Contracting by Negotiation

Join EBidd DeLisle and Maria Panichelli for their presentation for TargetGov and the Government Contracting Institute on November 2, 2015 in Linthicum Heights, MD. Continue Reading Bid Protests, and Size/Status Eligibility Challenges: In-Depth Look at the Most Important Processes in Government Contracting

By: Michael H. Payne

A decision was issued by the United States Court of Federal Claims on December 20, 2011, in Martin Construction Co. v. United States, a case involving a Corps of Engineers construction project in North Dakota. Martin was represented by Michael Payne and Joseph Hackenbracht, of Cohen Seglias Pallas Greenhall & Furman, and the case involved a termination for default by the Omaha District of the Corps on a multi-million dollar project involving the construction of a marina. The termination occurred because the Contracting Officer concluded that Martin was at fault for failing to complete the project by the required contract completion date. Martin had argued that the Corps’ design of the cofferdam (temporary dam), which was critical to the construction of the marina, was defective and that the contractor was effectively prevented from completing the marina according to the original schedule. The Court agreed that there was a defective design and found that the Corps’ designer had grossly underestimated the amount of water that would flow through the cofferdam.

The decision is extremely critical of the Corps of Engineers and amounts to a complete vindication of Martin. The Court ruled that the termination for default was wrongful and ordered a conversion to a termination for convenience. This, of course, now exposes the Corps to the payment of damages amounting to millions of dollars to compensate Martin for the costs incurred in attempting to deal with the defective design. The Court aptly noted that “The most troubling aspect of this case is the Corps’ adamant refusal to accept any responsibility for the defective design, even while Martin made every effort to comply with it.” The Court was also very critical of the Contracting Officer and stated that “Competent procurement officials would have acknowledged the agency’s obvious design mistake, made the necessary corrections, and afforded the contractor the contractor the additional time and money to complete performance.”

The Court concluded that the “evidence is overwhelming” that Martin was entitled to a time extension and that the termination for default was improper. Judge Thomas Wheeler quoted Martin’s geotechnical and scheduling experts, and he also quoted the Plaintiff’s brief by stating that “As Plaintiff’s counsel aptly pointed out, the Defendant ‘ignored the elephant standing amongst the teacups in the living room.” The decision is an important verification to the federal contracting community that a termination for default is a “drastic action” that will not be sustained unless the government can meet its burden of proof that the termination was justified. It was unfortunate, however, that Martin was forced to suffer the consequences of the “black mark” associated with a default termination until, as in this case, justice was ultimately served.

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.

By: Michael H. Payne

Government contractors frequently use incorrect terminology to describe a solicitation. For example, clients often call me and ask why they were not awarded a contract even though they had submitted the lowest bid. The first thing that I ask is whether the solicitation was a Request for Proposals ("RFP"), or an Invitation for Bid ("IFB"). If it was an RFP, the award was probably based on best value and the lowest-priced proposal would not necessarily receive the award. If the solicitation was an IFB, there would be more of a question about why an award was not made to the lowest-priced bidder. Of course, even in sealed bidding the lowest bidder must also be responsive and responsible in order to receive an award, so there can be a valid reason as to why the lowest bidder did not receive the award.

The best way to show that you understand the basics of the federal procurement process is to remember that responses to an IFB (sealed bid solicitation) are referred to as "bids," and responses to an RFP (negotiated procurement) are referred to as "proposals" or "offers." In other words, the proper terms under an IFB are "bid," "bidder," and "sealed bid," and the proper terms under an RFP are "proposal," "offer," and "offeror." Your lawyer will become very confused if you mix these terms by saying, for example, "I just submitted a bid on an RFP." Sometimes, the only way that I can figure out what my client is talking about is to ask for the solicitation number (the "R" or the "B" in the middle will be a dead giveaway), or I may simply ask my client to send me a copy of the solicitation.

