“Come Together, Right Now, Over Me”: Agency’s Consolidation of Multiple Contracts Into Single Procurement Is Reasonably Justified; McGoldrick Construction Services Corporation, GAO B-419327

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Protest challenging agency’s decision to consolidate multiple contracting vehicles into a single procurement is denied. The protester asserted that the agency had failed to articulate how consolidation would benefit the agency. But GAO found that they agency had reasonably found that consolidation would result in efficiencies and flexibility. The protester contended the agency had failed to consider alternatives to consolidation. GAO, however, noted that other contracting alternative were prone to inefficiencies and inflexibility. The protester argued in various ways that the consolidated solicitation was unduly restrictive of competition. GAO reasoned that the requirement either were not restrictive, or if they were, the protester had not been prejudiced by the restriction.

For several years, the Army Corps of Engineers procured construction services for several states—Texas, Oklahoma, Louisiana, Arkansas, and New Mexico—through four separate IDIQ contracts and 23 contract holders. But after conducting market research and consulting with the Small Business Administration, the Corps determined that it would be more efficient to procure these construction services through a single IDIQ contract set aside for small businesses.

The Corps issued a single RFP for construction in the five states. The RFP contemplated the award of 5 IDIQ contracts. McGoldrick Construction Services Corporation filed a protest alleging that the new RFP improperly consolidated the construction contracts and unduly restricted competition.

McGoldrick contended the consolidation violated FAR 7.107-2, which requires agencies to consider the effects of consolidation on small business. The provision requires agencies to conduct market research, identify alternative contracting approaches, and make a written determination that the consolidation is necessary and justified.

McGoldrick first argued that the Corps’ justification for the consolidation was irrational. The Corps found that the consolidation would result in efficiencies. Specifically, the Corps reasoned that having a smaller number of contract awardees was more efficient because there was a limited pool of skilled of labor and suppliers for the type of construction required by the solicitation. McGoldrick argued that this reasoning was flawed because it was volume of construction work that burdens labor and supply, not the number of contractors performing the work.

GAO disagreed. While the total volume of construction was likely to be a driver of the load on the labor pool, the agency’s conclusions that the same work could place a larger burden on capacity was not irrational. For instance, 23 contractors directing the same quantity of work could result in more scheduling conflicts than 5 contractors directing that same work.

The Corps also found that consolidation would result in greater flexibility. Under the previous contract, the Corps had overutilized some contractors and underutilized others. By having fewer contractors, the Corps believed it could better align capacity. McGoldrick thought that the Corps’ worries about misaligned capacity were misplaced.

But GAO found that the Corps’ concern with misaligned capacity were rational. Construction requirements can be uncertain and construction can sometimes occur in unanticipated locations, which could result in a risk of underestimating or overestimating workloads in different regions. The Corps reasonably believed that having fewer awardees could even out the use of different contractors.

McGoldrick contended that the agency had not shown that the claimed benefits—i.e., efficiency and flexibility­ — could provide the maximum practicable participation of small businesses as required by the FAR. McGoldrick reasoned that having four regional IDIQ contracts for 20 small businesses would permit greater small business participation than a single IDIQ for 5 small businesses.

GAO, however, noted that maximizing the number of small business award is not what the FAR requires. Instead, FAR 7.107-2 provided for “maximum practicable participation of small businesses.” Participation in this context means that small businesses have the opportunity to compete as prime contractors or subcontractors. Given that the entire procurement was set aside for small business, and that the SBA had signed off on the Corps’ approach, GAO found no reason to believe that small businesses would be denied an opportunity to participate.

McGoldrick further contended that the Corps had failed to consider other contracting alternative, like procuring from three separate smaller IDIQ pools. GAO found that while the Corps had not considered procuring from three separate pools, it had considered whether to procure from small regional pools, and it had concluded that a larger pool would offer more efficiencies. Those efficiencies applied with equal force to McGoldrick’s suggested three-pool approach—that is, the award to multiple IDIQ pools could strain the labor market and result in misaligned capacities.

McGoldrick alleged that the agency had failed to consider that limiting the single IDIQ contract to 5 awardees would have on pricing. GAO found that Corps had rebutted this argument. The work under the contract was mostly two-phase design-build work. Under the FAR, the maximum number of offerors selected for phase two of design-build contract is five. By making award to five contractors, the Corps could start every project at phase two, which would result in efficiencies that offset any impact on competitive pricing.

Aside from the consolidation arguments, McGoldrick argued that solicitation was unduly restrictive. The solicitation required offerors to demonstrate a $30 million bonding capacity. But the agency anticipated that projects would range between $70,000 and $30 million. McGoldrick contended that it was overly restrictive to require all offerors to demonstrate bonding capacity that would be significantly higher than most work required under the contract.

GAO, however, reasoned, that it will only find a solicitation unduly restrictive when it prevents the protester from competing. Here, McGoldrick had not suggested that it could not itself meet the bonding requirement; it only suggested that other business may have a problem. Because McGoldrick could apparently meet the bonding requirement, it had not been prejudiced by the requirement.

Lastly, McGoldrick argued that the past performance criteria were unduly restrictive. The solicitation defined relevant past performance as projects valued between $20 million and $30 million. McGoldrick argued that this excluded small businesses that could otherwise perform some of the smaller projects under the IDIQ.

GAO rejected this argument, reasoning that the solicitation did not provide that offerors who lack experience with projects under $20 million were ineligible. Instead, it merely provided that experience on larger projects would be considered more relevant. This did not unduly restrict competition.

McGoldrick is represented by Douglas L. Patin, Aron C. Beezley, and Lisa A. Markman of Bradley Arant Boult Cummings LLP. The agency is represented by Anna Kurtz and Brian Payton of the Army. GAO attorneys Michael Willems and Edward Goldstein participated in the preparation of the decision.

GAO - McGoldrick Construction Services Corporation