The Court of Appeals for the Federal Circuit has decided two cases that assure the continued use of the Multiple Award Task Order Contract (“MATOC”) in federal construction contracting. In the first case, Weeks Marine, Inc. v. United States, the United States Court of Federal Claims decided a bid protest in favor of Weeks Marine. The protest challenged the right of the South Atlantic Division of the Corps of Engineers to use MATOC procurement to solicit all maintenance dredging and shore protection projects for the next five years by establishing a MATOC pool of contractors who would compete for projects solicited on a task order basis. The Protester contended, and the Court agreed, that since sealed bidding had been used successfully in the procurement of dredging for many years, there was no basis to use contracting by negotiation, much less MATOC. The Court found that the Corps’ Acquisition Plan did not provide a rational basis for a departure from sealed bidding.
The Court of Appeals reversed the lower court and concluded that the Corps was required to “supply a reasoned chronicle of the risk assessment,” and did so “by stating the reasons for its procurement decision and the thinking behind those reasons.” Therefore, the Court concluded that as long as the Corps stated its reasons, and the thinking behind those reasons, the Court would not “second-guess” the Corps. In other words, even if the Corps’ rationale for using MATOC procurement made no sense and was not well supported, the Court would not disturb the Corps’ right to use a MATOC as long as some reasons were given. In this regard, the Court stated “If the court finds a reasonable basis for the agency’s action, the court should stay its hand even though it might, as an original proposition, have reached a different conclusion as to the proper administration and application of the procurement regulations.”
The second MATOC decision, Tyler Construction Group v. United States, involved a protest by a small business concern against the use of MATOC procurements to procure barracks construction in an eight state region. The protester contended that Indefinite Delivery Indefinite Quantity (“IDIQ”) contracts may only be used to procure supplies and services, and not construction, pursuant to FAR 16.5. MATOC procurements are solicited through the IDIQ contracting procedures specified in FAR 16.5, but that section of the FAR does not mention “construction” even once. Tyler argued that the Corps, under the guise of “innovation,” had adapted a contracting method used to procure supplies and services, like rounds of ammunition or electrical repair services, to the acquisition of large multi-million dollar buildings.
The Tyler protest also addressed the issue of improper bundling in violation of the Small Business Act. By taking individual projects, many of which were less than the $31.5 million (now $33.5 million) small business size standard for general construction, and bundling them into a $300 million MATOC procurement, the Corps effectively prevented small business concerns from competing as prime contractors. In other words, even though many small businesses could compete for projects in the $30 million range, they are excluded by the size of the bundled MATOC solicitation. In fact, both small businesses and small to medium-sized large businesses are effectively excluded from competition by MATOC procurements.
The Court of Federal Claims ruled that since the use of IDIQ/MATOC was not specifically prohibited in the procurement of construction by the FAR, it was therefore permitted. The Court also found that the Corps had conducted market research and had concluded that there was an industry consensus that bundling was “necessary and justified.” The Court of Appeals agreed with the lower court and decided that “The Corps, like other federal procurement entities, has broad discretion to determine what particular method of procurement will be in the best interests of the United States in a particular situation.”
In this writer’s opinion the widespread use of MATOC procurements to procure large dollar value construction projects is not consistent with the FAR. It is interesting that the use of the IDIQ procedure for construction was not subjected to review by the Defense Acquisition Regulations Council (DAR Council), as is commonly done when a new regulation is needed, or when there is a request for a deviation from an existing regulation. Although the Corps has taken the position that IDIQ/MATOC is an innovative method that is within its procurement discretion, we find it to be strange that a method affecting billions of dollars of construction procurement is not specifically addressed by the FAR, or the supplemental agency regulations (DFARS, AFARS, EFARS). In fact, when the Corps was challenged because it was not following its own regulations (EFARS) that addressed IDIQ contracting, it promptly rescinded those regulations. What the construction contracting community is left with is a multi-billion dollar procurement methodology that is unregulated, is ripe for abuse, and that only serves the interests of a reduced federal procurement workforce. It certainly remains to be seen whether MATOC is truly more efficient or cost-effective than traditional single project solicitations.
Most disturbing of all, is the hands-off policy adopted by the Court of Appeals for the Federal Circuit on matters of federal procurement. If the agencies can do whatever they want, as long as it is not expressly prohibited by law or regulation, and as long as they provide some reason for their decisions, the competitive opportunities that have been the hallmark of federal construction contracting will continue to be eroded. Many capable contractors have been, and will be, denied a fair opportunity to compete and, in the long run, that cannot possibly be in the best interests of the construction contracting community, or the federal government.
Michael Payne is a Partner and is the Chairman of the firm’s Federal Practice Group.