Agency Reasonably Concerned by Potential Confusion, Performance Problems Created by Pending Novation of Contract Assets; GAO B-416528.2, Wyle Laboratories Inc.

Protest challenging the agency’s rejection of a quotation is denied, where the protester proposed to perform as the prime contractor only until its contract assets were novated to its subcontractor and successor-in-interest, which the agency concluded introduced unreasonable risks to performance. GAO found the agency reasonably concluded that the quotation failed to show that the protester was capable of performing the work without its proposed subcontractor and successor, and that the agency was reasonably concerned that it would lack privity of contract with the subcontractor.

Wyle Laboratories Inc. challenged U.S. Customs and Border Protection’s rejection of its quotation for a contract for professional, technical, and operational support services, arguing that the agency improperly failed to conduct a comparative assessment of the vendors’ quotations prior to selecting Deloitte to receive the order.

The procurement was limited to vendors holding a contract under GSA’s OASIS vehicle. Prior to the solicitation being issue, Wyle, which holds an OASIS contract, entered into an asset purchase agreement with Grant Thornton whereby Wyle transferred all of the assets and liabilities used in or relating to the performance of Wyle’s OASIS contract to Grant Thornton. Grant Thornton does not hold an OASIS contract.

Wyle and Grant Thornton submitted documentation to GSA detailing the transaction and asking GSA to recognize Grant Thornton as the successor-in-interest to Wyle’s OASIS contract. However, when Wyle submitted its proposal, and during the pendency of the protest, GSA had not yet recognized the novation agreement.

When considering Wyle’s proposal, the agency concluded that awarding to Wyle would mean that CBP would not be in privity of contract with Grant Thornton, the entity who would actually perform the work. The agency concluded this introduced considerable risk, up to and including the fact that Wyle could switch out Grant Thornton with another contractor without first obtaining the approval of CBP. Accordingly, the agency concluded that Wyle’s quote could not be considered for award.

The protester challenged this determination, arguing that the agency did not base its conclusion on an assessment of its quotation, but on the outcome of Wyle’s pre-award protest with GAO. In response to that protest, GAO found that Wyle did not have an economic interest in the outcome of the procurement and dismissed the protest because Wyle was not proposed for performance.

While the quotation was submitted by Wyle, it indicated that Grant Thornton would lead the team and that Wyle would serve as the prime contractor only until the novation of its OASIS contract assets was complete. During the pendency of the pre-award protest, the agency began a technical evaluation. Based on this review, the evaluators determined that Wyle’s quotation had earned an outstanding rating under the technical and management factor, and neutral confidence rating for past performance.

The protester argued that these ratings show the agency must have believed Wyle could perform the task order, and therefore improperly relied solely on GAO’s decision in concluding that Wyle’s quotation was ineligible for award.

GAO disagreed, noting that the evaluation had nothing to do with Wyle ability to perform because the quotation provided for performance of the task order work solely by Grant Thornton. None of the substantive areas of the quotation contained any reference to Wyle or Wyle’s capability or intent to perform the task order, and Wyle admitted that it did not intend to perform the task order. Accordingly, any ratings reflected the agency’s evaluation of Grant Thornton’s ability to perform.

GAO also disagreed with the assertion that the agency was required to conduct a comparative assessment of the vendors’ quotations prior to determining that Wyle’s quotation was ineligible for issuance of the task order. The quotation proposed Wyle as the prime contractor (pending novation), but indicated that Grant Thornton would perform 100 percent of the work under the task order. The agency found it was not in its best interest to award to a vendor who, by its own admission, lacked the capability to perform. GAO also found the agency reasonably concluded it would not be in privity of contract with Grant Thornton, which introduced the risk that the subcontractor could be switched out. GAO found this reasonable and denied the protest.

Wyle Laboratories Inc. is represented by Alexander J. Brittin of Brittin Law Group, PLLC; and Jonathan D. Shaffer and Mary Pat Buckenmeyer of Smith Pachter McWhorter PLC. Deloitte Consulting LLP is represented by Keith R. Szeliga. Adam A. Bartolanzo, and Shaunna E. Bailey of Sheppard, Mullin, Richter & Hampton LLP. The government is represented by Carl J. Vernetti, Department of Homeland Security. GAO attorneys Heather Weiner and Jennifer D. Westfall-McGrail participated in the preparation of the decision.

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