Government Contracts Legal Forum : Government Contracts Lawyers & Attorneys for Litigation & Counseling

In September, I wrote about the Court of Federal Claims’ decision in MED Trends, Inc. v. United States, No. 11-420 (Fed. Cl. Sept. 13, 2011), where the Court concluded that it now enjoys jurisdiction over civilian task and delivery order procurements of any dollar value. Prior to this ruling, pursuant to 41 U.S.C. § 4106(f), protests of civilian task and delivery order procurements could be brought in the Court of Federal Claims only where the protest was based “on the ground that the order increases the scope, period or maximum value of the contract under which the order is issued.” § 4106(f)(1)(A). Under 41 U.S.C. § 4106(f), exclusive jurisdiction of all other task order protests rested with the U.S. Government Accountability Office (“GAO”). With the sunset of the task order jurisdictional provision of § 4106(f)(3), the Court confronted the question of whether their jurisdiction would regress to its pre-2008 Federal Acquisition Streamlining Act of 1994 (“FASA”) jurisdiction or whether it would follow the GAO’s conclusion that the sunset effectively reverted jurisdiction to the pre-FASA, Competition in Contracting Act of 1984 (“CICA”) jurisdiction, which made no distinction between contracts versus task or delivery orders.

Judge Bruggink concluded that the court’s jurisdiction defaulted to its general jurisdiction over bid protests under the Tucker Act (28 U.S.C, § 1491(b)(1)), which does not distinguish between protests of task order procurements and contract awards, and contains no language precluding the adjudication of protests of task order procurements. This meant that the Court of Federal Claims now enjoys jurisdiction over civilian task and delivery orders of any dollar amount, and under any otherwise cognizable basis of protest.  However, the Court denied MED Trends’ protest.

On August 24, 2011, MED Trends filed an appeal to the Federal Circuit of Judge Bruggink’s decision, which ultimately found for the Government on the merits. On October 24, 2011, the U.S. Department of Justice filed a cross-appeal in the case (No. 2011-5128). Although the documents are sealed, it seemly likely that the basis of the Government’s appeal is the determination by the Court of Federal Claims that the Court entertained jurisdiction over this procurement. As Judge Bruggink stated in his opinion, “There is no question that, had this protest been brought one month earlier, [prior to the sunset,] the court would not have been able to exercise jurisdiction.”  Notably, having won on the merits, the Department of Justice could not have appealed this decision had MED Trends not opted to file its own appeal first.

It will be interesting to see in the coming months whether the Federal Circuit accepts the Court of Federal Claims (and the GAO’s) reading of § 4106(f)(3). Because Congress has still not amended Title 41 to extend the 2008 NDAA grant of jurisdiction (as it has for Department of Defense task and delivery order procurements), the possibility exists that, if the Federal Circuit disagrees with the Court’s reading of its jurisdiction, the Federal Circuit and GAO could be operating under different interpretations of the same statute. It is likely though that, should the Federal Circuit interpret the sunset clause differently, GAO will modify its practice to conform to the Federal Circuit’s reading of the statute.

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This week, GAO released a decision in Power Connector, Inc., B-404916.2, Aug. 15, 2011, 2011 WL 5029615 that appears to introduce a significant change to the circumstances in which a procuring agency may limit the scope of proposal revisions during corrective action. 

Prior GAO precedent indicated that there are certain instances where an agency could limit proposal revisions during corrective action and certain instances where such limitations were improper. On the one hand, in Honeywell Technology Solutions, Inc. (“Honeywell”), B-400771.6, Nov. 23, 2009, 2009 CPD ¶ 240, the procuring agency decided to accept updated past performance references as part of corrective action, but did not amend the RFP. When a protester challenged the agency’s decision to forbid pricing revisions, GAO denied the protest because agencies “have broad discretion” in the area of corrective action and “[GAO] will not question an agency’s decision to restrict proposal revisions when taking corrective action so long as it is reasonable in nature and remedies the established or suspected procurement impropriety.” 

On the other hand, in Lockheed Martin Systems Integration-Owego et al. (“Lockheed”), B-299145.5 et al., Aug. 30, 2007, 2007 CPD ¶ 155, GAO sustained a protest where the procuring agency amended the way in which certain life cycle costs would be calculated during the cost reevaluation, yet forbade offerors from amending their technical proposals. GAO recognized that changes to the way costs will be tabulated can have a direct effect on the technical solution offered, and thus concluded that, when an agency amends its solicitation, it should allow offerors to amend proposals without restriction “unless [1] the agency offers evidence that the amendment could not reasonably have any effect on other aspects of proposals, or [2] that allowing such revisions would have a detrimental impact on the competitive process.” Id. at 5. Since the agency’s amendment had a clear connection to another aspect of Lockheed’s proposal, the limitation was deemed improper. 

