In a decision earlier this month, the Armed Services Board of Contract Appeals reiterated that the recovery of unabsorbed home office overhead, based on the Eichleay formula, is for "a stand-by of an uncertain duration." The Board held that where a contractor is entitled to a compensable contract time extension for additional work, the contractor is entitled to recover extended home office overhead. Extended home office overhead is calculated as a fixed percentage markup of costs incurred during the contract time extension. Fru-Con construction Corporation, ASBCA No. 55197, 55248, October 4, 2007. For a discussion on the Eichleay formula and the recovery of unabsorbed home office overhead, see our earlier article.
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.
In a decision issued by the Government Accountability Office, S4, Inc., B-299817, August 23, 2007, the disappointed offer protested an award to Croop-LaFrance, Inc., a lower priced offeror, under a Request for Proposals (“RFP”) to procure information technology desktop information services. The RFP specified that award would be based on a “technically acceptable-risk/past performance/price tradeoff,” which the RFP explained as follows:
For those Offerors who are determined to be technically acceptable, tradeoffs will be made between proposal risk, past performance and price. Proposal risk and past performance are of equal importance, and when combined, are considered significantly more important than price.
The agency determined that the ratings of past performance of S4, Inc. and Croop-LaFrance were essentially equal and that it was therefore appropriate that price should be the discriminator in making the source selection. S4 contended that the agency should have drawn more detailed distinctions in the past performance evaluations and that the agency improperly ignored significant distinctions. This sort of protest is very difficult to win because it calls upon the GAO to substitute its discretion for that of the agency – something that the GAO has consistently refused to do, except where there is no rational basis or the agency’s source selection, or procurements laws or regulations have been clearly violated.
Predictably, the GAO stated that “Determining the relative merits of an offeror’s past performance information is primarily a matter within the contracting agency’s discretion; we will examine an agency’s evaluation only to ensure that it was reasonable and consistent with the solicitation’s evaluation criteria and procurement statutes and regulations.” Here, the RFP did not commit the Air Force to evaluating past performance only in the more selective manner that S4 desires. Rather, based on the GAO’s review of the record, the finding was made that the Air Force’s approach was consistent with the RFP, and that the overall rating of Croop-LaFrance as “high confidence” under the past performance factor was reasonable.
On May 17, 2007, we presented a seminar in Richmond where we discussed the “New World of Federal Construction Contracting” with a number of contractors interested in obtaining and performing Indefinite Delivery Indefinite Quantity (IDIQ) and Multiple Award Task Order (MATOC) contracts. Federal agencies are turning to IDIQ and MATOC contracts more and more often for construction projects, particularly in conjunction with the military construction involved in the Base Relocation and Closure Program (BRAC).
A recent article in the May 24, 2007 on-line publication Mid-Atlantic Construction stresses the substantial market opportunities for contractors in the Richmond area, as well as in all of Virginia. Many of these opportunities involve military construction for the U.S. Army and the U.S. Navy. Quoting Harold B. Kelly, president of the Virginia Chapter of the Associated Builders and Contractors, "2007 looks terrific for many, many of our members." He predicts that the consolidation of Army logistics units at Fort Lee in Prince George County alone will have a major impact on the market. The Army plans to spend at least $1 Billion to build 6 million square feet of new space. Chris Jarling, general manager of Turner Construction Company in Virginia, noted that he anticipated that the U.S. Army Corps of Engineers will use the design-build delivery method to construct many of the BRAC projects in Virginia.
For more information on the extent of BRAC projects in Virginia, please see the attached information provided by the Commonwealth of Virginia.
A client new to Federal contracting was requested recently to submit a "BAFO" by an agency contract specialist. Our client asked what was meant by a "BAFO," and the government representative responded "your best and final offer," and suggested that our client read the Federal Acquisition Regulation (FAR). When our client could not find any reference to a "BAFO" or a "best and final offer" our "baffled" client called us. "Best and Final Offer," or "BAFO" was a term used in the FAR many years ago, before the major revision to Part 15, "Contracting by Negotiation," in 1997. In a negotiated procurement, following the conclusion of discussions with offerors, the contracting officer would issue a request for best and final offers to all offerors still within the competitive range. The pre-1997 FAR contained an entire section that described the "best and final" process. In Federal procurement today, “BAFO” has been replaced by "final proposal revision," as referenced in FAR 15.307. However, some agencies still refer to an “FPR” as a “BAFO.”
One of the most important factors considered by agencies in negotiated procurements is the past performance of an offeror. In addition to the information that an offeror might provide in response to a solicitation, source selection officials can access the performance evaluations from an offeror’s prior federal contracts. It is important, therefore, for Federal construction contractors to know what information on their past performance is available to procurement officials.
