The GAO recently denied Leidos Innovations Corporation’s protest of a determination that Leidos was ineligible to receive a $272 million award by the U.S. Army despite Leidos having both the highest-rated technical proposal and the lowest evaluated cost.  The GAO decision, which affirmed the agency’s determination that Leidos was non-responsible because one of Leidos’ subcontractors did not have the necessary base access, is an important reminder that prime contractors should thoroughly vet their subcontractors to ensure, to the extent possible, all necessary qualifications are satisfied for the associated contract.

In February 2016, Leidos was one of six contractors that responded to a request for task order execution plan (RTEP) to provide operational and sustainment logistics support for U.S. Special Operations Command’s Tactical Airborne Multi-Sensor Platform.  The RTEP noted that some of the work may take place at U.S. government facilities in the U.S. Central Command (USCENTCOM) Area of Responsibility (AOR).  Contractors were also on notice that they were subject to parts of the Defense Federal Acquisition Regulation Supplement, including a provision requiring contractors to comply with directives from the Combatant Commander of USCENTCOM.

Although Leidos had the highest-rated technical proposal and the lowest evaluated cost, the Contracting Officer (CO) found Leidos to be non-responsible because, for force protection reasons, one of Leidos’ subcontractors did not have base access in the USCENTOM AOR.  After learning of the non-responsibility determination, Leidos appealed the CO’s decision to the GAO.  Leidos argued that (1) the CO should have consulted with Leidos prior to the non-responsibility determination, and (2) that the information on the subcontractor was outdated.

In denying Leidos’ protest, the GAO affirmed the long standing principle that COs have extensive latitude when making responsibility determinations and such determinations are only reviewed by the GAO to ensure (1) that they were factually supported at the time of the decision and (2) that the decision was made in good faith.  With regard to Leidos’ arguments, the GAO rejected Leidos’ suggestions that COs are required to consult with contractors prior to concluding that a contractor is non-responsible, stating that such consultation is not necessary at least where the CO “has an otherwise reasonable basis for assessing the firm’s responsibility.”  Thus, while companies can petition to review non-responsibility determinations, the agency is not required to provide consultation.

The GAO also rejected Leidos’ argument that any base access issues were moot because its subcontractor was in the process of being purchased by an American company and American contractors are not subject to base access restrictions.  As the GAO pointed out, base commanders are free to deny access to contractors based on any number of factors irrespective of a company’s nationality.  The fact that the subcontractor was being purchased by an American contractor was not sufficient, by itself, to ensure the force protection concerns discussed in classified material reviewed by the GAO would be resolved and the subcontractor would be granted access.

Finally, the GAO found that no matter how small the role envisioned for the subcontractor in the overall contract, the subcontractor’s suitability to perform the required work can still result in a non-responsibility determination.  The GAO noted that COs are capable of reviewing the suitability of subcontractors “when it is in the government’s interest to do so.”

In affirming Leidos’s non-responsibility determination, the GAO confirmed that proposals are only as strong as their weakest subcontractor.  This presents significant challenges in situations like that faced by Leidos where, for national security reasons, a contractor or subcontractor may not have prior notice of ineligible status or an opportunity to present rebuttal evidence.  But the decision highlights the risk posed by uncertainty about a subcontractor’s ability to fulfill any of the requirements and the need to confirm, to the extent possible, that each subcontractor meets all of the requirements regardless of the size of its role.

We would like to thank Timothy Pellegrino, a Bass, Berry & Sims summer associate based in our Washington, D.C. office, for his assistance in drafting this post.