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A Misguided GAO Decision.

Recently, Oracle protested to the Government Accountability Office a decision to award a follow-on other transaction contract--rather than a procurement contract--to REAN Cloud LLC for a cloud migration program. Many government procurement professionals view GAO protest decisions as law. GAO does not make law and their decisions are not law or jurisprudence. They are opinions of government bureaucrats filtered through levels of bureaucracy and encrusted with "business as usual" thinking, as the opinion in this case demonstrates.

Before criticizing GAO, I will mention that it correctly observed that the dollar approval levels applicable to prototype OTs do not apply to production OTs. Its timeline of the REAN transaction shows it was much more expeditious than an equivalent Federal Acquisition Regulation transaction.

In 2017, the contracting command engaged REAN through the DIUx commercial solutions opening (CSO) process to prototype cloud migration services related to legacy software systems. Funding for the project was provided by U.S. Transportation Command. The scope of the project was expanded by an amendment to the agreement.

While work was still in progress, DIUx determined that success had been demonstrated and a follow-on production other transaction agreement was awarded in the amount of $950 million with potential to make sub-awards beyond TRANSCOM to other government agencies. The amount and scope of the award was subsequently reduced to $65 million but not before Oracle protested.

This case is important because it is an early example of the follow-on production authority for OTs enacted by Congress when the former prototype authority "section 845" was repealed and new authority under 10 U.S.C. 2371b was enacted. GAO found several errors committed by the Defense Innovation Unit-Experimental and its contracting agent Army Contracting Command-New Jersey. GAO's decision is premised in large part on the theory of inadequate notice to Oracle that a large production OT might follow a successful prototype project. GAO also questioned the DIUx determination that the project was successful.

Other transactions do not generally fall within GAO's statutory bid protest jurisdiction. It has however carved out a limited role for itself in OT protests, namely to determine if a procurement contract rather than an OT was legally required under the circumstances involved. In addition, GAO requires that a protest be filed in a timely manner and that the protester be an "interested party." In this case GAO determined Oracle was an interested party, that its protest filed in 2018 was timely and that a follow-on production OT was not legally authorized.

GAO's opinion asserted that its interpretation of 10 U.S.C. 2371b, the OT statute in question, was based on the "plain meaning" rule of statutory construction as well as the "give effect to all words of a statute" rule.

GAO violated both rules in its interpretation of the statute. It denied separate meanings to the terms "project," "transaction" and "agreement" by conflating them. It added to the obfuscation by injecting its own terminology "legal instrument" and "OTA" to mean the same thing as conflated statutory terms.

Both the statute itself and the CSO provided notice to Oracle of a potential follow-on production award. Oracle was not an interested party because it chose not to participate in the CSO process that led to REAN's receiving a prototype award. Its 2018 protest was untimely since it had notice in 2017.

GAO's opinion found that the prototype project was not successful because it was still in progress when the follow-on award was made. The statute requires a successful prototype project as a prerequisite for follow-on award. GAO gave no deference to the Army's determination that the project was successful despite that some work was in progress. Here GAO's conflating of terms and denying distinct meanings to them was important. Had it discovered their distinct meanings, it would have ruled in favor of the government. Had it found ambiguity it should have granted deference to the government's interpretation.

Finally, GAO's decision is misguided because it fails to discuss follow-on production authority contained in the predecessor OT statute. Previous production authority contained the kind of rigid approach GAO is trying to impose in its decision. As a result, it was never used. Congress abandoned the rigid approach in the version of production authority it added to section 2371b. GAO apparently chose not to discuss this since it undermines its position.

Richard L. Dunn Founder, Strategic Institute for Innovation in Government Contracting
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Title Annotation:Letters to the Editor
Comment:A Misguided GAO Decision.(Letters to the Editor)
Author:Dunn, Richard L.
Publication:National Defense
Article Type:Letter to the editor
Date:Aug 1, 2018
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