The intersection of these two legal principles is found in cases such as the recent decision in Intermarkets Global, B-400660.10, Feb. 2, 2011, 2011 CPD ¶ 30, where an agency revised two technical requirement in the RFP as part of corrective action and restricted proposal revisions to addressing the updated technical requirements. Specifically, the agency instructed:  “Price revisions are prohibited unless you can provide documented evidence, including a narrative explanation, showing a direct link, with supporting cost-type information, between changes in your proposal resulting from these two clarifications and the proposed pricing.” Id. at 3. When this limitation to pricing revisions was challenged, GAO denied the protest and upheld the agency’s corrective action approach. Citing to both of the above decisions in Honeywell and Lockheed, GAO found that there was no abuse of discretion in the agency’s decision to limit proposal revisions because offerors could make any pricing revisions that reasonably related to the revised technical requirements. Id.  GAO was unmoved by the protester’s desire to make wholesale pricing changes that had nothing to do with the revised solicitation. 

However, just six months after the Intermarkets Global decision, GAO seems to have issued a conflicting opinion in the Power Connector that has called into question the viability of not only Intermarkets Global, but many of the cases upon which it relied.

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In June I wrote about GAO’s conclusion that its protest jurisdiction over agency task and delivery order procurements will not only continue after the May 27, 2011 sunset date, but will expand. At that time, I noted that, to the extent the Court of Federal Claims agreed with GAO’s interpretation of the 41 U.S.C. § 4106(f)(3) (formerly codified at 41 U.S.C § 253j(e)) sunset clause, the Court’s existing jurisdiction over bid protests under the Tucker Act would not prevent it from hearing protests of civilian agency task and delivery order procurements. Three months have passed, and legislation to extend the GAO’s protest jurisdiction over these procurements remains stalled in Congress, but the Court of Federal Claims has spoken and has agreed that the sunset provision means that it is free to hear all protests of civilian task and delivery order procurements under its Tucker Act jurisdiction.

Under 41 U.S.C. § 4106(f), protests of civilian task or delivery order procurements may be brought in both the Court of Federal Claims and the GAO where the protest is based “on the ground that the order increases the scope, period or maximum value of the contract under which the order is issued.” § 4106(f)(1)(A). Since the 2008 amendments to the Federal Acquisition Streamlining Act (“FASA”), GAO has additionally enjoyed exclusive jurisdiction over any protests of orders in excess of $10 million. 10 U.S.C. § 2304c(e)(4) (Department of Defense (“DoD”)); 41 U.S.C. § 4106(f)(1)(B) (civilian agency).  The 2008 amended clauses included sunset provisions with a date of May 27, 2011. While the FY 2011 NDAA extended Title 10’s grant of jurisdiction to September 30, 2016, no similar extension has been passed to extend Title 41 jurisdiction past the May 27 sunset date.

In June, in Technatomy Corp., B-405140, June 14, 2011, GAO ruled that the sunset provision in 41 U.S.C. § 4106(f) did not remove GAO’s jurisdiction over civilian agency order procurements. Instead, GAO ruled that all of 41 U.S.C. § 4106(f) sunsetted, thereby eliminating any restrictions on GAO’s civilian agency task order jurisdiction, effectively reverting back to its pre-FASA, Competition in Contracting Act of 1984 (“CICA”) jurisdiction. Under CICA, GAO’s authority to hear bid protests made no distinction between contracts versus task or delivery orders, and did not require such orders to exceed $10 million. Additionally, under CICA, jurisdiction of these protests was not exclusively limited to GAO.  By announcing a reversion to this CICA jurisdiction, this decision meant that GAO asserted that it could hear a challenge over any civilian task or delivery order award, regardless of dollar figure, and that GAO’s jurisdiction over these protests was no longer exclusive.

At that time, it was unclear whether the Court of Federal Claims would agree with GAO’s interpretation of the § 4106(f) sunset clause. Earlier this week, in MED Trends, Inc. v. United States, No. 11-420 (Fed. Cl. Sept. 13, 2011), Judge Bruggink addressed this in the affirmative. 

On June 24, 2011, MED Trends challenged the award of a task order for information technology services issued by the DOL, acting through OSHA under the VETS GWAC vehicle. Shortly thereafter, the government moved to dismiss the protest asserting that the court lacked jurisdiction over this task order. Although the government conceded that a literal reading of the sunset provision meant that all of § 4106(f) was vacated, it argued that the legislative history demonstrated that Congress intended the sunset provision to repeal only the portion of that section granting jurisdiction to GAO over any protest of a FASA task order above $10,000,000 – the specific addition from the 2008 amendment. Based on a strict reading of the statute, Judge Bruggink disagreed, reading the term “subsection” to mean the entire division (f) of § 4106. In the absence of § 4106(f), Judge Bruggink concluded, the court’s jurisdiction defaulted to its general jurisdiction over bid protests under the Tucker Act (28 U.S.C, § 1491(b)(1)).  Unlike CICA, the Tucker Act does not distinguish between protests of task order procurements and contract awards and contains no language precluding the adjudication of protests of task order procurements.

Under this ruling, the Court of Federal Claims now enjoys jurisdiction over civilian task and delivery orders of any dollar amount and under any theory of law. Notably, since the previously parallel jurisdiction over DoD task and delivery orders under Title 10 was extended on January 7, 2011 to run through September 30, 2016, this means that – for the time being – the Court, with GAO, will have jurisdiction over all civilian task and delivery order procurements but will lack jurisdiction over DoD task order procurements protests not challenging the scope, period or value of the contract.

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Both Derek Mullins and Gunjan Talati contributed to this post.

