Posted on 8/31/2012 3:35 PM
Spriggs Consulting Services and Spriggs Law Group announce GovConAlert LLC, www.govconalert.com is up and running providing current federal procurement news and analysis and consulting services. For $249 per year, subscribers have news alerts and analysis Monday, Wednesday and Friday of each week, 52 weeks a year. These articles include practical suggestions and lessons learned from extensive experience in government contracts. Subscribers also receive 6 hours of private consulting/tutoring services and referrals to professionals for longer term needs. They also have access to a word searchable data base of over 100 articles on currents subjects of interest through http://spriggslawgroup.blogspot.com.
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Posted on 3/16/2012 6:18 AM
Spriggs Consulting Services announces that its blogs will now be found at http://spriggslawgroup.blogspot.com.
Posted on 2/27/2012 6:00 PM
GAO recently sustained a protest where the agency failed to conduct discussions with the protester regarding adverse past performance reports that the protester had not previously had an opportunity to address.
As a general matter, GAO said, the evaluation of an offeror's past performance is a matter within the discretion of the contracting agency, and GAO will not substitute its judgment for "reasonably based" past performance ratings. However, GAO will question an agency's evaulation conclusions where they are unreasonable or not properly documented. The critical question is whether the evaluation was conducted fairly, reasonably and in accordance with the solicitation's evaluation scheme. Moreover, the evaluation must be based on relevant information sufficient to make a reasonable determination of the offeror's past performance.
In the case, the agency argued it did not consider positive past performance information reliable. GAO dismissed this argument since the agency had considered similar information other offerors had submitted with their proposals.
It is a fundamental precept of negotiated procurements that discussions, when conducted, must be meaningful, equitable and not misleading, GAO reiterates. Discussions must not mislead offerors and must identify deficiencies and significant proposal weaknesses that could reasonably be addressed in a manner to materially enhance the offeror's potential for receiving contract award. Agencies are also required to provide an offeror with a chance to address adverse past performance information to which the offeror has not previously had an opportunity to respond.
While discussions must be meaningful, leading an offeror into the areas of its proposal requiring amplification or revision, the agency is not required to spoon feed an offeror as to each and every item that could be raised to improve its proposal.
Finally, GAO said an agency cannot escape its obligations to conduct discussions in a reasonable manner by characterizing an evaluated weakness in past performance as something less than adverse. Although agencies must advise offerors during discussions of adverse past performance regarding which the offeror has not yet had an opportunity to respond, GAO says an offeror is not entitled to discussions if it has perviously had an opportunity to address the issue with the agency.
Posted on 2/11/2012 10:38 AM
In a recent case, GAO decided the rejection of a contractor's small business plan was improper because the requirement for an acceptable small business plan really was a matter of the contractor's responsibility which is to be determined from information received up to the time of award. The Navy had rejected the contractor's offer based on the inadequacy of the plan. GAO sustained the protest and recommended the contractor's proposal be evaluated for award and that the plan be used only to determine the contractor's responsibility. As is always the case in a sustained protest, GAO went on to find that the contractor is entitled to the costs of pursuing the protest, including reasonable attorney fees. See MANCON, B-405663, February 9, 2012.
MANCON argued that the small business subcontracting plan evaluation factor was pass/fail and therefore a matter of responsibility and not for evaluation of its technical acceptability. GAO agreed. The rule is the requirement for an acceptable plan is applicable to the "apparently successful offeror". This rule applies even where the RFP requires submission of the plan with the offer. Moreover, in this case, the plans were evaluated on a pass/fail basis and therefore, says GAO, "the agency's evaluation of those plans concern an offeror's responsibility."
Responsibility is to be determined based on information received by the agency up to the time award is to be made. It is axiomatic that the contracting officer has broad discretion in determining a contractor's responsibility. Therefore, GAO generally will not question the determination unless it is made unreasonably.
GAO also determined that the Navy erred in its belief that further exchanges with MANCON concerning its subcontracting plan would constitute discussions requiring that discussions be opened with all offerors. "We have found that where acceptability of a small business subcontracting plan is a responsibility issue, exchanges between the agency and an offeror concerning such plans are not discussions." This makes sense. And while we are at it, this rule is not rocket science. The case illustrates the Navy contracting officer's lack of fundamental understanding of the regulations to say nothing of the failure to communicate with the contractor.
This case is just another poignant reminder to study the regulations and read the cases. It also is another example of how protests protect the integrity of the procurement process and can cost you nothing if you are right.
