Days After Award, Awardee Announced a Merger. Should the Agency Have Considered this Transaction When Evaluating Proposals?

Five days after receiving award, the awardee announced it was merging with another company. The protester argued the agency must not have properly considered the impact of this transaction when evaluating proposals. GAO, however, found the agency didn’t have to consider the transaction. An agency is only required to analyze a restructuring when it becomes aware that the transaction is imminent and essentially certain. Here, the agency was not aware of the transaction, and it was not clear the transaction had been imminent during the evaluation process.

Dyncorp International, LLC; PAE Aviation and Technical Services, LLC; M1 Support Services, LP, GAO B-420602 et al.

Background

The Navy issued a solicitation to holders of an IDIQ contract. The solicitation sought to award a task order for aircraft maintenance. Four offerors submitted proposals. The Navy awarded the contract to Vertex Aerospace, finding that Vetrex had the highest-rated, lowest-priced offer. Three unsuccessful offerors—Dyncorp International, PAE Aviation and Technical Services, and M1 Support Services—protested

Analysis

The protesters alleged the agency botched the technical evaluation, misevaluated cost realism, and ignored a conflict of interest. GAO rejected all of these arguments. One of the protesters, M1, also alleged the agency erred in not considering a corporate transaction. Five days after award, Vertex announced that it was merging with another company, Vectrus. M1 contended the agency should have considered the effect of this transaction on the award.

But GAO noted that an agency is only required to consider the impact of a corporate transaction when it becomes aware that the transaction is imminent and essentially certain. In this case, there was no evidence the Navy knew of this transaction when it made the award. Indeed the transaction had only been publicly disclosed five days after award. Also, there was also no evidence the transaction was imminent and certain prior to award. Documents filed with the SEC right before award showed there were open issues regarding the merger. Vectrus’s board did not approve the transaction until after the award. Even after award, Vertex needed shareholder approval. The Navy reasonably evaluated proposals without considering the merger.

DynCorp is represented by Scott M. McCaleb, Jon W. Burd, Sarah B. Hansen, and W. Benjamin Phillips, III of Wiley Rein LLP. PAE is represented by Anju Vohra, Robert L. Sneckenberd, James G. Peyster, Tyler S. Brown, and Allison Skager of Croweel & MOring LLP. M1 is represented by Aron C. Beezley, Lisa A. Markman, and Gabrielle A. Sprio of Bradley Arant Boult Cummings LLP. The intervenor, Vertex, is represented by J. Alex Ward, W. Jay DeVecchio, James A. Tucker, Alissandra D. Young, and Markus G. Speidel of Morrison & Foerster. The agency is represented by Christopher B. Erly, Morgan E. Gierhart, and Aldo Perez of the Navy. GAO attorney David A. Edelstain and Alexander O. Levine participated in the preparation of the decision.

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