Federal Construction Contracting Blog : Federal Construction Contracting Law Firm : Cohen Seglias Pallas Greenhall & Furman PC : Construction Law, Dredging and Claims

By: Edward T. DeLisle

Over the last several years, the scrutiny over federal small business programs has grown. That scrutiny has led to changes in policy and legislation designed to curb potential fraud in the procurement process. Because these changes have been implemented in such a short period of time, however, it is not unusual for the government to issue solicitations for small business set-aside contracts that are confusing, or even contradictory. In Commandeer Construction Company, Inc., B-405771, December 29, 2011, that is precisely what occurred resulting in a successful protest.

Commandeer Construction involved a solicitation that was set aside for Service-Disabled, Veteran-Owned Small Businesses (SDVOSBs), a program that has experienced much change in recent years. In 2006, the VA was given the authority to restrict competition to SDVOSBs as part of the Veterans Benefits, Health Care, and Information Act (the "Act"). 38 U.S.C. 8127(d). As the GAO explained in Commandeer Construction, pursuant to the Act, an SDVOSB set-aside contract may only be issued to entities listed in a database of veteran-owned small businesses maintained by the VA. The VA has chosen to use what it has termed its "Vendor Information Pages" ("VIP"), which can be found at www.vetbiz.gov, as its official listing of veteran-owned and service-disabled, veteran-owned concerns.

Subsequent to issuance of the Act, the VA issued VAAR 804.1102, which states that all VOSB and SDVOSB entities must be listed in its VIP database by January 1, 2012 in order to be eligible for set-aside contracts for such entities. By December 31, 2011, all VOSB and SDVOSB entities must not only be listed, but must also be "verified," in order to receive new contract awards under the Veteran's First program, a program operated exclusively by the VA. While firms were once permitted to self-certify their status as VOSBs and SDVOSBs, as part of Veterans Benefits Act of 2010, the VA instituted a more rigorous qualification process. Consistent with this new review procedure, which was designed to weed out fraud, the VA's "Center for Veterans Enterprise" ("CVE") was given the authority to render eligibility determinations for these programs. If a firm wished to obtain a set-aside contract as a VOSB or a SDVOSB entity, it would have to be verified by CVE.

In an effort to assist in the transition from a self-certifying system to one requiring government approval, the VA issued what it called its "Memorandum from VA Acting Associate Deputy Assistant Secretary for Procurement Policy, Systems Oversight and Accompanying Class Deviation from VA Acquisition Regulation" (the "Memorandum"). The Memorandum referenced what the VA described as a "class deviation." Based upon this class deviation, any "apparently successful offeror" that had not already been verified by CVE, could become verified on an expedited basis, and obtain an award of a VOSB or SDVOSB set-aside contract, provided CVE approved its status. Later, the VA clarified its position regarding who may qualify for a “class deviation,” taking the position that a company was not eligible for “either award or Fast Track Verification," unless it was visible in the VA’s VIP database. Commandeer Construction addressed the interplay between the class deviation identified in the Memorandum and the VA’s attempt to subsequently clarify what it meant.

In Commandeer Construction, the VA issued an IFB for a construction contract that was set aside for eligible SDVOSB firms. The solicitation stated that the award would be made to an SDVOSB firm that had “been verified for ownership and control and [was] so listed in the [VIP] database.” The IFB also included the “class deviation” language referenced above. What was not included as part of the IFB, however, was the Memorandum (and accompanying deviation), or the clarification made to the deviation, which was issued after the fact.

On August 8, 2011, the protesting party, Commandeer Construction, submitted an application to the CVE for approval as an SDVOSB. Thereafter, on August 30, 2011, Commandeer submitted its bid. As its bid was the lowest of those submitted, Commandeer was in line for an award. As it was not listed in the VIP database, however, the contract specialist for the VA intended to contact Commandeer for purposes of explaining the process of obtaining expedited verification.

Prior to contacting Commandeer, the VA contract specialist apparently learned of the clarification for the first time and discussed its meaning and significance with other VA officials. Based upon these discussions, the VA contract specialist decided that Commandeer was ineligible for award and informed it of such by letter dated August 31, 2011. At the time, CVE had not rendered a final decision on Commandeer’s SDVOSB eligibility.

Commandeer protested VA’s decision, taking the position that rejecting its bid was improper based upon the expedited review procedures outlined in the solicitation. The VA countered that the deviation clause, upon which Commandeer relied for potential eligibility, was never meant to apply to entities that were absent from the VIP database. According to the VA, the deviation clause was merely an effort to provide assistance to those firms that had already self-certified, but had not yet been CVE verified under the new review procedures. Commandeer Construction at 4.

The GAO based its decision on a strict reading of the solicitation. The deviation clause in the solicitation specifically stated that “the apparent successful offeror” would be given an opportunity to have its SDVOSB status reviewed on an expedited basis, if it was not “currently listed as verified” in the VIP database. While the VA may not have intended for the deviation to apply to firms not already listed in its VIP database, the GAO concluded that the solicitation itself did not provide that qualification. As such, Commandeer’s understanding that it could qualify for award pursuant to the expedited review procedure was reasonable. Based upon this finding, the GAO recommended that the VA complete its review of Commandeer’s verification documents and, if found to be eligible for SDVOSB status, award it the contract.

As the government continues to alter its approach in exercising control over small business programs, mistakes, such as those in Commandeer Contracting, will happen. Contractors must exercise care in reviewing and responding to any solicitation. If, during the course of the review process, an ambiguity is discovered, bring it to the attention of the contract specialist, contracting officer, or source selection authority immediately. Doing so will benefit all bidders and quite possibly prevent a pre-bid protest. For those ambiguities that are not readily detectible, and are only revealed at the time of contract award, be prepared to discuss your concerns with an attorney familiar with such issues right away, as a protest is likely your only source of recourse. For those participating in the government’s various small business programs, the fast-paced nature of regulatory change has opened these programs up to issues such as those presented in Commandeer Contracting. Bid and beware.

