Recent Developments
Emergency Economic Stabilization Act: On October 3, 2008, the President signed the Emergency Economic Stabilization Act of 2008, which among other things seeks to remove troubled mortgage and mortgage-related assets from the books of a broad range of financial institutions by transferring them to the US Treasury. The Treasury is authorized to hire contractors to assist it in carrying out the Act, and to waive specific provisions of the Federal Acquisition Regulation (FAR) if it determines that urgent and compelling circumstances make compliance with such provisions contrary to the public interest. For a discussion of the Act, including contractor considerations, see "Emergency Economic Stabilization Act Offers Opportunities for Sellers, Contractors, and Purchasers," Fried Frank 21st Century Money, Banking & Commerce Alert No. 08-10-06. In addition, the Treasury recently announced procedures for the selection of private entities to assist it in implementing the Troubled Asset Relief Program (TARP) authorized by the Act. For a discussion of potential challenges to the Treasury's procurement-related actions under TARP, see "Understanding the Intersection of Treasury Department TARP Procedures and Federal Contracting Rules," Fried Frank 21st Century Money, Banking & Commerce Alert No. 08-10-24.
National Defense Authorization Act: The Duncan Hunter National Defense Authorization Act for Fiscal Year 2009 (NDAA), which President Bush signed into law on October 14, 2008, contains several notable Government procurement-related provisions. Section 871 of the NDAA expands the current authority of the Comptroller General to examine contractor and subcontractor records to allow interviews with any current employees regarding Government contracts-related transactions. Section 841 of the NDAA requires the Administrator for Federal Procurement Policy to develop and issue a standard policy to prevent personal conflicts of interest by contractor employees performing acquisition functions closely associated with inherently governmental functions for or on behalf of the Government. This policy will be implemented through a new personal conflicts of interest contract clause or set of clauses, which will require covered contractors to take various actions relating to the identification, prevention, and reporting of personal conflicts of interest for employees performing such functions. The NDAA also contains several other provisions that require amendments to the FAR. These include FAR amendments to implement enhanced competition requirements for purchases made under multiple-award contracts (Section 863), to address the use of cost-reimbursement contracts and provide guidance regarding when and under what circumstances such contracts are appropriate (Section 864), to minimize the excessive use of subcontractors, or tiers of subcontractors, that add little or no value (Section 866), and to provide instructions regarding the appropriate use of award and incentive fees and ensure that such fees are linked to acquisition outcomes, defined in terms of program cost, schedule, and performance (Section 867). The text of the NDAA is available at http://thomas.loc.gov/cgi-bin/bdquery/z?d110:SN03001:|TOM:/bss/d110query.html|.
Task and Delivery Order Contracts: An interim rule was issued amending the FAR to implement the enhanced competition requirements for task and delivery order contracts contained in Section 843 of the Fiscal Year 2008 National Defense Authorization Act, which went into effect on May 27, 2008. 73 Fed. Reg. 54008 (Sep. 17, 2008). The interim rule provides that, for task or delivery orders exceeding $5 million, the requirement to provide all awardees a fair opportunity to be considered for each order must include, at a minimum: (1) a notice of the order that includes a clear statement of the agency's requirements; (2) a reasonable response period; (3) disclosure of the significant factors and subfactors, including cost or price, that the agency expects to consider in evaluating proposals, and their relative importance; (4) where award is made on a best value basis, a written statement documenting the basis for award and the relative importance of quality and price or cost factors; and (5) an opportunity for a post-award debriefing consistent with the post-award debriefing requirements in FAR 15.506. The interim rule also includes limitations on "single award" task and delivery order contracts exceeding $100 million. In addition, the interim rule amends the FAR to implement the expanded authorization of the Government Accountability Office (GAO) to consider bid protests relating to the issuance of task or delivery orders in excess of $10 million. (For a detailed discussion of this new protest authorization, see "Feature Comment: Acquisition Reform Revisited – Section 843 Protests Against Task And Delivery Order Awards At GAO.") Comments to the interim rule should be submitted by November 17, 2008.
State and Local Government Use of Federal Supply Schedules: The General Services Administration (GSA) issued an interim rule amending the GSA Acquisition Regulation to authorize state and local Government use of GSA Federal Supply Schedule 84 for the acquisition of security and law enforcement-related goods and services. 73 Fed. Reg. 54334 (Sep. 19, 2008). Schedule 84 includes alarm and signal systems, facility management systems, firefighting and rescue equipment, law enforcement and security equipment, marine craft and related equipment, special purpose clothing, and related services. Comments to the interim rule, which went into effect on September 19, 2008, should be submitted by November 18, 2008. (Under prior rulemakings, the GSA also has authorized state and local Government use of Federal Supply Schedules to procure (1) information technology products and services and (2) products and services required to facilitate recovery from a major disaster, terrorism, or nuclear, biological, chemical, or radiological attack. See 69 Fed. Reg. 28063 (May 18, 2004); 72 Fed. Reg. 4649 (Feb. 1, 2007).)
