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Joseph A. Hackenbracht is a Partner in the Federal Contracting Group of Cohen Seglias Pallas Greenhall & Furman and practices in all phases of federal government contract and construction law. He is often called upon to advise clients concerning contract interpretation and to assist clients in the preparation of proposals for negotiated procurements. Joseph has extensive experience handling protests, contract claims, appeals to administrative boards of contract appeals, and litigation in various Federal courts. He has prepared and litigated claims involving the many issues which arise concerning construction, including defective design, defective specifications, differing site conditions, changes, suspensions, delays and contract terminations.

By: Joseph A. Hackenbracht 

On July 18, 2012, the Small Business Administration published a proposed increase in the small business size standard for “Dredging and Surface Cleanup Activities” from $20 million to $30 million in average annual receipts. 77 FR 42197. The average annual receipts are calculated by averaging a concern’s receipts for the last three fiscal years. 13 CFR 121.104(c). Receipts means “total income.” 13 CFR 121.104(a).

In order to qualify as small on a Federal procurement, a concern must also perform at least 40 percent of the volume dredged with its own equipment or equipment owned by another small dredging concern. 13 CFR 121.201; note 2. This requirement, sometimes referred to as the “40 percent rule,” has been in SBA’s size standards for small business since 1974. Before 1974, the Department of Defense’s Armed Services Procurement Regulations (ASPR’s) had contained such a requirement for many years. (ASPR 1-701.1(A)(2)). In 1974, it was determined that DoD was exceeding its authority because the obligation to set size standards for small business was within the jurisdiction of the SBA.

When the SBA proposed to increase the size standard for Dredging in July, 2012, it also sought comments regarding the requirement that in order to qualify as small that a concern must perform at least 40 percent of the dredging with its own equipment or equipment owned by another small dredging concern. SBA has heard from small dredging firms that believe they should be able to lease equipment from any size firm as long as employees from the small firm perform the work on the contract.

At this time, however, SBA has proposed to continue requiring small dredging concerns to comply with the “40 percent rule,” in order to ensure that these firms perform a significant and meaningful portion of a dredging project set aside for small business. SBA has asked for comments from the industry and the public concerning (1) whether there continues to be a need for the current 40 percent equipment requirement; (2) whether there is a rationale for a different percentage; and (3) whether a different and more verifiable requirement based on an alternative measure (such as value of contract or personnel involved) may achieve the same objective of ensuring that small businesses perform significant and meaningful work.

The following methods can be used for the submission of comments: (1) the Federal eRulemaking Portal: www.regulations.gov, by following the instructions for submitting comments; or (2) Mail/Hand Delivery/Courier to Khem R. Sharma, Ph.D., Chief, Size Standards Division, 409 Third Street SW., Mail Code 6530, Washington, DC 20416. Please note that SBA will not accept comments to this proposed rule submitted by email. Also, be sure to refer to “RIN 3245-AG37” when submitting comments, so that SBA correctly attributes your comments to the proposed rule in question.

Joseph A. Hackenbracht is a Partner in the firm and a member of the Federal Contracting Practice Group.

By: Joseph A. Hackenbracht

From August 2, 2002 until July 14, 2004, Todd Construction, a general contractor located in Oklahoma, was awarded five indefinite delivery/indefinite quantity (ID/IQ) contracts by the Savannah District of the Corps of Engineers for design and construction of projects in Georgia, North Carolina, and South Carolina. Each contract was for a period of up to three years and together the task orders issued under the contracts could have added up to $65,000,000. On two of the task orders, each of which was for less than $500,000, Todd received unsatisfactory performance evaluations; it challenged those ratings.

Back in 2008, we reported (see our earlier blog article) about a decision by the U.S. Court of Federal Claims, Todd Construction, L.P. v. U.S., 85 Fed.Cl. 34, 2008, where the Court held that it had jurisdiction to hear a challenge to a performance rating. In that case, Todd submitted a CDA claim asserting that it received an erroneous performance evaluation. The Court concluded that the challenge constituted a “claim” within the meaning of the Contract Disputes Act, thereby giving the Court jurisdiction of what amounted to a non-monetary dispute.

