A spurned federal landlord persists until it has a day in court

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All the General Services Administration was trying to do was get new office space for Immigration and Customs Enforcement in Rhode Island. But, in a word, it bungled the procurement. The inspector general said so. So did the courts. But it wasn’t easy for the losing bidder to make its case, as we hear from Smith Pachter...


Best listening experience is on Chrome, Firefox or Safari. Subscribe to Federal Drive’s daily audio interviews on Apple Podcasts or PodcastOne.

All the General Services Administration was trying to do was get new office space for Immigration and Customs Enforcement in Rhode Island. But, in a word, it bungled the procurement. The inspector general said so. So did the courts. But it wasn’t easy for the losing bidder to make its case, as we hear from Smith Pachter McWhorter procurement attorney Joe Petrillo on the Federal Drive with Tom Temin.

Interview transcript:

Tom Temin: Joe, tell us about this case, a simple seeming way of just getting some leased office space for a branch office.

Joseph Petrillo: Yeah, doesn’t look like rocket science. But it got to be pretty confusing by the end. What happened here was that Immigrations and Customs Enforcement was leasing space, office space, in Warwick, Rhode Island from a company called Vas Realty. That lease of course was going to come to an end. So GSA, which handles leasing for ICE issued a solicitation for another term of lease to continue their operations there in Warwick. What happened after starts getting complicated, number of solicitations, at least one proposal amendment, at the end of that process, Vas submitted the only proposal. At that point, the contracting officer contacted Cape Moraine LLC, another leasing company and invited it to submit a proposal. Cape Moraine did submit a proposal and GSA accepted the proposal and evaluated it. There then was another round of discussions another round of proposal revisions. And GSA ultimately awarded the contract to Cape Moraine as the lowest price technically acceptable offer or back on October 2018.

Tom Temin: So GSA, in other words, was trying to create a competition by bringing in another leasing company to bid against the incumbent.

Joseph Petrillo: Exactly. That’s what it was trying to do. But as you see what they basically did was accepted a late proposal from Cape Moraine, and that came back to become an issue for them.

Tom Temin: Yeah, late proposals have always been a seemingly arbitrary, but very strict issue for the government as far back as competitive bids is the deadline is sacrosanct?

Joseph Petrillo: Absolutely. I mean, there are cases in which you practically brought the tears by the problem that’s caused by that, but it’s very strict and there isn’t much leeway there. In this instance, you know, after the award was announced, Vas requested a debriefing. And Vas Realty ultimately protested to GAO, but they got caught up in GAO’s fairly complicated procedural rules about when the proper time is to submit a protest when a debriefing is involved. In that instance, GAO never got to the issues of the protest, the protest was dismissed pretty much out of hand. But that’s not the end of the story. In the meanwhile, the GSA inspector general got a hotline tip from someone and decided to investigate. And then a couple years later, in March of 2020, they wrote a report which they issued the next month, and they found significant irregularities in the procurement. First of all, as we mentioned, Cape Moraine’s proposal was late. It came in well after the proposal due date for this procurement. But they went further and said that GSA’s computation of Cape Moraine’s lease price wasn’t proper, they had several issues with that. And that cast doubt about whether Cape Moraine’s price really was the lowest one admitted.

Tom Temin: We left out plumbing and electricity or something.

Joseph Petrillo: And well, it gets pretty complicated and the IG report does go into what the issues are and doesn’t give you the actual numbers. That’s redacted. But they do show that there were some questions about how that was done. And Cape Moraine finally didn’t own or control the property it had proposed to lease. This was apparently a requirement of the solicitation. So there’s some real issues here. So ultimately, Vas Realty gets a copy of the report, asks GSA what action it’s going to take and basically gets blown off, so they went ahead and filed a protest of the Court of Federal Claims.

Tom Temin: We’re speaking with Joe Petrillo. He’s a procurement attorney with Smith Pachter McWhorter. And just a detail on that, there’s a little bit of naivete on the part of that losing bidder because to think that GSA would do anything about the report from the IG. It seems like they misunderstood that there was no obligation on the part of GSA to do anything there.

Joseph Petrillo: Absolutely. You know, IG’s investigate lots of things and procurement irregularities of this sort are investigated once in a while, but very, very few can compare it to the large number of procurements that are out there. This instance though, they got lucky, and there was a report and it showed up some significant issues.

Tom Temin: All right, so Vas took them to court then and then what happened?

Joseph Petrillo: So they go to court and in court, the government contended for the first time really that Vas Realty wasn’t eligible for award because it hadn’t complied with a solicitation requirement regarding maximum rentable square footage. Now, that’s a fairly complicated issue and Vas had some defenses there. But the Court of Federal Claims didn’t think those held water and it dismissed the protests for lack of standing. That’s a legal term. What it means is basically that just because there’s something wrong with a procurement, it doesn’t necessarily mean that a particular offeror or has the right to bring a protest about it, you have to have standing to do so. In this instance, at least the trial court decided that wasn’t the case.

Vas appealled to the Federal Circuit. And that decision has recently been issued. And the appellate court restated the well known rule that standing in bid protests means that the protester has a substantial chance to win award if the protest is sustained. Now, in analyzing this situation, I mentioned there are lots of issues about whether or not Vas’ offer was acceptable or not, but the Federal Circuit was able to sidestep all of that. They said, Look, if the protest is sustained, would invalidate the contract award to Cape Moraine. Even if Vas realty is ineligible for award, there isn’t any eligible bidder at that point. So a new procurement would be required and Vas Realty would be able to compete in that procurement.

Tom Temin: And so what is the practical effect of that ruling saying that they could have if they should have?

Joseph Petrillo: Well, in this instance, because of past precedent on that question, the Federal Circuit said, yes, you do have standing to bring the protest. Now it goes back to the trial court, where Vas Realty will finally get its day in court on the merits.

Tom Temin: And do we know what ICE ever did about its office space in the meantime?

Joseph Petrillo: No, we don’t. Generally what happens in these situations is they continue to extend the lease they have but that’s not reported in the decision. I want to mention one other thing about the Federal Circuit decision, which is an interesting footnote they have at the end, the government also tried on appeal to get the case tossed on another technicality called latches meaning you waited too long. I mean, you fought your protest two years after the award was announced. And Vas probably had some defenses there as well, because it’s not likely they knew that Cape Moraine’s proposal was late or that they had any way of figuring out the computation of lease price was improper. But in this instance, again, the Court of Federal Circuit found a short circuit they said, well, government have you been prejudiced by the delay? And because Cape Moraine apparently had not started construction by the time the protest was filed, the government couldn’t find that it had been prejudiced. So they lost on that ground as well and Vas Realty had standing to pursue the protest.

Tom Temin: All right and pursue they will and someday we’ll find out how this actually breaks down. But that’s for another trial and another decision yet to come.

Joseph Petrillo: Right. Well, there’s still a bunch of issues to be resolved if GSA decides it’s going to continue to fight them.

Tom Temin: Joe Petrillo is a procurement attorney with Smith Pachter McWhorter. Thanks so much.

Joseph Petrillo: Thank you, Tom.

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