A SOLICITATION MUST CONSIDER EXPERIENCE OF AN OFFEROR’S AFFILIATES IF THE PROPOSAL DEMONSTRATES MEANINGFUL PARTICIPATION IN CONTRACT PERFORMANCE

Last year the Government Accountability Office (“GAO”) sustained a protest because the agency improperly gave an offeror credit for past performance of its separate affiliates, even though the record did not show that the affiliates would provide resources or be relied upon for contract performance.  IAP World Svcs, Inc.; EMCOR Gov’t Svcs., B-407917 et al., July 10, 2013.  Now comes GAO, and in the flip side of the argument, sustains a protest of a solicitation that is unduly restrictive of competition because the agency refused to consider past performance of affiliates that would participate meaningfully in contract performance.   Iyabak Const., LLC, B-409196, Feb. 6, 2014.

GAO has in the past stated that an agency properly may attribute the experience or past performance of a parent or affiliated company to an offeror where the firm’s proposal demonstrates that the resources of the parent or affiliate will affect the performance of the offeror. The relevant consideration is whether the resources of the parent or affiliated company–its workforce, management, facilities or other resources–will be provided or relied upon for contract performance such that the parent or affiliate will have meaningful involvement in contract performance. Ecompex, Inc., B-292865.4 et al., June 18, 2004, 2004 CPD ¶ 149. GAO finds it appropriate to consider an affiliate’s performance record where the affiliate will be involved in the contract effort or where it shares management with the offeror, however, it is inappropriate to consider an affiliate’s record where that record does not bear on the likelihood of successful performance by the offeror.

The solicitation in Iyabak was a small business set-aside for design, construction and repair of facilities.  The solicitation stated that an offeror would not receive credit for relevant past performance of a parent, affiliate or separate division in the rankings.  The only explanation offered by the agency (the Corps of Engineers) for this experience and past performance restriction was that the agency had encountered problems in the past when it considered the experience and past performance of affiliates.  During the development of the protest, GAO inquired of the Contracting Officer why the agency could not consider an affiliate’s past performance and experience where the offeror had demonstrated a firm commitment that the affiliate will participating meaningfully in contract performance.  The CO and the Corps never answered the question, either at a GAO hearing or in its post-hearing comments.

The GAO concluded that this solicitation was unduly restrictive of competition because the agency could not show that its needs couldn’t be satisfied by a subcontractor or affiliate with relevant experience.

SUGGESTIONS:

(1) In solicitations, agencies should permit offerors to obtain credit for the past performance and experience of affiliates provided that the offeror has a firm commitment of meaningful participation in the eventual contract.

(2) If you want to receive credit for the past performance or experience of an affiliate in a proposal you submit, be sure that you clearly demonstrate in your proposal that the resources of the affiliate will affect your performance as the offeror. You can do this by showing that the resources of the company whose experience you want count, namely, its workforce, management, facilities or other resources–will be provided or relied upon by you for contract performance and that the affiliate will have meaningful involvement in contract performance.  Examples would include:  direct involvement in project management of your affiliate’s personnel, use of affiliate’s facilities, use of your affiliate’s machines and equipment, or direct involvement of the affiliate’s employees in the contract in other ways.  Be sure to explain it all in your proposal.

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