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Oles Morrison

GAO Upholds Agency’s Rejection Of Protestor’s CAGE-Y Proposal

By on October 23, 2018 | Posted in Bid Protests

It is not uncommon for government contractors to have one or more related companies (e.g., parent/subsidiary companies) involved in the industry.  One way the government keeps track of such related entities is to utilize Commercial and Government Entity (CAGE) codes.  These codes are used for a variety of purposes, including facility clearances. As a recent Government Accountability Office (GAO) decision reminds contractors, CAGE codes are material and play an important role in establishing the precise legal identity of an offeror which, when examining a protest, will not to be taken lightly.

In this particular case, the United States Transportation Command (Agency) issued a request for quotations (RFQ) that required offerors to (among other requirements): (1) identify their CAGE code and (2) have and maintain a valid facilities clearance (FLC) at the secret or higher level.   In response to the RFQ, the one offeror (the Protester) timely submitted its offer, identified CAGE code 6YTU0, and indicated it possessed a secret FCL.  After several inquiries by the Agency and responses from the Protester, it was discovered the CAGE code the Protester provided belonged to the Protester’s wholly-owned subsidiary.  It was the CAGE code assigned to the subsidiary (and not the Protester) that was linked to the secret FCL.  Based on this, the Agency advised the Protester it was ineligible for consideration for award. 

The Protester made two primary arguments in its protest:

  1. The Agency’s ineligibility determination was improper because the Protester satisfied the RFQ requirements by providing a facility (under CAGE Code 6YTU0) with an active secret FCL; and
  2. The Agency was “reading into the Solicitation a requirement that does not exist – namely that the CAGE code for the offeror and the CAGE code for the secret FCL be identical.”

GAO was not convinced by either argument.  As to the first, GAO agreed with the agency that “[Protester] cannot aggregate the qualifications of two different entities…to meet the RFQ’s requirements.”  That is, the parent company possessing certain RFQ requirements, and the subsidiary possessing the secret FLC. As to the second argument, GAO concluded that the requirement that offerors identify their CAGE code as part of the solicitation was not “inconsequential.”  These codes, GAO explained, play in important role in establishing whether differently identified entities are in fact the same concern and are used to track a variety of critical information including (as in this RFQ) entities that possess an FCL.  Given the Agency appropriately inquired as to the discrepancies in the Protester’s proposal and the Protester’s failure to remedy the same, GAO concluded that the Agency’s determination that the Protester was ineligible for award was reasonable.

As the decision illustrates, regardless of whether companies are related, the government’s “view” of those companies as separate legal entities can directly impact whether that company will be considered eligible for a solicitation.  Accordingly, while some might view GAO’s decision as form over substance, the decision nonetheless reminds contractors to be careful and exact about the legal status of their various organizations when submitting a bid.