Agency Threads Needle on Request for Costs: Initial Protest Argument Lacked Merit, and Agency Took Prompt Corrective Action in Response to Supplemental Arguments; Bay West, LLC—Costs; Bhate Zapata LLC—Costs, GAO B-418960.6, B-418960.7

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Requests for recommendation of protest costs are denied. The agency took corrective action in response to supplemental protest arguments. The protesters alleged they were entitled to costs because the agency had not taken prompt corrective action in response to clearly meritorious initial protest arguments. One protester alleged that because the notice of corrective action had stated that the agency would address arguments raised in the initial protest, the agency had conceded that the initial arguments were clearly meritorious. GAO found that although the agency stated it would address issues raised in the initial protest, this did not mean the initial arguments were meritorious. GAO also reviewed the arguments raised in the initial protest and found that the agency had clearly defensible positions in response, so the arguments were not “clearly” meritorious.

The Army Corps of Engineers awarded a task order for environmental remediation services to 3E-QRI SBJV, LLC. Two unsuccessful offerors, Bay West, LLC and Bhate Zapata LLC, filed GAO protests challenging the award. Bay West argued, among other things, that the Corps did not evaluate the reasonableness of 3E-QRI’s price, misevaluated Bay West’s technical approach, failed to conduct meaningful discussions, and that 3E-QRI was ineligible for award. Bhate Zapata made various arguments challenging the evaluation of its own and the awardee’s proposal under several non-price factors.

The Corps filed agency reports responding to the protesters’ arguments. Both protesters filed comments and several supplemental protest arguments. The Corps notified GAO that it was taking corrective action based on the arguments raised in the comments and supplemental protests. The Corps intended to amend the solicitation and seek revised proposals. GAO dismissed the protests as academic. Bay West and Bhate Zapata both requested that GAO recommended reimbursement of the protest costs.

GAO may recommend reimbursement of protest costs if an agency unduly delayed in taking corrective action in the face of clearly meritorious protest. As long as an agency takes corrective action in response to a protest before the deadline for the agency report, GAO will consider the corrective action prompt. Here, the Corps took corrective action before filing an agency report in response to the supplemental protest arguments. Thus, the only issue was whether the initial protest arguments were clearly meritorious.

In its notice of corrective action, the Corps had stated that the corrective action would address issues raised in the initial protests. Bay West argued that this statement was a concession that the initial protest arguments were clearly meritorious.

GAO, however, did not view this statement as a concession. The notice of corrective action clearly stated that while the corrective action could address issues raised in the initial protests, it was the “supplemental protests that prompted the decision to take corrective action.” Additionally, GAO regulations allow a protester to request a recommendation of costs, but the regulations allow the agency files a response and for  GAO to review the matter. Thus, even if the Corps had suggested a concession, this did not mean that it had waived its ability to dispute arguments raised in a costs request.

Bay West also alleged that its initial challenged to 3E-QRI’s eligibility was meritorious. Bay West contended that 3E-QRI was not eligible because it did not hold the underlying IDIQ contract against which the task order was issued. Specifically, Bay West argued, 3E-QRI had novated the IDIQ to another entity, MSE Group, LLC.

The Corps acknowledged that 3E-QRI had novated the contract. The Corps explained that as a result of that novation, 3E-QRI had transferred its contract to a joint venture between 3E-QRI and MSE Group. The Corps noted that the novation had resulted in a contract action report that listed MSE Group as the entity that held that IDIQ contract. But the Corps contended this was an administrative error, and that the novation had not resulted in 3E-QRI being replaced with MSE Group.

GAO reasoned that a protest is clearly meritorious where a reasonable inquiry by the agency  would have revealed the absence of a defensible legal position. This is a higher standard than merely having merit to warrant sustaining a protest. GAO found that the Corps’ “administrative error” argument was a defensible legal position. Thus, the challenged to 3E-QRI’s eligibility was not “clearly” meritorious.

Bhate Zapata alleged that its initial protest had asserted a clearly meritorious argument challenging a deficiency it had received under the solicitation’s management factor. The Corps assessed Bhate Zapata a deficiency because the documents it submitted for its milestone payment schedules were “Draft” documents. Bhate Zapata argued that draft documents were acceptable because the solicitation permitted correction of errors in the milestone payment schedule after award.

But GAO reasoned that even if the solicitation anticipated that the milestone payment schedule would be finalized after aware, it still required offerors to demonstrate a comprehensive understanding of the schedule. Thus, the agency was not prohibited from evaluating Bhate Zapata’s schedule and concluding that defects in the schedule constituted deficiencies.

Bhate Zapata also argued that regulatory provisions in the performance work statement did not prohibit the submission of draft documents. GAO disagreed. The PWS clearly required the submission of documents that had been approved by the Air Force and other regulatory entities. As a result, GAO could not find this argument clearly meritorious.

Bay West is represented by Douglas L. Patin and Lisa A. Markman of Bradley Arant Boult Cummings LLP. Bhate Zapata is represented by Joseph G. Martinez, Phillip R. Seckman, and K. Tyler Thomas of Dentons US LLP. The agency is represented by David C. Brasfield of the Army. GAO attorneys Jonathan L. Kang and Laura Eyester participated in the preparation of the decision.

GAO - Bay West, LLC--Costs