Government Contracts Monitor

When a Solicitation is Cancelled, Should an Offeror Protest?

September 27, 2016

Given the high cost of preparing a proposal in response to a government solicitation, an agency’s cancellation of a procurement can be both frustrating and disappointing. However, as the recent Government Accountability Office (GAO) opinion in Medfinity LLC, B-413450 (September 9, 2016) makes clear, it is exceedingly difficult to prevail on a protest challenging an agency’s decision to cancel a procurement.

In Medfinity, the GAO denied a protestor’s complaint that the Department of Health and Human Services’ (HHS) cancellation of a solicitation for optometry equipment and installation was a “pretext.” The Request for Quotations (RFQ) was for a firm fixed price award to be made on a lowest price technically acceptable (LPTA) analysis. The solicitation was for four pieces of “Brand Name or Equal” equipment. For three of the four, the RFQ included only the brand and model of the solicited items. For the fourth, it included a page-long listing of the salient characteristics of the machine. In a brand name or equal procurement, the agency is required not only to identify the brand name of the item sought, but also to identify why it requires that particular brand name. Agencies meet this requirement by listing the “salient characteristics” of the items that will fulfill its needs. The agency’s description of these salient characteristics is what controls the technical evaluation: any proposed item other than the specific brand name listed in the RFQ must meet only the stated salient characteristics, not other brand name characteristics that are not identified as salient.

The protestor, Medfinity LLC (Medfinity) timely responded to the solicitation, proposing equipment that was not of the brand name specified in the RFQ, but which it asserted were equivalent to or better than the brand and models specified in the solicitation. HHS awarded Medfinity the contract, but another disappointed bidder, PROAIM Alericas, LLC (PROAIM) filed an agency-level protest alleging that the proposed equipment did not meet at least nine of the salient characteristics listed in the solicitation and, therefore, should have been deemed technically unacceptable. HHS sustained the agency-level protest and stated that it would take corrective action. Medfinity’s contract was terminated for convenience, and ultimately HHS cancelled the solicitation, determining that it had not adequately reflected the agency’s needs. The agency stated that it would be using the Defense Logistics Agency’s electronic catalogue (ECAT), a contract vehicle under which it could order the products directly, until it determined and adequately and properly articulated its requirements. Medfinity, now in the role of disappointed bidder as it was not eligible for award under ECAT, alleged that the stated reason for the corrective action was merely a “smokescreen” that would enable the agency to award non-competitively to PROAIM, which did have an ECAT contract.

The GAO reiterated the applicable standard: a contracting agency must only establish a reasonable basis to cancel a solicitation. This standard allows an agency wide latitude in determining when a solicitation, as written, does not actually meet the government’s needs. GAO has consistently held that an agency is in the best position to define its requirements and defers to agency determinations, where possible, as to whether a solicitation properly states what the agency intends to buy. However, when a protestor alleges, as Medfinity did here, that cancellation of a solicitation is a pretext for an agency to avoid awarding a contract on a competitive bases, or to substantively rule on the merits of a protest, GAO will scrutinize the decision more carefully. Nonetheless, “even if it can be shown that personal animus or pretext may have supplied at least part of the motivation to cancel the procurement”, the reasonableness standard still applies.

In this case, GAO noted that the original solicitation listed only the brand name and model of three of the four requested pieces of equipment. For those items, the RFQ did not contain a description of the salient characteristics that formed the basis for the agency’s asserted requirement for the solicited brand name. Without a listing of these characteristics, it was impossible to determine on the face of the solicitation what, exactly, the agency was looking for. Merely providing the brand name was not sufficient. With regard to the fourth item, the list of salient characteristics had simply been copied from a website and included in the solicitation. As such, it was not the result of an agency analysis as to whether the characteristics listed were in fact salient—that is, whether an offered item without those characteristics would have met the agency’s needs. Further, the agency’s original technical evaluation reflected no analysis of whether the items proposed by Medfinity met the solicitation’s salient requirements and thus the agency’s needs. Under these circumstances, GAO declined to find that the cancellation of this solicitation was a pretext for limiting competition, despite the fact that the agency then procured the equipment using an existing contract vehicle.

The agency’s strategy for acquiring the equipment in the interim was immaterial to the core question considered by GAO, which was whether the cancellation itself was reasonable. An agency has a significant amount of discretion in determining what its requirements are and whether a solicitation, and proposals responsive to it, adequately reflect those requirements. In the absence of evidence that the decision was unreasonable, GAO will defer to the agency—even where such a cancellation may ultimately materially changes the parameters of the procurement, and by doing so eliminate some potential offerors from competition.