United States Government Accountability Office 

Washington, DC 20548 

Comptroller General

of the United States

 

Decision 

Matter of: KAES Enterprises, LLC--Protest and Costs 

File: B-402050.4 

Date: February 12, 2010 

Bruce P. Babbitt, Esq., Jameson Babbitt Stites & Lombard, PLLC, for the protester. 

Michael McCabe, Esq., Federal Emergency Management Agency, for the agency. 

Frank Maguire, Esq., and John M. Melody, Esq., Office of the General Counsel, GAO, 

participated in the preparation of the decision. 

DIGEST 

1. Protest of cancellation of solicitation is denied where agency determined that its 

needs had changed, such that solicitation no longer met its needs, and protester 

failed to show otherwise. 

2. Request that GAO recommend reimbursement of costs of filing and pursuing 

protest is granted with regard to argument that protester’s proposal improperly was 

excluded from competitive range without consideration of price; GAO considers that 

protest ground clearly meritorious, as evidenced by advice from GAO attorney 

during alternative dispute resolution conference that protest likely would be 

sustained on that ground. 

DECISION 

KAES Enterprises, LLC, of Puyallup, Washington, protests the cancellation of 

Federal Emergency Management Agency (FEMA) request for proposals (RFP) 

No. HSFEHQ-09-R-0137, for generator maintenance. KAES also requests that we 

recommend that it be reimbursed the costs of pursuing its prior protest, which led to 

the cancellation, as well as its proposal preparation costs. 

We deny the protest of the cancellation and the request for reimbursement of 

proposal preparation cost, but recommend reimbursement of KAES’s costs of filing 

and pursuing its original protest with regard to its challenge to the exclusion of its 

proposal from the competitive range without consideration of its price. 

In its protest, KAES challenged several aspects of the agency’s evaluation of its 

proposal, the exclusion of its proposal from the competitive range, and the award to 
another vendor. On December 8, 2009, after receipt of the agency report, our Office 

conducted an “outcome prediction” alternative dispute resolution (ADR) conference, 

during which the cognizant GAO attorney advised the parties that the record 

indicated that the protester’s proposal improperly had been excluded from the 

competitive range without consideration of its price. See Arc-Tech, Inc., B-400325.3, 

Feb. 19, 2009, 2009 CPD ¶ 53. The GAO attorney advised the parties that the protest 

likely would be sustained on that ground and the decision would likely recommend 

that the agency reassess whether KAES’s proposal should be included in the 

competitive range, taking price into consideration. 

On December 10, FEMA advised GAO that, “following discussions involving 

members of the FEMA Acquisition team and the applicable program office,” it would 

take corrective action in response to the December 8 conference, as follows: 

FEMA will be canceling the contract award in its entirety, canceling 

the solicitation and re-soliciting the requirement. This action is being 

taken for the following reasons: 

(1) FEMA’s technical needs have changed increasing beyond what the 

contract award would have provided. 

(2) The Statement of Work (SOW) submitted in RFP HSFEHQ-09-R0137 and HSFEHQ-09-R-0021/09-R-0021A by Logistics Management 

Directorate (LMD) has changed from its original intent and does not 

meet the government’s current needs. 

(3) The competition of a new solicitation will be amongst all SDVOB 

potential offerors and the government will notify the previously 

submitted offerors of the solicitation’s release date. 

FEMA E-Mail to GAO, Dec. 10, 2009. We dismissed the protest as academic based on 

this proposed corrective action (B-402050, Dec. 10, 2009). 

PROTEST 

KAES asserts that the cancellation was improper. In a negotiated procurement, a 

contracting agency has broad discretion in deciding whether to cancel a solicitation, 

and need only establish a reasonable basis for doing so. USA Elecs., B-283269.2, 

Oct. 5, 1999, 99-2 CPD ¶ 67 at 3. A reasonable basis to cancel exists when, for 

example, an agency determines that a solicitation does not accurately reflect its 

needs. Logistics Solutions Group, Inc., B-294604.7, B-294604.8, July 28, 2005, 2005 

CPD ¶ 141 at 3 n.1. 

FEMA has set forth a facially reasonable basis for cancellation--that its technical 

needs have changed, increasing beyond what the contract award would have 

provided, and that the statement of work (SOW) also no longer reflects the 

Page 2 B-402050.4 
government’s needs. KAES does not dispute the agency’s specific factual assertions 

regarding the cancellation; that is, it does not assert that the agency’s needs have not 

changed or that the original SOW will meet the agency’s needs. Thus, there is no 

basis for us to question the agency’s justification for the cancellation, and since 

cancellation of an RFP is permissible where the agency’s needs have changed, we 

have no basis to object to the cancellation here. 

KAES asserts that the cancellation decision lacked credibility and was a “pretext” to 

avoid having to make award to KAES and to “avoid resolution of the protest.” 

Protest at 3-4. Procurement authorities are presumed to act in good faith, however, 

and in order for our Office to conclude otherwise, the record must show that 

procuring officials intended to injure the protester. Cycad Corp., B-255870, Apr. 12, 

1994, 94-1 CPD ¶ 253 at 5. The protester’s general assertion of bad faith 

notwithstanding, there is no evidence of such intent here. KAES cites the timing of 

the cancellation--it followed shortly the December 8 conference--as evidence of bad 

faith. However, since a solicitation properly may be canceled whenever the 

information precipitating the cancellation first surfaces or should have been known, 

Daston Corp., B-292583, B-292583.2, Oct. 20, 2003, 2003 CPD ¶ 193 at 3, the timing of 

the cancellation, by itself, in no way evidences agency bad faith. 