In One Largo Metro LLC et al., B-404896 (June 20, 2011), GAO sustained protests by three disappointed offerors, challenging GSA’s award regarding a lease of office space in suburban Maryland for the Department of Health and Human Services. Crowell & Moring attorneys represented King Farm Associates, LLC (“King Farm”), one of the protesters. 

In sustaining the protests, GAO found that the Head of the Contracting Activity (“HCA”) rejected the lower-level evaluators’ conclusions without articulating an adequate basis for doing so. The Agency’s source selection evaluation board (“SSEB”) had initially recommended award to King Farm. The source selection authority (“SSA”), however, raised concerns about the SSEB’s rationale for its ratings and directed it to reevaluate its recommendation. After a second evaluation that identified numerous technical differences between the proposals, the SSEB again recommended award to King Farm. The SSA, despite disagreement with the SSEB’s conclusion about the relative technical merits of the offerors, adopted the recommendation. The HCA then reviewed the SSA’s source selection decision. Rejecting the ultimate conclusions of the SSEB and SSA, the HCA summarily decided that Fishers Lane presented the best value to the Government.

Although GAO acknowledged the well-settled rule that source selection officials are not bound by the recommendations of lower-level evaluators, GAO found that the HCA failed to meaningfully consider not only a number of evaluated differences between the proposals, but also “considerable disagreement between the SSEB and the SSA concerning the relative merits of the proposals.” Instead, GAO determined that the HCA mechanically compared the percentages of adjectival ratings assigned to each offer by the SSEB and issued a conclusory pronouncement that Fishers Lane represented the best value to the government. GAO concluded: “In the absence of a documented, meaningful consideration of the technical differences between the offerors’ proposals, the HCA could not perform a reasonable tradeoff analysis.” 

GAO also sustained King Farm’s challenge to GSA’s evaluation of proposals under the access to amenities subfactor. The solicitation provided that offerors’ proposals would be evaluated for both the “quantity and variety” of specified amenities within a certain distance of the proposed office space, but GAO found that GSA improperly deviated from this requirement by considering only the amount of amenity categories. 

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With legislation to extend the GAO’s protest jurisdiction over civilian agency task and delivery order procurements stalled in Congress, GAO has concluded that its protest jurisdiction over those procurements will not only continue after the May 27, 2011 sunset date, but will expand.  The Federal Acquisition Streamlining Act (“FASA”) limited GAO’s protest jurisdiction to protests on the “ground that the order increases the scope, period or maximum value of the contract under which the order is issued” or involving orders in excess of $10 million. 10 U.S.C. § 2304c(e)(4) (Department of Defense (“DoD”)); 41 U.S.C. § 253j(e) (civilian agency). Since the 2008 amendments to FASA, GAO has enjoyed exclusive jurisdiction over protests of both DoD and civilian agency task and delivery orders. The amended clauses included sunset provisions with a date of May 27, 2011. While the FY 2011 NDAA extended Title 10’s grant of jurisdiction to September 30, 2016, no similar extension was passed to extend Title 41 jurisdiction past the May 27 sunset date.

On May 23, 2011, Technatomy Corporation protested the award of a task order issued by DISA under a GSA ID/IQ contract. Shortly thereafter, DISA filed a Motion to Dismiss arguing that GAO’s jurisdiction over civilian task order procurements sunsetted by operation of law on May 27, 2011, citing 41 U.S.C § 253j(e).

GAO denied that motion, ruling that the sunset provisions in 41 U.S.C. § 253j(e) jurisdiction did not remove GAO’s jurisdiction over civilian agency order procurements. Technatomy Corp., B-405140, June 14, 2011. Instead, GAO ruled that all of 41 U.S.C. § 253j(e) sunsetted, thereby eliminating any restrictions on GAO’s civilian agency task order jurisdiction, effectively reverting back to its pre-FASA, Competition in Contracting Act of 1984 (“CICA”) jurisdiction. Under CICA, GAO’s authority to hear bid protests made no distinction between contracts versus task or delivery orders, and did not require such orders to exceed $10 million. Additionally, under CICA, jurisdiction of these protests was not exclusively limited to GAO. By announcing a reversion to this CICA jurisdiction, the Technatomy decision means that GAO now asserts that it can hear a challenge over any civilian task or delivery order award, regardless of dollar figure, and that GAO’s jurisdiction over these protests is no longer exclusive.

Notably, to the extent that the Court of Federal Claims agrees with GAO’s interpretation of the § 253j(e) sunset clause, the Court’s existing jurisdiction over bid protests under the Tucker Act would not prevent it from hearing protests of civilian agency task and delivery order procurements.

Also of note in this decision is GAO’s analysis of whether the protest of this DISA task order award decision properly falls under Title 10 or Title 41 jurisdiction. The underlying contract vehicle, GSA VETS, was with GSA, a civilian agency. However, the task order competition was conducted by DISA, a DoD agency. Thus, there was a question of whether GAO’s jurisdiction over the protested task order award was authorized under Title 10 or Title 41. GAO’s interpreted the statutory language of Title 41 §§ 3101(c), 4103, to dictate that jurisdiction over task or delivery orders is determined by the agency issuing the underlying contract. As GSA issued the underlying contract, jurisdiction over the task order was authorized by Title 41, not Title 10.

