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shatkinson

Prime Contractor Changing Proposed Subcontractor After Award

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We recently awarded a best value contract for a construction project to a small business concern who proposed to use a subcontractor to perform the actual construction work. The prime submitted technical capabilities, resumes, and past performance of their sub to meet the technical requirements of the solicitation and would not have even been considered without the information provided on the sub. Technical was the most important factor and the technical strengths of the prime's proposal (thanks to the Sub) was the prime reason the they won the contract.

Fast forward a few weeks to a couple of days before the work is scheduled to begin and we find out that the prime is going to use a different sub. I should mention that the prime never informed us of their decision to use a different sub and that we found out only by doing a little digging. I have two issues with this and wanted to see if I'm off base at all in my thinking that this warrants a T4D.

1) Endangering the performance of the contract: Since we didn't evaluate the technical capabilities and experience of the new subcontractor, we don’t know if they will be able to meet the technical requirements of the contract. We could evaluate them now before we issue the Notice to Proceed, but this wouldn't address what I think is the more serious issue regarding the source selection process.

2) The award is now protestable: The award decision was based largely on the proposed subcontractor’s technical capabilities. If the unsuccessful found out that awardee’s subcontractor changed after award, I think they would have grounds to protest (and win). If they lost to the combined proposal of the awardee and proposed sub, and now that particular sub isn't even in the picture, doesn't that invalidate the source selection decision? Also, the prime is not following through with what they promised to offer (sub’s technical expertise). I’m sure it can be argued, as the prime is doing, that nothing has changed because the new sub is just as good or better (technically) than the proposed sub; however, if the Government allowed contractors to do this, what would prevent a prime from proposing to use the World’s Best Sub for every solicitation to get the award and then change to a different sub once award has been made? Even if you can’t prove the contractor misrepresented their intentions, it still doesn't seem right or fair.

Thoughts?

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Saying something in a proposal is not necessarily the same as promising something.

Promises in a proposal are not binding if they are not written into the contract.

If the subcontractor was important to you, and if you had wanted to lock the prime into a particular firm, then you should have done so. If you had wanted require the prime to obtain your approval before awarding a subcontract to a different firm than the one named in a proposal, then you should have done so. If you didn't do those things, then you have no grounds for T4D. What term of the contract did the contractor breach?

A protest will not be viable unless the protester can prove intentional bait and switch. What has happened is not necessarily an instance of bait and switch. Maybe the firm originally proposed as sub decided it didn't want the job, or maybe it tried to gouge the prime when they sat down to finalize terms. Have you inquired?

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On the off-hand possibility that you are with the Army Corps of Engineers, is the clause "Personnel, Subcontractors and Outside Associates or Consultants" or "Key Personnel, Subcontractors and Outside Associates or Consultants" in your contract? This clause controls substitutions of subcontractors identified in the proposal.

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Mere statements of intention in a proposal are not necessarily promises. See Restatement of the Law, Second, Contracts 2d § 2. Everything depends on (1) what is said and (2) how it is said. The best way to ensure that a contractor will be bound by its statements of intention is to write them into the contract as "shall" obligations.

See Omni Corp. v. U.S., 45 Fed. Cl. 585 (1998). See also "Postscript III: Identifying What's In The Contract," The Nash & Cibinic Report, June 1999, ¶ 31, commenting on Omni:


In its technical proposal, Omni stated that it would assign an equipment mechanic to each lock and dam. The cost of these mechanics was included in the contract price. In lieu of incorporating the technical proposal in the contract, the agency included the following provision in Section M (“Evalulation Factors for Award”) of the Request for Proposals:
y the submission of an offer pursuant to this solicitation, you, as the offeror, agree that the capability presented in your proposal which is in excess of the minimum capability requirements of this solicitation, as accepted by the Government, and upon award of a contract, thereby becomes an additional contract requirement for equivalent capability. Subsequently, a failure to provide such additional capability which results in deficient contract performance, can place the contract in jeopardy of default.
When the contractor performed the contract without having equipment mechanics on site for a substantial part of the time, the CO deducted the value of the mechanics from the price based on this provision, and the contractor sued to recover the amount withheld.
The U.S. Court of Federal Claims ruled for the contractor[.]
* * *
This case is an excellent example of an agency that saw that some parts of the technical proposal might offer additional value above that required by the contract specifications. However, rather than take the time to identify that offer of additional value and explicitly make it part of the contract, the agency attempted to write a broad provision covering the matter.

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I agree with Vern. The contract would have to incorporate proposal features into the contract in order to make them binding.

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The following statement is in the resultant contract: Contractor shall perform.. [the work]...in accordance with the contractor's proposal [emphasis added] and the terms and conditions of the contract.

Would that change anything?

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Not necessarily. It depends on whether the contractor made a firm commitment to use that firm and only that firm. If they merely put that firm forward as a candidate or "proposed" that firm, then your acceptance of the proposal probably does not commit them to use that firm and only that firm.

In any case, they wouldn't make a firm commitment to the firm before they know that they got the contract. They almost certainly included that firm in their proposal contingent upon (1) receiving the contract and (2) being able to reach an agreement with the firm on subcontract terms. At most what you reasonably could have done is required that they obtain your approval of any proposed subcontractor other than the one included in their proposal.

Ask them why they don't plan to use the firm that they proposed. Then check out the qualifications of the firm that they want to use. You may not have an issue. Don't let this become a thorn in the relationship based on some ungrounded "principle."

And the statement that you quoted from the contract was ill-advised. A proposal says a lot of things. The evaluators may have overlooked something that you wouldn't want the contractor to do. That's the kind of "broad provision" that Professor Nash warned against in the article from which I quoted above, and even that brief statement is poorly written. Read it closely. It seems to suggest that the proposal is separate from the terms and conditions of the contract. What if there is a conflict? Which prevails?

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