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Deaner

Inadvertanly rated a contractor technically acceptable

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Had a commercial RFQ . The requirement was for scheduled and unscheduled maintenance of equipment for one year. Contract was a FFP and was to include all parts and labor at the contractor’s expense. Received three quotations. The technical team rated each contractor technically acceptable. The contractor who received the award submitted their quote but added small writing at the bottom of their price volume that stated the price only includes labor and they would invoice additionally for parts. This was not the intent of the requirement and the contractor has partially started the work.

The contractor states they would want to change the price they submitted now that they have been made aware their price was to include parts as well as labor. The proposed price increase by the contractor still keeps them the lowest price of the three quotations received (Evaluation was LPTA), and they've been doing an outstanding job.

Without regards to whether or not a FFP contract was the proper contract type, and the fact the awardee should probably have been rated technically unacceptable and never have received the award, what do you do and why? (This was a previous situation that has been handled, wonder if others would handle it the same way).

1. Terminate the contract

2. Modify the contract

3. Other -

As a follow up question, does this happen often at other contracting offices? The technical team says acceptable, but later find out they were unacceptable? Unless the CO happens to be a subject matter expert for the particular requirement, or at least familiar with the type of work, who are they to question the technical team’s evaluation as long as they followed what the solicitation said it was going to do?

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Not sure if this example is applicable to your situation, but...

I had a requirement once upon a time for a specialized (but commercial) item, and it would be evaluated using LPTA. The estimated value was well below the SAT. The requirement package called for certain specs; in other words, the customer wanted a brand-name item. I explained to them why we can't just buy a brand-name item whenever we want one, and why pursuing that route would extend the lead time. The customer agreed to a brand name or equal solicitation using salient characteristics, and I got a number of offers in reply. The winning offer was of course the lowest-priced offer (which led to significant savings on the IGCE), and they actually offered the exact model the customer wanted in the first place. I sent their offer to the program office/user for technical evaluation, and got an explicit statement that the offer was technically acceptable. My supervisor signed off on the contract, and away we went.

Once the item was delivered, the customer began harassing contacting me on a regular basis, claiming the item I procured was not what they asked for. The customer apparently wanted a "nice-to-have" accessory, but it was not defined anywhere in the salient characteristics. This accessory would have increased the cost of the procurement, but we would have still been under budget and the provided funding. I asked the customer to explain how that could be, since they saw the offer (pricing redacted due to office policy, but otherwise the exact offer the winning vendor sent me), and that (prior to award) they affirmed that the offer was technically acceptable. This went on for months, and it took my supervisor threatening to report the customer to their supervisor for them to stop asking me about it. I must have sent the customer the RFQ I issued (including the customer's salient characteristics), the redacted offer, and their technical evaluation three times during that span!

I guess the moral of the story is: LPTA is great, but you better have your requirements well-defined. If there's a "nice-to-have" addition you want, don't assume the contractor will throw it in gratis. We all know what happens when you assume ;)

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Contract or purchase order? Something else?

Did the contract [or purchase order or something else] say labor only or did it say parts and labor?

Does the contractor think it is entitled, as a matter of right, to an increase in the contract price?

You say your situation is already handled -- what did you do?

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We’re talkin ~half a mil using the test program, so yes a purchase order was issued, but accepted by the contractor establishing a contract.

The SOW specifically stated the contractor was to provide parts and labor at their expense.

I don’t know if the contractor thinks they’re entitled as a matter or right or not, but simple concerned they will be operating at a loss if they were to finish performance the way it was written.

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The purchase order memorializes the agreement between the parties. If the contractor is unable to articulate a matter of right to an adjustment in the contract price, then the Government almost certainly cannot articulate a matter of right. Do not be persuaded to give the contractor a gift of additional money because you like the contractor -- there is no box in block 13 of the SF-30 to show a gift to the contractor as the authority for the modification.

If the contractor is willing to perform, let it perform. If the contractor intends to abandon the work, let it make its declaration. If the Government erred in issuing the purchase order, you may terminate it for the Government's convenience. If a mutual mistake was made in forming the contract, well, there's a process for that, too.

