We recently reported (see our earlier blog article) the decision of the United States Court of Federal Claims in BLR Group of America, Inc. v. United States, issued on November 25, 2008, in which the Court opened the door to contractor challenges of unfair or incorrect performance evaluations.  Coming literally on the heels of the BLR case, the Court issued another decision on December 9, 2008, Todd Construction Co., Inc. v. United States, denying a government motion to dismiss and holding that the Court had the jurisdiction to consider a challenge to a contracting officer’s decision regarding a contractor’s performance evaluation.  The Court held that Todd had submitted a “claim” within the meaning of the Contract Disputes Act of 1978 because, on March 22, 2006, the Government issued its proposed final evaluations of Todd’s work, and on April 20, 2006, Todd submitted its comments protesting those evaluations.  The Government issued final evaluations on July 21, 2006, and Todd submitted both a claim and a supplemental claim to the Department of the Army, asserting regulatory violations in the preparation of the evaluations and lack of factual accuracy. On April 25, 2007, the contracting officer wrote to Todd, indicating the letter “serves as my final decision regarding your performance on the above Task Order” with a subject line “Final Contracting Officer Decision.”  Based upon these facts, the Court held that “this is a final decision of the contracting officer upon a written demand.”

In 2003, Todd Construction received two task orders from the United States Army Corps of engineers (“Corps”) for roof repair of buildings at the Seymour Johnson Air Force Base in North Carolina, and the work was completed in September of 2005. On March 26, 2006, the Corps issued proposed final evaluations rating Todd’s overall performance on the work as unsatisfactory.  Todd submitted comments to the contracting officer explaining why, in its view, those ratings were unmerited, but the contracting officer nonetheless issued final unfavorable evaluations on July 23, 2006.  In August of 2006, Todd appealed the contracting officer’s decision to Ms. Rita Miles of the Department of the Army, alleging that the Government (1) violated the applicable performance review procedures set forth in Army Corps of Engineers Regulation 415-1-17 and (2) arbitrarily issued evaluations unsupported by the facts.  Ms. Miles apparently provided some documents to a vice-president of Todd, and Todd responded to that communication on October 2, 2006.  Ms. Miles rejected Todd’s appeal on April 25, 2007.  The negative evaluations were then made part of the Construction Contractor Appraisal Support System (“CCASS”).

The government’s motion to dismiss contented that the Court lacked jurisdiction because Todd’s challenge to the accuracy and procedural propriety of performance evaluations was not a “claim” within the meaning of the Contract Disputes Act because it is not made “as a matter of right” and does not arise from or relate to the contract. Specifically, the government contended that [w]here, as here, the contractor’s claim is that the Government breached its internal policies, rather than the provisions of the contract, such a claim cannot properly be considered a claim ‘relating to the contract.’” The Court disagreed and concluded that “this is a ‘final decision’ of the contracting officer upon a ‘written demand,’ and the Court further concluded that Todd made that written demand ‘as a matter of right.’”

The Court further stated that Federal regulations require that for construction contracts the “contracting activity shall evaluate contractor performance and prepare a performance report” “in accordance with agency procedures,” and that the report must be “reviewed to ensure that it is accurate and fair.” FAR 36.201.  The Corps has set forth detailed procedures to be followed in assessing contractor performance, with additional steps to be taken when the rating will be unfavorable.  Army Corps of Engineers Regulation 415-1-17(5)(c)(1).  In this case, Todd alleges that those procedures were not followed and that the evaluations it received were not, in fact, accurate and fair.  To the extent plaintiff asserts that when the Government prepares a performance evaluation that will be made part of the record upon which its future submissions will be judged, it is entitled to an accurate and fair performance evaluation prepared in accordance with the regulations, it makes that request “as a matter of right.” Alliant Techsystems, Inc. v. United States, 178 F.3d 1260, 1265 (Fed. Cir. 1999) (observing that the “claim must be a demand for something due or believed to be due rather than, for example, a cost proposal for work the government later decides it would like performed”); BLR Group of Am. v. United States, No. 07-579C, at 10 (Fed. Cl. Nov. 25, 2008).

