By: Michael H. Payne

There is an old saying that “you win some, and you lose some.” Well, if you are a construction contractor who competes in the world of Multiple Award Task Order Contracting (“MATOC”), you usually lose. Under sealed bidding, which dominated the procurement of federal construction for many years, a contractor who was not the low bidder could always compete for the next project. In the MATOC arena, a contractor who is not selected to be one of the chosen few to compete for task orders over what is often a three to five year period may not be able to compete for the “next project” for a long time. What this means is that there are a few winners, but there are many more losers.

Even if a contractor is fortunate enough to be selected as one of the MATOC master contract holders, there is no guarantee of being selected for future task orders. Every construction MATOC features a “seed” project that serves as the basis of the price competition for the evaluation of the offers on the master contracts. If a contractor does not win the seed project, there may not be another task order for a long time, and the award of the ensuing task orders may go to someone other than the low bidder. The reason for this is that most construction MATOCs are negotiated, best value, procurements (“RFPs”), and past performance, experience, technical merit, quality of personnel, small business subcontracting, and other evaluation factors may come into play. Although it can be argued that the award of a master MATOC should pre-qualify all of the MATOC holders, we have heard complaints from a number of contractors who lose out in the competition for task orders because they do not score well on past performance, or one of the other evaluation factors. This has never made sense to me because if a contractor has won the fierce competition for one of the master MATOCs, price should be the discriminator for the task order awards. If the contractor is not technically qualified to receive a task award on a lowest price proposal, why was the contractor selected as one of the MATOC holders in the first place?

Those who are really left out in the cold, however, are the construction contractors who fail to win one of the master MATOC awards. Simply because a contractor may not have scored particularly well technically, or simply because the contractor’s price on a seed project may have been too high, does not mean that it will always be that way. A contractor can do a much better job of putting together a competitive proposal the next week, but if all of the upcoming projects are tied up in MATOCs, the door is closed. Simply because a contractor submits the lowest price on a seed project does not mean that the contractor will be similarly competitive on future projects. It is for this reason that I have been a frequent critic of indefinite delivery/indefinite quantity (“IDIQ/MATOC”) contracting for construction. I do not believe that FAR 16.5, dealing with various indefinite delivery contracts, was ever meant to be applied to construction, and I believe that the system unfairly penalizes a lot of very qualified contractors who simply are not adept at proposal writing. Construction was successfully procured using sealed bidding for many years, and that system was more open and fair. The new system simply results in too many losers and not enough winners. (See the earlier article “Has the Corps of Engineers Gone MATOC Crazy?”).

Michael H. Payne is the Chairman of the firm’s Federal Practice Group and, together with other experienced members of the group, frequently advises contractors on federal contracting matters. He also serves as the Executive Director of FedCon Consulting, an ancillary business of the firm that involves former contracting officers, procurement and technical personnel, as well as lawyers, in providing assistance to federal construction contractors in the preparation of proposals.

By: Edward T. DeLisle

On December 22, 2010, the VA announced that it had selected the first twenty (20) mentor-protégé teams to participate in its newly minted Mentor-Protégé Program. The program is designed to assist firms that have already been verified as veteran-owned or service-disabled, veteran-owned small businesses by the VA. Eligible firms are permitted to team with mentors, who are expected to provide developmental assistance to their protégé(s). In return for providing assistance to protégé firms, the VA has stated that mentors can expect “proposal evaluation consideration” with regard to proposals submitted on “best value” solicitations. Moreover, large business prime contractors serving as mentors can receive subcontracting plan credits in connection with a specific VA contract. Protégé firms are limited to one mentor at a time and can only participate in the program twice. There are no specific limitations such as this placed on mentor firms.

The VA expects to name five (5) more mentor-protégé teams this month. After this month, the next set of teams will be selected in August, 2011. For additional information on the program, interested contractors should review the VA’s Mentor-Protégé Program Guidebook.

Edward T. DeLisle is a Partner in the firm and a member of the Federal Contracting Practice Group.

