The U.S. Department of Agriculture improperly awarded a $141 million sole source contract in exchange for the contractor’s agreement to withdraw a GAO bid protest.
According to a recent GAO bid protest decision, the award violated the Competition in Contracting Act, which does not permit an agency to award a sole source contract in exchange for a contractor’s promise to terminate litigation against the agency.
The GAO’s decision in Coulson Aviation (USA), Inc., et al., B-409356.2 et al. (Mar. 31, 2014) involved the USDA’s procurement of next generation (“NextGen”) large airtanker services for wildland firefighting support. The Air Force initially issued a solicitation for the NextGen airtanker services in 2011. After corrective action taken in response to a GAO bid protest, the USDA awarded NextGen contracts to four companies. Neptune Aviation Services, Inc., which had initially been identified as an awardee before the protest, was not awarded a NextGen contract.
In May 2013, Neptune filed a GAO bid protest challenging all four of the NextGen awardees. As called for by the Competition in Contracting Act, the protest triggered an automatic stay of the NextGen contract awards pending the GAO’s resolution of the protest. Although the USDA had significant concerns about its ability to adequately respond to the 2013 fire season without the protested NextGen large airtankers, the USDA elected not to override the stay.
While the protest was pending, the USDA and Neptune engaged in a series of discussions. In June 2013, the USDA and Neptune entered into a written settlement agreement. Under the settlement agreement, the USDA agreed to award Neptune a sole source contract for two NextGen large airtankers in exchange for Neptune withdrawing its GAO protest–thus ending the automatic stay of the other NextGen awards. Neptune subsequently withdrew its GAO protest.
After several months of internal discussions and talks with Neptune, the USDA awarded Neptune a sole source contract in December 2013. The estimated value of the sole source contract was $141,774,740. However, the contract allowed for additional airtankers to be added in each contract year. If the additional airtankers were included, the estimated value of the sole source contract was $496,211,590.
After notice of the sole source award was published in FedBizOpps, three of Neptune’s competitors (all awardees under the competitive NextGen contract) filed bid protests with the GAO. The protesters contended, in part, that the sole source award was improper because it was made in exchange for Neptune’s agreement to withdraw its bid protest.
The GAO agreed with the protesters. “A settlement agreement promising award of a contract on a sole-source basis in exchange for abandoning ongoing litigation, such as a bid protest, is not a permissible basis for restricting competition and excluding potential offerors,” the GAO wrote. “Quite simply, the existence of a settlement agreement does not permit a contracting agency to act in ways not otherwise permitted by applicable statutes and regulations.”
The GAO concluded, “[i]n sum, while the agency may not have entered into a settlement agreement promising to disregard applicable procurement statutes and regulations, the agency’s subsequent decision to award a sole-source contract to Neptune so as to comply with the terms of the settlement agreement and avoid a Neptune-threatened lawsuit was without a reasonable basis.” The GAO sustained the protest.
The Competition in Contracting Act establishes a broad policy of competition in federal procurements. Although sole source contracts are permitted in certain instances, those sole source awards must be consistent with CICA and the FAR. As the Coulson Aviation (USA) case demonstrates, an agency is not permitted to award a sole source contract in exchange for the contractor’s promise to withdraw a protest.