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GAO: Agency Shouldn’t Have Allowed Bid Correction

When a contractor submits a sealed bid that includes a mistake, the contractor may be allowed to correct its bid, if there must be clear evidence of the error on the face of the bid. According to a recent GAO decision, however, absent clear evidence, it is unreasonable for an agency to allow a bid correction. Herman Construction Group, Inc., B-415480 (Jan. 5, 2018) involved a construction procurement for renovation and expansion at the Department of Veterans Affairs Palo Alto Health Care System Campus. Five bidders responded to the IFB, including Herman and Talion Construction, LLC. After the bid period closed, the VA announced that Talion Construction, LLC had submitted the lowest bid and been selected for award. Talion’s bid price was $6,635,332. Herman Construction Group, Inc. submitted the second-lowest bid: $7,820,508. After award, Talion contacted the agency and explained it had made a mistake in its bid regarding the cost of drywall installation. Talion asked to revise its bid price to $7,771,658–still the lowest bid, but more than $1 million higher than the awarded bid price. According to Talion, it had used $500,000 as a placeholder for its bid while waiting for a bid from its anticipated subcontractor. The day before bids were due, Talion’s drywall subcontractor faxed its bid of $1,498,770 to Talion for incorporation into the proposal. According to Talion, this number was not included because Talion typically utilizes subcontractor bids made on the day of proposal submission and had failed to include the drywall subcontractor’s bid price in Talion’s final bid. To support its contentions, Talion provided the agency with a copy of the fax it received from its subcontractor the day before bids were due. Talion also provide the agency with both its original and “corrected” bid worksheets. The original bid worksheet retained the $500,000 placeholder whereas the corrected worksheet utilized the $1,498,770 number. Notably, both worksheets still named Talion as the drywall contractor, not the subcontractor. Based on the evidence provided, the agency allowed Talion to correct its bid. Even with the correction, Talion was still the lowest priced bidder and named the awardee. The second place offeror, Herman, subsequently filed a bid protest. While Herman raised multiple allegations regarding the VA’s award to Talion, GAO focused only on the allegation that Talion was unreasonably given the opportunity to correct its bid. In the unique context of sealed bidding, FAR 14.407-3(a) affords agencies the discretion to allow an offeror to correct its bid after the bid submission deadline, provided the correction will only increase the bid, and “clear and convincing evidence establishes both the existence of the mistake and [what] the bid actually intended[.]” For its part, GAO will review all of the evidence used to establish the existence of an error, and “will not question an agency’s decision based on this evidence unless it lacks a reasonable basis.” GAO was not convinced such clear and convincing evidence existed here. While Talion may have known the $500,000 place holder in its bid was an error, GAO wrote “there is nothing irregular about the entry for drywall installation that would lead one to believe that a mistake had been made.” Consequently, there was nothing in the original bid to tip the agency off that there was something amiss with Talion’s bid, particularly since Talion’s bid listed Talion, not its alleged subcontractor, as the drywall installation contractor. Accordingly, GAO considered Talion’s explanation of its internal procedures to be “uncorroborated and self-serving, as well as not offering clear and convincing proof of a mistake, because the explanation has no connection to the worksheet other than the amount of the mistaken value.” Turning its attention to the agency, GAO concluded clear and convincing evidence of a mistake did not exist. Therefore, “the agency improperly permitted Talion to correct the mistake in its bid.” GAO recommended the agency cancel its current award to Talion and either re-award to Talion at its original price, or make award to Herman. GAO’s decision in Herman Construction highlights the importance of accuracy in sealed bidding. Taking Talion at its word, Talion’s internal procedures resulted in Talion submitting an incorrect bid that appeared complete. Self-serving or not, Talion’s statements about its procedures were not enough to constitute “clear and convincing” evidence of a bid mistake in the eyes of GAO. Having made a mistaken bid, Talion was stuck with it.
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GAO: Agency Need Not Perform Calculations For Offeror

An agency ordinarily is not required to perform calculations to determine whether an offeror’s proposal complies with a solicitation’s requirements, according to the GAO. In a recent bid protest decision, the GAO rejected the protester’s argument that, in determining whether the proposal satisfied certain requirements, the agency should have used the information in the proposal to perform certain calculations. The GAO’s decision in Mistral, Inc., B-411291.4 (Feb. 29, 2016) involved a DHS small business set-aside solicitation to obtain new mobile video surveillance systems.  The solicitation called for a best value evaluation considering three factors: technical, past performance, and price. After taking corrective action in response to a bid protest, the DHS opened discussions with offerors in the competitive range, including Mistral, Inc.  In its written discussion questions for Mistral, the DHS asked Mistral to provide “an analysis and calculations” Mistral used to justify “the performance claims for Critical Failure Rate and Achieved Availability as prescribed in Section L of the solicitation.”  In response, Mistral’s final proposal revision directed the DHS to “the Excel spreadsheet (all formulas embedded)” submitted to the agency on a CD-ROM. When the DHS examined the CD-ROM submitted by Mistral, it found only a PDF of the required information–not an Excel file.  Although Mistral provided a table with calculations, the DHS was unable to access the embedded calculations contained in the original Excel spreadsheet.  The DHS assigned Mistral a risk for failing to provide the formulas, and an overall “Satisfactory” rating for its technical proposal.  The DHS awarded the contract to a competitor, which also received a “Satisfactory” technical rating, but proposed a lower overall price. Mistral filed a bid protest with the GAO.  Mistral argued, in part, that the agency could have derived the calculations and formulas from the information provided in the PDF, and therefore should not have assigned a risk for the supposed absence of this information. The GAO wrote that Mistral “does not explain how this could or should be done.”  And, “[m]ore importantly . . . an agency is not required to perform calculations or adapt its evaluation to comply with an offeror’s submission in order to determine whether a proposal was compliant with stated solicitation requirements.”  The GAO continued: Stated differently, the question is not what the agency could possibly do to cure a noncompliant submission, but rather, what it was required to do.  Based on our review of the record, we agree with the agency’s conclusions that without the substantiating evidence to support Mistral’s performance claims as required by the solicitation, and requested by the agency during discussions, it was reasonable to assign a medium risk to Mistral’s proposal in this area.  The GAO denied Mistral’s protest. The Mistral, Inc. protest is a good reminder that it is up to an offeror to prepare a thorough, well-written proposal, including all information required by the solicitation.  It is not the agency’s responsibility, in the ordinary course, to perform calculations using the information provided by the offeror to determine whether the proposal meets the solicitation’s requirements. And of course, Mistral is also a warning to offerors to be sure that electronic proposals are submitted in the appropriate format.  Although PDFs are commonly used in the submission of electronic proposals, there are circumstances in which a PDF may not get the job done–such as in Mistral, where the underlying Excel calculations, which weren’t available in PDF format, were important to the evaluation.
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Koprince Law LLC

Koprince Law LLC

 

GAO: Agency Erred By Issuing Out-of-Scope Task Order

An agency’s task order award was improper because the order was outside the scope of the underlying IDIQ contract. In Threat Management Group, LLC, GAO sustained a protest holding that the Air Force violated the Competition in Contracting Act by issuing a task order for some work beyond the scope of the awardee’s IDIQ contract. GAO’s decision highlights the fact that an order must be within the scope of the underlying contract–and the award of an out-of-scope order can be successfully challenged in a bid protest. The Threat Management Group decision involved a single-award IDIQ contract held by R3 Strategic Support Group, Inc. The IDIQ contract permitted R3 to provide explosive ordnance disposal (“EOD”) support services and training at various Air Force bases. Task orders issued under the IDIQ simply described the work as “EOD Support Services” in accordance with the IDIQ’s statement of work. Threat Management Group, LLC had been performing a separate Air Force contract to perform contingency training services. Under its contract, TMG employed 13 individuals, who provided training and other support services. In anticipation of the expiration of TMG’s contract, the Air Force contacted R3 about obtaining training services. The Air Force subsequently issued a task order, numbered 76 (and referred to in the GAO’s decision as “TO 76”) to R3. TO 76 called for R3 to provide 13 individuals–the same number of individuals required under TMG’s incumbent contract. R3’s IDIQ contract was for EOD support services. Some of work under TO 76, however, involved providing “controlled area training to Flight personnel,” “chemical, biological, radiological, and nuclear capability training,” and “medical training mannequin” – all seemingly outside the scope of the underlying IDIQ contract. Upon learning of the task order award to R3, TMG filed an agency-level bid protest. When the Air Force denied the agency-level protest, TMG protested at the GAO. The GAO wrote that the Competition in Contracting Act ordinarily requires full and open competition. Therefore, “[w]here an agency issues a task order for work that is beyond the scope of the contract originally awarded, the agency violates CICA.” This is because “the agency has subverted competition by awarding without competition work that would otherwise be subject to the statutory requirement for full and open competition.” In determining whether a task order is beyond the scope of the contract, GAO “looks to whether there is a material difference between the task order and contract.” GAO explained that it considers “the circumstances attending the procurement that was conducted;… any changes in the type of work, performance period, and costs between the contract as awarded and as modified by the task order; and… whether the original contract solicitation adequately advised offerors of the potential for the type of task order issued.” Under R3’s IDIQ contract “R3 is only permitted to provide training .  . . on ‘demolition and handling of explosives in accordance with [various] directives'” and related matters. TO 76 did not have a separate PWS. GAO reviewed R3’s monthly progress reports, and determined that R3 was performing services such as “training and refresher courses for Flight cadre; improved instructor expertise,” and providing a new “medical training mannequin” for medical training scenarios. GAO wrote that some of the services described in R3’s monthly reports do “not appear to fall within the scope of the underlying PWS.” GAO sustained TMG’s protest, and recommended that the Air Force cancel TO 76 and re-determine the scope of services and number of personnel required to ensure the task order fell within the scope of the underlying contract. As noted in a previous blog post, agencies have rather broad discretion to use BPAs, IDIQs and other vehicles to obtain good and services. However, as the Threat Management case again illustrates, that discretion is not unlimited. Even if an agency omits a PWS for a specific task order, the GAO will review other evidence to determine if the task order was out-of-scope. An order exceeding the scope of the underlying IDIQ contract violates CICA.
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Koprince Law LLC

Koprince Law LLC

 

GAO: Agency Corrective Action After Eight Months of Protests Was Not “Unduly Delayed”