Edward T. DeLisle is a Partner in the firm and a member of the Federal Contracting Practice Group.
 

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Prior to 2008, dating back to 1994, it was not permissible to protest a task order. The 1994 enactment of the Federal Acquisition Streamlining Act ("FASA") provided that protests over task or delivery orders were barred unless the protest alleged that the order increased the scope, period, or maximum value of the underlying contract through which the order was issued. That changed with the passage of the Defense Authorization Act of 2008 ("NDAA"), which contained an amendment that expanded the jurisdiction of the GAO to include protests of task or delivery orders valued in excess of $10 million. 41 U.S.C., Section 253j(e)(2). The NDAA also contained a sunset provision, which stated that the "subsection shall be in effect for three years." Section 253j(e)(3). The three year period expired on May 27, 2011. The question then arose as to whether the GAO could lawfully consider task and delivery order protests after May 27, 2011. That question was recently answered in the affirmative by the GAO.

In a protest filed by Technatomy Corporation, of Fairfax, Virginia, the protester argued that the agency unreasonably evaluated vendors' technical and cost quotations. The government argued that the protest should be dismissed because the GAO's jurisdiction had expired. In a decision issued on June 14, 2011, the GAO disagreed with the government and ruled that it now has jurisdiction to rule on all task and delivery order protests, regardless of their dollar value. The reasoning of the GAO was that the sunset provision which gave the GAO the authority to consider task and delivery protests in excess of $10 million (for three years) replaced the former statutory provision (1994 - “FASA”) that provided for only very limited task order review. The GAO concluded that when the three year period expired, its authority to consider task and delivery order protests did not simply revert to the pre-2008 jurisdictional level, but actually reverted back to the pre-1994 level.

In other words since the pre-2008 limitations were eliminated by the sunset provision in 2008, the only thing left is the pre-1994 jurisdiction under the Competition in Contracting Act which places no limitation on the GAO's authority to consider task and delivery order protests. The GAO will therefore accept jurisdiction of all protests involving task and delivery orders regardless of the dollar value. This also raises the interesting question of whether, based on the GAO’s decision in Technatomy Corporation, the Court of Federal Claims will now accept jurisdiction of task and delivery order protests, as well.

Michael H. Payne is the Chairman of the firm's Federal Practice Group and, together with other experienced members of the group, frequently advises contractors on federal contracting matters, including teaming arrangements, negotiated procurements, bid protests, claims, and appeals.

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By: Edward T. DeLisle

As part of the National Defense Authorization Act of 2008 (the 2008 Act), Congress provided the General Accounting Office (GAO) with the authority to hear protests involving certain task and delivery order contracts emanating from both defense and civilian agencies. At the time, this authority was limited to a period of three years, meaning that it was set to expire later this year. A few months ago, President Obama signed the National Defense Authorization Act of 2011 (the 2011 Act). As part of that Act, Congress partially extended the GAO’s authority. It permitted the GAO to continue hearing task and delivery order protests for contracts in excess of $10 million, but only for those contracts issued by Department of Defense agencies. For a reason not readily apparent, Congress failed to extend the GAO’s authority over civilian agencies. A bill has emerged in the Senate to address this omission.

As reported by Law360, Senate Bill 498, entitled the “Independent Task and Delivery Order Review Extension Act of 2011,” was recently introduced by Senate Homeland Security and Governmental Affairs Committee Chairman Joseph Lieberman, I-Conn. If passed, it would extend the GAO’s jurisdiction over task and delivery order protests relating to civilian agencies for an additional five and a half years, equaling the extension provided on DOD protests under the 2011 Act. This is an important development for government contractors. Many questions arose following passage of the 2011 Act. Why would Congress only extend the GAO’s authority over task and delivery orders on DOD work? It is possible that this was simply an oversight, though no one is quite sure. The legislative history is devoid of any discussion on the issue. Whatever the reason, if passed, S. 498 would maintain the status quo for five more years. We will continue to track this bill and report on its progress.

Edward T. DeLisle is a Partner in the firm and a member of the Federal Contracting Practice Group.

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By: Michael H. Payne

To protest or not to protest, that is the question. That may sound a little like William Shakespeare, but it actually is a question frequently posed by federal contractors. Particularly in the world of “best value” contracting, where subjective evaluation factors are applied to make source selections, contractors often feel that award decisions are unfair. A bid protest offers the possibility of relief in the form of corrective action by the agency, or in the form of a favorable protest decision by the agency, the GAO, or the United States Court of Federal Claims. Successful protests, however, require knowledge of procedural rules, an understanding of applicable procurement regulations, and knowledge of the extensive body of GAO and federal court decisions.

Put simply, it is a waste of time and money to file a protest that is untimely or that does not lay out the basis for the protest properly. Similarly, it is very important to know whether a procurement regulation addresses the subject of a protest, or whether there have been prior GAO or court decisions that help, or hurt, the contractor’s case. If a prior decision dealing with similar facts and issues agrees with the contractor’s position, it may be possible to convince the agency to take corrective action by simply providing the Contracting Officer with a copy of the decision. On the other hand, if a prior decision has ruled against the contractor, it may not be advisable to proceed with the protest unless you have found a way to distinguish your facts from those in the unfavorable case.

