Agency Not Required to Hunt Down and Investigate Bad Publicity, Says GAO

In a recent decision, GAO said that it is not the contracting agency’s job to play investigator when it comes to publicly available negative past performance information. GAO acknowledged that there may be certain situations where the agency is required to consider such information that it is aware of during its evaluation. But according to GAO, this denied protest involved no such situation.

GAO’s decision in Cotton & Company, LLP, B-418380.4 (March 10, 2021), involved the National Aeronautics and Space Administration’s (NASA) issuance of a task order request for quotations for the NASA Annual Financial Statement Audit (NAFSA). NASA issued this Federal Acquisition Regulation (FAR) subpart 8.4 solicitation through a General Services Administration Federal Supply Schedule.

The solicitation contemplated a best-value award of the fixed-price task order on the basis of three evaluation factors: technical, past performance, and price. It said that the technical factor would be pass/fail and past performance would be more important than price. Of relevance here, the solicitation required vendors to submit specific past performance information for up to five of their most relevant contracts. If a contract reference was deemed recent and met the minimum average annual cost requirements, the agency would then consider its degree of relevance based on content and performance. The performance aspects of the relevance evaluation would be based on customer satisfaction and contractor data regarding the vendor’s ability to meet technical, schedule, cost, and management requirements, its peer review report rating, and its quality control monitoring report.

Based on its initial evaluation, the agency first awarded the solicitation to Cotton & Company. After two separate protests, a voluntary corrective action, and a reevaluation, it made a new award to Ernst & Young. But Cotton & Company protested that award, and the agency took a second corrective action. After the second reevaluation, the agency again awarded to Ernst & Young as the best value vendor.

The agency found that Cotton & Company and Ernst & Young both passed the technical factor, both scored a level of confidence rating of “high” for past performance, and offered similar prices. As relevant here, Ernst & Young submitted five past performance references but two were deemed “less relevant” as they involved non-federal clients. The agency still evaluated all five references, finding that Ernst & Young’s experience covered each of the four specific relevance areas and rating it as overall high performance and very highly relevant. The agency also individually considered Ernst & Young’s Navy contract very highly relevant in the type and complexity of services, as it alone covered each of the four specific relevance areas.  In its best value decision, the agency said that “Ernst & Young’s demonstrated ability to successfully perform all aspects of the NAFSA requirement under one contract warranted paying the small price premium associated with Ernst & Young’s proposal.”

Cotton & Company subsequently filed the subject protest challenging several aspects of the agency’s past performance evaluation and its ultimate source selection decision. As relevant here, one allegation was “that the agency unreasonably failed to consider numerous publicly available news articles concerning Ernst & Young’s negative past performance and questionable business practices.” Specifically, the protest argued, “that the agency failed to consider past Public Company Accounting Oversight Board’s (PCAOB) investigations of Ernst & Young demonstrating audit failure rates as high as fifty percent.” Notably, the protest acknowledged that this information involved only Ernst & Young’s non-federal audits and that NAFSA was not subject to PCAOB inspection. But it also argued that “Ernst & Young itself claimed its non‑federal audits were relevant by identifying two non-Federal past performance examples.” Finally, the protest alleged that the agency should have been aware of these publicly available articles and PCAOB reports even if it was not.

The agency’s response to this was that such news articles were not the “type of information” that the solicitation required it to evaluate. The agency argued both that it was not aware of these articles during the evaluation and that it should not have been expected to be aware of them either. It added that the solicitation required “a copy of the firm’s latest peer review report,” and that Ernst & Young submitted a recent copy of its AICPA peer review report, as required.

GAO agreed with the agency and denied the protest on all grounds. GAO explained:

An agency is not required to hunt down and investigate any and all negative news articles concerning vendors when conducting past performance evaluations.  While we have recognized that, in certain limited circumstances, an agency has an obligation to consider information bearing on a vendor’s past performance when the record supports a conclusion that the agency was aware of the information and should have considered it, this is not one of those situations.  Here, none of the contracts in question were identified by Ernst & Young in its proposal, and none of them involved performance for the same procuring agency as the instant procurement.  As a result, there is no evidence to suggest that the agency knew or should have known of this information.

In the end, GAO also found the other underlying challenges to the agency’s past performance evaluation to be without merit, and thus, found “no basis to question the reasonableness of the agency’s conclusion that Ernst & Young’s slightly higher‑priced quotation represented the best value to the government, a determination which was based on Ernst and Young’s demonstrated ability to successfully perform all aspects of the NAFSA requirement under one contract.” 

The takeaway here is that, while there may be situations where the agency is required to consider certain information bearing on a vendor’s past performance, it is not required to play detective. GAO’s decision implies that an agency may be required to consider such information if it is, at a minimum: (1) something the agency was in fact aware of during its evaluation; and (2) relevant to the agency’s past performance evaluation under the solicitation. But GAO did not specify any bright lines for exactly when and how this duty actually kicks in. Thus, while this decision provides some helpful guidance for offerors and protesters alike, we can only wait and see if GAO will clarify its standards down the road.

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