In a GAO bid protest, recovering costs after an agency takes corrective action turns on whether or not the agency unduly delayed the corrective action. A recent GAO case shows that, in certain circumstances, an agency may be able to fight a protester almost to the bitter end, then take corrective action without necessarily having crossed the “unduly delayed” line. In Evergreen Flying Services, Inc., B-414238.10 (Oct. 2, 2017), the Department of the Interior issued a solicitation in September of 2016, asking for private aircraft to help fight wildfires. DOI wanted to hire up to 33 planes for four years, with an optional six-month extension. The idea was that the planes would be offered to the Bureau of Land Management exclusively for the 2017 fire season. A month later, DOI received proposals from 15 firms. It evaluated offers and settled on six firms and 33 individual planes (firms could offer the use of multiple aircraft). DOI announced the awards in December 2016. Evergreen Flying Services, Inc., a small business from Rayville, Louisiana, was one of the unsuccessful offerors. It filed a GAO bid protest the day after Christmas. Four days later, it filed a supplemental protest. Evergreen challenged the agency’s evaluation of its proposal, the best value determination, and the availability of the awardee’s aircraft. In January 2017, before submitting an agency report, DOI chose to take corrective action. Over the next two months, it reevaluated proposals and increased Evergreen’s ratings, but still did not select it for award. Evergreen protested again, on March 3. This time DOI fought the protest. It filed a request for dismissal (which GAO denied) and then filed an agency report on April 5. The report included each awardee’s complete schedule of services/supplies, aircraft questionnaires, and DOI’s evaluation sheets for each awardee. Evergreen poured through the documents, seized on some issues, and filed a supplemental protest (and comments on the agency report) on April 17. The supplemental protest, for the first time, alleged flaws relating to the other offerors and the agency’s evaluation of their proposals, including minor but technical flaws such as unsigned or typewritten names instead of signatures, and reliance on supporting documentation that was outside the solicitation’s five-year window. GAO asked for a supplemental agency report. Two days before it was due, DOI chose to take corrective action by cancelling the solicitation altogether. DOI said that the fire season was rapidly approaching and it did not have time to reevaluate proposals again. It also said it could acquire the planes it needed through other means: most of the offerors, including Evergreen, had “on-call” contracts with DOI for fire suppression services. GAO dismissed Evergreen’s latest protests on May 4. Evergreen and other offerors then protested the decision to cancel the solicitation and lost. The result, therefore, of three protests, two supplemental protests, one agency report, one request for dismissal, and two corrective actions, was zero contracts. By then, Evergreen (which was using DC-based government contracts lawyers) had, no doubt, spent a significant amount of money on legal fees. It filed a request for a recommendation of costs, arguing that the agency had unduly delayed taking corrective action in the face of a clearly meritorious protest. It had been 235 days (nearly eight months) since the solicitation came out, and 130 days since Evergreen’s initial protest. GAO wrote that, when a procuring agency takes corrective action in response to a protest, “our Office may recommend reimbursement of protest costs where, based on the circumstances of the case, we determine that the agency unduly delayed taking corrective action in the face of a clearly meritorious protest, thereby causing the protester to expend unnecessary time and resources to make further use of the protest process in order to obtain relief.”  A protest is “clearly meritorious” where “a reasonable agency inquiry into the protester’s allegations would reveal facts showing the absence of a defensible legal position.”  And, with respect to promptness, “we review the record to determine whether the agency took appropriate and timely steps to investigate and resolve the impropriety.” Because the better part of a year had passed during which time the agency fought the protester by filing a motion to dismiss (which it lost) and an agency report, Evergreen probably thought it had a good case for costs, at least on the “unduly delayed” side of the ledger. But that is not the way GAO saw it. GAO said that the measure of undue delay is not whether the corrective action was prompt with respect to the protester’s initial grounds, but rather whether the corrective action was prompt with respect to the first “clearly meritorious” grounds of protest. Thus, in order to recover costs back to the December protest and initial corrective action, “the central consideration . . . is whether Evergreen’s December protest included clearly meritorious protest ground that the agency expressly committed to rectify, but failed to, such that the protester was forced to continue its bid protest litigation to get relief.” GAO said that the initial December 2016 protests did not include “any protest grounds that we consider clearly meritorious on their face.” As for the second protest, which again DOI fought hard against, GAO said that it was not necessarily meritorious either, just that the “argument required further record development and response from the agency to determine whether the protest ground had merit.” Finally, GAO said that because the final corrective action took place two days before the supplemental agency report was due, the agency did not unduly delay taking it—adding that the arguments brought after reviewing the awardees’ and the evaluation documents may not have had merit. In other words, DOI’s corrective action was not delayed. In fact, it was two days early. GAO denied the request for costs. GAO noted that the purpose of recommending costs is not to reward a protester for winning. It is to “encourage agencies to take prompt action to correct apparent defects in competitive procurements.” Evergreen Flying Service shows that just because a protester “wins” does not mean GAO will recommend an award of costs, even when the protest process takes a long time. In our practice, we often suggest that clients assume that protest costs won’t be reimbursed, even if there is a corrective action or “sustain” decision, and consider an award of costs to be a potential bonus that may (or may not) accompany a successful protest. With the twin hurdles of “undue delay” and “clearly meritorious” to surmount, a recovery of costs is not a given.
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Koprince Law LLC

Koprince Law LLC

 

GAO: Agencies May Consider Outside Past Performance Information

When an agency requests that offerors provide past performance references, the agency ordinarily is not precluded from considering outside past performance information. In a recent bid protest decision, the GAO confirmed that an agency’s past performance evaluation may include information outside the past performance references submitted by the offeror–and the agency can use any negative past performance information to downgrade the offeror’s score. The GAO’s decision in Fattani Offset Printers, B-415308 (Nov. 20, 2017) involved a USAID solicitation for printing services.  The solicitation called for award to be made on a “best value” basis.  In its evaluation, the agency was to consider several factors and subfactors, including past performance.  The solicitation asked offerors to provide at least five past performance references. Fattani Offset Printers submitted a proposal.  Fattani’s proposal included five past performance reference letters.  All five reference letters gave Fattani positive reviews. In its evaluation, USAID reviewed Fattani’s five letters, and contacted three of those references.  USAID also contacted references outside of the five Fattani had provided.  Some of those sources gave Fattani negative reviews.  Based partly on this concern, USAID gave Fattani only 5 out of a possible fifteen points for past performance.  USAID awarded the contract to a competitor at a higher price. Fattani filed a GAO bid protest, raising several issues.  Among its allegations, Fattani contended that it was improper for the agency to contact additional past performance references because the solicitation did not expressly allow it. The GAO disagreed.  “Contrary to Fattani’s view,” the GAO wrote, “an agency is generally not precluded from considering any relevant past performance information, regardless of its source.”  Accordingly, “the agency acted reasonably when it solicited additional past performance references beyond those listed in Fattani’s proposal, notwithstanding the fact that the solicitation did not specify that the agency could seek alternate past performance references.” The GAO denied the protest. When an agency asks for past performance references, it’s a great opportunity for an offeror to put its best foot forward.  But, as the Fattani Offset Printers case demonstrates, just because an agency requests references doesn’t mean that the agency can’t consider other past performance information.  If the agency wishes, it ordinarily can consider past performance information from other sources, so long as that information is relevant.
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Koprince Law LLC

Koprince Law LLC

 

GAO: 8(a) Sole-Source Set-Aside Proper Notwithstanding Prior Intent

As a general rule, the SBA is prohibited from accepting a solicitation into the 8(a) Business Development Program if the procuring agency previously expressed publicly a clear intent to award the contract as a small business set-aside. On its face, this restriction seems clear. In practice, it can be anything but—the inquiry usually focuses on whether the agency’s prior intent was definitive enough to count. In SKC, LLC, B-415151 (Nov. 20, 2017), GAO provided important clarity about this restriction. In 2011, SKC was awarded a small-business set-aside contract by the Defense Intelligence Agency, for facility support services for DIA’s Directorate of Logistics Operations Center (“DLOC”). Before SKC’s contract ended in September 2016, DLA notified SKC that because of an anticipated change in acquisition strategy, DLA would issue SKC a bridge contract before recompeting the work. As SKC’s contract expired DLA, issued SKC a non-competitive bridge contract with a one-year base period and a single one-year option. In early 2017, DLA held industry days with potential contractors to discuss upcoming competitions. At those industry days, DLA forecasted the follow-on DLOC award would be set-aside for small businesses. But DLA gave attendees an important caveat: its acquisition forecasts were tentative, and no final decision regarding the procurements had been made. A couple of months later, however, DLA asked the SBA to accept the DLOC requirement as an 8(a) sole-source award to IKun, LLC. DLA identified the procurement as a new requirement, valued at over $20 million, which would be fulfilled under one base year and two one-year options. After the SBA accepted the requirement into the 8(a) Program, DLA advised SKC that it would not exercise the option under its bridge contract. SKC then protested to GAO, challenging the validity of the sole-source award. According to SKC, DLA’s decision to procure the work under the 8(a) Program was contrary to its publicly-stated prior intent to award the contract to a small business. Under the 8(a) Program’s prior intent restriction, the SBA is prohibited from accepting a procurement for an award as an 8(a) contract when The procuring activity issued a solicitation for or otherwise expressed publicly a clear intent to award the contract as a small business set-aside [or to HUBZones, SDVOSBs, or WOSBs] prior to offering the requirement to SBA for award as an 8(a) Contract. However, the [SBA’s Associate Administrator/Business Development] may permit the acceptance of the requirement under extraordinary circumstances. Because DLA told industry day attendees in early 2017 that the procurement might be issued as a small business set-aside, SKC asserted that the SBA and DLA violated this restriction. GAO disagreed, based largely in part on the SBA’s feedback. That is, in response to the protest, GAO requested the SBA to weigh in on whether DLA had publicly expressed a clear intent to issue the solicitation to small businesses. The SBA said no, because DLA provided multiple disclaimers to industry day attendees that its acquisition plan was not final and was subject to change. Neither was there any pre-solicitation notice, synopsis, or solicitation issued for the work that indicated it would be set-aside for small businesses. In short, the SBA concluded that DLA’s statements were not definitive enough to count as a clear public intent. Affording the SBA deference to interpret its own regulations, GAO agreed with the SBA’s analysis and denied the protest: SKC has provided no basis for us to disagree with the SBA’s interpretation that 13 C.F.R. § 124.504(a) does not limit SBA’s ability to accept a procurement into the 8(a) program when a procuring agency does not issue a pre-solicitation notice, synopsis, or solicitation to procure the requirement as a small business set-aside, but simply states that the requirement will be issued as a set-aside as part of a forecast with multiple disclaimers that the information is subject to chain. This decision provides important clarity to the 8(a) Program’s prior intent restriction. It’s not enough for the agency to tell offerors that a solicitation might be set-aside for small businesses; the agency’s intention must be more definitive. *** Small businesses and 8(a) participants should take note of this decision given its potential impact to both programs. If you have any questions as to how it might impact your business, please give me a call.
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Koprince Law LLC

Koprince Law LLC

 

