After a hiatus in the posting of new decisions on its website dating back to October 2006, the Armed Services Board of Contract Appeals recently posted a series of new decisions.  We will review and comment on the most interesting ones in upcoming articles and we begin today with the decision in Emerson Construction Co. Inc., ASBCA No. 55165, dated December 8, 2006.

The government filed a motion for partial summary judgment alleging that the contractor was not entitled to an equitable adjustment under FAR 52.211-18, VARIATION IN ESTIMATED QUANTITY (APR 1984) (VEQ clause), as a matter of law.  According to the government, the VEQ clause was not applicable to firm, fixed-price requirements type construction contracts. The contract required Emerson to provide “All Labor, Equipment and Materials for Miscellaneous Roads, Grounds, Site Repairs and Improvements at Fort Hood, Texas.”  The schedule included 23 pages listing each item of work to be accomplished along with the estimated quantity of each.

The government admitted that it ordered less than 85% of the estimated quantities overall, but argued that the VEQ clause should be applied to each individual delivery order, and not to the overall estimated quantity estimated in the contract.  In other words, unless each individual delivery order provided an estimated quantity of unit-priced items, the VEQ clause shuld not apply. The Board disagreed and held that the VEQ clause was applicable to the overall requirements contract, not just to the individual awarded delivery orders. The VEQ clause stated that it was applicable to “this contract.”  In the Board’s view, “this contract” indisputably referred to the overall requirements contract.  The contractor submitted an affidavit with an item-by-item analysis showing that the government ordered 85% of estimated quantities on only 7 of the 76 line items for the base year and only 6 of the 76 line items for the first option year.  In fact, for a majority of the 76 line items for the base year and first option year, the Government ordered less than 50% of the estimated quantities.

The Board concluded that under the VEQ clause, a contractor is entitled to an equitable adjustment in the contract price for increased costs due solely to the variation of unit-priced items actually ordered by the Government below 85 percent of the quantities of the unit-priced items estimated to be ordered under the contract. Henry Angelo & Co., ASBCA No. 43669, 94-1 BCA ¶ 26,484 at 131,824. The Board ruled that Emerson had shown, for purposes of entitlement, that there was such a variation.

MATOC – IDIQ – “Best Value” – BRAC

These are the terms that contractors are hearing more and more and they are part of the rapidly changing world of construction contracting with the federal government.  It is no longer enough to simply be the low bidder; now, in many federal procurements, it is the “best value” that gets the job.  To make matters even more complicated, projects that were once bid individually, on a project-by-project basis, are now being awarded under Indefinite Delivery Indefinite Quantity (IDIQ) or Multiple Award Task Order Contracts (MATOC) and the number of contracting opportunities is shrinking.  Nevertheless, for those who understand the system and know how to put an effective proposal together, there continue to be many opportunities for construction contractors and subcontractors to participate in the federal government’s vast construction program, including the upcoming Base Realignment & Closure (BRAC) program.

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If you are interested in learning more about construction contracting with the Army Corps of Engineers, NAVFAC, and other federal agencies, we invite you to attend one of the upcoming seminars sponsored by Payne Hackenbracht & Sullivan on How to Succeed in the New World of Federal Construction Contracting.  The seminars are to be held in Charlotte, Dallas, New Orleans, Orlando, or Philadelphia on one of the dates in February 2007 listed above and on the attached agenda.  The speakers include former Corps of Engineers attorneys and engineers, the former Deputy District Engineer of the New Orleans District, and the former Chief of the Construction Division of the Philadelphia District. The program will be presented from 8:30 a.m. until 1:00 p.m.

The program will focus upon Identifying Contracting Opportunities, Understanding the Latest Contracting Methods, Successfully Competing for Negotiated Procurements (including effective proposal preparation), and How to Deal Effectively with Federal Agencies, and will include information about how to protect your rights in both the bidding and contract performance stages of a project.  While contracting with the government provides many potentially profitable opportunities for a contractor, the federal contracting process is fraught with peril for those who do not understand federal procedures.  We will help you understand both what you should do, and what you should not do, when dealing with the federal government.

Please review the enclosed agenda and registration form, and feel free to contact us if you have any questions.  The attendance fee is $195, and additional attendees from the same company will only be charged $95.  Please register early because space is limited.

Our Seminar Coordinator, Rachel McNally, is available to answer your questions and she may be contacted at 215-542-2777, rem@phslegal.com.

In order to implement the 2005 Base Realignment and Closure Program (BRAC), Congress has a bill under consideration to fund recommendations in the amount of 5.43 billion dollars (H.R. 5385).   Although this is a substantial amount of money, it is 400 million dollars less than the Administration requested.  Nonetheless, once a funding bill is passed for this phase of the BRAC program, a significant number of projects are planned for Texas, Maryland, Virginia, North Carolina, Georgia, and Kentucky.  

On December 1, 2006, amendments to the Federal Rules of Civil Procedure became effective and made something that had already been established by court decisions very clear – that virtually every kind of electronically stored information (“ESI”) is discoverable in litigation.  Government construction contractors, and their attorneys, need to be concerned about the preservation and disclosure of electronic information, including e-mail messages, voicemail messages, and any kind of a file stored on a computer.  Unfortunately, as the information age makes an exponentially greater volume of information available, the seemingly easy storage of that information may actually be creating a vast minefield for the unwary.