A federal contractor has the option of filing a protest with an agency, the GAO, or the U.S. Court of Federal Claims (See FAR 33.1). While agency and GAO protests can be filed by letter, the letter must explain the basis for the protest in detail with citations to regulations and case law. This is particularly important when filing a GAO protest because the GAO will summarily dismiss a protest that does not provide a sufficient basis in fact and law. (See FAR 33.104 and 4 CFR Part 21 for the rules that govern GAO protests). When filing an agency protest, consideration must be given to the fact that you are essentially appealing to the same person, the Contracting Officer, who took the action that gave rise to the protest. Although there are exceptions, you may not receive an objective review if you file an agency protest. (See FAR 33.103 for the rules that govern agency protests). Generally speaking, both agency and GAO protests must be filed within 10 calendar days of the date when the contractor knew, or should have known, of the basis for the protest. If the protest involves a challenge to the solicitation itself, the protest must generally be submitted before the date for receipt of bids or proposals. (Note: In a protest of a negotiated procurement, the GAO requires that the protester must participate in a debriefing as a prerequisite to the filing of the protest. Accordingly, the protester has 10 days from the date of the debriefing, but the protest must be filed within 5 days if the protester wants to prevent the performance of the project while the protest is pending).

In the case of a Court of Federal Claims protest, there is no specific time limit, and a debriefing is not a prerequisite. It is more complicated, and expensive, to file a federal court protest, however, because a complaint, a memorandum of law, and a number of related documents required by the court’s rules must be prepared. Unlike an agency, or GAO protest, a Court of Federal Claims protest will generally be decided after each side files briefs in support of cross-motions for “Judgment Upon the Administrative Record.” The briefing is followed by an oral argument before the judge assigned to the case. In my experience, this procedure is more open and fair, and frequently holds out the highest probability of success. In view of the expense involved, however, a Court of Federal Claims protest (or any other type for that matter) should not be undertaken without first receiving legal advice about the prospects for success.

As an attorney who has been advising contractors on protest matters for over thirty years, I find the procedure involving protests on negotiated procurements to be particularly frustrating. Unlike sealed bidding, where everything is out in the open, negotiated procurements are shrouded in secrecy. Proposals are closely guarded and only the award price is generally disclosed. While an unsuccessful offeror may learn a little bit about why he was not selected during a debriefing, the sad reality is that it is often impossible to know whether there is a sound basis for a protest without first filing a protest. The reason for this is that until the agency’s internal documents in support of the source selection are reviewed, it is virtually impossible to tell whether the source selection was justified. I find this frustrating because I am often forced to tell my client that I cannot offer an opinion on the probability of success until after the protest is filed and the agency’s documents are reviewed. There are other times, of course, when the prospects for success, or failure, are known at the outset and the decision to proceed with a protest is much easier to make.

To add to the frustration, an attorney is not permitted to share the agency’s documents, or to reveal “protected” information to the client. It is routine, in the case of GAO and Court of Federal Claims protests, for the agency’s documents to be provided only after a Protective Order has been agreed to by the attorney and approved by the GAO or the Court. What that means is that only the protester’s attorney is permitted to review the agency’s documents. It is imperative, therefore, that a contractor be represented by an attorney who understands procurement law and who can be relied upon to make sound judgments based upon what is revealed in the agency’s documents. In my practice, I have frequently advised a client to withdraw a protest after I have reviewed the agency’s documents. This saves time and money, and prevents an unfavorable decision. If the documentation supports the protest, however, we can then forge ahead with the knowledge that a well-supported argument will be presented.

It is not uncommon for contractors to fear retribution by the agency if they file a protest. I have not found that to be the case in my experience, although I certainly would advise against filing a protest that makes a personal attack or that is frivolous. Given the tough economic and highly competitive time in which we live, government agencies have become accustomed to bid protests and they do not harbor any ill will. In the last analysis, protests keep government officials on their toes and help to assure that contracts are awarded fairly.

Michael H. Payne is the Chairman of the firm's Federal Practice Group and, together with other experienced members of the group, frequently advises contractors on bid protest matters.

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By: Edward T. DeLisle

On September 23, 2010, we wrote an article regarding the current status of the HUBZone priority fight between the GAO, the Court of Federal Claims and a number of federal agencies. That article followed another that we wrote on this issue on August 27, 2010. In a series of cases, the GAO and the Court of Federal Claims took the position that contracting officers were required to consider set-aside contracts for HUBZone entities, prior to considering set-asides for any other small or small, disadvantaged companies. In reaching this conclusion, the GAO and the Court of Federal Claims focused on the enabling legislation for the HUBZone program, which stated:

Notwithstanding any other provision of law…a contract opportunity shall be awarded pursuant to this section on the basis of competition restricted to qualified HUBZone small business concerns if the contracting officer has a reasonable expectation that not less than 2 qualified HUBZone small business concerns will submit offers and that the award can be made at a fair market price.

Based upon this language, the GAO and the Court of Federal Claims took the position that contracting officers did not have any discretion in deciding whether to set-aside a contract for HUBZone entities. They had to do so, unless they could show that there were not at least two qualified HUBZone companies that would submit offers at a reasonable price. That has all changed.

On September 27, 2010, President Obama signed the 2010 Small Business Jobs Act. As part of the Act, the language of the HUBZone statute was changed. The legislation now states that “a contract opportunity may be awarded pursuant to this section”, eliminating the mandatory nature of the original version. Based upon this simple change, the HUBZone program has been placed on equal footing with all other small and small, disadvantaged business programs, including, but not limited to, those relating to Service-Disabled, Veteran Owned Small Businesses and 8(a) companies.

As we stated in our last article, it was not likely that Congress intended to establish a priority for HUBZone companies. The problem was borne out of sloppy drafting. That drafting problem has now been corrected. It will be interesting to see how this change impacts the HUBZone program in the months to come.

Edward T. DeLisle is a Partner in the firm and a member of the Federal Contracting Practice Group.