By: Michael H. Payne

The recent increase in the use of Indefinite Delivery/Indefinite Quantity (“IDIQ”) contracting for construction has become even more evident by looking at the “FY 2011 – Forecasted Acquisition Strategy” issued by the Jacksonville District of the Corps of Engineers. A review of the list reveals that the majority of the construction work in the coming year will be awarded in the form of task orders under existing Multiple Award Task Order Contracts (“MATOC”), or under task orders on new MATOCs to be issued. The Jacksonville District is not alone in this trend and there is an unmistakable decline in the number of contracts available for full and open competition.

I have been a frequent critic of the use of IDIQ contracts for construction because I do not believe that the drafters of the FAR ever envisioned that the system described in FAR 16.504 for the purchase of supplies and services on an IDIQ basis would ever be used for construction. Nevertheless, that is exactly what has happened as contracting agencies continue to insist that IDIQ/MATOC contracting is more “expedient.” Even more disturbingly, most of these solicitations are being issued as RFPs (negotiated procurements) in total disregard for the FAR 36.103 preference for sealed bidding in the procurement of construction.

This consolidation of procurements could not come at a worse time for the construction industry. As state, local, and commercial contracting opportunities have declined during the recession, many contractors have looked to the federal market for work. What they have found is a large federal construction budget that is often used to fund various forms of small business set-asides, including MATOC set-asides, and various large-dollar multi-state IDIQ/MATOC procurements. There is, therefore, an ever-growing pool of qualified construction contractors who have fewer contracting opportunities. The result of all this is that both small and large business contractors are being denied the opportunity to effectively, and fairly, compete for billion of dollars worth of federal construction. The federal government, the construction industry, and the taxpayers all end up being the losers under this system.

Michael H. Payne is the Chairman of the firm’s Federal Practice Group and, together with other experienced members of the group, frequently advises contractors on federal construction matters.

By: Edward T. DeLisle

The SBA issued a press release yesterday regarding its new “Small Business Teaming Pilot Program”, which was established as part of the Small Business Jobs Act of 2010. The program will involve “training, guidance, counseling, mentoring and procurement assistance to small businesses” that are interested in teaming arrangements on federal projects. The SBA expects to issue grants to various national organizations during the 2011 fiscal year, who will then work with the SBA and other governmental agencies in an effort to educate and assist interested companies. Organizations interested in obtaining grant monies through the program must submit applications to the SBA by no later than February 25, 2011.

Edward T. DeLisle is a Partner in the firm and a member of the Federal Contracting Practice Group.

By: Edward T. DeLisle

This week the Department of Veteran’s Affairs announced that it will require all companies that wish to receive set-aside contracts as veteran-owned, or service-disabled, veteran-owned, businesses to verify their status. This announcement was made as part of the 2010 Veteran’s Benefit Act and is geared toward eliminating fraud and abuse. As reported by Government Executive.com, last month the VA began contacting companies currently listed in its contractor database, VetBiz.gov, and informed them that that they had ninety (90) days to provide the VA with business documents proving eligibility to qualify for set-aside contracts issued by, or on behalf of, the VA. The measures currently being put in place have resulted, in part, due to a GAO report issued in November of 2009, which cited numerous instances of fraud and abuse in the system.

Edward T. DeLisle is a Partner in the firm and a member of the Federal Contracting Practice Group.

By: Edward T. DeLisle

On October 4, 2010, the Small Business Administration issued a Final Rule allowing for the implementation of the long-awaited set-aside program for women-owned businesses. The program is designed to assist federal agencies in achieving the current 5% statutory goal for the award of contracts to such companies. Pursuant to the current version of the Rule, woman-owned businesses will not be required to identify instances of past discrimination to qualify for the program, but they will have to adhere to certain income and wealth restrictions, unless the industry they operate in qualifies as a "substantially underrepresented" industry. Construction contractors have not been identified as "substantially underrepresented" by SBA and, therefore, as currently constituted, the income and wealth restrictions will apply to the construction industry.

