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March 22, 2017 By cs

How an acquisition can jeopardize pending bids

When acquiring a government contractor, review and analysis of the target’s current government contracts is a central focus of due diligence for purposes of assessing the legal and business risks. Pending bids and proposals, however, also present unique issues and challenges and could have a significant impact on the anticipated value of the business.

Post-acquisition, the loss of resources from a former parent company or affiliated company may jeopardize the target company’s pending proposals. This situation could arise both where the proposal is successful and a protester challenges the award to the successor contractor, and where the successor contractor is not the successful awardee and itself seeks to challenge the procuring agency’s award decision. This article discusses recent decisions issued by the U.S. Government Accountability Office and the U.S. Court of Federal Claims and highlights key issues for both sellers and buyers arising from pending proposals. The decisions highlight the potential impact a merger or acquisition may have on a target company’s outstanding proposals and the importance of careful review of these proposals during due diligence.

The issues presented by pending proposals, like all issues presented in a due diligence review and risk assessment, must be considered in the context of the broader deal. Typically, this will involve negotiation of key provisions in the acquisition and ancillary agreements, U.S. Securities and Exchange Commission filings in the context of a public deal, Hart-Scott-Rodino reviews, and approvals by the U.S. Department of Justice or the Federal Trade Commission and avoidance of “gun-jumping” under the antitrust laws. Additionally, there is often the need to maintain secrecy and limit knowledge of the deal to a confined, manageable deal team with a “need to know.”

For a publicly traded company, prior to a public announcement of an acquisition, it would be unlawful for the company to share information about the proposed transaction with the procuring agency or others in advance of the public announcement or the required filing with the SEC. Regulation FD (Fair Disclosure) prevents a public company from selectively disclosing material nonpublic information to certain individuals or entities without making public disclosure of such information. The upshot is that when a target has a significant portfolio of pending proposals that could be material to the deal and the future value, and sustainability of the acquired business, the acquirer should appoint a team to review each pending proposal and, based on its terms, decide what needs to be disclosed to the contracting agencies, or risk disqualification or loss of a contract in a post-award protest. This also means that notice to agencies must be coordinated with notices to the SEC and public announcements. Risks concerning pending proposals may, of course, also arise in acquisitions of privately held companies.

Keep reading this article at: http://www.mondaq.com/article.asp?articleid=576436

Filed Under: Government Contracting News Tagged With: award protest, capabilities, capacity, COFC, DOJ, due diligence, FTC, GAO, protest, responsibility, SEC

August 11, 2016 By cs

HHS seeing stars after recent loss in COFC bid protest

As a result of their failure to abide by earlier bid protest decisions, three federal acquisition officials have been barred by the U.S. Court of Federal Claims from participating in any further actions regarding a “tainted” solicitation.

HHSIn Starry Associates, Inc. v. United States, No. 16-44C (Fed. Cl. July 27, 2016), the Court of Federal Claims (COFC) sharply criticized a Department of Health and Human Services (HHS) decision to cancel a solicitation following two bid protests at the Government Accountability Office “GAO).  The history and outcome of the case are exceptional among bid protests — an area of the law characterized by deference to agency decisions and arbitrary-and-capricious review.

HHS’s Program Support Center (PSC) issued a lowest-price, technically acceptable solicitation to procure business-operations services in support of HHS’s financial management system.  Protestor Starry Associates, Inc. was the incumbent, but Intellizant, LLC won the award as the lowest-price offeror.  Starry ended up filing three protests at GAO and the instant protest at the COFC, alleging that the procurement process was “tainted” in favor of Intellizant.

Protests accusing the agency of bias rarely prevail, but the COFC’s decision laid out in detail “a series of actions which,” by the court’s description, “reflect a lack of fidelity to the procurement process.”  And while the court declined to formally determine whether the procurement was tainted by bias, it functionally ended up in the same place.

Keep reading this article at: https://www.insidegovernmentcontracts.com/2016/08/hhs-seeing-stars-after-recent-loss-in-cofc-bid-protest/

Filed Under: Government Contracting News Tagged With: acquisition workforce, award protest, bid protest, COFC, Court of Federal Claims, GAO, HHS, protest

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