Acquisition of Awardee’s Affiliate Had No Impact on Responsibility Determination or Evaluation of Experience When a “corporate transaction” that
Acquisition of Awardee’s Affiliate Had No Impact on Responsibility Determination or Evaluation of Experience When a “corporate transaction” that
directly affects an offeror takes place—such as an acquisition or change in ownership— during a procurement, but prior to award, a federal agency must consider the transaction’s impact on the offeror’s technical and financial resources
(i.e., its responsibility) as well as when evaluating the offer. Although offerors must inform the agency of such corporate transaction, agencies can—and should—consider independent evidence of corporate transactions, which is an exception to the general rule that agencies should not consider external sources of information when evaluating offers. Of course, in the event that independent evidence of a corporate transaction (not disclosed by the offeror) arises, the offeror should be given the chance to respond to it.
In a recent bid protest, the GAO explained the highly deferential standard of review it will apply to protests based on corporate transactions if the record shows that the agency considered the effects of the transaction.
In this instance, the protester alleged that the Department of Veterans Affairs failed to consider the effects of a corporate transaction involving an affiliate of the awardee. Prior to the award, an entity which was “at least three levels removed from the awardee […] in the chain of corporate ownership” was acquired by a third-party.
The protester asserted that the corporate transaction in question introduced significant risks and uncertainty with respect to the awardee’s resources.
The office noted that it generally does not consider a protest challenging an agency’s responsibility determination. According to the GAO, it will only consider such protests when the agency ignores information that, by its nature, would be expected to have a strong bearing on whether the awardee should be found responsible.
Since, in this case, the record showed that the agency was aware of the corporate transaction at issue and considered it when determining the awardee’s responsibility, the GAO concluded that there was no basis to sustain the protest on such grounds.
The protester also argued that the agency’s alleged failure to consider the effects of the corporate transaction rendered unreasonable the agency’s evaluation of the awardee’s proposal under the experience factor.
The GAO also rejected this argument, finding that (1) the awardee was the entity that had performed the prior contracts identified in its proposal (and not any of the entities involved in the transaction), (2) the awardee’s proposal did not rely in any way on the entities involved in the acquisition, and (3) the agency considered the transaction and adequately documented the reasons as to why the it did not impact the evaluation of the awardee’s experience.