In the years that followed, Todd proceeded on a legal odyssey in what came to be known as Todd I, Todd II, and Todd III. Todd’s counsel battled with government attorneys in written brief and after written brief over nuances regarding one’s ability to challenge a performance evaluation. In 2009, the Court issued Todd II, finding that plaintiff’s must “do more than recite the elements of a cause of action; they must make sufficient factual allegations to ‘raise a right to relief above the speculative level.’” Todd v. U.S., 88 Fed.Cl. 235 (2009). The Court then granted Todd the opportunity to amend its pleadings. In Todd III, decided in 2010, the Court of Federal Claims concluded that, even after revising its complaint, Todd failed to state a claim upon which relief could be granted, and dismissed Todd’s challenge of its rating. The Court also found that Todd lacked standing to bring the action because there was no discernable injury from the alleged errors in the evaluation. Todd v. U.S., 94 Fed.Cl. 100 (2010).

Once Todd’s journey in the Court of Federal Claims came to an end, Todd had two choices: abandon pursuit of its claim or appeal the decision to the United States Court of Appeals for the Federal Circuit. Todd chose to appeal. On August 29, 2011, the Circuit Court issued its decision. The Circuit Court agreed with the lower court’s finding that, in the absence of a showing of prejudice or injury in fact, Todd lacked standing to challenge the alleged procedural violations in the agency’s evaluation. Furthermore, the Court of Appeals agreed with the lower court’s dismissal of the case for failure to state a claim. Todd Const. L.P. v. U.S., 656 F.3d 1306, C.A.Fed. 2011. The Court noted that the complaint did not “state a claim to relief that is plausible on its face,” and that Todd failed to “plead factual content that allows a court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” The Court of Appeals did confirm the jurisdiction of the Court of Federal Claims to hear challenges of performance ratings since, it concluded, the ratings are “related to” the contract and the challenge is a claim under the Contract Disputes Act.

So, on a contract that was performed between 2003 and 2005, concerning a performance evaluation issued on July 23, 2006, that was challenged in a claim submitted in August, 2006, which was denied in a Contracting Officer’s decision dated April 25, 2007, that was the subject matter of the Complaint filed on May 25, 2007, Todd learned on August 29, 2011, that the merits of the government’s evaluation of its performance would go unchallenged and unreviewed. Although Todd could appeal to the Supreme Court of the United States, there is no indication that Todd pursued the matter any further.

Decisions of the Court of Appeals for the Federal Circuit are precedent for both the Court of Federal Claims and the boards of contract appeals. Going forward, therefore, contractors can expect that both the boards and the Court will hear challenges of adverse performance ratings. However, in order to avoid the negative result suffered by Todd, contractors must plead the facts specifically and in detail, and identify individually which ratings are arbitrary and capricious and why they are erroneous. Contractors must also allege what the ratings should have been and that the outcome would have been different if the errors had not been made. In order to avoid dismissal based on standing, contractors must be ready to provide evidence that the negative rating has caused injury, or has prejudiced the contractor.

Based upon the above, contractors should consult with a professional to the extent that they wish to challenge a performance rating to assure themselves that the prerequisites of Todd I, II and III have been met.

Joseph A. Hackenbracht is a Partner in the firm and a member of the Federal Contracting Practice Group.

By: Joseph A. Hackenbracht

For many years, the boards of contract appeals have considered challenges to performance evaluations and declined, for various reasons, to hear those cases. Then, in 2008, the U.S. Court of Federal Claims held that it possessed jurisdiction to address a contractor’s challenge of the performance rating it had been given by the Corps of Engineers. Todd Construction Company, Inc. v. U.S., 85 Fed.Cl. 34, 2008. (see our earlier blog article) Todd had submitted a “claim” pursuant to the Contract Disputes Act (CDA) challenging its performance rating and the Court concluded that submission of the claim satisfied its “jurisdictional prerequisite.”

In 2010, after the Todd decision was issued by the Court of Federal Claims, the Armed Services Board of Contract Appeals decided that it also could address challenges to performance ratings based on the board’s jurisdiction to determine the rights and obligations of parties under the terms and conditions of their contract. Appeal of Versar, Inc., ASBCA No. 56857, 10-1 BCA ¶ 34437, May 6, 2010. Also in 2010, in a case where the contractor submitted a CDA claim challenging the performance rating, the Board held that under the CDA, it has jurisdiction to “decide any appeal” involving a claim “relating to a contract.” Appeal of Colonna’s Shipyard, Inc., ASBCA No. 56940, 10-2 BCA ¶ 34494, June 24, 2010.

