Public Contract Law Journal

Source Selections and Corporate Restructuring: The Lessons of Wyle Laboratories

by Steven W. Feldman

Steven W. Feldman is Attorney-Advisor, U.S. Army Engineering and Support Center, Huntsville, Alabama. The views expressed in this Article are solely the opinions of the author and do not represent the views of any federal agency. The author was co-counsel for the agency in Lockheed Martin Integrated Systems, Inc., B-410189.5, B-410189.6, 2016 CPD ¶ 273 (Comp. Gen. Sept. 27, 2016), on reconsid., B-410189.7 (Comp. Gen 2017), analyzed in this Article. I appreciate the helpful comments of Ralph Nash, Ryan Black, Jim Nagle, Ray Fioravanti, and Tim Felker on earlier drafts. Thanks to my wife Gayla Feldman for her constant love and support.

I. Introduction

Whether the U.S. economy is growing or slowing, restructurings in the sense of corporate mergers, acquisitions, and divestitures are common, and the government contracts industry is no stranger to this phenomenon.1 These corporate restructurings can have the desired upside, such as increasing the firm’s market share or diversifying its holdings, but they can also have an unexpected downside. Regarding the most likely unforeseen downside, the Government Accountability Office (GAO) has sustained a number of protests where the agency unreasonably made the award based on the selectee’s existing proposal where the agency also had notice that the same offeror in a materially different approach was planning a post-award corporate restructuring.2

In the typical circumstance, GAO’s concern is the impact upon the integrity of the competitive proposal process.3 In its leading decision, issued in 2013, the GAO said in Wyle Laboratories, “Where an offeror’s proposal represents that it will perform the contract in a manner materially different from the offeror’s actual intent, an award based on such a proposal cannot stand …4 The GAO reasoned that when the agency unreasonably relies on the existing proposal in this manner, “[b]oth the offeror’s representations, and the agency’s reliance on such, have an adverse impact on the integrity of the procurement process.”5

This Article will examine the GAO’s protest decisions addressing source selections and post award offeror/ awardee restructuring. Slight differences in the varieties of corporate restructurings can produce strikingly disparate outcomes. As GAO has said, the cases are “highly fact-specific, and turn largely on the individual circumstances of the proposed transactions and timing.”6 Another difficulty for both government and industry is that attorneys “[w]ho are expert in the field of acquisitions and mergers are often unfamiliar with the peculiarities of Government procurement, and vice versa.”7 Other fields of law, such as securities regulation, can also be relevant.8

The first part of this Article will discuss the facts, holding, and implications of the GAO’s decision in Wyle Laboratories, which addressed the reorganization of the Science Applications International Corporation (SAIC).9 As will be seen, the GAO sustained a protest against the National Aeronautics and Space Administration’s (NASA) award to SAIC where “old” SAIC’s intent after the award was to split SAIC into two successor entities, which were “new” SAIC and Leidos, Inc.10

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