day materials are often subject to change and as such may not be evidence of the clear intent to do anything discussed, absent written evidence to the contrary.  Second, the SBA’s analysis of impact on small businesses will involve comparison to the original contract, not a temporary bridge contract.

[View source.]

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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