How Did this Protester’s Byzantine Corporate Structure Tank Its Claim for Proposal Costs?

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The protester requested reimbursement of proposal and protest costs. But the claim for proposal costs presented a problem: the protester’s employees had not worked on the proposal. Instead, the protester had used outside management companies affiliated with its parent. Using a variety of factors, the protester tried to establish its proposal costs by calculating the market rate for the proposal drafters’ lost opportunity costs. GAO rejected the protester’s complicated methodology, reasoning that it was impossible to discern whether this method included unallowable costs. GAO denied most of the claim for proposal costs but granted the protester a portion of its protest costs.

Spectrum Investors, LLC–Costs, GAO B-418891.4


GSA issued a request for lease proposals seeking office space in Florida. GSA received four proposals, but it determined that only one proposal, from Plantation Professional Plaza, was acceptable.

Following award to Plantation, an unsuccessful offeror, Spectrum Investors, filed a protest with GAO. Spectrum alleged that Planation’s proposal should have been unacceptable because it didn’t satisfy GSA’s square footage or parking requirements, and Plantation did not have a certificate of occupancy when it submitted its proposal. GSA filed an agency report. Spectral submitted comments and new supplemental protests, contending that Planation did not not control the parking spaces it offered, and that Plantation had made misrepresentations in its proposal.

GAO held an outcome prediction conference with the parties and advised that it was likely to sustain Spectrum’s challenge regarding the number of parking spaces. GAO also indicated that it may sustain the protest relating to the certificate of occupancy.

In light of GAO’s predication, GSA took corrective action. Because the lease awarded to Plantation did not contain a termination for convenience clause, Spectrum’s only remedy was an award of proposal and protest costs. Spectrum and GSA attempted to negotiate costs, but to no avail. Spectrum asked GAO to recommend an amount for reimbursement.


Proposal Costs

Spectrum sought about $72,000 in proposal costs. Spectrum sought reimbursement for the work performed by four individuals. None of these individuals, however, worked for Spectrum. Rather, they worked for separate companies that provided administrative and management services to Spectrum’s parent company. For the two individuals who performed most of the work on the proposal, Spectrum conceived of an elaborate method for valuing their work based on the market rates for their lost opportunity costs. The calculation involved rents paid by Spectrum’s parent to a trust, wage information from an administrative support company, management fees paid by Spectrum and its parent, and the square footage of their respective properties.

GAO noted that a party seeking proposal costs generally establishes costs using the hourly rates of the employees that worked on the proposal. This is supposed to reflect the protester’s actual costs. GAO did not think Spectrum’s complicated lost opportunity costs calculation really reflected the actual cost of proposal preparation. GAO opined that there was no to discern from this calculation whether the claimed costs include profit or other unallowable costs. Thus, GAO denied the vast majority—about $69,000—of Spectrum’s claim for proposal preparation costs.

For the other two individuals that worked on the proposal, GAO found that their work—representing about $1800—was reasonably supported. The wage information for these individuals provided a  reasonable basis for assessing the time they put into the proposal.

Protest Costs

Scope of Recovery

A successful protester is generally entitled to be reimbursed for all issues pursued, not merely on those issues on which it prevails. GAO, however, will not recommend costs for losing issues that were clearly severable from meritorious issues. 

Here, GAO found that the parking issues Spectrum raised in its supplemental protest were severable from the other meritorious issues. The arguments raised in the supplemental protest were untimely; they should have been raised in the initial protest. What’s more, GAO reasoned they involved a dispute between private parties or matters of contract administration that GAO does not consider. 

Page Count Method

As to the remaining meritorious issues, the parties proposed reimbursement based on the page count method. Under this method, the number of in protest pleadings devoted to successful arguments is divided by the number of overall pages in the protest pleading, which yield a reimbursement percentage. But GSA and Spectrum disagreed over the number of pages devoted to successful pleading.

GAO found that GSA was applying the page count method too narrowly. GSA only counted  the actual pages of legal arguments supporting the meritorious arguments. But GAO found that other pages in the protest addressing, timeliness, background, and the request for relief  were necessary to satisfy GAO’s pleading requirement and thus should be included the page count. 

All in all, GAO found that 46 of 76 pages of Specturm’s pleadings were devoted to meritorious arguments. This 60 percent reimbursement percentage resultined in a recommendation of $59,000 in protest costs.

Spectrum is represented by Robert C. MacKichan, Gordon Griffin, and Hillary J. Freund of Holland & Knight. The agency is represented by Tammi Snyder Queen, Jessica Gunzel, and Carisa LeClair of the General Services Administration. GAO attorneys Evad D. Wesser and Michael Willens participated in the preparation of the decision.

–Case summary by Craig LaChance, Senior Editor

GAO - Spectrum Investors LLC--Costs