GAO Awards Fees, but Only for Obviously Correct Protest Ground

Supposedly, the general rule is that a protester is reimbursed the costs associated with a successful protest—including attorneys’ fees. But, as a recent case shows, that’s often not the case.

In a March decision, GAO recommended award of only a portion of fees associated with bringing a protest, even though GAO agreed that the protest was correct and the awardee should have been found technically unacceptable.

According to the decision, the agency fought the protest at first, but eventually admitted that the protester had a point and decided to take corrective action. But, when the protester asked for fees, GAO said it could only get some.

By way of background, this protest had to do with a Department of the Air Force solicitation to provide transportation of bulk jet, marine diesel, and commercial fuel. It required offerors to provide five barges of certain size to transport fuel to several ports.

The protester, Harley Marine Services, Inc., of Seattle, Washington, argued that the awardee (Vane Line Bunkering, Inc., of Baltimore, Maryland) sought to provide barges that were too large, among other supposed technical shortcomings. It also made the related argument that Vane Line’s past performance on the incumbent contract must have been poor because Vane Line did not have barges of the proper size.

The Air Force responded that the protester’s reading of the solicitation was overly narrow and that so long as the awardee provided at least one (of the five required) barges that could serve each port, it was in compliance.

The protester filed comments and new protest grounds. Not long after, the Air Force decided to take corrective action by cancelling the award, revising its needs, and issuing a new solicitation. GAO dismissed the protest as academic.

Harley Marine asked GAO to recommend that it be reimbursed the costs of filing the protest—including attorneys’ fees—on the basis that the Air Force unduly delayed taking corrective action in the face of a clearly meritorious protest. The Air Force “partially” opposed the request saying that the past performance argument was not clearly meritorious.

GAO said:

When a procuring agency takes corrective action in response to a protest, our Office may recommend reimbursement of protest costs where, based on the circumstances of the case, we determine that the agency unduly delayed taking corrective action in the fact of a clearly meritorious protest. Thus, as a prerequisite to recommending that costs be reimbursed where a protest has been settled by corrective action, not only must the protest have been meritorious, but it also must have been clearly meritorious, i.e., not a close question. A protest is clearly meritorious where a reasonable agency inquiry into the protest allegations would have shown facts disclosing the absence of a defensible legal position.

The standard, therefore, is whether the agency “unduly delayed” corrective action in the face of a protest that is “clearly meritorious.” You might note, that the standard, according to GAO, is that the protest have merit, not that every argument be a meritorious one.

GAO said that checking whether Vane Line’s barges met the solicitation’s requirements would have led to the obvious conclusion that the protest was meritorious. It said: “A reasonable inquiry in to the merits of Harley’s protest prior to the submission of the agency report would have revealed that Vane’s barges did not comply with the size restrictions for barges delineated in the solicitation, which would have rendered Vane’s proposal technically unacceptable.”

In other words, had the agency bothered to look, it would have realized that the awardee’s proposal did not meet the Air Force’s needs. Because the Air Force waited until after the agency report, it unduly delayed corrective action. Harley Marine’s protest had merit.

But, GAO did not stop there.

It noted that the general rule is that protesters be “reimbursed the costs incurred with respect to all the issues pursued, not merely those upon which it has prevailed” but said that when certain arguments are “so clearly severable” from the successful ones, those costs should not be paid.

At the request of the Air Force, GAO said that the past performance argument was clearly severable and not clearly meritorious. GAO did not analyze whether it mattered that the technical argument (boats are too big to perform) and past performance argument (boats were too big to perform) had the same underlying facts.

Citing previous decisions where it made similar rulings—we’ve written about a similar decision—GAO recommended that the protester be reimbursed the costs associated with the technical argument, but not the past performance argument.

While its true that this decision fits with previous ones, it also seems to undercut the supposed general rule that a protester who prevails gets fees associated with the protest, not just for those arguments that were winners. (For an in-depth look at this issue read our article in “The Procurement Lawyer.”)

Believe it or not, GAO’s practice of recommending payment of attorneys fees is revolutionary in American law. In this country, when parties litigate the rule is that each pays his or her own way. It’s so fundamental to the system that it’s called the “American Rule.” GAO therefore must have a darn good reason for departing from it.

It does.

Knowing that GAO might recommend that the agency pay a protesters fees incentivizes the agency in question to consider the arguments made by the protester and, if the protester has a point, take corrective action or risk the consequences.

Without the risk of paying fees, agencies would have little reason not to fight every protest all the way to the end. All the agency could possibly lose is time, and unlike a court of law, there’s no risk of a damages verdict at the end. The worst that could happen is that GAO recommend going back and re-doing the acquisition.

Only the risk of paying fees and potential embarrassment of a public decision prevents that from happening. Thus, the policy behind awarding fees when the agency refuses to see the writing on the wall is incredibly sound. This decision and those like it seems to undercut that policy.

What’s worse, it incentivizes protesters to leave arguments on the cutting room floor unless they are certain to be correct. But that would belie the realities of the bid protest system. Protesters are rarely certain of the exact facts that support their protests grounds. They have no access to other offerors’ proposals and only a snapshot of the award decision. It is usually not until the comments stage that protesters have a clear idea of the basis of a challenged agency decision (and then, only their attorneys have access to protected material).

Further, the standard used to come to this conclusion is hard to ascertain. Did it matter that the agency eventually took corrective action? It could be that GAO wanted to reward the agency for eventually doing the right thing. But that would mean that one standard applies to an agency that fights all the way to a decision, and another to an agency that delays taking corrective action.

Further, the underlying facts of the clearly meritorious ground appeared to be the same as the severable ground. So what makes an argument “clearly severable” versus just being different? This fuzziness further undermines the purpose of recommending fees in the first place.

Without a clear standard, protesters like Harley Marine are stuck wondering whether it was all worth it.