GAO Faults Contractor for General Manager’s Sickness

When an incumbent contractor’s general manager got sick and had to quit, the contractor promptly found a replacement, which the agency approved. But there was still one problem: the incumbent had already proposed to use the same general manager for the next contract.

According to GAO, the agency was right to eliminate the contractor from the competition, even though the agency knew that the contractor had a new general manager and had, in fact, approved the replacement.

In Chenega Healthcare Services, LLC, B-416158 (2018), The contractor, Chenega Healthcare Services, LLC, a San Antonio, Texas, 8(a) program participant small business, was the incumbent contractor on an 8(a) indefinite delivery, indefinite quantity services contract to the Department of Energy in support of the National Training Center at Kirtland Air Force Base in Albuquerque, New Mexico.

Chenega, a subsidiary of Chenega Corp., an Alaska Native Corporation, was in the last year of its performance on the incumbent contract when the agency issued a request for proposals to re-compete the procurement. In August 2017, Chenega submitted a proposal, which included the resume and commitment letter of the general manager currently performing.

In December 2017, while proposals were still being evaluated, the general manager informed Chenega that he could not continue work due to medical reasons. Chenega notified DOE that he left and that it had hired a replacement general manager, who DOE subsequently approved. Chenega also contacted two contracting officials working on the re-compete and told them that it would propose a substitute manager for the upcoming contract.

DOE did not allow Chenega to substitute a new general manager. Instead, in January, the contract specialist emailed Chenega to ask whether the proposed general manager’s commitment letter was still valid. Chenega replied that it was not.

Despite Chenega offering a less expensive proposal, the evaluators found Chenega’s proposal “unsatisfactory” because Chenega suposedly had failed “to propose a General Manager” and eliminated it from the competition.

Chenega protested to GAO, arguing that the agency was obligated to consider the replacement general manager, who, after all, the agency knew about and had approved on the incumbent contract. Chenega argued that the “too close at hand” doctrine—stemming from a line of cases in which GAO has held that past performance information of which the agency is aware is too close at hand to ignore—required the agency to consider this known replacement.

GAO declined to extend this doctrine beyond past performance, reiterating that “too close at hand” does not extend to “situation where the information in question relates to technical requirements of the solicitation, including the qualifications of proposed key personnel.” GAO added that the doctrine is “not intended to remedy an offeror’s failure to submit an adequate and acceptable proposal.”

Chenega also argued that the agency should have held discussions and given it the opportunity to update its proposal and substitute the new general manager. GAO said “the unavailability of a key person identified in a proposal renders a proposal technically unacceptable, and the agency has the discretion whether to evaluate the technically unacceptable proposal or to conduct discussions under such circumstances.”  Here, because “an agency need not conduct discussions with a technically unacceptable offeror,” the agency acted within its discretion by rejecting Chenega’s proposal instead of opening discussions.

GAO denied the protest.

We do not normally opine on whether GAO’s decisions are correctly decided, and we recognize that generally it is GAO’s job to apply the law, not make broader policy judgments. That said, GAO’s decision in this case (and in similar cases) puts contractors in a very tough spot.

In complex procurements, the evaluation of proposals can take months. In a few cases, we’ve seen the time frame from proposal submission to award take years. During that time, a lot can happen to a key employee: the employee can become sick, as happened in Chenega Healthcare Services. The employee could die. The employee could retire. All these things are outside the offeror’s control.

Chenega did the right thing and told the contracting officer that the letter of intent was no longer valid. But there is no mechanism that, after the proposal deadline, allows a contractor to pull back its proposal once submitted and change it to reflect a new reality. In such circumstances, the contractor has to rely on the procurement officials to be reasonable and use their discretion to reach a fair result.

To that end, GAO did not need to necessarily extend its “too close at hand” doctrine to sustain this protest. There is a far more fundamental legal principle that it could have relied on. According to FAR 1.602-2, contracting officers have a duty to ensure “that contractors receive impartial, fair, and equitable treatment[.]” The Court of Federal Claims has cited FAR 1.602-2 in holding, for example, that an agency may abuse its discretion by refusing to allow clarification of an obvious clerical error in an offeror’s proposal.

Here, the fair and equitable thing to do would have been to give Chenega the opportunity to revise its proposal to include the new general manager. That likely would have involved opening discussions with all offerors, but this need not have been unduly burdensome to DOE; agencies have reasonable discretion to limit the scope of discussions.

The GAO should have applied the basic principles of justice and fair dealing, which are already encompassed by the FAR, and sustained the protest based on the unreasonable actions of the agency in failing to open discussions to allow Chenega to substitute its general manager. But that didn’t happen. Unless Chenega or another contractor can persuade the Court of Federal Claims to adopt a different position, offerors are on notice: if something happens to one of your proposed key personnel, you could be in a tough spot.

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