The United States Government Accountability Office ("GAO") sets a high bar for those pursuing bid protests before it. The ratio of protests sustained to protests dismissed or denied is heavily tilted toward the latter. That's why GAO decisions that sustain a bid protest are important resources for identifying the issues that raise red flags during a solicitation. Below are four notable bid protest decisions before GAO in the past month where the protestor won, and what GAO's analysis teaches companies about potentially meritorious protest grounds.
1. Orlans PC, B-420905, 2022 WL 16635146 (C.P.D. Oct. 25, 2022)
Under Federal Acquisition Regulation ("FAR") Part 12 acquisitions for commercial products or services, solicitation provisions included on the basis that they are "consistent with customary commercial practice" must be supported by adequate, documented market research. Orlans PC, B-420905, 2022 WL 16635146 (C.P.D. Oct. 25, 2022).
In Orlans, the Department of Agriculture's Rural Development Administration issued a request for proposals ("RFP") under FAR Part 12 for "nationwide default management services." 2022 WL 16635146 at 1. "The RFP…contain[ed] a fixed-price line item for uncontested foreclosure services and a time-and-materials line item for contested foreclosure services." Id. at 2. Accordingly, "the selected contractors [would] be entitled to payment of the fixed price for all foreclosure actions, with additional services to be billed on a time-and-materials basis when the foreclosure is contested." Id. "Services under these line items [would] be invoiced only upon the government's receipt of an unencumbered title." Id. Orlans filed a pre-award bid protest, contending that these "pricing and payment terms [were] inconsistent with customary commercial practice and unduly restrictive of competition." Id. at 1.
In response to the agency's argument that Orlans had failed to state legally and factually sufficient protest grounds, the GAO held that the vendor had done more than merely allege that the RFP's terms were inconsistent with customary commercial practice. Orlans, 2022 WL 16635146 at 4-5. Rather, by explaining in detail how the RFP's terms were inconsistent and supporting these explanations with a sworn declaration based on extensive industry experience, Orlans established the legal and factual sufficiency of its claim. Furthermore, the agency failed to support its claim that no customary commercial pricing methodology existed where it had failed to include a specific request for "information regarding customary commercial pricing practices" as part of its market research. Id. at 6. The GAO explained that "the absence of objections to a solicitation provision does not satisfy an agency's obligation to establish support for an affirmative determination regarding customary commercial practice," especially if the agency does not directly ask about customary commercial practices. Id. at 7. The GAO also rejected the agency's argument that its own prior contracts provided evidence of customary commercial practice, explaining that federal government contracts "are not generally considered to be part of the commercial marketplace." Id. at 7-8.
In sum, the GAO held that the agency's pricing and payment terms were not consistent with customary commercial practice. The protestor demonstrated that making payment only after delivering an unencumbered title was inconsistent with industry practice, and the agency's market research did not support the solicitation's terms.
2. CharDonnay Dialysis, LLC, B-420910; B-420910.2, 2022 WL 16900277 (C.P.D. Oct. 27, 2022)
When conducting a best-value tradeoff, a source selection official "is obligated to consider, and document, the underlying bases for [his or her] conclusion" if they determine that two or more proposals are "essentially equal for non-price factors." CharDonnay Dialysis, LLC, B-420910; B-420910.2, 2022 WL 16900277 at 11 (C.P.D. Oct. 27, 2022).
In CharDonnay, the Department of Justice's Bureau of Prisons issued an RFP under FAR Parts 12 and 15 "for dialysis treatment services." 2022 WL 16900277 at 1-2. "Award was to be made on a best-value tradeoff basis, considering…technical, past performance, and price" factors. Id. at 2. The agency received proposals from two vendors, including protester. Id. After evaluating both proposals, the agency assessed both vendors with the same adjectival ratings: "Very Good" technical proposals and "Exceptional" past performance proposals. Id. The source selection authority determined that the other vendor's proposal offered the best value to the government because, all things being equal, it offered a lower price than protestor. Id. at 3. CharDonnay filed its post-award protest, arguing, among other things, that the agency had conducted "a flawed source selection decision." Id.
