A bid protest must allege a violation of a procurement statute or regulation. Although most protests challenge the award or proposed award of a contract, the GAO will also consider protests involving defective solicitations and other unreasonable agency actions like the cancellation of a solicitation. In certain cases, the GAO will consider protests involving the termination of a contract where the protest alleges that the government’s termination was based upon improprieties associated with the contract award (this is sometimes called a “reverse protest”). Additionally, the GAO will consider protests concerning (1) awards of subcontracts by or for a Federal agency, (2) sales by a Federal agency, or (3) procurement actions by government entities that do not fall within the strict definition of Federal agencies, if the agency or entity involved has agreed in writing to allow the GAO to decide the dispute.
The Government Accountability Office (“GAO”) issues statistics each year regarding the outcome of bid protests. In 2015, there were 2,639 cases filed and there we 587 decisions on the merits. Of those, only 68 protests were sustained. According to the way the GAO presents its statistics, that would indicate that protestors prevailed approximately 12% of the time. In reality, since many protests were withdrawn or summarily dismissed, the protesters only prevailed in 68 of the 2,639 protests filed and the true success rate was closer to 3%. With those odds, why would anyone file a GAO bid protest? The answer requires a little closer scrutiny since statistics can be misleading.
Please join us for Maria Panichelli and Amy Kirby‘s seminar, “Avoiding Common Pitfalls in Small Business Government Contracting,” for the District of Columbia Procurement Technical Assistance Center (DC PTAC) on November 5th in Washington, D.C. Continue Reading Avoiding Common Pitfalls in Small Business Government Contracting
In a bid protest argued by our firm before the United States Court of Federal Claims on September 23, 2014, the Court ruled in favor of our client, RLB Contracting, Inc., (RLB) in a matter involving the designation of the dredging exception to NAICS code 237990, which is for “Other Heavy and Civil Engineering Construction.” 13 C.F.R. § 121.201 (2014). The solicitation for the “South Lake Lery Shoreline Protection and Marsh Creation Project” was set aside for small business concerns by the Natural Resource Conservation Service, but the exception to NAICS code 237990 that applies when a project is considered to be dredging was not invoked. At the time, the exception lowered the small business size standard from $33.5 million to $25.5 million for dredging and required that the successful contractor “must perform at least 40 percent of the volume dredged with its own equipment or equipment owned by another small dredging concern.” 13 C.F.R. § 121.201, Footnote 2. (Currently, the applicable small business size standards are $36.5 million and $27.5 million respectively).
The small business regulation found at 13 C.F.R. 121.402(b)(2) states that “[a] procurement is usually classified according to the component which accounts for the greatest percentage of contract value.” In this case, RLB presented evidence that the agency had internally estimated that over 50% of the work involved dredging and that the agency had made its NAICS code designation based on an erroneous calculation that only 10% of the work involved dredging. RLB first appealed the NAICS code designation to SBA’s Office of Hearings and Appeals (“OHA”), arguing that the agency applied the incorrect NAICS code size standard. OHA denied the appeal on the basis that the project included other items of work in addition to dredging. However, OHA did no analysis as to the contract value or relative importance of those “other items.” RLB then brought its protest to the United States Court of Federal Claims, again arguing that the agency violated the regulations by failing to apply the dredging exception. RLB also argued that the agency had failed to provide correct information to OHA, and that OHA had refused to consider supplemental information furnished by counsel for RLB. The Court ruled that OHA’s decision was incorrect as a matter of law because OHA’s “decision does not give primary consideration” to “the relative value and importance of the components of the procurement” and did not concern itself with whether the agency classified the procurement “according to the component [of work] which accounts for the greatest percentage of contract value.” 13 C.F.R. § 121.402(b)(1)-(b)(2) (2014).
The Court was critical of the agency for not including pertinent documents in the Administrative Record which demonstrated that the agency knew that the dredging work accounted for the greatest percentage of contract value, and was further critical of OHA for concluding that other, relatively minor, elements of the work supported the agency’s contention that the project did not predominantly involve dredging. As a result, the Court entered a permanent injunction and remanded the matter to the Contracting Officer with instructions “to make a new determination of whether the dredging exception applies based on all available current information.” The Court further stated that “If item 7, Excavation Marsh Creation Dredging, is the most valuable item of work, the contracting officer must give primary consideration to it.”