A contractor can review its own performance evaluations on the internet by accessing the Business Partner Network website, [www.bpn.gov]. and clicking on the link Past Performance Information Retrieval System, PPIRS. [www.ppirs.gov]. The PPIRS is maintained for the government by the Department of the Navy. The Navy requires that, before accessing the system, a senior management representative must register by submitting a Senior Management Access Request Form to the office identified on the form. [http://www.cpars.navy.mil/accessforms/csmarf.htm]
In addition, before accessing the PPIRS a contractor must not only be registered with the Central Contractor Registration (CCR), [www.ccr.gov] but also must have created a Marketing Partner Identification Number (MPIN) in its CCR profile. Instructions on creating an MPIN are available on the CCR website.
As everyone who has dealings with the federal government is learning, access to government information is becoming more difficult, particularly information from the Department of Defense. Obtaining the past performance information on your federal contracts is no exception. As of November 1, 2006, contractors must also have a valid DoD PKI (Public Key Infrastructure) certificate. For most federal construction contractors, this certificate must be obtained from an External Certificate Authority (ECA). The approved ECA vendors for the Department of Defense are VeriSign, Inc. and Operations Research Consultants, Inc.
The American Society of Civil Engineers calls attention, on its website, to the rapid deterioration of our nation’s highways, bridges, airports, dams, waterways, water systems, wastewater systems and other infrastructure facilities that are vital to our nation’s economy and our quality of life. Estimating that over $1.6 trillion needs to be invested during the next five years to restore the infrastructure to only a good condition, the ASCE offers a plan of action for Congress to address this national emergency.
Implementation of this action plan, or even just portions of the plan, would represent a significant opportunity for Federal construction contractors.
Earlier this month, the President submitted the Administration’s FY2008 Budget to Congress. Federal construction contractors should be encouraged by the large number of projects that are proposed for funding. The budget provides the highest level of funding ever included in any President’s budget for U.S. Army Corps of Engineers’ water resources projects and programs. The proposed budget for the Department of Defense includes over $8 billion for the BRAC (Base Realignment and Closure) program. The Defense FY2008 budget also includes considerable funding for military construction to support the Integrated Global Presence and Basing Strategy (IGPBS) that is presently being implemented to move U.S. forces from overseas to continental U.S. installations to better position them to support worldwide contingencies.
For more information on where these projects will be built in the coming years, please click here. The FY2008 Budget for military construction totals over $18 billion.
In the most recent edition of Defense AT&L, a magazine published by the Defense Acquisition University, author Wayne Turk discusses the skills that a competent project manager needs to possess in the 21st Century. In addition to people, financial and scheduling skills, Turk emphasizes seven attributes of a good project manager – patience, wisdom, sense of humor, flexibility, creativity, understanding of the law of unintended consequences, and subject matter expertise. While Turk points out that there is no substitute for practical experience, he also provides sources of information and training for neophyte, as well as experienced, managers. Reading this article, as well as Turk’s earlier “Ten Rules for Success as a Manager,” Defense AT&L, July-August 2004, provides useful information to prospective federal construction contractors about what agency source selection officials may look for when they review the qualifications of management personnel in connection with proposals on negotiated procurements.
The January 3, 2007 edition of ENR.com, an online publication of McGraw-Hill Construction, contains a webcast of the construction industry "matchmaking" session that the Bureau of Overseas Buildings Operations (OBO) of the Department of State held with representatives of over 900 companies on October 10, 2006 in Arlington, Virginia. The webcast provides contractors with important information on the dramatically increased embassy design and construction program of the Department of State. Contractors need to know that the State Department employs the design-build negotiated procurement process found in Section 36 of the FAR in almost all of OBO’s capital program.
The cover story, “New Marching Orders,” in the most recent edition of Constructor, published by McGraw-Hill Construction, highlights a trend in military construction that should concern small to mid-size general contractors. In the past, many projects for construction of military housing and other facilities were procured as individual contracts through sealed bid solicitations issued by the U.S. Army Corps of Engineers. Small and mid-size contractors, familiar with the local market conditions, were well positioned to compete for, win, and perform these contracts. E. Michael Powers reports that today, however, the Corps is focusing its procurement efforts on multiple-award construction contracts and indefinite delivery/indefinite quantity contracts with task orders. These contracts tend to be for greater volumes of work, resulting in contracts that exceed the bonding capacity of many small to mid-size firms.
Powers also notes that a contract to build fifty buildings at a cost of $10 million per building, spread across a large geographic area, might not even appeal to firms that have the bonding capacity to bid on such a large contract. In addition, where so much work is included in one contract, there is only one prime contractor, whereas before there could have been as many as fifty contractors performing fifty separate projects.
These large procurements are often the subject of negotiated procedures under FAR, Part 15, where price is no longer the controlling factor in determining who receives the contract. In these "best value" procurements, the experience and past performance of a larger contractor may be decisive in the Corps’ award decision.