While the Court has scheduled further briefing by the parties as to what should be the appropriate remedy, the decision comes as yet another welcome advance in the willingness of the Court to look into the fairness of contractor performance evaluations. In the past, government agencies have acted with impunity and have leveraged their power to issue poor performance ratings in order to extract concessions from contractors during performance. There is no question, moreover, that the power to reduce a performance rating has had a chilling effect on the filing of claims – a right that is granted by law and regulation. The Court further noted that “the creation of mandatory performance reviews, databases archiving those reviews, and the requirement to consider those archived materials in future contract awards means that a negative review is potentially devastating to a contractor, who may have no opportunity—or very little opportunity—to mitigate the impact that review will have on future awards.”  Accordingly, “there are sound reasons, as Judge Sweeney recently explained, to address performance evaluations as issues of contract performance rather than as part of a bid protest when the contractor seeks future government contracts.”  See BLR Group of Am. v. United States, No. 07-579C, at 17 (Fed. Cl. Nov. 25, 2008).

The BLR and the Todd cases make it clear that contractors do not have the right to simply challenge a performance evaluation by filing an appeal directly to the Court. There must first be a “claim” that is submitted to the contracting officer challenging the decision and explaining why the contractor believes that the performance rating should be changed. If the contracting officer then issues a decision denying the “claim,” or if the contracting officer fails or refuses to respond within a reasonable time, the contractor may then appeal the contracting officer’s decision to the Court of Federal Claims. (The jurisdiction of the boards of contract appeals is not as broad as the Court’s and the boards have not been as receptive to contractor challenges to performance evaluations). Because this is an evolving area of the law, however, and because there are procedural hurdles that must be overcome, it is strongly suggested that contractors seek legal counsel before undertaking an appeal of this nature.

A decision just published by the Government Accountability Office ("GAO"), Matter of Burchick Construction Co., mpany, involved a request for proposals issued by the Department of Veteran Affairs ("VA") for the construction of an ambulatory care center . After receiving five proposals and evaluating the technical evaluation factors, the VA conducted discussions with the offerors that only addressed their price proposals. The VA determined that the offeror providing the best value was Massaro Corporation at a firm fixed price of $38,530,000. Burchick Construction Company, whose price proposal of $36,686,000 was the lowest price offered, challenged the award of the contract to Massaro.

During the evaluation of technical proposals, the VA had determined that Burchick’s proposal contained "weaknesses" in a number of factors, including past performance, identification of key personnel, and small business participation. Based on these perceived weaknesses, the VA scored Burchick with a total of 50.8 points out of a possible technical score of 100 points. The VA had given Massaro a score of 67.3 points. When the VA decided to discuss the price proposals, it also decided that it would not conduct discussions with the offerors with respect to the firms’ technical proposals, because "none of the offerors could materially improve its technical proposal."

 

Burchick contended that the VA did not conduct meaningful discussions since the VA did not apprise Burchick of, or provide it with the opportunity to address, the significant evaluated weaknesses in its technical proposal. Burchick explained that it could have addressed each of the VA’s concerns that resulted in the downgrading of its technical evaluation.

 

While the GAO conceded that agencies have considerable discretion in determining whether and how to conduct discussions in a negotiated procurement, it found that where discussions are conducted, an agency must identify deficiencies and significant weaknesses, at a minimum, in the proposals of each offeror in the competitive range. The GAO concluded that discussions must be meaningful, meaning that the discussions must be sufficiently detailed so as to lead an offeror into the areas of its proposal requiring amplification or revision.

 

The GAO found that the VA failed to conduct meaningful discussions with Burchick, and that there was a reasonable possibility that Burchick was prejudiced, given that it offered the lowest price and could have addressed the VA’s concerns such that it may have been offering the "best value" to the government. The GAO sustained the protest and recommended that the VA conduct discussions with the offerors about the technical proposals, and make a new source selection decision.

