Criminal Convictions of Awardee’s Principals Didn’t Preclude Affirmative Responsibility Determination; Second Street Holdings LLC, 600 Second Street Holdings LLC, and Seven Hundred 2nd Street Holding LLC, GAO B-417006 et al.

Protest challenging the award of a lease is denied. The protester contended the agency had changed or waived requirements for the awardee. GAO found these arguments were either untimely or based on a misreading of the solicitation. The protester alleged the evaluation of the awardee under non-price factors was unreasonable, but GAO determined these arguments were just disagreement with the agency’s evaluation conclusions. The protester asserted the agency unreasonably found the awardee responsible when two of the awardee’s principals had prior criminal convictions. GAO reasoned that prior criminal convictions do not make an offeror per se non-responsible. The agency considered the convictions and, in its discretion, found they were not disqualifying.

Background

GSA issued a request for lease proposals seeking office space for the Securities and Exchange Commission. Several prospective offerors filed multiple protests with GAO and the Court of Federal Claims challenging the terms of the solicitation. Once all the protests were resolved, GAO awarded the lease to Cayre Jemals Nick LLC (CJN). The incumbent lessor, Second Street Holdings, filed a protest challenging almost every aspect of the evaluation.

Legal Analysis

• Changed Requirements Argument Was Untimely – Second Street alleged that GSA failed to properly consider the impact of the COVID-19 pandemic and should have given offeror a chance to submit revised proposals in light of the pandemic. GAO found that this argument was untimely. The pandemic was not an obscure consideration. If Second Street thought the agency needed to consider the issue, it should have raised the issue before award. The post-award challenge was too late.
• GSA Didn’t Waive Requirement – Second Street claimed GSA waived a requirement by not requiring CJN to propose an occupancy date within the solicitation’s estimated occupancy of 2023. GAO, however, found that the estimated occupancy date was only an estimate. The solicitation mandated an occupancy date within 1,060 days of award. CJN’s occupancy date fell within the 1,060 day window.
• GAO Lacks Jurisdiction to Consider Violation of 40 U.S.C. § 3307 – Under 40 U.S.C. § 3307, an appropriation for a lease in excess of $1.5 million may only be made if the House Committee of Public Works adopts a resolution approving the purpose of the lease. Second Stret argued that the GSA violated this statute by failing to submit a proper prospectus to Congress. GAO, however, found that this statute did not implicate a procurement obligation or the agency’s evaluation of proposals. Thus, the issue fell outside GAO’s protest jurisdiction.
• GSA Reasonably Assessed Awardee’s Proposal – Second Street alleged that CJN’s failed to satisfy various requirements. For instance, Second Street argued CJN’s property was in a run-down neighborhood, that it lacked amenities and adequate parking. GAO found that the arguments were simply disagreement with GSA’s evaluation conclusions
• Second Street Was Not Prejudiced By Alleged Waiver of Financing Requirements – Second Street claimed that documents CJN submitted as evidence of its financial commitments failed to satisfy solicitation requirements. GAO found that even if GSA had waived solicitation requirements for CJN, Second Street had not been prejudiced. A protester is only prejudiced by a waiver of solicitation requirements if they can show they would have altered their proposal if the requirements had been waived for them. Here, Second Street was not relying on debt financing for the building. Thus, even if GSA had waived the financing requirement for everyone, Second Street would not have changed its offer.

• Price Evaluation Was Reasonable – Second Street compaliend that GSA failed to evaluate the realism of CJN’s proposal and that it failed to account for holdover rent in assessing CJN’s price. But GAO found that the solicitation did not require an evaluation of price realism. Nor did it require the agency to consider holdover rent when assessing price.

• Responsibility Determination Was Reasonable – Second Street alleged the affirmative determination of responsibility for CJN was unreasonable because two of its principals had past criminal convictions for fraud and tax evasion. GAO reasoned that a criminal conviction does not, in and of itself, preclude an affirmative responsibility determination. It is within an agency’s discretion to consider the passage of time between the conviction and the award. Second Street’s disagreement with the agency’s judgment on responsibility was not enough to sustain a protest.

• GSA Didn’t Conduct Unequal Discussions – Second Street alleged GSA engaged in unequal post-FPR discussions with only CJN. GAO disagreed, finding that GSA merely requested continuing evidence of its financial capability. CJN did not revise its price. Given the passage of time, it was reasonable for GSA to confirm CJN’s lenders’ willingness to still fund the project.

Second Street is represented by Seamus Curley, Chelsea Goulet, and Gregory Jaeger of Stroock & Stroock & Lavan LLP. The intervenor, CJN, is represented by Alex D. Tomaszczuk, J. Matthew Carter, Alexander B. Ginsberg, and Dinesh C. Dharmadasa of Pillsbury Winthrop Shaw Pittman LLP.  The agency is represented by Elizabeth H. Johnson and Daniel Cutler of GSA. GAO attorneys Evan D. Wesser and Edward Goldstein participated in the preparation of the decision.