COFC: Agency Cannot Ignore Changed Solicitation Requirements after 4-Year Bid Protest Saga

A recent court case details the aftermath of a bid protest battle lasting over four years. During that period, the agency’s requirements had changed, and the court held that the agency was required to amend its solicitation as a result.

In DZSP 21, LLC v. United States, 139 Fed. Cl. 110 (2018), the Court of Federal Claims considered the long-running saga of protests of a Navy procurement for base operation services for military installations in Guam. Prior to the protest the court was considering, there had been four GAO protests and one previous court protest. The two contractors involved were Fluor Federal Solutions, LLC and DZSP 21, LLC.

The Navy issued the original solicitation underlying the protest in October 2013. In the GAO protests, the Navy took corrective action on three separate occasions. As summarized by the court, “DZSP has been performing the base operation services on Guam since 2005, operating under bridge contracts since 2014 while the protests related to awards under the 2013 solicitation have been litigated.”

The solicitation was for “a cost-plus multi-year contract” “for base service operations for the Joint Region Marianas, comprising various military installations in Guam.” The Navy would evaluate proposals based roughly 50% on cost, 25% on past performance, and remaining 25% on technical factors. The total value of the contract was approximately $500,000,000.

In initial evaluation in 2014, “both DZSP and Fluor received an overall technical rating of ‘outstanding’ and a confidence assessment rating of ‘substantial confidence.” “Because DZSP’s proposal was the less costly of the two, the Navy determined that DZSP provided the best value to the government, and awarded it the contract.”

Fluor then filed a number of protests to GAO. After three of them, the Navy took corrective action but continued to award the contract to DZSP.

In July 2016,

The Navy again rated both proposals as technically outstanding and evoking “substantial confidence.” Although the gap in cost between the two proposals had closed, with DZSP holding a $2.6 million advantage, the Navy once again determined that DZSP provided the best value to the government and awarded it the contract.

In October 2016, Fluor filed another GAO protest and GAO sustained it. The Navy took corrective action and, in a reversal of its prior actions, awarded the contract to Fluor in 2017.

What had changed from the prior decisions?

In awarding to Fluor, the Navy’s 2017 cost evaluation “stated that the Navy no longer considered DZSP’s approach to ‘maintaining exempt labor rates’ to be ‘reasonable and realistic.'” The cost evaluation team for the Navy stated that it had “considered data from the current and past bridge contracts under which DZSP had been operating while the procurement process was pending.”

“The Navy also changed its views on the reasonableness of Fluor’s proposal and made upward adjustments to both cost proposals.” With the changes, Fluor was the lowest-cost proposal and best value.

DZSP became the protester, and filed a protest in the Court of Federal Claims.

The court held that the Navy’s award to Fluor was arbitrary and capricious because ” the Navy had erroneously assigned a strength to Fluor under Factor C, staffing and resources, where it may have been required to assess a weakness, and had arbitrarily made an upward adjustment to DZSP’s cost estimate.” “It was unreasonable,” the court held, for the Navy to “consider the bridge contracts only as to cost, while ignoring other aspects that were relevant to a full evaluation of Fluor’s and DZSP’s proposals, especially those concerning staffing and contractual risk of satisfactory performance.”

In response to the court’s decision, the Navy conducted a 22-day reevaluation and awarded to Fluor again. This reevaluation “disregard[ed] the bridge contracts in their entirety,” despite the court’s emphasis on those very bridge contracts.

DZSP once again challenged the award in court.

The court again sustained DZSP’s protest, holding that agency failed to take into account “significant increase in operational requirements” for military base operation services since an original solicitation in 2013 and the bridge contracts awarded since that time after the series of protests concerning this contract. 

Under FAR § 15.206(a), “[w]hen . . . the government changes its requirements or terms and conditions, the contracting officer shall amend the solicitation.” The court found that, “[c]onsidering the bridge contracts as a relevant factor highlights what has already become evident: the requirements of this solicitation have changed markedly.”

The court then ordered the Navy to amend its solicitation after this 4-year series of bid protest battles. The court held that the Navy must take into account the increased staffing needs and requirements as shown under the bridge contracts. The court also held it was “irrational for the Navy to not consider [incumbent] DZSP’s work on the bridge contracts” as part of its past performance evaluation.

This case provides an interesting example of a long and convoluted protest battle involving years of bridge contracts. The Navy was not free to ignore the changes in its requirements that had occurred over this period of time, nor was it free to ignore the performance that the incumbent had carried out during the series of bridge contracts.