Recently, in the matter of SK Hart Properties LLC, the unsuccessful incumbent contractor for the General Services Administration’s office in Salt Lake City protested the Agency’s decision to use a “fixed tenant improvement allowance.” At its heart, the contractor submitted it does not need the full amount listed for improvements in the solicitation for the contract because its space is relatively prepared for the Agency to use as is. Because the incumbent contractor would not charge the Agency the full amount allowed to alter the space, assuming they will increased their bid price above the competitor, who had a lower base rate of rent but arguably needs closer to the full amount to meet the Agency’s needs. The incumbent failed to win either the award or the protest, despite arguing the procurement artificially increased their bid price by requiring it to claim expenses they would not incur.
The GAO sided with the Agency who agreed the funds may not actually be spent, but that not including a fixed allowance would unjustly allow the incumbent to rely on improvements to their space previously paid for by the government. No mandate required the Agency to eliminate advantages held by the incumbent, but their decision to do so is permitted. This form of pricing also allowed the Agency to focus on the rental rate, without worrying if proposed improvement costs were correct.
The decision offers a unique example of the GAO attempting to foster competition under the Competition in Contracting Act, even if it results in increased costs to the government.
About the Author:
Tyler Freiberger is an associate attorney at Centre Law & Consulting primarily focusing on employment law and litigation. He has successfully litigated employment issues before the EEOC, MSPB, local counties human rights commissions, the United States D.C. District Court, Maryland District Court, and the Eastern District of Virginia.