By: Michael H. Payne & Elise M. Carlin

Each year, a significant number of bid protests filed at the GAO are the result of inadequate discussions. Recently, the GAO released two decisions which reiterated the importance of holding meaningful discussions that do not mislead offerors during negotiated procurements.

The purpose of holding discussions in negotiated procurements is to maximize the best value to the government. Discussions are held to give offerors in the competitive range an opportunity to revise their bids to make them more competitive. The Federal Acquisition Regulation (the “FAR”) defines discussions and in what context they occur with an offeror:

Negotiations are exchanges, in either a competitive or sole source environment, between the Government and offerors, that are undertaken with the intent of allowing the offeror to revise its proposal. These negotiations may include bargaining. Bargaining includes persuasion, alteration of assumptions and positions, give-and-take, and may apply to price, schedule, technical requirements, type of contract, or other terms of a proposed contract. When negotiations are conducted in a competitive acquisition, they take place after establishment of the competitive range and are called discussions.

Requirements of Discussions

It is well established in federal procurement law that discussions between the contracting officer of an agency and an offeror must be meaningful. Once discussions have been opened, the FAR dictates that an agency “shall…indicate to, or discuss with, each offeror still being considered for award, significant weakness, deficiencies, and other aspects of its proposal…that could, in the opinion of the contracting officer, be altered or explained to enhance materially the proposal’s potential for award.” In order to be meaningful, a discussion must generally lead an offeror into specific areas of their proposal which require modification. Additionally, discussions should be as specific as practical considerations permit, and give offerors a reasonable opportunity to address any potential weaknesses or deficiencies in its proposal which could impact the offeror’s competitiveness.

Limitations on Discussions

While discussions must be meaningful, they must also not be misleading. Additionally, they must not favor one offeror over another. During discussions, the contracting officer cannot divulge one offeror’s technical solution to another, including any unique technology or innovative and unique uses of commercial items, or any other information that would compromise an offeror’s intellectual property. Additionally, any pricing information cannot be revealed without that offeror’s permission. In terms of pricing information however, the government may inform an offeror that its price is considered too high or too low and explain how that conclusion was reached. It is also within the government’s discretion to inform all offerors if there is a particular price that it has determined to be reasonable based on price analysis, market research or other methods. The government may not disclose the names of any individuals who have provided reference information about an offerors past performance. Lastly, during discussions, the government may not knowingly provide source selection information in violation of the provisions of the FAR that govern procurement integrity, or the savings provisions of the U.S. Code pertaining to Restrictions on disclosing and obtaining contractor bid or proposal information or source selection information. Once discussions have concluded, each offeror must have an opportunity to submit a final proposal revision by a common deadline.

Ewing Construction Co., Inc. Decision

On April 26, 2010, the GAO released the decision Ewing Construction Co., Inc., B-401887.3, B-401887.4. Ewing Construction Co., Inc. (“Ewing”) protested the award of a contract to Overland Corp. by the Navy for the design and construction of a rotor blade facility at the Corpus Christi Army Depot, Naval Air Station, located in Corpus Christi, Texas. Ewing argued that the Navy failed to conduct meaningful discussions and reasonably evaluate proposals. The GAO sustained the protest because of the Navy’s failure to conduct meaningful discussions, but did not discuss whether or not proposals were reasonably evaluated since it recommended that discussions be reopened, meaningful discussions be conducted and that a new source selection be made, if appropriate.

In this case, the Navy held discussions as a corrective action to an initial protest raised by Ewing. After the corrective discussions, the Navy reevaluated the proposals. During the reevaluation, the agency determined that its concerns over Ewing’s proposal were more serious than before-a deficiency, rather than a significant weakness. However, the Navy elected not to reopen discussions with the offerors, as it should have, and Ewing was never notified of its deficiency, or given an opportunity to amend its proposal to address the problem. A significant weakness would have resulted in the downgrading of its proposal, but a deficiency made it ineligible for award. Because this concern, if it remained unaddressed, would render Ewing ineligible for award, the GAO recommended that the Navy reopen discussions. Additionally, if after the next round of corrected discussions, the Navy chooses a contractor other than Overland, they are to terminate the contract for convenience and award the contract to the appropriate offeror. Ewing was awarded the costs of filing and pursuing the protest, including attorneys’ fees.

