Decided: November 23, 2021
Agency: Department of the Air Force
Disposition: Protest Sustained
Keywords: Documentation of Evaluation, Restructuring, Mergers & Acquisitions
This protest is notable because it showcases that, although the GAO is highly deferential to agency evaluations, the GAO will sustain a protest if it finds the record contains insufficient information from which to assess the adequacy and reasonableness of the agency’s consideration. Here, GAO ultimately sustained the protest solely because there was not sufficient documentation to determine if the agency adequately considered the effect of a corporate transaction on a proposal.
This case also underscores that an agency must keep adequate documents on offerors’ corporate restructuring, particularly related to mergers and acquisitions, and document their considerations of those corporate transactions on any affected proposals. Offerors involved in corporate restructuring also must ensure proper disclosure to the relevant agencies. Importantly, this case shows that unsuccessful bidders have leverage for protesting if an awardee participated in similar corporate restructuring, but should specifically request details in their debriefings to determine whether the agency adequately documented relevant considerations.
Protesting an award should be a data driven, fact specific, strategically assessed, and appropriately funded thoughtful decision for any business. However, Government Contractors often can only determine deficiencies in an award, including whether an agency kept inadequate records, by filing a bid protest. With GAO bid protests, such information is typically uncovered from the Agency Report, available 30-days after the protest is filed. General Counsel, P.C. helps our clients reach critical decisions before protesting an unsuccessful award or intervening as a successful awardee, litigating bid protests through to decision, and adapting post-decision internal methods for a more successful acquisitions win plan.
Summary of Facts
Vertex Aerospace, LLC protested the award of a task order to DynCorp International LLC by the Department of the Air Force under solicitation No. FA3002-21-R-0001 for comprehensive flight operations support (FOS) at Vance Air Force Base (AFB), Oklahoma. In September 2020, the Air Force established the Aircraft Maintenance Enterprise Solutions (ACES) multiple award (MAC), indefinite-delivery, indefinite-quantity (IDIQ) contract for aircraft maintenance services. The ACES MAC IDIQ contract was awarded to eight contractors, including DynCorp, Vertex, and Amentum Services, Inc. Only these eight contractors are eligible to receive task orders under the ACES MAC IDIQ.
On November 20, 2020, Amentum Government Services Holdings, LLC, acquired all of the outstanding shares of DynCorp’s former parent holding company, DefCo Holdings, Inc. As a result of the transaction, DefCo and all of its corporate subsidiaries, including DynCorp, became wholly owned subsidiaries of Amentum and Amentum became the immediate parent company of DynCorp.
On December 18, the agency issued the Vance AFB FOS task order solicitation, referred to as a fair opportunity proposal request (FOPR), to holders of the ACES MAC IDIQ contract. The agency received proposals by the February 4, 2021, due date, including proposals from DynCorp and Vertex. On March 19, DynCorp submitted documentation to the Defense Contract Management Agency (DCMA), requesting novation of numerous contracts, including the ACES IDIQ contract, to Amentum Services, Inc. DCMA granted DynCorp’s request, notified individual contracting officers for each contract affected by the novation, and directed them to modify the affected contracts to incorporate the Novation Agreement.
The contracting officer for this solicitation was provided with this notification and a complete copy of the novation agreement before the agency completed the evaluation of DynCorp’s proposal. The May 17 notification from DCMA expressly informed the contracting officer of Amentum’s acquisition of DynCorp and stated that Amentum acquired all of DynCorp’s assets and assumed all of DynCorp’s obligations and liabilities associated with the novated contracts. DynCorp’s proposal for this task order did not mention its recent acquisition by Amentum. The record does not contain a pre-award document that provides a description of what actions, if any, the contracting officer for the Vance task order took in response to receiving this information.