Last month, the Board issued a follow-up decision in Versar addressing the merits of claimant’s position that its performance rating was issued in error. The Board found that Versar had failed to show that its performance rating was arbitrary and capricious, the requisite standard, and, therefore, denied Versar’s claim. In so doing, the Board stated that “bare or insufficient allegations cannot sustain a claim that the government issued an unjustified performance rating.”Appeals of Versar, Inc., ASBCA Nos. 56857 et al., 2012 WL 1579539, April 23, 2012. In its discussion, the Board referenced a decision of the United States Court of Appeals for the Federal Circuit, Todd Const. L.P. v. U.S., 656 F.3d 1306, C.A. Fed. 2011, where the Circuit Court affirmed the decision of the Court of Federal Claims to dismiss a challenge to a performance rating on the basis that the contractor failed to state a claim upon which relief could be granted. In its decision, the Circuit Court affirmed the lower court’s determination that it had jurisdiction to hear cases involving challenges of performance ratings issued by the government.

Decisions of the Court of Appeals for the Federal Circuit are precedent for both the Court of Federal Claims and the boards of contract appeals. Going forward, therefore, contractors can expect that both the boards and the Court of Federal Claims will address challenges of performance ratings in accordance with the Circuit Court’s decision in Todd Const. L.P. v. United States. Contractors can be encouraged that it is now settled that both the boards and the court have jurisdiction to hear challenges of adverse performance ratings.

Upon receipt of an unacceptable performance rating, a contractor should submit a claim under the Contract Disputes Act challenging the rating as arbitrary and capricious. The contractor needs to raise specific objections to individual ratings and demonstrate the errors in the government’s evaluation. After receiving a decision, or in the event a decision is not issued, the contractor should file an action in either the appropriate board of contract appeals or the Court of Federal Claims.

Contractors must be prepared to plead the facts specifically and in detail, and identify individually, which ratings are arbitrary and capricious and why they are erroneous. Contractors also need to be sure to allege what the ratings should have been and that the outcome would have been different if the errors had not been made. In order to avoid dismissal based on standing, it may also be necessary to establish that the negative rating has caused injury, and has prejudiced the contractor. One way to demonstrate the prejudice and injury may be to present facts that the negative rating resulted in the contractor not receiving a contract.

As the ASBCA noted in Versar, the contractor did not provide the board with “specifics of the rating, ratings process, categories, and details,” as well as evidence of what the rating should have been. If contractors want the court to step into the fray, they must furnish the court with the specifics to establish that the government’s evaluations are erroneous and the subsequent ratings are arbitrary and capricious. Unsupported allegations and conclusory statements will not win the day.

Joseph A. Hackenbracht is a Partner in the firm and a member of the Federal Contracting Practice Group.

 By: Joseph A. Hackenbracht

Federal contractors need to prepare for another change in the online environment. Currently scheduled to take place in late July of this year, the Central Contractor Registration (CCR) system will no longer exist. The Federal government is starting a new registration system called the System for Award Management, or SAM [Uncle, get it?] for short. In addition to replacing CCR, SAM will incorporate the Federal Agency Registration [FedReg], the Online Representations and Certifications Application [ORCA], and the Excluded Parties List System [EPLS]. For all those contractors already registered in CCR and ORCA, you can breathe a sigh of relief; the Federal government is going to transfer your information into the new system. Although some of the terminology is changing, enough has remained the same that SAM should be familiar, so when the time comes for a contractor to renew its registration, it will not have too much trouble. For more information, go to the website.  A quick introduction to the new system is attached.

The government, however, is not through with its centralization of procurement information. Contractors familiar with the FedBizOpps system for reviewing solicitations, amendments, and other procurement actions can look forward to it being incorporated into SAM, along with the PPIRS, Past Performance Information Retrieval System, and many other data sites.

That’s life in the digital age, changing so quickly that it is hard to know whether you’re coming or going.

Joseph A. Hackenbracht is a Partner in the firm and a member of the Federal Contracting Practice Group.
 

In an earlier blog we discussed what the ARRA meant for Federal Construction Contractors, and noted that the reporting would be over the internet, once the government had its website up and running.

On Monday, August 17, 2009, recipients of economic stimulus funds were notified that they now can access the website www.federalreporting.gov and register. Registration is necessary before the site will permit recipients to file reports, which begins on October 1, 2009. In addition to completing the registration process on the website, recipients also must obtain a Federal Reporting Personal Identification Number (FRPIN). Instructions on how to obtain a FRPIN can be found at http://www.recovery.gov/?q=content/recipient-reporting. The Government has published a 32 page guide to assist recipients in the registration process.

