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

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 price\technical 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 price\technical 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 price\technical 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 price\technical tradeoff was conducted in accordance with the law. 

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An important decision, Serco, Inc. v. United States was issued by the United States Court of Claims last week in a case involving a government-wide acquisition contract (“GWAC”) awarded by the General Services Administration (GSA) to provide technology products and services to the entire federal government.  Sixty-two offerors competed for a chance to perform task orders under this GWAC.  In ranking the technical proposals of these offerors, GSA teams assigned adjectival ratings to various subfactors and then converted them into whole numbers ( e.g., 3, 4, 5). Combining, averaging and weighting these figures, the agency ended up with technical scores that were carried out to three decimal points ( e.g., 3.817), and it made critical distinctions among the sixty-two offerors based upon the thousandths of a point.  Based upon these technical scores, twenty-eight contractors were designated by the agency as “presumptive awardees.”  GSA then purported to conduct price reasonableness and tradeoff analyses to take into account price-but, conspicuously, none of these comparisons resulted in any of the “presumptive awardees” being displaced by a lower-priced offeror.  Indeed, GSA ultimately made awards to offerors whose prices were 59th, 60th and 61st out of the sixty-two offers-prices that the agency claims were “fair and reasonable” despite being twice as high as the lowest winning offer, as much as thirty percent higher than the independent government cost estimate, and more than two standard deviations to the mean of the evaluated prices for all the offerors.

The so-called “Alliant” GWAC is to be administered by GSA pursuant to section 5112(e) of the Clinger-Cohen Act.  Alliant is designed to provide federal agencies with a broad range of information technology (IT) products and services, including computers, ancillary equipment, software, firmware and similar applications, network design, support services, and related resources such as telecommunication and security.  Alliant contemplates the multiple-award of indefinite delivery, indefinite quantity (MA/IDIQ) contracts, with a ceiling of $50 billion, to be performed, on a task order basis, during a five-year base period and one, five-year option period.  Under the Alliant Solicitation No. TQ2006MCB0001 (the Solicitation), individual task orders could range as high as $1 billion in value; successful offerors, however, are guaranteed a minimum take of only $2,500.  Alliant offers a wide range of contract types, including fixed-price, cost reimbursement, labor-hour and time and material.

On September 26, 2007, Serco, Inc. (Serco) filed a complaint in this court challenging the award decisions and seeking a variety of injunctive relief.  Subsequently eight other unsuccessful offerors filed protests and were joined in the Serco protest. GSA issued the Solicitation on September 29, 2006. The Solicitation advised that GSA “contemplate[d making] approximately 25 to 30 awards ... but reserves the right to place fewer or more awards, depending upon the quality of the proposals received.” Those receiving awards under the Solicitation are eligible to perform task orders under the contract. The Solicitation indicated that “[a]ward will be made to responsible Offerors whose proposals are determined to provide the ‘best value’ to the Government.”

In a scholarly opinion, by Judge Francis M. Allegra, the Court concluded that GSA, “in attaching ”talismanic significance to technical calculations that suffer from false precision, made distinctions that, in their own right, likely were arbitrary, capricious and contrary to law, but certainly became so when the agency failed adequately to account for price and to make appropriate tradeoff decisions. Those compounding errors prejudiced the plaintiffs and oblige this court to set aside the awards in question and order appropriate injunctive relief.”  The Court did not agree that there was a rational basis to make distinctions between offerors on the basis of thousandths of a point. Judge Allegra ruled that “Precision of thought is not always reflected in the number of digits found to the right of a decimal point – indeed, as with other constructs, there can be, to paraphrase Holmes, a “kind of precision that obscures.”  Ultimately, Court ruled that the agency made award decisions that were “arbitrary, capricious and otherwise contrary to law.”

The Government intimated that the court should afford the agency more slack than usual, on account of the size of this procurement and the number of offerors to be evaluated.  But, the Court found that “given the extraordinary breadth of discretion already afforded to agencies in government procurements, it is hard to fathom what form a still more relaxed rule of deference might take. Would such a rule permit the adoption of procedures that would allow the agency to rely on performance information that is unverified and unresponsive to its stated evaluation criteria?  Not, it would seem, without a wholesale revision of the fairness principle embodied in CICA and the FAR - ‘a cornerstone of effective competition.’  Cibinic & Nash, supra, at 899.  Would such a rule allow the agency to treat demonstrably imprecise statistics as being precise?  Not unless deference somehow magically makes insignificant digits significant. And would this heightened deference permit the agency to dispense with any reasonable consideration of price, leaving that question for a later day?  Certainly not, again, without some substantial modification of CICA and FASA-and with Congress heading the opposite direction in tending, in recent years, toward enhancing, rather than diminishing, the importance of price.  But whatever the reach or meaning of the salvific rule defendant would have this court apply, one thing is certain-it has no foundation in the Solicitation, the FAR or the governing procurement statutes.  Per contra. While an agency certainly may choose to pursue a GWAC pursuant to its mandate to ‘efficiently fulfill the Government's requirements,’ it may not obtain efficiencies in derogation of the FAR and other governing statutes.  Nor, as should be obvious, does the raw size of a procurement afford an agency the license to engage in what otherwise would be arbitrary and capricious conduct.”

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