Government Contracts Monitor

GAO Rules that Bid Protest Settlement Does Not Justify Sole Source Award

April 15, 2014

The U.S. Government Accountability Office (GAO) recently sustained three protests challenging an almost one-half billion dollars, nine-year, sole source award by the U.S. Department of Agriculture, U.S. Forest Service (Forest Service) – an award made pursuant to a settlement agreement resolving an earlier bid protest. Coulson Aviation (USA) Inc.; 10 Air Tanker Air Carrier, LLC; Minden Air Corp., B-409356.2, et al., (Comp. Gen. Mar. 31, 2014). In rebuking the Forest Service, GAO stated that “[a] settlement agreement promising award of a contract on a sole-source basis in exchange for abandoning ongoing litigation, such as a bid protest, is not a permissible basis for restricting competition and excluding potential offerors.” GAO further found that the agency’s required Justification and Approval (J&A), invoking the industrial mobilization exception to the general statutory mandate for full and open competition, was unsupported, unreasonable and did not comply with legal standards, and also contained factual errors. GAO directed the agency to reassess whether a sole source contract is necessary to meet the agency’s needs, and to either execute a new, “properly-reasoned J&A for the sole-source award,” or to terminate or modify the awarded contract, as appropriate.

Adding some extra spice to this protest, (1) the challenged awardee’s CEO was the former Director of Acquisition Management for the Forest Service and, in GAO’s words, “was quite familiar with … agency officials,” and had “significant communications,” with such officials, who “relied upon” the CEO’s “verbal representations ... concerning the firm’s financial viability,” (2) USDA’s Senior Procurement Executive (SPE) concluded that the planned sole source award for industrial mobilization purposes was not justified, refused to approve the proposed award, and subsequently wrote a detailed Memorandum recommending that higher level authority not approve the J&A, (3) the Assistant Secretary for Administration nevertheless approved the J&A, characterizing his action as merely a “professional disagreement” with the SPE, and (4) the actual contract awarded was almost three times the dollar value of the $141M award authorized in the J&A, as the result of added options not discussed in the J&A.

GAO’s decision describes “a long and contentious history” of the Forest Service’s efforts to procure next generation (NextGen) airtanker services for wildland firefighting support. The Forest Service issued the NextGen RFP in 2011, and made several awards, including to Neptune Aviation Services, Inc. (Neptune). Two disappointed offerors, Coulson Aviation (USA) Inc. (Coulson) and 10 Tanker Air Carrier, LLC (10 Tanker) protested to GAO. The agency decided to take corrective action by reopening the competition, and GAO dismissed the protests.

The Forest Service subsequently amended the RFP, received and evaluated revised proposals, and announced its new intended NextGen awards, which did not include Neptune. “Shortly after learning that it would not receive a NextGen contract award, Neptune informed the Contracting Officer of its intent to protest at [GAO] unless an ‘acceptable solution’ could be worked out.” Neptune filed the threatened protest, triggering a stay of the awards.

The Forest Service and Neptune engaged in “a series of settlement discussions,” culminating in “a written settlement agreement, under which the agency agreed to award Neptune a sole-source contract for two NextGen large airtankers in exchange for Neptune withdrawing its protest. Neptune then withdrew its protest. Upon learning of this award, Coulson, 10 Tanker and Minden filed the instant protests.

This case provides a number of pertinent lessons for both contractors and agency personnel, including (1) litigation threats, greed and overreaching do not create a sympathetic environment and seldom succeed on legal review, (ii) be sure you understand the scope of authority of agency officials, (iii) understand and ensure compliance with the requirements of the various exceptions to full and open competition (or other similar regimes) that you might want to invoke in a particular case, (iv) ensure the accuracy, pertinence of and demonstrable basis for the facts being asserted and or relied upon, (v) remember that agency senior procurement executives can be a valuable resource, and ignore their reasoned procurement advice at your peril, (vi) ensure that an awarded contract is consistent with the authorizations therefor, and (vii) don’t be afraid to protest if something simply doesn’t smell right.

Hopewell Darneille is the attorney responsible for the content of this article.