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.
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Civilian agencies may issue class deviations to quickly implement provisions of the 2018 National Defense Authorization Act increasing the micro-purchase threshold to $10,000 and the simplified acquisition threshold to $250,000.
In a memorandum for civilian agencies issued on February 16, the Civilian Agency Acquisition Council says that agencies may elect to adopt interim authority allowing their Contracting Officers to take advantage of these higher thresholds, even as the FAR Council goes through the formal process of codifying those changes.
The memorandum states that an official FAR Case has been opened to “implement that appropriate statutory changes in the FAR that are compelled” by the 2018 NDAA. However, “agencies may have a need to use the increased thresholds prior to publication of the FAR changes.” Therefore, the memorandum “constitutes consultation in accordance with FAR 1.404 with the Chair of the CAAC allowing agencies to authorize a class deviation to implement the changes.”
The CAAC’s memorandum makes it relatively easy for agencies to adopt class deviations: the CAAC provides agencies with the relevant FAR text, together with “highlights of the appropriate FAR citations needing changes to implement the increased thresholds.” The highlighted provisions may serve “as a basis for issuing a class deviation.”
The CAAC memorandum “is effective immediately, and remains in effect until the increased thresholds are incorporated into the FAR or is otherwise rescinded.”
It’s very important to note that the CAAC memorandum is not itself a class deviation. Instead, it authorizes civilian agencies to adopt their own class deviations while the FAR Case is pending. If I don’t miss my guess, many Contracting Officers are going to be pushing their agencies for class deviations to take advantage of this new authority more quickly.
We’ll keep you posted.
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Greetings from Oklahoma, where I am wrapping up a busy week of travel that has included speaking engagements both at the Iowa Vendor Conference and The Indian Country Business Summit.
While I’ve been on the road, it has also been a noteworthy week in government contracting news. This week, SmallGovCon Week In Review takes a look at stories about the year end spending frenzy, the Freedom of Information Act may undergo major changes, DoD is barely exceeding 50% when it comes to meaningful competitions, and much more.
The projected federal contract spending is on a decidedly upward slant with two issues affecting the year-end spending frenzy. [American City & County]
What impact will the outcome of the presidential election have on the government contracting landscape? [GovBizConnect]
Federal agencies could soon face a new governmentwide guidance on how they respond to Freedom of Information Act requests, following an upcoming meeting in September. [Federal news Radio]
The Office of Federal Procurement Policy has launched a dashboard to hold agencies accountable to meet the goals in the category management memos. [Federal News Radio]
With worry that only 56.5 percent of the DoD’s contracted dollars involved a meaningful competition between two or more vendors, they have issued a series of corrective actions to reverse a downward slide that has been ongoing for nearly a decade. [Federal News Radio]
Several speculative conclusions can be made based on fiscal 2015 government contracting data and, according to one commentator, the outlook is not positive. [Federal News Radio]
The FAR Council published the final rule regarding the Fair Pay and Safe Workplaces Executive Order, which imposes a host of new obligations on government contractors, including an obligation to report various labor law violations during the bid and proposal process. [The Hill]
A former MCC Construction Company officer and owner pleads guilty to conspiring to defraud the government. [The United States Department of Justice]
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Good news for small business looking to break into Department of Defense contracting: the 2017 NDAA establishes a new prototyping pilot program for small businesses and nontraditional defense contractors to develop new and innovative technologies.
The DoD is putting its money where its mouth is: the new pilot program is funded with $250 million from the rapid prototyping fund established by last year’s NDAA.
The new pilot program is officially called the “Nontraditional and Small Contractor Innovation Prototyping Program.” Under the program, the authorized funds are to be used to “design, develop, and demonstrate innovative prototype military platforms of significant scope for the purpose of demonstrating new capabilities that could provide alternatives to existing acquisition programs and assets.”
Congress is relying on the DoD to develop many of the program’s parameters. The 2017 NDAA calls for the Secretary of Defense to submit, with its budget request for Fiscal Year 2018, “a plan to fund and carry out the pilot program in future years.”
In the meantime, Congress has authorized $50 million to be made available for the following projects in FY 2017:
(1) Swarming of multiple unmanned air vehicles.
(2) Unmanned, modular fixed-wing aircraft that can be rapidly adapted to multiple missions and serve as a fifth generation weapons augmentation platform.
(3) Vertical takeoff and landing tiltrotor aircraft.
(4) Integration of a directed energy weapon on an air, sea, or ground platform.
(5) Swarming of multiple unmanned underwater vehicles.
(6) Commercial small synthetic aperture radar (SAR) satellites with on-board machine learning for automated, real-time feature extraction and predictive analytics.
(7) Active protection system to defend against rocket-propelled grenades and anti-tank missiles.
(8) Defense against hypersonic weapons, including sensors.
(9) Other systems as designated by the Secretary.
In addition to sounding like something out of a science fiction movie, these categories provide insight into some of Congress’s (and DoD’s) prototyping priorities–particularly those in which small and nontraditional contractors are expected to be able to play an important role.
The 2017 NDAA authorizes the prototyping program through September 30, 2026. As the Secretary of Defense will not submit its implementation plan for the pilot program until its next budget request, it may take some time before the program hits full stride. In the interim, interested contractors can start positioning themselves to take advantage of this new opportunity.
2017 NDAA: The National Defense Authorization Act for Fiscal Year 2017 appears poised beneath the president’s pen for signing. It includes some massive changes as well as some small but nevertheless significant tweaks sure to impact Federal procurements in the coming year. For the next few days, SmallGovCon will delve into the minutia to provide context and analysis so that you do not have to. Visit smallgovcon.com for the latest on the government contracting provisions of the 2017 NDAA.
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President Obama signed the 2017 National Defense Authorization Act into law on December 23, 2016. As is often the case, the NDAA included many changes affecting government contractors.
Here at SmallGovCon, my colleagues and I have been following the 2017 NDAA closely. Here’s a roundup of all 16 posts we’ve written about the government contracting provisions of the 2017 NDAA.
SDVOSB Programs: 2017 NDAA Sharply Curtails VA’s Authority. (Dec. 5, 2016).
2017 NDAA Restricts DoD’s Use of LPTA Procedures. (Dec. 7, 2016).
2017 NDAA Extends SBIR & STTR Programs For Five Years. (Dec. 8, 2016).
2017 NDAA Authorizes $250 Million For New Small Business Prototyping Program. (Dec. 8, 2016).
2017 NDAA Increases DoD’s Micro-Purchase Threshold To $5,000. (Dec. 9, 2016).
SDVOSB Programs: 2017 NDAA Modifies Ownership & Control Criteria. (Dec. 12, 2016).
