Navy must reimburse contractor in A-76 dispute

The rules that govern public-private competitions are anything but murky, according to the General Accounting Office. In a March 27 decision, GAO ruled that the Navy must reimburse a contractor for the cost of filing a bid protest that alleged the service violated Office of Management and Budget Circular A-76 when it decided to keep support work in-house at the Naval Air Station in Lemoore, Calif. GAO dismissed the protest last November when the Navy reversed course and decided to conduct a new cost comparison between the in-house group and the contractor, a joint venture of the CH2M Hill and J.A. Jones companies. The case provides a telling look at how GAO interprets A-76 rules. The Navy's decision to reopen the competition came after GAO informed the service that it faced "significant litigation risk" in the case. GAO had no choice but to dismiss the protest once the Navy launched a new cost comparison, according to GAO Associate General Counsel Daniel I. Gordon. "When there is not a final selection by the agency, we cannot hear the protest," he said. But GAO can order an agency to reimburse a protestor if it concludes that the agency put off revisiting an award decision in the face of a "clearly meritorious protest." When the Jones/Hill joint venture requested reimbursement for its protest costs, GAO ruled its protest was clearly meritorious. In so doing, GAO offered a stinging rebuke of the Navy's interpretation of A-76 rules. The Navy originally selected the in-house group after determining it could deliver the same performance at a lower cost than the private firm. But the Navy did not consider 68 "performance strengths" in the Jones/Hill proposal that the Navy itself had identified when Jones/Hill was chosen as the best contractor to compete against the Navy through what is known as the "best value selection process." As a result, the Navy held the private firm to a higher performance standard than the in-house group, GAO ruled. "Failing to ensure that the [in-house group] offers a level of performance comparable to that of the best value private-sector proposal selected to compete with the [in-house group] can cause the very technical superiority that led to the private sector proposal's selection to become the cause for losing the public/private cost comparison," the GAO decision stated. The Navy agreed to consider the 68 strengths when it reopened the competition. In its argument against reimbursing Jones/Hill, however, the service said that because Circular A-76 rules are unclear, the contractor's protest was far from "clearly meritorious." "It is well recognized that the guiding rules [of Circular A-76] are murky at best," argued the Navy. GAO disagreed, noting that the A-76 Supplemental Handbook states that agencies must compare the performance standards of in-house and private sector proposals when the winning private bid is chosen through the best value selection process. GAO scolded the Navy for ignoring this principle. "It should have been clear that we would view a protest as clearly meritorious if…the record established that an agency had identified strengths in the selected private-sector proposal during the best value private-sector competition, but then failed to consider those strengths during the [public-private competition]" the decision said. The contractor's lead attorney said agencies often ignore some aspects of a contractor's proposal when it is compared to the in-house bid. "What we've seen, time and time again, is a different group in the agency evaluation process won't add the private bid's technical superiority to the [public-private competition]," said Jones/Hill attorney William Roberts. Navy lead attorney Vicki O'Keefe declined to comment on the case. Roberts criticized GAO's decision to dismiss Jones/Hill's protest because the Navy did not address some contested issues when it reopened the competition. "The agency didn't agree to implement corrective action on all the contested issues," he said. "[GAO's decision] sets a dangerous precedent, because if an agency thinks it can implement partial corrective action, it's an easy way out." But Jones/Hill has a reasonable chance of winning the current competition, according to GAO. This competition is expected to be done soon, said Roberts. The contractor can file another bid protest against the Navy if it loses again. While he disagrees with some of GAO's decisions in the case, Roberts lauded the agency for setting out clear guidance on how to follow A-76 rules. "GAO has done an excellent job of establishing...the best guidance on how to conduct an A-76 procurement," he said.
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