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By: Edward T. DeLisle

On August 27th, we posted an article regarding the recent Court of Federal Claims case, DGR Associates, Inc. v. United States. In that case, the protesting contractor took the position that the government agency, the Air Force, failed to follow the direction of Congress in determining how to set aside contracts for small and small, disadvantaged businesses. It proffered that the legislation which created the HUBZone program clearly gave HUBZone companies priority over other small and small, disadvantaged businesses. The statute reads in relevant part:

Notwithstanding any other provision of law...a contract opportunity shall be awarded pursuant to this section on the basis of competition restricted to qualified HUBZone small business concerns if the contracting officer has a reasonable expectation that not less than 2 qualified HUBZone small business concerns will submit offers and that the award can be made at a fair market price.

In agreeing with the GAO's position regarding this issue, the Court reached the following conclusion:

On the issue of statutory interpretation, the language of the Small Business Act granting priority to the HUBZone program could not be more clear. By using the phrases "notwithstanding any other provision of law...a contract opportunity shall be awarded on the basis of competition to qualified HUBZone small business concerns, "Congress established a priority for the HUBZone program over other competing small business programs.

The Court then proceeded to set forth the remedy associated with its finding:

By this decision, the Court enters a permanent injunction requiring the Air Force and the Small Business Administration to terminate the unlawful contract awarded to General Trades & Services, and to determine whether the criteria of 15 U.S.C. § 657a(b)(2)(B) are met, such that the contracting opportunity at issue must be set aside and awarded on the basis of restricted competition to a qualified HUBZone small business concern. Defendant is enjoined from awarding the contract in a manner that is inconsistent with this decision.

The Court could not have been clearer. The Air Force was required to assess whether the contract could have been set aside for HUBZone concerns. If the Air Force reached the conclusion that at least two HUBZone companies could perform the work at a fair price, then the contract had to be set aside for HUBZones. While at this point it is not clear what happened following the Court's decision, based upon two recent GAO decisions, it is obvious that the Air Force and at least one other government agency don't intend to follow the Court's directive in other cases.

Matter of: Rice Services, Inc. B-403746, issued by the GAO on September 16, 2010, involved a decision by the Air Force to set aside a contract for 8(a) small business concerns. The protester took the position that the contract should have been set aside for HUBZone companies. In response to the protest, the GAO asked the Air Force "whether it had acted in reliance on the DOJ Memorandum Opinion." In DGR Associates, Inc., the Air Force based its position on a memorandum issued by the Department of Justice, which concluded that the Small Business Act did not require HUBZone prioritization. The GAO, and then the Court of Federal Claims, disagreed with the DOJ's position. Nonetheless, in response to the GAO's question in the Rice Services matter, it is clear that the Air Force refused to budge:

[Consistent] with our prior position, the Air Force intends to follow the Memorandum Opinion issued by the Office of Deputy Assistant Attorney General, Office of Legal Counsel, Department of Justice, concluding that there is no statutory requirement to prioritize the HUBZone small business program.

Undeterred, the GAO sustained the protest. Following the reasoning set forth in DGR Associates, Inc., the GAO stated that the language of the HUBZone statute clearly mandated that HUBZone's were to be given priority over other small and small, disadvantaged businesses. As a result, it issued a recommendation to the Air Force that it "undertake reasonable efforts to ascertain whether it will receive offers from at least two HUBZone concerns...at a fair market price."

In Matter of: Rice Services, Inc. B-402966.2, also issued by the GAO on September 16, 2010, the same protester made an identical challenge, this one involving the Defense Commissary Agency. The DCA attempted to set aside a contract for service-disabled, veteran-owned small businesses and, in doing so, took the same position as the Air Force, that is, that it could do so without first considering whether the contract should be set aside for HUBZone contractors. The DCA suffered the fate as the Air Force. The GAO sustained the protest.

The above illustrates the current tug-of-war between certain executive agencies, as well as the judicial branch, of our government. While one can guess as to what Congress may have intended when it established the HUBZone program, the language of the statute is clear. The Court of Federal Claims and the GAO had no choice but to rule as they did in the cases cited above. If Congress was simply sloppy in drafting the HUBZone program's enabling legislation, which was probably the case, then only Congress can fix the problem. It will be interesting to see how this battle plays out in the weeks and months to come.

Edward T. DeLisle is a Partner in the firm and a member of the Federal Contracting Practice Group.
 

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By: Edward T. DeLisle

On August 13th, the Court of Federal Claims temporarily ended a controversy regarding how agencies go about setting aside contracts for certain qualified small businesses. DGR Associates, Inc. v. United States involved a decision by the Air Force to issue a set aside contract for qualified 8(a) companies. The project involved housing maintenance, inspection services and repairs at Eielson Air Force Base in Alaska. The solicitation was challenged by a HUBZone contractor who claimed that the Air Force violated the Small Business Act by failing to give priority to HUBZone contractors. Specifically, the protesting contractor claimed that when the HUBZone program was established in 1997, the legislation required agencies to consider setting aside contracts for HUBZone contractors prior to considering any other small and/or disadvantaged companies for such contracts.

The enabling statute for the HUBZone program states the following:

Notwithstanding any other provision of law ... a contract opportunity shall be awarded pursuant to this section on the basis of competition restricted to qualified HUBZone small business concerns if the contracting officer has a reasonable expectation that not less than 2 qualified HUBZone small business concerns will submit offers and that the award can be made at a fair market price.

Given this language, the protesting contractor took the position that Congress intended to give priority to HUBZones over other small and small, disadvantaged businesses, where government agencies make the decision to issue set aside contracts. The GAO agreed. In May of 2010, the GAO issued a recommendation to the Air Force that it follow clear Congressional authority and set aside the solicitation for HUBZone contractors, if further research suggested that two or more HUBZone contractors could perform the work at a reasonable price.  The Air Force refused to follow this recommendation, taking the position that Congress did not intend such a result. The protesting contractor then took action in the Court of Federal Claims.