GAO: “Minimal” Solicitation Changes Justified Cancellation

An agency was entitled to cancel a solicitation when its needs changed–even though the anticipated changes in its needs “might be characterized as minimal.” In a recent bid protest decision, the GAO confirmed that a procuring agency has broad discretion to cancel a solicitation when the agency’s anticipated needs change, and that discretion extends to cases in which the agency’s changed needs could be addressed by amending the existing solicitation. The GAO’s decision in Social Impact, Inc., B-412655.3 (June 29, 2016) involved a USAID solicitation for support for the agency’s Monitoring, Evaluation, and Learning Program in Tanzania.  After evaluating competitive proposals, USAID initially selecting Management Systems International for award.  Social Impact, Inc. then filed a GAO bid protest, challenging the award to MSI. In response to the protest, USAID notified the GAO that it intended to terminate the award to MSI and cancel the solicitation.  Explaining its decision to cancel the solicitation, the agency stated that “Changes in USAID/Tanzania Mission staffing, and its in-house capacity, as well as changes in Agency experience and best practices vis-a-vis monitoring, evaluation, and learning (MEL) activities, dictate that the Mission streamline its MEL activities by moving some of the underlying procurement’s related work, such as the learning component, in-house to maximize efficiency and cost-savings.” Social Impact filed a GAO bid protest challenging the agency’s decision to cancel.  Social Impact argued, in part, that the cancellation was inconsistent with FAR 15.206(e), which states: If, in the judgment of the contracting officer, based on market research or otherwise, an amendment proposed for issuance after offers have been received is so substantial as to exceed what prospective offerors reasonably could have anticipated, so that additional sources likely would have submitted offers had the substance of the amendment been known to them, the contracting officer shall cancel the original solicitation and issue a new one, regardless of the stage of the acquisition. Social Impact contended that the changes in USAID’s needs were minimal, and not “so substantial as to exceed what prospective offerors reasonably could have anticipated.”  Therefore, Social Impact argued, USAID should have amended the existing solicitation rather than canceling it. The GAO wrote that “Section 15.206(e) mandates that an agency cancel a solicitation and issue a new one” when the “so substantial” test is satisfied.  “There is nothing to suggest, however, that the converse is true, i.e., that an agency is is prohibited from canceling a solicitation when changes in the agency’s requirements do not rise to the level contemplated in Section 15.206(e).”  The GAO continued: To the contrary, our Office has held that, even when the changes could be addressed by an amendment, “[t]he only pertinent inquiry is whether there existed a reasonable basis to cancel, since an agency may cancel at any time when such a basis is present.”  Where the record reflects a reasonable basis to cancel, and in the absence of the criteria described in section 15.206(e), the agency has broad discretion in determining whether to cancel or amend a solicitation. The GAO concluded that “we find the agency’s decision to cancel the solicitation to be reasonable despite the fact that the anticipated changes to the solicitation might be characterized as minimal.”  The GAO denied Social Impact’s protest. As the Social Impact case demonstrates, agencies enjoy broad discretion when it comes to canceling solicitations.  Even where an anticipated change in the agency’s needs could be satisfied by amending the existing solicitation, the agency may validly decide instead to cancel it.
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Koprince Law LLC

Koprince Law LLC

 

GAO: “Brand Name Only” Restrictions Must Be Justified

Competition is the touchstone of federal contracting. Except in limited circumstances, agencies are required to procure goods and services through full and open competition. In this regard, an agency’s decision to limit competition to only brand name items must be adequately justified. GAO recently affirmed this principle in Phoenix Environmental Design, Inc., B-413373 (Oct. 14, 2016), when it sustained a protest challenging the Department of the Interior, Bureau of Land Management’s decision to restrict its solicitation for herbicides on a brand name basis. The solicitation at issue in Phoenix Environmental Design specifically named five herbicides, and contemplated that BLM would issue a purchase order to the vendor that offered to provide those five herbicides on a best value basis. Because the estimated value of these commercial—about $5,500—fell below the simplified acquisition threshold, BLM issued the solicitation using commercial item and simplified acquisition procedures (under FAR Parts 12 and 13, respectively). Phoenix Environmental Design, Inc. filed a pre-award GAO bid protest challening BLM’s decision to limit the solicitation to brand name herbicides. Phoenix argued that BLM’s decision was unduly restrictive of competition. To support its protest, Phoenix pointed to a list of commercial herbicides—described by Phoenix as equal to the brand names identified in the solicitation—that were approved for use on BLM land. BLM opposed the protest, saying that the brand name herbicides requested were currently approved for use under the agency’s pesticide use proposal (“PUP”). To use a specific pesticide on BLM land, there must be an approved PUP listing the specific pesticide. So, BLM said that it was “justified in using brand name only herbicides in this case because if it desires to use other equal pesticides that are not on the PUP, it will be required to amend the PUP to include these pesticides, which will take up to six months.” Resolving the protest, GAO noted that agencies are required to obtain competition to the maximum extent practicable. As part of this requirement, agencies are generally prohibited from soliciting quotations based on personal preference or from restricting the solicitation to suppliers of well-known and widely distributed makes or brands. “In a simplified acquisition,” GAO wrote, the FAR allows an agency to “limit a solicitation to a brand name item when the contracting officer determines that the circumstances of the contract action deem only one source is reasonably available.” Applying these principles, GAO found BLM’s decision to restrict competition to the brand name herbicides to be unreasonable. Though BLM said that all of the specified herbicides were approved for use under the PUP, it failed to support this statement with adequate documentation. To the contrary, based on the information provided, GAO concluded that “there is no current PUP that covers three of the herbicides that the agency is procuring under a brand name only specification.” Faced with this information, BLM said that it has discretion to purchase a product prior to the completion of a PUP. Specifically, BLM said that its purchase of the brand name items was justified because it was finalizing a (yet-to-be-approved) PUP that included them. This explanation, however, was inconsistent with BLM’s justification for restricting competition to name brands in the first place—BLM had said that it could not purchase the generic herbicides because they were not listed on the PUP. GAO found this inconsistency to be unreasonable, writing that BLM “cannot simply rely on the PUP to limit competition, where it has not provided a reasonable basis for excluding items from the PUP.” Because BLM failed to reasonably justify its reasons for limiting the competition to only brand name items, GAO sustained Phoenix’s protest. On occasion, an agency might have a good reason to limit a solicitation to only brand name items. But where it doesn’t have a good reason—or where those reasons aren’t adequately documented—GAO will often find the solicitation to be unduly restrictive of competition. That’s exactly what happened in Phoenix Environmental Design.
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Koprince Law LLC

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GAO Won’t Evaluate Subcontractor’s Small Business Status

GAO ordinarily will not hear any argument that is based on a company’s small business status, even if the alleged large company is only a proposed subcontractor. In a recent decision, GAO declined to hear a protester’s argument that the awardee’s supposedly-small subcontractors were affiliated with other entities, holding that such a determination is reserved solely for the SBA. The case, URS Federal Services, Inc., B-412580 et al. (Mar. 31, 2016), involved an Army task order request seeking proposals to perform maintenance, repair, overhaul, modification and upgrade of various military vehicles and equipment. The solicitation was issued on an unrestricted basis, but contained a requirement that 25 percent of the labor value for each performance period be proposed for performance by small businesses. After evaluating competitive proposals, the Army awarded the task order to VSE Corporation. URS Federal Services, Inc., the incumbent, then filed a GAO bid protest challenging various aspects of the award decision. Among its challenges, URS contended that the agency should have excluded VSE’s proposal for failing to meet the 25% small business requirement. URS contended that two of VSE’s proposed small business subcontractors were affiliated with each other, causing both to exceed the relevant size standard. The GAO wrote that the Small Business Act “gives the Small Business Administration (SBA) not our office, conclusive authority to determine matters of small business size for federal procurements.” Accordingly, GAO’s bid protest regulations provide that challenges to an entity’s size status “may be reviewed solely by the Small Business Administration.” GAO dismissed this aspect of URS’s protest, writing “[w]e will not consider any allegation that is based on URS’s assertions regarding the size status of particular firms, since such matters are solely for the SBA’s consideration.” What’s interesting to consider, however, is what if URS was right? For argument’s sake, let’s say that the awardee’s subcontractors were affiliated and therefore too large to satisfy the small business participation requirements. What should URS have done? The SBA’s size protest regulations allow “interested parties” to file protests with respect to “SBA’s Subcontracting Program.” (See 13 C.F.R. 121.1001(a)(3)).  In a 2013 case, IAP World Services, Inc., SBA No. SIZ-5480 (June 24, 2013), the SBA Office of Hearings and Appeals held that an unsuccessful offeror could file a size protest based on whether the successful offeror–itself a large business–would improperly count work performed by a certain entity toward its subcontracting goals. In reaching this conclusion, OHA wrote that 13 C.F.R. 121.1001 “contemplates that there will be protests of the small business size status of subcontractors under [SBA’s] Subcontracting Program and that these may be filed by ‘other interested parties,'” including “an unsuccessful offeror for the prime contract.” Thus, it seems that URS should have taken the matter to the SBA. As the GAO made clear in URS Federal Services, it will not decide such challenges as part of the bid protest process.
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GAO Sustains Protest of “Unduly Restrictive” Solicitation Requirement

GAO typically affords agencies wide discretion to establish technical restrictions within solicitations. In a recent decision, however, GAO confirmed that such discretion is not unbounded. When an agency’s technical restriction is unduly restrictive of competition, the GAO will sustain a bid protest. Global SuperTanker Services, LLC, B-414987 et al., 2017 CPD ¶ 345 (Comp. Gen. Nov. 6, 2017) involved a Forest Service procurement for aerial firefighting aircraft to support the agency’s wildland firefighting objectives. Firefighting aircraft could be called to perform fire suppressant dispersal during either the initial attack or extended attack firefighting phases. The distinction between these two phases has to do with timing. Whereas “nitial attack refers to those actions taken by the first resources to arrive at a wildfire,” extended attack includes “those actions conducted when a fire cannot be controlled by initial attack resources within a reasonable period of time.” The procurement was structured as a “call when needed” basic ordering agreement. Under this structure, the Forest Service would not incur any costs for days when there was no firefighting activity. Instead it would issue orders to the BOA holders when services were needed, but the BOA holders were under no obligation to fill the order request. Given the unpredictability of Forest Service’s firefighting needs, the agency believed that this arrangement provided the necessary flexibility without incurring costs for time when aircraft was not needed. The Solicitation also included a technical limitation on tank size for firefighting suppressant. As the Solicitation explained: The minimum required volume is 3000 gallons (dispensable) and 27,000 pounds of payload. The maximum allowed volume is 5000 gallons (dispensable) and 45,000 pounds of payload…. Aircraft with less than 3000–gallon dispensing capacity or greater than 5000–gallon dispensing capacity will not be considered. This type of limitation on tank size had not appeared in prior solicitations for similar aerial firefighting services. Global SuperTanker Services, Inc. owns and operates a heavily modified Boeing 747-400 jumbo jet capable of aerial firefighting (more information can be found here). Given its substantial size, it boasts some impressive specifications, including a dispersal tank that can discharge 19,200 gallons of fire suppressant. Other than its tank capacity, the aircraft could meet all of the Forest Service’s technical specifications. Interested in competing under the Solicitation, Global SuperTanker sent a letter to the Forest Service requesting an explanation of the tank size limitation. The Forest Service did not respond. Global SuperTanker then filed an agency level protest of the Solicitation’s restriction on tank sizes over 5,000 gallons. The Forest Service denied the protest, citing the fact that the Solicitation was, in part, to support initial attack operations for which tank sizes over 5,000 gallons were ill-suited. The Forest Service also noted that it anticipated issuing a solicitation in 2018 for tankers exceeding 5,000 gallons. Global SuperTanker then protested at GAO, arguing that the Solicitation’s tank size limitations were unduly restrictive of competition. In response, the Forest Service reiterated its argument that the Solicitation called for initial attack operations, for which large tanker aircraft were not ideal. Additionally, the Forest Service also cited on four studies on aerial firefighting from 1995 to 2012, which the Forest Service argued supported its decision to limit the dispersal tank size under the procurement. In a lengthy opinion, GAO rejected the Forest Service’s arguments and found the 5,000 gallon tank capacity limitation was, in fact, unduly restrictive of competition. The GAO wrote that “[t]he determination of the government’s needs and the best method of accommodating them is primarily the responsibility of the procuring agency, since its contracting officials are most familiar with the conditions under which supplies, equipment and services have been employed in the past and will be utilized in the future.”  However, “n preparing a solicitation, a procuring agency is required to specify its needs in a manner designed to achieve full and open competition, and may include restrictive requirements only to the extent they are needed to satisfy its legitimate needs.”  In this respect, “solicitations should be written in as non-restrictive a manner as possible in order to enhance competition.” Turning to the Forest Service solicitation, GAO first addressed the Forest Service’s argument that the Solicitation was only seeking initial attack operations for which tank sizes over 5,000 gallons were ill-suited. Reviewing the solicitation, GAO noted that aerial tankers for both initial attack and extended attack operations were sought. As GAO explained: [A]gency officials expressly indicated that the 5,000–gallon limitation was based upon the conclusion that [very large air tankers] were not suited to perform initial attack operations, omitting any discussion of extended attack operations. As a result, the agency’s argument represents a post hoc attempt to justify the 5,000–gallon restriction. In other words, GAO concluded the solicitation did not support the Forest Service’s position because the solicitation expressly sought both initial attack and extended attack services and that the Forest Service’s argument to the contrary amounted to nothing more than litigation posturing with no basis in the factual record. GAO then turned its attention to analyzing whether it was reasonable for the Forest Service to conclude that firefighting aircraft with tank capacities exceeding 5,000 gallons were ill-equipped for initial attack phase operations. In support of its position, the Forest Service cited four studies. During the briefing phase, Global SuperTanker vociferously challenged the applicability and validity of the studies cited by the Forest Service to support tank size limitation. As a result, the Forest Service abandoned its arguments on a number of the studies, choosing to rely principally on a 2012 study to support its arguments. GAO highlighted two findings from the 2012 study in its decision. First, the 2012 study recommended that the “[m]inimum capacity [for firefighting aircraft] should be at least 2000 gallons of retardant, 3000 gallons or more would be preferred.” Second, the study noted that effectiveness of aerial application depended on the type of fire, and that larger tanks were better suited for particular situations, such as in forests with thick canopies. The 2012 study was further undermined by third party publications (including one from GAO) noting there was insufficient data being collected by the Forest Service to assess the effectiveness of various aerial firefighting aircraft. GAO was unimpressed with the Forest Service’s studies. As it noted, “the 2012 study could be construed to support [Global SuperTanker’s] arguments,” rather than the Forest Service’s. Ultimately, GAO was unpersuaded by the studies because none provided rational support for the Forest Service’s position—that limiting tank size to 5,000 gallons was appropriate for initial attack operations—and a number of sources openly undermined the agency’s position. Based in part on these findings, GAO wrote that “the agency has failed to provide reasonable justifications for the challenged specification, such that we are unable to conclude that the challenged specification is reasonably necessary for the agency to meet its needs.” GAO sustained Global SuperTanker’s protest.  GAO recommended the Forest Service return to the drawing board and fully document its needs, then incorporate whatever technical specifications are reasonably necessary to effectuate those needs. So, what can contractors take away from GAO’s decision in Global SuperTanker? The most important take away is that an agency must be able to demonstrate a clear, rational connection between the agency’s needs and the technical limitations imposed by a solicitation. Moreover, the thoroughness of GAO’s review in this case also suggests that GAO is willing to do more than merely take an agency at its word regarding its technical needs. Make no mistake: an agency has broad discretion to establish its minimum needs. But as the Global SuperTanker decision demonstrates, that discretion is not unlimited.
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GAO Suspends Protester–Again–For “Abusive Litigation Practices”

