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On March 22, 2018, the Department of Defense (DoD), Office of the Under Secretary of Defense issued a Class Deviation letter to the heads of all Department of Defense agencies requiring, effective immediately, that every DoD agency ensure that its contracting officers implement the recommendations for enhanced post-award debriefings set forth in Section 818 of the 2018 National Defense Authorization Act (NDAA).

The direction makes clear that DoD agencies are to provide unsuccessful offerors who are given a debriefing in accordance with FAR 15.506(d) the opportunity to “submit additional questions related to the debriefing within two business days after receiving the debriefing.”  The agency will then be required to “respond in writing to the additional questions submitted by an unsuccessful offeror within five business days after receipt of the questions” and must hold the debriefing open until it “delivers its written responses to the unsuccessful offeror.”

Continue Reading DoD Implements New Enhanced Debriefing Procedures from the 2018 NDAA

We have already seen many changes from the new administration and it seems more and more are happening every day.  What more can you expect and how will this effect government contractors?  The team of Crowell & Moring lawyers from our Government Contracts, Labor & Employment, White Collar, Corporate and Privacy & Cybersecurity practice groups discussed this topic during a 90-minute webinar this week.  Areas covered included: update on executive orders and other labor and employment issues, costs, claims, commercial item contracting, cyber and privacy issues, compliance, data rights and bid protests (plus many more).  If you were not able to participate, we have posted the presentation and the recorded session on our webpage here.  As important changes and developments occur, we will continue to provide updates.  The best way to stay informed is through these free resources – Bullet Points, blog posts and Podcasts – subscribe today!

It should come as no surprise to those involved in the federal procurement marketplace that, under the Obama administration, the Government has sought to strengthen accountability in government contracting, and, to that end, has resorted to a number of tools in the Government’s arsenal for combating fraud, waste, and abuse. The latest such effort is a new push to enhance the government’s existing suspension and debarment function.

In perhaps a telling sign of things to come, on November 15, 2011, the head of the Office of Management and Budget (“OMB”), Jacob Lew, issued a memorandum requiring the heads of executive departments and agencies to increase management attention on suspension and debarment, consistent with the policies and procedures in the FAR.  In particular, OMB directed departments and agencies to a appoint a senior accountable official, if one has not already been designated; assess the agency’s existing suspension and debarment resources; review internal suspension and debarment policies and procedures; and ensure that contractors on the Excluded Parties List System have not received, and do not receive, grants and contracts, and take corrective action if it is found that an award was improperly made to a suspended or debarred contractor. Further, OMB has directed agencies to increase participation on the Interagency Suspension and Debarment Committee (“ISDC”), which provides a support structure to assist departments and agencies in building and maintaining effective suspension and debarment programs.

On the heels of the OMB memorandum, the U.S. Senate’s Committee on Homeland Security and Governmental Affairs Congress convened hearings on November 16 on “Weeding Out Bad Contractors.” Among others, the witnesses for these hearings include Daniel Gordon, the Administrator for Federal Procurement Policy, and David Sims, the Chair of the ISDC, and Steven Shaw, the Air Force’s debarment and suspension official. The general message from this testimony is that, while some agencies have effective and robust suspension and debarment programs, many others have failed to adequately utilize the suspension and debarment tool. Although it does not appear that there are any new suspension and debarment rules on the horizon, contractors should take note and expect to see a rise in new suspension and debarment matters.
 

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.

By now, most government contractors are (or most certainly should be) aware of the Federal Acquisition Regulation (“FAR”) provisions governing organizational conflicts of interest. While OCIs have been a hot issue for some time in the federal procurement world, OCIs are becoming an increasing risk area in the state procurement arena as well.   

By way of background, pursuant to the FAR, an “OCI arises when, because of other relationships or circumstances, a contractor may be unable, or potentially unable, to render impartial advice or assistance to the government, the contractor’s objectivity in performing the contract work is or might be impaired, and/or the contractor would have an unfair competitive advantage.” FAR 2.101. There are three general categories of OCIs: biased ground rules; impaired objectivity; and, unequal access to information. If not adequately mitigated or, when necessary, avoided, an actual or potential OCI can result in a vendor’s disqualification.      

Many contractors have been surprised to learn that a growing number of states have adopted OCI rules that follow these FAR principles. Some states, such as Maryland, Virginia, Minnesota, and Illinois have codified OCI rules in their respective state administrative or procurement codes. In other states OCI rules have been adopted at the agency-level. For instance the California, Tennessee and Washington Departments of Transportation have adopted OCI rules. Some states, such as California, have also adopted OCI rules via standard state contract provisions. 

Even where there is no specific state OCI rule or standard contract clause,  state contractors are not necessarily off the OCI hook. For instance, where federal grant money is used at the state level, such as in healthcare and education procurements, federal regulations sometimes require that the state grantee consider OCI issues before making award.   Moreover, many state procurement codes have rules that mirror the general federal procurement requirements regarding competition and fair and equitable treatment. Thus, for instance, a disappointed bidder could argue in the context of a post-award state protest that an awardee with an unequal access OCI has an unfair competitive advantage that runs afoul of the general state requirements for competition. 

In short, OCIs are not simply a federal procurement matter. State contractors must also beware.     

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.

 

 

 FY 2009 FY 2008 FY 2007 FY 2006 FY 2005
Cases Filed 1,989 (up 20%) 1,652 (up 17%) 1,411 (up 6%) 1,326 (down 2%) 1,356 (down 9%)
Cases Closed 1,920 1,582 1,394 1,275 1,341
Merit (Sustain + Deny Decisions) 315 291 335 251 306
Number of Sustains 57 60 91 72 71
Sustain Rate 18% 21% 27% 29% 23%
Effectiveness Rate (reported) 45% 42% 38% 39% 37%
ADR (cases used) 149 78 62 91 103
ADR Success Rate 93% 78% 85% 96% 91%
Hearings 12% (65 cases) 6% (32%) 8% (41 cases) 11% (51 cases) 8%(41 cases)

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.