Government Contracts Monitor

Proposal Costs: Grabbing the Brass Ring at GAO

May 23, 2016

A protest sustained on its merits is always good news for a contractor, and often is accompanied by an award of the costs to pursue the protest. Occasionally, however, a contractor will achieve an even bigger win: not only seeing its protest sustained and recouping its protest costs, but also winning award of its proposal preparation costs. The recent Government Accountability Office decision in Federal Builders, LLC--The James R. Belk Trust, B-409952.3 (May 6, 2016), involved just such an outcome: the protester was awarded over $250,000.00 in costs. The decision explains the circumstances that can lead to such a result.

The underlying procurement involved a 2014 General Services Administration (GSA) request for lease proposals (RLP) seeking leased office and warehouse space. The RLP stated that GSA would make award on a Lowest Price Technically Acceptable basis and allowed offerors to propose construction of a new facility or renovation of an existing one but made clear that, either way, Davis-Bacon wage rates would apply to any required labor. In response to the RLP, GSA received 2 offers: one from Federal Builders and the other from a firm called Presidio Bay. Presidio Bay proposed to upgrade an existing facility to meet GSA’s needs.

After finding both offers technically acceptable and determining Presidio Bay’s lease rate to be lower than that of Federal Builders, GSA awarded the lease to Presidio Bay. Federal Builders protested, alleging that GSA had unreasonably evaluated the two technical and price proposals, had failed to hold meaningful discussions, and had engaged in disparate treatment of the offerors. After it received the agency comments, Federal builders supplemented its protest grounds, alleging that Presidio Bay had not indicated it would pay Davis-Bacon wage rates as the RLP required. GAO agreed with the supplemental protest ground and found that the agency had erred in deeming Presidio Bay’s proposal acceptable because the proposal failed to meet a material solicitation requirement. For this reason, GAO sustained the protest.

Because the award at issue was a lease which contained no termination for convenience clause, however, the sustained protest could have been a hollow victory for Federal Builders. GAO ordinarily does not recommend termination of an awarded lease, even where it sustains the protest and finds the award improper. In this case while it did not recommend termination, GAO did hold that Federal Builders should be reimbursed for its proposal preparation costs, as well as the costs of filing and pursuing its protest, including reasonable attorneys’ fees.

As required by GAO rules, Federal Builders submitted its claim for protest costs to the agency within 60 days of GAO’s decision it its favor. The total amount of the submitted claim was over $200,000. Ten months later, the agency responded with a counter-offer of $4,000.00. GAO noted that this was less than 2 percent of Federal Builder’s claim. While the parties negotiated, GSA never offered more than $39,000.00 to settle the cost claims and the two sides were unable to agree on the appropriate amount of costs to be reimbursed.

GAO has the discretion to recommend that an agency reimburse a protestor’s costs for pursuing a cost claim where the agency failed to consider or unreasonably delayed consideration of a claim. Such discretion allows GAO to encourage agencies to expeditiously and reasonably consider and resolve claims for protest costs. Here, GAO found that the agency had unreasonably delayed resolving Federal Builders’ cost claim. The protestor had properly submitted a detailed claim backed with substantiating documents detailing the costs it incurred for legal fees, consultants, and Federal Builders’ in-house personnel. While the agency is permitted to negotiate and require proof of incurred costs, it must give claims reasonable and timely consideration. GAO found that GSA did not meet that burden in this case. While GAO was unable to allow Federal Builders to compete in the procurement again, it sought to make the contractor whole by awarding proposal costs. Ultimately, GAO found GSA responsible for $47,242.00 in bid preparation costs, in addition to $21,577.50 in legal fees for Federal Builders’ cost claim and over $190,000.00 in legal fees for the protest itself.

When submitting a cost claim to an agency, it’s critical to provide enough detail to allow the agency to reach an expedient decision. This means including detailed records relating to time and other costs. Though the process of assembling a cost claim can seem painstaking, it is well worth the effort and in the end benefits all parties—the protestor, the government, and consultants and attorneys who provide professional services. When a protestor is awarded costs and its submitted claims are reasonable and substantiated, the agency must pay. If the agency doesn’t respond, it may find itself with an even higher cost than it initially expected.