At this juncture, the Final Rule is in the midst of its 120 day implementation stage and is scheduled to go into effect on February 4, 2011.  At some point prior, the FAR Council will issue a new clause relative to this program. Moreover, keep an eye out for a few potential changes issued by members of the 112th U.S. Congress, which is being sworn in today. In one form or another, this change to the federal procurement landscape will occur in 2011.

Edward T. DeLisle is a Partner in the firm and a member of the Federal Contracting Practice Group.

By: Michael H. Payne

To protest or not to protest, that is the question. That may sound a little like William Shakespeare, but it actually is a question frequently posed by federal contractors. Particularly in the world of “best value” contracting, where subjective evaluation factors are applied to make source selections, contractors often feel that award decisions are unfair. A bid protest offers the possibility of relief in the form of corrective action by the agency, or in the form of a favorable protest decision by the agency, the GAO, or the United States Court of Federal Claims. Successful protests, however, require knowledge of procedural rules, an understanding of applicable procurement regulations, and knowledge of the extensive body of GAO and federal court decisions.

Put simply, it is a waste of time and money to file a protest that is untimely or that does not lay out the basis for the protest properly. Similarly, it is very important to know whether a procurement regulation addresses the subject of a protest, or whether there have been prior GAO or court decisions that help, or hurt, the contractor’s case. If a prior decision dealing with similar facts and issues agrees with the contractor’s position, it may be possible to convince the agency to take corrective action by simply providing the Contracting Officer with a copy of the decision. On the other hand, if a prior decision has ruled against the contractor, it may not be advisable to proceed with the protest unless you have found a way to distinguish your facts from those in the unfavorable case.

A federal contractor has the option of filing a protest with an agency, the GAO, or the U.S. Court of Federal Claims (See FAR 33.1). While agency and GAO protests can be filed by letter, the letter must explain the basis for the protest in detail with citations to regulations and case law. This is particularly important when filing a GAO protest because the GAO will summarily dismiss a protest that does not provide a sufficient basis in fact and law. (See FAR 33.104 and 4 CFR Part 21 for the rules that govern GAO protests). When filing an agency protest, consideration must be given to the fact that you are essentially appealing to the same person, the Contracting Officer, who took the action that gave rise to the protest. Although there are exceptions, you may not receive an objective review if you file an agency protest. (See FAR 33.103 for the rules that govern agency protests). Generally speaking, both agency and GAO protests must be filed within 10 calendar days of the date when the contractor knew, or should have known, of the basis for the protest. If the protest involves a challenge to the solicitation itself, the protest must generally be submitted before the date for receipt of bids or proposals. (Note: In a protest of a negotiated procurement, the GAO requires that the protester must participate in a debriefing as a prerequisite to the filing of the protest. Accordingly, the protester has 10 days from the date of the debriefing, but the protest must be filed within 5 days if the protester wants to prevent the performance of the project while the protest is pending).

In the case of a Court of Federal Claims protest, there is no specific time limit, and a debriefing is not a prerequisite. It is more complicated, and expensive, to file a federal court protest, however, because a complaint, a memorandum of law, and a number of related documents required by the court’s rules must be prepared. Unlike an agency, or GAO protest, a Court of Federal Claims protest will generally be decided after each side files briefs in support of cross-motions for “Judgment Upon the Administrative Record.” The briefing is followed by an oral argument before the judge assigned to the case. In my experience, this procedure is more open and fair, and frequently holds out the highest probability of success. In view of the expense involved, however, a Court of Federal Claims protest (or any other type for that matter) should not be undertaken without first receiving legal advice about the prospects for success.

As an attorney who has been advising contractors on protest matters for over thirty years, I find the procedure involving protests on negotiated procurements to be particularly frustrating. Unlike sealed bidding, where everything is out in the open, negotiated procurements are shrouded in secrecy. Proposals are closely guarded and only the award price is generally disclosed. While an unsuccessful offeror may learn a little bit about why he was not selected during a debriefing, the sad reality is that it is often impossible to know whether there is a sound basis for a protest without first filing a protest. The reason for this is that until the agency’s internal documents in support of the source selection are reviewed, it is virtually impossible to tell whether the source selection was justified. I find this frustrating because I am often forced to tell my client that I cannot offer an opinion on the probability of success until after the protest is filed and the agency’s documents are reviewed. There are other times, of course, when the prospects for success, or failure, are known at the outset and the decision to proceed with a protest is much easier to make.

