GAO’s Rules,4 C.F.R. § 21.8(d), (e), provide for awards of protest costs and attorney fees. Clearly, such awards are appropriate when GAO sustains a protest on its merits, and the Rules so provide, 4 C.F.R. § 21.8(d). But the Rules also provide for awards of protest costs and attorney fees when an agency takes corrective action before a decision on the merits. 4 C.F.R. § 21.8(e). Here we’ll examine the cases in which GAO has made such awards absent a decision on the merits.
GAO’s Rule allowing awards of protest costs and attorney when an agency takes corrective action before a decision on the merits was put in place in 1991. Before this change, GAO awarded protest costs and attorney fees only in those cases where it sustained a protest on its merits. If an agency took corrective action in response to a protest the day before the decision issued, GAO declined to award protest costs and attorney fees. GAO changed its practice when it became concerned that agencies were takin g longer than necessary to initiate corrective action, and it supposed that providing for awards of protest costs and attorney fees where agencies delayed taking corrective action would encourage agencies to respond to meritorious protests early in the process.
As initially proposed, the Rule would have allowed such awards only where corrective action was taken after the due date for submission of the agency report (now 30 calendar days after the date of filing, 31 U.S.C. § 3553(b)(2)(A)). As announced, the Rule permits award of protest costs and attorney fees without regard to the report due date; in its announcement of the final Rule, GAO said that it was more appropriate to base such decisions on the circumstances of particular cases, and it supposed that t here might be cases, even where corrective action was taken after submission of the agency report, where an award of protest costs and attorney fees might not be justified, just as there might be cases where award of protest costs and attorney fees might be justified even where corrective action was taken before the date set for report submission. GAO said that its intent was to make such awards in those cases where it could conclude that the agency unduly delayed taking corrective action in the face of a clearly meritorious protest. Oklahoma Indian Corp., B-243785.2, June 10, 1991, 91-1 CPD ¶ 558, at 2.
Thus, we have three elements required for an award of protest costs and attorney without a GAO decision sustaining a protest on its merits: (1) corrective action, (2) a clearly meritorious protest, and (3) undue delay. These we will examine in turn.
“Corrective action” happens when an agency takes action that remedies the grounds for protest. Often, corrective action occurs when a competition is reopened, or when competitive proposals are re-evaluated and rescored. However, the corrective action taken must result from the protest, not something else. In M.E.E., Inc., B-265605.5, May 29, 1996, 96-1 CPD ¶ 258, an offeror protested a best value contract award. It turned out that the agency had received a revised Davis-Bacon Act wage determination before contract award, and FAR 22.404-5(c)(3) requires, in such cases, that the competition be reopened to include the revised wage rates. The agency reopened the competition, effectively remedying the grounds for protest. GAO denied a claim for protest costs and attorney fees, ruling that reopening the competition “was not prompted by any protest to our Office, and . . . thus was not corrective action in response to a protest to our Office.” Id., 96-1 CPD, at 5 n. 2.
When agencies promise corrective action, a dismissal quickly follows. But what happens when the agency delays carrying out its promise? Commercial Energies, Inc., B-243718.2, Dec. 3, 1991, 91-2 CPD ¶ 499, at 6, teaches that if corrective action is unduly delayed, then protest costs and attorney fees are properly awarded.
What is “a clearly meritorious protest?” A “clearly meritorious protest” is not limited to those protests where corrective action results in contract award to the protester. Department of the Army, B-270860.5, July 18, 1996, 96-2 CPD ¶ 23, at 2. Rather, a “clearly meritorious protest” is one in which “a reasonable agency inquiry into the protester’s allegations would show facts disclosing the absence of a defensible legal position.” Spar Applied Systems, B-276030.2, Sept. 12, 1997, at 4-5.
When is a promise of corrective action “unduly delayed?” Generally, promises of corrective action are “unduly delayed” when a protester is compelled to “incur costs other than those associated with its initial protest filing,” LORS Medical Corp., B-270269.2, Apr. 2, 1996, 96-1 CPD ¶ 171, at 3, save for costs incurred to defend against agency motions to dismiss, Carlson Wagonlit Travel, B-266337.3, July 3, 1996, 96-2 CPD ¶ 99, at 4. (“We think a contracting agency, in defending protests filed with our Office, is permitted to vigorously assert procedural and substantive defenses in good faith without having to risk the assessment of costs.”).
An “undue delay” commences when the “issue which prompted the agency’s corrective action [is] squarely presented early in the protest process,” Custom Printing Co., B-275798.3, July 9, 1997, at 5, and when “key evidence supporting the protest ground” is apparent in the evaluation record, Chant Engineering Co., Inc., B-274871.2, Aug. 25, 1997, at 5. Since GAO’s authority to award protest costs and attorney fees attaches only to parties whose protests are properly before GAO, an “undue delay” does not commence with the filing of an agency protest, All Marine Services, Ltd., B-270514.2, Feb. 13, 1996, 96-1 CPD ¶ 75, at 2-3, or with the improper actions complained of, LORS Medical, 96-1 CPD, at 2.
And corrective action that comes after the agency report due date is not “unduly delayed” when it is taken in response to protest grounds raised after the initial protest filing:
Where a protester raises different protest grounds in multiple submissions to our Office, the filing of the initial protest establishes the appropriate date for determining the promptness of the agency’s corrective action only where there is a nexus between the protest grounds set forth at that time and the corrective action.
Holiday Inn-Laurel, B-265646.4, Nov. 20, 1995, 95-2 CPD ¶ 233, at 3.
Indeed, despite the early speculation that there might be cases where an award of protest costs and attorney fees would be appropriate even if corrective action is announced before the date set for submission of the agency report, GAO now appears to have adopted a per se rule that protest costs and attorney fees will not be awarded if corrective action is promised before the date set for receipt of the agency report. HSQ Technology, B-276050.2, June 25, 1997, at 2 (“Corrective action taken on or before the agency report due date is not unduly delayed and provides no basis for the recovery of protest costs.”).
The message from all of this is that GAO’s Rule allowing award of protest costs and attorney fees when an agency takes corrective action before a decision on the merits has a far broader scope than its day-to-day application.
— Cy Phillips
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