2017 NDAA Strengthens Subcontracting Plan Enforcement. (Dec. 13, 2016).
2017 NDAA Requires GAO Report On Minority And WOSB Contract Awards. (Dec. 13, 2016).
2017 NDAA Requires Report On Bid Protest Impact At DoD. (Dec. 14, 2016).
2017 NDAA Restores GAO’s Task Order Jurisdiction – But Ups DoD Threshold. (Dec. 14, 2016).
2017 NDAA Requires “Brand Name Or Equivalent” Justifications. (Dec. 19, 2016).
2017 NDAA Establishes Preference For DoD Fixed-Price Contracts. (Dec. 21, 2016).
2017 NDAA Creates Pilot Program For Subcontractors To Receive Past Performance Ratings. (Dec. 21, 2016).
2017 NDAA Reiterates GAO Bid Protest Reporting Requirements. (Dec. 30, 2016).
2017 NDAA Requires Report on Indefinite Delivery Contracts. (Jan. 4, 2017).
That’s a wrap of our coverage for now, but we’ll keep you posted as various provisions of the 2017 NDAA begin to be implemented. And of course, it won’t be long until we start covering the upcoming 2018 NDAA.
Happy New Year!
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They say that two things in life are guaranteed – death and taxes – and status as a federal contractor may not exempt one from the latter, according to a recent Armed Services Board of Contract Appeals decision.
In Presentation Products, Inc. dba Spinitar, ASBCA No. 61066 (2017), the ASBCA held the contractor was liable to pay a state tax, and the government had no duty to reimburse the contractor. The problem arose from the fact that the contractor did not incorporate state tax costs into its proposed price, despite being required to pay the taxes under the terms of the contract and applicable state law.
Under the terms of the firm fixed-price contract, Presentation Products Inc. (doing business as Spinitar) was to provide the Army with installation of a video conferencing system in Fort Shafter Flats, Hawaii. The solicitation included FAR 52.212-4 (Instructions to Offerors–Commercial Items), which provides, in paragraph (k): “Taxes. The contract price includes all applicable Federal, State, and local taxes and duties.”
Hawaii places a general excise tax (or GET) on businesses rather than a sales tax on customers, which is not automatically waived when the customer is the federal government. The GET is an excise tax imposed on the gross revenues of businesses “derived from the privilege of doing business in Hawaii.” Under Hawaii’s GET, businesses are not required to collect GET from their customers, but may pass it on to customers upon agreement by the customer.
Seemingly under the belief the contract would not be subject to Hawaii’s GET, Spinitar’s proposal stated “[t]he above prices do not include any applicable sales taxes. Hawaii’s GET tax reimbursement policy implemented for federal purchases will be utilized.” The contract incorporated the terms of the solicitation, including FAR 52.212-4(k).
Upon commencing performance of the contract, Spinitar learned the goods and installation services being provided were subject to Hawaii’s GET of 4.5 percent, amounting to $7,624.14. Spinitar submitted a claim to the contracting officer, arguing that it should be reimbursed by the federal government. The contracting officer denied Spinitar’s claim.
In appealing its case to the ASBCA, Spinitar relied on the fact that it expressly noted in its price proposal that it had not included the GET in its price and that “Hawaii’s GET tax reimbursement policy implemented for federal purchases will be utilized.” Therefore, Spinitar argued, the government should reimburse Spinitar for the GET payment.
The ASBCA wrote that Spinitar “appeared to be surprised to learn from conversations with the Hawaii Department of Taxation that the GET exemption for goods sold to the federal government would not apply” to its contract. Spinitar was wrong, and “[t]he government is not liable for Spinitar’s mistake.” The ASBCA denied Spinitar’s appeal.
Government contractors often assume that all goods and services provided to the federal government are exempt from state taxes. Not so.
While this is a very complex area of law, Spinitar demonstrates that there is no blanket “federal contractor exemption” from state taxes. Accordingly, prior to submitting a proposal, federal contractors should do their homework and learn whether the contract they are bidding on will be subject to applicable state taxes. Failure to do so could leave the contractor responsible for taxes not included within the contractor’s proposed pricing–and the government won’t be liable for the contractor’s mistake.
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Ahh, fall. A time for football, hay rides, and returning to campus. Being in a college town, we are always reminded that students are back on campus due to the increased traffic, the homecoming parade, and the increased buzz (no pun intended) around the town. The onset of fall sometimes dredges up unwanted memories about turning in term papers and meeting all the inane requirements insisted upon by the professor.
A recent GAO opinion also brought me back to my college days. Specifically, what happens when the government (kind of like a college professor) sets a requirement for a certain type of file format for a solicitation, but the offeror submits a proposal in a different file format? A recent GAO opinion answers that question in the contractor’s favor–although GAO’s ruling isn’t a blanket permission slip for contractors to ignore file format requirements.
In McCann-Erickson USA, Inc., B-414787 (Comp. Gen. Sept. 18, 2017), McCann-Erickson USA, Inc. had submitted a proposal to provide advertising services to the Army on an IDIQ basis for a potential 10-year contract worth up to $4 billion. The Army would evaluate proposals “on a best-value basis, considering cost/price, along with several non-cost/price evaluation criteria.”
The solicitation set up a two-phase evaluation process. Phase one would be based on written proposals while phase two would involve an oral presentation for all proposals that were deemed acceptable. Phase one involved “a substantive evaluation of written proposals considering cost/price and the non-cost/price evaluation factors with a focus on the adequacy of the offerors’ response–and the feasibility of their approach–to fulfilling the requirements of the RFP.” But instead of following the two-phase review process, the Army conducted what it termed a “compliance review” of proposals, consisting of reviewing and eliminating proposals based on “informational deficiencies” in what GAO described as a “superficial, perfunctory review of the ME proposal to identify instances where ME allegedly did not fully comply with the instructions for proposal preparation.”
What were these “information deficiencies” identified by GAO? The wrong file format was one of them. The Army rejected ME’s proposal, in part, “for submitting its cost/price proposal as a portable document file (pdf) rather than as a Microsoft Excel spreadsheet.” Per the GAO, “[t]he record shows that the agency did not substantively evaluate the ME cost/price proposal, choosing not to calculate the firm’s total evaluated cost/price; performing no meaningful cost realism evaluation; and not evaluating the proposal for balance, fairness or reasonableness, as specifically contemplated by the solicitation’s cost/price evaluation factor. The agency also did not afford ME an opportunity to submit its cost proposal as a Microsoft Excel file.”
GAO rejected the Army’s interpretation of its submission requirements because
In addition, GAO held that allowing ME to submit an Excel version of its cost/price proposal would be prudent, as long as no changes were made in the pricing, because this would amount to a mere clarification of the proposal. In the end, GAO sustained the protest and advised the Army to reevaluate ME’s proposal and awarded costs to ME.
It’s important to note that the GAO’s decision was based on the specific circumstances of the case. GAO did not hold that it is always okay for an offeror to submit its proposal in the wrong electronic file format. In fact, in a case decided a few years back, the GAO reached the opposite conclusion–holding that an offeror was properly excluded from award when it submitted its proposal in PDF instead of Excel. The difference? In the prior case, the agency argued that it needed to manipulate offerors’ cost data to complete the price evaluation, and the GAO agreed that doing so would be “unduly burdensome” without an Excel file.
Perhaps a college student may come across this blog after turning in a paper in the wrong format and be able to argue that, if it’s good enough for the GAO, it should be good enough for you, professor. Regardless, this decision is noteworthy because it points to limits on an agency’s discretion in rejecting a proposal based on the file format of the submission.
