Solicitation Improperly Excluded Affiliates’ Past Performance, Says GAO

According to the GAO, a solicitation was unduly restrictive because it prohibited the consideration of the past performance of an offeror’s affiliates–even when the affiliates would contribute to performance of the contract.

The GAO’s bid protest decision in Iyabak Construction, LLC, B-409196 (Feb. 6, 2014) demonstrates that agency restrictions on the consideration of past performance must be reasonable.  However, the Iyabak Construction decision should not be interpreted as standing for the principle than an agency can never exclude the past performance of an offeror’s affiliates if those affiliates will contribute to contract performance.  Rather, the case suggests that it was the government’s failure to offer a good explanation–not the underlying restriction itself–that led to the “sustain” decision.

The Iyabak Construction GAO bid protest involved an Army Corps of Engineers solicitation for the design, construction, and repair of ultilidor systems at Eielson Air Force Base and other installations in Alaska.  The solicitation was issued as a small business set-aside.

Offerors were to be evaluated in a two-step process.  In the first step, the Corps would evaluate three factors: relevant experience, past performance, and organization.  The most qualified offerors would be invited to participate in the second phase.

With respect to the experience factor, the Corps sought recent, relevant experience on similar projects.  The solicitation stated that project examples were “limited to those projects performed by the firm submitting an offer” and that the requirements of the factor “cannot be met through the experience of the offeror’s parent, affiliate, or separate division.”  A similar restriction applied to the past performance factor.

Iyabak Construction, LLC filed a pre-award GAO bid protest.  Iyabak argued that the solicitation was unduly restrictive of competition.  Iyabak contended that the solicitation should allow for the consideration of an affiliate’s experience and past performance when the affiliate makes a firm commitment to be meaningfully involved in contract performance.

In response, the Corps stated that it had previously considered the experience of affiliates under other solicitations.  However, the proposals it received would sometimes include “general statements” about the affiliates and did not demonstrate that the affiliates would contribute to past performance.  The Corps argued that given its previous experiences, it was reasonable to restriction consideration of experience and past performance to the prime contractor itself.

After receiving the Corps’ response to the protest, the GAO convened a conference call with the parties to the protest.   However, “despite explicit inquiry,” the agency was unable to explain why it could not consider an affiliate’s past performance and experience in cases where the offeror demonstrates a firm commitment that the affiliate will participate meaningfully in contract  performance

Still unsatisfied with the Corps’ explanation, the GAO sustained the protest, writing:

In sum, we find that the RFP’s past performance and experience requirements are unduly restrictive of competition, given the agency’s failure to explain why its needs could not be satisfied by a less restrictive method of evaluating offerors’ past performance and experience. That is, the Corps has not explained or shown why the agency’s concerns with considering an affiliate’s past performance and experience under the RFP are not satisfied by making such consideration contingent upon a firm commitment that the affiliate would participate meaningfully in the performance of the contract. 

The GAO recommended that the solicitation be amended in accordance with the decision and that the protester be awarded its costs of filing and pursuing the protest.

The Iyabak Construction decision demonstrates that when an agency adopts restrictions regarding past performance and/or experience, those restrictions must be reasonable.  However, the case does not mean that an agency can never exclude the experience of affiliates, even those “meaningfully involved” in contract performance.

The GAO contrasted the Corps’ unreasonable explanation with its decision in Valor Construction Management, LLC, B-405365 (Oct. 24, 2011), in which the GAO held that an agency had properly restricted the consideration of past performance and experience to the prime contractor alone “given the size, price, and complexity of the procurement . . ..”   In other words, had the Corps had given a better explanation, it might have survived the protest.

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