Pending Proposals and the Purchase or Sale of a Government Contractor: What are the Bid Protest Risks?
On August 5, 2015, GAO overturned the Department of Homeland Security, U.S. Citizenship and Immigration Services’s (USCIS’s) award of a $210M field office support services contract to PAE Professional Services, Inc. (PAE). This decision is the second time that GAO has overturned USCIS’s decision to award the contract to PAE.
In a previous decision involving the same procurement, GAO ruled that USCIS had to more thoroughly consider allegations of fraud set forth in a civil complaint that the Department of Justice had brought against an entity that was then PAE’s parent company. After GAO’s previous decision, PAE was acquired in a stock sale by a different company, which eliminated PAE’s affiliation with its former parent. USCIS then announced in April 2015 that PAE was a responsible contractor and that the agency had decided to proceed with contract performance based upon the prior evaluation results.
FCi Federal, Inc. (FCi) filed a new protest to challenge USCIS’s confirmation of the previous evaluation results. GAO ultimately agreed with FCi’s allegations that USCIS had unreasonably failed to reevaluate PAE’s proposal after its sale to a different entity. PAE’s proposal represented that its former parent company would be providing financial resources and back office support services to support PAE’s execution of the contract. Because PAE was no longer affiliated with the former parent company, GAO determined that PAE’s proposal was “outdated” because it no longer reflected how PAE intended to perform the contract. In light of this conclusion, GAO ruled that USCIS’s failure to reevaluate PAE’s proposal was unreasonable.
GAO’s decision demonstrates that when the government knows that a pending proposal has been submitted by a company that is going to be bought or sold, the government must reasonably assess whether and how the purchase or sale impacts the evaluation of its proposal.
It may be possible for proposal teams to take proactive steps to potentially mitigate bid protest risk that can result from the contemplated purchase or sale of a government contractor. Proactive planning is important because contractors may not be given an opportunity after the common deadline for proposal submission to make proposal revisions to account for changes resulting from a sale. At a minimum, the proposal should not suggest reliance on the experience, resources, or past performance of an affiliate that no longer will be affiliated if the impending sale is consummated. Different factors in each procurement will impact decisions about whether to modify a proposal strategy, what details to provide the government about an anticipated transaction, and other potential steps to mitigate risk.
New GSA Sales Reporting Rule Eliminates Onerous Price Reductions Clause and Commercial Sales Practices Disclosure Requirements for Participating Contractors
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Stacy Hadeka and Allison Bender also contributed to this report.19 May 2016