Please follow SLG blogs at http://spriggslawgroup.blogspot.com.
Posted on 2/9/2012 12:33 PM
Spriggs Consulting Services (SCS), a small veteran owned business, announces the formation of the Spriggs Law Group (SLG) to serve clients engaged in disputes and litigation before federal agencies and tribunals. SCS was established January 1, 2011 to assist with solicitation and proposal review, compliance with contract and regulatory requirements, to identify and prevent contract (and subcontract) problems and to resolve disputes by negotiation and mediation, short of litigation. Alas, not all disputes can be resolved. SLG takes the problem solving effort through litigation at the federal level before the Court of Federal Claims, the Armed Services Board of Contract Appeals, the Civilian Board of Contract Appeals and the Government Accountability Office (the tribunals).
What does SCS do? Contractors and subcontractors can bid improvidently because they do not know the rules and do not have experienced eyes looking at solicitations. They can lose the award and need help deciding whether to protest. They can lose money and wonder if they can recover their losses from the government. They can run into compliance problems by not managing contract performance with a careful eye to contract and regulation requirements. SCS identifies problems and solves them short of litigation. Years of litigation teach dispute avoidance and resolution techniques which can avoid litigation. So, if you are bidding on a contract, have lost the award or are losing money on the contract, SCS is the place to go.
What does SLG do? If all else fails, SLG handles the litigation. SLG plans to hire sufficient attorneys to handle even the most complex litigation. However, as a small business, SLG is tuned into the budget constraints of other small businesses and medium sized businesses as well. Thus, SLG is able to provide flexible pricing designed to meet today's budget constraints. Having a lawyer as your contract manager always is a good idea (SCS). But having a lawyer for litigation is a practical if not legal requirement (SLG). If you want to file your protest at the Court of Federal Claims, you must have a lawyer admitted to that court. If you file a protest at GAO, you will need a lawyer so he or she can see the complete procurement file. If you go to one of the boards of contract appeals, you need qualified representation.
SCS continues its mission unchanged. SLG is now on board. The SLG web site is www.spriggslawgroup.com. That site is under construction but should be available soon. The SLG email address is email@example.com.
Please follow SLG blogs at http://spriggslawgroup.blogspot.com.
Posted on 2/7/2012 10:00 AM
Judge Christine Miller of the Court of Federal Claims (COFC) has issued an injunction stopping performance on a Marine Corps Systems Command (MCSC) best value contract for tactical fuel and water systems. She agreed with the protester's argument the awardee made a material misrepresentation in its proposal that a certain firm was a subcontractor and that MCSC relied on this mispresentation in its evaluation of past performance. Under the facts in this case, Judge Miller determined the interests of national defense and national security do not prevail over upholding the integrity of the procurement process to redress a material misrepresentation.
After carefully reviewing the evidence, Judge Miller found that the successful awardee made a material misrepresentation listing a supplier, with which it had teamed, as a subcontractor and listed that supplier as part of its past performance presentation. The court also found that MCSC's evaluation showed MCSC relied on the misrepresentation in evaluating the successful awardee's past performance. All of this, said the court, was prejudicial to the protester. The court relied on precedent establishing the rule that any misstatement which materially influences how a proposal is evaluated should disqualify the proposal. "The integrity of the system demands no less. Any further consideration of the proposal in these circumstances would provoke suspicion and mistrust and reduce confidence in the competitive procurement system."
Judge Miller ordered the Marine Corps Systems Command, its officers, agents, employees and all other connected persons not to proceed with the performance of the contract and she ordered the contracting officer to direct the contractor to cease performance under the contract.
There are a number of obvious lessons here. You can get real relief in bid protest cases. There are consequences for misrepresenting your intentions in a proposal. Bait and switch by contractors can be found out and punished. Courts can order the government to stop performance on an awarded contract and to redo a procurement.
Why go to court versus the GAO? Or why go to GAO and then to court? Attend our bid protest seminar and we'll be happy to explain the many ins and outs and pros and cons. However, each case is different and requires careful analysis before you decide to protest and then select the forum.
Posted on 2/3/2012 1:55 PM
We have been asked whether it is possible to challenge an agency decision not to exercise an option under an existing government contract. Conversely, we have been asked whether a disappointed competitor can challenge the propriety of the agency's decision to exercise an option under an existing contract.