The government has indicated that anyone interested in reviewing the reports filed by recipients of Stimulus funding will be able to do so beginning on October 11, 2009 at the website www.recovery.gov.

 

The U.S. Army Corps of Engineers has posted the Civil Works projects that it intends to fund from the appropriations Congress provided in the American Recovery and Reinvestment Act of 2009 (Pub. L. 111-5) on its website. In order to spend its $5 billion slice of the $787 billion stimulus pie, the Corps selected approximately 178 Construction projects and 892 Operation and Maintenance projects, nine Formerly Utilized Sites Remedial Action Program (FUSRAP) projects. These projects or useful increments of these projects will be completed with stimulus funding.
 
The only state that is not slated to receive any stimulus projects is Wyoming, because no eligible work on any ongoing Civil Works activity was presently available. The Corps applied the selection criteria which largely revolved around contracts that could be awarded and completed quickly. The wide geographic distribution of selected projects spreads the employment and other economic benefits across the United States and across Civil Works programs to provide the nation with project benefits related to inland and coastal navigation, the environment, flood and storm damage reduction, hydropower, and recreation.
 
The Corps has indicated that the majority of the contracts will be competitively bid. Some contracts will be awarded by issuing task orders on existing contracts generally referred to as Indefinite Delivery Indefinite Quantity (IDIQ) contracts or Multiple Award Task Order Contracts (MATOC). At this time the Corps is unable to specify what projects will be procured in what fashion. The Corps has indicated that it intends to make maximum use of small businesses, either as prime contractors or subcontractors, in its stimulus program.
 
In a recent article in Engineering News Record, Bruce Buckley reported that “Driven by a need to speed projects to market, federal agencies are drawing heavily on accelerated delivery methods to move stimulus-funded work into the express lane. More than ever, traditional stand-alone procurement will take a back seat on federal jobs, as many new opportunities end up with firms holding existing “task order” contracts.” The risk that overuse of task order contracts will be anti-competitive was stressed in the article. Mr. Buckley noted that “Agencies are already leaning heavily on IDIQ contracts. Data from the Federal Procurement Data System show that orders through contracts grew from 14% of total dollars in fiscal 1990 to about 52% in fiscal 2005, says OMB.” In a May 2007 memo to federal acquisition officers, then-OMB Administrator Paul Denett warned of “a lack of meaningful competition for orders” in light of the increased use of IDIQ vehicles.
 
Mr. Buckley quoted Michael Payne, chairman of the federal construction practice group in Cohen Seglias Pallas Greenhall & Furman: “As more tasks go to IDIQ holders, some small to medium-size firms who don’t have IDIQ contracts are locked out . . . With IDIQ contract limits now reaching into the hundreds of millions of dollars and the scope sometimes spanning multiple states, many firms can’t get adequate bonding to compete.” Mr. Payne also stressed that the method could hurt many of those the stimulus is designed to help, “The purpose is to lead to job creation. What better way than to go with open competition and make it available to the maximum number of companies?”

In recent years, the U.S. Army Corps of Engineers has attempted to employ "innovative" contracting methods but, in doing so, has often limited the number of contractors who have had the opportunity to perform major construction projects.  One of the justifications for these “innovative” methods has been that there will be a reduction in the administrative workload resulting in a "savings" for the government.  As a result, it seemed as though fewer solicitations were being issued using the sealed bidding procedures in FAR Part 14, with a corresponding increase in the procurement of construction under FAR Part 15, Contracting by Negotiation.  Construction contractors began to find that competition was no longer based on price alone, but on subjective factors as well, such as past performance, technical ability, or client satisfaction.  Of course, even though these procurements were purportedly “negotiated,” the instances where discussions or negotiations actually occurred were relatively few in number.  It was for that reason that we continued to wonder whether the Corps ever actually intended to “negotiate” a negotiated contract.  Could the reason possibly be that the Corps wants to be able to use subjective evaluation factors, under the guise of “best value,” as an excuse not to award construction contracts to responsible, bonded, contractors who offer the lowest price?