Anyway, what did you do?

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It sounds like you accidentally snookered them into accepting your offer to perform the work and eat the cost of the parts.

Follow-up question: How much money we talkin about *in parts*? (Not the grand total)

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We’re talkin ~half a mil using the test program, so yes a purchase order was issued, but accepted by the contractor establishing a contract.

How did they accept the purchase order? Did they sign it?

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I don’t think I accidentally snookered anyone into anything. The contractor had a tiny footer on a page the government missed, and the contractor apparently missed parts were to be included in the contract. The requirement didn’t change between the solicitation and the contract. I thought it was pretty well established parts were to be included.

Parts were ~10% of the total price.

Don, yes the contractor signed the purchase order.

What happened was we terminated the contract for convenience and paid the contractor the cost of the scheduled maintenance along with the cost of replacement parts (no unscheduled maintenance or any other work was performed).

Although it may have been an honest mistake (giving the contractor the benefit of the doubt) I determined the contractor should have received an unacceptable rating as their quotation did not adhere to the requirements of the solicitation, so I had the contractor finish the scheduled maintenance (which had already been started) and then terminated the rest of the contract as stated above. Had this been protested, I probably would have had to take corrective action (hard to say though).

Whether or not that was a good decision I don’t know, a couple people above me thought I ought to give the contractor his requested increase. Given the fact patterns (although hard to discuss here in every detail), I think I was right (or most right) and I’d do it again given similar fact patterns.

The question in a more simple form, what do you do when you award a contract to a contractor who should have been rated unacceptable, but they perform as they stated they would, which is unacceptable?

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I think the CO should have caught the pricing error more so than the technical panel. If the change in cost was lower than the next lowest bid, I am sure my agency would modify the order and get on with business. I know we have done so before for various reasons.

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The question in a more simple form, what do you do when you award a contract to a contractor who should have been rated unacceptable, but they perform as they stated they would, which is unacceptable?

Hi, Deaner,

The circumstances sound unusual, but my guess is that by awarding the PO, the CO overrules the techncial panel and thereby declares them acceptable. By accepting the PO (eigher by signing or beginning work) the contractor has to perform in accordance with it. If they default, then you terminate them.

Sounds like that was a rough one . . . glad it is behind you.

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Looks to me like there was negligence on the part of the government - here I am assuming the KO or their staff had access to the price information. The government team, led by the KO, didn't carefully read the price quote. There is no excuse for that. Seems like somebody should have compared the prices and their bases. Also, I may be wrong but for commercial acquisitions, I thought that firms are encouraged to negotiate or offer terms consistent with commercial practice.

The firm also appears to be naive or ignorant by not understanding the details of the government's purchase order which varied from their quote.

I'd venture to say that there was mutual mistake and that the best solution would be to terminate the contract for convenience.

You said that you did but added that you would favor a poor performance rating. Inasmuch as you didn't know the basis of their quotation, I would say that that is unfair and unwarranted. You said that even adding for parts, the firm still had the lowest price and satisfactorily completed what they were assigned...

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I'd venture to say that there was mutual mistake and that the best solution would be to terminate the contract for convenience.

You said that you did but added that you would favor a poor performance rating.

I didn’t intend to mean I favor the contractor receive a bad rating. I was trying to state that if the government caught the price details in the quotation, they probably would have been rated unacceptable or unresponsive and never received the award to begin with.

In this situation, The quotation number, date, and all were included in block 29.

Dont know if it matters, but the page where the contractor added the footer indicating his quotation only included labor was one of 15 pages of unsolicited information, but the solicitation didn't put any page max for quotations.

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Some people indicated the Contractor would be obligated to perform based upon the contract terms and conditions and that a modification providing an adjustment would be tantamount to a gift. Commercial items exceeding the SAT shall be issued using the SF-1449 except in certain instances (FAR 12.204). Block 29 on the SF-1449 states:

AWARD OF CONTRACT: REF. OFFER ____________

DATED ____________. YOUR OFFER ON SOLICITATION (BLOCK 5), INCLUDING ANY ADDITIONS OR CHANGES WHICH ARE SET FORTH HEREIN, IS ACCEPTED AS TO ITEMS: ___________

Would it change anyone opinion for whether the agency could force the Contractor to perform without any consideration of the quotation if the CO included the Contractor's quotation number in Block 29 and indicated acceptance of all items? Would it make a difference if the statement identifying allowability of cost was an attachment?