Considering the same arguments made before the GAO, the Court of Federal Claims agreed with the conclusion reached in that forum. In rendering its decision, the Court stated as follows:

On the issue of statutory interpretation, the language of the Small Business Act granting priority to the HUBZone program could not be more clear. By using the phrases "notwithstanding any other provision of law ... a contract opportunity shall be awarded on the basis of competition to qualified HUBZone small business concerns," Congress established a priority for the HUBZone program over other competing small business programs.

The Court went on to state that "Congress must alone enact an appropriate amendment" if its intent was something other than to provide priority to HUBZones.

Based upon this decision, until such time as Congress acts, if a contracting officer is prepared to set aside a contract, he or she must determine whether two or more HUBZone contractors can perform the work for a fair price. If the answer to that query is "yes", then the contract must be set aside for HUBZone contractors to the detriment of other small and small, disadvantaged businesses. While one can reasonably expect Congress to take action at some point in the near future, in the short term this could mean more opportunities for HUBZone contractors.

Edward T. DeLisle is a Partner in the firm and a member of the Federal Contracting Practice Group. 

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The GAO announced yesterday that it had decided to sustain Boeing’s protest of the Air Force’s selection of Northrop Grumman (who included the European company Airbus on its team) over Boeing for the $40 billion aerial tanker contract - a contract that could ultimately be worth $100 billion.  Considering the GAO’s history of denying most of the protests that come before it, today’s outcome is likely a surprise to the many who expected the Office to stand behind the Air Force’s source selection.  The much-discussed dispute has been waging since March 11, 2008 when Boeing filed its protest. Prior to this award, Boeing had been the Air Force’s only supplier of this type of aircraft for fifty years.   The actual sixty-nine page decision was filed under a protective order and has not yet been released. A public version will be made available once all interested parties review it and identify all sensitive information that must remain confidential.

The GAO reached its decision after extensively reviewing voluminous documents produced by the Air Force and hearing testimony from Air Force witnesses.  In its press release today, the GAO made it clear that it did not consider the merits of either company’s proposal and that it examined only whether the Air Force complied with the standards established in the statutory and regulatory schemes governing the federal procurement process. “Our decision should not be read to reflect a view as to the merits of the firms’ respective aircraft. Judgments about which offeror will most successfully meet the governmental needs are largely reserved for the procuring agencies…”   In their evaluation they concluded that the Air Force made “significant errors that could have affected the outcome of what was a close competition between Boeing and Northrop Grumman.”  Senator Richard C. Shelby (R-Ala.) commented that “I cannot believe that in the most highly scrutinized procurement in the history of the United States, the GAO found so many errors.”

The GAO sustained Boeing’s protest for seven specific reasons, including: failure to review the proposals in lights of the solicitation criteria; violating the evaluation provisions of the solicitation, specifically the provision that, “no consideration will be provided for exceeding [key performance parameter] objectives; failure to demonstrate that the Air Force’s determination that Northrop Grumman’s tanker could refuel all current tanker-compatible receiver aircraft in accordance with current Air Force procedures, as required by the solicitation”; conducting misleading discussions with Boeing; “administrative oversight” in making an award despite “clear exception to a material solicitation requirement” in one of the requirements; unreasonable evaluation of military construction costs in “calculating the offerors’ most probably life cycle costs for their proposed aircraft,” an evaluation that if done properly would have resulted in Boeing having the lowest probable life cycle cost; and the improper increase of Boeing’s estimated non-recurring engineering costs in calculating, as well as the improper use of a simulation model in determining those costs. 

The Office recommended that the Air Force “reopen discussions with the offerors, obtain revised proposals, re-evaluate the revised proposals, and make a new source selection decision, consistent with our decision.” It also recommended that the Air Force amend its solicitation if it does not “adequately state its needs” before conducting further discussions with the companies.  Additionally, if the Air Force chooses to award the contract to Boeing, the GAO recommends that it terminate the contract with Northrop Grumman, reimburse Boeing’s protest costs, including attorneys’ fees. By law, the Air Force has sixty days to inform the GAO of its response.   As Tom Schatz, president of the Citizens Against Economic Waste put it, “Air Force Officials didn’t miss it by a little, they apparently missed it by a mile.”

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Effective May 23, 2008, there will be important changes that pertain to a contractor’s ability to protest task and delivery orders.  These changes are embodied in Section 843 of the 2008 Defense Authorization Act, "Enhanced Competition Requirements for Task and Delivery Order Contracts," and legislators expect the new provisions to increase competition for task and delivery order contracts.  Most notably, the new law allows a contractor to protest a task order in excess of $10 million to the GAO.  Previously, the Federal Acquisition Streamlining Act of 1994 (“FASA”) prohibited task order protests, except in very limited circumstances.  In addition, the new law requires that DOD task or delivery order contracts in excess of $100 million be awarded to multiple contractors, with certain exceptions, and the establishment of enhanced competition requirements, such as a requirement for debriefings on task or delivery orders in excess of $5 million under such multiple award contracts.  The GAO is currently revising its bid protest rules to address the newly acquired jurisdiction over task order protests. (The new rules will be posted on this blog as soon as they are issued).

At the April 19, 2007 hearing of the Senate Committee on Armed Services regarding the DOD’s management of costs under the Logistics Civil Augmentation Program (“LOGCAP”) contract in Iraq, Senator Carl Levin (D-MI) asked why ithe Army waited five years to split the contract among multiple contractors, allowing for competition of individual task orders.  The response from the Assistant Secretary of the Army for Acquisition, Technology, and Logistics was: "I don't have a good answer for you."  The provisions of Section 843 ensure that, absent compelling reasons not to, there will be competition in the award of task and delivery orders on future contracts of this type.  As far as we are concerned, however, there is an open question as to whether Multiple Award Task Order Contracts (‘MATOC”) are legally authorized under the Federal Acquisition Regulation for the procurement of construction. A protest raising that issue was filed by our firm and is pending before the United States Court of Federal Claims.