Of course, government procurement personnel frequently add to the confusion. RPPs are often referred to as "negotiated procurements" even though there usually are no negotiations (or "discussions"), and contracting officers often refer to both bids and proposals as "bids," To make matters worse, the GAO and the courts refer to protests of either an IFB or an RFP as "bid protests." No wonder there is so much confusion.

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.

By: Michael H. Payne & Elise M. Carlin

Each year, a significant number of bid protests filed at the GAO are the result of inadequate discussions. Recently, the GAO released two decisions which reiterated the importance of holding meaningful discussions that do not mislead offerors during negotiated procurements.

The purpose of holding discussions in negotiated procurements is to maximize the best value to the government. Discussions are held to give offerors in the competitive range an opportunity to revise their bids to make them more competitive. The Federal Acquisition Regulation (the "FAR") defines discussions and in what context they occur with an offeror:

Negotiations are exchanges, in either a competitive or sole source environment, between the Government and offerors, that are undertaken with the intent of allowing the offeror to revise its proposal. These negotiations may include bargaining. Bargaining includes persuasion, alteration of assumptions and positions, give-and-take, and may apply to price, schedule, technical requirements, type of contract, or other terms of a proposed contract. When negotiations are conducted in a competitive acquisition, they take place after establishment of the competitive range and are called discussions.

Requirements of Discussions

It is well established in federal procurement law that discussions between the contracting officer of an agency and an offeror must be meaningful. Once discussions have been opened, the FAR dictates that an agency "shall…indicate to, or discuss with, each offeror still being considered for award, significant weakness, deficiencies, and other aspects of its proposal…that could, in the opinion of the contracting officer, be altered or explained to enhance materially the proposal’s potential for award." In order to be meaningful, a discussion must generally lead an offeror into specific areas of their proposal which require modification. Additionally, discussions should be as specific as practical considerations permit, and give offerors a reasonable opportunity to address any potential weaknesses or deficiencies in its proposal which could impact the offeror’s competitiveness.

Limitations on Discussions

While discussions must be meaningful, they must also not be misleading. Additionally, they must not favor one offeror over another. During discussions, the contracting officer cannot divulge one offeror’s technical solution to another, including any unique technology or innovative and unique uses of commercial items, or any other information that would compromise an offeror’s intellectual property. Additionally, any pricing information cannot be revealed without that offeror’s permission. In terms of pricing information however, the government may inform an offeror that its price is considered too high or too low and explain how that conclusion was reached. It is also within the government’s discretion to inform all offerors if there is a particular price that it has determined to be reasonable based on price analysis, market research or other methods. The government may not disclose the names of any individuals who have provided reference information about an offerors past performance. Lastly, during discussions, the government may not knowingly provide source selection information in violation of the provisions of the FAR that govern procurement integrity, or the savings provisions of the U.S. Code pertaining to Restrictions on disclosing and obtaining contractor bid or proposal information or source selection information. Once discussions have concluded, each offeror must have an opportunity to submit a final proposal revision by a common deadline.
 

Continue Reading Recent GAO Decisions Highlight the Importance of Meaningful Discussions with Offerors During the Negotiated Procurement Process

By: Michael H. Payne

It is not uncommon, in best value negotiated procurements, for a solicitation to announce that the technical evaluation factors, collectively, are more important than price.  Construction contractors, of course, still remember the days of sealed bidding where the lowest bidder received the award and they are not very receptive to hearing about a subjective technical evaluation that results in an award to a higher priced proposal.  Nevertheless, the Federal Acquisition Regulation allows an award to a higher priced proposal, provided that an appropriate price/technical tradeoff has been made by the agency.

According to FAR 15.101-1(a), “A tradeoff process is appropriate when it may be in the best interest of the Government to consider award to other than the lowest priced offeror or other than the highest technically rated offeror.”  The regulations go on to provide, in FAR 15.101-1(b), that when using a tradeoff process, the following apply:
(1) All evaluation factors and significant subfactors that will affect contract award and their relative importance shall be clearly stated in the solicitation; and
(2) The solicitation shall state whether all evaluation factors other than cost or price, when combined, are significantly more important than, approximately equal to, or significantly less important than cost or price.