The GAO also criticized the agency’s reliance on a numerical comparison of the proposals to determine "best value." While not specifically challenged by Burchick, the GAO noted that a mechanical comparison of the technical and price point scores is not a valid substitution for the qualitative assessment of the technical differences or the benefits associated with a higher priced proposal. Point scores are merely guides, and the record must contain adequate documentation of the price/technical tradeoff to support an agency’s judgment concerning the significance of the differences is reasonable and adequately justified in light of the evaluation scheme. 

 

It should be noted that the Federal Acquisition Regulation does address the extent of the discussions which are to be conducted with offerors in the competitive range. FAR 15.306(d)(3) provides that:

 

At a minimum, the contracting officer must, subject to paragraphs (d)(5) and (e) of this section and 15.307(a), indicate to, or discuss with, each offeror still being considered for award, deficiencies, significant weaknesses, and adverse past performance information to which the offeror has not yet had an opportunity to respond. The contracting officer also is encouraged to discuss other aspects of the offeror’s proposal that could, in the opinion of the contracting officer, be altered or explained to enhance materially the proposal’s potential for award. However, the contracting officer is not required to discuss every area where the proposal could be improved. The scope and extent of discussions are a matter of contracting officer judgment.

 

While it is not uncommon for the GAO to defer to the discretion afforded the agency in negotiated procurements, that deference, as demonstrated in the Burchick decision, is not absolute. In instances where, as here, the agency’s actions are clearly not in accordance with the requirements of the FAR, seeking redress in a protest before the GAO can sometimes result in a favorable outcome.

In an interesting decision issued by the United States Court of Federal Claims on November 25, 2008, in a case entitled BLR Group of America, Inc. vs. United States, the Court ruled that it had jurisdiction to consider a contractor’s claim that a Contractor Performance Assessment Report (“CPAR”) was “false and highly prejudicial.” The case arose because the Air Force had assigned a final performance rating of “Marginal” to the contractor in several categories, and had refused to amend the rating pursuant to a rebuttal presented by the contractor. Instead, the Air Force disseminated the rating by posting it on the Past Performance Informational Retrieval System (“PPIRS”), a database of performance ratings accessed by contracting officers while making contractor responsibility determinations and while conducting past performance evaluations during the source selection process on negotiated procurements. At a time when contractors are experiencing the rapidly growing use of “best value” negotiated procurements, the accuracy and fairness of contractor performance evaluations can be critical to a contractor’s ability to successfully compete for government contracts.

The Court did not address the merits of the contractor’s contention that the performance rating was “false and highly prejudicial,” but simply ruled that the Court had jurisdiction to consider the case. The government had filed a motion to dismiss and cited a number of Armed Services Board of Contract Appeals decisions where the Board had declined to consider appeals based on challenges to performance evaluations. The Court refused to follow the Board’s decisions (the Court of Federal Claims is not bound by the decisions of the various boards of contract appeals) and concluded that a contractor could file a claim under the Contract Disputes Act of 1978. In doing so, the Court focused on the Federal Acquisition Regulation (“FAR”), which provides that a claim is “a written demand or written assertion by one of the contracting parties seeking, as a matter of right, the payment of money in a sum certain, the adjustment or interpretation of contract terms, or other relief arising under or relating to this contract.” See FAR 52.233-1. The Court also noted that the contractor was not appealing the performance evaluation itself, and concluded that a contractor’s claim requesting a change to a performance evaluation is a proper mechanism, and provides the proper jurisdictional predicate, to challenge an adverse performance evaluation in the Court of Federal Claims. 