The GAO has suspended a protester for “abusive litigation practices,” for the second time. Last year, the GAO suspended Latvian Connection LLC from participating in the GAO bid protest process for one year, after the firm filed 150 protests in the course of a single fiscal year.  Now, citing “derogatory and abusive allegations,” among many other concerns, the GAO has re-imposed its suspension–this time, for two years.   The GAO’s decision in Latvian Connection LLC–Reconsideration, B-415043.3 (Nov. 29, 2017) arose from an Air Force solicitation for the construction of relocatable building facilities in Kuwait.  Latvian Connection LLC filed a GAO bid protest, arguing that the Air Force improperly awarded the contract to a foreign entity that is not a U.S. small business and improperly failed to post the solicitation on FedBizOpps. Latvian Connection filed its protest on August 28, 2017.  As SmallGovCon readers will recall, on August 18, 2016, the GAO took the unusual step of suspending Latvian Connection from filing bid protests for a period of one year, citing the company’s “abusive” protest practices.  Latvian Connection’s protest of the Air Force award was filed just days after the one-year ban expired. The Air Force filed a request for dismissal, arguing, among other things, that the protest was untimely because it was filed more than a month after Latvian Connection learned of the basis of protest.  The GAO suspended the requirement for the agency to file a formal response to the protest, pending GAO’s decision on the motion to dismiss.  (GAO often suspends the requirement for a formal agency report when it intends to dismiss a protest, to prevent the agency from unnecessarily investing time and resources preparing a formal response.) The suspension of the agency report didn’t sit well with Latvian Connection.  The company asserted that the suspension of the agency report was “prejudicial,” and threatened that if the GAO attorney did not recuse himself, Latvian Connection would file a complaint with the GAO’s Office of Inspector General.  The GAO attorney did not recuse himself, and Latvian Connection followed through with its threat, filing an OIG complaint requesting that the GAO attorney be investigated. Shortly thereafter, the GAO dismissed Latvian Connection’s protest as untimely.  Latvian Connection then filed a request for reconsideration of the dismissal decision. GAO wrote that Latvian Connection’s request for reconsideration, “includes no new information, evidence, or legal argument addressing the timeliness of the protest.”  Instead, “the request only repeats the arguments that Latvian Connection made during the protest, and expresses disagreement with our decision to dismiss the protest as untimely.”  Under the GAO’s bid protest rules, “imply repeating arguments made during our consideration of the original protest and disagreeing with our prior decision does not meet our standard for reversing or modifying that decision.”  The GAO dismissed the request for reconsideration for these reasons. But the GAO didn’t stop there.  It wrote, “[w]e also dismiss the request for reconsideration for continuing abuse of GAO’s bid protest process.”  GAO explained that it had previously banned Latvian Connection from filing bid protests for a period of one year, and revealed that when the one-year suspension period was nearing its end “our Office wrote Latvian Connection to remind the firm of a number of important legal requirements for filing and pursuing protests.” But “[d]espite the prior suspension, and despite our August 18 letter, Latvian Connection’s request for reconsideration, as well as its underlying protest and other recent filings, exhibit the same abusive litigation practices that previously led our Office to suspend Latvian Connection.”  Not mincing words, the GAO said: “Latvian Connection’s pleadings are incoherent, irrelevant, derogatory, and abusive.” By way of example, GAO wrote that “in its response to the request for dismissal of the underlying protest, Latvian Connection alleged that by suspending the requirement for the agency report pending resolution of the dismissal request, the GAO attorney assigned to the case was covering up for agency and GAO wrongdoings, and aiding and abetting DOD discrimination of agency veteran-owned small businesses.” Similarly, “in the instant request for reconsideration, Latvian Connection alleged, without any substantiation, that GAO is covering up white collar criminal activity by DOD and the Air Force.” GAO wrote that in another protest filed on November 3, “there were several links to internet videos published by Latvian Connection’s CEO.”  The GAO continued: These videos are profane, inappropriate, and threatening.  In fact, Latvian Connection routinely threatens to publish videos disparaging agency and GAO officials, or threatens to file complaints against them to state bar officials or agency inspectors general, whenever the protester disagrees with a potential procedural or final decision.  Despite Latvian Connection’s apparent belief, such threats will not result in a different answer from our Office.  Our forum is not required to tolerate threats, profanity, and such baseless and abusive accusations. GAO said that Latvian Connection’s protests, “continue to place a burden on GAO, the agencies whose procurements were challenged, and the taxpayers, who ultimately bear the costs of the government’s protest-related activities.”  The GAO concluded that “Latvian Connection’s protests and litigation practices undermine the effectiveness and integrity of GAO’s bid protest process and constitute an abuse of process.” For these reasons, the GAO suspended Latvian Connection and its CEO “from filing bid protests at GAO for a period of 2 years from the date of this decision.”  Additionally, GAO wrote, “if Latvian Connection continues its abusive litigation practices after the end of this new suspension period, our Office may impose additional sanctions, including permanently barring the firm and its principal from filing protests at GAO.” As I wrote last year, it’s fair to note that the GAO previously sustained at least three of Latvian Connection’s many protests, including two protests establishing (at least in my eyes) important precedent involving agencies’ responsibilities when using FedBid.  Not all of Latvian Connection’s protests have been frivolous. That said, there should be no place in the protest process for the sort of tactics the GAO describes in its recent decision.  Like any adversarial process, the protest process demands that litigants treat each other with basic courtesy and decency.  Unwarranted threats, unsupported allegations of malfeasance, and abusive and profane language should have no place in the protest system, even where a protester (like Latvian Connection) isn’t represented by counsel. Beyond that, GAO is exactly right when it points to the burden on GAO, agency attorneys, and ultimately the taxpayers in responding to frivolous protests.  The American taxpayer, and the public servants who represent them, shouldn’t have to expend resources and time responding to hundreds of protests that never should have been filed in the first place.  Allowing such protests to continue undermines the integrity of the protest system–a system which itself is under attack by those who (incorrectly) assume that most protests are frivolous. The GAO’s suspension of Latvian Connection demonstrates that statutory changes aren’t required to prevent abuse of the bid protest system. The GAO can, and will, take matters into its own hands in a rare, but appropriate, circumstance.   View the full article  

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GAO Says “No” to Air Force Buying Employees Sporks

The U.S. Air Force cannot buy sporks, at least not in many situations. One would think that the recently passed $700 billion defense bill would provide a little wiggle room for the military to buy paper plates and utensils for its civilian contractors, but, according to the GAO, that is not necessarily the case. In Air Force Reserve Command-Disposable Plates and Utensils, B-329316, 2017 WL 5809101 (Comp. Gen. Nov. 29, 2017), GAO determined that disposable plates and utensils are, like food, a personal expense that must be born by the individual user. The ruling begs the question: What does the Air Force and the Government Accountability Office have against sporks? The answer, apparently—and I swear I am not making this up—is that sporks do not advance the mission of the Air Force, therefore, taxpayer money ordinarily cannot buy them. (I should note at this point, dear reader, that the GAO decision this blog is based on does not actually use the word “spork.”  Instead it talks about paper plates and “disposable utensils.”  But a “spork” is a disposable utensil and it lends an additional air of absurdity, so I am going to keep using it.) How did the United States government come to this anti-spork conclusion, you might be asking. Unlike most of the GAO decisions we cover here at SmallGovCon, the ruling came about not due to a bid protest, but instead because the Air Force asked GAO to provide an advance ruling on the status of these products. Just over a year ago, Grissom Air Reserve Base, located north of Kokomo, Indiana, announced that it had discovered there was too much lead and copper in the water on post to drink, and ordered that the faucet water could not be used for consumption, making coffee, or washing dishes. The base operates 24 hours a day and employs both civilian and military personnel who work 12-hour shifts during which they may not leave the work area. They eat meals in a break room which has a sink, microwave, and toaster. Since discovering the tap water was undrinkable, the Air Force had been buying bottled water for workers. But without potable water, employees had to take their dishes home to wash. In response, the base comptroller authorized the temporary purchase of disposable plates and utensils “to protect the building’s occupants from health related issues associated with unsafe lead and copper concentrations.” That sounds like a reasonable alternative to making Air Force employees wash their dished at home. But the Staff Judge Advocate, the command-level Judge Advocate, and the command-level Financial Management decided that while appropriated funds could be used to purchase drinking water, they could not be used to purchase disposable plates and utensils. They asked GAO to rule. GAO said that the Air Force has a duty to provide drinking water for its employees, and “agencies may use their appropriations to provide bottled water to employees where no potable water is available.” But once the agency provides potable water, “the remaining flexibility lies with individual employees to make choices that suit their preferences.” GAO continued: “employees may choose to 1) purchase and use their own disposable plates and utensils; 2) wash plates and utensils at home and transport them back to the office; or 3) wash plates and utensils using the water provided.”  Because employees had these options, “AFRC does not demonstrate a legal necessity to provide these items.”  GAO concluded: “ecause the purchase of disposable items is for the personal benefit of AFRC employees, appropriated funds are unavailable.” In other words, sporks, legally speaking, did not advance the Air Force’s mission and were more valuable to the individual employees than it was to the government. Therefore, absent Congressional approval, or significantly differing circumstances, the government cannot use taxpayer dollars to provide them. Since the Spork Act of 2018 seems unlikely, for the time being, the employees of Grissom will have to make do. Meanwhile, here at SmallGovCon, we’ll continue to keep you updated on government contracts legal developments in the new year–be they major Supreme Court rulings, or slightly less groundbreaking updates on the government’s spork policy.
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GAO Reports on How Contracting Officers Select NAICS Codes