Recent Decisions
Small Business Set Asides: The GAO concluded that the FAR's small business set aside provisions apply to task and delivery orders under multiple award contracts. Delex Systems, Inc., B-400403, Oct. 8, 2008. Under FAR 19.502-2(b), contracting officers are required to set aside any "acquisition" over $100,000 for small business participation when there is a reasonable expectation that offers will be obtained from at least two responsible small business concerns and award will be made at fair market prices. The US Navy argued that these set aside requirements apply only to initial contract awards, and not to orders under multiple award contracts. Based upon its review of applicable statutory and regulatory provisions, the GAO rejected the Navy's argument, and concluded that such orders are properly viewed as acquisitions under FAR 19.502-2(b). The GAO further noted that, since the competition for a task or delivery order is the stage when the multiple award contract holders offer prices and solutions to meet specific agency needs, this is the most meaningful stage for contracting officers to judge the likelihood of receiving two fair market-priced submissions from small businesses for the services or supplies being acquired. Because the Navy did not adequately support its determination that it could not expect to receive offers from two small business multiple award contract holders, the GAO sustained the bid protest and recommended that the Navy properly perform the analysis required by FAR 19.502-2(b) and, if appropriate, set aside the delivery order for small business multiple award contract holders.
Federal Supply Schedules: The GAO sustained a bid protest challenging the terms of a Department of Veterans Affairs (VA) solicitation for pharmacists and pharmacy technicians, to be provided under the Federal Supply Schedule (FSS), because the solicitation required offerors to include non-FSS supervisory services as part of their quotations. Seaborn Health Care, Inc., B-400429, Oct. 27, 2008. In addition to pharmacists and pharmacy technicians, which are included on the FSS at issue, the solicitation required the successful offeror to provide, at its own expense, on-site supervisors with specific minimum experience, capability, and performance requirements. The applicable FSS, however, includes no provision for on-site supervisory personnel or services. Although the VA argued that it was simply providing for appropriate contract administration and supervisory services that are inherent in the cost of properly administering the contract, the GAO stated that "inherent" supervision of contractor employees is "something quite different, we think, from an agency's specifying that specific personnel are to be provided and that supervision will be performed in a particular manner." Because non-FSS products and services may not be purchased using FSS procedures, the GAO recommended that the VA cancel the solicitation and properly resolicit the requirement.
Organizational Conflicts of Interest: The GAO concluded that the US Navy improperly disqualified an offeror from a procurement for information operations support services due to a perceived organizational conflict of interest (OCI). AT&T Government Solutions, Inc., B-400216, Aug. 28, 2008. The Navy determined that, because one of the company's affiliates provides products and services similar to those used by the agency and to be evaluated under the solicited contract, the company would be in a position to favor its own products and capabilities during performance. The Navy therefore found that the company had an "impaired objectivity" OCI that required its disqualification from the procurement. In performing this OCI assessment, however, the Navy failed to evaluate the company's proposal, which included a proposed OCI mitigation plan, even though the solicitation required the agency to evaluate all proposals to determine whether an apparent OCI exists. The Navy also failed to consider whether or not the perceived OCI could be resolved (i.e., avoided, neutralized, or mitigated) short of eliminating the company from the competition. Moreover, the GAO concluded that the Navy's OCI determination appeared to be based more on unsupported inference than fact and that, under these circumstances, the agency's failure to communicate its OCI concerns to the company and provide it an opportunity for a response was unreasonable. The GAO therefore sustained the protest and recommended that the Navy, after giving the company an opportunity to respond to the perceived OCI, perform a new OCI assessment consistent with the solicitation.
Competitive Range Determinations: The US Court of Federal Claims (COFC) held that the US Army's competitive range determination in a procurement for optical rifle sights, in which the agency included only one proposal for further consideration and discussions, was arbitrary and capricious and without a rational basis. L-3 Communications EOTech, Inc. v. United States, No. 08-515C (Fed. Cl. Sep. 23, 2008). The COFC concluded that the Army's competitive range determination reflected disparate treatment of the offerors because it contemplated a relaxation of solicitation testing requirements for the sole offeror included in the competitive range. Specifically, while the protester's proposal was eliminated from the competition based upon the failure of its bid samples to pass Endurance-Live Fire Essential Criteria testing, the Army contemplated that the sole offeror in the competitive range would be permitted to revise its proposal through discussions and that its modified optical rifle sights would not then be subjected to testing before award. Although the offeror's initial bid samples passed the Endurance-Live Fire Essential Criteria testing, the COFC stated that there was no assurance that the offeror's sights, as modified, also would pass the testing. In addition, the COFC identified various testing and evaluation irregularities that were inconsistent with the solicitation and together acted to "cast a shadow" upon the procurement. (Notably, the plaintiff first unsuccessfully pursued its protest with the GAO, which found no error in the Army's actions. See L-3 Communications EOTech, Inc., B-311453 et al., Jul. 14, 2008.)
