Government’s motion to dismiss protest for lack of standing is granted. The solicitation had initially indicated that the government would issue a tax exemption certificate to the successful offeror that would exempt the awardee from paying local taxes. Later, however, the government twice amended the solicitation to clarify that it was not granting the successful offeror a tax-exemption. Despite these amendments, the protester submitted a price proposal that relied on the tax exemptions. The government rejected the protester’s proposal as ineligible. The court agreed with the government, finding that the protester’s failure to consider the amendments on tax exemption was a failure to comply with material terms of the solicitation. By failing to comply with the solicitation’s terms, the protester submitted a non-responsive proposal.
Immigration and Customs Enforcement (ICE) issued a solicitation seeking services to operate a detention center in Arizona. Amendment 5 to the solicitation answered questions raised by prospective offerors. One of the questions noted that Arizona charged a 4.5% business tax and asked whether the government would issue a tax exemption certificate to the successful offeror. ICE answered that question “Yes.”
But ICE later changed its mind. The government issued amendment 19, which clarified that the government could not delegate its tax exempt status to contractors. A prospective offeror, Asset Protection & Security Services, emailed ICE stating that it had reviewed amendment 19 and that its proposal did not require any further revisions. Shortly thereafter, ICE issued amendment 20, which once again clarified that the government could not delegate its tax exempt status to contractors. Once again, Asset avowed that it had reviewed the amendment and that its proposal did not require any further revisions.
Asset submitted a proposal. Despite amendments 19 and 20, stating that contractors would not be exempt from local taxes, Asset’s price proposal provided that sales taxes had not been included in the company’s price due to the government’s express intent to provide a tax-exempt certificate.
ICE determined that Asset’s proposal was ineligible for award due to defective pricing. Nevertheless, ICE included Asset’s proposal in the best value tradeoff. ICE ultimately found that another company, Akima Global Services, Inc, offered the best value to the government.
Asset filed a protest with GAO challenging ICE’s ineligibility determination and the award to Akima. GAO denied the protest. But GAO found that ICE’s conclusions that the Asset’s price created a contingency or took exception to the solicitation were unreasonable. While GAO agreed that Asset’s price relied on an incorrect assumption, GAO did not believe that Asset had conditioned its price on future negotiations. Although GAO found ICE’s conclusion unreasonable, it did not believe Asset had been prejudiced by the error. Regardless of the pricing error, Asset would not have been next in line for award.
Asset then filed a protest with the Court of Federal Claims. Asset again argued that ICE had erred in finding its proposal ineligible due to the local taxes issue. Asset also challenged ICE’s technical and past performance evaluations. Akima intervened in the protest. Akima and the government then moved to dismiss Asset’s protest for lack of standing, arguing that Asset’s price proposal was non-compliant and thus the company did not have a substantial chance of receiving award.
The court reasoned that a proposal that fails to conform to the material terms and conditions of the solicitation is unacceptable and not eligible for award. The court found that the requirement that proposals acknowledge that a state tax exemption would not be issued was a material term of the solicitation because it was a substantive part of the contract that affected pricing. Despite being given two attempts to account for the lack of tax exemption, Asset failed to consider that lack of exemptions and submitted a price that relied on an exemption. This was therefore a failure to conform to the material terms of the solicitation.
Asset argued that if ICE believed the tax-exemption language in its price proposal was inconsistent with the solicitation, it should have sought clarifications of those prices and not disqualified Asset. But the court reasoned that it is the obligation of the offeror to provide a complete proposal. The government does not have an obligation to contact an offeror for further clarification. After giving all offeror multiple chances to change their price proposals, ICE was not required to reach out to Asset again and give it yet another opportunity to clarify.
Asset next argued that even if it failed to consider the tax-exemption issues, its proposal had not indicated that its firm fixed-price would change if the tax exemption assumption turned out to be incorrect. Indeed, Asset continued, its proposal also did not reserve the right to receive or to request an adjustment to price if its assumption on the tax proposal issue was wrong.
The court, however, found this argument unpersuasive. Asset was effectively arguing that the government should have overlooked the tax-exemption assumption in its proposal. But the court found that the error in Asset’s proposal was material; in fact, it rendered Asset’s proposal non-responsive. The government could not simply ignore this flaw.
Asset also argued that because ICE had included Asset’s proposal in the trade-off analysis, it had waived its finding that Asset’s proposal was ineligible. The court found no authority holding that an agency waives an ineligibility determination by including the proposal in the best value analysis. Indeed, regardless of waiver, the court would still have the authority and the obligation to determine whether it had jurisdiction to proceed after the protest submitted a non-conforming proposals
Finally, Asset noted that GAO had determined that ICE’s eligibility determination was unreasonable. The court, however, found that the issue had been framed differently in the GAO protest. In that protest, the tax-exemption issue was analyzed as a contingency pricing issue. But the court found that this framing overlooked a bigger problem with Asset’s proposal, namely, that it failed to conform to the material terms of the solicitation. Given that Asset’s proposal was non-responsive, GAO findings concerning contingency pricing were irrelevant.
Asset is represented by David T. Ralston, Julia Di Vito, and Frank Murray of Foley & Lardner LLP. The intervenor, Akima, is represented by C. Peter Dugan, Alfred M. Wurglitz, and Annie M. McGuire of Miles & Stockbridge P.C. The government is represented by Daniel B. Volk, Douglas K. Mickle, Robert E. Kirschman, Jr., and Ethan P. Davis of the Department of Justice as well as Javier A. Farfan of the U.S. Immigration and Customs Enforcement.COFC - Asset Protection