A newly released Government Accountability Office report provides a rare peek behind the curtain of how contracting officers assign North American Industry Classification System codes. Contracting officers are required by 13 C.F.R. § 121.402(b) to designate the NAICS code that “best describes” the work to be performed. It sounds simple enough, but the report reveals that it can be tricky. The contracting officers interviewed by GAO as part of its December 2017 Report to the Committee on Small Business, House of Representatives said as much, telling GAO that assigning a NAICS can be challenging, especially “when one or more codes could apply to a contract.” “Best describes” is a lofty principle, but in practice, nothing tells the contracting officer how he or she is supposed to go about determining what NAICS code best describes the work. There are hundreds of codes with wildly different corresponding size standards. Making sense of them all is surely no easy task—especially since none of the agencies studied provide NAICS-specific training. The selection of one code over another can have a massive impact on any procurement. The NAICS code determines whether a business is “small” for the purposes of that procurement. In terms of dollars, size standards vary in annual revenue from $750,000 to $38.5 million. Employee count size standards vary from 100 to 1,500. Thus, that one decision can dramatically affect the contours of the competition. The report, given to Congress in December, was the result of interviews with contracting officers and small business specialists from the Departments of the Army, the Navy, Homeland Security, and Health and Human Services. But, somewhat disappointingly, GAO’s sample size appears to be extremely small. GAO only interviewed one contracting officer per agency. Nevertheless, all four contracting officers told similar tales. The steps they generally take are 1) review the statement of work/performance work statement to get an idea of the type of work being done to assign a preliminary code; 2) conduct/review market research; and 3) seek input from the small business specialist. Reviewing the work, according to those interviewed, includes checking to see what code the work was previously solicited under, if applicable, and whether similar work has been previously procured by the agency. Although all four of the contracting officers said that the market research contributes to the decision, GAO found evidence of market research in only two of the four contracts reviewed. Meanwhile, the mechanism for seeking the input of the small business specialist is simply filing out a form. The small business specialist reviews the form prior to the contracting officer issuing the solicitation. Not to oversimplify a complicated process, but it sounds like the contracting officers generally pick a code after reviewing the work and as long as they do not get any push back, go with that. The obvious drawback to this system is that it is heavily dependent on the contracting officer’s personal judgement. As one contracting officer told GAO, “assigning the NAICS code is subjective and two different contracting officers could review the same contract and find different codes to be appropriate.” GAO, in fact, found evidence that this happens. For example, GAO wrote that an order for “a new closed circuit TV (CCTV) System” went out under NAICS code 541330 (Engineering Services), with a corresponding size standard of $15 million. But an order for “installation of intrusion detection and closed circuit video surveillance” went out under code 541512 (Computer Systems Design Services) with a corresponding size standard of $27.5 million. Thus, although the work was very similar, much larger businesses were eligible to compete for the latter procurement. GAO also noted the challenge associated with IDIQ contracts, because “the statements of work may cover more than one code.” The SBA attempted to give contracting officers more freedom on that front by issuing a rule in 2013 that allowed the assignment of more than one NAICS code to multiple-award contracts. But, according to the GAO findings, contracting officers do not take advantage of the flexibility, in part because there is not a practical mechanism that would allow them to do so. The contract writing systems which feed into the Federal Procurement Data System-Next Generation (FPDS-NG) only allow for one NAICS code per contract. The study also gave industry groups and firms the chance to opine. Unsurprisingly, they “expressed concern that some contracting officers assign NAICS codes because they want specific size standards, not because they are the most appropriate codes[.]” Both HHS and SBA pushed back against that idea. The SBA argued that the “results of NAICS code appeals as an indication that the practice of assigning NAICS codes based on the size standard was not widespread.” But, as we recently pointed out, the relative sparsity of sustained NAICS appeals found in this report does not necessarily mean that a good portion of appeals filed are not successful. Furthermore, the standard on appeal is not whether there is a better NAICS code to describe the work, but whether the code picked was in “clear error of fact or law,” which means that the SBA Office of Hearings and Appeals’ job on appeal is not to determine if the selected code “best describes” the work, just if the selected code was obviously wrong. Unfortunately, the small sample size means that no hard conclusions can be drawn. However, the report highlights the importance of NAICS codes in small business acquisitions, and suggests that policymakers would be wise to undertake further study to determine if the process of assigning NAICS codes can be improved.
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GAO Report Highlights Recent Trends In Government Contracting

Earlier this month, the GAO  released a comprehensive report detailing the trends in government contracting over a five-year period (from fiscal year 2011 through 2015). The entire report is available here. If you have a few hours to spare, it’s worth a read; if not, this post will summarize a few of its most eye-catching nuggets. Off the bat, the report noted the massive amount of money spent on government contracts. In 2015, federal agencies procured over $430 billion in products and services—nearly 40 percent of the government’s discretionary spending. However, this amount represents a substantial decrease in government-wide contracting expenditures since 2011. Defense obligations decreased by nearly 31 percent over this time (dropping from $399 billion to $274 billion), while civilian obligations remained comparatively steady (nearly $176 billion in 2011 to $164 billion in 2015). Interestingly, the report noted that approximately 2/3 of federal contracts were procured via competitive means during this time. Civilian agencies averaged higher competition rates (nearly 80 percent of solicitations, in 2015) than did defense agencies (only about 56 percent). Even still, a surprising number of competed contracts were effectively sole source awards—in 2015, 14 percent of competed solicitations were awarded to the sole offeror. GAO further found that fixed-price contracts were the primary purchasing vehicle during this time frame. Nearly 2/3 of total contract obligations during this five-year time period were fixed-price awards. Defense agencies relied more on cost-type contracts—which GAO considers to be “high risk,” as they “do not directly incentivize contractors to control costs and thus carry significant potential risk of overspending”—than did civilian agencies. (As we wrote earlier on SmallGovCon, the 2017 National Defense Authorization Act establishes a preference for the DoD to use fixed-price contracts, although such a preference is already contained in the FAR). Contracts were about split between awards issued under indefinite delivery vehicles (like IDIQs and government-wide acquisition contracts) and definitive contracts. Finally, the report discussed the government’s progress toward reaching its small business contracting goals. Government-wide, GAO found that small businesses received over $97 billion in prime contract awards in 2015. According to the SBA, the government met its goal for contracting to small businesses—achieving about 25 percent small business participation in 2015 (versus the 23 percent goal). On the whole, more agencies met their socioeconomic contracting goals in 2015 than did in 2011. For all the positive news, the report revealed a downward trend in small business contracting. Defense awards to small businesses fell about $10 billion over this time period, while civilian awards decreased by about $5 billion. GAO’s report is an interesting look into the state of federal contracting and, in particular, the government’s focus on austerity since 2011 (including sequestration). We’ll see how changes to the political landscape affect the next five years.
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GAO Reaffirms Agencies’ Broad Discretion to (Not) Consider Price Realism for Fixed-Price Contracts

As a general rule, an agency is only required to evaluate a fixed-price offer for reasonableness (that is, whether the price is too high). Agencies are not required to evaluate fixed-price offers for realism (that is, whether the price is too low) and, in fact, cannot do so unless the solicitation advises offerors that a realism evaluation will be conducted. GAO recently reaffirmed this principle when it denied a protest challenging an agency’s refusal to consider the realism of offerors’ fixed prices as part of a corrective action, even though the agency suspected that at least one offeror’s price was unrealistically low. Under FAR 15.404-1(d)(3), an agency may evaluate fixed-price contracts for realism “in exceptional cases,” but it is not required to do so. Ripple Effect Communications, B-413722.2 (Jan. 17, 2017), confirmed the breadth of an agency’s discretion to evaluate—or not—fixed price offers for realism. Ripple Effect involved a challenge to the terms of a corrective action following Venesco, LLC’s protest challenging an award made to Ripple. Venesco argued in its protest that the Army improperly declared its price to be unrealistic, in part because the solicitation was ambiguous as to whether offerors’ fixed prices would be evaluated for realism. The Army then announced that the procurement would be resolicited, and made clear that price realism would not be evaluated. Ripple then protested the scope of this corrective action, arguing that the Army should be required to evaluate offerors’ prices for realism. Ripple noted that the Army’s evaluation of Venesco’s proposal already revealed concerns with Venesco’s labor rates, “which were far below the average of all evaluated proposals in all but one labor category.” Thus, “it would be unreasonable for the agency not to consider the risk posed by Venesco’s prices.” In response to these arguments, the Army noted that it never intended to evaluate offerors’ proposed prices for realism. And although Venesco’s debriefing noted concern with unrealistic prices, the Army called this a “conclusory finding” that was not actually based on a completed price realism evaluation. In any event, offerors’ ability to submit revised proposals (including prices) mitigated any need for a price realism evaluation. GAO agreed with the agency and denied the challenge to the corrective action. In doing so, it relied on an agency’s broad discretion to evaluate (or not) price realism under fixed-price solicitations: Because the solicitation contemplates the award of a fixed-price contract, the agency’s intended evaluation approach is consistent with the Federal Acquisition Regulation (FAR), which establishes that an agency “may . . . in exceptional cases,” provide for a price realism evaluation when awarding a fixed-price contract, but is not required to do so. Given the agency’s broad discretion to decide whether to include a price realism evaluation in this instance, we have no basis to conclude that the agency’s decision was unreasonable. Denying Ripple’s protest, GAO reaffirmed the principle that agencies have broad discretion to evaluate fixed-price offers for realism. Ripple Effect shows the breadth of this discretion—even where an agency has reason to suspect an offeror’s fixed-price might be unrealistically low, it is not required to evaluate that price for realism unless the solicitation specifically says otherwise.
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GAO Protest Attorneys’ Fees And Costs: Read Our “Procurement Lawyer” Article