Contractors need to be aware that even computer files that have been intentionally or inadvertently deleted are potentially discoverable.  (Simply because data has been “deleted” from a hard drive does not necessarily mean that it cannot be retrieved).  Courts may no longer accept the excuse that “the files were erased” if there was an obligation to preserve the data, or if the company failed to have an established ESI retention policy to assure the reasonable retention of electronic information.  The new rules provide guidance and clarification on a number of topics related to electronic discovery (e-discovery), including the discoverability of data that is difficult to access, such as back-up tapes, the form in which electronically stored information should be produced, and how to deal with the inadvertent production of privileged information when large amounts of electronic data are produced.

One of the difficulties with the production of electronic data is that it is often harder to review than paper documentation because it involves the examination of large amounts of data stored on CDs, DVDs, floppy disks, hard drives, backup tapes, network servers, Internet backup services, and other storage devices.  A company often finds it to be an overwhelming task to gather the data, and an equally daunting and costly task to electronically produce it.  Electronic information on a complex matter involving technical data can occupy hundreds or even thousands of CDs (we are currently involved in exactly such a case).

It is important to recognize that the content of electronic information can be very different, and far less formal, than paper documentation.  We have noticed that there is often a tendency to be careless when writing an e-mail message because of the informality, as compared to a letter.  Contractor personnel are frequently very candid in e-mail messages and they may make off-the-cuff remarks that give the other side “ammunition” to discredit the contractor’s position.   In addition, electronic information often contains “metadata” (underlying data that states when a document was created, modified, accessed, etc.).  Without realizing it, or intending to do so, an electronic file may provide much more information than the author or the company ever intended, or was required, to preserve and that information may be a goldmine for the other side in litigation.

Continue Reading Important New Rules on Electronically Stored Information

In the most recent edition of Defense AT&L, a magazine published by the Defense Acquisition University, author Wayne Turk discusses the skills that a competent project manager needs to possess in the 21st Century.  In addition to people, financial and scheduling skills, Turk emphasizes seven attributes of a good project manager – patience, wisdom, sense of humor, flexibility, creativity, understanding of the law of unintended consequences, and subject matter expertise.  While Turk points out that there is no substitute for practical experience, he also provides sources of information and training for neophyte, as well as experienced, managers.  Reading this article, as well as Turk’s earlier “Ten Rules for Success as a Manager,” Defense AT&L, July-August 2004, provides useful information to prospective federal construction contractors about what agency source selection officials may look for when they review the qualifications of management personnel in connection with proposals on negotiated procurements.

The January 3, 2007 edition of ENR.com, an online publication of McGraw-Hill Construction, contains a webcast of the construction industry “matchmaking” session that the Bureau of Overseas Buildings Operations (OBO) of the Department of State held with representatives of over 900 companies on October 10, 2006 in Arlington, Virginia. The webcast provides contractors with important information on the dramatically increased embassy design and construction program of the Department of State. Contractors need to know that the State Department employs the design-build negotiated procurement process found in Section 36 of the FAR in almost all of OBO’s capital program.

As we have mentioned previously, the growing use of multiple award task order contracts in federal construction contracting, as can be seen in much of the disaster recovery work in New Orleans, is limiting the competitive opportunities for small and mid-sized construction contractors.  Unless a contractor is the recipient of one of the major task order contract awards, there is no opportunity for a contractor to compete for upcoming individual task orders and the contractor is effectively precluded from competing for potentially millions of dollars of work to be awarded over a period of years. In the past, when there were more single award contracts, if a contractor lost out to a competitor, there was always another solicitation on the horizon.  If a contractor fails to become one of those selected to compete under a multiple award task order contract, there may be no, or very little, work “waiting in the wings.”

It follows that it is important to monitor the decisions of the GAO and the courts to see what is being done to protect the rights of contractors, and we will continue to do so.  In a newly issued GAO decision, Palmetto GBA, LLC, B-299154, December 19, 2006, the Comptroller General stated that according to the legislative history of the Federal Acquisition Streamlining Act (FASA), task and delivery-order contracts were intended to encourage the use of multiple-award, rather than single-award contracts, in order to promote an ongoing competitive environment in which each awardee would be fairly considered for each order issued.  H.R. Conf. Rep. No. 103-712, at 178 (1994), reprinted in 1994 U.S.C.C.A.N. 2607, 2608; S. Rep. No.103258, at 15-16 (1994), reprinted in 1994 U.S.C.C.A.N. 2561, 2575-76. In this regard, the Federal Acquisition Regulation (FAR) requires agencies to provide all awardees “fair opportunity to be considered for each order exceeding $3,000 issued under multiple delivery-order contracts or multiple task-order contracts.”  FAR sect. 16.505(b)(1)(i).