With this ruling, GAO has potentially opened the door to new protests previously barred by the strict jurisdictional limits of § 253j(e), such as task order awards less than $10 million. Additionally, since the previously parallel jurisdiction over DoD task and delivery orders under Title 10 was extended on January 7, 2011 to run through September 30, 2016, this means that – for the time being – GAO will have broader jurisdiction over civilian task and delivery order procurements than they have over DoD task order procurements. It will be interesting to see if GAO’s decision spurs Congress to reinstate § 253j(e), but in the meantime GAO, and potentially the Court of Federal Claims, may entertain a broader protest jurisdiction over civilian task and delivery order procurements.

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In Santa Barbara Applied Research, Inc. (“SBAR”) v. United States, No. 11-86C (May 4, 2011), Judge Firestone of the United States Court of Federal Claims (“COFC”) ultimately upheld the Air Force’s in-sourcing decision on facts that are largely sui generis. However, before ruling in the Air Force’s favor on the merits of the cost comparison, Judge Firestone first unequivocally held that the COFC has subject matter jurisdiction to hear a challenge to a DoD in-sourcing decision, and the Plaintiff, the incumbent provider of the in-sourced services, had standing to bring such a challenge. 

As a threshold matter, the government did not dispute that the COFC had jurisdiction to hear SBAR’s in-sourcing challenge under the Tucker Act, 28 U.S.C. § 1491(b)(1), because the matter involved the “alleged violation of statute or regulation in connection with a procurement or proposed procurement.” The government’s position on the COFC’s exclusive jurisdiction to hear in-sourcing challenges was consistent with the position that it has taken in a number of recently filed in-sourcing challenges in the district courts.

However, in moving to dismiss SBAR’s challenge for a lack of standing, the government staked out a position that was directly inconsistent with the arguments that it had advanced in moving to dismiss the district court in-sourcing cases. In this regard, the government moved to dismiss the SBAR challenge at the COFC on the grounds that, inter alia, SBAR was not an “interested party” because the matter did not involve a formal public-private competition, and, therefore, SBAR purportedly did not suffer the competitive injury necessary for standing under section 1491(b)(1).  In advancing this argument, the government relied on the Federal Circuit’s prior decisions in American Federation of Government Employees, AFL-CIO (“AFGE”) v. United States, 258 F.3d 1294 (Fed. Cir. 2001) and Weeks Marine, Inc. v. United States, 575 F.3d 1352 (Fed. Cir. 2009). 

Remarkably, in the district court actions where the government moved to dismiss on the grounds that the COFC had exclusive jurisdiction, the plaintiffs in those cases argued that dismissal was not proper because, inter alia, the in-sourcing challenges were not “bid protests” and the plaintiffs were not interested parties to pursue such actions at the COFC. In response, the government asserted that the plaintiffs were in fact interested parties and could demonstrate prejudice because an in-sourcing decision necessarily involves consideration of whether it is in the best interests of the government to contract for its requirements, and contractors interested in bidding on such contracts are affected and suffer injury when the decision is made not to contract. Despite taking a directly contrary position before the COFC, the government further argued in the district court matters that AFGE and Weeks Marine did not support the argument that the plaintiffs lacked interested party status.  See, e.g., Government’s Replies to Plaintiffs’ Motions to Dismiss in Rothe Development, Inc. (5:10-CV-00743-XR (Western Dist. Of Tex.)); K-MAR Industries, Inc. (CIV-10-984-F (Western Dist. Of Okla.)); Vero Technical Support, Inc., (10-14162-CIV-GRAHAM/LYNCH (Southern Dist. of Fla)).

In an apparent attempt to reconcile its inconsistent positions on standing to challenge in-sourcing decisions, in an April 2011 filing in Triad Logistics Svs., Corp., which is another in-sourcing challenge pending before the COFC, the government acknowledged to Judge Horn that “the United States’ position with respect to these issues has developed over time.” That seems to be quite the euphemism. 

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On April 13, 2011, the U.S. Senate Committee on Homeland Security and Governmental Affairs approved S. 498, the Independent Task and Delivery Order Review Extension Act of 2011. This bill extends the Government Accountability Office’s (“GAO”) protest jurisdiction over task and delivery orders under civilian agency procurements in excess of $10 million through September 30, 2016, aligning the GAO’s protest jurisdiction over civilian and defense related procurements. 

Previously, on January 7, 2011, President Obama signed the National Defense Authorization Act for Fiscal Year 2011 (“NDAA for FY2011”), extending the GAO’s supplemental authority to hear protests of task and delivery orders in excess of $10 million, but only for Department of Defense (“DoD”) procurements. The legislative history of the NDAA for FY2011 did not explain any rationale for this incongruity.

The GAO was first given supplemental protest authority over DoD and civilian agency task and delivery orders by the 2008 National Defense Authorization Act, Pub. L. No. 110-181. Under this act, the GAO’s supplemental protest authority was set to expire after three years on May 27, 2011.

S. 498’s companion bill in the U.S. House of Representatives, H.R.899, was already approved by the Committee on Oversight and Government Reform on March 10, 2011. Currently, S. 498 and H.R. 899 await a vote by their respective houses of Congress. 