First, we address whether a contractor on an existing contract can challenge the government's decision not to exercise its option. Under recent judicial authority, when a contract contains an option to extend its term, unless the contract provides otherwise, the government enjoys broad discretion and is under no obligation to exercise the option. The government's decision can provide a vehicle for relief only if the contractor proves that the decision was made in bad faith or was so arbitrary or capricious as to constitute an abuse of discretion. Bad faith amounts to proof of specific intent to injure the contractor.
Second, is it possible for a disappointed bidder on the contract to challenge the government's exercise of an option under the contract it awarded to another contractor? By challenge, of course, we mean can one go to a board of contract appeals, the Court of Federal Claims (COFC) or the GAO seeking redress? Since the disappointed bidder has no contract, it cannot seek redress at a board of contract appeals or the COFC under the statute affording those tribunals jurisdiction over contract disputes. So, can the contractor challenge the proposed exercise of the option under the bid protest jurisdiction of COFC or GAO?
The rule is you cannot protest matters of contract administration but there are exceptions to the rule.
The Competition in Contracting Act (CICA) affords GAO jurisdiction relating to: (1) solicitations; (2) cancellation of solicitations; (3) award or proposed award of a contract; and (4) termination or cancellation of award if the protest is based on improprieties in the award of the contract. Based on CICA, it would appear GAO will not hear complaints about contract administration. However, we are aware of a 2010 case (citing other GAO cases) in which GAO undertook to review whether exercise of the option was proper. GAO found "no basis to question the agency's exercise of the option . . . ." GAO will not question an agency's decision "as long as it is reasonable". As far as we know, GAO has never granted such a protest.
The COFC has protest jurisdiction relating solely to solicitations and contracts or violations of statutes or regulations relating to procurements or proposed procurements. The COFC specifically declines protest jurisdiction over complaints involving contract administration. However, the COFC also heard a 2010 case in which a disappointed bidder protested the exercise of an option although the facts in that case are very unique and a definite exception to the rule.
So, you may always challenge wording in the solicitation, the nature and type of the procurement, the cancellation of a solicitation, an award under a solicitation and in some cases the termination or cancellation of an award. You may get GAO (of perhaps even the COFC) to hear your complaint about the exercise of an option but GAO will not second guess the agency unless its decision is unreasonable or an abuse of discretion.
Postscript: If the agency issues a solicitation as part of its decision making process on whether to exercise an option and then cancels the solitication, you could protest. However, the agency has broad discretion in cancellations and, again, it need only show it acted reasonably, rationally and that it did not abuse its discretion.
Posted on 2/3/2012 10:26 AM
On December 7, 2011, DOD introduced a new clause for contracts estimated to exceed the simplified acquisition threshold. DOD now requires contractors to certify that any request for equitable adjustment (REA) exceeding that threshold in amount is "made in good faith, and that the supporting data are accurate and complete to the best of [the contractor's] knowledge and belief."
Just to review the bidding, contractors may seek REA's for upward adjustments in price and schedule extensions on any government contract containing the standard Changes clause. For commercial item contracts awarded under FAR Part 12, it's a difference story. There, the changes clause says changes may only be made by mutual agreement of the parties. However, REA's can be submitted under breach of contract theories on commercial item contracts. In any event, if you have the new clause in DFARS 252.243-7002, you must certify your REA.
This is not the same certification required under FAR Subpart 33.2. If you desire to convert your REA to a claim, you must use the certification language at FAR 33.207. That certification adds another clause to the certification asserting the contractor's belief the amount accurately reflects what it believes the government must pay and attests to the certifier's eligibility to make the certification. If you want to request the contracting officer's final decision thereby affording yourself the opportunity to appeal that decision and you want to recover interest on your REA, you must certify it with the exact language from FAR 33.207. Although minor informalities in the language can be corrected later, you should use the exact language in the regulation.
REA's are an integral part of the public contracting scheme. One of the major differences between public and private commercial contracts is the use by the government of the Changes clause. Because the government dictates the mandatory use of this clause and thereby maintains total control over the contractor's performance, the law has developed various remedies for the contractor to recover additional costs (and profit on those costs) under various theories called constructive changes. (These constructive changes are actually breaches of the contract given a different name.)
We've written several blogs about breaches of government obligations under every contract. The government's specifications must be free of errors, conflicts and omissions and must permit commercially practicable performance. The government is obligated to cooperate with the contractor, not interfere in the contractor's performance and communicate with the contractor. The govenment is obliged to provide information vital to the contractor's performance. There are other types of constructive changes such as constructive acceleration of performance (where the government unjustifiably denies the contractor's request for a schedule extension). Differing interpretations of contract language give rise to constructive changes.