 

In addition, even though the contracting officer had not issued a final decision, the Court ruled that the contractor had made its claim to the contracting officer for a fair and accurate CPAR on January 12, 2007, and that the contracting officer, more than twenty-two months later, had failed to issue a final decision in conformance with 41 U.S.C. 605(a).  The Judge then stated that “Because twenty-two months exceeds the length of time that the court considers “reasonable” for the contracting officer to issue a decision in this case, the court deems the claim denied by operation of 41 U.S.C. § 605(c)(5), which allows plaintiff to pursue the instant appeal.” In other words, the failure of the contracting officer to issue a decision within a reasonable time was treated as a “deemed denial” entitling the contractor to file an appeal.

 

The Court not only held that it had the jurisdiction to consider the case, but it also stated that a contractor is legally entitled to a fair and accurate performance evaluation. In view of what has frequently been the use of performance evaluations as a tool to unfairly punish contractors, and to intimidate them into not filing claims for fear that they will receive lower performance ratings, this decision comes as a welcome leveling of the playing field. We have always felt that the statutory right that contractors have to file claims and appeals should not be diminished by fear of reprisal. All claims should be evaluated on their merits. 

 

Please see the Federal Construction Project Manager’s Bulletin, November 2008, a publication of Construction Contract Specialists, Inc., for an excellent article entitled "The Contractor Performance Evaluation System (Revisited)," authored by Paul Perkins, that addresses the BLR decision and revisits an earlier article. Mr. Perkins presents interesting background information on the contractor performance evaluation system and provides the author’s perspective as a former contracting officer, project manager, and construction consultant.

 

This has been a banner year for ethics in government contracting. This intense focus on integrity and honesty in business is evident in the evolution of the rules of the game-the Federal Acquisition Regulation. Just last December, changes to the FAR mandated contractors to “conduct themselves with the highest degree of integrity and honesty” and to document how they planned to achieve this standard in a Code of Business Ethics and Conduct (see our January 2008 blog article). In addition, the requirements for contractors were stepped up to include prominently displayed hotline posters to facilitate the reporting of violations. 

Before the initial changes were passed, public comments were sought regarding the proposed legislation. Review of these comments revealed two paramount concerns: the exemption of foreign contracts, and the exemption of contracts for the acquisition of commercial goods. The first of these was addressed in April when the House voted to close a loophole in the original ethics provisions (see our April 2008 blog article). Initially, contracts performed outside of the United States were exempt from the requirements-an odd exception considering that the new rules were initially drafted in response to the flagrant abuses of the federal procurement system abroad. The second concern regarding commercial contracts was addressed shortly thereafter. 

Early this summer, the Department of Justice demonstrated its continued commitment to cracking down on ethics in contracting when they went a step further and proposed additional modifications to the FAR. These proposals gave teeth to the earlier provisions by including the foreign and commercial contracts mentioned above under the business ethics umbrella. Additionally, they imposed new requirements on contractors such as reporting violations of the civil False Claims Act, while adding knowing failure to timely report such violations as an additional cause for debarment or suspension under FAR subpart 9.4.  As in the original ethics rules, small business were still not required to have a formal awareness/training program and internal control system, but the requirement to report violations of the civil False Claims Act did apply to them, along with the inclusion of foreign contracts and contracts for the acquisition of commercial goods to the ethics rules. 

These new ethics rules were enacted on June 30, 2008, when President Bush signed the supplemental appropriations bill,  H.R. 2642 . While this bill required contractors to report violations of federal law and overpayments received, many questions remained, such as to whom contractors would report. These ambiguities and were left to the FAR Council to iron out. 

 Just two days ago, on November 12, 2008, the FAR Council revealed its final rule regarding the “Contractor Business Ethics Compliance Program,” clarifying the murky details of the newly-enacted fraud-busting proposals. These more stringent requirements become effective on December 12, 2008, and will require federal government contractors to establish and maintain specific internal controls to detect and prevent improper conduct in connection the award or performance of any government contract; and timely disclose to the agency Office of the Inspector General, with a copy to the contracting officer, whenever, in connection with the award, performance or closeout of a government contract performed by the contractor or a subcontract awarded thereunder, the contractor has credible evidence of a violation of Federal criminal law involving fraud, conflict of interest, bribery or gratuity violations found in Title 18 of the United States Code; or a violation of the civil False Claims Act (31 U.S.C. §§ 3729-3733). 