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An agency failed to meet its obligations to properly publicize a simplified acquisition valued between $15,000 and $25,000 where the agency placed the solicitation in a three-ring binder at the reception desk in a government office–and that office was closed during most of the relevant time.
In a recent decision, the GAO affirmed that principle that even when the dollar value of a simplified acquisition doesn’t meet the requirement for electronic posting on FedBizOpps, the agency still must take reasonable steps to maximize competition.
GAO’s decision in Bluehorse Corp., B-413533 (Oct. 28, 2016) involved a Bureau of Indian Affairs solicitation for diesel fuel for a school district served by the BIA in New Mexico.
After identifying an emergency need for the diesel fuel, the BIA prepared an RFQ on Saturday, July 30. The RFQ was prepared under the procedures for the streamlined acquisition of commercial items under FAR 12.6, and called for a performance period of delivery from August 2, 2016 through April 30, 2017.
The RFQ stated that because it was an “emergency requirement,” the deadline for receipt of quotations would be August 1, 2016. Since the contracting officer did not expect the award to meet the FAR’s threshold for electronic posting on FedBizOpps ($25,000), she instead sent the RFQ by email to three firms she had identified as eligible Indian Economic Enterprises.
In addition to sending the RFQ to the three IEEs, the contracting officer placed a copy of the RFQ in a three-ring binder kept at a reception desk of the BIA Navajo Region Contracting Office in Gallup, New Mexico. That office was closed on Saturday, July 30 and Sunday, July 31.
The BIA received two quotations by August 1. Both quotations were from vendors who had received the RFQ by email. The BIA awarded the contract to one of those vendors at a price of $20,800.
After learning of the award, Bluehorse Corporation filed a GAO bid protest. Bluehorse (which was not one of the three firms that had been sent the RFQ by email) argued that it was eligible to compete for the contract and capable of supplying the diesel fuel, but had been denied a fair opportunity to compete. In particular, Bluehorse contended that the BIA failed to publicize the requirement properly, which effectively precluded Bluehorse from submitting a quotation.
The GAO wrote that when a procurement is expected to be valued between $15,000 and $25,000, the contracting officer must “display . . . in a public place, or by any appropriate electronic means, an unclassified notice of the solicitation or a copy of the solicitation,” and that the solicitation “must remain posted for at least 10 days or until after quotations have been opened, whichever is later.”
In this case, the GAO held, the BIA did not properly publicize the RFQ:
The BIA’s actions here fell short of the minimum standards for obtaining maximum practicable competition when using simplified acquisition procedures with respect to both publication of the requirement and soliciting sources. We do not regard the Saturday placement of the solicitation in a binder, in an office that was effectively closed to the public on a weekend, for quotations that were due by 2 p.m. on Monday, as meeting the requirement for public posting.
The GAO held that “the BIA’s actions fail to show appropriate concern for fair and equitable competition,” and sustained Bluehorse’s protest.
Competition is the cornerstone of the government contracting process, even for most simplified acquisitions. As the Bluehorse protest demonstrates, even simplified acquisitions between $15,000 and $25,000 must be reasonably publicized to allow for competition.
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The recently-finalized SBA small business mentor-protege program will change the landscape of set-aside contracting–for large businesses and small contractors alike.
I am excited to announce that Koprince Law LLC has partnered with GOVOLOGY to offer a live electronic training on this important new program. Please join us on August 11, 2016 at 12:00 p.m. Central for this 90 minute training. The training is open to the public, so please follow this link to register. If you’re a Koprince Law LLC client or SmallGovCon newsletter subscriber, check your email for a special discount code.
See you online on August 11!
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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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Coming as welcome news for collaborative R&D, the 2017 NDAA will extend the life of the Small Business Innovation Research and Small Business Technology Transfer programs.
The conference version of the bill, which seems likely to be on the President’s desk in short order, contains provisions extending both programs for five years.
SBIR and STTR are unique research, development, and commercialization programs overseen by the SBA. Each program calls for a three-phase process. In the first two phases, R&D is funded by the government; the third phase of each program involves commercialization. Although the programs have many similarities, there are also important differences. For example, in the SBIR program, a small business may collaborate with a non-profit research institution; in the SBIR program, such collaboration is required.
Both programs were scheduled to expire on September 30, 2017. The 2017 NDAA extends the lifespan of the programs through September 30, 2022. This extension will allow small businesses to continue their collaboration with research institutions to develop new technologies for a variety of applications—good news for businesses and universities doing research in cutting edge fields.
2017 NDAA: The National Defense Authorization Act for Fiscal Year 2017 appears poised beneath the President’s pen for signing. It includes some massive changes as well as some small but nevertheless significant tweaks sure to impact Federal procurements in the coming year. For the next several days, SmallGovCon will delve into the minutia to provide context and analysis so that you do not have to. Visit smallgovcon.com for the latest on the government contracting provisions of the 2017 NDAA.
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GAO’s jurisdiction to hear protests of certain civilian task and delivery orders has been restored.
On December 15, 2016, the President signed the 2016 GAO Civilian Task and Delivery Order Protest Authority Act (the “ 2016 Act”) into law. The 2016 Act restores GAO’s recently-expired jurisdiction to hear protests of civilian task and delivery orders valued in excess of $10 million.
As we recently blogged about here at SmallGovCon, the 2017 National Defense Authorization Act also restores GAO’s jurisdiction over task and delivery orders. But even while the 2017 NDAA awaits the President’s signature (or potential veto), Congress and the President have enacted separate legislation to permit GAO to resume hearing bid protests of civilian task and delivery orders.
This Act makes permanent the GAO’s authority to hear protests on civilian task or delivery contracts valued in excess of $10 million. It does so by deleting the sunset provision relating to the authorized protest of a task or delivery order under 41 U.S.C. § 4106(f).
While the 2016 Act permanently restores GAO’s jurisdiction over protests involving civilian task and delivery orders valued above $10 million, as noted in a prior blog, the 2017 NDAA will increase the threshold for challenging DoD task and delivery orders to $25 million. For now, however, DoD orders meeting the $10 million threshold, including those issued under civilian contract vehicles, are once again subject to GAO oversight.
The enactment of the 2016 Act reinforces the importance of bid protests in the procurement process, as evidenced by the fact that 46% of protests in Fiscal Year 2016 resulted in relief for the protester (either a “sustain” decision or voluntary agency corrective action). Congress made the right call in restoring GAO’s jurisdiction, and did so even faster than the 2017 NDAA would have allowed.
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The curse is broken! For the first time in 71 years, my Chicago Cubs will play a World Series game in Wrigley Field tonight. While I wish I could be in Wrigley to cheer them on, the ticket prices are being called “record breaking,” and not in a good way. So I’ll be watching with my family from the comfort of my couch right here in Kansas–which, if nothing else, will offer the advantage of a better dinner than the ballpark (I’ll take chicken smoked on the Big Green Egg over a ballpark hot dog any day).
But before I head home to watch the first pitch, it’s time for our weekly dose of government contracting news and notes. In this week’s SmallGovCon Week In Review, a judge has blocked implementation of the Fair Pay and Safe Workplaces Rule, Guy Timberlake sounds the alarm about proposed changes to small business goaling, a group of contract employees have gone on strike in protest of alleged legal violations, and much more.