In a further extension of the use of "Contracting by Negotiation," the Corps has also adopted the Multiple Award Task Order Contracting (“MATOC”) procedures provided under FAR Part 16.5, "Indefinite-Delivery Contracts," to the procurement of major construction projects.  We have been involved in on-going legal challenges to the use of MATOC for construction  because we believe that the preference for sealed bidding in construction, as expressed in FAR Part 36, is being ignored by the Corps.  Through the use of MATOC, the Corps has found a way to limit the competition for the design and construction of facilities in entire regions of the country to only a few of the very largest construction companies.
 
Just as the shift to large, regional MATOCs has decreased the number of contractors, both large and small, who are able to perform these projects as prime contractors, the adoption of design-build as the favored mechanism for major construction projects has also tended to limit competition.  Design-build contracting has permitted the government to shift more and more risk and responsibility to the contracting community, but it seems to be a community that is shrinking in size.  Does this make any sense at a time when the country is suffering from rapidly increasing unemployment and the government is planning to spend billions of dollars on improving the infrastructure?  There are many small and medium-sized business concerns who have capably performed thousands of federal construction projects over the years under sealed bidding.  We continue to wonder why that successful system is being systematically abandoned.

Now the Corps is beginning to issue solicitations for major construction projects under the provisions of FAR Part 16.403, Fixed Price Incentive Contracts, using a project delivery method referred to as "Early Contractor Involvement," or “ECI” for short.  Under ECI, the Corps engages the services of a general contractor to provide "preconstruction services" concurrent with the design of a project that is being performed by a design firm.  The construction contractor reviews the partially completed design for constructability and biddability.  As the design work nears completion, construction is then procured through the exercise of an option under the ECI contract.  An ECI procurement requires the construction contractor to compete on both technical and price factors long before the project’s design is developed to the point that facilitates meaningful and well-informed cost proposals, however.  With so little detailed information on the construction that is being procured, the competition among construction firms has the real possibility of being nothing more than a popularity contest in which the government procurement officials make choices based on who they think they want to work with, rather than the contractor they should be working with based on the technical aspects of a particular project.  The competitors also must provide a ceiling price for the project as part of their proposals, long before the design has reached the point where a price estimate is anything more than an educated guess.  Although a Corps spokesman, in an article published in Engineering News-Record, indicated that the Corps is turning to ECI for classic reasons, that it is "better, faster, cheaper,"  we wonder what the basis is for such a bold conclusion.

In a recent press release, the New Orleans District of the Corps reported that it will use Early Contractor Involvement (ECI) to construct the $500 Million Gulf Intracoastal Waterway West Closure Complex project.  Colonel Alvin Lee, New Orleans District Commander, indicated that although "the New Orleans District has never used ECI as an acquisition strategy before," the District was "excited about the benefits it brings to this momentous project.”  In addition to the West Closure Complex project, the New Orleans District is proposing to employ ECI on a series of levee improvement projects on the Chalmette Loop Levee in St. Bernard Parish, Louisiana.  These additional ECI contracts will total between $850 Million and $1.75 Billion.

Other Corps districts have had some experience using a similar method of procurement under a strategy known as "IDBB," or "Integrated-Design-Bid-Build."  Two of these IDBB projects are the new Community Hospital and the National Geospatial Intelligence Agency Complex at Fort Belvoir, Virginia.  Very recently, other Corps districts have advertised the intention to issue ECI solicitations, notably for the construction of a Replacement Hospital at Fort Riley, Kansas ($250 to $500 Million).  Other Federal agencies can be expected to increasingly employ the ECI procurement method; the U.S. Navy already intends to construct a $68 Million Helicopter Maintenance Hanger in San Diego using ECI.  In private construction, ECI is called Construction Management (or Manager) at-risk, "CM@R."   A joint committee of the AIA and AGC have described CM@R as follows:

Construction management at risk (CM@R) approaches involve a construction manager who takes on the risk of building a project. The architect is hired under a separate contract. The construction manager oversees project management and building technology issues, in which a construction manager typically has particular background and expertise. Such management services may include advice on the time and cost consequences of design and construction decisions, scheduling, cost control, coordination of construction contract negotiations and awards, timely purchasing of critical materials and long-lead-time items, an
d coordination of construction activities.  In CM@R the construction entity, after providing preconstruction services during the design phase, takes on the financial obligation for construction under a specified cost agreement. The construction manager frequently provides a guaranteed maximum price (GMP). CM@R is sometimes referred to as CM/GC because the construction entity becomes a general contractor (GC) through the at-risk agreement. Primer on Project Delivery, AIA/AGC (2004).