Continue Reading Department of Justice Adds Teeth to Current Contractor Ethics Rules

The GAO announced yesterday that it had decided to sustain Boeing’s protest of the Air Force’s selection of Northrop Grumman (who included the European company Airbus on its team) over Boeing for the $40 billion aerial tanker contract – a contract that could ultimately be worth $100 billion.  Considering the GAO’s history of denying most of the protests that come before it, today’s outcome is likely a surprise to the many who expected the Office to stand behind the Air Force’s source selection.  The much-discussed dispute has been waging since March 11, 2008 when Boeing filed its protest. Prior to this award, Boeing had been the Air Force’s only supplier of this type of aircraft for fifty years.   The actual sixty-nine page decision was filed under a protective order and has not yet been released. A public version will be made available once all interested parties review it and identify all sensitive information that must remain confidential.

The GAO reached its decision after extensively reviewing voluminous documents produced by the Air Force and hearing testimony from Air Force witnesses.  In its press release today, the GAO made it clear that it did not consider the merits of either company’s proposal and that it examined only whether the Air Force complied with the standards established in the statutory and regulatory schemes governing the federal procurement process. “Our decision should not be read to reflect a view as to the merits of the firms’ respective aircraft. Judgments about which offeror will most successfully meet the governmental needs are largely reserved for the procuring agencies…”   In their evaluation they concluded that the Air Force made “significant errors that could have affected the outcome of what was a close competition between Boeing and Northrop Grumman.”  Senator Richard C. Shelby (R-Ala.) commented that “I cannot believe that in the most highly scrutinized procurement in the history of the United States, the GAO found so many errors.”

The GAO sustained Boeing’s protest for seven specific reasons, including: failure to review the proposals in lights of the solicitation criteria; violating the evaluation provisions of the solicitation, specifically the provision that, “no consideration will be provided for exceeding [key performance parameter] objectives; failure to demonstrate that the Air Force’s determination that Northrop Grumman’s tanker could refuel all current tanker-compatible receiver aircraft in accordance with current Air Force procedures, as required by the solicitation”; conducting misleading discussions with Boeing; “administrative oversight” in making an award despite “clear exception to a material solicitation requirement” in one of the requirements; unreasonable evaluation of military construction costs in “calculating the offerors’ most probably life cycle costs for their proposed aircraft,” an evaluation that if done properly would have resulted in Boeing having the lowest probable life cycle cost; and the improper increase of Boeing’s estimated non-recurring engineering costs in calculating, as well as the improper use of a simulation model in determining those costs. 

The Office recommended that the Air Force “reopen discussions with the offerors, obtain revised proposals, re-evaluate the revised proposals, and make a new source selection decision, consistent with our decision.” It also recommended that the Air Force amend its solicitation if it does not “adequately state its needs” before conducting further discussions with the companies.  Additionally, if the Air Force chooses to award the contract to Boeing, the GAO recommends that it terminate the contract with Northrop Grumman, reimburse Boeing’s protest costs, including attorneys’ fees. By law, the Air Force has sixty days to inform the GAO of its response.   As Tom Schatz, president of the Citizens Against Economic Waste put it, “Air Force Officials didn’t miss it by a little, they apparently missed it by a mile.”

In a decision issued on April 21, 2008,  Bell BCI Company v, United States, the United States Court of Federal Claims issued a decision that can only be described as a “slam dunk” for the contractor. The case arose from the construction of a laboratory building at the National Institutes of Health (“NIH”) in Bethesda, Maryland.  Approximately nine months into construction, NIH decided to add a new floor to the building. NIH issued more than 200 contract modifications that delayed the completion of the project by 19-1/2 months, and increased the contract price by $21.4 million, or 34 percent.  The prime contractor, Bell BCI Company (“Bell”), received payment for performing most of the changed work, but asserted an impact claim for the cumulative effect of the changes on Bell’s overall performance.  The decision includes a number of conclusions of law that will be very interesting to contractors who face unwarranted denials of cumulative impact claims, or the unfair application of leverage by the Government. The description below is based upon excerpts from the decision, but a reading of the entire decision is strongly recommended.