A federal court in Texas has halted enforcement of new rules requiring many U.S. government contractors to disclose labor law violations, including workplace safety violations, when bidding for contracts. [POLITICO]
The GSA has introduced new initiatives to better engage small and innovative companies that aren’t traditionally government contractors. [fedscoop]
Our friend Guy Timberlake takes a look at what would happen if, all of a sudden, agencies didn’t have to work so hard to meet or exceed their small business goals. [GovConChannel]=
The team at the Office of Management and Budget have been thinking creatively on how to deal with unsolicited proposals and generate the best ways to approach the federal IT procurement process. [fedscoop]
Fed up truck drivers and warehouse workers employed by federal contractors are striking for 48 hours to draw attention to alleged wage theft and other violations. [workdayMinnesota]
Washington Technology lays out four things you need to know about new the contractor requirements for classified networks. [Washington Technology]
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Resolving a protest challenging a past performance evaluation, GAO is deferential to the agency’s determinations. It is primarily concerned with whether the evaluation was conducted fairly and in accordance with the solicitation’s evaluation criteria; if so, GAO will not second-guess the agency’s assessment of the relevance or merit of an offeror’s performance history.
For protesters, therefore, challenging an agency’s past performance evaluation can be difficult. But a recent decision makes clear this task is not impossible—GAO will sustain a protest challenging a past performance evaluation if the agency treats offerors differently or unfairly, such as by more broadly reviewing the awardee’s CPARs than the CPARs of the protester.
At issue in CSR, Inc., B-413973 et al. (Jan. 13, 2017) was the Department of Justice’s evaluation and award of a blanket purchase agreement to Booz Allen Hamilton. The BPA sought performance measurement tool services for the Office of Justice Programs, to assist with the Office’s award of grants to federal, state, local, and tribal agencies for criminal justice, juvenile justice, and victims’ matters.
According to the solicitation, offerors were allowed to submit up to nine past performance examples. DOJ could supplement this information with “data obtained from other sources, including, but not limited to, other DOJ and OJP contracts and information from Government repositories[.]” CSR (the protester) submitted six past performance examples, three of which concerned task orders involving similar services previously performed for the agency.
Booz Allen scored an exceptional rating while CSR earned only an acceptable rating. CSR filed a GAO bid protest, alleging that these ratings were caused by DOJ’s disparate treatment of the offerors.
CSR contended that DOJ only considered CPARs for CSR’s submitted past performance examples (finding the quality of CSR’s prior work to be mixed) but considered Booz Allen’s CPAR ratings for past performance projects that were not identified in its proposal (finding them to be of high quality). CSR alleged that had DOJ considered CPARs for its other projects (as it had for Booz Allen), its past performance score would have been higher.
GAO found the past performance evaluation to be unequal. In doing so, GAO noted that it will not normally object to an agency’s decision to limit its review of past performance information. But this discretion comes with a large caveat—as a fundamental matter of fairness, offerors must be evaluated on the same basis and the evaluation must be consistent with the solicitation’s terms. Explaining its decision, GAO wrote:
[T]he agency’s evaluation of CSR’s past performance was based on only the most recent CPARs for those specific projects identified by the vendor in its quotation. However, when evaluating BAH’s past performance, the agency considered CPARs for other than the specific projects that BAH had identified in its quotation. . . . Quite simply, to the extent that the agency’s past performance evaluation of BAH considered CPARs for other than the projects specifically referenced by the awardee in its quotation, the agency was required to do the same when evaluating CSR’s past performance. As the agency was required to treat vendors equally and evaluate past performance evenhandedly, and failed to do so here, the agency’s actions were disparate and unreasonable.
GAO sustained CSR’s protest.
Though agencies typically enjoy discretion in evaluating past performance, CSR confirms that this discretion isn’t unlimited. Agencies must evaluate offerors fairly. This means that, if an agency considers a broad range of CPARs from one offeror, it must consider a similar range of CPARs for other offerors, too.
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A small business cannot file a viable SBA size protest if the small business has been excluded from the competitive range, or if its proposal has otherwise found to be non-responsive or technically unacceptable.
In its recent final rule addressing the limitations on subcontracting, the SBA also clarifies when small businesses can–and cannot–file viable size protests.
Under the SBA’s current regulation, a size protest may be filed by “[a]ny offeror whom the contracting officer has not eliminated for reasons unrelated to size.” Many small businesses and contracting officers have found this regulation confusing, both because it contains a double negative and because it is unclear when an offeror has (or has not) been “eliminated” from a competition.
In its new final rule, the SBA states that its intent “is to provide standing to any offeror that is in line or [under] consideration for award, but not to provide standing for an offeror that has been found to be non-responsive, technically unacceptable, or outside of the competitive range.” The SBA points out that, while such offerors cannot file viable size protests of their own, “SBA and the contracting officer may file a size protest at any time, so any firm, including those that do not have standing, may bring information pertaining to the size of the apparent successful offeror to the attention of SBA and/or the contracting officer for their consideration.”
The new rule provides that a size protest can be filed by “[a]ny offeror that the contracting officer has not eliminated from consideration for any procurement-related reason, such as non-responsiveness, technical unacceptability or outside of the competitive range.” The rule takes effect June 30, 2016.
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For Federal Supply Schedule procurements, agencies are not required to evaluate past performance references of subcontractors, unless the solicitation provides otherwise.
As one offeror recently discovered in Atlantic Systems Group, Inc., B-413901 (Jan. 9, 2017), unlike negotiated procurements, where agencies “should” evaluate the past performance of subcontractors that will perform major or critical aspects of the contract, offerors bidding under FSS solicitations should not assume that a subcontractor’s past performance will be considered.
Atlantic Systems involved a solicitation for technical, engineering, management, operation, logistical, and administrative support for the Department of Education’s cybersecurity risk management program. The solicitation was set aside for SDVOSB concerns that held Schedule 70 contracts.
Pursuant to the solicitation, offerors were to be evaluated for both corporate experience and past performance. In order to enable the agency to conduct the past performance/experience evaluation, each “offeror” was to provide evidence of the experience “of the organization” with similar projects or contracts.
For corporate experience, offerors were to provide between 3 and 5 performance examples that demonstrated the offeror’s capabilities “with similar projects or contracts, in terms of the nature and objectives of the project or contract; types of activities performed; studies conducted; and major reports produced.” Similarly, under the past performance factor, offerors were to provide between 3 and 5 performance examples “performed in the past  years that were similar in size, scope, and complexity” to the solicitation. The solicitation did not specify how the agency would treat a subcontractor’s past performance.
Under both corporate experience and past performance categories, Atlantic Systems provided two examples of its own performance and two examples from its subcontractor. In its evaluation, the agency did not consider the subcontractor’s past performance. Rather, “since the solicitation asked for experience and past performance for the organization, offeror, the agency only considered the information provided for the entities in whose name the offers were submitted.” Based in part on this determination, the agency rated Atlantic Systems as “does not possess” for corporate experience, and “neutral” for past performance. The agency awarded the order to a competitor.
