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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.

In a procurement of leather fabric, the protester, Power Connector, had previously filed a post-award bid protest alleging a variety of procurement errors in the agency’s evaluation of offers. Before submitting its agency report, the procuring agency took voluntary corrective action to address the errors and inconsistencies. As part of that corrective action, the agency decided to “clarify” what constituted “relevant” experience for the purposes of evaluations under the past performance evaluation factor. Whereas the initial RFP indicated that the agency would consider any “like or similar work experience,” the revised RFP now defined relevant work as contracts where the offeror provided “leather items” within the last “five years.”

Offerors were allowed to submit new past performance references in response to the amended RFP, but were told that revisions to pricing proposals would not be accepted because (1) the change to the past performance evaluation criteria had no logical relationship to pricing, and (2) Power Connector had inadvertently been provided with the pricing of all other offerors as part of its post-award debriefing, which gave it an unfair competitive advantage over its competitors. These two rationales mirrored the above-quoted logic of the Lockheed decision. 2007 CPD ¶ 155 at 5.

Power Connector protested the agency’s proposed corrective action, arguing that offerors should be allowed to amend their pricing in light of the material amendment to the RFP. Though the protester could not identify a direct connection between revisions to the way past performance would be evaluated and the manner in which leather fabric was priced, Power Connector argued that the revised past performance evaluation criteria significantly hurt Power Connector’s chance for a strong past performance rating and, had Power Connector known up front that its past performance evaluation would be weak, it would have proposed more competitive pricing to compensate. On the competitive fairness point, Power Connector argued that the agency could remedy the problem by means other than denying Power Connector the right to amend its pricing.

GAO sustained the protest. On the first issue, it concluded bluntly, “[W]e think the protester demonstrates that the revision to the evaluation criteria would have an effect on its proposed price.” 2011 WL 5029615 at *4. Though it did not engage in a detailed analysis, GAO seems to have determined that, even though the past performance evaluation criteria could not reasonably have any direct effect on Power Connector’s pricing, there was an indirect competitive effect resulting from the solicitation amendment that was sufficient to restrict the agency’s effort to limit proposal revisions.

On the subject of the agency’s concern about competitive fairness in light of the inadvertent pricing disclosures, GAO again agreed with the protester. Though it concurred with the agency that the concern about Power Connector’s insights into competitor pricing was valid, GAO rejected the agency’s argument that limiting proposal revisions was a proper remedy. Instead, GAO suggested that the agency should release the same pricing information to all offerors in order to level the playing field.

The brevity of the decision and the scant discussion of GAO precedent beyond boilerplate standard of review language suggest that GAO may not have intended Power Connector to be a significant revision to established law. Nonetheless, the plain language of the decision raises numerous questions which now must to be resolved in future decisions.

First, what is left of the exception identified in the Lockheed decision (and other decisions before and after) that allowed an agency to restrict proposal revisions in situations where the amendment to the RFP “could not reasonably have any effect on other aspects of proposals”? If a protester can repudiate the agency’s application of the Lockheed exception merely by asserting that the change to the solicitation would have caused it to alter some unrelated portion of its proposal in order to be more “competitive,” then how can an agency ever demonstrate that it has satisfied the exception? Will GAO now review on a case-by-case basis whether the material amendment to the solicitation places the protester in a less competitive posture than the previous solicitation language? Who has the burden of proof? What evidence will be considered in light of the fact that the re-evaluation has not yet taken place in order to concretely establish how the solicitation amendment altered the protester’s ratings/scores?

Second, how does GAO reconcile the Intermarkets Global decision with its ruling in Power Connector? GAO in Power Connector did not indicate that it was reversing the Intermarkets Global precedent. To the contrary, it actually cited Intermarkets Global approvingly for some of the basic standard of review language. 2011 WL 5029615 at *3. In Intermarkets Global, GAO found that a corrective action provision limiting pricing revisions to areas of pricing directly related to the amended technical requirements to be an appropriate application of the first prong of the Lockheed exception. Yet it seems that GAO could have sustained Intermarkets Global on the same basis as Power Connector by finding that the amended technical requirements could have made the protester’s technical solution less attractive and, thus, necessitated pricing reductions to maintain “competitiveness.” If these decisions are not in conflict, what distinguishes them? In what circumstances would one apply and the other not?

Third, did the specific nature of the RFP amendment and the desired proposal revisions play a role in the decision? Will the rationale of Power Connector be applied to the reverse set of facts—where the amended evaluation criteria is a pricing term and the protester wishes to revise its past performance proposal? What about when price is out of the equation and multiple non-price criteria are at issue? If not, why not?

Fourth, what does this decision say about an agency’s right to determine how best to protect the competitive integrity of a procurement? The Lockheed decision held that, where an agency could show that “allowing [pricing] revisions would have a detrimental impact on the competitive process,” it had established a sufficient basis for restricting pricing revisions. 2007 CPD ¶ 155 at 5. The disclosure of proprietary pricing information to Power Connection created an undisputed competitive integrity problem. Yet the Power Connector opinion indicates that an agency must now not only demonstrate that pricing revisions would be “detrimental” to the “competitive process,” but also show that there is no other available remedy which would allow for pricing revisions without harming procurement integrity. In so holding, GAO denied the agency’s right to select its desired remedy in an area of discretionary decision-making that is rarely intruded upon. Moreover, GAO effectively ordered the agency to disclose proprietary proposal pricing information of unsuccessful offerors, which is a specific step that GAO has rarely, if ever, taken.

Time will tell how GAO resolves these questions and incorporates the Power Connector decision into it existing precedent body. In the meantime, GAO has created significant uncertainty where the law had been largely settled.