Recent GAO Decision Finds Offeror Eligible for Award Despite Lapse in SAM Registration
In a decision publicly released on September 19, 2024, the Government Accountability Office (GAO) sustained a bid protest by Maxim Healthcare Staffing Services, Inc. In short, GAO ruled that the procuring agency had unreasonably concluded that Maxim Healthcare was ineligible for award because of a temporary lapse in its System for Award Management (SAM) registration.1 A lapsed SAM registration may seem like a picayune detail of proposal preparation, but as we discussed in a previous Legal Update, this case is among a growing list of protest decisions from GAO and the Court of Federal Claims (CFC) analyzing lapsed SAM-registration issues. Given the volume of the recent challenges, a further discussion of the relevant rules—on which GAO and the CFC now appear to agree—is worthwhile.
The Bottom Line
The Federal Acquisition Regulation (FAR) directs contractors to register in SAM to establish a common source of vendor data for the government. And FAR 52.204-7(b)(1), which may be repeated (or incorporated by reference) in an agency’s solicitation, can require that offerors “shall continue to be registered until time of award, [and] during performance” and completion and close-out.2 Under GAO’s and the CFC’s recent decisions, if FAR 52.204-7(b) is included in an RFP and becomes the subject of a protest, any lapse in an offeror’s registration after the submission of a proposal can result in the offeror being found ineligible for award (if an awardee), or lacking interested party status—and thus standing to pursue a protest (if a disappointed offeror).
After devoting resources to the preparation and submission of a proposal, and any potential discussions and proposal revisions, contractors should avoid the risk of being found ineligible for award—or not having standing to protest a disappointing award decision—by ensuring that its SAM registration remains valid throughout the procurement process. It should do that by updating and submitting necessary information well in advance of any scheduled expiration date, so the relevant agencies’ personnel have sufficient time to verify submitted information and approve the registration before the current registration expires.
Background Facts
The Maxim Healthcare protest arose from a Department of Homeland Security (DHS) procurement for on-site medical staffing services for detainees at various federal facilities. The task order solicitation was issued to holders of a DHS indefinite-delivery, indefinite-quantity (IDIQ) contract under FAR Subpart 16.505. Relevant here, the solicitation did not include FAR 52.204-7, System for Award Management, which would have required offerors to continuously maintain their SAM registrations, in order to be eligible for award.
Based on its initial review of proposals, DHS awarded the task order to Maxim Healthcare. However, after revaluating proposals in response to a GAO bid protest, DHS determined that Maxim Healthcare was ineligible for award because its SAM registration had lapsed during the proposal period. After DHS terminated the task order and made award to another vendor, Maxim Healthcare filed a protest at the GAO.
GAO’s Analysis
In its protest, Maxim argued that DHS’s decision to exclude its proposal from the competition was flawed because the solicitation did not include FAR 52.204‑7 or otherwise state that a proposal would be rejected if the vendor’s SAM registration lapsed. GAO agreed with Maxim Healthcare and sustained the protest. Pointing out that neither the solicitation nor Maxim Healthcare’s IDIQ contract contained or incorporated FAR 52.204-7, GAO determined that DHS failed to provide a justification to exclude Maxim’s proposal from consideration.
In reaching its conclusion, GAO rejected DHS’s contention that its actions were justified because FAR 4.1103 requires a contracting officer to verify an offeror’s SAM registration. GAO explained that “unless a contracting officer elects to include a specific solicitation provision informing offerors that the agency will verify SAM registration, there is no way for offerors to know that SAM registration is a solicitation requirement.”3 Declining to read FAR 52.204-7 into the solicitation here, GAO noted that there is no requirement that mandatory provisions must be incorporated into solicitations by operation of law when they have been omitted. For these reasons, GAO concluded that DHS had no basis to find Maxim’s proposal ineligible for award.4
In contrast, GAO and the CFC have made clear that when FAR 52.204-7(b) is included, a lapse in the SAM registration after submission of the offer will be fatal. For instance, in Myriddian, LLC v. US, the CFC enjoined an agency from proceeding with award when the RFP expressly incorporated FAR 52.204-7 by reference and the awardee had allowed its SAM registration to lapse for 17 days between proposal submission and award.5 Indeed, when a protester demonstrated that three awardees were ineligible for award because of lapsed SAM registrations, the court not only enjoined award to those offerors, but ruled that an agency’s attempt during corrective action to fix those ineligible proposals by issuing a deviation from the “continuous registration” requirement was “arbitrary and capricious.”6
Conclusion
Federal contractors are likely to view this decision as a welcome limitation to the generally sweeping (and sometimes harsh) requirement to maintain their registration in SAM, such as in CFC’s Myriddian, Hanford Tank, and Zolon PCS decisions—or in GAO’s GLS Joint Venture decision.