An interesting aspect of the Palmetto case is that the GAO reiterated that a task or delivery order that precludes competition for future task or delivery orders for the duration of the contract performance period may constitute a “downselection.”  The GAO has recognized downselections in circumstances not only where all work under a contract will be foreclosed from future competition, but also where specific categories of work will be similarly foreclosed for the duration of the contract.  While the GAO did not find that “downselection” occurred in the Palmetto case, it is important for contractors to recognize that a task order award that eliminates competition for future work can be successfully protested. Continue Reading Task Order Contractors Must be Given a Fair Opportunity to Compete for Individual Task Orders

A recent Government Accountability Office decision, Tessa Structures, LLC, B-298835, highlights the difference between responsiveness and responsibility determinations and the obligation of an agency to refer responsibility determinations to the Small Business Administration (SBA).  The protestor, a small business, responded to a Federal Highway Administration solicitation seeking bids for bridge painting.  As part of its bid, each prospective contractor was required to state the number of days of performance, not to exceed 305 days.  The protestor, Tessa Structures, submitted the low bid and stated that it would perform in 120 days. 

The FHWA reviewed Tessa’s bid and requested that Tessa explain how it would perform in 120 days. Tessa advised the FHWA that it planned to begin at the end of August and complete before Christmas; significantly, as discussed below, Tessa did not include its assumption that it would receive notice to proceed by August 28 with its bid. The FHWA believed that Tessa’s plan to begin at the end of August was contrary to the solicitation because the agency reserved the right to issue a notice to proceed as late as October 24th.  The FHWA rejected Tessa’s bid as non-responsive, based upon Tessa’s 120 day performance period and its assumption regarding the notice to proceed, without seeking any input from the SBA. 

The GAO determined that Tessa’s bid with a 120 day planned performance period was improperly rejected by the FHWA because the issue of performing within a set period of time was a matter of responsibility, not responsiveness.   The GAO found that because the solicitation specified only a maximum performance period, (305 days) and no minimum period, Tessa could properly bid to perform in a shorter period.  Furthermore, Tessa did not insert anything in its bid that restricted or qualified its performance in contravention of the solicitation. Of particular importance to the GAO was the fact that Tessa did not insert its assumption about the issuance of the notice to proceed in its bid, and, therefore, did not contravene the solicitation’s notice to proceed requirements. Had Tessa provided these assumptions in its bid, it most likely would have been found non-responsive.    

Continue Reading Agency Confuses Responsiveness with Responsibility

The cover story, “New Marching Orders,” in the most recent edition of Constructor, published by McGraw-Hill Construction, highlights a trend in military construction that should concern small to mid-size general contractors.  In the past, many projects for construction of military housing and other facilities were procured as individual contracts through sealed bid solicitations issued by the U.S. Army Corps of Engineers.  Small and mid-size contractors, familiar with the local market conditions, were well positioned to compete for, win, and perform these contracts.  E. Michael Powers reports that today, however, the Corps is focusing its procurement efforts on multiple-award construction contracts and indefinite delivery/indefinite quantity contracts with task orders.  These contracts tend to be for greater volumes of work, resulting in contracts that exceed the bonding capacity of many small to mid-size firms.

Powers also notes that a contract to build fifty buildings at a cost of $10 million per building, spread across a large geographic area, might not even appeal to firms that have the bonding capacity to bid on such a large contract.  In addition, where so much work is included in one contract, there is only one prime contractor, whereas before there could have been as many as fifty contractors performing fifty separate projects.

These large procurements are often the subject of negotiated procedures under FAR, Part 15, where price is no longer the controlling factor in determining who receives the contract.  In these “best value” procurements, the experience and past performance of a larger contractor may be decisive in the Corps’ award decision.

Continue Reading Declining Opportunities for Small and Mid-Sized Federal Construction Contractors

In yet another example of one of my long-standing complaints about the GAO’s interpretation of the “Procurement by Negotiation” process specified in FAR, Part 15, the GAO has reiterated its long-standing policy that “there is generally no obligation that a contracting agency conduct discussions where the RFP specifically instructed offerors of the agency’s intent to award a contract on the basis of initial proposals without conducting discussions.   In a decision issued today, in the Matter of Gemmo-CCC, B-297447.2, December 13, 2006, the GAO ruled that a protest that the agency should have engaged in clarifications with the protester to resolve material omissions in its proposal must be denied since any such exchange would have constituted discussions, not clarifications, and an agency generally has no obligation to hold discussions where it put offerors on notice of its intent to make award on the basis of initial proposals.

The protester’s offer was not considered for award because the agency believed that important vendor data had been omitted from the proposal. The protester argued that since its price was substantially lower than the awardee’s price, the agency should have informed it if it believed that vendor product data had been omitted and should have allowed the protester to cure the alleged defect.  The GAO disagreed and stated that “contrary to the protester’s assertion that the agency was required to hold discussions before making award in light of the protester’s lower price, an agency is not precluded from awarding on the basis of initial proposals basis merely because an unacceptable lower-priced offer might be made acceptable through discussions.”  In other words, an agency has no obligation to negotiate a negotiated proposal, even if such negotiations (discussions) might result in an unacceptable low bid being made acceptable. From a taxpayers perspective, that policy does not make sense.