Federal Court Rules that Negotiated IDIQ/MATOC Contracting Cannot be Used Instead of Sealed Bidding Without a Lawful and Rational Basis
In a recent prebid protest presented by our firm, Payne Hackenbracht & Sullivan, the United States Court of Federal Claims considered the protest of Weeks Marine, Inc. v. The United States (“Weeks”) challenging the decision of the United States Army Corps of Engineers, South Atlantic Division (“SAD”), to solicit proposals for maintenance dredging and shore protection projects using negotiated indefinite delivery indefinite quantity (“IDIQ”) multiple-award task order contracts (“MATOC”). The Court noted that the contemplated change to negotiated IDIQ task order contracting represented a significant departure from SAD’s prior practice of using sealed bidding, and further noted that the policy change had caused widespread industry criticism.
As grounds for its protest, Weeks asserted that SAD’s proposed change to negotiated IDIQ/MATOC task order contracting was contrary to law, and was without any rational basis. Weeks relied upon 10 U.S.C. § 2304(a) and Federal Acquisition Regulation (“FAR”) ¶ 6.401(a), mandating that an agency shall use sealed bidding procedures when (1) time permits, (2) awards will be made solely based on price, (3) discussions are not necessary, and (4) the agency reasonably expects to receive more than one bid. Weeks contended that each of these four conditions was met for SAD’s dredging contracts, and that no legal basis existed to use negotiation procedures.
The Corps of Engineers argued in opposition that SAD’s proposed IDIQ task order contracting was lawful, that the agency had wide discretion in selecting an appropriate procurement method, and that SAD’s justification for the change was reasonable under current circumstances. The Court disagreed and ruled that an agency’s discretion “does not empower an agency to employ a procurement method in violation of applicable law.” The Court ruled that SAD had not pointed to any significant changes in its procurement environment that would warrant a change to IDIQ task order contracting. The Acquisition Plan confirmed that SAD had “excelled in program execution” during the last two years and “the Court does not see any reasons or developments for moving away from the sealed bid process. Without any analysis of the applicable statutes and regulations, and without citing any significant reasons or developments, the Court held that SAD would violate 10 U.S.C. § 2304(a), FAR ¶ 6.401(a), FAR ¶ 14.103-1(a), and FAR ¶ 36.103(a) by employing IDIQ task order contracting methods.“
This is an important judicial opinion that will hopefully cause government agencies to revisit decisions to utilize contracting by negotiation in either single procurements or IDIQ contracting. When the sole justification for negotiated contracting boils down to nothing more than a desire to introduce unnecessary subjectivity into the source selection process, RFPs should not be used and sealed bidding should continue to be the preferred method. In dredging, as in many other areas of construction contracting, sealed bidding has been a successful procurement method for many years. It is a system that provides the greatest risk coupled with the greatest opportunity for reward and it is an integral part of the free enterprise system.
Of great concern to the Court was the fact that under SAD’s “new” procurement method approximately $2 billion in task order awards during the next five years would become virtually immune from any judicial or administrative bid protest review. The Federal Acquisition Streamlining Act of 1994 (“FASA”) provides that “[a] protest is not authorized in connection with the issuance of a task order or delivery order except for a protest on the ground that the order increases the scope, period, or maximum value of the contract under which the order is issued.” While SAD’s current sealed bid awards routinely are subject to bid protest review by the Government Accountability Office (“GAO”) or the Court, SAD’s task order awards would be insulated from review except in very limited circumstances. Thus, while purporting to use highly discretionary “best value” evaluation procedures in awarding task orders, SAD effectively would remove itself from any bid protest oversight. Although the Corps argued that the Court must apply the FASA provision that Congress created, the Court ruled that this provision did not authorize SAD to convert all of its procurements into task orders.
In asserting a need for a change from sealed bidding to contracting by negotiation, the Corps contradicted its own position by stating that its sealed bid approach had “excelled in program execution” during the last two years. As a result, the Court concluded that “The agency has provided no evidence that the current system is failing or in need of revision. In fact, the Court would be hard-pressed to identify any contracts better suited to sealed bid procurement than dredging. If not appropriate for dredging work, it is difficult to imagine when sealed bidding ought to be used.” (Emphasis added).
After carefully considering the Administrative Record and the parties’ arguments, the Court found that the solicitation violated applicable statutes and regulations, and that SAD’s attempted justification for the new procurement approach was without a rational basis. The Court also found that the agency’s stated desire to consider evaluation factors other than price, in the dredging industry, “is a weak justification to abandon sealed bidding.” The Court also noted that “The dredging industry consists of a small group of highly specialized contractors who are well known to SAD and some of the dredging contractors are family-owned companies with small management organizations. The major barrier to entry is the expensive excavating equipment that a contractor must acquire. Much of the dredging industry’s work is performed for the Corps of Engineers. Under these circumstances, where new entries to the business are rare, and where the contractors are well known to the agency, a responsibility determination under FAR ¶ 9.104 should suffice.”
In another important ruling the Court stated that it “does not regard a Corps of Engineers 'ombudsman' procedure included in the solicitation as a viable substitute for the judicial or administrative bid protest review that currently exists for sealed bidding.” Under the “ombudsman” procedure, the review is confined to the Corps of Engineers, at either the Contracting Officer or the ombudsman level, and that is not the same as judicial review or review by the GAO.