The take away points are these: (1) you have a right to seek redress for constructive changes; (2) if you submit an REA on a DOD contract, you must certify it under DFARS 252.243-7002; (3) if you want to convert your REA to a claim, you then must recertify it in accordance with FAR 33.207; and (4) call us as are experts at preparing REA's and claims.
Posted on 2/2/2012 2:36 PM
It's time we got aggressive about our rights to debriefings. FAR 15.506 has a fairly detailed rule requiring debriefings which, for the most part, the government ignores. Dan Gordon encouraged open, thorough debriefings in his myth busters memorandum. What did he mean when he said thorough debriefings discourage protests? No doubt he was thinking about the far too commonplace situation where a bidder has to protest just to see what the SSEB and SSA did when that information should have been released, in redacted form to protect contractor proprietary information, at the debriefing. A proper FAR 15.506 debriefing prevents a protest just to find out what happened.
FAR 15.506 lists the minimum that should be disclosed at a debriefing. At a minimum. Dan has emphasized the regulation lists the minimum information required to be released. One of the requirements is a "summary of the rationale for award". As we've said before, we've attended at least one debriefing where the SSEB report and the SSA decision were released (in sparingly expurgated form). At a minimum, the government should thoroughly explain why it reached its award conclusion. There is nothing in the law to prevent release of all the post decision documents provided the contractor's rights in its trade secrets and proprietary data are protected.
Get aggressive. The regulation requires information. If you don't get it, threaten to protest. Yes, threaten to protest, which means you had better be prepared to actually file it. Protesting is a constitutional and statutory right. As a citizen, even more importantly as an interested bidder on a government contract, you have a right to protest. Protesting plays an important role in the taxpayers' procurement process.
When the courts first intervened in public procurements, they did so on the theory that disappointed bidders were acting on behalf of the taxpayers as "private attorney generals". So, you could say it not only is your right but it is also your obligation to protest. As a practical matter, why would you want to protest? So you can find out what happened. So you can see why you lost the award. That's why. And, if the government won't show you the SSEB report and SSA decision at the debriefing, tell the contracting officer you will go to GAO or the Court of Federal Claims to get the documents.
When you go to court or GAO you will not necessarily see the SSEB complete report and SSA decision but your lawyer will see them under a protective order. Your outside counsel will see everything once he or she is admitted to the protective order. Based on advice of counsel, you can then decide whether to proceed with the protest. If the SSEB report and SSA decision meet the legal tests, you can dismiss the protest. If they don't, you can proceed with the protest and perhaps achieve the kind of victory we have reported in the recent opinions by Judge Lynn Bush.
We once wrote an article about how not to protest. If your thorough debriefing or your case at court or the GAO reveals that the government followed the evaluation factors and awarded the contract faithfully following those criteria and the applicable regulations, you can forgo your protest. But always write a letter to the contracting officer explaining that on the basis of a thorough examination of the record you have decided that you will not protest. You must make maximum use of the word protest in your dealings with the government. The government must know that you are willing to be the "private attorney general" on behalf of the taxpayer but you only carry your challenge all the way through when you know the government has violated the rules.
Posted on 1/26/2012 7:54 AM
Yes, that is the title of FAR 15.201. "Exchanges of information among all interested parties, from the earliest identification of a requirement through the receipt of proposals, are encouraged." (Emphasis added.) All interested parties are encouraged to get involved in talking about the government's needs. FAR 15.201 says such communication is encouraged so that potential bidders (offerors) can determine "whether or how they can satisfy the Government's ability to obtain quality supplies and services, including construction, at reasonable prices, and increase efficiency in proposal preparation, proposal evaluation, negotiation, and contract award." It reads like an open invitation to do a lot of talking, doesn't it?
There are a lot of success stories about how well FAR 15.201 communication can work. But there also are some real horror stories about how lack of communication can kill a procurement in more ways than one.
The regulation encourages industry days, small business conferences, public hearings, market research, one-on-one meetings, presolicitation notices, draft RFP's, RFI's, presolicitation or preproposal conferences and site visits (during which talking can take place). One on one meetings are encouraged.
The only warnings in the section are to be consistent with the integrity requirements in FAR 3.104 and when the buy is on the street, the contracting officer cannot just talk to one bidder about information necessary for proposal submission without sharing that information with all bidders. FAR 3.104 covers certain obvious fairness, favoritism, ethics and self-aggrandizement rules. (No bribes, conflicts of interest, disclosure of contractor secrets or source selection information prior to award.) It does not inhibit communications contemplated by FAR 15.201. FAR 3.104 covers basic moral tenents. It is not an excuse to refuse to talk with contractors.