Section 843 of the Defense Authorization Act lifts the ban imposed by the Federal Acquisition Streamlining Act on protests to the Government Accountability Office (GAO) of task or delivery orders valued over $10 million.  This provision may be short-lived though: it contains a “sunset” provision and expires three years after it becomes effective. Congress enacted Section 843 in response to the need for enhanced competition requirements, and apparently believed that federal agencies had too little oversight when permitted to issue task order procurements that were not subject to protest.   After the FASA was enacted, federal agencies increasingly employed the indefinite delivery, indefinite quantity (“IDIQ”) contracts for expensive projects, purportedly to utilize “streamlining” but, in part, to circumvent the bid protest process.  It will be interesting to see whether the newly enacted right to file bid protests will have a “chilling” effect on agency plans to issue IDIQ contracts in the future.

The exclusive jurisdiction granted to the GAO means that the Court of Federal Claims (CFC) will not adjudicate these protests.  Under the current protest regime, both the GAO and the CFC are authorized to hear bid protests, and we would have preferred for that dual jurisdiction to have continued on task order protests, as well.  An advantage of the current system for contractors is that if they are unhappy with the outcome of a GAO protest, they can obtain de novo review of that same protest at the CFC.  Under Section 843, this second chance will not be available for task or delivery order protests. This has serious implications for contractors because only a small fraction of protests heard by the GAO are sustained.  

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As Federal government contractors know all too well, Federal procurement has entered the electronic age in a big way.  Not only are solicitations advertised solely through the internet at http://www.fedbizopps.gov, prospective contractors must be registered with another website, FedTeDS, www.fedteds.gov, in order to access plans, specifications and amendments electronically.  Prospective contractors must also be registered with the Central Contractor Registration site, www.ccr.gov, to be eligible to access FedTeDS. The Federal Acquisition Regulation, at FAR 4.1201, now provides that "Prospective contractors shall complete electronic annual representations and certifications at http://orca.bpn.gov. Instead of submitting executed Representations and Certifications with bids and proposals, prospective contractors can choose to rely on their electronic versions, FAR 52.204-8, in order to comply with the requirements of any particular solicitation.  However, what is the effect on a bidder or offeror's status if the information in the electronic file is wrong, missing, or incomplete? Is the bidder/offeror considered nonresponsive and is its bid/offer rejected?

In a recent decision of the Government Accountability Office, S4, Inc., B-299817, August 23, 2007, the Comptroller General found that the awardee’s failure to list NAICS code 541513 in its ORCA certifications did not render the proposal nonresponsive.  The GAO concluded that additional information was also available to the Contracting Officer and found that additional information made it reasonable for the Contracting Officer to conclude that the offeror met the small business size standard for the solicitation.  This is consistent with other GAO decisions that have repeatedly held that “the failure to include with a bid completed standard representations and certifications does not render the bid nonresponsive because it does not affect the bidder’s material obligations.  Such a failure therefore may be waived as a minor bidding irregularity and the information may be furnished after bid opening.

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Under the federal Competition in Contracting Act, an automatic stay of a federal procurement goes into effect if an unsuccessful bidder files a bid protest with the GAO either within ten days after a contract award is made or within five days of an agency debriefing to the bidder, whichever is later.  During the stay, “the contracting officer may not authorize performance of the contract to begin while the protest is pending.”  Nonetheless, the agency may override the automatic stay under certain conditions:

The head of the procuring activity may authorize the performance of the contract (notwithstanding a protest of which the Federal agency has notice under this section) –

(i) upon a written finding that –

(I) performance of the contract is in the best interests of the United States; or

(II) urgent and compelling circumstancesthat significantly affect interests of the United States will not permit waiting for the decision of the Comptroller General concerning the protest; and (ii) after the Comptroller General is notified of that finding. 31 U.S.C. § 3553(d)(3)(C).

Proesters offen fear that an agency will seek to override the automatic stay because of national security or other exigent circumstances, but an override rarely occurs because of the need to obtain higher authority approval.  (The Army Acuisition Corps actually published a manual in 2004 entitled the "The Competition in Contracting Act Automatic Stay Override Guide.")  Recently, in a case decided by the United States Court of Federal Claims, Superior Helicopter LLC and Ranier Heli-Lift, Inc. v. United States, three unsuccessful bidders protested a solicitation issued by the Forest Service (the “Service”), a component of the United States Department of Agriculture, for exclusive-use contracts for helicopter services to support firefighting efforts.  The three unsuccessful bidders for awards – Superior Helicopter LLC (“Superior”), Ranier Heli-Lift, Inc. (“Ranier”), and Erickson Air-Crane, Inc. (“Erickson”) – filed bid protests with the Government Accountability Office (“GAO”), triggering an automatic stay under the Competition in Contracting Act, 31 U.S.C. §§ 3551-56, of the contracts awarded in the procurement.  After the Forest Service acted on July 9, 2007 under 31 U.S.C. § 3553(d)(3)(C) to override the stay based on findings of exigent circumstances and the best interests of the government, the three helicopter operators filed suit in the United States Court of Federal Claims on July 11, 2007, seeking a temporary restraining order, a declaratory judgment, and preliminary and permanent injunctive relief from the Forest Service’s decision to override the stay.

