Post-mortem: First, some background: The original requirement for staffing support was previously provided to Northrop Grumman under a different contract. The agency decided that the new contract should be set aside for small-businesses, and awarded it to 2020 Company Ltd. in fall 2011. BCA quickly protested, which drove the agency to report plans of corrective action on January 24, 2011. A few days later, it canceled the task order instead, pointing to newly announced budget cuts.
Interestingly, an interim order was issued to Northrop Grumman under its FSS contract for the support services on a month-by-month basis.
The government has the authority to cancel contracts and make changes to contracts with great latitude, but it must be reasonable and can’t be in bad faith. An agency also has very broad discretion in canceling a solicitation, but it must have a reasonable basis for doing so.
Given that, BCA argued that the agency provided “no factual basis” for the cancellation and “no evidence of budgetary constraints.” These were unconvincing arguments to the GAO in light of the fact that HHS had announced the significant reduction in its FY 2012 budget. BCA also alleged that Northrop Grumman had subcontracted a portion of its interim award to 2020 Company, providing access to information that could be valuable for a future competition. The GAO correctly found that it was not permitted to consider that issue. And more generally speaking, BCA argued that HHS was taking extraordinary steps simply to keep from awarding it any work — a common feeling from contractors who lost a contract, even if nearly impossible to prove.
The fact is that BCA didn’t do itself any favors. Arguing that a budget cut to the program is not a reasonable basis to cancel a solicitation, or that a conflict of interest could position competitors to win future awards, is not the best means of relationship building. Agencies technically aren’t supposed to hold grudges; but at the very least, such accusations can harm business prospects down the road by causing potential partners to think twice.