Second Street Holdings, LLC (5DC0392)

B-417006 Jan 17, 2019 Jump To VIEW DECISION DOWNLOADS RELATED PAGES GAO CONTACTS Highlights Second Street Holdings, LLC, 600 Second Street Holdings, LLC, Seven Hundred 2nd Street Holdings, LLC, and their managing agency Property Group Partners collectively protest the terms of request for lease proposals (RLP) 5DC0392 issued by the General Services Administration (GSA), Public Buildings Service, for the long-term lease of a property or properties to serve as the headquarters for the Securities and Exchange Commission (SEC). The protesters contend that the RLP is unreasonable, unduly restrictive of competition, unduly vague, and unfairly prejudicial to them because it requires an offeror to propose two fixed-price, assignable purchase options that the agency may choose to exercise 15 or 25 years in the future, respectively. We deny the protest. We deny the protest. View Decision DOCUMENT FOR PUBLIC RELEASE The decision issued on the date below was subject to a GAO Protective Order. This version has been approved for public release. Decision Matter of: Second Street Holdings, LLC File: B-417006 Date: January 17, 2019 Seamus Curley, Esq., and Samantha Rubin, Esq., Stroock & Stroock & Lavan LLP, for the protesters. Adetokunbo Falade, Esq., and Elizabeth H. Johnson, Esq., General Services Administration, for the agency. Michael Willems, Esq., and Edward Goldstein, Esq., Office of the General Counsel, GAO, participated in the preparation of the decision. DIGEST Solicitation requirement for offerors to propose two fixed-price, assignable purchase options for leased properties exercisable after 15 or 25 years, respectively, is not unreasonable, unduly restrictive of competition, or impermissibly vague. DECISION Second Street Holdings, LLC, 600 Second Street Holdings, LLC, Seven Hundred 2nd Street Holdings, LLC, and their managing agency Property Group Partners collectively protest the terms of request for lease proposals (RLP) 5DC0392 issued by the General Services Administration (GSA), Public Buildings Service, for the long-term lease of a property or properties to serve as the headquarters for the Securities and Exchange Commission (SEC).1 The protesters contend that the RLP is unreasonable, unduly restrictive of competition, unduly vague, and unfairly prejudicial to them because it requires an offeror to propose two fixed-price, assignable purchase options that the agency may choose to exercise 15 or 25 years in the future, respectively. We deny the protest. BACKGROUND Currently, the SEC leases space for its headquarters in three buildings: 100 F Street NE, Washington, D.C., 600 Second Street NE, Washington D.C., and 700 Second Street NE, Washington, D.C. Agency Report (AR), exh. 1, Memorandum of Law (MOL), at 3. The three buildings collectively house the SEC's headquarters and are owned by the protesters. Id. The three existing leases will expire between April of 2019 and February of 2021. Id. In December of 2016, the GSA submitted a prospectus to its Congressional oversight committees describing a proposed long-term lease of space for the SEC headquarters in accordance with 40 U.S.C. § 3307. MOL at 3 and AR, exh. 3, Prospectus PDC-11-WA17. The relevant committees of the Senate and House of Representatives indicated their assent to the prospectus on November 29, 2017 and April 12, 2018 respectively. See AR, exhs. 5, 10, Senate and House of Representatives committee resolutions. On July 10, 2018, GSA issued the RLP seeking to lease up to 1,274,000 square feet of office and related space for an initial term of 15 years, with a fixed-price option to renew the lease for 10 additional years for a total of 25 years. MOL at 3. Additionally, the RLP required offerors to include two fixed-price, assignable purchase options for the leased property, one of which would be exercisable at the end of the initial 15-year lease term, and one of which would be exercisable at the end of the 10-year renewal term. Id.; RLP at 21. The RLP included a draft lease specifying that any leases of parts of the facilities to non-government parties should be cancellable as of the dates on which a transfer of ownership would occur, but that the government may negotiate a purchase price adjustment for any non-government leases with termination dates that extend beyond the transfer date. AR, exh. 25, RLP Draft Lease, at 47 The RLP established that award would be made on a lowest-price, technically acceptable (LPTA) basis, with the price for each proposal being calculated using a net present value (NPV) formula. AR, exh. 24, RLP at 23-25. Relevant to this protest, the RLP indicated that the NPV of the purchase options would be included in the evaluated price, and would be computed by taking 50 percent of the offered price, and then discounting that fraction at a 5 percent annual rate. Id. at 25.