The Court found that the Forest Service’s assertion that exclusive-use contracts were needed to face the significant risks posed by the 2007 fire season was misleading. No one doubted that the risks of fire this season were significant, but exclusive-use contracts would not have added more resources to combat that risk. The Forest Service’s overarching justification as to why the override was in the “best interests” of the United States and based on “urgent and compelling circumstances” was that the exclusive-use contracts were better than the CWN contracts at guaranteeing helicopter availability.  But, the Service provided no data showing that more resources would be made available than were otherwise at the Federal Service’s disposal under the pre-existing exclusive-use contracts and the CWN contracts upon which the Forest Service had previously relied in the immediately prior firefighting seasons.

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The Government Accountability Office (“GAO”) posted five protest decisions today and, not surprisingly, each protest was denied. One of those decisions, Metson Marine Services, Inc., B-299705, involved Metson’s protest of the award of a contract to Seaward Services, Inc. under a Request for Proposals (RFP) issued by the Department of the Navy, Military Sealift Command (MSC) to obtain port operation and vessel management services for the Athena high speed research vessel system.  Metson protested that the agency unreasonably concluded that its proposal was technically unacceptable, failed to conduct meaningful discussions with Metson, and conducted an unreasonable evaluation of Seaward’s past performance.

The GAO decided that the agency reasonably determined that the protester’s proposal was technically unacceptable and that it would not conduct further discussions with the protester, where protester’s final revised proposal, submitted after extensive discussions, failed to meet the solicitation’s requirements for a key personnel position. Metson had argued that the agency failed to conduct meaningful discussions.  More specifically, Metson maintained that when Metson’s proposed person was found to not meet the RFP requirements for this key personnel position, the agency was obligated to follow up with further discussions.  Had it done so, the protester asserted, the agency “would have realized that Metson’s proposed person was not only qualified, but exceeded the qualifications of the person Seaward had proposed for the same position.

This decision is not noteworthy because of any groundbreaking legal pronouncements; it simply highlights how difficult it is to overcome the deference that the GAO affords to government agencies.  While acknowledging that “when an agency engages in discussions with an offeror, the discussions must be meaningful,” the GAO nevertheless concluded that an offeror’s creation of a proposal defect which first appears in a proposal revision following discussions does not trigger an obligation to engage in another round of discussions and proposal revisions to advise the offeror of the newly-created deficiency and permit attempted correction. We find ourselves wondering why not?  Isn’t it the purpose of a negotiated procurement to use discussions to correct deficiencies and facilitate the selection of the best value?

In similar deference to agency discretion, the GAO dismissed the protester’s assertion that it was unreasonable for the agency to conclude that its key person failed to meet the solicitation qualification requirements for the position. Metson argued that this individual’s qualifications not only met, but exceeded, the solicitation requirements.  In response the GAO stated that “In reviewing a protest of an agency’s proposal evaluation, it is not our role to reevaluate proposals. Rather, we will consider only whether the evaluation was reasonable and consistent with the terms of the solicitation and applicable procurement statutes and regulations.”

While the agency and the GAO may have ultimately ruled correctly under the particular facts of this case, the GAO’s reluctance to look behind an agency’s decision not to continue or reopen discussions, or not to look behind an agency’s proposal evaluation, means that it is virtually impossible to win a protest where the reasonable exercise of agency discretion is at issue.  In our opinion, the GAO would foster a much more even-handed application of the negotiated procurement source selection procedures if it did not defer so easily to agency discretion.

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In a decision issued on July 24, 2007, Matter of Panacea Consulting, Inc., the GAO ruled that protest costs should be awarded to the protester because the GAO attorney had indicated, during an Alternative Dispute Resolution proceeding, that the protest would be sustained if a GAO decision was issued.  The protester alleged that the agency improperly gave disproportionate weight to price versus technical considerations in the source selections, and failed to document the basis for the numeric scores assigned to the submissions during its evaluation and source selection.   In response to the comments of the GAO attorney, the agency advised the GAO that it intended to take corrective action by reevaluating the submissions in a manner consistent with the terms of the solicitations, and that it also intended to prepare narrative materials in support of its evaluation.  The agency then conducted a reevaluation and made the same source selection it had made in the fist place.  

When a procuring agency takes corrective action in response to a protest, the GAO may recommend that the agency reimburse the protester its protest costs where, based on the circumstances of the case, the GAO determines that the agency unduly delayed taking corrective action in the face of a clearly meritorious protest, thereby causing the protester to expend unnecessary time and resources to make further use of the protest process in order to obtain relief. Bid Protest Regulations, 4 C.F.R. sect. 21.8(e) (2007).  A protest is clearly meritorious when a reasonable agency inquiry into the protest allegations would show facts disclosing the absence of a defensible legal position.

The record showed that the agency had weighted the evaluation criteria differently during the evaluations than the manner stated in the solicitations.  It likewise should have been apparent to the agency that the evaluation records were legally inadequate for proper source selection decisions, since the record contained no information explaining the basis for the scoring of the submissions or the source selection decisions. Blue Rock Structures, Inc., B-293134, Feb. 6, 2004, 2004 CPD para. 63 at 5 (where agency fails to adequately document the basis for its source selection decision, it runs the risk that GAO may be unable to determine that the agency’s decision is reasonable).  The GAO therefore concluded that the protest grounds in question were clearly meritorious.

The agency’s assertion that reimbursement was not warranted because the reevaluation resulted in the same source selection decision was without merit. Where an agency has taken corrective action, the determinative considerations for the GAO in deciding whether costs should be reimbursed are whether the corrective action was unduly delayed (here, the agency does not argue that it was prompt, and we generally consider action to be unduly delayed where, as here, it is taken after the agency report due date), and whether the arguments raised were clearly meritorious. The fact that a reevaluation as part of corrective action resulted in the same source selection decision had no bearing on the GAO’s assessment.