A question remains as to whether the government can exercise the flexibility that a private entity can employ to insure that the ECI, or CM@R, process can be successful.  Whether or not such flexibility is possible, use of ECI will certainly further diminish the competitive nature of the government procurement of construction projects in the future.

For over twenty years, the federal government and private industry, including contractors, mining companies, developers and builders, have debated the extent to which land clearing and dredging activities should be regulated. Since the 1970’s, the U.S. Army Corps of Engineers and the U.S. Environmental Protection Agency have regulated the discharge of pollutants into the waters of the United States under 33 U.S.C. §1251 et seq., [the Clean Water Act]. Section 404 of the Act includes the discharge of dredged or fill materials as a regulated activity, and the Corps, by issuance of Section 404 permits, has regulated excavation activities in navigable waters and wetlands. 

In the 1980’s, "discharge of dredged material" was not considered by the agencies to include the “de minimis incidental soil movement that occurs during normal dredging.” In the early 1990’s, the Corps and EPA redefined the term to include the redeposit of dredged material. This regulatory definition was challenged in court, and in 1998 the U.S. Court of Appeals for the District of Columbia Circuit ruled that the agencies could not regulate "incidental fallback."   National Mining Association v. U. S. Army Corps of Engineers, 145 F.3d 1399. In August 2000, the Corps and EPA included a definition of the term "incidental fallback" in the regulations. The agencies also added that the use of mechanized earth-moving equipment in waters of the United States was presumed to result in the discharge of dredged material, except where the equipment usage could be shown to only result in incidental fallback. The adoption of these definitions was apparently the agencies’ "reasoned attempt to more clearly delineate the Clean Water Act jurisdiction" rather than develop a "bright line" rule for determining which activities would require a Section 404 permit.

 

In response to an adverse decision issued by the United States District Court for the District of Columbia in January 2007, National Ass’n of Home Builders v. U.S. Army Corps of Engineers, Civil Action No. 01-0274, January 30, 2007, the U.S. Army Corps of Engineers and the Environmental Protection Agency recently adopted a Final Rule on December 31, 2008, 73 FR 79641, that deleted the definition of "incidental fallback" from 33 CFR 323.2(d)(2)(ii) and 40 CFR 232.2(2)(ii), as well as the language indicating that the Corps and EPA "regard" the use of mechanized earthmoving equipment as resulting in a discharge subject to regulation.

 

With the re-issuance of the Section 404 regulations, the situation now will be as it was in 1999 where the decision as to when a particular redeposit of dredged material is subject to Clean Water Act jurisdiction will entail a case-by-case evaluation. This regulatory roll back may create additional burdens to parties that engage in activities that involve incidental fallback and the use of mechanized earthmoving equipment. Corps and EPA guidance in the 1990’s identified these activities as including:

 

· Mining activities, including sand and gravel mining, aggregate mining, precious metals and gem mining, recreational mining, and small instream hydraulic dredges

 

· Ditching and draining activities, including ditching to lower the water table, ditching to drain

wetlands, and removal of beaver dams

 

· Maintenance dredging activities and excavation for currently used flood control projects or for

previously abandoned flood control, and irrigation or drainage projects

 

· Channelization and the reconfiguring or straightening of streams

 

(See 1997 Corps/EPA Memorandum)

A decision just published by the Government Accountability Office ("GAO"), Matter of Burchick Construction Co., mpany, involved a request for proposals issued by the Department of Veteran Affairs ("VA") for the construction of an ambulatory care center . After receiving five proposals and evaluating the technical evaluation factors, the VA conducted discussions with the offerors that only addressed their price proposals. The VA determined that the offeror providing the best value was Massaro Corporation at a firm fixed price of $38,530,000. Burchick Construction Company, whose price proposal of $36,686,000 was the lowest price offered, challenged the award of the contract to Massaro.

During the evaluation of technical proposals, the VA had determined that Burchick’s proposal contained "weaknesses" in a number of factors, including past performance, identification of key personnel, and small business participation. Based on these perceived weaknesses, the VA scored Burchick with a total of 50.8 points out of a possible technical score of 100 points. The VA had given Massaro a score of 67.3 points. When the VA decided to discuss the price proposals, it also decided that it would not conduct discussions with the offerors with respect to the firms’ technical proposals, because "none of the offerors could materially improve its technical proposal."