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For one reason or another, the date on which an agency anticipates granting a contract award often comes and goes with no award decision being made. In these situations, contractors are often asked beforehand to extend the acceptance period of their proposals to accommodate the expected delay in award. But what happens when the contractor does not agree to the extension by the agency’s deadline for doing so? Does that mean the contractor foregoes any chance it may have had at receiving the award? According to GAO, the answer is sometimes “no.”

In an April 6, 2011 decision, Ocean Services, LLC, B-404690, GAO dealt with this exact situation. In this total small business set-aside, the agency thrice asked offerors to extend the acceptance period of their proposals, and each time, the offerors agreed to the extension. When the agency sought a fourth extension so that it could perform additional market research, Ocean Services initially responded that it was concerned that the agency was pursuing a re-competition without the small business component. Ocean Systems, at that time, did not extend the acceptance period of its proposal.

The agency then sent, Ocean Services an e-mail on Friday, December 17, 2010, reminding Ocean Services that its proposal was set to expire the next day, a Saturday. The agency requested an extension of the offer, and on the next business day, Monday, December 20, Ocean Services extended its proposal. All other offerors extended their proposals before December 18, 2010.

The agency subsequently excluded Ocean Services from the competition because Ocean Services’ did not extend its proposal until December 20, two days after the proposal had expired. Ocean Services filed a bid protest at GAO challenging the exclusion.

In its decision, GAO applied the rule that when a proposal has expired, an offeror may “revive its proposal . . . if doing so would not compromise the integrity of the competitive bidding system.” GAO found that revival of the bid was appropriate because, in this case, Ocean Systems never declined to extend its offer and sought to extend it on the first business day after the offer expired. Because only two days had elapsed between the proposal’s expiration and revival, GAO concluded that Ocean Systems could not have “compromised the procurement process by avoiding market fluctuations to which other offerors were exposed.” Absent prejudice to other offerors, GAO recommended that the agency accept the revival of Ocean Systems’ proposal.

Although there certainly would be cases where revival of an expired proposal might not be appropriate, Ocean Services demonstrates that GAO does not condone strict enforcement of proposal expiration dates where the competitive process is not harmed by the proposal’s revival.
 

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Both Amy O'Sullivan and Puja Satiani contributed to this post.

On March 17, 2011, bid protest litigators Amy O’Sullivan and Puja Satiani will be teaching “Government Contracts Bid Protests: Practice, Procedure and Strategy,” a full-day seminar for Federal Publications Seminars. The course will focus on the practice, procedure, and strategy involved in protests at the agency-level and before the U.S. Government Accountability Office (GAO) and the U.S. Court of Federal Claims, with the focus largely on the latter two forums. Participants will receive a copy of Government Contract Bid Protests: A Practical and Procedural Guide (2010 ed.), which was discussed in a previous blog entry.

Details about the course and on-line registration are available at http://www.fedpubseminars.com/Basics/Government-Contracts-Bid-Protests-Practice-Procedure-and-Strategy/.
 

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On January 7, 2011, President Obama signed the National Defense Authorization Act for Fiscal Year 2011, which, among other things, extends the Government Accountability Office’s (“GAO”) protest jurisdiction over certain Department of Defense (“DoD”) task and delivery orders through September 30, 2016.  However, absent congressional action, GAO’s jurisdiction over protests of task and delivery orders under civilian agency procurements will lapse on May 27, 2011 (unless there is an allegation that the order is outside the scope of the underlying ID/IQ contract).

The 2008 National Defense Authorization Act, Pub. L. No. 110-181, established supplemental GAO protest authority for task and delivery orders over $10 million.  Section 843 of that Act contained dual conforming statutes in Title 10 (controlling DoD procurements) and Title 41 (controlling civilian agency procurements) of the U.S. Code.  Those parallel clauses contained a sunset provision, such that this supplemental protest authority would expire on May 27, 2011 (“this subsection shall be in effect for three years, beginning on the date that is 120 days after the date of the enactment of the National Defense Authorization Act for Fiscal Year 2008.”). 

Section 825 of the NDAA for FY2011 extends until September 30, 2016, GAO’s supplemental protest authority over DoD task and delivery order procurements in excess of $10 million.  However, because Section 825 only amends Title 10 (but not Title 41), GAO’s supplemental jurisdiction over protests regarding task and delivery order order procurements for civilian agencies in excess of $10 million lapses on May 27, 2011.

The legislative history does not explain any policy rationale for this incongruity, and we are not aware of any reason to distinguish DoD from civilian agency procurements for these purposes.  It is possible that subsequent legislation will extend the sunset date for civilian agencies.  If not, some interesting questions may arise as the expiration of GAO’s jurisdiction approaches.  For example, if a protest is filed before the sunset date, will GAO have jurisdiction to decide that protest and issue a recommendation even if it is unable to do so before the sunset date? 