Successful GAO bid protesters can sometimes recover their attorneys’ fees and costs.  But when are fees and costs recoverable?  How must a claim be supported?  When is a claim for costs and attorneys’ fees due? In the Summer 2017 edition of The Procurement Lawyer (the quarterly publication of the American Bar Association’s Public Contract Law Section), my Koprince Law LLC colleagues Candace Shields and Ian Patterson take an in-depth look at the recovery of costs and attorneys’ fees in GAO bid protests, answering these questions and many more. Not a Public Contract Law Section member? No problem. The Public Contract Law Section has kindly allowed us to republish the article–just click here to read.
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GAO Lacks Jurisdiction Over Certain DoD Task Orders, Too

As previously foreshadowed and discussed in depth, October 1, 2016, marked the date in which unsuccessful offerors lost the ability to challenge most task order awards issued by civilian agencies. Although the GAO remains able to hear protests relating to DoD task orders exceeding $10 million, two recent GAO decisions impose an important limitation: GAO does not have jurisdiction to consider awards issued by DoD under a multiple-award contract operated by a civilian agency. By way of background, for several years, a GAO protest challenging a task order award issued by a civilian agency was not permitted unless it fell under either of the following exceptions: The protest alleged that the order increases the scope, period, or maximum value of the contract under which the order was issued; or The protest challenged an order valued in excess of $10 million. However, the statute included a sunset provision whereby the second basis of jurisdiction–protests involving task orders in excess of $10 milion–was no longer effective after September 30, 2016. Thus, after this date, an unsuccessful offeror’s ability to protest a task order issued by a civilian agency became limited to only protests alleging the order increased the scope, period, or maximum value of the contract. GAO’s recent decision in Ryan Consulting Group, Inc., B-414014 (Nov. 7, 2016), confirmed its lack of jurisdiction over task and delivery orders valued above $10 million issued under civilian agency multiple-award IDIQ contracts. While unsuccessful offerors can still challenge task orders issued by the Department of Defense if the order exceeds the $10 million value, see 10 U.S.C. §2304c(3)(1), two recent GAO decisions limit its jurisdiction in this area by holding that when DoD places an order against a civilian IDIQ vehicle, the task order cannot be protested. In Analytic Strategies LLC, B-413758.2 (Nov. 28, 2016), the DoD issued a solicitation under the GSA’s OASIS vehicle. The solicitation contemplated the award of a task order valued in excess of $125 million. After evaluating initial proposals, the DoD excluded the proposals of Analytic Strategies LLC and Gemini Industries, Inc. from the competitive range. Analytic Strategies filed a GAO bid protest on October 3, 2016; Gemini filed a protest on October 28. The GAO dismissed both protests, finding that it lacked jurisdiction. The GAO held that because OASIS is a civilian IDIQ, orders issued under OASIS fall under the civilian provisions of 41 U.S.C., and cannot be protested unless the protest alleges that the order exceeds the scope, period, or maximum value of the IDIQ contract.  While the protesters contended that GAO had jurisdiction over its protest under 10 U.S.C., GAO found this argument misplaced. GAO stated that it saw “nothing in the relevant provisions of Titles 10 or 41 that authorize a different result because the agency that will benefit from the task order, fund the task order, or place the task order, is an agency covered by Title 10.” GAO solidified this position shortly thereafter in HP Enterprise Services, LLC, B-413382.2 (Nov. 30, 2016), again finding it was without jurisdiction to hear a protest in connection with a  task order valued above $10 million issued under a civilian agency multiple-award IDIQ. In HP Enterprise Services, the GSA issued a solicitation to holders of the GSA ALLIANT IDIQ, seeking a contractor to provide various IT support services for the DoD. After receiving notice that it had not been selected, HP Enterprise Services, LLC filed a GAO bid protest challenging the award decision. HPES contended that GAO had jurisdiction over its protest pursuant to 10 U.S.C. § 2304c(e), rather than 41 U.S.C. § 4106(f), because the procurement was conducted “on behalf” of the DoD, that it was subject to DoD Regulations, and the performance was funded by the DoD. GAO, however, hung its proverbial hat on the fact that a civilian agency issued the IDIQ, writing that “there can be no doubt that the protested task order has been, or will be, issued under a civilian agency IDIQ contract.” Interestingly, GAO’s recent decisions depart from its previous practice of citing 10 U.S.C.–the DoD statute, not the civilian statute–in cases like these. For example, in Odyssey Systems Consulting Group, Ltd., B-412519, B-412519.2 (Mar. 11, 2016), the Air Force issued a solicitation under the OASIS contract, and an unsuccessful offeror challenged the resulting award decision. In a footnote explaining why it had jurisdiction to hear the protest, the GAO said: The awarded value of the task order exceeds $10 million. Accordingly, the procurement is within our jurisdiction to hear protests related to the issuance of orders under multiple-award indefinite-delivery, indefinite-quantity contracts. 10 U.S.C. § 2304c(e)(1)(B).  Interestingly, even though the Odyssey Systems case involved the same IDIQ at issue in Analytic Strategies, the GAO did not explain its apparent shift in position. These jurisdictional matters are very important, but the effect of these cases is likely to be short-lived. The U.S. House of Representatives has recently approved a conference version of the 2017 National Defense Authorization Act, and the Senate is expected to approve the same conference bill as early as this week. The conference version of the 2017 NDAA strikes the sunset provision of 41 U.S.C. § 4106(f), thereby reinstating GAO’s jurisdiction to hear task order awards valued above $10 million issued by civilian agencies. Thus, assuming the President signs the bill into law in its current form, unsuccessful offerors once again will be free to protest civilian task orders valued above $10 million. We will keep you posted.
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GAO Finds Offeror’s Protest of OCI Exclusion Untimely

To be timely, a GAO bid protest challenging the terms of the solicitation must be filed no later than the proposal submission deadline. A recent GAO decision affirmed that, at least in some cases, this deadline applies to an offeror’s elimination from competition based on an organizational conflict of interest. Because the offeror knew of its potential conflict and the agency’s position on its eligibility before its proposal was submitted, its post-evaluation protest was untimely. GAO dismissed its protest. The facts in A Squared Joint Venture, B-413139 et al. (Aug. 23, 2016) are relatively straightforward. A Squared Joint Venture (“A2JV”) was a joint venture formed by two companies, including Al-Razaq Computing Services. Al-Razaq was the incumbent contractor under a contract for acquisition and business support services at NASA’s Marshall Space Flight Center (“MSFC”). Al-Razaq’s contract allowed it access to MSFC’s procurement-related information and, in some cases, required it to be involved with MSFC’s acquisition efforts. So its contract included a limitation on future contracting that, among other things, prohibited Al-Razaq and any of its subcontractors from performing or assisting with the performance of any other contract issued by MSFC during the performance of the incumbent contract. In February 2016, NASA issued the follow-on solicitation to Al-Razaq’s incumbent contract. The solicitation sought many of the same acquisition support functions that Al-Razaq was currently performing, and also included an identical limitation on future contracting clause. Later in February, Al-Razaq’s Acquisition Team Lead met with the contracting officer to discuss whether Al-Razaq personnel performing the incumbent contract could assist with the preparation of the offeror’s proposal. The contracting officer told Al-Razaq that it needed to implement a firewall to separate both the information and personnel associated with its incumbent performance from those personnel preparing the proposal. A2JV submitted its offer on March 18. But contrary to the contracting officer’s instruction, its proposal was hand-delivered to the MSFC contracting activity by (then-) current and former Al-Razaq program managers under the incumbent effort. In fact, Al-Razaq’s program manager “informed agency officials that he had been involved in the preparation of the A2JV proposal, and had spent 10-12 hours a day for the last two weeks working on the proposal.” NASA eliminated A2JV’s proposal from competition on May 9, citing its organizational conflict of interest—specifically, its unequal access to information. Explained by GAO, “an unequal access to information OCI exists where a firm has access to nonpublic information as part of its performance of a government contract, and where that information may provide a firm a competitive advantage in a later competition for a government contract.” Justifying A2JV’s exclusion, the contracting officer explained that Al-Razaq’s incumbent performance includes its support of MSFC procurement activities, and allows Al-Razaq “access to the full breadth of sensitive contractual and financial information necessary for the administration of MSFC contracts.” Al-Razaq was required to screen new business opportunities to avoid a conflict of interest, yet failed to do so. Its use of the existing program manager created an impermissible OCI. A2JV protested its elimination, challenging the determination that it had unequal access to information and was required to firewall its employees. NASA, in its response, argued that the protest was untimely because it was not filed before the deadline to submit proposals. GAO agreed with NASA. It explained that “Al-Razaq (and A2JV) was fully aware prior to closing of the fundamental ground rules by which the [] competition was being conducted.” To this point, it said “prior to the closing time for the receipt of proposals, A2JV was aware of the operative facts regarding the existence of an actual or potential OCI involving itself, as well as the agency’s position on the offeror’s eligibility to compete[.]” If A2JV believed that a firewall was not necessary, it should have protested that requirement prior to the RFP’s closing date. A2JV’s untimely protest was dismissed. Knowing the deadline to file a bid protest can be tricky. If a protest challenges the ground rules of a solicitation, it must be filed by the time proposals are due. As A Squared Joint Venture confirms, GAO will dismiss any protest that does not meet the filing deadline–including, potentially, one involving the government’s position on an alleged OCI.
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GAO Final Rule: EPDS Filing System Will Be Live May 1

We’ve been following GAO’s plan to implement its Electronic Protest Docketing System (“EPDS”) with great interest. In fact, we’ve had the opportunity to test-drive the new system (tl/dr: it’s a very user-friendly system, but there are a couple of minor improvements that would make it even better). Just yesterday, GAO released a final rule implementing EPDS. Here are the most important takeaways. GAO’s final rule includes two very important points about EPDS: First, the final rule says that, effective May 1, 2018, “EPDS will be the sole means for filing a bid protest at GAO (with the exception of protests containing classified information).” One commenter expressed concern about EPDS being the sole means for filing, noting that file size or type might not be compatible with EPDS. In this (rare) instance, however, GAO noted that its EPDS Instructions explain how a protest should be filed. Second, GAO confirmed that new protest actions will be subject to a $350 filing fee. “At this time,” GAO explained that “additional fees will not be required for supplemental protests, requests for reconsideration, requests for recommendation for reimbursement of costs, or requests for recommendation on the amount of costs.” This clarification is helpful, as it wasn’t previously clear if supplemental protests would also be charged the $350 fee. As expected, some commenters objected to the fee, asking that protest filings continue to be free. But somewhat surprisingly, other commenters argued that the fee was too low to discourage serial or speculative protesters (one commenter, in fact, suggested a $1000 fee). GAO rejected these suggestions, noting that the fee is not intended to discourage or reduce the number of protests but instead to cover the costs of establishing and operating EPDS. GAO also considered waiving the fee for small businesses but decided “that the interest of administrative efficiency supports imposition of a uniform fee for all protests.” We think GAO’s rejection of a high fee makes sense. As we’ve previously noted, GAO protests aren’t actually all that common, and GAO already has effective remedies for dealing with abusive protesters if needed. Imposing a high fee would create an unnecessary barrier to the protest process, especially for small businesses. GAO also noted that the protest fee might be a reimbursable cost if the protester is successful. In the case of a corrective action (where a protest isn’t decided on its merits), GAO noted that 4 C.F.R. § 21.8(e) allows a protester to request the agency reimburse the protester’s costs; if GAO recommends the agency reimburse such costs, the filing fee would be reimbursable. *** With that, EPDS will be live May 1. All-in-all, I welcome this advancement: most courts use some type of electronic filing system, and it only makes sense for GAO to do the same. The final rule includes a few additional nuggets unrelated to EPDS that we’ll separately address. In the meantime, let us know if you have any questions about EPDS or GAO bid protests.
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GAO Confirms: No Protests of Most Subcontract Awards

