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Agency failure to consider impact of corporate transaction renders award decision infirm
2022 PRINDBRF 0053
• Practitioner Insights Commentaries
• February 4, 2022
(February 4, 2022) - Crowell & Moring LLP attorneys discuss a U.S. Government Accountability Office decision that sustained a bid protest following the awardee's corporate transaction and explain how the ruling can affect government contracts involved in acquisitions.
The acquisition and consolidation of government contractors has become increasingly prevalent in recent years. GAO's recently released decision in Vertex Aerospace, LLC, B420073, B-420073.2, Nov. 23, 2021,1 serves as an important reminder to contractors that failure to properly update a procuring agency about such transactional activity can have adverse impacts on a pending proposal, even where a transaction is structured/intended to have no impact upon a contractor's proposed performance.
In Vertex, GAO sustained a protest challenging an Air Force task order award due to the agency's failure to "meaningfully consider" the impact of the awardee's acquisition by another company during the pendency of the procurement.
In late 2020, DynCorp was awarded an IDIQ contract. Shortly thereafter, Amentum Government Services Holdings, LLC ("Amentum"), acquired all of the outstanding shares of DynCorp's former parent holding company, resulting in DynCorp becoming Amentum's wholly owned subsidiary.
In December 2020, DynCorp submitted a proposal in response to a task order solicitation under the IDIQ contract. While DynCorp's proposal was pending and before award, DynCorp submitted documentation to DCMA requesting novation of its IDIQ contract to Amentum. DCMA, in turn, provided a copy of the novation agreement to the Air Force during its evaluation of DynCorp's proposal.
Nonetheless, the Air Force completed that evaluation without considering what impact, if any, the Amentum acquisition would have on DynCorp's ability to perform. After the Air Force awarded the task order to DynCorp, Vertex protested, alleging, among other things, that the Air Force's failure to consider that specific question was in error.
GAO sustained the protest. In so doing, GAO noted that DynCorp's proposal made no mention of its recent acquisition, nor did the agency's evaluation record or source selection documentation make any reference to the acquisition or its potential effect on DynCorp's performance.
GAO also rejected the Air Force's post-protest explanation that the acquisition would have no impact on DynCorp's performance, noting the lack of detail in the contemporaneous record explaining how the integration and consolidation of contract performance activities between the two companies would be accomplished to ensure that the resources and employees needed for the contract would be available.
As a result, GAO held the record was insufficient to support a conclusion that the agency meaningfully and reasonably considered the effect of the corporate transaction on the awardee's ability to perform the task order.
Significantly, GAO stressed that decisions regarding matters of corporate status and restructuring are highly fact-specific and turn largely on the individual circumstances of the proposed transactions and timing.
With that in mind, companies undergoing corporate transactions should work closely with experienced government contracts counsel to determine the best way to minimize the impact such transactions may have on pending proposals, to affirmatively notify agencies of such transactions, and to provide sufficient assurance — prior to an agency's award decision — that such transactions will not impact the offeror's proposed performance.
Notes
1 https://bit.ly/3giGcpb
Anuj Vohra, a partner in Crowell & Moring LLP's government contracts group, assists clients with contract formation, regulatory compliance, intellectual property and data rights, and the Freedom of Information Act before the U.S. Government Accountability Office and the U.S. Court of Federal Claims. He can be reached at [email protected]. Cherie J. Owen, a senior counsel in the firm's government contracts group, represents clients with bid protests. She is a former GAO bid protest hearing officer and can be reached at [email protected]. Issac D. Schabes, an associate in the firm's government contracts group, previously clerked for the Court of Federal Claims and the Maryland Court of Appeals. He can be reached at [email protected]. All authors are based in Washington, D.C. This article was originally published Jan. 13, 2022, on the firm's website. Republished with permission.
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Issac D. Schabes| End of Document | © 2024 Thomson Reuters. No claim to original U.S. Government Works. |