KAES asserts that it will be prejudiced by the cancellation because its prices 

presumably have been exposed. However, there is no evidence or reason to believe 

that KAES’s prices have been exposed. There also is no indication that KAES was 

otherwise prejudiced by the cancellation to an extent greater than other offerors. As 

discussed at the December 8 ADR conference, if the protest were sustained on the 

issue identified by GAO--exclusion of KAES’s proposal from the competitive range 

without consideration of its price--the probable recommended corrective action 

would have been for the agency to reassess KAES’s exclusion considering price. 

Thus, there was no assurance that KAES would have been included in the 

competitive range but for the cancellation, and there certainly is no basis to assume 

that it would have had a greater chance of receiving the award than other offerors. 

KAES asserts that the cancellation is inconsistent with the corrective action 

recommended by GAO during the ADR conference. However, the GAO attorney did 

not recommend corrective action at the conference; rather, he advised the parties of 

the likely recommendation if we issued a decision sustaining the protest. In any 

case, even had the GAO attorney provided such a recommendation, that would not 

have precluded the agency from canceling the RFP upon subsequently determining--

properly, we have found--that the RFP did not meet its current needs. We conclude 

that there is no basis for us to object to the cancellation of the RFP. 

COSTS 

KAES requests that we recommend that it be reimbursed both the costs of pursuing 

its prior protest challenging its exclusion from the competitive range, and the costs 

of preparing its proposal. 

Page 3 B-402050.4 
When a procuring agency takes corrective action in response to a protest, our Office 

may recommend reimbursement of protest costs if, based on the circumstances of 

the case, we determine that the agency unduly delayed taking corrective action in 

the face of a clearly meritorious protest. 4 C.F.R. § 21.8(e) (2009); AAR Aircraft 

Servs.--Costs, B-291670.6, May 12, 2003, 2003 CPD ¶ 100 at 6. A protest is clearly 

meritorious where a reasonable agency inquiry into the protest allegations would 

have shown facts disclosing the absence of a defensible legal position. Core Tech 

Int’l Corp.--Costs, B-400047.2, Mar. 11, 2009, 2009 CPD ¶ 59 at 6. Here, our 

willingness to inform the parties through outcome prediction ADR that the protest 

was likely to be sustained on the identified ground was an indication that we view 

that ground as clearly meritorious for purposes of recommending reimbursement of 

protest costs. National Opinion Research Ctr.--Costs, B-289044.3, Mar. 6, 2002, 

2002 CPD ¶ 55 at 3. Further, while we consider corrective action to be prompt if it is 

taken before the due date for the agency report responding to the protest, we 

generally do not consider it to be prompt if it is taken after that date. CDIC, Inc.--

Costs, B-277526.2, Aug. 18, 1997, 97-2 CPD ¶ 52 at 2. Here, FEMA did not take 

corrective action until after the filing of its agency report and the subsequent 

December 8 ADR conference. 

While we therefore recommend that KAES be reimbursed its costs, we do so only 

with regard to the issue identified during the ADR conference--exclusion of KAES’s 

proposal from the competitive range without consideration of its price. In this 

regard, when appropriate, we will limit a recommendation for reimbursement of 

protest costs where we determine that the successful and unsuccessful protest 

grounds are clearly severable. See, e.g., BAE Tech. Servs., Inc.--Costs, B-296699.3, 

Aug. 11, 2006, 2006 CPD ¶ 122 at 3. In making this deteremination, we consider, 

among other things, the extent to which the claims are interrelated or intertwined, 

e.g., whether the successful and unsuccessful claims share a common core set of 

facts, are based on related legal theories, or are otherwise not readily severable. 

See Sodexho Mgmt., Inc.--Costs, B-289605.3, Aug. 6, 2003, 2003 CPD ¶ 136 at 29. 

Here, we conclude that KAES’s challenges to the agency’s technical evaluation of its 

proposal, which constituted the bulk of its protest, were clearly severable from the 

specific ground on which, as we advised the parties, KAES was likely to prevail, 

i.e., the agency’s failure to consider price when excluding the firm’s proposal from 

the competitive range. This ground was based on a legal theory and facts sufficiently 

different from those on which KAES’s other evaluation arguments were based that 

severing the issues is appropriate in this case. Accordingly, our recommendation of 

KAES’s entitlement to protest costs is limited to costs related to this issue. 

KAES also requests we recommend that it be reimbursed the costs of proposal 

preparation in light of the cancellation. However, the expenses KAES incurred in 

preparing its proposal are typical costs of doing business and competing for 

government contracts. Rice Servs, Inc.; Watson Servs., Inc., B-293861 et al., June 15, 

2004, 2004 CPD ¶ 167 at 5 n.3. Under the circumstances here, where we have found 

that the cancellation of the solicitation was unobjectionable, there is no basis for us 

Page 4 B-402050.4 
Page 5 B-402050.4 

to recommend reimbursement of those costs. See Kos Kam Pelasgus, Joint Venture, 

B-225841, Apr. 1, 1987, 87-1 CPD ¶ 370 at 3. 

The protest of the cancellation and the request for proposal preparation costs are 

denied. The request that we recommend reimbursement of protest costs is granted 

as to the issue of the exclusion of the KAES proposal from the competitive range 

without consideration of its price, as discussed above. 

Lynn H. Gibson 

Acting General Counsel