Despite older case law to the contrary, the GAO ordinarily lacks jurisdiction to decide a protest challenging the award of a subcontract, even where the subcontract is alleged to have been made “for” the government, as in the case of some subcontracts awarded by DOE Management and Operation prime contractors. In a recent decision, the GAO confirmed that, except in very narrow circumstances, it won’t decide protests challenging subcontract awards. The GAO’s decision in Peter Vander Werff Construction, Inc., B-415676 (Feb. 6, 2018) involved the award of a subcontract by Lawrence Livermore National Security, LLC.  LLNS is a M&O prime contractor to the DOE, responsible for the management and operation of the Lawrence Livermore National Laboratory in California.  LLNS’s prime contract included FAR 52.244-5 (Competition in Subcontracting) which specifies that a prime contract shall select subcontractors “on a competitive basis to the maximum extent practicable with the objectives and requirements of the contract.” In March 2017, LLNS issued a competitive solicitation for the award of multiple master task agreements for general construction and design services.  LLNS received 32 offers.  After evaluating those offers, LLNS made 16 awards.  LLNS informed the remaining offerors, including Peter Vander Werff Construction, Inc., that their offers were unsuccessful. PVWC filed a GAO bid protest challenging the evaluation.  The DOE moved to dismiss the protest, arguing that the GAO lacked jurisdiction. The GAO wrote that, for several years, it “took jurisdiction over subcontract awards by prime contractors to the federal government where, as a result of the government’s involvement in the award process, or the contractual relationship between the prime contractor and the government, the subcontract, in effect, was awarded on behalf of–i.e., ‘by or for’–the government, and federal procurement laws and regulations otherwise would apply.” But in 1991, the U.S. Court of Appeals for the Federal Circuit issued a decision interpreting jurisdictional language similar to that governing the GAO.  In that case, the Federal Circuit held that the General Service Administration’s Board of Contract Appeals lacked jurisdiction over subcontract procurements conducted “for” a federal agency, unless the prime contractor was a “procurement agent” as narrowly defined in other authority. After the Federal Circuit issued its decision, the GAO narrowed its jurisdiction over subcontract protests.  Since the 1991 decision, the GAO will only take jurisdiction over a subcontract protest in two instances: first, “upon the written request of the federal agency that awarded the prime contract,” and second, “where we find that a subcontract essentially was awarded ‘by’ the government.” With respect to the second instance, GAO has “considered a subcontract procurement to be ‘by’ the government where the agency handled substantially all of the substantive aspects of the procurement and, in effect, took over the procurement, leaving to the prime contractor only the procedural aspects of the procurement, i.e., issuing the subcontract solicitation and receiving proposals.”  In contrast, unlike its pre-1991 cases, the GAO will no longer take jurisdiction of a subcontract that was awarded “for” the government. In this case, there apparently was no written request by DOE that the GAO decide this matter.  Additionally, the GAO found that this was not a subcontract issued “by” the Government.  In that regard, the GAO wrote that “the record does not establish that the agency controlled essentially every meaningful aspect of the procurement.”  Instead, “the evaluation and ultimate decision was made by LLNS,” the prime contractor. The GAO dismissed the protest. As the Peter Vander Werff Construction case demonstrates, the GAO’s jurisdiction over subcontract protests is very narrow.  Contrary to older case law, the GAO no longer accepts jurisdiction based on the allegation that a subcontract was awarded “for” the government.
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GAO Confirms: DoD Task Order Protest Threshold Is $25 Million

The GAO ordinarily lacks jurisdiction to consider a protest of a task or delivery order under a DoD multiple-award contract unless the value of the order exceeds $25 million. In a recent bid protest decision, the DoD confirmed that the 2017 National Defense Authorization Act upped the jurisdictional threshold for DoD task orders from $10 million to $25 million. The GAO’s decision in Erickson Helicopters, Inc., B-415176.3, B-415176.5 (Dec. 11, 2017) involved a solicitation under the U.S. Transportation Command’s Trans-Africa Airlift Support multiple-award IDIQ contract.  The agency sought to procure personnel recovery, casualty evaluation, and airdrop services in various parts of Africa. In May 2017, the agency issued a task order RFP to all three IDIQ contract holders.  After evaluating proposals, the agency awarded the order to Berry Aviation, Inc.  AAR Airlift Group, Inc., an unsuccessful offeror, filed a protest challenging the award. The agency directed Berry to suspend performance of the task order pending the outcome of AAR’s protest.  But in the interim, the agency issued a sole source order to Berry to provide the same services. In August 2017, three days after the agency issued its sole source justification, Erickson Helicopters, Inc. filed a protest challenging the sole source award to Berry.  Erickson alleged, in part, that the award to Berry was flawed for various reasons, such as that Berry did not provide fair and reasonable pricing. The GAO wrote that, under statutory authority modified by the 2017 NDAA, “our Office is authorized to hear protests of task orders that are issued under multiple-award contracts established within the Department of Defense (or protests of the solicitations for those task orders) where the task order is valued in excess of $25 million, or where the protester asserts that the task order increases the scope, period, or maximum value of the contract.” In this case, many of Erickson’s arguments did not allege that the task order increased the scope, period, or maximum value of the underlying IDIQ.  After a detailed analysis, the GAO concluded that the total value of the task order would be “no more than $23,189,823.90.”  This amount, GAO said, “is less than the $25 million threshold necessary to establish the jurisdiction of our Office.” GAO dismissed these portions of Erickson’s protest. For many years, the GAO had jurisdiction over DoD task order protests valued in excess of $10 million. But in the 2017 NDAA, Congress upped the threshold to $25 million.  This significantly varies from the threshold for orders under civilian IDIQs, which remains at $10 million. It’s easy for prospective protesters to get tripped up by these jurisdictional rules. Jurisdiction may not be the most exciting topic in the world, but anyone wishing to protest a task or delivery order at the GAO must consider whether the GAO has jurisdiction.
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GAO Clarifies Competition Standards for Simplified Acquisitions

A recent GAO decision has shed light on the question of what an agency must do to adequately promote competition during a simplified acquisition. There is still no bright line for determining which agency actions meet this threshold.  However, the recent decision in Bluehorse Corp., B-415641 et al. (Feb. 6, 2018), established that merely inquiring about a solicitation, without taking further action as recommended by the procuring agency, is not enough to force an agency to include a company in a limited competition. To promote contracting efficiency, the FAR allows for special simplified acquisition procedures to be applied to certain procurements that do not exceed the regulatory threshold. An agency is not required to use the ordinary full and open competition standards to conduct these simplified acquisition procurements. However, what exactly is required of a federal agency under a simplified acquisition procedure has yet to be clearly defined by the applicable provisions of the FAR and the relevant GAO case law. The FAR requires the agency to “promote competition to the maximum extent practicable” and establishes that this standard can generally be met through the solicitation of at least three sources. See FAR § 13.104. GAO’s decision in Bluehorse involved two requirements for clear diesel fuel issued by the Department of the Interior, Bureau of Indian Affairs. Bluehorse Corporation, an Indian Small Business Economic Enterprise, attempted to protest the oral solicitation and award of these contracts to a competitor based on several grounds, all of which were denied by GAO. The procurement was conducted under simplified acquisition procedures, because the dollar value for the requirements was below $25,000, as required by FAR § 13.003. These contracts required the supply of clear diesel fuel to two San Carlos Irrigation Project (“SCIP”) locations in Coolidge, Arizona, and Sacaton, Arizona. The BIA conducted market research via an ISBEE search in SBA’s Dynamic Small Business Search database to identify ISBEE petroleum refineries capable of performing the two requirements. The search yielded thirty-eight ISBEE sources, including the protester, Bluehorse. An SCIP representative then contacted four potential ISBEE suppliers from this list regarding each procurement. These suppliers all purported capability to meet the contract requirements. After orally soliciting quotes from three of these suppliers, BIA awarded the contracts to the vendor with the lowest quoted price for each contract. Bluehorse argued that the agency improperly denied it the opportunity to compete by failing to solicit Bluehorse’s oral quotations for these contracts. To support its challenges, Bluehorse relied on its history of work at the Coolidge site and the geographic proximity of the two SCIP contract sites. Bluehorse explained that it delivered clear diesel fuel to the same SCIP site in Coolidge, Arizona, in February of 2016, and the following September, it requested the delivery schedule for an upcoming solicitation that the agency had posted for fuel to the Coolidge site. In response to this inquiry, the agency requested that Bluehorse include its best delivery schedule “if” it provided a quote; but Bluehorse did not respond or provide such information. Nonetheless, Bluehorse argued that the agency’s failure to request a quotation for the Coolidge site was improper given Bluehorse’s past fuel delivery to the site. Further, Bluehorse relied on the geographic proximity of the two Arizona SCIP sites to argue that the agency should have solicited a quotation from Bluehorse for the Sacaton SCIP site as well. The agency responded that its actions were proper in accordance with the FAR because it contacted at least three vendors, and it was not aware of Bluehorse’s interest in competing for these specific requirements. Relying on the FAR and the relevant sections of the United States Code, GAO explained the legal standard for simplified acquisition procedures as follows: GAO further explained that, “[t]he determinative issue in such cases is whether the agency made a deliberative or conscious attempt to preclude the protester from competing, knowing the firm’s interest in competing, and, if it did so, whether that action was reasonable.” In applying this standard to the procurement at hand, GAO found nothing improper with the agency’s decision not to obtain oral quotations from Bluehorse for either of the locations under the solicitations.  GAO did not dispute the fact that Bluehorse provided diesel fuel to the agency in February of 2016 for the same Coolidge, Arizona location or the fact that Bluehorse was aware of a September 2016 solicitation for fuel at the Coolidge location. Nonetheless, GAO found that it was Bluehorse’s responsibility to respond to the agency’s statement that it needed the fuel immediately and the agency’s request that Bluehorse provide its best delivery schedule if it submitted a quote. Regarding these facts, GAO explained: In conclusion, GAO held, “while it was within the agency’s discretion to obtain an oral quotation from Bluehorse for either location, we find that under the facts here the agency was not required to do so.” GAO denied Bluehorse’s protest. Bluehorse highlights the minimal standards placed upon agency actions under an oral solicitation conducted under simplified acquisition procedures. While the agency is required to afford fair competition opportunities to responsible sources that have explicitly expressed their interest in submitting a quotation, the agency is not required to orally solicit quotations from sources whose interest in the solicitation the agency has not been made aware of.  This holding makes it clear that a firm may not rely on general inquisitions, contract history, or the ordinary full and open competition requirements to support a protest under these procedures.  The firm must clearly establish and actively pursue its interest in competing for the contract(s). Once an agency is made aware of a firm’s interest in a solicitation, it is not permitted to make a deliberate or conscious attempt to prevent that firm from competing under that solicitation. However, when there is no evidence on the record that the agency has been informed of a firm’s clear intention to compete under the solicitation, the agency acts properly by fulfilling the minimal search requirements of FAR § 13.104. The BIA acted properly here, according to GAO, by orally soliciting quotations from at least three capable and responsible sources and subsequently awarding the contracts to one of those sources.
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GAO Can’t Resolve SDVOSB Eligibility Protests