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With billions of dollars at stake in one procurement alone, or the future viability of a company hanging in the balance of a single contract award, federal Government procurements are highly competitive. And, as these procurements have been increasingly the subject of bid protests – which can alter both the terms of the solicitation or the outcome of the evaluation – contractors simply cannot afford to be ignorant of the bid protest strategies, process, and procedures. Did you realize that this right to protest was put in place to give all offerors an opportunity to ensure a fair and objective chance at competing for and winning government business? Did you know that protests are not just for large business and lawyers – they are important for all contractors seeking to do business with the government? And, most importantly, did you know that if you aren’t aware of the procurement rules and your own rights to challenge, you could lose your ability to protest?

Because of the significant role bid protests play in your company’s business as a government contractor, you might be interested in reading the 2010-2011 edition primer on bid protests by Crowell & Moring’s own contributing editors, Partner Amy Laderberg O’Sullivan and Counsel Puja Satiani. This book explains the key advance-planning, decision-making, litigation, and litigation avoidance practice pointers for bid protests before an agency, the U.S. Government Accountability Office (GAO), and the U.S. Court of Federal Claims.  It also offers guidance for newcomers on the fundamentals of where and how to protest and provides information on substantive developments for seasoned practitioners. Before filing a protest, the book explains:

• How to maximize the information obtained during a debriefing;
• Considerations that must be weighed when deciding whether to protest; and
• Advantages and disadvantages of the three forums.

The book also explains the full lifecycle of a protest and the related procedural requirements, including:

• Jurisdictional issues such as timeliness traps and standing concerns;
• Protective orders and associated pitfalls;
• Development of a protest, such as shaping the scope of the agency record;
• The standard of review applied by the adjudicator;
• Potential outcomes, including corrective action, withdrawal, or decision, and the types of relief available; and
• Options available after an unfavorable decision.

The book is available from West Publishing at http://west.thomson.com/productdetail/160715/40769688/productdetail.aspx.  . Using the book as a course manual, Amy and Puja also teach a full day seminar on bid protests for Federal Publications. Details and on-line registration for the seminar are available at: http://www.fedpubseminars.com/Basics/Government-Contracts-Bid-Protests-Practice-Procedure-and-Strategy/.

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A recent GAO report highlights the fact that when a solicitation and procurement strategy prioritize (1) capabilities and the quality or level of service to be procured over (2) the dollars to be paid, government contracting, project, and source selection personnel are forced to earn their paychecks.  In these situations, two or more proposals, with potentially vast differences, must be comparatively analyzed for overall and incremental value, with solicitation requirements serving as a baseline, and government employees must decide which proposal provides the best value to the government.

On October 28, 2010, GAO followed through on the mandate in Section 845 of the National Defense Authorization Act for Fiscal Year 2010 and reported on the Defense Department's use of the best value tradeoff process in source selections during March through October 2010.  GAO focused on difficulties and challenges faced by government officials in making and supporting source selections when factors other than cost or price (e.g., technical approach, past performance, small business utilization) are designated as having more importance, when combined, than cost or price factors.  DOD relies heavily on this approach in situations involving high-dollar, competitive contract awards.  The GAO report notes that government used this approach 95% of the time during FY 2009 in situations involving competitively awarded contracts involving an obligation of $25 million or more.

In theory, the government's use of a best value tradeoff analysis should provide the critical element of flexibility to decision makers.  That is, the decision to pay Contractor A a higher price for good and services than that offered by Contractor B is an acceptable one, if doing so yields the best value to the government.

In practice, the use of a best value tradeoff process places government officials in the position of having to exercise business judgment.  And, perhaps most important, the process forces the government to articulate and document its reasons, with very specific references to information gained from offerors during source selections, for deciding that the government's best interest are served by paying either (1) more dollars for more capability or service, or (2) less dollars for less capability or service.  Interestingly, GAO found that DOD officials selected the lower priced option nearly as often as it selected the highest rated, but more costly, proposal.

GAO's report underscores the importance of growing a DOD Acquisition Workforce (including 6,400 anticipated new hires over the next few years) that has the guidance, skills, and business judgment to maneuver the best value tradeoff process properly and successfully.  And GAO would know, considering the continuing failures by the federal acquisition workforce to perform tradeoffs and determine best value.  Here are two recent examples.

This past summer, in Powersolv, Inc., B-402534, Jun. 1, 2010, 2010 U.S. Comp. Gen. LEXIS 234, GAO sustained a protest because the Federal Railroad Administration utterly failed to engage in a tradeoff process when it selected for award the proposal of a higher priced, higher rated proposal for database support services.  After the protestor pointed out that no tradeoff analysis was done to justify payment of a 10% price premium, the agency scrambled unsuccessfully to find documents that would have shown consideration, with specifics from features of contractor proposals, of whether the higher price was worth it.

Likewise, in Systems Eng'g Int'l, Jul. 20, 2010, 2010 CPD ¶ 167, GAO sustained a protest in a procurement for power system maintenance services because EPA took an unacceptable short-cut in the best value tradeoff process and only considered the top two qualitatively rated offers out of ten received.  In this instance, EPA failed to consider the lower priced offers.  GAO noted that, even though the protester's offer was marked low as "Marginal" in non-price factors under consideration, the offer nonetheless should have been considered in the best value tradeoff process, because it was the least expensive quote.