The Court found in favor of the contractor, and awarded damages of $6,200,672, the full amount of its claim, plus Contract Disputes Act interest measured from April 5, 2002. The record demonstrated that NIH, despite its best intentions, lost control of the project beginning in September 2000, and could not prevent the scientists who would occupy the building from demanding changes. The addition of a new floor after construction had begun proved to be a disastrous idea, particularly in causing many mechanical and electrical changes after the work already had been installed.  As changes and delays mounted, NIH and its quality management firm only made matters worse by directing Bell to perform extra work without time extensions, or authorizing Bell to accelerate performance. In issuing 200-plus contract modifications, NIH actually addressed more than 730 Extra Work Orders (“EWOs”).

The Court found that there was evidence that NIH failed to satisfy its implied duty of good faith and fair dealing in the administration of the project. NIH asserted a liquidated damages claim against Bell knowing that such a claim lacked a factual basis. NIH lodged this claim only to gain negotiating leverage after Bell submitted a request for equitable adjustment.  Further, NIH’s quality construction manager recanted the Contracting Officer’s approval of various extra work items after Bell had completed the extra work.  The Court noted “a contracting officer’s review of certified claims submitted in good faith is not intended to be a negotiating game where the agency may deny meritorious claims to gain leverage over the contractor.” Moreland Corp. v. United States, 76 Fed. Cl. 268, 292 (2007). The same principle applies where the agency asserts an unfounded liquidated damages claim solely to gain negotiating leverage.

The Court stated that Bell’s claim for damages from delay and cumulative impact on the NIH project sometimes is called a “delay and disruption” claim. There is a distinction in the law between: (1) a “delay” claim; and (2) a “disruption” or “cumulative impact” claim. Although the two claim types often arise together in the same project, a “delay” claim captures the time and cost of not being able to work, while a “disruption” claim captures the cost of working less efficiently than planned. Bell BCI Co. v. United States, 72 Fed. Cl. 164, 168 (2006); see also U.S. Indus., Inc. v. Blake Constr. Co., Inc., 671 F.2d 539, 546 (D.C. Cir. 1982) (holding that, unlike a delay claim that provides redress from not being able to work, a disruption claim compensates for damages when the work is more difficult and expensive than anticipated).

The contractor must prove for either claim the elements of liability, causation, and resultant injury. When the contractor is asserting a delay claim, the contractor has the burden of showing the extent of the delay, that the delay was proximately caused by government action, and that the delay caused damage to the contractor. While the law requires “reasonable certainty” to support a damages award, damages do not need to proven with mathematical exactness. Rather, “[i]t is sufficient if a claimant furnishes the court with a reasonable basis for computation, even though the result is only approximate.”  Ace Constructors, Inc. v. United States, 70 Fed. Cl. 253, 274 (2006)

Continue Reading Cumulative Impact Claim Allowed by the United States Court of Federal Claims

The requirement found at FAR 52.203-13 was implemented on December 24, 2007 and requires any contractor who is awarded a contract in excess of $5 million to have a written Code of Business Ethics and Conduct within thirty days after award.  Large business firms must also implement a training and compliance program within ninety days (see our earlier blog article for additional information). The requirements, however, did not apply to contracts that were to be performed outside of the United States. This “exemption” for foreign projects has now received the attention of the U.S. House of representatives.