Technical Evaluations: The GAO sustained a bid protest regarding the award of two US Forest Service contracts for fire support helicopter services because the agency improperly evaluated proposals under the most important technical factor on a pass/fail basis. Helicopter Transport Services LLC, B-400295 et al., Sep. 29, 2008. The solicitation identified four technical evaluation factors, listed in descending order of importance, and stated that these four factors, when combined, were significantly more important than price. While the Forest Service applied a scale of five adjectival evaluation ratings ranging from Exceptional to Unacceptable (with associated point scores) for the last three technical factors, the agency evaluated the most important technical factor using only two ratings, Acceptable or Unacceptable. The GAO concluded that evaluating proposals under the most important technical factor on a pass/fail basis was inconsistent with the solicitation's announced evaluation scheme because it effectively gave no weight to that factor in the price/technical trade-off decision and made the three less important technical factors the determining factors for award. The GAO also sustained the protest because the Forest Service failed to contemporaneously document the technical evaluation team's oral discussion of their individual experiences with the protester in arriving at a rating under the past performance factor. Without any contemporaneous documentation of the team's discussion, and with no record of what contract performance information was considered and how much relevance the information was accorded, the GAO held that it had no basis on which to conclude that the past performance evaluation was reasonable.
Price Realism Analyses: In response to the latest in a series of bid protests challenging the US Air Force's award of a $1.2 billion fixed price contract for maintenance of the KC-135 Stratotanker fleet, the COFC held that the agency's price realism analysis was fatally flawed because the analysis relied upon the premise that the maintenance would be performed on a non-aging KC-135 fleet. Alabama Aircraft Industries, Inc. – Birmingham v. United States, No. 08-470C (Fed. Cl. Oct. 7, 2008). Although the Air Force argued that the offerors understood that the out years under the "fixed price" contract would be subject to continued contractual negotiations to account for aging aircraft, the COFC concluded that the solicitation did not notify offerors that the agency was seeking proposals that were premised upon a non-aging KC-135 fleet. The COFC therefore ordered the Air Force to resolicit the procurement and take the necessary steps in a new solicitation to address explicitly the impact of an ever-aging KC-135 fleet on the maintenance required under the contract. (In earlier GAO protests regarding this procurement, the GAO first sustained, and then denied, complaints regarding the Air Force's price realism analysis. The COFC stated that the GAO was "right the first time it addressed the issue," in Pemco Aeroplex, Inc., B-310372, Dec. 27, 2007, reconsid. denied, B-310372.2, Feb. 1, 2008, "and not the second time," in Pemco Aeroplex, Inc., B-310372.3, Jun. 13, 2008.)
Best Value Tradeoffs: The COFC held that the award of three US Army contracts for program management support services should be set aside because the Source Selection Authority's best value tradeoffs were improper. Femme Comp Inc. et al. v. United States, No. 08-409C et al. (Fed. Cl. Sep. 30, 2008). The COFC found that that the Source Selection Authority (SSA) did not adequately document her best value tradeoffs in the Source Selection Decision Document (SSDD), which was replete with conclusory statements instead of substantive comparisons of the proposals. The COFC also found that the SSDD clearly reflected the SSA's intent to inflate the technical portions of the lower-priced offerors' proposals while downplaying the technical superiority of the higher-priced offerors' proposals. Similarly, the COFC found that it was also apparent that the SSA emphasized the nature, quality, and extent of a proposal's strengths when it benefited a lower-priced proposal, but often ignored the nature, quality, and extent of a proposal's strengths and relied instead on the adjectival/color ratings when a higher-priced proposal was found to be superior. The COFC stated that many of these issues reflected a more basic problem with the SSA's best value tradeoffs. Specifically, the solicitation provided that the four non-price evaluation factors, taken together, were significantly more important than the price factor. However, the SSA's consistent efforts to boost the technical merits of the lower-priced proposals and to denigrate the technical superiority of the higher-priced proposals evidenced a desire to award contracts not on a best value basis as required by the solicitation, but on a lowest-priced, technically acceptable basis. Separately, the COFC also identified evaluation errors under two of the non-price evaluation factors, which further undermined the validity of the SSA's tradeoffs.