These decisions, and GAO's recent report, suggest that the federal acquisition workforce is going to continue to be held accountable for the best value decisions it makes and that it may well be money well spent for the government to devote more significant resources to hiring individuals with the sound business judgment and experience required to make effective best value tradeoff decisions for major acquisitions.

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This week, in UXB-KEMRON Remediation Services, LLC, B-401017 (Oct. 25, 2010), the GAO provided an important reminder about its exacting application of timeliness rules. 

The United States Army Corps of Engineers (“USACE”) published a delivery order proposal request under a multiple award, ID/IQ contract for landmine removal work in Afghanistan. The ID/IQ schedule contract under which the solicitation was issued had a pool of both large and small business entities with expertise in the area of munitions removal and disposal. 

The USACE decided to make the delivery order procurement at issue an unrestricted competition open to both small and large businesses alike. One small-business contract holder, UXB-KEMRON Remediation Services LLC, disagreed with this decision and contacted the Contracting Officer to request that the competition be limited to the pool of small business schedule contractors. When the Contracting Officer rejected this request, UXB-KEMRON filed an “appeal” to the USACE’s Task Order Ombudsman seeking reconsideration of the issue. The appeal was filed nine days prior to the due date for quotes. 

Eight days later, on the eve of the due date for quotes, the Task Order Ombudsman denied UXB-KEMRON’s appeal. The next week, UXB-KEMRON filed a bid protest with the GAO.  

Shortly thereafter, USACE submitted a motion to dismiss the GAO protest on timeliness grounds because it had been filed after the due date for quotes. In response, UXB-KEMRON argued that its “appeal” to the Task Order Ombudsman was an agency-level protest and, per Federal Acquisition Regulation § 33.103, UXB-KEMRON had ten days from the date of denial of the agency-level protest to file a GAO protest, even if the due date for quotes had lapsed. 

GAO agreed with the Government and dismissed the case. The basis for the dismissal was the Comptroller General’s conclusion that an appeal to the Task Order Ombudsman is not an agency-level protest under FAR Part 33 because the Task Order Ombudsman position is a creation of FAR Part 16. In particular, FAR § 16.505(b)(6) states in pertinent part:

Task-order and delivery-order ombudsman. The head of the agency shall designate a task-order and delivery-order ombudsman. The ombudsman must review complaints from contractors and ensure they are afforded a fair opportunity to be considered, consistent with the procedures in the contract.

Though the “appeal” to the Ombudsman may well have contained all of the information necessary for a valid agency-level protest, FAR § 33.103 does not contain any exceptions to the rules for agency-level protests for Ombudsman appeals. Therefore, because the Ombudsman “appeal” was not styled as a bid protest, and because it was addressed to someone other than the Contracting Officer (or other official designated to receive bid protests), GAO refused to treat it as the equivalent of an agency-level protest. As a result, UXB-KEMRON’s time to file at GAO had expired on the day quotes were due. 

This case serves as an important lesson that GAO’s timeliness rules are precisely written and quite unforgiving. Contractors must read these rules carefully and, when unresolved questions remain, contractors should consult with government contracts counsel rather than guess about the appropriate course of action and risk making an error that cannot be undone.  

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In MCR Federal, LLC, B-401954.2 (Aug. 17, 2010), GAO denied protester's challenge to the agency's decision, in the context of taking corrective action, to waive organizational conflicts of interest for two offerors. The agency - CIA - concluded that executing a waiver was in the government's best interest, because the pool of qualified contractors was so small that preclusion of an offeror (due to OCIs) would limit competition.

In denying the protest, GAO noted that "[w]here a procurement decision - such as whether an OCI should be waived - is committed by statute or regulation to the discretion of agency officials, our Office will not make an independent determination of the matter." GAO found that the agency complied with FAR 9.503, including approval by the agency head's designee and a written determination setting forth (i) the extent of the conflict and (ii) explanation for why application of the OCI rules would not be in the government's interests in the particular procurement. 

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 In its annual report (.pdf) to Congress under the Competition in Contracting Act of 1984, 31 U.S.C. § 3554(e)(2), GAO disclosed the following bid protest statistics for FYs 2005-2009. 

Perhaps the most glaring trend evident from this data is the steady rise in bid protests filed at GAO since FY 2007. After dropping 2% in FY 2006, the number of GAO protests rose by 6%, 17%, and 20% in FYs 2007 thru 2009, respectively. Although the increase in FY 2007 was modest, the spikes in FYs 2008 and 2009 were substantial. There are several possible explanations for this significant rise in GAO bid protests, but the two greatest drivers are as follows:

First, expansion of GAO’s protest jurisdiction. Of the 1,989 cases filed in FY 2009, 168 can be attributed to GAO’s expanded bid protest jurisdiction over task orders (139 filings); A-76 protests (16 filings), and Transportation Security Administration protests (13 filings). These 168 filings represent 50% of the total increase in filings from FY 2008 to FY 2009 (337 filings).

 

Second, the severe economic downturn. As corporate revenues and profits fall, the importance of each contract award has a more significant impact on the bottom line. Many companies can no longer afford a “we’ll get the next one” attitude, and protests have seemingly become the last resort in corporate business capture strategy.