Importantly, the Maxim Healthcare decision makes clear that although the plain language of FAR 52.204-7 requires offerors to maintain their SAM registrations without lapses throughout the procurement (including, as relevant to a protest, during the solicitation period), a procuring agency may not enforce this requirement without sufficiently warning offerors. In other words, if the government neither incorporates FAR 52.204-7 nor provides an express warning that a SAM registration lapse can render a proposal ineligible for award, the government will be unable to use such a lapse as a basis to exclude a proposal from the competition. This case also serves as a helpful reminder that the GAO will not read mandatory FAR provisions into a solicitation when the agency chose to omit them.
In light of this decision, contractors should closely examine a solicitation’s terms early in the procurement process so as to ensure that they understand the applicable requirements with respect to compliance matters such as SAM registration.
1 Maxim Healthcare Staffing Servs., Inc., B-422389.2, Aug. 21, 2024, – CPD ¶ –, 2024 WL 4235193.
2 FAR 52.204-7(b)(1) requires that, to receive an award, an offeror must “be registered in SAM when submitting an offer or quotation, and shall continue to be registered until time of award, during performance, and through final payment of any contract, basic agreement, basic ordering agreement, or blanket purchasing agreement resulting from this solicitation.” As discussed in a previous Legal Update, GAO has held that FAR 52.204-7 “plainly and unambiguously requires offerors to maintain their SAM registrations during the evaluation period.” TLS Joint Venture, LLC, B-422275, Apr. 1, 2024, 2024 CPD ¶ 74 at 3.
3 Maxim Healthcare Staffing Servs., Inc., B-422389.2, at 5 n.4.
4 Similarly, in VivSoft Technologies, LLC, B-421561.15, Apr. 11, 2024, 2024 CPD ¶ 94 at 7-8, GAO denied a lapsed SAM registration protest allegation because “the solicitation did not include or incorporate FAR [] 52.204-7” and rejected the argument that the FAR provision should be read into the solicitation). See Thalle/Nicholson Joint Venture v. US, 164 Fed. Cl. 224, 229-30, 233-34 (2023) (reaching the same conclusion); STG Int’l v. US, 165 Fed. Cl. 577, 581-83 (2023) (rejecting lapsed SAM registration ground when lapse occurred and was corrected after phase 1 of proposal had been submitted but before submission of other phases of the proposal, including the pricing components, which were necessary for a legally valid offer); see also Independent Rough Terrain Center, LLC v. US, 172 Fed. Cl. 250, 260-63 (2024) (although the court has jurisdiction over a protest of a solicitation for a follow-on production contract issued under the Army’s Other Transaction Authority, the protester lacked standing to present the claim because it had allowed its SAM registration to lapse during the procurement).
5 165 Fed. Cl. 650, 654-57 (2023); see Hanford Tank Disposition Alliance, LLC v. US, No. 23-683, 2023 WL 5167489 (Fed. Cl. 2023) (when RFP referenced FAR 52.204-7 and “itself unambiguously required bidders to continuously be registered with SAM” from submission “through award and performance,” offer from contractor whose SAM registration lapsed was not responsive and performance of the awarded contract was enjoined); TLS Joint Venture, LLC, B-422275, Apr. 1, 2024, 2024 CPD ¶ 74 at 2, 5-7 (concluding that the awardee did not continuously maintain its SAM registration because even though it had submitted updated SAM information to the government before expiration, the relevant officials did not verify and renew the registration until 24 hours after it had expired – thus GAO recommended terminating the awarded contract); CGS-ASP Security JV LLC, B-420497, Feb. 18, 2022, 2022 CPD ¶ 39 at 2-3.
6 Zolon PCS II, LLC v. US, – Fed. Cl. –, 2024 WL 4132156 (2024). Notably, in the context of a sealed bid solicitation under FAR Part 14, such as the one at issue in Vietnam-Australia Environment Joint Stock Co. B-420821, July 15, 2022, 2022 CPD ¶ 185, GAO applies a different rule. In such procurements, an “inactive SAM registration at the time of bid submission constitutes an immaterial defect” for which the contracting officer either should give the bidder an opportunity to cure the deficiency or grant a waiver. Id. at 2; see CGS-ASP Security, 2022 CPD ¶ 39 at 2-3 (explaining the distinction).