AMEC Earth & Environmental, Inc. Decision

On December 22, 2009, the GAO released the decision AMEC Earth & Environmental, Inc., B-401961, B-401961.2. In its protest, AMEC Earth & Environmental, Inc. (“AMEC”) challenged the meaningfulness of discussions conducted by the U.S. Coast Guard regarding one of up to five projects that were part of a request for proposals for design-build and construction services for the Department of Homeland Security. Particularly at issue were the discussions regarding AMEC’s selection of a particular software program, and AMEC’s reasonable, yet inaccurate and uncorrected, assumption that the project site was a wetlands area.

During discussions, AMEC was only asked to address specific questions regarding its use of a particular software program. Due to the nature of the questions, AMEC could not have reasonably understood the true nature of the agency’s concern with their use of the software. Because of this, the GAO determined that the discussions were misleading. “An agency may not mislead an offeror – through the framing of a discussion question or a response to a question – into responding in a manner that does not address the agency’s concerns, or misinform the offeror concerning a problem with its proposal or about the government’s requirements.” The agency responded by saying that the use of the software was not considered unacceptable, nor was the weakness considered “significant,” and that a determination by them that the use of the software was a weakness would have been tantamount to imposing an undisclosed requirement.

The GAO ruled that while it is true that the FAR only requires agencies to address “significant” weaknesses and deficiencies during discussions, the record revealed that the agency went well beyond the minimal requirements in its discussions with the other eight firms in the competition. In fact, in its discussions with the other offerors, the agency addressed nearly every weakness, almost verbatim, regardless of whether or not they were “significant.” Given the requirement of the FAR that the agency shall not engage in exchanges that “favor one offeror or another,” it was incumbent upon the agency to hold broad discussions with all offerors equally. The GAO also found the agency’s concerns about directing AMEC toward a particular technical approach regarding its use of software to be misplaced. Had the agency simply identified its particular concerns with the use of the software to it, AMEC would have been allowed to make a decision based on a clear understanding of the agency’s concerns regarding its technical proposal.

In its proposal, AMEC indicated to the government that it reasonably understood that the project would take place in a wetlands area. AMEC’s decision was based on research of publicly available information and it was the only offeror who identified the project site as such. The agency did not consider this designation regarding the project site in its evaluation of AMEC’s proposal. Since AMEC was the only offeror to make this conclusion based on publicly available information, the agency was obligated to clarify the agency’s understanding of the project site to AMEC. In response, the agency relied on a report that was not publicly available which indicated that the state of New Jersey did not consider the project site to be a wetlands area. The GAO was unsatisfied with this response and held that the agency’s failure to clarify its position on the issue violated the fundamental principle of negotiated procurements that a solicitation must provide for the submission of proposals based on a common understanding of the agency’s requirements.

The GAO recommended that the agency reopen the competition and hold meaningful discussions with AMEC, and other offerors, as necessary. Further, the GAO indicated that the discussions with AMEC, at a minimum, should address the agency’s concerns regarding AMEC’s choice of software and clarify its position regarding the wetlands issue. The GAO also ruled that agency was required to reimburse AMEC’s costs for filing and pursuing the protest, including attorneys’ fees.

After losing a negotiated procurement, it would be wise to request a debriefing from the agency. While at the debriefing, it is important to uncover not only the reasons behind the rejection, but also to determine the nature of the discussions with the competing offerors. If you believe the government conducted inappropriate discussions during a negotiated procurement which you lost, it may be appropriate to file a bid protest. The Cohen Seglias Pallas Greenhall & Furman Federal Construction Practice Group can help you determine if you have a valid bid protest and help you through the process.

Michael Payne is a Partner and is the Chairman of the firm’s Federal Practice Group.