FrankHH | Shutterstock

Protest alleging that agency erred in finding protester’s proposal unacceptable is denied. The agency rejected the protester’s proposal because the protester did not meet the solicitation’s small business participation goals, which required offerors show small business participation equal to 47 percent of total value. The protester argued that it only needed to show participation equal to 47 percent of the amount subcontracted, not of total contract value. GAO found that the protester had misinterpreted the solicitation. The protester also argued that the agency had failed to amend the solicitation after its requirements had changed. GAO reasoned that if this was the case, the protester had not been prejudiced by the agency’s inaction. Even if the agency had amended the solicitation to reflect changed requirements, the protester’s proposal was still unacceptable under an unrelated small business participation requirement.

The Department of Education (DOE) issued a solicitation seeking services to support the Office of Federal Student Aid. DOE amended the solicitation several times. Amendment 8 revised the small business subcontracting plan requirements and required offerors to submit revised proposals. Amendment 8 instructed offeror to revise their small business subcontracting goals as a percentage of both total contract dollars and total subcontract dollars. Amendment 8 also revised the small business subcontracting requirement from 32 percent to 47 percent.

Nelnet Diversified Solutions submitted a proposal revision in response to amendment 8. DOE, however, found Nelnet’s revisions did not show participation equal to 47 percent of the total value of the effort. Nelnet’s proposal was unacceptable. Following award, Nelnet protested.

DOE rejected Nelnet’s proposal because its subcontracting plan did not demonstrate that small business would participate in 47 percent of total value of the effort. Nelnet argued, however, that “total value of the effort” did not mean that small businesses had to participated in 47 percent of the total value of the contract. Rather, Nelnet contended the “total value of the effort” could meant different things depending on whether an offeror was a small or large business.

If an offeror was large, Nelnet argued, the required level of small business participation had to be achieved through first-tier subcontractors. But if an offeror was small, the participation could be demonstrated through a combination of the offeror’s own performance and from first-tier subcontractors. From this, Nelnet inferred that for a large business, a small business participation plan and a small business subcontracting plan must meet the same requirements. Thus, for a large business, the term “total value of effort” must mean the “total value of the effort to be subcontracted.” Consequently, Nelnet contended, as a large business, it had satisfied the solicitation’s small business participation plan by subcontracting 47 percent of the amount or work it planned to subcontract to small businesses.

GAO found that this argument ignored the plain and obvious meaning of the term “total value of the effort.” That term clearly referred to all the work to be performed under the contract, not merely to amount to be subcontracted. Indeed, GAO reasoned, Nelnet’s argument would require the addition of a term not a present in the text: “total value of the effort [to be subcontracted].”

Nevertheless, Nelnet contended that the history of the RFP amendment supported its interpretation. Nelnet claimed that initially, the solicitation required offerors to propose small business subcontracting goals as a percentage of total contract value. But Nelnet alleged that amendment 8 changed this by instructing offerors to meet a percentage of subcontracting goals based only on the percentage of dollars subcontracted.

GAO found that amendment did not revise the requirement in the manner suggested by Nelnet. Amendment 8 directed offerors to revise their subcontracting plans to include two forms of data: goals as a percentage of total contract value and goals as a percentage of dollars subcontracting. Nothing in the amendment advised offerors that they should disregard the goals as a percentage of total contract value and instead only propose goals only as a percentage of dollars subcontracted.

Next, Nelnet claimed that the term “total value of effort” in amendment 8 was latently ambiguous. But a latent ambiguity only exits when two or more reasonable interpretation of  a term are possible. As GAO had already found, Nelnet’s interpretation of the term was not reasonable.

Nelnet asserted that when DOE saw that the company’s proposal did not meet the small business participation requirements, it should have known that offerors did not have a common understanding of the solicitation’s requirements and conducted further discussions.

GAO noted that in some cases, it has found that significant differences in proposals indicates that offerors do not have an understanding of requirements. But those cases are rooted in unclear or latently ambiguous requirements. Here, there was nothing to indicate that amendment 8 was somehow unclear to the other offerors. Nelnet was the only offeror who did not comply with the small business participation requirements.

Aside from the small business participation requirement, Nelnet argued that DOE should have known prior to award that its requirements had changed and that it needed to revise the solicitation and allow revised proposals. Specifically, Nelnet contended, the solicitation required offerors to migrate student loans to the agency’s Enhance Processing System. Prior to award, however, DOE had cancelled a separate solicitation for the Enhanced Processing System so there would no system for offerors to migrate loans to. Thus, Nelnet argued, the solicitation it had responded to no longer reflected the agency’s needs.

But GAO found that it did not need to resolve this issue. In protests challenging an agency’s failure to amend to reflect a change in requirements, the protester is not prejudiced if the aspect of its proposal that precluded award would not have been affected by the solicitation amendment. Here, even if the agency had amended to reflect changes to the Enhanced Processing System, it would not have affected the small business participation factor under which Nelnet’s proposal was found unacceptable.

Nelnet is represented by Steven S. Diamond, Stuart W. Turner, Nathaniel E. Castellano, and James R.S. Mestichelli of Arnold & Porter Kay Scholer, LLP. Intervenor F.H, Cann & Associates is represented by Rebecca E. Pearson, Christopher G. Griesedieck, and Taylor A. Hillman of Venable, LLP. Intervenors Missouri Higher Education Loan Authority and Texas Guaranteed Student Loan Corporation are represented by Katherine S. Nucci and Jayna Marie Rust of Thompson Coburn LLP.  The agency is represented by Megan R. Nathan and John W. Kim of the Department of Education. GAO attorneys Jonathan L. Kang and Laura Eyester participated in the preparation of the decision.