The key provision, found in FAR 15.101-1(c), however, provides that “The perceived benefits of the higher priced proposal shall merit the additional cost, and the rationale for tradeoffs must be documented in the file in accordance with 15.406.  This is where, in my opinion, the government frequently falls short.  It should not be enough for federal agencies to simply state that they have greater “confidence” or that they feel “more comfortable” with the higher priced proposal, they should be required to explain why the higher priced proposal is worth the price premium.  Unfortunately, many of the so-called pricetechnical tradeoff analyses that I have seen fall short of amounting to a rational explanation.

The U.S. Court of Federal Claims has held that price cannot be ignored simply because it is to be given less weight than the technical factors, and the Court has also stated an evaluation that fails to give price its due consideration is inconsistent with the Competition in Contracting Act and cannot serve as a reasonable basis for an award.   In this regard, it is important to note that FAR 15.308 provides that “the source selection decision shall be documented, and the documentation shall include the rationale for any business judgments and tradeoffs made or relied on by the SSA, including benefits associated with additional costs.”  Indeed, the Court has stated that “Conclusory statements, devoid of any substantive content, have been held to fall short of this requirement, threatening to turn the tradeoff process into an empty exercise.  Indeed, apart from the regulations, generalized statements that fail to reveal the agency’s tradeoff calculus deprive this court of any basis upon which to review the award decisions.”  Serco Inc. v. United States, 81 Fed.Cl. 463 (2008).

Unfortunately, a contractor who believes that he may have been victimized by an arbitrary pricetechnical tradeoff does not have direct access to the government’s documentation needed to determine whether his suspicions are correct.  It is necessary to first file a protest in order to gain access to the government’s internal documentation and, even then, only the protester’s attorney is permitted to review the documents.  Source selection documents, including a pricetechnical tradeoff analysis, are only made available after the entry of a Protective Order that swears the attorney to secrecy.  Nevertheless, once an experienced federal government contracts attorney reviews the agency’s documents, it will be possible for that attorney to advise the contractor as to whether a valid basis for protest exists.  If the agency’s documentation seems to be in order and makes rational sense, the protest can always be withdrawn.  It is a sad commentary, however, that contractors often need to file a protest in order to determine whether there is a valid basis to protest.

Michael H. Payne is the Chairman of the firm’s Federal Practice Group and frequently advises contractors about whether the government has conducted a proper source selection, and whether a pricetechnical tradeoff was conducted in accordance with the law. 

By: Michael H. Payne

In a negotiated procurement, where a contractor submits a proposal in response to an RFP (Request for Proposals), FAR 15.506(a)(1) states that “An offeror, upon its written request received by the agency within 3 days after the date on which that offeror has received notification of contract award in accordance with 15.503(b), shall be debriefed and furnished the basis for the selection decision and contract award.” It is a good idea to request a debriefing if you did not receive the award because you may learn something that will help you to improve your next proposal, or you may learn that you were treated unfairly and that you may have a basis to file a protest. The offeror who was awarded the contract should also request a debriefing because there may be information about how the proposal can be made even better the next time. In addition, if a disappointed offeror files a protest, an awardee may be in a better position to defend a protest after receiving a debriefing.

The Contracting Officer is not permitted to discuss the details of other proposals, but the regulations, at FAR 15,506(d) do require that:
At a minimum, the debriefing information shall include —
(1) The Government’s evaluation of the significant weaknesses or deficiencies in the offeror’s proposal, if applicable;
(2) The overall evaluated cost or price (including unit prices), and technical rating, if applicable, of the successful offeror and the debriefed offeror, and past performance information on the debriefed offeror;
(3) The overall ranking of all offerors, when any ranking was developed by the agency during the source selection;
(4) A summary of the rationale for award;
(5) For acquisitions of commercial items, the make and model of the item to be delivered by the successful offeror; and
(6) Reasonable responses to relevant questions about whether source selection procedures contained in the solicitation, applicable regulations, and other applicable authorities were followed.

