The Government Accountability Office (“GAO”) this week sustained the protest of a lease award to an offeror that failed to commit to pay wage rates required under the Davis Bacon Act, which was a material requirement of the Request for Lease Proposal (“RLP”).  The GSA’s RLP, which called for the lease of 12,500 square feet of office and warehouse space in Arizona, provided that Davis-Bacon wage rates — which apply to contractors and subcontractors performing on federally funded or assisted construction contracts for public buildings or public works — would apply to “all work (including shell and [tenant improvements]) performed prior to the Government’s acceptance of the space as substantially complete . . . if the lessor proposes to satisfy the requirements of this lease through the construction of a new building or the complete rehabilitation or reconstruction of an existing building and the Government will be the sole or predominant tenant.”

The awardee, Presidio Bay Capital, LLC (“Presidio Bay”), proposed a building with 7,000 square feet of space, but indicated in its proposal that the building would be expanded to meet the RLP requirements.  Prior to the deadline for final proposals, Presidio Bay informed the broker assisting the GSA that it intended to complete the expansion work “under separate contract” prior to the initiation of tenant improvement (“TI”) construction and that the TI construction would be paid at Davis-Bacon rates.  When it submitted its final proposal, Presidio Bay included the applicable Davis-Bacon wage determination listing the rates to be paid to covered employees, but did not address which work would be subject to those rates.

In sustaining the protest, the GAO found that Presidio Bay’s response distinguished the building expansion work from the TI work, and that Presidio Bay had committed to pay Davis-Bacon wages only for the latter.  Because the building expansion work was necessary to increase the size of the building to meet the solicitation requirement, the GAO concluded that the building expansion work constituted “reconstruction” work performed prior to the Government’s acceptance of the space and was therefore subject to the Davis-Bacon wage rate requirement.  As such, the GAO concluded that absent an affirmative response from Presidio Bay acknowledging the broader applicability of the Davis-Bacon requirement, the GSA could not have reasonably found Presidio Bay’s proposal to be compliant with the RLP, and sustained the protest.  The GSA had defended its decision to award the lease to Presidio Bay by saying that Presidio Bay’s final proposal, signed one month after the communication with the broker, took no exception to the terms of the solicitation, and therefore GSA had no reason to suspect that Presidio Bay would not comply with the Davis-Bacon wage requirements.  In response, however, the GAO noted that that, “[e]ven where a proposal does not expressly take exception to a material term of a solicitation, we may determine that aspects of the proposal should have led to further inquiry by the agency.”