While we're on FAR 3.104, we also should point out it does not inhibit release of source selection information after award. FAR 15.506 on debriefings states the minimum information to be released. The more source selection information that is released at debriefings, the fewer the protests. We can testify that we once went to a debriefing at which the contracting officer released the SSEB report and the SSA's decision - right there at the debriefing! We suggest this always ought to be the case. (Redacted, of course, for contractor secret data.)
We think FAR 15.201 is pretty straightforward and easy to understand and implement. OFPP agrees. Senior government acquisition officials agree.
Once the contract is awarded, it contains an implied obligation on the government's part to communicate and cooperate with the contractor, "to do whatever is reasonably necessary to enable the contractor to perform". This is a time honored legal principle read into the contract as a matter of law. If that is true, as it is, after award, does it not also make sense to treat communications before the proposal submission date mandatory as a matter of law? We think so.
Posted on 1/25/2012 5:15 PM
We posted our brief comment on a Judge Bush opinion on September 28, 2011. We also referred to it when we wrote about another Judge Bush opinion on January 15, 2012. We now invite you to read the best treatise published to date on best value procurements and it is found at www.uscfc.uscourts.gov/sites/default/files/firstline.pdf. This is the 79 page published opinion of Judge Bush in FirstLine Transportation Security, Inc. v. United States, U.S. Court of Federal Claims No. 11-375 C (September 27,2011). Judge Bush covers everything you need to know about best value tradeoffs, proper source selection evaluations and decisions, proper use of evaluation factors, the impropriety of turning best value tradeoff procurements into lowest price, technically acceptable awards, and how best value decisions must be made and documented.
The price of the successful awardee was 16% lower than the protester FirstLine’s price. FirstLine’s technical ratings included 33 strengths and no weaknesses whereas the successful awardee had 1 strength and 1 weakness. Yet the SSEB concluded that the higher technical merit offered by FirstLine did not justify the price differential because the successful awardee offered “an acceptable level of technical competence". Judge Bush said this “had the effect of converting the best-value procurement contemplated under the RFP into one based on low price and mere technical acceptability.” Essentially, the SSEB converted best value into LPTA. She went on to show that FAR 15.101-1 and 15.101-2(b)(1) contain entirely different procurement methods. Judge Bush then pointed out the SSEB was required under FAR 15.308 to properly document its tradeoff analysis, which it did not do. Although FAR 15.308 applies to the SSA, not the SSEB, since the SSA merely adopted the SSEB’s conclusion, the SSEB was obliged to meet the documentation requirements of FAR 15.308.
In documenting the tradeoff analysis, she said the SSEB report contained nothing more than conclusory assertions based on flawed premises. The report did not compare the competing proposals in any meaningful way. It did not address the relative benefits and disadvantages of the competing proposals and it did not explain why a higher-priced, but technically superior proposal does not merit its higher price. “The government cannot simply declare that a price premium is not justified by a superior technical proposal without some substantive discussion of why that is so.”
“Thus, when selecting a low-price technically inferior proposal in a best-value procurement where non price factors are more important than price, it is not sufficient for the government to simply state that a proposal’s technical superiority is not worth the payment of a price premium. Instead, the government must explain specifically why it does not warrant a premium.”
Judge Bush also noted that, with only one minor exception, there is no evidence the SSEB even considered the relative weight of the evaluation factors which had been stated in descending order of importance with all other factors more important than price. The successful awardee and the government argued the government was free to disregard the evaluation factors as long as the evaluation of the proposals was reasonable. We can almost hear her banging her gavel: “That is not the law.”
Judge Bush then takes on the SSA’s decision. The decision making requirement is in FAR 15.308, which she quotes. First the SSA must reach an independent award decision based on a comparative assessment of the proposals against all of the criteria set forth in the solicitation. Then, the SSA must document an independent award decision. “Here, the SSA’s documentation is limited to her adoption of the SSEB report and her otherwise unsupported statement that [the successful awardee’s] proposal represents the best value to the government.” Again, you can almost hear the gavel. The SSA must document the rationale for any business judgments and tradeoffs made or relied on by the SSA. The express language of FAR requires the SSA to exercise independent judgment and document that judgment. “Here, the SSA should have explained why the FirstLine proposal was not worth its higher price, notwithstanding its substantial technical superiority.”
