Government Contracts Monitor

Corrective Action Must Consider Changed Circumstances

October 12, 2015

The Government Accountability Office (GAO) recently reiterated, in the corrective action context, that an agency cannot ignore changed circumstances, and that an award cannot stand where, as a result of interim developments, the awardee no longer intends to perform in a manner consistent with its proposal. FCi Federal, Inc., B-408558.7, B-408558.8, August 5, 2015.

In an earlier decision discussed here, GAO held that the contracting officer, in determining the responsibility of the awardee, U.S. Investigative Services Professional Services Division (USIS/PSD), failed to consider Justice Department fraud allegations against the awardee’s parent, USIS LLC (USIS) and the close relationship between the awardee and its parent with respect to the proposed contract performance. GAO sustained FCi Federal’s initial protest and recommended that the agency make a new responsibility determination, which GAO noted is a condition precedent to an award decision, taking into account the awardee’s own description of its relationship with its parent, as well as the fraud allegations.

Subsequently, the awardee was acquired by another company in a stock purchase transaction, and changed its name to PAE Professional Services, Inc. (PAE). The awardee represented that, at that point, it had no further affiliation with USIS. Based upon this representation and consideration of the financial resources of PAE’s new parent, the contracting officer determined that PAE is responsible, and notified FCi Federal that the agency was lifting the prior stop work order and proceeding with performance of the originally awarded contract. The agency did not reevaluate proposals or make a new award determination.

FCi protested, arguing that the agency was required to reevaluate proposals and make a new award decision, as well as a new responsibility determination. The agency countered that the GAO had only required a new responsibility determination, and that the agency had done that. The agency further asserted that, in any event, the stock acquisition had no impact on the awardee’s earlier proposal or how the awardee would perform.

While acknowledging that the details of implementing GAO corrective action recommendations generally are within the sound discretion and judgment of the agency, GAO stated that an agency nevertheless “cannot reasonably ignore matters that, in the interim, raise significant questions about its initially-reached conclusions.” GAO went on to note that responsibility is an issue to be resolved before award, citing FAR 9.103(b), and expressly applies to “prospective contractors.” Therefore, having made a new responsibility determination, “the agency necessarily was required to either reaffirm the prior award or make a new award.” In any event, GAO concluded that, to the extent the agency asserts that GAO’s prior decision only recommended making a new responsibility determination, “the agency could not reasonably ignore the impact on this procurement of the sale of USIS PSD to PAE[’s parent].”

Based upon a review of the record, including USIS/PSD’s proposal, the agency’s contemporaneous evaluation records and the hearing in the earlier protest, GAO concluded that (1) USIS/PSD had relied in its proposal substantially on the resources and support (including “substantial” back office support), corporate experience and financial resources of USIS, and (2) that the agency’s earlier evaluation and award decision reflected the recognition that USIS would have substantial involvement in the proposed performance. However, in view of the awardee’s interim sale, it was now no longer apparent to what extent, if at all, any of such previously relied upon support and resources would be available to PAE. In short, in view of the intervening sale, GAO concluded that the original proposal, upon which the award was based, no longer reflected PAE’s actual intended approach to performance, and that continuance of the prior award under such circumstances would adversely impact the integrity of the procurement process.

GAO also separately found, contrary to the agency’s assertion, that the record showed that the contracting officer, by stating that “[t]he information [] gathered in my reconsideration of P[AE]’s responsibility did not lead me to change my Past Performance rating” as to PAE, did, in fact, constitute a reevaluation of past performance. Moreover, GAO held that, in view of the sale and fact that USIS and its related companies would no longer have any role in performance, it was unreasonable for the agency to have considered any information relating to those companies in evaluating PAE’s past performance.

GAO therefore recommended that the agency reopen discussions with all offerors remaining in the competition, request revised proposals and make a new award decision.

The bottom line is that in implementing corrective action agencies must consider, and cannot ignore, interim developments, such as the sale of the proposed awardee, that change the way a company proposed to perform. Conversely, if, as here, an unsuccessful offeror is aware of changed circumstances impacting the awardee, the unsuccessful offeror should be prepared to protest in a timely manner if, during debriefing, the agency does not establish that it adequately considered these impacts.