See FAR 15.506 for the rules relating to postaward debriefings.

Michael H. Payne is the Chairman of the firm’s Federal Practice Group and frequently represents contractors during debriefing and provides advice as to whether the contractor’s rights have been violated.

By: Lane F. Kelman

In making an award on initial proposals, is a tradeoff only between the two (2) highest-rated, highest-priced proposals appropriate?  The GAO, in a recent decision,Coastal Environments, Inc., B-401889, dated December 18, 2009, provides important clarification.  The decision beckons closer scrutiny of awards by unsuccessful offerors.

In Coastal Environments, Inc., the RFP identified six (6) evaluation factors in descending order of importance: (1) personnel and company qualifications, (2) management capability, (3) technical excellence, (4) past performance, (5) small business participation, and (6) price; the RFP also identified several subfactors under the non-price evaluation factors. Award was to be made to the responsible offeror whose proposal was determined to represent the “best value” to the government, all factors considered.

Eight proposals were received and evaluated using the adjectival rating system.  The contracting officer, as the Source Selection Authority (‘SSA”), reviewed the evaluation findings and performed a price/technical tradeoff between the two most highly rated proposals; those of Ecological Communications Corporation (“ECC”) and another Offeror.  Those two proposals were also the highest priced proposals. The Source Selection Authority (“SSA”) ultimately selected ECC for award after concluding that “due to the highly specialized nature of the work…ECC’s technical superiority” justified paying an additional $2,984 to ECC.

Coastal, who was not part of the tradeoff process, filed a protest and alleged, among other issues, that the tradeoff process should not have been restricted to ECC and the other most highly rated offeror. Coastal’s proposal, while not as highly rated, was $17,434.44 lower in price than GCC’s proposal.  The GAO held that the SSA impermissibly limited the price/technical tradeoff analysis to a comparison of the two highest-rated, highest-priced proposals.  The SSA failed to conduct any qualitative assessment of the technical differences between the two (2) highest-rated, highest-priced proposals and any of the other technically acceptable proposals to determine whether either of these proposals contained features that would justify the payment of a price premium.

The GAO found that the two higher-rated, higher-priced proposals considered in the tradeoff both received overall adjectival ratings of “Good” and “Low Risk,” while Coastal’s proposal received the next lowest rating of “Acceptable” and “Low Risk,” but was priced approximately 20 percent lower. The GAO concluded that a proper tradeoff decision must, per Federal Acquisition Regulation § 15.308, provide a rational explanation of why a proposal’s evaluated technical superiority warrants paying a premium.  Here, the SSA did not identify what benefits in ECC’s proposal warranted paying a premium to ECC when compared to Coastal’s lower-priced proposal, which was found to be acceptable and low risk.

Lane F. Kelman is a Partner in the firm and a member of the Federal Contracting Practice Group

By: Lane F. Kelman

As opportunities in the private sector remain, at best, stagnant, the public sector has become increasingly competitive. The desire to gain a competitive advantage, however, must be tempered by compliance with ethical obligations. When attempting to gain a competitive advantage, it is crucial to avoid the appearance that your advantage is unfair. A recent decision by the GAO, Health Net Federal Services, LLC, highlights the balance that must be had when you seek a competitive advantage and the risk if the balance is not maintained.

On November 9, 2009, the GAO sustained the bid protest of Health Net Federal Services, LLC (HNFS) of the award of a contract to Aetna Government Health Plans, LLC (AGHP). HNFS and AGHP issued offers in response to request for proposals issued by the Department of Defense TRICARE Management Activity (TMA) for T-3 TRICARE managed health care support services. TRICARE is a managed health care program implemented by the Department of Defense (DOD) for active-duty and retired members of the uniformed services, their dependents, and survivors.
HNFS was the incumbent contractor. Its bid protest focused on a number of different issues, the most compelling challenge was that AGHP should be excluded from the competition based on an alleged unfair competitive advantage stemming from AGHP’s hiring of a former TMA employee (the TMA Chief of Staff) to prepare AGHP’s proposal.