Atlantic Systems filed a bid protest at GAO. Atlantic Systems contended, in part, that the agency had erred by failing to consider the past performance and experience of its subcontractor. Atlantic Systems pointed out that in a prior bid protest, Singleton Enterprises, B-298576 (Oct. 30, 2006), GAO sustained the protest, holding that the solicitation contained a “latent defect”: the agency had reasonably concluded that “offeror” meant only the prospective prime contractor; the protester had reasonably believed otherwise.
But Singleton was a negotiated procurement; offers were evaluated under FAR Part 15. FAR 15.305(a) states that agencies “should” consider the past performance of a subcontractor that will perform major or critical aspects of the contract. FAR 15.305(a) was central to GAO’s ruling in Singleton, because it created a reasonable expectation that a subcontractor’s past performance would be considered.
Here, in contrast, “the solicitation was issued pursuant to FAR part 8,” which applies to FSS procurements. FAR Part 8 “does not suggest that in evaluating an offeror’s past performance an agency should also consider the past performance of its proposed subcontractors.” Accordingly, “we do not find that the solicitation here is ambiguous, and it was reasonable for the agency to consider the experience and past performance of the offeror (i.e., the entity that submitted the offer) and not its subcontractors.”
As a policy matter, it’s fair to wonder if the underlying rule for consideration of a subcontractor’s past performance should vary depending on which Part of the FAR applies to the acquisition. But as a practical matter, Singleton Enterprises stands for an important principle: if an FSS solicitation does not specifically indicate that a subcontractor’s past performance will be considered, there is no guarantee that it will be.
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An Alaska Native Corporation subsidiary was not affiliated with its parent company and two sister companies under the ostensible subcontractor affiliation rule, even though the company in question would rely on the parent and sister companies for managerial personnel, financial assistance and bonding.
A recent decision of the SBA Office of Hearings and Appeals highlights the breadth of the exemption from affiliation enjoyed by ANC companies.
OHA’s decision in Size Appeal of Olgoonik Diversified Services, LLC, SBA No. SIZ-5825 (2017) involved a Department of State solicitation seeking a contractor to provide design-build construction services in Baghdad. The solicitation was issued as a small business set-aside under NAICS code 236220 (Commercial and Institutional Building Construction), with a corresponding $36.5 million size standard.
After evaluating competitive proposals, the agency announced that Olgoonik Diversified Services, LLC was the apparent successful offeror. An unsuccessful competitor subsequently filed a size protest. The protester alleged, in part, that Olgoonik was affiliated with other entities under the ostensible subcontractor rule.
The SBA Area Office determined that Olgoonik was established in 2011 as a wholly-owned subsidiary of Olgoonik Development, LLC (“OD”), an ANC holding company. OD, in turn, was a wholly-owned subsidiary of an ANC. OD had 11 other subsidiaries besides Olgoonik, referred to as Olgoonik’s “sister companies.” These sister companies included O.E.S., Inc. (“OES”) and Olgoonik Specialty Contractors, LLC (“OSC”).
The SBA Area Office found that Olgoonik had relied on OES and OSC for the relevant past performance identified in its proposal. OD would provide bonding and other financial assistance to allow Olgoonik to perform the contract. All six key employees listed in the proposal (including the Program General Manager responsible for overall project management) were OSC employees.
Although Olgoonik had not named OES or OSC as subcontractors in its proposal, the SBA Area Office found that Olgoonik was unusually reliant on its sister companies for contract performance. The SBA Area Office issued a decision finding Olgoonik affiliated with OES and OSC under the ostensible subcontractor rule (the SBA also found an affiliation for another reason, which is outside the scope of this post).
Olgoonik filed a size appeal with OHA. Olgoonik argued that the ostensible subcontractor rule did not apply because OSC and OES were not proposed as subcontractors for the project. Additionally, Olgoonik argued that a regulatory exemption from affiliation precluded a finding of affiliation. That exemption, which is found in 13 C.F.R. 121.103(b)(2)(ii), provides, in part, that businesses owned and controlled by Indian Tribes, ANCs, Native Hawaiian Organizations, and Community Development Corporations are not considered affiliated with other businesses owned by these entities “because of their common ownership or common management.” However, “[a]ffiliation may be found for other reasons.”
OHA first addressed the low-hanging fruit: the fact that OD, OES and OSC were not proposed to be subcontractors on the State Department project. OHA wrote that it has “consistently held that in order for the ostensible subcontractor rule to apply, the alleged affiliate must actually be a subcontractor of the challenged concern.” In this case, “there is no record of subcontracting in [Olgoonik’s] proposal,” meaning that OD, OES and OSC could not be Olgoonik’s ostensible subcontractors.
But OHA didn’t stop there: it also found that the SBA Area Office had erred by failing to apply the “common ownership” and “common management” exceptions from affiliation. OHA wrote that “an ANC transfers personnel among its sister companies as part of the common management of its concerns, and an ANC’s exercise of common management is a clear exception to a finding of affiliation.” Additionally, OHA explained, “relying on its parent company for financial assistance in justifying a finding of affiliation based on a joint venture or ostensible subcontractor is equally illogical.” ANCs are “excepted from affiliation based on common ownership, thus it would be reasonable for a subsidiary to rely on its parent company’s financial resources, and for bonding . . ..”
OHA granted Olgoonik’s size appeal.
The SBA’s regulations do not expressly exempt ANCs, Tribes, NHOs and CDCs from ostensible subcontractor affiliation. But as the Olgoonik Diversified Services size appeal demonstrates, the types of relationships that might ordinarily be deemed indicative of ostensible subcontractor affiliation are often part and parcel of common ownership and management. Olgoonik Diversified Services confirms that OHA will broadly apply the regulatory exception to cover things such as transferred personnel, financial assistance, and bonding assistance.
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An agency did not act improperly by allowing for oral final proposal revisions, rather than permitting offerors to submit written FPRs following discussions.
In a recent bid protest decision, the GAO held that–at least in the context of a task order awarded under FAR 16.505–an agency could validly accept oral revisions to offerors’ proposals.
The GAO’s decision in SSI, B-413486, B-413486.2 (Nov. 3, 2016) involved an Air Force solicitation seeking a contractor to provide enterprise language, regional expertise, and cultural instruction to the 1st Special Forces Command and Special Operations Forces Language Office. The solicitation was open to holders of the U.S. Special Operations Command Wide Mission Support Group B multiple-award IDIQ. The Air Force intended to award two task orders to a single vendor.
The Air Force received initial proposals from 12 vendors, including Mid Atlantic Professionals, Inc. d/b/a SSI. In its initial evaluation, the Air Force assigned SSI’s proposal “unacceptable” ratings under two non-price factors.
The Air Force elected to open discussions with offerors. The Air Force sent SSI the results of its initial technical evaluation and invited SSI to meet with the Air Force to provide oral responses and discuss the government’s concerns.
After meeting with SSI, the Air Force reevaluated SSI’s proposal and assigned SSI “good” and “acceptable” ratings for the portions of the proposal that were initially rated “unacceptable.” However, after evaluating the remaining proposals, the Air Force made award to Yorktown Systems Group, Inc., which received similar non-price scores but was lower-priced.