This decision is an important victory for the small business dredging industry because it makes it clear that federal agencies are not free to circumvent the protection afforded to small business dredging contractors, under the exception to NAICS code 237990, by characterizing work generally as civil construction even though the dominant item of work is dredging. The exception is designed to prevent brokering by non-dredging small business concerns who, after receiving an award, could subcontract virtually all of the dredging work to a large business dredging concern.
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 including bid protests, claims and appeals, procurement issues, small business issues, and dispute resolution.
Robert Ruggieri is a Senior Associate in the firm’s Federal Practice Group.
Prior to 2008, dating back to 1994, it was not permissible to protest a task order. The 1994 enactment of the Federal Acquisition Streamlining Act ("FASA") provided that protests over task or delivery orders were barred unless the protest alleged that the order increased the scope, period, or maximum value of the underlying contract through which the order was issued. That changed with the passage of the Defense Authorization Act of 2008 ("NDAA"), which contained an amendment that expanded the jurisdiction of the GAO to include protests of task or delivery orders valued in excess of $10 million. 41 U.S.C., Section 253j(e)(2). The NDAA also contained a sunset provision, which stated that the "subsection shall be in effect for three years." Section 253j(e)(3). The three year period expired on May 27, 2011. The question then arose as to whether the GAO could lawfully consider task and delivery order protests after May 27, 2011. That question was recently answered in the affirmative by the GAO.
In a protest filed by Technatomy Corporation, of Fairfax, Virginia, the protester argued that the agency unreasonably evaluated vendors’ technical and cost quotations. The government argued that the protest should be dismissed because the GAO’s jurisdiction had expired. In a decision issued on June 14, 2011, the GAO disagreed with the government and ruled that it now has jurisdiction to rule on all task and delivery order protests, regardless of their dollar value. The reasoning of the GAO was that the sunset provision which gave the GAO the authority to consider task and delivery protests in excess of $10 million (for three years) replaced the former statutory provision (1994 – “FASA”) that provided for only very limited task order review. The GAO concluded that when the three year period expired, its authority to consider task and delivery order protests did not simply revert to the pre-2008 jurisdictional level, but actually reverted back to the pre-1994 level.
In other words since the pre-2008 limitations were eliminated by the sunset provision in 2008, the only thing left is the pre-1994 jurisdiction under the Competition in Contracting Act which places no limitation on the GAO’s authority to consider task and delivery order protests. The GAO will therefore accept jurisdiction of all protests involving task and delivery orders regardless of the dollar value. This also raises the interesting question of whether, based on the GAO’s decision in Technatomy Corporation, the Court of Federal Claims will now accept jurisdiction of task and delivery order protests, as well.
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, including teaming arrangements, negotiated procurements, bid protests, claims, and appeals.
By: Michael H. Payne
The GAO requires, as provided in 4 CFR 21.2, that:
(a)(1) Protests based upon alleged improprieties in a solicitation which are apparent prior to bid opening or the time set for receipt of initial proposals shall be filed prior to bid opening or the time set for receipt of initial proposals. In procurements where proposals are requested, alleged improprieties which do not exist in the initial solicitation but which are subsequently incorporated into the solicitation must be protested not later than the next closing time for receipt of proposals following the incorporation.
(2) Protests other than those covered by paragraph (a)(1) of this section shall be filed not later than 10 days after the basis of protest is known or should have been known (whichever is earlier), with the exception of protests challenging a procurement conducted on the basis of competitive proposals under which a debriefing is requested and, when requested, is required. In such cases, with respect to any protest basis which is known or should have been known either before or as a result of the debriefing, the initial protest shall not be filed before the debriefing date offered to the protester, but shall be filed not later than 10 days after the date on which the debriefing is held.