 

Burchick contended that the VA did not conduct meaningful discussions since the VA did not apprise Burchick of, or provide it with the opportunity to address, the significant evaluated weaknesses in its technical proposal. Burchick explained that it could have addressed each of the VA’s concerns that resulted in the downgrading of its technical evaluation.

 

While the GAO conceded that agencies have considerable discretion in determining whether and how to conduct discussions in a negotiated procurement, it found that where discussions are conducted, an agency must identify deficiencies and significant weaknesses, at a minimum, in the proposals of each offeror in the competitive range. The GAO concluded that discussions must be meaningful, meaning that the discussions must be sufficiently detailed so as to lead an offeror into the areas of its proposal requiring amplification or revision.

 

The GAO found that the VA failed to conduct meaningful discussions with Burchick, and that there was a reasonable possibility that Burchick was prejudiced, given that it offered the lowest price and could have addressed the VA’s concerns such that it may have been offering the "best value" to the government. The GAO sustained the protest and recommended that the VA conduct discussions with the offerors about the technical proposals, and make a new source selection decision.

The GAO also criticized the agency’s reliance on a numerical comparison of the proposals to determine "best value." While not specifically challenged by Burchick, the GAO noted that a mechanical comparison of the technical and price point scores is not a valid substitution for the qualitative assessment of the technical differences or the benefits associated with a higher priced proposal. Point scores are merely guides, and the record must contain adequate documentation of the price/technical tradeoff to support an agency’s judgment concerning the significance of the differences is reasonable and adequately justified in light of the evaluation scheme. 

 

It should be noted that the Federal Acquisition Regulation does address the extent of the discussions which are to be conducted with offerors in the competitive range. FAR 15.306(d)(3) provides that:

 

At a minimum, the contracting officer must, subject to paragraphs (d)(5) and (e) of this section and 15.307(a), indicate to, or discuss with, each offeror still being considered for award, deficiencies, significant weaknesses, and adverse past performance information to which the offeror has not yet had an opportunity to respond. The contracting officer also is encouraged to discuss other aspects of the offeror’s proposal that could, in the opinion of the contracting officer, be altered or explained to enhance materially the proposal’s potential for award. However, the contracting officer is not required to discuss every area where the proposal could be improved. The scope and extent of discussions are a matter of contracting officer judgment.

 

While it is not uncommon for the GAO to defer to the discretion afforded the agency in negotiated procurements, that deference, as demonstrated in the Burchick decision, is not absolute. In instances where, as here, the agency’s actions are clearly not in accordance with the requirements of the FAR, seeking redress in a protest before the GAO can sometimes result in a favorable outcome.

The Armed Services Board of Contract Appeals (“ASBCA”) recently decided a case involving the issue of whether a contractor could recover the fees charged by a consulting firm as a contract administration cost.  Fru-Con Construction Corporation. Although the cost principles in the FAR, at 31.205-47(f), provide that "costs are unallowable if incurred in connection with the prosecution of claims or appeals against the Federal Government," FAR 31.205-33 provides that "professional and consultant services" are allowable in certain circumstances. One of those circumstances occurs when a consultant’s preparation of a request for equitable adjustment was for the purposes of seeking a negotiated settlement of pending issues with the government.  In such a case, a consultant’s costs may be allowable if otherwise found to be reasonable.

The ASBCA addressed the issue of whether the consultant’s fee of $612,000 was reasonable. Troubled by the lack of specificity in the consultant’s contract, the summary nature of the consultant’s bills, and the apparent lack of oversight by the contractor, the Board decided that it was almost as if the contractor had given the consultant a blank check. The Board concluded that a prudent business person in the conduct of a competitive business would not have reasonably incurred the expenses in an effort to negotiate with the government. The Board concluded that the contractor was entitled to recover a reasonable amount for its consulting fees and, in a jury verdict, decided that $65,000, not $612,000, was allowable as a reasonable contract administration cost.

When contracting for professional services on a Federal government contract, it is important to clearly define what the professional will do, to obtain itemized bills that include sufficient detail regarding the nature of the services provided, and to oversee the consultant’s activity. In addition, obtaining the consultant’s work product, including trip reports, minutes of meetings, memoranda and reports will go a long way in helping a contractor avoid a later determination that the consultant’s costs were unreasonable and, therefore, not recoverable.