The remedy? Do it over and do it right. Injunction issued.
· Scrub the evaluation factors. Make sure they comply with FAR 15.304.
· Scrutinize the SSEB’s report to make sure it complies with FAR 15.305
· Scrutinize the SSA’s decision to make sure it complies with FAR 15.308.
· It’s against the law to take a best value tradeoff procurement and turn it into a LPTA.
We urge you to read Judge Bush’s opinion in FirstLine. It will tell you everything you need to know about how best value tradeoff procurements are supposed to work and it will tell you they are a far cry from LPTA’s.
Posted on 1/22/2012 8:17 AM
We've reported several times on OFPP's myth busting campaign. It's a laudable effort to improve communications between government and industry. Dan Gordon, now at George Washington University's law school, was its champion and indefatigable promoter. Lesley Field now leads OFPP and she sounds just as committed as Dan (who, by the way, will continue to speak out in his new position). Here's what Lesley recently wrote:
"Bill - thanks for your note. We continue to promote the MythBusters principles and hope to have a follow-on effort that addresses myths from the private sector's perspective this spring. Additionally, agencies have developed and most have posted their vendor [communications] plans. We hope to make these more easily available through a central location shortly, and we're planning additional improvements that will make it easier for businesses to find out about collaboration opportunities with agencies. So, we're very much committed to continuing the MythBusters effort and would be happy to discuss further."
We really need to hear from you on this. Please send me an email about your successful and your unsuccessful efforts to engage the government, particularly contracting officers, in meaningful conversation. Please send us a note about your experiences.
Posted on 1/20/2012 6:10 PM
We applaud the National Defense Industrial Association (NDIA) for making one of its 2012 issues the proper use of lowest price, technically acceptable (LPTA) acquisitions. NDIA says it is acceptable to use LPTA for janitorial, grass cutting, mail handling and snow removal but not for complex engineering services. Amen. Tradeoffs among technical factors, past performance and price must be made for complex items and services. Technical services, including most engineering projects, do not lend themselves to source selection based on LPTA. NDIA points to the growing concern about DOD's expanded use of LPTA. We believe LPTA should be under attack. Criticisms of its use are warranted. Acquisition leaders and contracting officers alike should heed NDIA's concern and our reminder to pay attention to FAR.
Yes. Pay attention to FAR. As we have pointed out, FAR 15.101 covers the "best value continuum" by saying LPTA may be appropriate "where the requirement is clearly definable and the risk of unsuccessful performance is minimal". Grass cutting should go to the lowest priced bidder. On the other hand, the "less definitive the requirement, the more development work required, or the greater the performance risk" tradeoffs (best value) should be used. FAR 15.101-2 clearly says in the use of LPTA's, "tradeoffs are not permitted".
We need to interject a word about language. Best value procurements are those in which there are tradeoffs among technical factors, past performance and price. LPTA's are not best value procurements because they do not involve tradeoffs. Yet LPTA's are considered part of the "best value continuum" in FAR 15.1. We think the regulation creates some confusion among members of the contracting community because what we commonly call best value (tradeoffs) is discussed with LPTA's as part of a "best value continuum". The two are separate notions. We don't really see a continuum. LPTA is not best value as we understand it.
So, what happens? Contracting officers think the continuum is a sliding scale so that they can slip some procurements from best value tradeoffs to LPTA's. Or, they think LPTA's are perfectly acceptable since they are discussed under the "best value continuum". Wrong. The slip approach violates the law against changing the rules in the middle of the game. And the notion LPTA's are always perfectly acceptable is just plain wrong even under the continuum language in the regulation.
The answer? Get on board with NDIA. LPTA's are acceptable for grass cutting but not for more complex items and services.
Posted on 1/15/2012 11:30 AM
On September 28, 2011, we reported that Judge Lynn Bush of the U.S. Court of Federal Claims (COFC) stopped a best value award because the trade-off analysis was flawed and improperly documented. On January 9, 2012, she did it again. This time she found disparate treatment of offerors and irrational evaluation ratings not based on evidence in the contemporaneous administrative record.
Judge Bush reiterates that the COFC defers to agency expertise when the agency assigns ratings to proposals. However, the court is not bound by technical ratings not supported by the record made at the time the proposals are reviewed. She states the court must review the technical ratings "not through the lens of post-hoc rationalizations, but by examining the contemporaneous record." The court must look carefully at the documents the agency had before it when the decision was made. Justifications offered after the fact to justify the decision are not persuasive. The court also cannot affirm an improperly justified evaluation rating simply because there might be a rational basis the agency can come up with later.
