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Posted on Tuesday, July 18, 2017

GAO, But Not Vendor, Can Review Classified Adverse Information

It seems like basic fairness: letting offerors rebut adverse information an agency uses to find the offeror nonresponsible. But what if that information is classified? How can the integrity of the solicitation process and national security be maintained when an agency uses classified information to deny an offeror a task order?

One answer comes from a recent GAO decision. It shows that, although national security concerns must be respected, they need not trump basic fairness. In this case, although the offeror impacted by the classified adverse information on a proposed major subcontractor could not review the classified information, GAO itself could review it, injecting an essential element of independent review into the solicitation process.

GAO’s decision makes another point: the importance of a prime contractor’s review of a teaming partner’s responsibility during the proposal preparation stage.

Leidos Innovations Corp. had the highest-rated, lowest-priced proposal and was in line for the award in an Army task order solicitation for logistic support services that might have to be performed at military bases and “in remote, primitive, or austere environments.”

But the contracting officer determined that one of Leidos’s major subcontractors was not responsible under FAR 9.104. After searching a military contract database, the contracting officer learned that the subcontractor did not have access to the required military bases. The contracting officer then dug deeper into the issue, reviewed a classified report supporting the Army’s denial of access, and verified that the database’s information was current and reliable.

Moreover, the contracting officer had to consider that, under law and policy going back to 1837, a base commander has the ultimate authority over who is allowed onto a specific base. Having no choice but to comply with established base access policy, the contracting officer concluded that, because the subcontractor was not responsible due to force protection concerns, Leidos was likewise not responsible and could not get the task order.

Leidos protested to GAO, arguing that the contracting officer’s decision had been based on outdated database information and that the Army should have given Leidos a chance to rebut the adverse information.

Overturning at GAO an agency’s negative determination of responsibility is extremely difficult. Here, Leidos had to show bad faith on the part of the agency or a lack of any reasonable basis for the determination.

Leidos could do neither. It did not even claim the agency acted in bad faith. Moreover, GAO found the agency’s determination that the subcontractor was not responsible to be reasonable. The contracting officer had reviewed both the database’s information on the subcontractor and the classified information supporting it. In addition, the contracting officer had to comply with the access decisions of the base commander.

The final issue was whether the agency erred in not letting Leidos try to rebut the information the agency used to make the nonresponsibility decision. GAO concluded that the agency was not required to do so when, as here, the agency has an “otherwise reasonable basis for assessing the firm’s responsibility,” presumably the base commander’s control of access and its validity in this case.

To GAO’s credit, GAO independently reviewed the classified information the agency used in finding the agency’s decision reasonable and denied the protest.

From a vendor’s perspective, the lesson here is that the issue could have been avoided altogether. As mentioned above, careful review of the qualifications of a major subcontractor at the start of the teaming process might have disclosed the subcontractor’s lack of base access and allowed the prime contractor to replace a major subcontractor that prevented it from receiving the award.

Leidos Innovations Corporation, B-414289.2, June 6, 2017.

Berenzweig Leonard is teaming up with Red Team Consulting for a monthly newsletter featuring upcoming contracts, key protest decisions, legal updates, events, and more. This post was published in the July 2017 Monthly Insights newsletter. For more information on how to sign up for Monthly Insights, please click here.

Terry O’Connor is the Co-Director of Government Contracts for Berenzweig Leonard, LLP, and can be reached at TOconnor@BerenzweigLaw.com.