Protester Entitled to Reimbursement of Protest Costs Incurred Before Protest Was Actually Filed; GOV National Healthcare Drive, LLC, GAO B-419258.4

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Request for reimbursement of proposal and protest costs is granted in part and denied in part. Following a sustained protest, the agency agreed to pay some of the protester’s proposal and protest costs but denied more than half of the claimed costs. GAO found that for many of the claimed costs, the agency’s refusal was unreasonable. For instance, the agency refused to pay costs that had been incurred by the protester’s predecessor before the protester existed as a legal entity. GAO found these were still reimbursable proposal costs. The agency also refused to pay protest costs incurred before the protest was filed. GAO rejected this argument, finding that it would be virtually impossible to file a protest without incurring pre-filing costs. GAO rejected other claimed costs that were not either unclear or not associated with the protest.

The Department of Veterans Affairs awarded a 20-year lease to Carnegie Management and Development Corporation. An unsuccessful offeror, GOV National Healthcare Drive, LLC, filed a protest with GAO challenging the award. GAO sustained the protest, finding that the VA erred in not holding discussions.

Normally, under the circumstances in this case, GAO would recommend the agency reopen the acquisition, conduct discussions, and make a new source selection. But in this case, the lease contract did not have a termination for convenience clause, so the agency could not reopen the acquisition. Accordingly, GAO recommended that the VA reimburse GOV its bid preparation and protest costs.

In accordance with GAO’s recommendation, GOV submitted a $479,000 claim for bid preparation and protest costs. The VA only approved $197,000. GOV then filed a request seeking over $246,000 in additional costs.

Proposal Preparation Costs

The VA objected to portion of GOV’s proposal costs on the grounds that they had not been incurred by GOV. GOV was a joint venture. The costs in question were incurred by one joint venture members before GOV was created as a legal entity. The VA did not believe it had to reimburse costs incurred before the protester existed.

GAO, however, found that this argument focused on form over substance. Although GOV was nominally the offering entity, the joint venture member, which owned 99% of GOV, was the real party in interest. This was not a legitimate basis to deny proposal preparation costs.

GAO found the VA was on firmer ground objecting to over $81,000 in costs incurred responding to an expression of interest before the proposal. Where an agency merely seeks information relating to the suitability of a firm’s products or services, but has not actually issued a solicitation that would lead an offeror to believe that a contract would be awarded, expenses incurred in connection with the request for information cannot be characterized as proposal costs. Indeed, in this case, the VA’s request for expressions of interest clearly advised it would not result in the award of a lease.

The VA further object to 15,000 of costs incurred in proposal preparation services. GOV paid another company to help it prepare its proposal. GOV had obligated itself to pay this company $15,000 for a final revision. But the VA never asked for final revisions, so it claimed these costs were unreasonable.

GAO, however, found the $15,000 properly reimbursable.GOV had agreed to pay the other company a fixed-price for proposal services. Although payment under the contract were due in installments, GOV was still obligated to pay the full amount of the contract. What’s more, GAO had sustained the protest precisely because the VA had not held discussions and solicited final revisions. The VA should not be allowed to avoid the consequences of its actions.

Protest Costs

The VA also objected to several of GOV’s claimed protest costs. First, the VA argued that fees incurred by the law firm Wiley Rein were not reimbursable. The VA objected to all the costs that were incurred before GOV actually filed a protest. The agency argued that because these costs were incurred before a protest existed, they had not been incurred in connection with a protest.

GAO found this argument meritless. All the costs in question were incurred in connection with activities that lead directly to the filing of protest. In fact, GAO reasoned, it was not apparent how counsel for the protester could prepare for the protest without actually familiarizing themselves with the facts and circumstances surrounding the acquisition.

GAO did, however, deny some of other feed billed by Wiley Rein. Two of the billing entries were not sufficiently detailed in describing the activities for which GOV was billed. A third entry billed GOV for research into caselaw from other forums. GAO reasoned that because these costs related to another forum, they were not costs associated with the protest filed at GAO and thus not reimbursable.

GAO denied costs associated with a fourth Wiley entry associated with pursuing a potential media campaign. This entry also included protest-related costs. But where a claim aggregates allowable an unallowable costs (like costs for a media campaign), and GAO cannot tell which portion is allowable, the entire entry is unallowable.

The VA objected to several billing entries incurred by another law firm, Curran Legal Services Group. The VA reviewed these entries, finding some of them allowable while others were not. For instance, for several entries, it was not evident that the work performed related to the protest. Also, many of the entries were opaquely worded; GAO could not tell what services were even provided.

Lastly, GAO considered whether GOV was entitled to reimbursement of costs incurred in pursuing its costs claim. Some of the VA’s objections to the claim were reasonable, while other were not. Given the irrationality of some of the VA’s objections, GAO concluded that all the costs incurred in pursing the costs claim were reimbursable.

GOV is represented by Paul F. Khoury, Richard B. O’Keefe, and Lindy C. Bathurst of Wiley Rein LLP. The agency is represented by Alicia M. Harrington of the Department of Veterans Affairs. GAO attorneys Scott H. Riback and Tania Calhoun participated in the preparation of the decision.

GAO - GOV National Healthcare Drive