"A tradeoff analysis based on signficantly flawed evaluation ratings is itself irrational," she says. Because the ratings were incorrect and arbitrary, the best value award itself is flawed and must be overturned. If the Source Selection Authority (SSA) relies on errors by the technical evaluation team, the SSA's decision is compromised. It is possible to challenge an award when the evaluations simply don't make sense and the offerors are not treated with an even hand.
Her remedy is to set aside the award. She points out the agency may re-procure the diplomatic security protection management services. However, she lays down some specific guidelines as to how that reprocurement must take place. In the redo, she plays a theme from her December opinion on which we reported. The proper tradeoff analysis must be based on the independent judgment of the SSA.
We should emphasize a final point. Her decision was not just based on the irrational technical evaluation ratings. It also was based on the failure of the SSA to strictly follow the weighting scheme for evaluation factors which was set forth in the solicitation. We've emphasized this many times in these blogs. The meat of a solicitation is in its evaluation factors and the SSA is obliged to follow them strictly in reaching the decision to award.
Posted on 1/11/2012 4:24 PM
In our posting of September 2, 2011, we opined on why you need a contract manager. We listed fifteen (15) items on a list of things that a contract manager does and this list was not exhaustive or all inclusive. We repeat that important message below.
Our purpose now is to point out that we meant it when we said “you are in the most highly regulated industry in the world. You also know the regulations are more voluminous and complicated than the U. S. Tax Code.” What does that tell you?
Not all contract managers are lawyers and not all lawyers are contract managers. But in government contracting and subcontracting, your contract manager had better be a lawyer. Pure and simple. You need someone who can navigate the rigorous labyrinth of laws and regulations. Or, be sure to hire a contract manager who has a contract management lawyer at her fingertips. Yes, we said “contract management lawyer”, not just any lawyer. Your team needs contract management with legal expertise and talent steeped in government contracts and subcontracts experience. Whether it’s getting a contract, keeping it, or making a profit on it, you need complete contract management coverage.
What a Contract Manager Does. Here’s a list:
1. Knows the statutes, regulations and case law thoroughly and in depth;
2. Knows, writes and speaks the English language clearly and concisely;
3. Reviews solicitation documents for clarity and legal sufficiency;
4. Assures proposals are well written and meet solicitation and regulation requirements;
5. Handles discussions, clarifications and negotiations of proposals;
6. Handles debriefings and protests;
7. Monitors performance and assures compliance with all contract terms and conditions and regulation requirements;
8. Handles all contract interpretation issues and questions about regulations;
9. Investigates, identifies, analyzes and solves all contractual performance issues;
10. Keeps a daily diary of contract performance and communications with the contracting officer;
11. Handles all requests for equitable adjustment, claims, terminations and disputes;
12. Handles all communications with the contracting officer;
13. Prepares, reviews and signs all contractual documents;
14. Reads all publications relating to acquisition news and keeps current on all statutes, regulations and case law; and
15. Handles contract closeout.
This list is not all inclusive.
So, why do you need a Contract Manager? Ask your friends at Lockheed Martin. Ask any member of the National Contract Management Association. Or, just ask yourself whether you are really good at doing the things on the list yourself or if you really have anyone else who is performing those duties. If not, you need a contract manager. You can’t do business with the government without one.
Posted on 1/11/2012 7:28 AM
Who said that? Why, Dan Gordon, of course, on the eve of leaving his post as Administrator of the Office of Federal Procurement Policy (OFPP). A contracting officer told Dan that she was nervous to meet with industry because she did not want to get in trouble with ethics officials. "My answer to her was, if you need to, take five lawyers from your agency with you, but have the meetings. Lawyers are your friends," he admonished her. Dan was speaking in the context of his "lightbulb moment" when he decided to launch his mythbusters campaign, He vowed that Lesley Field, his successor, and the entire OFPP team would be continuing the mythbusting campaign which really hasn't taken hold in the field yet.
According to Dan, some people in government have legitimate complaints about vendors' marketing campaigns to which they really don't like to listen. So, there will be a second mythbusters campaign directed at contractors.
We all know the changes required by the mythbuster campaigns will be cultural. "But I'm convinced that the push for the mythbusters campaign for more communication, early communication, honest communication, full communication, will pay off for the government, but also for industry," Dan said on his way to his new post at George Washington University.