Bid Protest Timeliness: The GAO dismissed a pre-award bid protest challenging the terms of a US Army solicitation for exercise room equipment because the protester failed to consider the impact that the GAO's established business hours have on its protest timeliness rules. FitNet Purchasing Alliance, B-400553, Sep. 24, 2008. The GAO's Bid Protest Regulations provide that protests based upon alleged apparent solicitation improprieties must be filed prior to bid opening or the time set for receipt of initial proposals. Here, the protest was transmitted to the GAO shortly before 6:30 a.m. on Monday, September 8, 2008, which was an hour and a half before the 8:00 a.m. deadline for submission of quotations to the Army. The GAO's business hours, however, are from 8:30 a.m. to 5:30 p.m., and the GAO does not consider a protest that is transmitted outside of business hours to have been filed until its office next opens for business. Accordingly, even though the protest was transmitted before the deadline for submission of quotations, the GAO deemed the protest to have been filed at 8:30 a.m., which was a half hour after the quotation deadline. The GAO therefore dismissed the protest as untimely. For the protest to have been considered timely, it had to have been filed at the GAO by 5:30 p.m. on the previous business day.
Stay Overrides: When a procuring agency issues an override of an automatic suspension of award or performance during a GAO bid protest, the protester may file a separate action in the COFC to challenge the agency's action. In two recent decisions, the COFC held that the procuring agencies improperly issued overrides, and the court reinstated the procurement suspensions while the GAO decided the protests. In Nortel Government Solutions, Inc. v. United States, No. 08-682C (Fed. Cl. Oct. 20, 2008), the COFC held that the Drug Enforcement Agency's override decision was invalid because the agency failed to consider important, relevant aspects of an override analysis, such as whether reasonable alternatives to the override existed (e.g., extending the current contracts), and offered explanations that ran contrary to the evidence before it. In E-Management Consultants, Inc. v. United States, No. 08-680C (Fed. Cl. Oct. 14, 2008), the COFC held that the National Highway Traffic Safety Administration's override decision was improper because, among other things, the agency failed to address whether, in light of the possible availability of reasonable alternatives, significant adverse consequences would necessarily occur if it did not override the automatic stay.
Oral Contracts: The Civilian Board of Contract appeals (CBCA) held that it lacked jurisdiction over a Texas County's appeal regarding an alleged oral agreement between the County and the GSA for the payment of proposal preparation costs. Presidio County, Texas v. General Services Administration, CBCA 1209, Oct. 2, 2008. During a meeting between the County and the GSA regarding the agency's potential sole source award of a lease to the County for property with a building to be constructed by the County, the County expressed its concerns that the costs it would incur to put together a lease proposal, including surveying, architectural, and legal costs, would not be recouped if a lease did not result. At the meeting, the GSA's Contracting Officer reassured the County's representatives that, if the project fell through, the agency would reimburse the County for these local taxpayer funded costs, stating "we wouldn't do that to you." In fact, after the GSA issued a solicitation and the County submitted a proposal for the lease, the agency cancelled the procurement and no lease was awarded. When the County submitted a claim for its proposal preparation costs, however, the GSA denied the claim, stating that costs expended in responding to a solicitation are costs of doing business and are not reimbursable by the Government when an award is not made. During its subsequent appeal, the County contended that the CBCA had jurisdiction under the Contract Disputes Act because the claim arose under an implied-in-fact oral contract between the County and the GSA. To establish the elements of an oral or implied-in-fact contract, however, the County was required to show: (1) mutuality of intent to contract; (2) consideration; (3) an unambiguous offer and acceptance; and (4) actual authority on the part of the Government's representative to bind the Government. The CBCA concluded that the County failed to demonstrate a mutual intent to be bound by the terms of the oral agreement because the solicitation did not contain any provisions making the GSA liable for the County's proposal preparation costs, and the County submitted its proposal without a solicitation amendment providing for such GSA liability. The CBCA stated that "[t]he alleged oral agreement does not prevail over the allocation [of liability] in the solicitation to which the County responded." The CBCA further concluded that, even if it assumed that the Contracting Officer's statements during the meeting constituted a binding offer to reimburse the County for its proposal preparation costs, the County never formally accepted the offer. In that regard, the Board noted that nowhere in the County's proposal did it specify that the County's actions were undertaken in reliance on the alleged oral offer. Because a valid contract (written, oral, or implied) is a prerequisite to the CBCA's jurisdiction, the board dismissed the County's appeal.
Appropriated Funds: The COFC held that it lacked jurisdiction to consider a company's claim for payments owed under a contract with the Coalition Provisional Authority to provide life support services in Iraq because the contract did not involve appropriated funds of the United States. Laudes Corp. v. United States, No. 07-4C (Fed. Cl. Oct. 16, 2008). Since the contract provided that all payments would be made from the Development Fund for Iraq, and would not involve the appropriated funds of any Coalition Country, the COFC stated that the company's remedy for non-payment is under the legal system of Iraq.
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