Agency’s Disclosure of Protester’s Proprietary Information Did Not Give Other Offerors a Competitive Advantage; Lion Vallen, Inc., GAO B- 418503, B-418503.2

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Protest challenging the terms of a solicitation is denied. The agency had cancelled a solicitation after it had inadvertently disclosed the protester’s proprietary information to another offeror. The agency issued a new solicitation with different terms. The protester alleged the new solicitation was not different enough from the previous one to mitigate the harm caused by the disclosure of the protester’s information. GAO found that the new solicitation’s terms were materially different, and that the new terms negated any harm caused by the disclosure of the proprietary information. The protester also alleged that the disclosure of its information constituted a violation of the Procurement Integrity Act. But the Act is only violated by a knowing disclosure. Here, the agency had reasonably determined the disclosure had been unintentional.

For seventeen years Lion Vallen, Inc. (LVI) was a prime contractor for the Marine Corps, providing equipment management, storage, and distribution services. Beginning in 2017, LVI was s subcontractor for another contractor who provided the same services.

In 2018, the Corps issued a request for information seeking market research for a new 2019 equipment management procurement. The RFI, however, contained some of the LVI’s proprietary information. To mitigate the disclosure, the Corps told LVI that it would modify its acquisition strategy when the 2019 RFP was issued.

When the Corps issued the 2019 RFP, it received several proposals, including one from LVI. The Corps conducted discussions with all the offerors. The contract specialist, however, accidentally sent LVI’s discussions letter to another offeror. The letter disclosed LVi’s price and deficiencies in its proposal.

The contracting officer conducted an investigation to determine whether the disclosure had violated the Procurement Integrity Act. The contracting officer found the transmittal of LVI’s letter to another offeror was an inadvertent error, simply the result of mistaken file names. Nevertheless, the Corps concluded that it was best to cancel the solicitation. The Corps had found that the 2019 RFP was not in compliance with new inventory management requirements issued by the Marine Commandant. The Corps believed that cancelling the solicitation and r-issuing with new inventory requirements, which offerors would have to price into new proposals, would resolve the LCI disclosure problem.

The Corps issues a new RFP in 2020 that incorporated the new inventory requirements and changed some of the labor categories. LVI filed a protest, challenging the terms of the 2020 RFP, essentially arguing that the new RFP did not mitigate, and indeed exacerbated, the disclosure of LVI’s proprietary information.

LVI argued that the transmittal of its discussions letter for 2019 RFP to another offeror had resulted in competitive prejudice, and that the modification of the solicitation’s terms in the 2020 RFP failed to mitigate this prejudice. GAO, however, found that 2020 RFP had mitigated the harm from the disclosure. The 2020 RFP made significant changes to the terms of the solicitation, which negated the usefulness of the disclosed information.

First, GAO noted the 2020 RFP included new inventory guidance that increased the accuracy requirements, reduced the time for performance, and required offerors to submit a physical inventory control plan that was not required under the 2019 RFP. Second the 2020 RFP now required offerors to price the risks of liability for defects in inventory accuracy. Third the 2020 RFP increased the number of time and materials labor categories, requiring offerors to propose prices on a different basis than the 2019 RFP. These changes, GAO, concluded made the disclosure of LVI’s 2019 price irrelevant.

LVI also argued that the 2020 RFP improperly adopted LVI’s proposed labor categories from the company’s 2019 proposal. LVI contended that offerors would assume that the changes in labor categories from the 2019 RFP to the 2020 RFP were based on information from LVI’s proposal because of its status as the subcontractor for the incumbent. But GAO found that the revisions to the labor categories in 2020 RFP were based on categories defined by the Service Contract Act, not LVi’s proposal.

LVI also complained that the Corps had wrongly disclosed LVI’s information as part of the 2018 RFI. GAO, however, found that this argument untimely. LVI argued that the 2018 disclosures caused it competitive disadvantage in connection with the 2020 RFP. LVI also complained that the 2020 RFP was not sufficiently different from the 2020 RFP. Thus, if the 2018 disclosure caused harm with respect to the 2020 RFP, it should have also caused LVI harm in connection with the 2019 RFP:. But LVI had never protested the terms of the 2019 RFP. Because LCI did not protest the 2019 RFP, GAO found no basis to conclude that its complaints about the 2018 disclosure were now somehow timely.

LCI further contended that disclosure of its proprietary information during discussions had violated the Procurement Integrity Act, and that the Corps had wrongly concluded a violation had not occurred.  The PIA, however, prohibits government officials from knowingly disclosing proposal information. Where a disclosure is inadvertent, the contracting officer may reasonably conclude there was no violation of the PIA. Here, LVI had not specifically disputed the Corps’ finding that the disclosure had been unintentional. GAO had no basis to sustain the protest on this ground.

Finally, LCI argued that the 2020 RFP failed to sufficiently mitigate potential conflicts of interest. The 2020 RFP prohibited offerors from proposing certain companies that had been involved in the acquisition process as subcontractors. LCI contended that the solicitation did not go far enough in that it did not also prohibit offerors from hiring employees of these conflicted firms.

GAO found LVI’s argument misguided. The 2020 RFP did not give offerors the unconditional right to hire employees from potentially conflicted firms. Rather the RFP required an offeror that intended to employ such an individual to address potential OCIs in their proposal. The RFP further provided that the Corps would evaluated any mitigation plan.

LVI is represented by Francis E. Purcell, Jr. and Joseph E. Berger of Thompson Hine LLP. The agency is represented by Ellen Brandau and Robert J. Drone of the US Marine Corps. GAO attorneys Jonathan L. Kang and Laura Eyester participated in the preparation of the decision

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