COFC Sustains Protest, Rejecting Agency’s Improper Reliance on Subcontractor’s Experience and “Next-In-Line” Requirement for Standing

In another recently released bid protest sustained by the Court of Federal Claims, the Court addresses a protestor’s standing and an offeror’s ability to rely on the experience of its subcontractors in satisfying technical evaluation criteria. This question of when and how to rely on an affiliate’s experience recently came up at an industry event and this case provides a thorough discussion of when such reliance is acceptable and how offerors must structure their proposals to take advance of another entity’s experience.

At issue in Advanced Management Strategies Group v. US was a VA procurement for commercial healthcare consulting services. The contract was an SDVOSB set-aside. The Solicitation contemplated a BPA would be issued based on a best value tradeoff to a single offeror pursuant to FAR part 8.405-3. Under the terms of the Solicitation, which specified that it was not a FAR part 15 procurement, the Agency informed offerors that discussions would not be held, but that the VA reserved the right to ask for a price discount from the apparent awarded, as permitted by the FAR. The VA awarded the contract to Enterprise Resource Performance, Inc. (“ERPi”); Advanced Management Strategies Group (“ACGM”) filed a protest with the Court of Federal Claims arguing, in part, that the evaluation improperly relied on the experience of one of ERPi’s subcontractors.

Specific to the issues raised in the protest, the Solicitation provided that the Agency would consider both the prime contractor and subcontractors experience with commercial healthcare project based on “previous demonstrated recent and/or relevant experience.” During the Q&A, the VA confirmed that offerors could rely on their proposed subcontractor’s experience, regardless of size. In evaluating past performance, the VA included a definition of “major subcontractor” and focused on the level of risk associated with offerors’ proposals based on the “historical quality” of the offerors’ respective history. The evaluation criteria provided that offerors would be judged based on their past performance and that of their major subcontractors.

In response to the Solicitation, the VA received six proposals, all of which were eligible SDVOSBs. The technical evaluators performed individual and consensus evaluations of the proposals. The CO did not perform its own evaluations, but instead relied on the conclusions of the technical evaluators to perform a best value tradeoff between (i) ERPi and AMSG and, separately, (ii) ERPi and a third offeror. Based on the tradeoffs performed, the CO concluded that ERPi provided best value because it represented the highest rated and lowest priced offer.

Active Zone of Consideration

In response to the protest, the Government and ERPi argued that because ASMG was not next in line for award, it had no standing to protest the contract and therefore, the protest should be dismissed. The Court rejected this argument, finding that ASMG was in the “active zone of consideration.” Specifically, the Court relied on the fact that the CO had conducted a best-value tradeoff with the awardee and ASMG. Given that ASMG was actively considered for award, as evidenced by its inclusion in the trade off, the Court determined that ASMG had standing to protest the award. In doing so, the Court expressly held that it was not necessary for a protestor to show that it would have received the award but for the alleged error.

Although most of the cases cited by the parties deal with situations in which the party found to have standing was second in line, a protestor need not show that it would have received the award but for the alleged error. [citations omitted] When the agency’s best value trade-off includes the protestor, even when it was not notionally the second-rated offeror, the protestor has established that it would have had a substantial chance of receiving the award but for the alleged error.

In an interesting passage, the Court used the agency’s extensive discretion as justification for allowing an offeror other than the next in line to establish standing. Making this point, the Court stated:

The law is plain that, in the context of a best value procurement, agencies have broad discretion to award for any reason that meets a bare standard of rationality. We thus cannot conclude that there is no possible reason the agency might award to AMSG over [ ]. In other words, here, the law will not assume it a fait accompli that the next highest rated proposal would receive the award.

For unsuccessful offerors who may not explicitly be identified as “next in line” for award, this case provides helpful guidance on how to establish standing and rebut any argument that their protests should be dismissed because they were not next in line for the contracts in question.

Reliance on a Subcontractor’s Experience

As noted above, the Solicitation provided that offerors could rely on subcontractors to establish commercial healthcare experience, an evaluation factor of equal importance with the technical factor. In establishing its experience, ERPi relied on that of one of its (minor) subcontractors who shared a similar name to that of a “major subcontractor” also identified in ERPi’s proposal. The VA’s evaluation attributed “substantial confidence” to ERPi’s proposal based almost entirely on this subcontractor’s commercial healthcare experience. It appears that the VA may have confused this subcontractor with the “major subcontractor” of a similarly name.

In sustaining the protest, the Court found that regardless of whether the “major” and “minor” subcontractors were affiliates and could be properly considered together by the agency for their collective experience [an issue disputed by the parties and not resolved by the Court], there was no indication in the record of how or why the Agency reasonably concluded that the experience of the (minor) subcontractor would justify rating ERPi with “substantial confidence for this factor.” To the contrary, the record reflected that the subcontractor who provided the essential experience relied on by the VA would be performing less than 3 percent of the work. In reaching is conclusion, the Court relied on established law providing that a parent or affiliated company may be relied upon for experience or past performance if the proposal demonstrates that the resources of that parent or affiliate will affect the performance of the offeror. Here, there was no such evidence in the proposal. At oral argument, the Government and ERPi argued that this subcontractor would be a second tier subcontractor, but the Court rejected this argument on the grounds that there was no evidence of this in the proposal or contemporaneous record.

Based on the conclusion that the VA had arbitrarily and unreasonably evaluated ERPi for the commercial healthcare experience factor, one of the two most important evaluation factors—as stated by the Solicitation, the Court determined that the award must be set aside. Accordingly, the Court sustained AMSG’s protest.

This case provides valuable discussion of standing and how to successfully use (or protest) an affiliates experience in connection with a proposal and also provides insight into the Court’s detailed and reasoned process for analyzing bid protests.