Selling assets during a protest? Be careful not to jump on the shark | Bass, Berry & Sims PLC
In the past we have warned readers Protest about the potential impact of transactions on pending awards, particularly the ability of a contractor. A recent decision by the Court of Federal Claims (COFC) shows that transactions while a protest can also endanger the position of the contractor.
September 9th COFC rejected a protest filed by Lank Shark Shredding LLC after Land Shark sold assets after the protest was filed. Land Shark filed a complaint in May 2019 contesting the termination of a Disabled Veterans Small Business (SDVOSB) shredding contract by the Department of Veterans Affairs (VA). The tender was canceled because only Land Shark had submitted a timely offer and the VA found that Land Shark’s offer was suffering from price and technical deficiencies.
Background: Company sold assets after a protest was filed
It was first announced during the hearing in June 2021 that Land Shark âhad sold its name, assets and interests and that these transactions raised the question of whether the case label should be changed to reflect Land Shark’s new name. Disabled Veterans Security, LLC, … and whether a body was authorized to bring this case forward. “
Land Shark then decided to replace the new company as a protester or change the case label to reflect the new name. It stated that in December 2020 another SDVOSB acquired all of its assets necessary to carry out its government contract work and ongoing undisputed government contracts.
In another transaction that same month, Land Shark sold its commercial shredder business to another company that was hiring a number of former Land Shark employees. Land Shark also stated that the renamed facility, Disabled Veterans Security (DVS), is in the process of reviewing its SDVOSB status.
The government stated that the case labeling should be adjusted
In response, the government agreed that the case title should be changed, but requested that it be dismissed on the “no business left” basis.[ed] in a position where it could fill in the footsteps of the former Land Shark Shredding, LLC in relation to the March 2019 offer “and that DVS was not a verified SDVOSB, which meant it was not eligible to compete for the decommissioning .
The COFC agreed that the headline should be changed as Land Shark retained its interest in the protest as it was banned from selling the assets. It also agreed with the government that the procedure should be rejected because DVS was not an actual bidder in the tender and could not prove any significant chances of being awarded the contract. In addition, the court found that DVS could not prove that it was a full legal successor to Land Shark, as it was “no longer the owner”[ed] the property or employ[ed] the staff who did it when the bid was submitted in March 2019. “
The COFC found that Land Shark had failed to demonstrate that the new company had the resources, including equipment and staff, to perform the shredding contract. While the COFC agreed that DVS could eventually acquire these resources, this was insufficient to demonstrate that it could provide the assets and services proposed in Land Shark’s offering. For all these reasons, the COFC came to the conclusion that DVS was not involved and dismissed the action for lack of jurisdiction.
Key takeaways for government contractors
For contractors considering transactions while a protest is pending, Land Shark Shredding LLC advises that the impact of this transaction on the protest must be carefully weighed. If the protest is of significant value to the company, it may be appropriate to postpone the transaction until the protest is resolved. Otherwise, you might open the door to one Land shark Result.