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In what we regard as a somewhat unusual decision by the GAO, given its reluctance to interfere with matters of agency discretion, the GAO has concluded that the Air Force failed to make reasonable efforts to ascertain whether an acquisition was suitable for an SDVOSBC set-aside.  The GAO ruled that a procuring agency is required to make reasonable efforts to ascertain whether an acquisition is suitable for a set-aside for service-disabled veteran-owned small business concerns (SDVOSBC) before it can proceed with a small business set-aside. Under the circumstances presented in a decision issued on March 28, 2007, MCS Portable Restroom Service, B-299291, the GAO concluded that the Air Force failed to make reasonable efforts to ascertain whether this acquisition was suitable for an SDVOSBC set-aside and the protest was sustained.

The GAO reiterated that, generally, a procurement set-aside determination is a matter of business judgment within the contracting officer’s discretion, which “our Office will not disturb absent a showing that it was unreasonable.” The GAO further commented that although the use of any particular method of assessing the availability of firms for a set-aside is not required, measures such as prior procurement history, market surveys, and advice from the agency’s small business specialist may all constitute adequate grounds for a contracting officer’s decision to set aside, or not to set aside, a procurement. The assessment must be based on sufficient evidence so as to establish its reasonableness.

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As we have mentioned previously, the growing use of multiple award task order contracts in federal construction contracting, as can be seen in much of the disaster recovery work in New Orleans, is limiting the competitive opportunities for small and mid-sized construction contractors.  Unless a contractor is the recipient of one of the major task order contract awards, there is no opportunity for a contractor to compete for upcoming individual task orders and the contractor is effectively precluded from competing for potentially millions of dollars of work to be awarded over a period of years. In the past, when there were more single award contracts, if a contractor lost out to a competitor, there was always another solicitation on the horizon.  If a contractor fails to become one of those selected to compete under a multiple award task order contract, there may be no, or very little, work “waiting in the wings.”

It follows that it is important to monitor the decisions of the GAO and the courts to see what is being done to protect the rights of contractors, and we will continue to do so.  In a newly issued GAO decision, Palmetto GBA, LLC, B-299154, December 19, 2006, the Comptroller General stated that according to the legislative history of the Federal Acquisition Streamlining Act (FASA), task and delivery-order contracts were intended to encourage the use of multiple-award, rather than single-award contracts, in order to promote an ongoing competitive environment in which each awardee would be fairly considered for each order issued.  H.R. Conf. Rep. No. 103-712, at 178 (1994), reprinted in 1994 U.S.C.C.A.N. 2607, 2608; S. Rep. No.103258, at 15-16 (1994), reprinted in 1994 U.S.C.C.A.N. 2561, 2575-76. In this regard, the Federal Acquisition Regulation (FAR) requires agencies to provide all awardees “fair opportunity to be considered for each order exceeding $3,000 issued under multiple delivery-order contracts or multiple task-order contracts.”  FAR sect. 16.505(b)(1)(i).

An interesting aspect of the Palmetto case is that the GAO reiterated that a task or delivery order that precludes competition for future task or delivery orders for the duration of the contract performance period may constitute a “downselection.”  The GAO has recognized downselections in circumstances not only where all work under a contract will be foreclosed from future competition, but also where specific categories of work will be similarly foreclosed for the duration of the contract.  While the GAO did not find that “downselection” occurred in the Palmetto case, it is important for contractors to recognize that a task order award that eliminates competition for future work can be successfully protested. Continue Reading...

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A disappointed bidder (on an Invitation for Bids), or an offeror (on a Request for Proposals), has the option to file a protest to the agency, to the General Accountability Office (GAO), or to the United States Court of Federal Claims. It is not always easy to decide where, and whether, to file a protest and contractors need to be aware of the pitfalls. One thing is certain, it is not easy to win a protest and a great deal of deference is given to contracting officers by the GAO and by the Court of Federal Claims.  It is incumbent upon a contractor to be certain that the issue raised is not frivolous, and that prior decisions of the courts or the GAO have not already established the correctness of the government's position.

It has been my experience that if a protest involves agency policy, it is usually a good idea to file a protest with the agency to give the Contracting Officer the opportunity to take corrective action. (See FAR 33.103 for the rules on Protests to the Agency). If a protester is dissatisfied with the result of an agency protest, the protester is still permitted to take the protest to the GAO or to the United States Court of Federal Claims. As far as taking a protest directly to the GAO is concerned, unless prior GAO decisions have shown a likelihood that the GAO will agree with your position, a GAO protest is not usually a very satisfying experience. (See FAR 33.104 for the rules on Protests to the GAO, and also see the Bid Protest Regulations issued by the GAO).  (Another useful resource is the GAO's Descriptive Guide on Bid Protests).

The statistics made available by the GAO demonstrate how difficult it is for a protester to win. In the period from 2001 through 2005, 6,543 protests were filed (an average of about 1,300 protests per year).  See the 2005 GAO report to Congress. Of these, only 1,528 resulted in a decision and in 303 of the decided cases the protester’s position was sustained. The way the GAO sees it, this means that protesters experience a 20% success rate. Of course, 20% is not very encouraging and, in reality, the way that the GAO calculates the percentage of sustained protests is misleading. By simply comparing the number of “sustains” to the number of decided cases during the period, the GAO ignores the 5,000 cases that were not decided for one reason or another. Some of those cases were probably dismissed summarily by the GAO, others were withdrawn only to be re-filed in the Court of Claims, and some of the protesters may have simply “thrown in the towel” as a result of frustration with the process. In any event, if you compare the number of “sustains” to the number of cases filed (303 out of 6,543), the protester prevailed in less than 5% of the protests. Take your pick, 20% or 5%, neither one is very good. (In 2006, there have been 1,327 protests filed to date, and 72 have been sustained).  See the 2006 GAO report to Congress. Continue Reading...

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