Link: GAO Decision
Protestor: Maersk Line, Limited
Agency: Department of Transportation, Maritime Administration
Disposition: Protest Denied.
Protest that solicitation for ship managers for Ready Reserve Force vessels unduly restricts competition by limiting competition to contractors qualifying as a specific category of United States citizen is denied where the requirement is mandated by applicable agency regulations.
General Counsel PC Highlight:
Maersk Line, Limited protested the terms of an RFP to obtain ship manager services for three Ready Reserve Force (RRF) vessels. The solicitation contained three mandatory eligibility requirements, of which Maersk protested the requirement that offerors must be citizens of the United States. The statutes and regulations defining “citizen” for purposes of this RFP provided that a corporation must be organized in the United States, have its controlling interest owned by a United States citizen, have U.S. citizens as its CEO, chairman, and all officers authorized to act in the absence of such persons, and have no more of its directors than a minority of the number necessary to constitute quorum as noncitizens. These requirements applied at each tier of ownership, including all parent companies, and companies considered to be U.S. citizens under this definition are often referred to as “section 2 citizens.” The agency executed a J&A for other than full and open competition, citing the RFP’s mandatory eligibility requirements.
The GAO began its analysis by considering the agency’s interpretation of the Merchant Vessel Sales Act of 1946 (the 1946 Act), which Maersk argued only required section 2 citizenship of private parties seeking to purchase war-built vessels. The GAO could not conclude that, in enacting the 1946 Act, Congress addressed the citizenship requirement with respect to the RRF provisions by only making the requirement expressly applicable to the Act’s other provisions. It thus determined that the agency was entitled to Chevron deference, further finding the agency’s interpretation to be reasonable. The agency asserted that the section 2 citizenship requirement was consistent with the 1946 Act’s declaration of policy, which stated that it was necessary for the national security to have a merchant marine “owned and operated under the U.S. flag by citizens of the United States.”
The GAO disagreed with Maersk that the declaration of policy does not concern Section 11 of the Act’s authorization of the National Defense Reserve Fleet (NDRF) and RRF, rejecting Maersk’s attempt to divorce the declaration of policy’s emphasis on the necessity, for national security, of having an American-owned merchant marine, owned and operated by U.S. citizens, from the national defense purposes of Section 11. It found unreasonable Maersk’s reading that the citizenship requirement does not apply here because the vessels are not “owned and operated by citizens of the United States,” but rather are owned by the U.S. government. It found reasonable the agency’s interpretation of the 1991 amendments to Section 11 allowing it to impose additional minimum eligibility requirements, such as the section 2 citizenship requirement the agency had been imposing for over forty years.
If an agency elects to place restrictions on the ability to compete for a requirement, they are required to execute a J&A for other than full and open competition, citing the reasoning for the restrictions. Prospective offerors who are rendered ineligible based on these restrictions but would otherwise be qualified to compete may choose to protest the terms of such restricted solicitations. However, the GAO will generally defer to the agency’s decision to restrict competition so long as it is reasonable and supported by the record and applicable statutory authority.