"Where…a solicitation provides for source selection on a best-value tradeoff basis, it is the function of the source selection authority…to decide whether one proposal's technical superiority under the non-price factors is worth a higher price." CharDonnay, 2022 WL 16900277 at 9. "When an agency reasonably evaluates competing proposals as essentially equal, no tradeoff is required in selecting the lower-priced proposal." Id. In doing so, however, "an agency cannot simply rely on the fact that proposals have the same adjectival ratings." Id. Instead, "the selection official must explain the basis for why proposals are considered essentially equal…because[,] even if offerors had received identical adjectival ratings, this would not necessarily mean that the agency had to view the offerors as essentially technically equal and award to the lowest-priced offeror." Id. at 10. In the case of CharDonnay, the source selection official's documented reasoning was only that "[b]oth [vendors] received a Very Good technical rating and Exceptional rating in past performance." Id. Because "the record [was] devoid of any qualitative discussion of the underlying merits of the proposals and why they should be considered technically equal," the GAO concluded that the agency failed to "demonstrate that the SSA meaningfully looked behind the adjectival ratings or considered the qualitative value of proposals to determine they were essentially equal." Id.
In brief, GAO held that the source selection authority did not consider and document the underlying bases for concluding that CharDonnay's and its competitor's proposal were equal but for price, such that the source selection decision was unreasonable.
3. KPMG LLP, B-420949; B-420949.2, 2022 WL 16921986 (C.P.D. Nov. 7, 2022)
When conducting a best-value tradeoff procurement, the source selection official must conduct and document a meaningful analysis of all the stated evaluation factors, even if one factor, such as price, is stated to be of less importance than other factors. KPMG LLP, B-420949; B-420949.2, 2022 WL 16921986 at 12-13 (C.P.D. Nov. 7, 2022).
In KPMG, the Department of the Air Force issued an RFP under FAR part 15 for "visible accessible understandable linked trusted (VAULT) subject matter expert support." 2022 WL 16921986 at 1-2 (footnote omitted). The RFP stated that the agency would use a "tradeoff process as defined in [FAR] 15.101 where technical [was] significantly more important than cost or price." Id. at 3 (brackets omitted). After evaluating the 27 proposals that the agency received, it "rated 10 proposals as outstanding, 8 proposals good, 2 proposals acceptable, 1 marginal, and 6 technically unacceptable," and "recommended all proposals that were rated acceptable or better for award." Id. at 3-4. Of these proposals, seven were assessed "Outstanding" technical ratings, while the rest were assessed "Good" technical ratings, including KPMG. Id. at 4-5. The source selection evaluation board recommended all seven "Outstanding" technical proposals for award, which the source selection authority followed. Id. at 5. The source selection authority explained that the "Outstanding" proposals were "advantageous" and a "benefit" to the government because they "represent[ed] the best overall value" that "warrant[ed] paying a premium." Id. at 5-6. "After requesting and receiving a debriefing, KPMG filed [its] protest." Id. at 6.
The GAO explained that "[w]hen conducting a tradeoff, an agency may not so minimize the impact of price as to make it a nominal evaluation factor because the essence of the tradeoff process is an evaluation of price in relation to the perceived benefits of an offeror's proposal." KPMG, 2022 WL 16921986 at 13. It found that the agency's "tradeoff rationale consisted of a single generalized statement that the strengths in the awardees' proposals, as well as the reduced risk of poor performance, justify paying additional costs," which did not demonstrate that the agency had considered price "in any meaningful way in the source selection decision." Id. The GAO concluded, instead, that the record demonstrated that "price had no impact on an offeror's ability to be selected for award." Id. Because the agency's selection decision lacked a discussion of lower-rated and lower-cost proposals, GAO determined that the agency failed "to substantively discuss the specific qualities of the offerors' proposals in relation to each other" and instead relied on the adjectival rating system to mechanically award to "Outstanding" rated technical proposals. Id. at 14-15.
Here, GAO held that the agency failed to conduct and document a meaningful analysis of all of the stated evaluation factors—namely, price—because its brief analysis did not discuss price or compare lower-rated and lower-cost proposals.
