A topic that comes up every now and again in government-contracting-policy circles is the impact of corporate mergers and acquisitions on "the industrial base". Even the White House talks about how "extreme consolidation poses risks to our nation’s national and economic security". It's a whole thing! Companies buy other companies.
Another thing that we've talked about is how companies partner with each other to win government work. Companies create joint ventures. They create teaming agreements. They subcontract out work. All sorts of partnerships.
Those partnerships can even lead to consolidation! You're a small up-and-coming business, you work with a big contractor, they like your style, and eventually they buy you out and you become an executive on their team. Sweet outcome for everyone.
But, other times, consolidation can lead to different outcomes? Here's a fun one involving a company called TRAX and a potential teaming partner called Oasis:
With the aim of pursuing the contract at issue, in May of 2019, TRAX and Oasis Systems, LLC, entered into a non-disclosure agreement (NDA). In April of 2020, TRAX and Oasis entered into a teaming agreement outlining the terms under which Oasis would assist in the preparation of TRAX’s proposal for this procurement, with the understanding that if TRAX was awarded the contract, Oasis would support the contract as a subcontractor to TRAX. TRAX contends that its collaboration with Oasis included a discussion of “TRAX’s specific, highly confidential and proprietary win strategies and themes,” as the two firms “worked closely to develop a cohesive and competitive proposal.”
Look at all of that cooperation! TRAX and Oasis are out there, working like a team, sharing confidential "win themes". The very model of corporate cohesion. Likely, synergies abound! And, of course, it's all very highly confidential and proprietary, covered under an NDA.
The relationship between TRAX and Oasis unraveled in November of 2020, when Oasis informed TRAX that it was withdrawing from the teaming agreement. TRAX sent Oasis a termination agreement that acknowledged that Oasis possessed TRAX’s proprietary bid and proposal information and prohibited Oasis from competing as a prime or subcontractor on another team, “further underscoring the sensitivity of the bid and proposal information Oasis possessed at the time of termination.” In April 2022, ERC announced that it had entered into an agreement to acquire Oasis. The former Chair of Oasis became the Chief Executive Officer (CEO) of ERC, and the former CEO of Oasis became the Chief Operating Officer of ERC.
Get ready to clutch your pearls here, because ERC was not just any acquirer. It turns out, ERC is a direct competitor of TRAX, and they had the audacity to win the contract that TRAX and Oasis were supposed to team together on!
Now, while your pearls are clutched, a thing to note here is that I am not your lawyer. And maybe even clutch harder, because sometimes, depending on how they're written, teaming agreements are not even enforceable!
I don't actually know what was in the teaming agreement between TRAX and Oasis and whether TRAX has remedies against ERC, but one path TRAX pursued was to get the government to disqualify ERC.
Sometimes this works!
TRAX submitted a notification of a Procurement Integrity Act violation to the government to see if the contracting officer would disqualify ERC. Alas, the Army was unimpressed:
The Army conducted its investigation of the alleged PIA violation.... The contracting officer reviewed all of ERC’s proposal revisions submitted during the three rounds of discussions for the ATSS requirement and found that “[t]here was no indication that ERC utilized TRAX’s proprietary information in their proposal.” The Army advised TRAX that the agency had determined that there was “no evidence of a PIA violation.”
TRAX then protested to the GAO, which dismissed the protest. Why? Essentially because they felt comfortable deferring to the government's investigation. And also, the GAO noted, the PIA doesn't really help you in a protest unless there's a government official involved:
We have also previously found that where a protester fails to allege any government misconduct or involvement in the disclosure of proprietary information, it has failed to allege a legally or factually sufficient basis of protest that a violation of the PIA occurred.
No PIA violation, no disqualification. Rough beat for TRAX.
That said, before you start feeling too bad for TRAX, here's an important fact:
TRAX was the first awardee; the recent award was to ERC.
See? They were a winner, too!
Sometimes, you're sitting with a company and synergistically sharing win themes. Sometimes, even, you both win! And then sometimes you try and get them disqualified and sue the pants off of them because you sat down and shared win themes.
Who knows? Maybe next, they'll merge! After all, given the right circumstances, maybe they can find some cohesion again. If that does come to pass, though, I'd suggest their counsel spend just a bit more attention than usual on those NDAs.
[Programming note: For the first few months, I have been writing these posts twice a week. But it's a lot of effort to write twice a week and I've also heard that maybe it's a bit too much email? Would you prefer once a week? Would you prefer I keep going at twice a week? Drop me a note and let me know what you think! In the meantime, THANK YOU for reading GovContrActually!]