To add to the frustration, an attorney is not permitted to share the agency’s documents, or to reveal “protected” information to the client. It is routine, in the case of GAO and Court of Federal Claims protests, for the agency’s documents to be provided only after a Protective Order has been agreed to by the attorney and approved by the GAO or the Court. What that means is that only the protester’s attorney is permitted to review the agency’s documents. It is imperative, therefore, that a contractor be represented by an attorney who understands procurement law and who can be relied upon to make sound judgments based upon what is revealed in the agency’s documents. In my practice, I have frequently advised a client to withdraw a protest after I have reviewed the agency’s documents. This saves time and money, and prevents an unfavorable decision. If the documentation supports the protest, however, we can then forge ahead with the knowledge that a well-supported argument will be presented.

It is not uncommon for contractors to fear retribution by the agency if they file a protest. I have not found that to be the case in my experience, although I certainly would advise against filing a protest that makes a personal attack or that is frivolous. Given the tough economic and highly competitive time in which we live, government agencies have become accustomed to bid protests and they do not harbor any ill will. In the last analysis, protests keep government officials on their toes and help to assure that contracts are awarded fairly.

Michael H. Payne is the Chairman of the firm’s Federal Practice Group and, together with other experienced members of the group, frequently advises contractors on bid protest matters.

By: Robert E. Little, Jr.

Individual sureties are natural persons – as opposed to corporations and limited liability companies – who offer to bind themselves on bid, performance, and payment bonds. Individual sureties are acceptable from prime contractors on federal construction projects, provided the individual owns and pledges sufficient assets to cover the appropriate percentage of the value of the bid or contract. However, they are not eligible for listing on the Department of Treasury’s list of approved corporate sureties. This means that neither they nor their assets have been federally vetted.

Attendees of the Bonding Basics segment of the 5th Annual National Veterans Small Business Conference and Expo, where I was a panelist representing the Naval Facilities Engineering Command (NAVFAC), were treated to a discussion about individual sureties. Although some attendees may have left the conference with the impression that individual sureties are a simple last resort for firms that cannot obtain bonding through corporate sureties or with the assistance of the U.S. Small Business Administration’s (SBA) Surety Bond Guarantee Program, individual sureties are not so simple. There have been many occasions where contractors have lost out on federal government contracting opportunities because they did not understand the significance of establishing the acceptability and value of the asset or assets pledged by an individual surety.

During my 17 years as senior counsel at NAVFAC headquarters, I observed that the Navy’s experience with individual sureties’ pledged assets mirrored that of the Federal Highway Administration (FHA) in the 2009 case Tip Top Construction, Inc. v. U.S.  I saw pledges of everything from non-existent bank stock and untradeable securities to “corporate reinsurance debentures” printed on very nice-looking paper.

Continue Reading Federal Government Bonding Basics: Individual Sureties

By: Edward T. DeLisle & Craig Schroeder

Last year, the United States Association of Veterans in Business (“USAVETBIZ”) urged Congress for a government-wide preference in contracting and set-aside programs that extended the existing preference for service-disabled veteran owned small businesses (“SDVOSB”) to all veteran-owned small businesses.  While that has not happened yet, the set aside program for SDVOSBs has been recently strengthened.

On October 7, 2010, the Government Accountability Office (“GAO”) issued a decision interpreting the Veterans Benefits, Health Care, and Information Technology Act of 2006, 38 U.S.C. sections 8127-8128 (Supp. III 2006) (“the Act”) to require that, in certain circumstances, architect/engineer service contracts must be set aside by the Department of Veterans Affairs (“VA”) for SDVOSBs.  In the Matter of Powerhouse Design Architects & Engineers, Ltd., Powerhouse, a Pittsburgh SDVOSB, protested the terms of eight Sources Sought Notices (SSN) issued by the VA for A/E services. Powerhouse asserted that the agency improperly failed to set aside these procurements for SDVOSB firms as required by the Act and its implementing regulations. The procurements were conducted pursuant to the Brooks Act, 40 U.S.C. § 1101 et seq. (Supp. III 2006), and Federal Acquisition Regulation (FAR) subpart 36.6. Consistent with the Brooks Act, the agency publicized its need for A/E services on FedBizOpps. Powerhouse challenged the terms of the SSNs, which were issued on an unrestricted basis.

