Can an Agency Extend an Incumbent's Contract Without Justification?
The GAO has ruled that cancelling solicitations and extending contracts with an incumbent, requires a good reason. In the Matter of: Walker Development & Trading Group, Inc., File: B-413924, dated January 12, 2017, the GAO sustained the protest of a VA decision to extend the award of an $10 million indefinite‑delivery/ indefinite-quantity (IDIQ), fixed‑priced contract for laundry services.
On July 7, 2016, the agency posted an RFQ on the FedBizOpps website for laundry services for the Los Angeles, Loma Linda and Long Beach VA hospitals. The RFQ anticipated the award of contract for a base year and four one-year options. The solicitation stated that award would be made to the lowest-priced, technically acceptable offeror.
On October 3, 2016, after the solicitation deadlines, the protester received a notice that the agency cancelled the solicitation stating that it decided to cancel its effort to procure laundry services “after receiving legal guidance to do so.” The bidder’s protest soon followed on October 5.
The protester argued the agency lacked a reasonable basis to cancel the solicitation and that the agency’s actual motivation was to award a contract to the incumbent, “who seem to win all of the awards for laundry out of the contracting office.” The protester contended the agency made a sole-source award to the incumbent.
The VA tried unsuccessfully to dismiss the protest arguing the alleged sole-source contract was a continuation of an existing contract that had been extended and that the extension was a matter of “contract administration within the discretion of the contracting agency.”
To support its argument the VA submitted a document entitled “Agency response and motion to dismiss” and three attachments. The attachments show that the VA made an award to the incumbent on August 1, 2016, for emergency laundry services for one month; then the VA extended this contract until September 2016 by amendment No. 1, and then by amendment No. 2, extended the contract until February 28, 2017. The agency argued in its legal memorandum that the alleged sole-source contract was, in fact, a continuation of an “existing contract [that] has been extended through February, 2017 in full compliance with [FAR clause] 52.217-8.”
Cancelling Solicitation Without Reasonable Basis
The GAO on the other hand, found that in a negotiated procurement an agency may only cancel an existing solicitation where it has a reasonable basis for doing so and “in the absence of an adequate agency record to support its actions, and in the absence of any reasonable explanation for its actions, we are left with no option but to make an adverse inference in this matter.” If the record does not support a reasonable basis for a cancellation a protest will be sustained.
In addition, the VA attempted using FAR clause 52.217-8 to extend the performance period of a previously awarded contract. But, the GAO found that the solicitation number for the cancelled solicitation and the solicitation number for the contract awarded to Railroad Cleaners were identical. Then, the VA provided no information regarding the contract with the incumbent so the GAO sustained the protest as an impermissible sole source contract.
Agencies have tremendous discretion – if they use it appropriately. In this case, the VA abused its discretion and was the bid protest process forced the VA to re-compete a valuable contract.