Left at the Altar revisited: What to do if Key Personnel "Might" Break their Commitments?

Almost three years ago to the day, I told the sad (but fictional) story of Pat McBrilliant’s change of heart about working for a contractor if it was awarded the contract for which he was proffered for a “key” position. A recent decision issued by the Court of Federal Claims arises out of the decision of a “Mr. H” to announce his resignation under similar circumstances. See KPMG LLP v. United States, COFC No. 22-866 (2023).

In both of these scenarios, the contractors were notified of the impending departure of a key person during the midst of the procurements after proposals had been submitted but before an award decision was announced. Pat McBrilliant had taken a position with a competitor; whereas, Mr. H had announced his impending resignation but he still was employed by the contractor at the time the relevant award was announced. While this is a key distinction, both scenarios present a real quandary – what should an offeror do when it has learned that a key person has announced that they will not be available to take the key position for which he or she was proposed?

As I noted in my previous blog, if a solicitation requires the proposal of specific individuals for “key” positions necessary for the performance of the contract, the prospective contractor is required to identify those individuals in good faith. Typically, that requires the contractor to have communicated with the proposed employee and obtained their commitment to take the position if the contract is awarded.

If the key person becomes unavailable but the contractor had no idea before the contract was awarded, there will not have been a “bait and switch” and the contractor’s award probably will not be affected. See, e.g., Development Alternatives, Inc., B-217010, 85-1 CPD ¶ 188, 1985 WL 52433. However, if the contractor does learn of the individual’s decision to renege on their commitment, it has an obligation to notify the agency of changes “even after [the] submission of proposals.” See, e.g., General Revenue Corp., B-414220, 2017 CPD ¶ 106, 2017 WL 2130370. Armed with that knowledge, the agency’s choice is to proceed as-is with that knowledge factored into the evaluation or to reopen discussions to permit the proposal of a replacement generally will not be reversed. See, e.g., Ashlin Mgmt. Grp., B-419472.3, B-419472.4, 2021 CPD ¶357 (Nov. 4, 2021).

Enter Mr. H. He was employed by KPMG LLP on the current, but expiring contract. The solicitation at issue was for the award of the follow-on contract. Mr. H announced his impending resignation, but remained employed by KPMG. Presumably because it was the incumbent contractor, KPMG informed the agency of the anticipated departure. The agency awarded the contract to KPMG without taking his impending, but not yet complete, departure into consideration. A competitor (Sehlke Consulting, LLC) cried foul. The GAO sustained the protest and advised the agency that it should reevaluate the proposals taking the departure into account or to reopen discussions to allow the submission of revised proposals. See Sehlke Consulting, LLC, B-420538, 2022 CPD ¶119 (May 18, 2022). Given the GAO’s general approach to these situations, this outcome did not seem particularly surprising.

As recounted in the COFC decision, the agency, following the GAO recommendation, elected to reevaluate the proposals as they were, but it determined that Mr. H would be unavailable, found KPMG’s proposal technically unacceptable, and awarded the contract, not to Sehlke, but to another competitor, Deloitte and Touche, LLP. See KPMG at 5.

Based on its belief that the GAO’s decision was wrong and should not have been followed by the agency, KPMG protested the new award decision at the Court of Federal Claims. The facts recited in the COFC’s decision were largely the same. However, the decision reveals a wrinkle not discussed in the GAO decision. As part of the communications between KPMG and the agency, KPMG stated that, yes, the person would be leaving employment for the remainder of the current contract, but was attempting to convince him to remain on. In addition, the employee indicated that KPMG would have “options” on him if KPMG received the new contract. KPMG at 8-9.

After reviewing these facts, the COFC concluded that the GAO’s decision was “irrational” and that the agency should not have followed it. In the Court’s view, GAO erred when it found that Mr. H’s departure was definitive when, in fact, his departure was pending but not final at the time of award. The Court observed that its prior decisions “demonstrate that, without more, key personnel are unavailable when they, in fact, no longer working with the employer.” KPMG at 10. Thus, in the absence of a completed departure, the pending departure should not have led the agency to treat him as unavailable. In the Court’s view, employers should not be downgraded when there is a potential departure because people can change their minds. Moreover, as a matter of policy, concluding that a planned, but incomplete, departure renders them unavailable at the time of award “would give the whims of proposed key personnel outsized influence over government contract awards.” KPMG at 10. The procurement now goes back to the agency for a “proper evaluation” in which the agency should not factor the departure into the award decision.

Returning to the quandary that is presented when the status of key personnel is in doubt, the situation in this case was muddied by the fact that KPMG was the incumbent on the predecessor contract, which meant that it really did need to notify the agency about its employee’s anticipated departure. The COFC’s holding essentially means that agencies should ignore such information for purposes of evaluating a follow-on contract.

Going forward, it appears that, if the COFC is deciding the matter, an offeror’s duty to notify the agency of a key person’s unavailability will not arise until that person’s unavailability is definitive as opposed to potential or pending. What the GAO will do with a similarly doubtful departure going forward may not be so clear.