Companies competing for federal contracting opportunities now have yet another reason to fear their proposals being rejected and their awards getting overturned.
A recent decision by the Government Accountability Office (GAO) held that continuous registration in the System for Award Management (SAM) is mandatory throughout the evaluation period for an offeror to be eligible for award, even if a period of lapsed registration is as short as 24 hours. If that were not concerning enough, GAO is not alone in its interpretation of the requirement to be registered in SAM – the Court of Federal Claims (COFC) adopted a similar interpretation last year. As a result, contractors now could face protests in either forum for being anything less than fully compliant with maintaining continuous, uninterrupted SAM registration while their proposals are being evaluated for award.
GAO Decision
The GAO decision – TLS Joint Venture, LLC, B-422275 (April 1, 2024) – involved the award of a roughly $5 million contract for custodial services at the Naval Surface Warfare Center, Carderock Division to Silas Frazier Realty LLC (SFR). An unsuccessful offeror, TLS Joint Venture LLC (TLS), challenged the award on the basis that SFR’s registration in SAM – which is the primary government repository for potential federal awardee and federal awardee information and the centralized government system for certain contracting, grants and other assistance-related processes – had lapsed between the time SFR submitted its proposal and the date of award. Specifically, because the solicitation against which TLS and SFR had competed incorporated FAR 52.204-7, System for Award Management (Oct. 2018), and advised that offerors must comply with all material aspects of the solicitation, including regulatory requirements, to be considered eligible for award, TLS argued that SFR’s proposal should have been rejected as ineligible as a result of its lapsed SAM registration. GAO agreed with TLS, sustained the protest and recommended that the Navy cancel its award to SFR.
In so ruling, GAO rejected the Navy’s argument that FAR 52.204-7 does not require continuous registration but rather only requires a firm to be registered at the time of proposal submission and when any contract is awarded. GAO found that such an interpretation to be inconsistent with the plain, unambiguous language used in the clause. For those unfamiliar with what it says, FAR 52.204-7(b)(1) provides:
An Offeror is required to be registered in SAM when submitting an offer or quotation, and shall continue to be registered until time of award, during performance, and through final payment of any contract, basic ordering agreement, or blanket purchasing agreement resulting from this solicitation.
(Emphasis added).
GAO found that the emphasized language could only mean one thing – namely, that an offeror had to maintain SAM registration throughout the evaluation period to be eligible for award. Thus, the Navy could not rely upon regulatory history or the fact that it would be onerous for agencies to have to monitor SAM registrations for compliance to advance a contrary interpretation, as doing so violated the well-established principle that regulations are to be interpreted consistent with their ordinary, contemporary, common meaning.
While COFC decisions are not binding upon it, GAO included a footnote in its TLS decision noting that COFC also recently interpreted FAR 52.204-7 to require offerors to maintain their SAM registrations without lapses during the entire evaluation period prior to receiving an award. In Myriddian, LLC v. United States, 165 Fed. Cl. 650 (2023) – the case referenced in GAO’s footnote – COFC enjoined an $11 million contract issued by the Department of Health & Human Services for methodologies to ensure consistent coding of Medicare and Medicaid claims because the awardee’s SAM registration had lapsed for a 17-day period between submitting its offer and receiving the award. COFC rejected arguments that the lapse in SAM registration was immaterial. Instead, COFC held that agencies had to ensure awardees complied with mandatory solicitation requirements like FAR 52.204-7 “to preserve the integrity of the procurement process.”
Timeline of Events
The lapse in Myriddian was over two weeks long. But what if an offeror’s SAM registration lapsed for only a very short period of time, such as a single day? Unfortunately for contractors, that was exactly the factual scenario GAO faced when it sustained TLS’s protest.