With the sharp rise in protests, it would be reasonable to assume a corresponding increase in the number of decisions on the merits and sustains. We all know about why one should never assume, and that holds true here. Indeed, the number of GAO merit decisions was actually lower in both FYs 2008 (291) and 2009 (315) as compared with FY 2007 (335). The same is true for the number of sustains – there were 91 sustains in FY 2007 versus 60 sustains in FY 2008 and 57 in FY 2009. How can that be so? Again, there are a number of potential explanations, but here are two most likely culprits:

First, GAO has managed its growing docket by increasing resort to a unique form of alternative dispute resolution (“ADR”) -- “outcome prediction.” Under this ADR process, the GAO decision attorney informs the parties (typically after the record is closed) about how GAO is likely to rule if forced to draft a decision. More often than not, the party facing a likely adverse decision voluntary “does the right thing.”  GAO used ADR in 149 protests in FY 2009, as compared with 78 in FY 2008 and 62 in FY 2007.    This spike in the use of “outcome prediction” not only accounts for at least a portion of the drop in the number of written decisions, but also sustains (many of the cases in which GAO uses outcome prediction would have resulted in sustains if GAO had issued a written decision).

Second, agencies are increasingly taking corrective action before even producing the agency report. Rather than digging-in and litigating, agencies have become more willing to voluntarily “pull the plug” and implement corrective measures when faced with potentially meritorious protests. Corrective action takes the matter out of GAO’s hands (at least temporarily), thereby negating the need for a written decision.    

A final note, and a good news bulletin for protesters, GAO’s “effectiveness rate” has climbed to 45%. The “effectiveness rate” reflects cases where the protester obtained some form of relief by the agency, either by virtue of a sustain or an agency’s decision to take corrective action. As such, in nearly half of the protests filed in FY 2009, the protestor apparently received some form of relief.

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Two recent bid protest decisions from the Government Accountability Office (GAO) provide a helpful reminder that a “price realism” analysis is never considered to be part and parcel with the Government’s standard price evaluation in a federal procurement, nor synonymous with a “price reasonableness” determination. A price realism review is only required when called for in the procurement solicitation. Moreover, federal agencies lack the discretion to conduct a price realism assessment when the solicitation does not advice prospective contractors of that intention. 

In SDV Solutions, Inc., B-402309 (Feb. 3, 2010), GAO denied a bid protest which alleged that the contract awardee’s price in a fixed-price procurement for computer support services was unreasonably low. GAO identified that the solicitation in question stated that the agency would conduct a “price reasonableness” review, rather than a “price realism” review. And, in what has become a frequent refrain in its protest decisions, GAO explained that “the purpose of a price reasonableness review in a competition for award of a fixed-price contract is to determine whether the prices offered are too high, as opposed to too low.” Id. at 4. Based on this, GAO found:

Arguments . . . that an agency did not perform an appropriate analysis to determine whether prices are too low such that there may be a risk of poor performance concern price realism; a price realism evaluation [was] not required here, where the solicitation provides for the award of a fixed-price contract and does not include a requirement for price realism.

Id.

While the rejection of protest grounds like the pricing argument raised in SDV Solutions are fairly routine, GAO’s decision in Milani Construction, LLC, B-401942 (Dec. 22, 2009), is an important reminder that the law in the area of price realism is a two-way street. For the first time in nearly five years, GAO addressed a situation in which a federal agency had conducted a price realism review as part of its price evaluation when the underlying solicitation did not inform offerors that price realism would be a consideration. Specifically, Milani Construction had submitted a bid that was substantially below that of the other offerors in the procurement. Rather than treating this as a plus factor in the award decision, the agency evaluators deemed Milani’s bargain price evidence that it failed to fully comprehend the complexity of the work required. As a result, the agency considered Milani’s price to be a negative in the source selection process, and Milani’s proposal was passed over for a higher priced offering. 

In its protest, Milani characterized this risk finding as the byproduct of a “price realism” analysis and argued that such a finding was improper when the solicitation did not inform prospective offerors that price realism would be considered. GAO agreed with Milani and sustained the protest. First, GAO noted that “the submission of even a ‘below-cost’ price is not by itself improper” in fixed-price procurements, since the risk of cost overruns are borne by the contractor, rather than the government. Id.at 5. Then, GAO concluded that, before a price realism analysis may take place, “offerors competing for award of a fixed-price contract must be given reasonable notice that a business decision to submit a low-priced proposal will be considered as reflecting on their understanding [of technical requirements] or the risk associated with their proposal.” Id.at 5-6. GAO determined that, upon failing to provide the necessary notice in the solicitation, the agency was not permitted to conduct a discretionary realism review of Milani’s bid.  

In recent, high profile bid protests such as General Dynamics One Source, LLC, B-400340.5 (Jan. 10, 2010), and Health Net Federal Services, B-401652.3 (Nov. 4, 2009), GAO has taken a clearer stance on the minimum requirements for a passable price realism analysis in fixed-price procurements and sustained protests when the agency’s analysis fails to pass muster. Against that backdrop, the decisions in SDV Solutions and Milani Construction provide an important reminder that the threshold question of whether the solicitation explicitly permits a realism analysis must be answered in the affirmative before GAO will consider the substantive arguments of either party regarding the propriety of the agency’s realism review (or lack thereof).

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