Corrective Action Following Dismissal Request Doesn’t Mean Protester Gets Costs Reimbursed, Says GAO

While GAO’s bid protest process is designed to achieve the laudable goal of providing a less costly process for procurement disputes, pursuing a GAO protest is nevertheless expensive. To offset these expenses, successful GAO protesters may be reimbursed for some of their expenses incurred pursuing a protest. But what constitutes a successful protest that would entitle a protester to costs? In a recent request, GAO concluded that successfully defending against a motion to dismiss was not enough to entitle a party to costs, despite the fact that the agency subsequently took corrective action.

GAO’s decision in Southern Aire Contracting, Inc.—Costs, B-418070.3 (Comp. Gen. Feb. 21, 2020), involved a request for reimbursement of legal costs incurred pursuing an earlier protest. Before taking a look at why Southern Aire believed it was entitled to reimbursement, we need to first look at what led to Southern Aire to protest in the first place.

In spring 2019, the Army issued a solicitation for a multiple award task order procurement for repair and construction services at Fort Benning, Georgia. In response, the Army received offers from 33 offerors including Southern Aire.

After evaluating offers, the Army distributed a pre-award notice that identified 7 awardees. Southern Aire was identified as being among the awardees. Roughly a week later, however, the Army distributed a revised pre-award notice that removed Southern Air from the named awardees. In subsequent discussions with Southern Aire, the contracting officer explained that it was never an awardee, and its inclusion on the first pre-award notice had been a mistake.

Unsurprisingly, Southern Aire filed a GAO protest generally alleging that the Army’s evaluation of its proposal was unreasonable and contrary to the terms of the solicitation. For those new to the GAO protest process, here’s a summary: after a protest is filed with GAO, the protested agency must produce an Agency Report with a legal memorandum summarizing the legal defense of the agency’s actions as well as all relevant supporting documents. Filing of the Agency Report is typically the first substantive filing by an agency in response to a protest.

In Southern Aire’s protest, the Agency Report was due on October 28. Breaking from tradition, however, the Army took a more aggressive approach to defending Southern Aire’s protest. On October 16, the Army requested Southern Aire’s protest be dismissed because it lacked factual and legal support. GAO suspended the deadline for filing the agency report while the dismissal request was sorted out.

Southern Aire responded to the dismissal request defending the legal and factual sufficiency of its protest and raised new protest arguments based on information learned in the dismissal motion.

On October 24, the Army notified GAO that it was withdrawing its dismissal request. GAO never scheduled a new deadline for the submission of Agency Reports. Five days later, on October 29, the Army notified the parties that it intended to take voluntary corrective action. GAO subsequently dismissed Southern Aire’s protest as academic in an unpublished decision.

By all accounts, Southern Aire’s protest was successful. It resulted in a corrective action by the Army, which included the reevaluation of proposals. As such, Southern Aire requested that GAO recommend reimbursement of reasonable costs for pursing the protest. According to Southern Aire, the Army unduly delayed taking corrective action in the face of a clearly meritorious protest.

Southern Aire’s request for costs is rooted in GAO’s bid protest regulations. Specifically, a successful protester may request its bid protest costs under the following circumstance:

If the agency decides to take corrective action in response to a protest, GAO may recommend that the agency pay the protester the reasonable costs of filing and pursuing the protest, including attorneys’ fees and consultant and expert witness fees.

4 C.F.R. § 21.8(e). Despite the grant of authority in its regulations, GAO decisions have limited when protesters can get costs to instances where “the agency unduly delayed taking corrective action in the face of a clearly meritorious protest, thereby causing a protester to expend unnecessary time and resources to make further use of the protest process in order to obtain relief.” GAO generally presumes there was an undue delay where corrective action is taken after the Agency Report is filed. This is because protesters will incur costs developing comments on the agency report.

Southern Aire argued that because the Army filed its Agency Report on October 29—one day after the original date set for submission of the Agency Report—the Army unduly delayed its corrective action. Southern Aire further argued that its protest was clearly meritorious, as evidenced by the Army’s withdrawal of its dismissal request and subsequent corrective action.

GAO did not agree. Relevant to GAO’s analysis was the fact that the due date for the Agency Report had been suspended following the Army’s dismissal request and that no new date was set for filing the Agency Report. According to GAO, “the Army’s proposed corrective action occurred prior to the agency report being due, and neither its report nor the protester’s comments were filed.” Consequently, GAO concluded, Southern Aire was not required to expend resources to file comments, so the Army’s corrective action was prompt, and cost reimbursement was not necessary. Thus, GAO denied the request for cost reimbursement.

GAO’s decision is an example of how GAO has limited the availability of fees for successful protesters. Unfortunately, rather than weigh the unique circumstances of each corrective action, GAO has opted instead to utilize a bright line rule that cost reimbursement is only appropriate when the agency takes corrective action after it files its agency report.

In my opinion, this bright line rule harms protesters like Southern Aire. In its decision, GAO concluded that Southern Aire was not required to expend additional resources because the Army never filed an Agency Report before taking corrective action. While GAO is factually correct, it misses the larger point that Southern Aire was required to expend resources to respond to the Army’s dismissal request, which was subsequently withdrawn. To say, as GAO does, that Southern Aire was no worse off for the Army’s delay in taking correction until October 29th, ignores the work (and costs) Southern Aire had to put further defending its protest from dismissal.

Unfortunately, GAO’s position on costs is pretty well entrenched. While Southern Aire presented an interesting factual permutation impacting the costs questions, it’s not entirely surprising GAO ultimately denied its request. What we do know is that defending against a motion to dismiss prior to corrective action being taken is not enough—in itself—to entitle a protester to cost reimbursement.