Government Need Valid Reason for Cancelling a Solicitation

Back in July 2016, the Department of Veterans Affairs (VA) issued a solicitation for laundry services in the Los Angeles area. After the closing date for receipt of quotations, the VA reopened the solicitation on September 1, 2016 to increase the maximum award amount from $2.5 million to $10 million. A month later the VA cancelled the solicitation and at the same time, extended the existing contract with the incumbent contractor, Railroad Cleaners.

Walker Development, one of the bidders, filed a protest with the GAO (or Comptroller General) arguing that the VA lacked a reasonable basis to conceal the solicitation. Walker argued that the cancellation was a pretext and that the VA's actual motivation was to award a contract to the incumbent, Railroad Cleaners, who, according to Walker, seemed to win all of the awards for laundry services from VA. Walker further argued that the VA had, in essence, made a sole-source award to Railroad Cleaners that foreclosed competition for the work.

An agency may cancel an existing solicitation where it has a reasonable basis for doing so. The VA initially argued that it cancelled the solicitation because it listed a minimum amount of $1 million for the IDIQ contract and Walker's quotation was under that amount. Later, the VA argued that the minimum dollar setting was $2.5 million. The VA stated that it would not be able to make an award to any vendor that submitted a quote under that amount as, in effect, it would be guaranteeing the contractor that at least $2.5 million would be spent.

GAO found that the VA failed to produce a report that coherently addressed its rationale for the cancellation. Rather, it provided conflicting rationales for the cancellation. Additionally, the VA provided no evidence indicating a guaranteed minimum of $2.5 million. Although the GAO afforded the VA numerous opportunities to provide its rationale for the cancellation, the VA failed to avail itself of those opportunities. In the absence of an adequate VA record to support its actions, and in the absence of any reasonable explanation for its actions, the GAO was left with no option but to make an adverse inference in this matter. The GAO concluded that the record did not establish that the VA had a reasonable basis for the cancellation of the solicitation and so, it sustained Walker's protest.

The GAO ordered the VA to reinstate the solicitation, terminate Railroad Cleaner's contract, and reimburse Walker the cost of filing and pursuing the protest.

Read the full decision here.