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I didn’t intend to mean I favor the contractor receive a bad rating. I was trying to state that if the government caught the price details in the quotation, they probably would have been rated unacceptable or unresponsive and never received the award to begin with.

"Fair enough" - sorry I misunderstood you.

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Had a commercial RFQ . The requirement was for scheduled and unscheduled maintenance of equipment for one year. Contract was a FFP and was to include all parts and labor at the contractor’s expense. Received three quotations. The technical team rated each contractor technically acceptable. The contractor who received the award submitted their quote but added small writing at the bottom of their price volume that stated the price only includes labor and they would invoice additionally for parts. This was not the intent of the requirement and the contractor has partially started the work.

The above, from the original post, is most irrelevant to the issue. The part in red, which might be relevant, is unclear.

What happened during the contract formation process? What does the contract say? "Requirements" don't have intent, for goodness sake. Contracting parties do.

A quote is not an offer and could not have been accepted to form a contract. It could not have bound the parties unless incorporated into the contract. The government sent a purchase order, which was an offer. The contractor signed it, which was an acceptance. Whatever the parties signed is what now binds them. What, if anything, does the contract say about the cost of parts? It sounds to me like the contractor is saying it should not have signed the contract. Well, if the contract doesn't say that parts are extra, and if the contract is not legally insufficient for some reason, then the contractor is stuck.

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In this situation, The quotation number, date, and all were included in block 29.

What is "and all" in block 29 and what was identified in block 20 of the SF-1449?

Did the government fill in blocks 23 and 24, based upon the quotation?

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"Well, if the contract doesn't say that parts are extra, and if the contract is not legally insufficient for some reason, then the contractor is stuck."

I agree.

How about a real case? See http://www.cbca.gsa.gov/files/decisions/2012/WALTERS_12-19-12_2782__LACEY_NEWDAY_CONSULTING,_LLC.pdf

Here, the contracting officer sent out a RFQ asking for quotations for beef. Several quotations came in, with the lowest at $0.60 per pound and the remaining all between $1.66 and $2.40 per pound. The contracting officer issued a purchase order to the lowest-price quoter.

The contractor alleges in the appeal that it made a mistake and that the intended price was $2.05 per pound. It says it raised this matter with the contracting officer before the purchase order was issued. Nonetheless, the contractor accepted the purchase order and delivered the beef. Then, it submitted an invoice at $2.05 per pound. The contracting officer rejected the invoice, and a claim and appeal followed.

Here are the pertinent extracts from the appeal decision (my emphasis added):

The instant contract between BOP and Lacey Newday came about as a result of BOP’s issuance of an RFQ. Under the Federal Acquisition Regulation (FAR), RFQs are treated differently than either invitations for bids (IFBs) or requests for proposals (RFPs), in that the submission of a quotation in response to an RFQ is not considered an offer that is subject to acceptance by means of a Government purchase order or award. . . .

When the contracting officer ultimately transmitted a written purchase order on January 11, 2012, that was the Government’s offer. Although, in accordance with the FAR, the contracting officer might have sought written acceptance of the offer from Lacey Newday, by its signature of the purchase order or by some separate writing, she did not do so. Instead, acceptance in this case was properly effected by delivery of the ordered meat items on January 17, 2012. The purchase order clearly called for delivery of 10,000 lbs. of ground beef at $0.60/lb., and there is no evidence that Lacey Newday attempted to vary these terms of the purchase order between its issuance on January 11 and its completion of meat delivery on January 17. . . . Thus, when delivery was made on January 17, 2012, it signified Lacey Newday’s clear and unequivocal acceptance of the offer to purchase 10,000 lbs. of ground beef at $0.60/lb.

The Board need not address which party is the more credible in terms of appellant’s assertions regarding prior notifications of bid error during the various telephone conversations on December 22 and 29, 2011. Those conversations all predated both the agency’s offer and Lacey Newday’s acceptance and thus would not be relevant to the parties’ agreement on contract terms.