SSI filed a protest challenging the award to YSG. SSI alleged, in part, that the Air Force had acted improperly by failing to allow offerors the opportunity to submit written FPRs, and to lower their prices as part of written FPRs. SSI contended that the Air Force was not allowed to accept oral proposal revisions.
The GAO noted that this acquisition was conducted under FAR 16.505, not under FAR 15.3, which governs negotiated procurements. The GAO wrote that, under FAR 16.505 and the provisions of SSI’s underlying IDIQ contract, an offeror must be given “a fair opportunity to compete.” However, “[t]here is no requirement in the contract that the agency solicit and accept written FPRs after conducting discussions.” Additionally, “there is no indication in the record that the agency conveyed or suggested through its course of dealings with offerors that it intended to solicit written FPRs after the close of discussions.”
The GAO denied SSI’s protest.
The notion of an oral proposal revision seems odd, and probably wouldn’t be allowed in a negotiated procurement conducted under FAR 15.3. But as the SSI case demonstrates, when an agency is awarding a task order under FAR 16.505, the agency can, in fact, allow for oral FPRs.
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I am very pleased to announce that Candace Shields is joining our team of government contracts bloggers here at SmallGovCon.
Candace comes to us from the Social Security Administration, where she was an Attorney Advisor for several years. As an associate attorney at Koprince Law LLC, Candace’s practice focuses on federal government contracts law.
Please check out Candace’s online biography and great first blog post, and be sure to visit SmallGovCon regularly for the latest legal news and notes for small government contractors.
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When multiple unsuccessful offerors protest a solicitation, the GAO ordinarily will dismiss any and all bid protests associated with the procurement in the event one unsuccessful offeror takes its case to federal court–even if some protesters would prefer to remain at the GAO.
As one federal contractor recently learned in Colleague Consulting, LLC—Reconsideration, B-413156.18 (Sept. 12, 2016), the GAO’s jurisdictional rules prevent it from deciding protests when the outcome of the protest could be affected by a pending federal court decision.
Colleague Consulting involved a competition for a GSA contract. Colleague Consulting, LLC was eliminated from the pool of successful offerors because its proposal was deemed technically unacceptable. After learning of its exclusion, CCL filed protest with the GAO.
Separately, another unsuccessful offeror under the same solicitation filed a bid protest before the GAO challenging the GSA’s decision not to conduct discussions. After a time, that second unsuccessful offeror withdrew its protest from the GAO and refiled it before the U.S. Court of Federal Claims.
One of the goals of the GAO protest process is to give government contractors an administrative alternative to pursuing their bid protests in federal court. The GAO process, by design, is typically faster and less expensive than pursuing a protest in court (though not always). Despite this option, contractors also are afforded the opportunity to pursue bid protests at the Court of Federal Claims.
Because both the GAO and the Court of Federal Claims are authorized to decide bid protests, there is the possibility that different adjudicators will come to differing—and potentially contradictory—conclusions. To prevent such an outcome, the GAO’s jurisdictional regulations, at 4 C.F.R. § 21.11(b), state that “GAO will dismiss any case where the matter involved is the subject of litigation before, or has been decided on the merits by, a court of competent jurisdiction.”
Returning to Colleague Consulting, after the GAO received notice of the Court of Federal Claims protest, determined that “disposition of the COFC case could render a decision by our Office on CCL’s protest academic.” The GAO dismissed CCL’s protest, citing 4 C.F.R. § 21.11(b).
CCL filed a motion for reconsideration, urging the GAO to reverse its decision and continue hearing its protest. CCL argued that the word “matter” within 4 C.F.R. § 21.11(b) should be construed narrowly to mean that the GAO must dismiss a protest only where the arguments before the GAO and Court are similar. In this case, CCL argued, the arguments were entirely dissimilar: CCL was protesting its technical evaluation whereas the other unsuccessful offeror was protesting the GSA’s decision not to hold discussions.
The GAO disagreed. It wrote:
While the word ‘matter’ is not defined, there is nothing in the language of the regulation, or elsewhere, to suggest that it is meant to apply to the exact narrow issue involved in the protest before our Office. Instead, the matter before the court can properly be characterized as a dispute over which companies should have remained in the competition under the GSA solicitation. While that matter remains before the [federal court], GAO will not also decide the question.
GAO denied CCL’s request for reconsideration.
In today’s contracting environment, it is not uncommon for more than one offeror to pursue a protest over the same procurement. With each offeror being able to choose where it wants to file (i.e. GAO or the Court of Federal Claims), an offeror wishing to use the GAO’s administrative processes may nonetheless be out of luck if a competitor chooses the Court.
Ian Patterson, a law clerk with Koprince Law LLC, was this post’s primary author.
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This week I had the pleasure of speaking at the 20th Annual Government Procurement Conference in Arlington, Texas. It was a great event and I was glad to see so many familiar faces. Next up, I’ll be in Des Moines on August 23rd for the Iowa Vendor Conference, where I’ll be joined by my friend Guy Timberlake for a great day of networking and information sessions.
But even as I log miles on the air and on the highways, there’s no mistaking the fact that we’re in the last days of the government fiscal year–and that means a busy week of government contracting news. This week, SmallGovCon Week In Review takes a look at stories involving an update to CAGE codes, some Milwaukee businesses under investigation for wrongly portraying themselves as veteran-owned and minority-owned, a lack of oversight allowed contractors to overbill a government customer, a look at the uptick in government spending as the fourth quarter winds down, and much more.
The Defense Logistics Agency will, for the first time in 44 years, allow CAGE codes to expire. [Defense Logistics Agency]
Has the Homeland Security Department and it’s components gone overboard with agile? [Federal News Radio]
Several Milwaukee-area businesses are under investigation for falsely claiming they were owned by minorities and military veterans in order to win government contracts. [Daily Progress]
The Defense Information Systems Agency said it will amend the ENCORE III RFP to fix some of the problems pointed out by protesters that were upheld by the GAO last week. [Federal News Radio]
The U.S. Fish and Wildlife Service allowed contractors to overbill the government for more than $130,000 because the agency didn’t “always review contractor invoices to ensure costs claimed were allowable and adequately supported.” [The Daily Caller]
A proposed rule from the SBA would update the regulations governing the delivery and oversight of its business lending programs. [Federal Register]
The SBA is asking a judge to throw out a lawsuit claiming it uses “creative accounting” for federal contracting benchmarks. [Federal News Radio]
The procurement policy world is heating up as summer begins to wind down and we jump into the final stretch of the fiscal year. [Federal News Radio]
Companies fraudulently got $268 million in contracts, according to a recent affidavit. [BizTimes]
A trifecta of companies protested the Department of Defense TRICARE contract awards, including the winner of the contract. [Federal News Radio]
The SBA has launched a new website that helps women-owned small businesses more easily manage eligibility and certification documents for the WOSB Federal Contract Program. [GCN]
An increasingly sluggish security review process is forcing some recruiters, contractors and agencies to change the way they enlist new qualified, cleared candidates. [Federal News Radio]
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In May 2017, SDVOSBs and VOSBs lodged another big win in their battle to enforce the statutory preferences for veteran-owned companies: the Court of Federal Claims held that the VA cannot buy products or services using the AbilityOne list without first applying the “rule of two” and determining whether qualified SDVOSBs or VOSBs are likely to bid.