As reported today by the Associated Press, the House has voted to close a multibillion-dollar loophole in a crackdown on contract fraud, approving plans to force the Bush administration to act within six months. At issue is a Bush administration rule requiring government contractors to report misuse of taxpayer dollars to the Justice Department. The rule, as originally published last November, included a loophole to exempt contracts performed overseas. Administration officials told lawmakers at a House Oversight and Government Reform hearing earlier this month that the loophole was a "drafting error" and likely would be removed. The administration since has stripped the loophole from the proposed rule, which likely will be finalized later this year. At the House hearing, a top official for the White House Office of Management and Budget predicted the exemption would not be included in the final rule. The Justice Department said has charged at least 46 people in investigations over the past several years into kickbacks, bribes and other abuses of government-funded contracts in Iraq, Afghanistan and Kuwait. It opposed the loophole.  (Excerpted from "House moves to close contract fraud loophole" as published by the Associated Press).

We agree that there is no reason to treat projects performed overseas any differently than projects performed in the United States. After all, it was the Justice Department’s concern about the millions of dollars of fraud, waste, and abuse in Iraq, Afghanistan, and Kuwait that give rise to the rule in the first place.

© 2008 Associated Press. All rights reserved

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.”

Continue Reading Court Enjoins Awards of Government-wide Task Order Contracts Because of "False Precision" in the Numerical Ratings of the Offerors

Effective May 23, 2008, there will be important changes that pertain to a contractor’s ability to protest task and delivery orders.  These changes are embodied in Section 843 of the 2008 Defense Authorization Act, "Enhanced Competition Requirements for Task and Delivery Order Contracts," and legislators expect the new provisions to increase competition for task and delivery order contracts.  Most notably, the new law allows a contractor to protest a task order in excess of $10 million to the GAO.  Previously, the Federal Acquisition Streamlining Act of 1994 (“FASA”) prohibited task order protests, except in very limited circumstances.  In addition, the new law requires that DOD task or delivery order contracts in excess of $100 million be awarded to multiple contractors, with certain exceptions, and the establishment of enhanced competition requirements, such as a requirement for debriefings on task or delivery orders in excess of $5 million under such multiple award contracts.  The GAO is currently revising its bid protest rules to address the newly acquired jurisdiction over task order protests. (The new rules will be posted on this blog as soon as they are issued).

At the April 19, 2007 hearing of the Senate Committee on Armed Services regarding the DOD’s management of costs under the Logistics Civil Augmentation Program (“LOGCAP”) contract in Iraq, Senator Carl Levin (D-MI) asked why ithe Army waited five years to split the contract among multiple contractors, allowing for competition of individual task orders.  The response from the Assistant Secretary of the Army for Acquisition, Technology, and Logistics was: "I don’t have a good answer for you."  The provisions of Section 843 ensure that, absent compelling reasons not to, there will be competition in the award of task and delivery orders on future contracts of this type.  As far as we are concerned, however, there is an open question as to whether Multiple Award Task Order Contracts (‘MATOC”) are legally authorized under the Federal Acquisition Regulation for the procurement of construction. A protest raising that issue was filed by our firm and is pending before the United States Court of Federal Claims.

Section 843 of the Defense Authorization Act lifts the ban imposed by the Federal Acquisition Streamlining Act on protests to the Government Accountability Office (GAO) of task or delivery orders valued over $10 million.  This provision may be short-lived though: it contains a “sunset” provision and expires three years after it becomes effective. Congress enacted Section 843 in response to the need for enhanced competition requirements, and apparently believed that federal agencies had too little oversight when permitted to issue task order procurements that were not subject to protest.   After the FASA was enacted, federal agencies increasingly employed the indefinite delivery, indefinite quantity (“IDIQ”) contracts for expensive projects, purportedly to utilize “streamlining” but, in part, to circumvent the bid protest process.  It will be interesting to see whether the newly enacted right to file bid protests will have a “chilling” effect on agency plans to issue IDIQ contracts in the future.

The exclusive jurisdiction granted to the GAO means that the Court of Federal Claims (CFC) will not adjudicate these protests.  Under the current protest regime, both the GAO and the CFC are authorized to hear bid protests, and we would have preferred for that dual jurisdiction to have continued on task order protests, as well.  An advantage of the current system for contractors is that if they are unhappy with the outcome of a GAO protest, they can obtain de novo review of that same protest at the CFC.  Under Section 843, this second chance will not be available for task or delivery order protests. This has serious implications for contractors because only a small fraction of protests heard by the GAO are sustained.  

