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

CORRECTION (5/15/12): A prior version of this blog post first posted on May 11, 2012, analyzed the proposed amendment to the Tucker Act discussed herein under the mistaken impression that it had been part of the committee mark version of the 2013 National Defense Authorization Act. We have since learned that the proposed amendment to the Tucker Act was not included in the bill that went to committee vote. The below analysis has been altered to examine the proposed legislation in the proper context. We apologize for the error.

On April 25, 2012, the Department of Defense submitted proposed legislation to the House Armed Services Committee for consideration in the 2013 National Defense Authorization Act (NDAA) that would dramatically amend the Tucker Act, 28 U.S.C. § 1491(b), by importing essentially all of the GAO’s rigid timeliness rules with regard to bid protest actions and applying them to protests filed before the U.S. Court of Federal Claims (COFC). Amongst the GAO timeliness rules currently contained in 4 C.F.R. § 21 that DoD proposed to be added to the Tucker Act and apply to the COFC include: 

• The absolute rule that pre-award solicitation challenges must be filed before the submission date for proposals; 
• The rule that any post-award protest must be filed within 10 days of when an offeror knows or should have known of the basis for protest, unless subject to a mandatory debriefing, in which case the protest must be filed within 10 days of that debriefing, and;
• In the event that an agency protest has been filed, the rule that a COFC protest must be filed within 10 days of when the offeror knew or should have known of the adverse decision in the agency protest. 

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At 1pm EST on February 9, 2012, Crowell & Moring government contracts attorneys Peter Eyre and James Peyster will be conducting a webinar entitled “Conflicts of Interest in Government Contracting: Reducing Risk in an Age of Increased Visibility” on behalf of L2 Federal Resources. This webinar will provide an overview of the key principles of conflicts of interest law old and new, including a review of the new personal conflict of interest rules which took effect on December 2, 2011 and a preview of the pending changes to the rules for addressing organizational conflicts of interest. Having established the regulatory framework, the webinar will also provide best practice tips for identifying, avoiding, mitigating, and managing actual or potential conflicts of interest.  Peter and James will welcome audience questions in the final 15 minutes of the 90-minute event. 

Details about the webinar and on-line registration are available at http://l2federalresources.com/2012/conflicts-of-interest-in-government-contracting-reducing-risk-in-an-age-of-increased-visibility/ 

Please note that L2 Federal Resources requires a registration fee for its webinars.

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 We invite you to join us on November 16 at 3pm EST for a complimentary webinar, “Understanding and Implementing the New FAR Contractor Personal Conflict of Interest Provisions.” 

On November 2, 2011, the FAR Councils issued a final rule amending the Federal Acquisition Regulation (“FAR”) to include new provisions governing personal conflicts of interest of contractor and subcontractor employees supporting or performing certain government acquisition functions. Click here to find Crowell & Moring’s preliminary analysis of the rule.

These new personal conflict of interest regulations contain numerous contractor compliance requirements which will necessitate careful implementation prior to the December 2nd effective date for the rule. During the webinar, we will address these new compliance requirements, provide implementation tips, and help clarify the confusing picture of who is covered by these new rules. Click here to register.

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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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 On April 13, 2011, the Obama administration released a draft executive order called “Disclosure of Political Spending by Government Contractors.” This executive order, if implemented, would instruct the FAR Councils to amend the FAR to require significant disclosures about contractor political contributions to be made as part of any proposal submitted by a firm seeking a federal contract. The disclosures would not only cover the contributions by the company itself, but also the company’s affiliates, the company’s political action committees, and the individual contributions of all officers and directors:

(a) All contributions or expenditures to or on behalf of federal candidates, parties or party committees made by the bidding entity, its directors or officers, or any affiliates or subsidiaries within its control; and

(b) Any contributions made to third party entities with the intention or reasonable expectation that parties would use those contributions to make independent expenditures or electioneering communications.

The disclosure obligation would kick in any time the aggregate amount of contributions given to a single source reach $5000 and the information collected would be posted of the Data.gov website so that the public could access the information. 

In the six weeks since this draft executive order was released, there has been significant backlash from industry. A wide array of trade associations and business advocacy groups, including the Professional Services Council, the Aerospace Industries Association, and the U.S. Chamber of Commerce, have chimed in to vigorously oppose the proposed order. At the same time, watchdog groups of applauded the proposed Order as an example of increased transparency in the area of federal contracting. 

While the Obama administration has assured critics that the information collected would not be considered as part of the evaluation of proposals (beyond the threshold issue of whether the certification of full disclosure was completed), questions persist about whether the draft Order would cause exactly the situation it seeks to avoid—injecting politics into the federal contracting system by providing competitive decision-makers with information they would not otherwise have possessed in the regular course of business. Other entities are concerned about the chilling effect this draft Order would have on political contributions by individuals at the company, whose personal political interests may have little or nothing to do with the interests of the employer. 

In the last week, groups of Republicans in both the House and Senate, led by Darrell Issa (R-California) and Susan Collins (R-Maine) respectively, have introduced legislation called the Keeping Politics Out of Federal Contracting Act of 2011, which would effectively preempt the draft Obama Executive Order by prohibiting federal agencies from collecting the political contribution information of contractors and their employees as part of a federal procurement. The statute would also prohibit federal agencies from using political affiliation or contribution information received from any source as a factor in the award of federal contracts. 

We will keep our readers apprised as the situation continues to develop. 

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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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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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