Agency Didn’t Act in Bad Faith When, After Receiving Bids, It Conducted Additional Market Research and Reopened Procurement; DCR Development, LLC, GAO B-419608, B-419608.2

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Protest alleging that agency acted in bad is denied. After receiving the protester’s final proposal, the agency decided to conduct additional market research and then to reopen the procurement. This agency’s decision was complicated by the fact that before conducting additional research, the agency had mistakenly sent the protester a copy of the contract to sign. The protester alleged that the agency had acted in bad faith by making an award, rescinding it, and then reopening the procurement. GAO disagreed. Although the agency sent a contract to the protester, it never actually made an award. The solicitation provided that a contract was not formed until the agency executed. While the protester signed the contract, the agency never executed it. Additionally, given that the agency had determined the protester’s prices were not reasonable, it appropriately decided to conduct market research and reopen the procurement.

The General Services Administration issued a request for lease proposals seeking office and hangar space in Texas. GSA received an offer from one firm, DCR Development. The agency conducted discussions with DCR and received final proposal revisions. The contracting officer then submitted DCR’s proposal to GSA’ Leasing Division for review and approval.

But while the Leasing Division was reviewing the proposal, the contracting officer mistakenly sent a copy of the proposed lease to DCR through GSA’s electronic document management system. DCR executed the contract.

The Leasing Division, however, continued to review DCR’s offer. The Division discovered that the contracting officer had compared DCR’s proposed rates with rates for office space instead of rates for hangar space. To obtain more accurate rates, GSA decided to conduct additional market research. GSA notified DCR that it was reviewing rental rates.

Based on the additional market research, GSA decided to reopen the procurement to obtain additional competition. GSA received a new offer from DCR and from another offeror, KH Aviation, LLC. GSA awarded the lease to KH. DCR filed a protest with GAO.

DCR alleged that GSA conducted the procurement in bad faith by awarding it the lease but then rescinding the award to conduct additional market research. GAO noted, as an initial matter, that DCR was never actually awarded the lease. The solicitation provided that an offeror’s execution of the lease merely constituted an offer. A lease was not formed until the GSA executed and delivered a signed copy to the offeror. Here, DCR executed the lease it mistakenly received, but GSA never accepted by executing the least itself. Thus, contrary to DCR’s contentions, there was no award and no rescission of the award.

Additionally, GAO reasoned that the GSA’s decision to conduct additional market research did not constitute bad faith. Emails in the record reflected the agency’s concerns with DCR’s rates. What’s more, the record showed that once GSA conducted market research, it reasonably decided that DCR’s rates were not fair and reasonable. GSA’s regulations require that an award can only be made at a fair and reasonable price. If GSA determined that pricing is not fair and reasonable, then award cannot be made. Given this, GAO could not say the agency acted unreasonably

DCR contended that GSA conducted misleading discussions by failing to inform the company that it had mistakenly assessed price using the wrong rates. GAO, however, noted that once GSA discovered that DCR’s price may not be reasonable, it advised DCR that it was reopening the procurement to obtain rates that were within the market range. Once GAO advised DCR that its rate was not in the market range, if imparted sufficient information for the DCR to know that its price was too high.

DCR also objected to the technical evaluation, arguing that GSA failed to adequately document whether KH’s proposal met a solicitation checklist for aviation and aviation asset requirements. But GAO found that the record showed that GSA confirmed that KH’s officer complied with the solicitation’s requirement and found that its offer was technically acceptable. This evaluation was documented in the price negotiation memorandum. The solicitation did not detail how GSA was support to evaluate a firm’s compliance with the aviation’s requirements, but to GAO, GSA’s verification seemed unobjectionable on its face.

DCR is represented by Shane J. McCall, Nicole D. Pottroff, and Christopher S. Coleman of Koprince Law. The agency is represented by Helen Y. Kearns and Dixon Merkt of the General Services Administration. GAO attorneys Heather Weiner and Jennifer D. Westfall-McGrail participated in the preparation of the decision.

GAO - DCR Development, LLC