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Protestor Succeeds on An Unusual Challenge to Corrective Action

by | Aug 16, 2019 | Government Contracts

A protestor that loses a decision before the Government Accountability Office (GAO) can protest the recommended GAO corrective action to the U.S. Court of Federal Claims (COFC). As a recent COFC decision shows, the protestor can also challenge the way the Agency is carrying out the corrective action.

The Air Force issued a solicitation for a range of services focused on satellite support. The solicitation required offerors, at a minimum, to use small businesses for 25% of the labor Contract Line Item Numbers (CLINs). Specifically, the percentage was to be “calculated on an annual basis by dividing total small business expenditures by total labor costs/prices on all TOs on just those labor CLINs.” After Engility Corp. won the contract, Peraton Inc. protested to the GAO, arguing that Engility’s proposed small business use did not meet the required 25%. Peraton’s argument calculated the required 25% from the prime contractor’s cash-flow perspective and considered solely what the prime contractor would pay the subs. The Air Force defended its award decision and claimed that Engility met the 25% based on “the government’s perspective” – the 25% requirement was calculated based on the amount the government paid the prime for small business labor, which included the prime’s fee added to what the prime paid the subs.

GAO found the Air Force’s logic to be unreasonable and recommended that it take corrective action, which could be to re-open discussions with all offerors and ask for revised proposals.

The Air Force took that option, but in the course of the discussions issued three Evaluation Notices (EN), the last of which cancelled the previous two and cryptically stated that the relevant solicitation term “is agnostic concerning [a state tax cost] in the prices.”

Peraton protested the Air Force’s corrective action to the COFC. The COFC noted that “[o]ne way to challenge a corrective action, traditionally, has been to attack the rationality of the GAO recommendation that the agency is attempting to implement.” The COFC had no problem with the reasonableness of GAO’s recommendation. Instead, it had problems with how the Air Force was carrying out its on-going corrective action.  “In the court’s view, the agency’s corrective action, as documented in the record thus far, falls short of being rational. Indeed, if there is a logic in the Air Force’s ENs that have issued to the offerors, it is not apparent to the court. The court, under [precedent], will uphold a corrective action that is coherent and reasonable. This corrective action, as explained in the documents before the court, is not.” The COFC issued a preliminary injunction enjoining the Air Force from awarding the contract until further order of the court. Peraton Inc. v. The United States, No. 19-932C, July 22, 2019.

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Terry O’Connor is a Partner at Berenzweig Leonard. Terry and Stephanie Wilson  lead the firm’s Government Contracts practice. Terry can be reached at [email protected].