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GAO Warnings: Why Relying on Affiliate Qualifications Risks Your Government Proposal
Two sustained protest decisions recently released by the U.S. Government Accountability Office (GAO) highlight a significant risk for government contractors: relying on affiliated entities to demonstrate necessary qualifications in a proposal for a contract award. Ignoring the legal distinctions between related companies is a common trap for the unwary that can ultimately ruin a proposal’s chances for award.
While the prime offeror is not required in every instance to hold all necessary qualifications, clarity is the best policy when working with related companies. Blurred lines between the offeror and its affiliates create substantial risks.
Clarity and Compliance: The Rules of Relying on Affiliates
When developing a proposal strategy, contractors must pay close attention to what the solicitation allows. Furthermore, care must be taken to adequately describe the offeror’s relationship with any affiliate whose qualifications are relied upon and the affiliate’s proposed involvement in performance.
These decisions emphasize the critical importance of explaining the affiliate’s relationship with the offeror and their role in performance in a clear, consistent, and solicitation-compliant manner.
Case Study 1: Past Performance Pitfalls
In one decision, Enviremedial Services, GAO sustained a protest on the basis that the awardee should not have received credit for the past performance of its affiliate. The request for proposal (RFP) specifically stated that a project identified for past performance evaluation would only be considered if the offeror or a team member was awarded the contract as a prime contractor.
The awardee cited an affiliate’s contract, but the proposal did not explain the relationship between the two entities, nor did it describe any role the affiliate would have in the current performance. The agency nevertheless treated the past performance as if it belonged to the awardee, ignoring the legal distinction.
Even without a specific solicitation provision, there is a general rule that an agency may attribute the past performance of an affiliated company only where the firm’s proposal demonstrates that the resources of the affiliate will affect the performance of the offeror. Because the agency failed to reconcile the facts, GAO held it was improper to credit the awardee with its affiliate’s past performance.
Case Study 2: Blurred Roles and Eligibility
A second decision, Island Peer Review Organization, dealt with another blurring of affiliates’ roles, resulting in the challenge working to the offeror’s detriment.
The RFP required the agency to perform a pass/fail eligibility assessment based on certain prequalification criteria. Crucially, the RFP mandated that prime offerors satisfy this eligibility assessment “on the merits and structure of their own organization”—not through subcontractors.
The awardee’s proposal asserted that it was a joint venture comprising eight member organizations, which would seem compliant. However, the proposal repeatedly described these same member organizations elsewhere as subcontractorsfor the performance of the contract. The protester challenged the awardee’s eligibility on the grounds that, as an organization with no employees (an unpopulated joint venture), the awardee impermissibly relied on subcontractors to satisfy the core prequalification criteria.
GAO sustained the protest because the agency failed to discuss or analyze how the proposal was compliant on the merits of the awardee’s own organization, and the agency made no attempt to reconcile the conflicting references to the members as subcontractors.
Takeaways for Government Contractors
In both procurement challenges, the would-be awardee suffered due to either a lack of sufficient clarity in the proposal or a proposal approach that simply misaligned with the solicitation’s requirements.
The key lessons for government contractors are:
- Understand the Solicitation: Fully grasp the solicitation’s terms when developing your proposal strategy and text.
- Explain the Relationship Clearly: Articulate the affiliate’s relationship with the offeror and their role in performance in a manner that is clear, consistent, and compliant with the RFP.
A blurring of the lines between the offeror and its related companies can be fatal for a proposal.
Tags: GAO protest, government contracts, affiliate qualifications, past performance, proposal strategy, joint venture, subcontractor, eligibility criteria, government accountability office, MarketUS