In sustaining the protest, the GAO analyzed the Act and its implementing regulations. It noted that the Act provides that “. . . a contracting officer of [the VA] shall award contracts on the basis of competition restricted to small business concerns owned and controlled by veterans if the contracting officer has a reasonable expectation that two or more small business concerns owned and controlled by veterans will submit offers and that the award can be made at a fair and reasonable price that offers best value to the United States.” 38 U.S.C. § 8127(d). The GAO then went on to look at the regulations, which state that “the contracting officer shall set aside an acquisition for competition restricted to SDVOSB concerns upon a reasonable expectation that: (1) Offers will be received from two or more eligible SDVOSB concerns[4] and; (2) Award will be made at a reasonable price.”

The GAO found “nothing in the VA Act or the VA regulations that exempts A/E procurements from the set-aside requirement.” It also found that the agency’s defenses to application of the set aside requirement meritless. Accordingly, the GAO held that “the agency [should] determine whether there is a reasonable expectation that it would receive offers from two or more eligible SDVOSB concerns and award would be made at a reasonable price. For each requirement where there is such an expectation, we recommend that the VA solicit the requirement on the basis of a competition restricted to SDVOSB concerns.” Powerhouse was awarded its costs for pursuing the protest, including reasonable attorneys’ fees.

While USAVETBIZ is still seeking a veteran-wide preference, the Powerhouse decision should be considered a victory for all veterans, service-disabled or otherwise.

Edward T. DeLisle is a Partner in the firm and a member of the Federal Contracting Practice Group.  Craig A. Schroeder is an Associate in the firm’s Federal Practice Group. 

By: Edward T. DeLisle

On September 23, 2010, we wrote an article regarding the current status of the HUBZone priority fight between the GAO, the Court of Federal Claims and a number of federal agencies. That article followed another that we wrote on this issue on August 27, 2010. In a series of cases, the GAO and the Court of Federal Claims took the position that contracting officers were required to consider set-aside contracts for HUBZone entities, prior to considering set-asides for any other small or small, disadvantaged companies. In reaching this conclusion, the GAO and the Court of Federal Claims focused on the enabling legislation for the HUBZone program, which stated:

Notwithstanding any other provision of law…a contract opportunity shall be awarded pursuant to this section on the basis of competition restricted to qualified HUBZone small business concerns if the contracting officer has a reasonable expectation that not less than 2 qualified HUBZone small business concerns will submit offers and that the award can be made at a fair market price.

Based upon this language, the GAO and the Court of Federal Claims took the position that contracting officers did not have any discretion in deciding whether to set-aside a contract for HUBZone entities. They had to do so, unless they could show that there were not at least two qualified HUBZone companies that would submit offers at a reasonable price. That has all changed.

On September 27, 2010, President Obama signed the 2010 Small Business Jobs Act. As part of the Act, the language of the HUBZone statute was changed. The legislation now states that “a contract opportunity may be awarded pursuant to this section”, eliminating the mandatory nature of the original version. Based upon this simple change, the HUBZone program has been placed on equal footing with all other small and small, disadvantaged business programs, including, but not limited to, those relating to Service-Disabled, Veteran Owned Small Businesses and 8(a) companies.

As we stated in our last article, it was not likely that Congress intended to establish a priority for HUBZone companies. The problem was borne out of sloppy drafting. That drafting problem has now been corrected. It will be interesting to see how this change impacts the HUBZone program in the months to come.

Edward T. DeLisle is a Partner in the firm and a member of the Federal Contracting Practice Group.