But the AbilityOne vendor in question isn’t going down without a fight. It’s taking the case to the United States Court of Appeals for the Federal Circuit–and the Court of Federal Claims just issued a ruling staying its May decision pending the results of the appeal.
The COFC’s decision in PDS Consultants, Inc. v. United States, No. 16-1063C (2017) was a major victory for SDVOSBs and VOSBs. In that case, the COFC resolved an apparent conflict between the statutes underlying the AbilityOne program and the VA’s SDVOSB/VOSB preference program. The COFC held that “the preference for veterans is the VA’s first priority” and trumps the requirement to use AbilityOne as a mandatory source.
But Winston Salem Industries for the Blind Inc., known as IFB Solutions, has appealed the COFC’s decision to the Federal Circuit. And in a ruling issued on September 1, the COFC held that its original decision would be suspended pending the resolution of IFB’s appeal.
The COFC wrote that there are four factors it will consider when deciding whether to suspend a ruling pending an appeal: “(1) whether the movant has made a strong showing that it is likely to succeed on the merits; (2) whether the movant will be irreparably injured absent an injunction; (3) whether the issuance of the injunction will substantially injure the other interested parties; and (4) where the public interest lies.” These factors are “not necessarily entitled to equal weight,” and the court may be “flexible” in its application of the factors.
Here, all parties agreed that “whether the court properly interpreted the interplay between [the two statutes] is a question of first impression” that “has not been decided by any prior court.” Thus, “while the court rejected IFB’s argument, it is not possible to determine the likelihood of success on appeal.”
Turning to the second factor, irreparable harm, IFB argued that, if the COFC decision stood, it would lose “62% of its revenue from optical services or 15.5% of its total revenue” by January 1, 2018. The COFC wrote that “the loss of these contracts would have a severe impact on not only IFB’s optical business but also IFB’s mission as a nonprofit to provide employment, training, and services to persons who are blind.” Therefore, the COFC found that IFB had established irreparable harm.
Under the third factor, balancing of the harms, PDS argued that a stay would substantially injure PDS and other SDVOSBs because they would not be able to compete for the contracts in question during the pendency of the appeal. The COFC wasn’t persuaded, writing that the harm PDS identified “is hypothetical” because “t is based on the hope that it would be able to compete for the subject work . . ..” The COFC “weighed the concrete harm IFB has identified against the hypothetical harm PDS has identified” and found that IFB’s harm outweighed PDS’s.
Finally, with respect to the public interest factor, the COFC wrote that both statutes (AbilityOne and the VA’s veteran preference rules) “serve important public purposes.” But because IFB had identified concrete harm under the third factor, “the public interest tips in favor of allowing IFB to continue its work of employing blind and severely handicapped individuals under its contracts for VISNs 2 and 7 until the appeal is resolved.”
For these reasons, the COFC granted IFB’s motion for a stay pending appeal. Under the stay, the VA will be permitted to continue procuring the products in question from IFB until the appeal is resolved.
Interestingly, the VA didn’t take a position on whether the COFC’s ruling should be stayed. It’s not clear from the public documents why the VA stayed out of the fight, but perhaps the VA is having second thoughts about getting into another long-running legal (and P.R.) battle with veterans.
In any event, the COFC’s ruling is a big disappointment for SDVOSBs and VOSBs, many of whom hoped that the COFC’s May decision would put an end to the question about how the “rule of two” intersects with the AbilityOne program. Stay tuned.
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An 8(a) Program participant was terminated from the 8(a) Program for failing to pay a subcontractor.
According to the SBA, the non-payment reflected poorly on the 8(a) company’s character–and “good character” is a prerequisite for 8(a) Program participation.
The decision of the SBA Office of Hearings and Appeals in Corporate Portfolio Management Solutions, SBA No. BDPT-567 (2018) was an appeal of the SBA’s decision to terminate Corporate Portfolio Management Solutions from the 8 (a) Program. The reason for the termination was CPMS’s failure to pay a subcontractor.
In 2012, the SBA certified CPMS as an 8(a) Program participant. The following year, the GSA awarded CPMS an 8(a) prime contract. CPMS then hired a subcontractor, Procon Consulting, LLC, to perform some of the work under the GSA contract.
By April 2016, CPMS owed Procon $68.688.53 for its subcontract work. In August 2016, Procon initiated arbitration before the American Arbitration Association to recover the amounts due. In December 2016, CPMS signed a consent order and judgment acknowledging that it owed Procon the full $68,688.53. CPMS agreed to pay Procon $75,000 in three installments, with the last installment due February 28, 2017.
In June 2017, Procon filed a complaint in the Superior Court of the District of Columbia, seeking to enforce the arbitration consent order. Procon alleged that CPMS had failed to make any of the agreed-upon installment payments. In October 2017, the Court issued a judgment in favor of Procon.
Procon didn’t limit itself to civil remedies. In July 2017, Procon sent a letter to the SBA asking for the SBA’s assistance in recovering the unpaid debt and urging the SBA to revoke Procon’s 8(a) certification.
In August 2017, the SBA suspended CPMS from participating in the 8(a) Program. By notice dated October 27, 2017, the SBA informed CPMS that it was being terminated from the 8(a) Program. The SBA’s notice specified that the termination was due to a lack of business integrity because CPMS had failed to pay Procon and failed to comply with the arbitration order.
CPMS appealed the termination to OHA. CPMS said that it had begun making payments to Procon and had taken other corrective actions such as implementing new corporate policies. However, CPMS did not dispute any of the underlying facts regarding its relationship with Procon.
OHA wrote that “[t]he SBA has an affirmative responsibility under the Small Business Act to ensure that only eligible business concerns are admitted into, and remain in, the 8(a) BD program.” OHA explained, “[t]his ensures that public funds are properly administered, and that the benefits of the 8(a) BD program are limited to those small businesses that qualify to receive such benefits.”
Here, even assuming that CPMS had begun making payments to Procon and had changed some of its internal corporate policies, “these contentions do not rebut SBA’s conclusion that [CPMS] engaged in conduct indicating a lack of business integrity when it failed to pay its subcontractor.” OHA dismissed the appeal.
The Corporate Portfolio Management Solutions case shows that, when it comes to 8(a) Program participation, “good character” means more than avoiding criminal convictions. If an 8(a) Program participant doesn’t pay its bills, the SBA may terminate the participant from the 8(a) Program.
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The analysis of an offeror’s past performance is sometimes a crucial part of an agency’s evaluation of proposals. And an agency’s evaluation of past performance is ordinarily a matter of agency discretion.
Though broad, this discretion is not unlimited. An agency’s past performance evaluation must be consistent with the solicitation’s evaluation criteria. GAO recently reaffirmed this rule, by sustaining a protest challenging an agency’s departure from its own definition of relevant past performance.
