Government agencies have ample discretion when it comes to corrective action in response to a bid protest.  A recent GAO bid protest shows that contractors must tread lightly when it comes to challenging that discretion.

Unlike negotiations in the private sector, power plays against the government can end in lost contracting opportunities.

The procurement that spawned the protest in question started as a sealed IFB by the U.S. Army Corps of Engineers (USACE) for dredging services.  In response, to the IFB, the Agency received three timely bids – and determined that all three were unreasonably high-priced (in comparison to a government estimate).  USACE therefore determined that it could not award the contract.

The lowest of those bidders submitted an agency-level protest, arguing that its bid was not unreasonably high – rather, the government’s estimate lacked a reasonable basis and was unrealistic.  In response to the agency protest, USACE attempted to engage the contractor in a dialogue concerning how its bid was formulated (in accordance with a USACE Acquisition Instruction, which authorizes the agency to share the details of the government estimate with the apparent low bidder), but the contractor declined to share details regarding its pricing.  Unsurprisingly, USACE then promptly denied the agency-level protest.

The contractor next took its argument to the GAO, where it again protested the government’s cost estimate as unreasonable.  This time, USACE elected to take corrective action and convert the acquisition from a sealed bid to a negotiated procurement.

The contractor again protested – this time arguing that the decision to convert the procurement was unreasonable and that the agency should have awarded the contract under the terms of the IFB at the originally-bid price.  This time, it was the GAO that dismissed the protest and allowed the agency to proceed with its corrective action.

Most interestingly, GAO dismissed the contractor’s challenges concerning the realism of the government’s price estimate as untimely.  According to GAO, the contractor failed to diligently pursue the basis for its protest when it declined to engage in an exchange of pricing information at the agency level.  But for this decision (according to GAO’s reasoning), the contractor would have been armed with a copy of the government’s estimate and equipped with the basis to pursue a protest (before both the agency and at the GAO).  The GAO also dismissed the protest arguments concerning the conversion to a negotiated procurement (again relying on the lack of any basis in the record to scrutinize the government estimate).

The series of protests is not a total loss for the contractor, as it is still eligible to engage in the continued competition and to negotiate its proposed price with the agency.  That said, the contractor finds itself right back where it started — leaving open the question of whether it would have been better served to engage with the agency over price as the lowest-priced bidder in response to the IFB.