4. Rice Solutions, LLC—Costs, B-420475.2, 2022 WL 16961111 (C.P.D. Nov. 15, 2022)
When requesting reimbursement of reasonable costs following a successful bid protest, it is the successful protestor's obligation to provide documentation to support its request, i.e., it must document "the amount and purposes of activities associated with the claimed effort and establish that the claimed hourly rates reflect the concerned individuals' actual rates of compensation." Rice Solutions, LLC—Costs, B-420475.2, 2022 WL 16961111 at 3 (C.P.D. Nov. 15, 2022). In other words, "claims for reimbursement must [1] identify and support the amounts claimed for each individual expense (including cost data to support calculations of claimed hourly rates for employees), [2] the purpose for which that expense was incurred, and [3] how the expense relates to the protest before our Office." Id. Rates of compensation must be supported by "objective evidence," such as "corporate payroll records, W-2 forms, or tax records." Id. at 3-4.
In Rice Solutions, the protester successfully challenged the Department of Health and Human Services' Indian Health Service's solicitation on the basis that the agency had only conducted discussion with one offeror. 2022 WL 16961111 at 1. In sustaining the protest, the GAO recommended reimbursing Rice Solutions' "reasonable costs of filing and pursuing its protest." Id. Rice Solutions' first certified claim to the agency lacked sufficient documentation, prompting the agency to request a revised claim from the protestor. Id. at 2. Rice Solutions' revised claim sought reimbursement of the costs of filing and pursuing its protest, as well as its proposal preparation costs. Id. After receiving no response from the agency, Rice Solutions filed its request for reimbursement with the GAO. Id.
First, the GAO addressed Rice Solutions' request for reimbursement of 18 hours by its chief operating officer at a claimed rate of $350/hour. Rice Solutions, 2022 WL 16961111 at 4. Because the vendor stated that the hourly rate "was based on market rates," GAO concluded that it could not be reimbursed. Id. Specifically, market rates typically include profit, which is unavailable in requests for reimbursement following a successful bid protest. Id. Beyond this, GAO noted that Rice Solutions provided no objective evidence to support the officer's $350/hour rate, i.e., records demonstrating that this was the individual's hourly compensation rate. Id.
Second, GAO addressed Rice Solutions' request for reimbursement of two hours by a director of administrative services at an hourly rate of $350. Rice Solutions, 2022 WL 16961111 at 4. There, it noted that the only documentation that the vendor had provided in support of this claim was an agreement with the administrative services director that Rice Solutions would compensate the individual at a rate of $350/hour "dependent upon receipt of successful protest." Id. at 5. Rice Solutions had otherwise failed to provide any objective evidence that an administrative personnel position would be compensated at the same rate as its chief operating officer, or that such a rate would be reasonable based on the individual's experience, reputation, and ability, or based on the customary rate for such services in the vendor's industry. Id. at 6-7.
Third, GAO addressed Rice Solutions' request for reimbursement of nine hours by a contract specialist at a rate of $350/hour. Rice Solutions, 2022 WL 16961111 at 7. In support of its claim, Rice Solutions submitted an invoice from the individual's firm, which indicated that the contract specialist had spent the hours on "protest prep" and "management." Id. The GAO concluded that the submitted invoice did "not provide sufficient specificity to show that all work performed by [the contract specialist] was incurred in pursuit of the protest" because "protest prep" and "management" were "too general to determine the nature of [the individual's] efforts, whether tasks performed were reasonably related to this protest's preparation, or whether the costs could be deemed duplicative or excessive." Id. at 8.
The GAO therefore held that Rice Solutions had failed to meet its burden because it did not provide objective evidence of its claimed costs or their reasonableness, it did not specify how they related to the protest, and it included unallowable elements in its claim, such as profit.
Conclusion
Despite the GAO's high bar for sustaining a bid protest, disappointed offerors can prevail in challenging flawed procurements if they know what to look for during the solicitation. Contractors should keep an eye out for vague or undocumented agency assertions about market practices, best-value tradeoffs, and other factors that compare proposals to an objective or fixed set of facts. And throughout the protest, it is important to maintain records in order to avoid a "win the battle, lose the war" scenario where the contractor is left with no recourse to have its protest costs reimbursed.