At issue in Delfasco, LLC, B-409514.3 (Mar. 2, 2015), was an Army solicitation that sought the production of two types of practice bombs and a suspension lug, used for attaching the bombs to aircraft. Offerors would be graded under a best value evaluation scheme, which had three factors: technical ability, past performance (which included subfactors for quality program problems and on-time delivery), and price. An offeror’s technical ability was significantly more important than its past performance and price; past performance and price were equally weighted.
The past performance evaluation was to consider the relevancy of the offeror’s prior work. Relevant past performance was defined “as having previously produced like or similar items . . . as items that have been produced using similar manufacturing processes, including experience with casting, machining, forging, metal forming, welding, essential skills and unique technologies required to produce the MK-76 with MK-14, BDU-33 and the 25lb Suspension Lug.” The solicitation’s evaluation criteria further explained that relevant past performance is that which “involved similar scope and magnitude of effort and complexities this solicitation requires,” while somewhat relevant past performance “involved some of the scope and magnitude of effort and complexities this solicitation requires.”
Three companies submitted offers under the solicitation. Delfasco—a previous producer of the two bombs and the lug—was one of the offerors. Delfasco’s proposal noted that it had previously produced “millions” of the practice bombs and “thousands” of the suspension lug sought by the Army. It also contemplated using existing practices, technology, personnel, and equipment to continue this production. Nevertheless, the Army gave Delfasco a somewhat relevant past performance rating.
GTI Systems also submitted a proposal. The Army’s evaluation of GTI’s past performance indicated that GTI had much more limited experience than Delfasco. The Army noted that GTI “lacked relevant past performance with respect to two necessary skills identified in the RFP, and only somewhat relevant experience with respect to another skill.” But even though the Army’s evaluation concluded that GTI “does not appear to have relevant experience i[n] all aspects that will be required on this solicitation,” it nonetheless found that GTI’s “past performance does involve a similar scope and magnitude of effort and complexities this solicitation requires giving the offeror an overall relevancy rating of ‘Relevant[.]’”
In sum, then, Delfasco was given a somewhat relevant past performance rating. GTI Systems (“GTI”)—who had never produced these same practice bombs or the suspension lug—was found to have relevant past performance. In part because of this rating difference, GTI was named the awardee.
Delfasco filed a GAO bid protest challenging the Army’s award decision. In the course of the protest, the Army admitted that Delfasco should have received a relevant past performance rating. Nevertheless, the Army argued, the award result would have been the same even if Delfasco had been assigned a relevant past performance rating.
Delfasco contended, however, that the Army’s errors went beyond the somewhat relevant past performance rating initially assigned to Delfasco. Additionally, Delfasco contended, the Army had erred by finding GTI’s past performance to be relevant instead of somewhat relevant.
GAO wrote that an agency’s evaluation of past performance is ordinarily “a matter of agency discretion.” However, that discretion is not unlimited. An agency’s past performance review must be “reasonable and consistent with the solicitation’s evaluation criteria and with the procurement statutes and regulations, [and] adequately documented.”
In this case, GAO found that the Army had not properly exercised its discretion. GAO referred back to the solicitation’s definition of relevant past performance, and noted that the Army found that GTI “had not demonstrated ‘any’ relevant experience” in casting or forging, and only somewhat relevant experience in machining. Thus, GAO found that “GTI has only demonstrated ‘some’ of the skills necessary to produce the bomb bodies.” Given “limited relevant experience,” GTI’s relevant past performance rating was not justified. GAO sustained Delfasco’s protest.
A disappointed offeror protesting a past performance evaluation often faces an uphill battle, given the discretion agencies typically enjoy in conducting their evaluations. But Delfasco affirms that this discretion is not unlimited—where an agency fails to follow its own past performance evaluation criteria, GAO will sustain a protest.
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The ongoing federal movement to prevent fraud waste, and abuse in the contracting process continues. And as demonstrated in a recent federal court decision, the government retains its ability to refuse to pay a procurement contract tainted by fraud.
In the recent decision of Laguna Construction Company, Inc. v. Ashton Carter, Appeal Number 15-1291, the U.S. Court of Appeals for the Federal Circuit affirmed that a procurement contract tainted by violations of the Anti-Kickback Act is voidable under the doctrine of prior material breach.
In 2003, the government awarded Laguna Construction Company a contract to perform work in Iraq. Under the contract, Laguna received 16 cost-reimbursable task orders to perform the work, and awarded subcontracts to a number of subcontractors.
In 2008, the government began investigating allegations that Laguna’s employees were engaged in kickback schemes with its subcontractors. In October 2010, Laguna’s project manager pleaded guilty to conspiracy to pay or receive kickbacks, conspiracy to defraud the United States, and violations of the Anti-Kickback Act, which broadly prohibits prime contractors from soliciting or accepting kickbacks in exchange for awarding subcontracts. The project manager admitted that, for approximately three years, he allowed subcontractors to submit inflated invoices to Laguna, and profited from the difference.
In February 2012, three principal officers of Laguna were charged with receiving kickbacks for awarding subcontracts. The company’s Executive Vice President and Chief Operating Officer also was charged with conspiring to defraud the United States by participating in a kickback scheme from December 2004 to February 2009, which he pleaded guilty to in July 2013.
After performing work until 2015, Laguna sought payment of past costs. The government refused a portion of these costs alleging that it was not liable because Laguna had committed a prior material breach by accepting subcontractor kickbacks under the contract. The Armed Services Board of Contract Appeals agreed, stating that Laguna “committed the first material breach under this contract, which provided the government with a legal excuse not to pay [Laguna’s] invoices.”
Laguna appealed to the Federal Circuit. Laguna argued, in part, that any alleged breach was not material because the Government may audit and reconcile costs, thereby “assur[ing] that the Government will incur no damages.”
The Federal Circuit explained that, the prior material breach doctrine, a contractor’s claim against the government may be barred when the contractor breaches the contract through “fraud-based” contract.” The court further explained that its decision comported with the Supreme Court’s instruction “that the government must be able to ‘rid itself’ of contracts that are ‘tainted’ by fraud, including kickbacks and violation of conflict-of-interest statutes,” citing to the Supreme Court’s prior rationale that:
[E]ven if the Government could isolate and recover the inflation attributable to the kickback, it would still be saddled with a subcontractor who, having obtained the job other than on merit, is perhaps entirely unreliable in other ways. This unreliability in turn undermines the security of the prime contractor’s performance–a result which the public cannot tolerate, especially where, as here, important defense contracts are involved.
In this case, the court wrote that Laguna “committed the first material breach” by agreeing to accept kickbacks from its subcontractors. The court held that “[t]he Board properly determined that these criminal acts constituted material breach that may be imputed to Laguna, since both employees were operating under the contract and within the scope of their employment when they ‘manipulated the contracting process.'” The court denied Laguna’s appeal, and affirmed the ASBCA’s decision.
This decision provides a cautionary example of one of the many risks involved in accepting kickbacks for awarding subcontracts. The Anti-Kickback Act continues to provide for criminal, civil, and administrative penalties–and some of those penalties were assessed against Laguna’s employees. But the Laguna case demonstrates that violations of the Anti-Kickback Act (and other fraud-based breaches of a government contract) also may excuse the government from paying a contractor’s claim for additional contract costs.
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