In evaluating the possibility of an unfair advantage on behalf of AGHP, the GAO acknowledged that a guiding principle is the obligation of contracting agencies to avoid even the appearance of impropriety in government procurements. Where a firm may have gained an unfair competitive advantage through its hiring of a former government official, the firm can be disqualified from a competition based on the appearance of impropriety – even if no actual impropriety can be shown – if the determination of an unfair competitive advantage is based on facts and not mere innuendo or suspicion.

The GAO went on to conclude that the former TMA Chief of Staff that was hired by AGHP did, in fact, have access to non-public propriety information. As a result of the actual access to this information, a prima facie case was established that an appearance of impropriety existed. Importantly, the access to propriety information and appearance of impropriety did not, in and of themselves, require disqualification. Rather, AGHP, despite a recommendation from TMA’s ethics advisor to disclose the Chief of Staff’s involvement to the Contracting Officer ("CO"), failed to do so. Since the CO was not provided the opportunity to investigate the issues stemming from the use of a high-level former TMA employee in the preparation of its proposal, the appearance of impropriety was necessarily not assessed by the CO prior to the award and the protest was sustained.

The recent emphasis on ethics on government contracting requires contractors to avoid any conduct that even appears to be unethical. The case highlights the care that must be taken when contractors hire former government employees and involve them in the procurement process. If the employee was involved in the planning of the project or procurement while employed by the government, or if the employee had access to non-public information, a risk exists that the relationship will result in the disqualification of the proposal. Regardless, there should be full disclosure to the Contracting Officer before submitting a proposal.

Lane F. Kelman is a Partner in the firm and is a member of the firm’s Federal Contract Practice Group. He may be contacted for advice regarding federal construction contracting matters, including issues involving ethics in federal contracting. His e-mail address is lkelman@cohenseglias.com.

Contractors continue to be concerned about the impact that the filing of protests or claims will have on their past performance evaluations in negotiated procurements.  While it is never a good idea to file a frivolous protest or claim, it is improper for procurement officials to downgrade past performance evaluations simply because a contractor has exercised a right afforded by law and regulation.  In fact, the Office of Management and Budget issued a Memorandum for Senior Procurement Executives on April 1, 2002, and stated that “. . . the filing of protests, the filing of claims, or the use of ADR, must not be considered by an agency in either past performance evaluations or source selection decisions.”  The Memorandum went on to provide that contractors may not be given “downgraded past performance evaluations for availing themselves of their rights by filing protests and claims or for deciding not to use ADR; and Contractors may not be given more positive past performance evaluations for refraining from filing protests and claims or for agreeing to use ADR.”

The Under Secretary of Defense endorsed the Memorandum and circulated it on December 16, 2002.  The cover letter stated that “We should continue to work with our contractors to avoid or minimize unnecessary protests and claims and encourage the use of ADR, where appropriate, while not discouraging contractors from availing themselves of the rights provided to them by law. The policy embodied in the Memorandum has not changed and contractors should challenge any past performance evaluation that is downgraded because of previous protests or claims.  It must be recognized, moreover, that the reason for a lower than expected evaluation may not always be revealed during a debriefing.  If a contractor suspects that an inappropriate downgrading has occurred, the only way to prove it may be to file a protest so that the agency’s Administrative Record may be reviewed by the protester’s attorney. (Note: In a negotiated procurement, the Administrative Record is almost always subject to a Protective Order that prohibits disclosure of the information to anyone other than the protester’s attorney).

Michael Payne is a Partner and is the Chairman of the firm’s Federal Practice Group.