Decision

For the foregoing reasons, the appeals are DENIED.

I continually wonder why so many contracting officers want to make contractors whole in matters such as this. We’re contracting officers for the United States, not social workers.

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ji, I understand what you are saying. I am trying to understand, in this instance, what was in the government's offer. Deaner said the the government was unaware that the quote excluded te cost of parts from its stated price.

I still think that the proper course of action here was a no cost termination for convenience.

This is coming from someone who generally always doubled checked the math in proposals for contracts, mods and claims. Having worked with foreign contractors early on, I was aware that 1+1 could sometimes equal other than 2.

It was very easy in spreadsheet programs to include "global" multipliers or individual cells with multipliers. Contractors were using minicomputers in the 1980's to develop proposals. We had our own, personal calculators until several of us office engineers bought PC's and our own software for database, spreadsheet and word processor applications.

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This does reveal the need for parties to talk to each other and confirm certain key matters before signing contracts. I guess you can't do that on every small buy, but this one was $500K, not gigantic, but not exactly minuscule.

As for what to do, it may not be wise to force a company to perform when it is dissatisfied and will lose a significant amount of money. Both parties screwed up in one way or another.

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I believe in the old adage to teach people correct principles, and then let them govern themselves.

If a contracting officer wants to do a kindness to a contractor, I want him or her to do it with a full understanding of the underlying correct principles. I'm not wholly convinced that happened here. Maybe, maybe not. But if he or she did the kindness without understanding correct principles, and comes here for validation, well, that might not be helpful in teaching correct principles to others.

If as a result of this discussion, the original poster or any other reader better understands the validity of a written contract (even a purchase order accepted by a contractor) and understands the Government's right to performance under a contract, and better understands that a purchase order is not a contract at issuance and only becomes one when the contractor accepts it (and then having accepted it, must perform it), then this was a good discussion -- this is the value in WIFCON.

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If as a result of this discussion, the original poster or any other reader better understands the validity of a written contract (even a purchase order accepted by a contractor) and understands the Government's right to performance under a contract, and better understands that a purchase order is not a contract at issuance and only becomes one when the contractor accepts it (and then having accepted it, must perform it), then this was a good discussion -- this is the value in WIFCON.

Hopefully, the original poster or any other reader do not have such an understanding, because they would be wrong. The FAR 2.101 definition of "contract" clearly includes both bilateral and unilateral purchase orders:

“Contract” means a mutually binding legal relationship obligating the seller to furnish the supplies or services (including construction) and the buyer to pay for them. It includes all types of commitments that obligate the Government to an expenditure of appropriated funds and that, except as otherwise authorized, are in writing. In addition to bilateral instruments, contracts include (but are not limited to) awards and notices of awards; job orders or task letters issued under basic ordering agreements; letter contracts; orders, such as purchase orders, under which the contract becomes effective by written acceptance or performance; and bilateral contract modifications.

I would prefer that the original poster or any other reader better understand that a unilateral purchase order is an offer to enter into a unilateral contract. A unilateral contract is defined as:

unilateral contract

n. an agreement to pay in exchange for performance, if the potential performer chooses to act. A "unilateral" contract is distinguished from a"bilateral" contract, which is an exchange of one promise for another. Example of a unilateral contract: "I will pay you $1,000 if you bring mycar from Cleveland to San Francisco." Bringing the car is acceptance.

That would make for a very good discussion. If the original poster or other readers are interested in further reading, see Comptech Corp., ASBCA 55526, 2008 WL 4628786 (Oct. 1, 2008).

Edited by Don Mansfield

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Without regards to whether or not a FFP contract was the proper contract type, and the fact the awardee should probably have been rated technically unacceptable and never have received the award, what do you do and why? (This was a previous situation that has been handled, wonder if others would handle it the same way).

Since this is a $500,000 action using simplified acquisition procedures, I wouldn't necessarily consider the quote technically unacceptable. I could go back and ask why parts weren't included. The vendor could simply revise the quote and we've home free.

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