The GAO lacks jurisdiction to determine whether an offeror is a service-disabled veteran-owned small business. In a recent bid protest decision, the GAO rejected the protester’s creative attempt to convince the GAO to take jurisdiction, and confirmed that, for non-VA acquisitions, the SBA has sole authority to determine whether an offeror is an SDVOSB. The GAO’s decision in OBXtek, Inc., B-415258 (Dec. 12, 2017) involved a DHS RFQ for cybersecurity support services.  The RFQ was issued to holders of the GSA’s OASIS Small Business (Pool 1) IDIQ contract.  The DHS set aside the order for SDVOSBs. After evaluating quotations, the DHS announced that it would make award to Analytic Strategies, LLC.  OBXtek, Inc., an unsuccessful competitor, subsequently filed a bid protest at the GAO. OBXtek argued, in part, that Analytic Strategies had misrepresented its SDVOSB status in order to compete for the set-aside RFQ.  Specifically, OBXtek contended that Analytic Strategies had been acquired by another company in August 2016, and was not an eligible SDVOSB at the time it submitted its quotation in mid-2017. OBXtek conceded that the GAO doesn’t have authority to determine whether a company is an SDVOSB.  However, OBXtek argued that Analytic Strategies’ SDVOSB eligibility wasn’t at issue.  Rather, OBXtek argued, it was asking the GAO to determine whether Analytic Strategies had made a material misrepresentation in its proposal by expressly certifying that it was an SDVOSB.  And, as OBXtek pointed out, the GAO ordinarily has the ability to determine whether an offeror made a material misrepresentation in its proposal. It was a creative effort, but GAO didn’t buy it.  Under the Small Business Act, the GAO wrote, “the SBA is the designated authority for determining whether a firm is an eligible SDVOSB concern” for most non-VA acquisitions, and “it has established procedures for interested parties to challenge a firm’s status as a qualified SDVOSB concern.”  As a result, the GAO “will neither make nor review SDVOSB status determinations.” Here, “[w]hile the protester may be correct in asserting that allegations of a vendor submitting a quotation with a material misrepresentation is within our Office’s jurisdiction, the issue as it is here, of whether a vendor is an SDVOSB (and eligible to compete under a set-aside) is a matter within the jurisdiction of the SBA.”  In other words, determining whether Analytic Strategies had made a material misrepresentation would require GAO to determine whether Analytic Strategies was (or was not) an SDVOSB–a determination that the GAO is not permitted to make. The GAO dismissed this portion of OBXtek’s protest. As I was reading the case, I kept wondering–why did OBXtek protest to the GAO in the first place?  Ordinarily, the answer would be simple: the company was confused by the nuanced jurisdictional rules of federal bid protests, and simply filed in the wrong place.  But OBXtek, by advancing its creative argument, seemed to understand that the SBA was the right place to file an SDVOSB protest.  So why not file there? I can only speculate, but it’s possible that OBXtek didn’t think that it could file a viable SBA SDVOSB protest.  Under the SBA’s SDVOSB regulations, a company that qualifies as an SDVOSB at the time of initial offer on a multiple-award contract ordinarily is considered an SDVOSB for the life of that contract, including “for each order issued against the contract.”  There are exceptions to this rule, but if none of them applied, Analytic Strategies might not have been required to be an SDVOSB at the time of its quotation on the DHS order.  If my speculation is correct, OBXtek’s protest might have been an effort to circumvent this rule. Regardless of the reasons why OBXtek took its case to GAO, the OBXtek, Inc. decision is an important reminder: the GAO cannot determine SDVOSB eligibility.  For most non-VA acquisitions, SDVOSB determinations must be left to the SBA.
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GAO Bid Protest Effectiveness Hits 47%–So Why Doesn’t Bid Protest “Reform” Address Government Shortcomings?

GAO bid protests succeeded almost half the time in Fiscal Year 2017. According to the GAO’s latest Bid Protest Annual Report, the effectiveness rate of GAO bid protests was 47% in the recently-completed fiscal year.  The statistics are striking, because they come just as Congress is finalizing the 2018 National Defense Authorization Act, which includes measures aimed at reducing bid protests.  But with bid protests succeeding at a nearly 50% clip, why does the protest “reform” debate seem to center almost entirely on discouraging contractors to protest, rather than on decreasing the number of flawed source selection evaluations? The GAO’s annual report indicates that 17% of protests were sustained in Fiscal Year 2017.  That’s the stat that will get bandied about by those who contend that protests are largely frivolous.  “Less than a fifth of protests get sustained!” they’ll say.  But using the sustain rate as evidence of protest frivolity is misleading. When a protest is filed at GAO, the procuring agency has two options: fight the protest, or voluntarily take “corrective action” to address the flaws alleged by the protester.  Although agencies rarely say it out loud, a decision to take corrective action typically is a tacit admission that the evaluation was flawed.  In other words, the agency counsel has reviewed the protest and thought, “I’m not sure I can win this one.”  When an agency has a losing hand, corrective action is the right move. The GAO knows this, and uses the effectiveness rate statistic to measure how often the protester obtains “some form of relief from the agency . . . either as a result of voluntary corrective action or our Office sustaining the protest.”  And as I mentioned at the outset, that all-important statistic was at a sky-high 47% in FY 2017.  That’s higher than in any recent year, although not a major outlier: the effectiveness rate has been 43% or higher since FY 2013. Recently, Congress has been debating so-called reforms to the bid protest process.  I discussed the proposals in-depth in a July post, but the underlying rationale appears to be that protests are ever-increasing and typically frivolous.  Thus, protest “reform” is aimed almost entirely at discouraging contractors to protest in the first place–or outright prohibiting certain protests.  For example, the 2017 National Defense Authorization Act jacked the GAO’s jurisdictional threshold for most DoD task and delivery order protests from $10 million to $25 million.  Lose a $22 million DoD order?  Sorry, no protest allowed.  The Senate’s versions of the 2017 and 2018 NDAAs would have imposed other poorly-conceived restrictions. Why is there a popular belief that protests are both pervasive and frivolous?  The discussion seems driven by the sky-is-falling comments of some agency officials, who make it sound like every other acquisition is being frivolously protested. One former high-ranking official even went full-on Scarlet Letter and suggested creating a “shame list” for losing protesters.  (Hint: the result of every GAO protest already is available on the GAO’s website). Sure, it stinks when you’re the contracting officer on the receiving end of a protest, but the fact remains that protests only occur on a very low percentage of acquisitions.  Headlines like “Drowning in Protests” may catch some eyeballs, but they’re not particularly factual.  Indeed, GAO protests were down 7% in Fiscal Year 2017, while the effectiveness rate was up.  But you probably won’t see many articles with headlines like “Not Drowning in Protests.” That’s not to say that frivolous protests never occur, although GAO has the power to deal with that problem on its own.  My point, rather, is that protest “reform” efforts seem to focus almost entirely on getting contractors to protest less often, without acknowledging that some of the best ways to decrease protests involve internal government reforms rather than punitive measures directed at contractors. What could government be doing to reduce protests? Well, when 47% of protests succeed (despite the protester having the burden of proof!) it means that evaluators are messing up a lot of source selections.  Also, when the GAO’s stats suggest it’s essentially a coin flip as to whether a protested source selection was defensible, that’s reason for a potential protester to move forward, even without a slam dunk initial case.  Improving source selection training and processes would improve the underlying source selections, which would be the best thing anyone could do to reduce protests. Additionally, as OFPP has pointed out, improved communication with industry–particularly in debriefings–is likely to reduce protests, as well.  In debriefings, agencies often act like they’re guarding Coke’s secret formula, rather than discussing the outcome of a competitive procurement.  Our clients sometimes come away from post-award debriefings with little more than a just-the-facts-ma’am  recitation of the minimal information required by FAR 15.506–or worse, a PowerPoint debriefing in which three-quarters of the slides simply regurgitate generic information about the FAR and solicitation’s evaluation factors.  I understand the agency’s thought process (“the more information we give them, the more they’re likely to use it against us”), but it’s often dead wrong.  The client walks out of the debriefing (or closes the PowerPoint slideshow) feeling as though the agency is hiding something.  In my experience, minimalist debriefings increase protests. Congress seems to recognize that OFPP may be on to something, because the conference version of the 2018 NDAA includes a provision entitled “Enhanced Post-Award Debriefing Rights,” which would require the DoD to provide additional information in certain debriefings.  Unfortunately, this provision is limited to DoD awards of $100 million or more, although small businesses and “nontraditional contractors” could request an enhanced debriefing in the case of an award exceeding $10 million. The move toward enhanced debriefings is a step in the right direction, but I worry that it won’t be enough to address the underlying issue–and not just because enhanced debriefings will be limited to large DoD procurements. So long as many agency officials believe that the best policy in a debriefing is to supply the bare minimum required by law, offerors may still walk away with the sense that the agency is hiding something.  Congress can’t legislate a culture change, but that’s really what’s needed to make debriefings truly effective in reducing protests. Like any other contracting process, the bid protest process should always be evaluated to see if it can be improved.  But the GAO’s statistics (and those compiled by others) make very clear that the sky isn’t falling.  I’m not suggesting a public “shame list” for agency officials who poorly plan or execute an acquisition.  But instead of squawking about how bid protests are ever-increasing and frequently frivolous, acquisition officials ought to get their own houses in order first.
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GAO Bid Protest “Sustains” Jump Sharply In FY 2016

The GAO sustained 22.56% of protests decided on the merits in Fiscal Year 2016–nearly double the 12% sustain rate reported in FY 2015. According to the GAO’s FY 2016 Bid Protest Annual Report, the GAO sustained 139 of the 616 protests decided on the merits (that is, cases where GAO actually reached a “sustain” or “deny” decision).  The overall effectiveness rate for protesters–a combination of “sustain” decisions, plus the many cases in which agencies took corrective action in response to protests–was 46%, a slight increase over the prior fiscal year. The GAO’s annual report shows that 2,789 protests were filed in FY 2016, up 6% over the prior fiscal year.  Of these protests, only 616 were ultimately decided on the merits.  The remaining protests were closed for other reasons, such as corrective action, dismissals for reasons such as untimeliness, and cases resolved after GAO-mediated alternative dispute resolution. GAO sustained 139 of the 616 protests.  In contrast, in FY 2015, the GAO issued only 68 “sustain” decisions–or slightly less than half the total number of “sustains” issued in FY 2016.  However, the overall protest effectiveness rate of 46% was little different than in FY 2015, where protesters realized a 45% effectiveness rate.  Effectiveness rates have slowly ticked upwards over the last five fiscal years, from 42% in FY 2012 to 46% most recently. The GAO’s trend away from oral hearings continued.  In FY 2016, the GAO held oral hearings in only 27 cases.  Back in FY 2012, the GAO held 56 oral hearings.  Last year, the GAO held 31. Most protests are decided based solely on written filings. The bid protest process frequently comes under attack, with some “sky is falling” commentators making it sound like nearly every federal procurement is challenged by frivolous protesters–and urging drastic rollbacks of contractors’ protest rights to combat this supposed threat.  The GAO’s annual report is a refreshing return to actual facts. As the report demonstrates, protests are filed on only a tiny fraction of federal procurements, and nearly half of protests result in relief for the protester.  While there will always be the occasional protest that shouldn’t have been filed, the GAO has ways of dealing with those who abuse the protest process.  The raw numbers make clear that protests remain an important way of ensuring that procurements are conducted fairly.
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