Of course, filing a GAO protest may not achieve any meaningful relief unless the project is stayed pending resolution of protest. In this regard, FAR 33.104(c) provides that "When the agency receives notice of a protest from the GAO within 10 days after contract award or within 5 days after a debriefing date offered to the protester for any debriefing that is required by 15.505 or 15.506, whichever is later, the contracting officer shall immediately suspend performance or terminate the awarded contract," except when the interests of the United States will not permit waiting for a GAO decision. The key here is that, in a negotiated procurement, the agency must have received notice from the GAO within five days after the debriefing. That means that the protest needs to be filed as quickly as possible after the debriefing in order for there to be any realistic possibility that the GAO will notify the agency in time. In our experience, when agencies receive notice even one day late, they will refuse to impose a stay.
The rigid timeliness requirements of the GAO often lead protesters to file bid protests in the United States Court of Federal Claims where there is no 10-day, or 5-day, time limit, and where a debriefing is not a prerequisite to filing a protest on a negotiated procurement. The downside, however, is that the Court does not grant an automatic stay and a protester must file a motion for a temporary restraining order in order to halt further performance pending resolution of the protest. In our experience, the government frequently agrees to voluntarily stay performance once the protest is filed (often at the urging of the judge) and a TRO hearing is not always required.
It should also be noted that if a protest involves a matter that should have been raised prior to bid opening, or prior to the date for receipt of proposals, such as a challenge to the terms of the solicitation, a protest filed after award will be dismissed as untimely. The Court of Appeals for the Federal Circuit has held that “a party who has the opportunity to object to the terms of a government solicitation containing a patent error and fails to do so prior to the close of the bidding process waives its ability to raise the same objection subsequently in a bid protest action in the Court of Federal Claims.” (See Blue and Gold, 492 F.3d 1308). Accordingly, contractors should consult with legal counsel to be certain that all of the procedural requirements of a protest have been met.
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 protests and federal construction matters.
By: Edward T. DeLisle
As part of the National Defense Authorization Act of 2008 (the 2008 Act), Congress provided the General Accounting Office (GAO) with the authority to hear protests involving certain task and delivery order contracts emanating from both defense and civilian agencies. At the time, this authority was limited to a period of three years, meaning that it was set to expire later this year. A few months ago, President Obama signed the National Defense Authorization Act of 2011 (the 2011 Act). As part of that Act, Congress partially extended the GAO’s authority. It permitted the GAO to continue hearing task and delivery order protests for contracts in excess of $10 million, but only for those contracts issued by Department of Defense agencies. For a reason not readily apparent, Congress failed to extend the GAO’s authority over civilian agencies. A bill has emerged in the Senate to address this omission.
As reported by Law360, Senate Bill 498, entitled the “Independent Task and Delivery Order Review Extension Act of 2011,” was recently introduced by Senate Homeland Security and Governmental Affairs Committee Chairman Joseph Lieberman, I-Conn. If passed, it would extend the GAO’s jurisdiction over task and delivery order protests relating to civilian agencies for an additional five and a half years, equaling the extension provided on DOD protests under the 2011 Act. This is an important development for government contractors. Many questions arose following passage of the 2011 Act. Why would Congress only extend the GAO’s authority over task and delivery orders on DOD work? It is possible that this was simply an oversight, though no one is quite sure. The legislative history is devoid of any discussion on the issue. Whatever the reason, if passed, S. 498 would maintain the status quo for five more years. We will continue to track this bill and report on its progress.
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.
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.
Many contractors prepare bids on a computer, using either commercially prepared bid packages or "home grown" spreadsheets using Excel or similar programs, to automatically calculate their bids. A recent decision by the Comptroller General, however, reveals some of the dangers that these "automatic" packages hold for a contractor. A bidder on a sewer lagoon project for the Corps of Engineers recently utilized a computer program and contended that an erroneous entry resulted in its bid of $6,881,800 being 25 percent lower than the next competitor’s bid. The low bidder alleged that it had made a "mistake" in preparing its bid and requested upward correction. The Federal Acquisition Regulations (FAR) allow upward correction of a bid when the bidder provides clear and convincing evidence of both the existence of a mistake and the bid actually intended, but only where the correction would not result in displacing one or more lower bids. See FAR 14.407-3(a). The low bidder alleged that a "mistake" occurred because it "overrode" the automatic calculations in the spreadsheet by manually entering a dollar amount in the "total" column for a bid item rather than allowing that total amount to be automatically calculated by the formula in that cell.