SFR’s SAM registration was “Active” until 9:34 am Monday, Dec. 11, 2023. SFR had submitted its renewal registration request on the Friday afternoon before its registration was set to expire. However, the General Services Administration (GSA) – which is tasked with managing SAM – had to first verify SFR’s taxpayer status with the Internal Revenue Service (IRS), and then verify SFR’s CAGE Code with the Defense Logistics Agency (DLA), before it could reactivate SFR’s SAM registration, resulting in the following sequence of events:
This means that SFR was unregistered in SAM for a total period of 24 hours and 14 minutes, between the time its previous registration expired at 9:34 am Monday, Dec. 11 and the time GSA reactivated its registration at 9:48 am Tuesday, Dec. 12. Yet that was enough to render SFR ineligible for award, according to GAO. The Navy could not rely upon the fact that SFR submitted a renewal registration request before its registration had expired because that renewal request did not mean that SFR was “registered in SAM” for the purpose of FAR 52.204-7 compliance. Instead, GAO found that, to be considered “registered in SAM” under the clause, “the government must verify the registration information and mark the contractor’s record as ‘Active.’” Because neither of those conditions were satisfied before the expiration time of SFR’s prior SAM registration, SFR did not maintain continuous, uninterrupted SAM registration throughout the evaluation period, in violation of FAR 52.204-7.
Strict Application
So, what does this mean for contractors going forward? As an initial matter, they need to be aware that, unlike other areas where we’ve seen divergence between GAO and COFC in recent years (pre-award changes to key personnel, the “late-is-late” rule, etc.), this seems to be an area upon which the two major bid protest fora apparently agree, at least for now. Both COFC in Myriddian and GAO in TLS strictly applied FAR 52.204-7 to determine offerors ineligible. Accordingly, contractors should expect this protest ground to be brought up more frequently in both jurisdictions.
Contractors should also be on the lookout for protests challenging even minuscule lapses in SAM registration, especially since FAR 52.204-7 is required to be inserted in most government contracts, with only a few selected categories (classified contracts, acquisitions below the micro-purchase threshold and a handful of other procurements listed at FAR 4.1102(a)) excepted from SAM registration. While COFC has yet to deal with a SAM registration lapse fewer than two weeks long, GAO’s sustainment in TLS of a protest challenging a lapse of barely over a day suggests that no lapse, no matter how brief, is safe from review.
But what about prospective protesters? How do COFC’s and now GAO’s strict adherence to the mandates of FAR 52.204-7 affect them? Obviously, they will be actively searching their competitors on SAM.gov to see if they can lodge a protest against an award made to a contractor that let their registration slip, even for a moment. But to have standing to even bring such a protest ground (or any protest ground, for that matter), must a disappointed offeror also make sure that they didn’t let their SAM registrations lapse during the evaluation period? After all, the effect of Myriddian and TLS is that such lapses render offers ineligible for award. And if a protester that allowed its SAM registration to lapse before award is no longer eligible for award, then how can they possibly be considered an “interested party” to challenge an agency’s source selection decision? Neither COFC nor GAO have considered this standing issue yet, but presumably what is good for the goose should be good for the gander, meaning even potential protesters need to be aware of their SAM registration statuses during the evaluation process.
Vigilance is Key
To avoid these pitfalls, offerors should be extremely vigilant in ensuring uninterrupted SAM registration during the entire time their proposals are being evaluated before an award is made and submit any renewal registration requests well in advance of the expiration times of their current registrations. The latter point cannot be emphasized enough. As was shown in TLS, it takes the government some time to process renewal registration requests. Unless GSA, IRS and DLA are able to increase their staffing significantly or implement automation to reduce the time it takes to verify and reactivate registrations to be near-instantaneous, contractors need to factor in enough time for their SAM renewal registration requests to go through to ensure their uninterrupted compliance with FAR 52.204-7.
Then again, perhaps the solution is not to expect contractors to comply with a mandatory, continuous registration requirement. The FAR Council could amend FAR 52.204-7 to require SAM registration only at the time of offer submittal and award. After all, that was what the Navy argued when it relied upon the regulatory history of the clause that, before 2018, only required offerors to acknowledge that they needed to be registered in SAM prior to award.
Until that happens, contractors need to abide by the plain meaning of what FAR 52.204-7 requires, which according to both COFC and now GAO, is continuous SAM registration from the time of proposal submission until the time of award. If they have any doubts or questions about what that means, they should seek legal advice from experienced government contracts counsel immediately, since even a lapse in registration as short as a day could mean disqualification from award.
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