The Air Force concluded that DynCorp’s higher-rated but higher-priced proposal represented the best value to the agency and made award to that firm on July 28. On August 9, the contracting officer requested that DCMA provide information related to the DynCorp-Amentum novation to include a new organizational chart and DCMA requested this organizational information from Amentum. Amentum responded that the organization chart and operations did not change because of the acquisition and “[m]ost of the impact was related to Corporate, where our indirect costs were challenged by our new owners.” Vertex filed this protest.
Basis of Protest
Vertex argues that the agency failed to adequately consider the potential impact of DynCorp recently being acquired by another firm. The agency argues that it properly considered the fact that DynCorp had been acquired by Amentum and found that the recent acquisition presented no performance risk related to the task order.
GAO noted that when reviewing protests challenging an agency’s evaluation of proposals, it only reviews the record to determine whether the evaluation was reasonable and consistent with the solicitation’s evaluation criteria, as well as applicable procurement laws and regulations. Where an agency fails to document or retain evaluation materials, it bears the risk that there may not be adequate supporting rationale in the record for GAO to conclude that the agency had a reasonable basis for its evaluation conclusions.
Regarding corporate transactions, GAO stated that matters of corporate status and restructuring “are highly fact-specific and turn largely on the individual circumstances of the proposed transactions and timing,” including whether the contracting agency was aware of the transaction, and of the imminence and certainty of the transaction. “When an agency becomes aware of an impending transaction prior to award–either through information in an offeror’s proposal or through other information resources–and such transaction is imminent and essentially certain (or already consummated), an agency should analyze the effect on proposals of the corporate transaction at issue.” GAO also noted that “our concern regarding a corporate restructuring that occurs during a competition has been whether an offeror’s proposal relies on resources that may no longer be available after the corporate restructuring.”
GAO found that, here, while the contracting officer initially may not have been aware of Amentum’s November 2020 acquisition of DynCorp, upon receipt of DCMA’s notification of the approved novation agreement, the contracting officer possessed information that should have raised questions about what effect the transaction could have on DynCorp’s ability to perform. Thus, GAO found that the agency was required to analyze the effect of the corporate transaction on DynCorp’s proposal.
While the contracting officer here stated that the agency considered the impact transaction could have on DynCorp’s proposed effort and determined that there would be no material effect, GAO found that the record “does not contain any contemporaneous documentation that the agency meaningfully and reasonably considered the effect this corporate transaction could have on DynCorp’s ability to perform.” Specifically, the agency’s evaluation does not discuss the impact of the corporate transaction on DynCorp’s ability to perform and the agency’s source selection decision document does not discuss the ramifications of the acquisition.
GAO noted that “under certain circumstances, our Office will accord lesser weight to post-hoc arguments or analyses due to concerns that judgments made ‘in the heat of an adversarial process’ may not represent the fair and considered judgment of the agency.” “When an agency offers an explanation of its evaluation during the heat of litigation that is not borne out by the contemporaneous record” GAO generally gives the explanation “little weight.” GAO found that, here, the agency did not document its assessment after receiving additional information and prior to the filing of Vertex’s protest. Therefore, GAO’s understanding of the agency’s consideration of the corporate transaction is only based on assertions contained in the agency’s filings, which reflect considerations made during the course of this protest.
GAO ultimately found that the agency’s post-award explanations were insufficient, because the record is devoid of details explaining how it will be ensured that DynCorp has the resources available to perform the task order at issue. GAO noted that while DynCorp’s ability to perform the task order may not be materially affected by the corporate transaction, the record is inadequate for it to reach that conclusion. GAO concluded that “given the lack of contemporaneous documentation, our Office has insufficient information from which to assess the adequacy and reasonableness of the agency’s consideration” and it sustained the protest.
Our Government Contracts Practice Group has extensive experience in government contract law, helping clients solve their government contract problems relating to the award or performance of a federal government contract, including bid protests, contract claims, small business concerns, and teaming and subcontractor relations. If you need more guidance or information, contact Craig Lawless, Senior Counsel in our Government Contracts practice area at General Counsel, P.C., 703-266-1865.