By: Paul Emanuelli
This article is an excerpt from the 2021 edition of The Art of Tendering: A Global Due Diligence Guide, which is available for purchase.
In its November 2019 decision in Vane Line Bunkering, Inc., the U.S. Government Accountability Office (GAO) ordered a re-evaluation after determining that the winning bidder was technically non-compliant and relied on the prior experience from affiliated companies that would not be involved in the performance of the contract. The dispute dealt with a Department of Defense Request for Proposals (RFP) for fuel transportation services for jet, marine diesel, and commercial fuel.
The RFP prescribed the ship capacity requirements for the services. The complainant claimed that the winning bidder’s proposed ships did not meet those technical requirements. The GAO agreed, finding that the evaluator’s assessment was unreasonable since they failed to address information in the winning proposal that was inconsistent with the capacity requirements set out in the RFP:
The record here shows that the agency had direct evidence–on the face of Harley’s proposal–that one of Harley’s vessels exceeded the capacity limitations delineated in the RFP. The contemporaneous record is silent about how the agency viewed the conflict between Harley’s proposal narrative and the capacity limitations in the USCG documentation. The COIs were a required component of Harley’s technical proposal. A reasonable review of the documentation should have created doubt about whether Harley’s proposed vessel the HMS 2607 would comply with the above-stated capacity requirement. In addition, the agency has not proffered an explanation as to why the capacity information contained in the USCG COI would be inaccurate, or otherwise unreliable, for the purposes of addressing the discrepancy in this vessel’s stated capacity.14 Under the circumstances here, we find that the agency unreasonably evaluated Harley’s proposals by failing to recognize information on the face of Harley’s proposal that contradicted its proposal’s assertions of compliance. See SeaBeam Instruments, Inc., B-253129, Aug. 19, 1993, 93-2 CPD ¶ 106 at 6-8; Carson Helicopter Services, Inc., supra. Thus, we sustain this aspect of Vane’s protest.
The complainant also asserted that the winning bidder improperly relied on the prior experience of affiliated companies to meet the experience requirements even though those companies would not be involved in the performance of the contract. The GAO agreed that this was another significant flaw with the evaluation:
The record confirms the agency’s assertions that Harley identified itself as the contractor that performed each of the contracts identified in its PPQs. AR, Tab 34, Harley Past Performance Evaluation, at 7, 10, 13. As Vane has highlighted, though, all of Harley’s proposed vessels are owned and operated by personnel from Harley’s subsidiaries, not Harley, the parent company. AR, Tab 20, Ownership Documentation, at 1-46. While Harley’s technical proposal states that all vessels to be utilized are owned by either Harley Marine Special Leasing, LLC, or Harley Marine Financing, LLC, the ownership documentation provided by Harley shows that it also proposed to utilize vessels owned, or controlled, by its other subsidiaries as well, such as Pacific Coast Maritime, Inc., Harco Marine, LLC, and Harley Marine NY. AR, Tab 19, Harley’s Technical Proposal at 5; AR, Tab 20, Ownership Documentation, at 4-46; AR, Tab 30, at Harley Evaluation Notices, at 17. Thus, as a holding company, Harley’s proposal evidences that the firm will rely exclusively on the assets of its subsidiaries for the performance of the contract. Moreover, the protester points out that the firms actually performing the contracts referenced in the PPQs would have been Harley’s subsidiaries, not Harley.17 Comments and Supp. Protest at 14-15.
As the GAO confirmed, evaluators could only attribute the prior experience of an affiliated company where the proposal clearly demonstrates that those resources will be used in the performance of the contract:
An agency properly may attribute the experience or past performance of a parent, subsidiary, or affiliated company to an offeror where the firm’s proposal demonstrates that the resources of the affiliate will affect the performance of the offeror. See GM-Bulltrack, JV, B-414591.6, B-414591.7, Oct. 30, 2018, 2018 CPD ¶ 378 at 4. The relevant consideration is whether the resources of the parent or subsidiary company–its workforce, management, facilities or other resources–will be provided or relied upon for contract performance such that the parent or affiliate will have meaningful involvement in contract performance. See GM-Bulltrack, JV, supra. While it is appropriate to consider a subsidiary’s performance record where the affiliate will be involved in the contract effort, it is inappropriate to consider an affiliate’s record where that record does not bear on the likelihood of successful performance by the offeror and where there is no evidence that the affiliate will meaningfully contribute to performance. See National City Bank of Indiana, B-287608.3, Aug. 7, 2002, 2002 CPD ¶ 190 at 10; Health Net Federal Services, LLC, supra.
However, the GAO found that the winning bidder failed to demonstrate how its subsidiaries would be involved in the performance of the proposed contract:
As noted above, the record shows that Harley will be relying on multiple subsidiaries to perform this effort, which include not only use of vessels but also all the services associated with the provision of bulk fuel transportation. Harley’s past performance proposal, however, does not explain the roles–if any–that the subsidiaries had on the contracts detailed in its PPQs. In this regard, Harley’s proposal failed to connect the performance described in its PPQs with the subsidiaries it was proposing to rely on for performance here. Absent a clearer indication of which subsidiaries contributed to the referenced efforts, the agency could not explain how the performance described in the PPQs bore on the likelihood of success here. While Harley’s proposal did explain that these are wholly-owned subsidiaries, our Office has stated that the fact of ownership of an affiliated company is not sufficient to show that the past performance of one can be contributed to the other. See IAP World Servs.; Inc., EMCOR Gov’t Servs., B-407917.2 et al., July 10, 2013, 2013 CPD ¶ 171 at 9 (explaining that mere presence of common management and general claims of access to resources of subsidiaries were insufficient to attribute offeror’s past performance); Language Select LLP, dba United Language Group, B-415097, B-415097.2, Nov. 14, 2017, 2017 CPD ¶ 359 at 10.
In sum, because the record shows that the only nexus between Harley’s PPQs, and performance on this requirement, is Harley’s corporate ownership of its subsidiaries (which we have found to be insufficient for the attribution of past performance) we conclude here that the agency unreasonably evaluated Harley’s past performance. See IAP World Servs., Inc., EMCOR Gov’t Servs., supra; Health Net Federal Services, LLC, supra.
As this case illustrates, the assessment of technical compliance and evaluation of prior experience can be a complex undertaking. When those factors are included in evaluation criteria, government evaluators should ensure that they verify the material information provided by competing bidders in their proposals to better ensure the defensibility of any resulting evaluation and award decisions.
