In a recently released bid protest decision that could spell trouble for federal agencies, the Court of Federal Claims rejected as unreasonable the Federal Highway Administration’s (“FHWA”) proposed corrective action in an $18 million procurement for support services. 

The procurement in question, designed to obtain laboratory support services at one of the FHWA’s Highway Research Centers, garnered two proposals: one from the incumbent contractor, Professional Service Industries, Inc. (“PSI”), and another from Genex Systems, LLC (“Genex”). In February of 2016, the FHWA awarded the contract to Genex. PSI protested the award to the GAO, alleging that Genex’s proposed program manager – the position ultimately responsible for Genex’s performance under the contract – failed to meet the minimum experience required by the solicitation. The FHWA chose to take corrective action rather than attempt to fight the protest, informing GAO that it intended to cancel the award to Genex, reevaluate the qualifications of both offeror’s proposed program managers, and make a new award decision. The GAO – as it nearly always does – accepted the agency’s proposed corrective action and dismissed the protest.

The FHWA did not fare any better on reevaluation. After internal deliberation, the agency made no adjustments to the solicitation requirements, did not solicit new proposals from the offerors, and simply made an award, once again, to Genex. Unsurprisingly, as neither the solicitation’s requirements for key personnel nor Genex’s proposed program manager had changed, a second GAO protest was lodged by PHI.

Reaching a decision on the merits, the GAO sustained the protest – agreeing with PHI that Genex’s proposed program manager did not meet the required minimum experience for the position, as set forth in the plain language of the solicitation. In sustaining the protest, the GAO had the following recommendation for the FHWA:

We recommend that the agency reevaluate proposals in accordance with the evaluation criteria set forth in the RFP. In the event that the agency concludes that the solicitation, as written, does not accurately reflect its needs, we recommend that the agency amend the solicitation, solicit revised proposals, and evaluate them.

It was the FHWA’s actions in response to the sustained protest that ultimately landed the agency in hot water with the Court of Federal Claims: the FHWA opted to issue an amendment to the solicitation, relaxing the minimum requirements for the position of program manager. Before the due date for the submission of revised proposals, PSI filed a challenge with the Court of Federal Claims, alleging that the agency’s decision to amend the solicitation was arbitrary, capricious, and an abuse of discretion.

After cross-motions for Judgment on the Administrative Record and oral arguments, the Court held that, even though an agency’s corrective action need only be “reasonable under the circumstances,” the FHWA’s actions were unreasonable and, therefore, the FHWA was permanently enjoined from using the revised solicitation criteria to evaluate proposals.

The Court’s decision in favor of PSI turned on the fact that the government was not able to offer any evidence to support its assertion that amending the solicitation was necessary to accurately reflect the government’s needs. In fact, the government provided no documentation at all reflecting any internal discussions or analyses regarding how its actions were meant to implement the GAO’s recommendations. Had the FHWA’s administrative record included as much as a cursory discussion of why it was necessary to relax the minimum requirements for proposed program managers, the case very well could have had a different outcome.

Furthermore, the Court was troubled by the fact that “the changes in responsibilities and qualifications that FHWA proposed have the effect of conforming the solicitation precisely to the experience and qualifications of Genex’s proposed PM [program manager].” While the court acknowledged that it couldn’t go so far as to find that the FHWA acted in bad faith by amending the solicitation, in the absence of any justification for the amendment, the court was unwilling to overlook the rather stark fact that the solicitation was being amended to reflect minimum key personnel requirements that conformed nearly exactly to what the agency knew would be the contents of Genex’s proposal.

The decision is significant because it shows a willingness by that the COFC to scrutinize an agency’s decision to take corrective action in response to a bid protest. Corrective action is a frequent occurrence – roughly one in every three bid protests is resolved via corrective action, according to the GAO’s 2015 Bid Protest Statistics. The GAO itself rarely, if ever, pushes back on a proposed corrective action, instead taking the position that if the agency makes the same mistake again, the protestor will simply protest again. Many times, this philosophy leads to a spiraling sequence of bid protests and corrective actions that wastes the time and resources of both the government and contractors. Therefore, cases such as this one are very important. There must be a willingness to wade into the heart of particularly troubled procurements and decide whether or not the agency is properly implementing corrective action in a way that ensures maximum, fair competition as required by the Competition in Contracting Act (CICA).

Takeaway for Contractors

In a bid protest proceeding, even where an agency has pledged to take corrective action, that action needs to be reasonable in order to survive a legal challenge. If the government’s corrective action seems unfair, or erratic, or clearly biased toward an award to a particular offeror, a challenge may be in order.

Edward T. DeLisle is Co-Chair of the Federal Contracting Group. Ed frequently advises contractors on federal contracting matters including bid protests, claims and appeals, procurement issues, small business issues and dispute resolution.

Carl J. Vernetti is an Associate in the Federal Contracting Group and focuses his practice on federal procurement issues. He has broad experience with matters concerning prime and subcontractors looking to do business with the government.