Continue Reading Bid Protests to GAO to be Allowed on Task Orders in Excess of $10 Million

The Commander of the Air Force Material Command, General Bruce Carlson, recently told reporters at a forum sponsored by Aviation Week that there should be some sort of penalty for protests that are found to be unwarranted.   It was reported that the General said “that some losing bidders file protests with 20 or 30 elements when perhaps only one part has any foundation.  In recent years, nearly every significant defense contract has been protested by the losers to the Government Accountability Office.”  The comments, which were reported by GovernmentExecutive.com and the Congress Daily, demonstrate a total lack of understanding about the vital need for accountability on the part of federal agencies, contracting officers, and source selection authorities.

I disagree with the General’s observations.  Government contractors, and the taxpayers, are entitled to a procurement process that is fair and reasonably transparent, and they are entitled to take advantage of the Constitutional right to petition Congress for redress of grievances.  They are also entitled to take advantage of statutory and regulatory procedures authorizing protests against unfair or illegal procurement actions without intimidation or fear of having to pay some sort of “penalty” to the government.   It is interesting that one of the protests that apparently triggered the General’s comments was a challenge by the Sikorsky Aircraft Company and Lockheed Martin Systems to what they contended was an unfair source selection process in the award of a large dollar value contract to The Boeing Company for the Combat Search and Rescue Replacement Vehicle (CSAR-X).  The GAO sustained the protest and found that the Air Force had ignored differences among the proposed aircraft that could have had a material impact on likely O & S costs, and that the Air Force had departed from its stated evaluation approach. (See the attached GAO decision).

This is not the first time that the Air Force has not followed the procurement regulations and has lost a protest. The General, rather than focusing on the improvement of source selection procedures by his agency, would seek to reduce the number of challenges to Air Force procurements by penalizing unsuccessful protesters.  This, of course, would have the unavoidable effect of reducing the number of successful protests, as well, and would give the Air Force even greater latitude to run roughshod over the procurement regulations.

It is not easy to win a protest before the GAO or the United States Court of Federal Claims. The protester must demonstrate a clear violation of procurement laws or regulations, an abuse of discretion, or a decision by the Contracting Officer that lacked a rational basis. In fact, given the rapidly expanding use of multiple award task order contracting (“MATOC”), where the law prohibits protests against task orders (except in very limited circumstances), government contractors are already precluded from protesting task order solicitations and source selections that they believe are unfair. In addition, great deference is afforded to contracting officers by the GAO and the Court and when protests are sustained there generally is something very wrong in the procurement process. In other words, there are plenty of things built into the system to discourage frivolous protests, including the cost of legal representation, without seeking to impose additional “penalties.”

It must be recognized that there is a statutory and a regulatory right to file a protest, and these rights cannot be denied by agency action alone. The statutory basis for bid protests is found in 28 USC 1491(b)(1), granting the Court of Federal Claims Protest Jurisdiction.  For the GAO the statutory basis is found in 31 USC 3526, the authority to settle accounts.  As provided in Pichel Air Service, 84-1 CPD  108, the basis for the GAO to decide protests is based upon the authority to adjust and settle accounts and to certify balances in the accounts of accountable officers under Pub. L. No. 97-258, § 3526, 96 Stat. 964 (1982) (codified at 31 U.S.C. § 3526).  With account settlement authority, the Comptroller General can take exception to an improper transaction and hold the certifying officer or relevant official personally liable for the amount of money improperly expended. Moreover, his decisions on the expenditures of appropriated funds are binding on the executive branch.” The regulatory basis is found in FAR 33.1, Protests (Agency and GAO protests)  and 4 CFR Part 21 (GAO Bid Protest Regulations) which states that protests may be filed with the GAO.