We are aware of activities to continue the mythbusting campaigns about which we will report in these blogs. Dan's replacement, Lesley Field, and her staff are the key players here. But each of us has a role. We ask you to go to www.actgov.org and www.bettergovernmentit.org and read what the American Council for Technology - Industry Advisory Council has written about better communication between government and industry. In an exhaustive work the Council has interviewed and surveyed many people in government and industry and has come up with a list of thirteen (13) action items to improve how we conduct business. Although the study had its genesis with the IT side of the house, the suggestions apply with equal force to all government contracting.
Too many lawyers? Not according to Dan. In government contracting, we submit lawyers are your very best friends. Don't be shy. We don't bite. And, those of us who have devoted our lives to improving the federal acquisition landscape nuture the process. We are not the obstructionists. We truly facilitate. In our opinion, there are not enough of us to go around in this, the most highly regulated and most complicated enterprise on earth.
And, contrary to popular culture, not all of us cost an arm and a leg.
Posted on 1/9/2012 2:48 PM
Listen to Judge Mary Ellen Coster Williams of the United States Court of Federal Claims:
"In addition to obligations expressly set forth in the text of a contract, every party to a contract owes a common law 'covenant of good faith and fair dealing' to its contracting partner. [Citation omitted.] This implied duty obligates the parties to act 'with good faith and fair dealing in [their] performance and in [their] enforcement' of the contract. [Citation omitted.] A party must refrain from doing anything 'that will hinder or delay the other party in performance of the contract' or that will destroy the other party's reasonable expectations regarding the fruits of the contract. [Citation omitted.] The duty of good faith and fair dealing encompasses the duties to cooperate and not hinder contract performance."
We should hasten to add it also includes the duty to communicate and disclose information vital to contract performance. To which we also should add the duty to clearly state contract requirements and provide specifications free from errors, conflicts and omissions.
Notice in Judge Williams' opinion her reference to the government's obligation to refrain from anything that will destroy the other party's reasonable expectation regarding the fruits of the contract. The Armed Services Board of Contract Appeals says this requires the government to do everything reasonably necessary to enable the contractor to perform.
This rule has been around a long time. But the workforce turns over and changes. Education is improving but experience is the best teacher. It's time we reminded everyone of the legal obligations of the parties to a contract. In practical terms, this means they should work together and communicate. It's the law.
Posted on 1/8/2012 11:50 AM
Recently, we've noticed an outstanding white paper from the American Council for Technology Industry Advisory Council on "Improving the Management of Federal Government IT Assets Through Better Communication With the IT Industry." In 16 pages, this document describes the problems and presents proposed action items all designed to improve government communications with industry. And, everything applies across the board to all procurements for all agencies. We applaud this excellent work and look forward to following the implementation of its recommendations.
The ACT/IAC paper refers prominently to a little known Memorandum from the Deputy Secretary of Defense to all senior officials in any way engaged in acquisition. ACT/IAC lauds this Memorandum, as do we, and points out that "we have also never heard any government employee cite an agency that encourages communication with the private sector." Appalling! It's time we all read this Memorandum and made sure everyone in DOD is aware of it. Moreover, the policy should be extended to all agencies. Indeed, it is squarely in line with Dan Gordon's Myth-Busters Memorandum to all senior government acquisition officials about which we've written before.
"The Department's policy is for representatives at all levels of the Department to have frequent, fair, even and transparent dialogue with the commercial base on matters of mutual interest, as appropriate, in a manner which protects sensitive information, operation, sources, methods and technologies. For the Department, this includes representatives of end users and requirements generators as well as those within acquisition organizations. Traditional and non-traditional suppliers are to be included in such dialogue. Matters of mutual interest include, but are not limited to: DOD and industry business practices and policies; removal of barriers to competition; technology trends and development objectives; security challenges; and the performance of organizations, contracts, projects and programs." (Emphasis added.)
The memorandum attaches a summary of laws applicable to such communications. Without citing the laws, here is what they say: government officials may not participate in a matter that presents an actual or apparent conflict of interest; government officials may not disclose proprietary or source selection information; government officials may not give unauthorized preferential treatment to one firm but must treat all firms equally; government officials may not disclose trade secrets or other proprietary information without permission of the owner of the information; government officials must protect procurement-sensitive information; and, if applicable government officials must comply with the Federal Advisory Committee Act.
The DOD Memorandum says "officials within the Department are encouraged to communicate with industry . . . ." Dan Gordon, on behalf of the President of the United States, says this applies across the board to all agencies on all acquistions. Is anyone listening?
Posted on 1/7/2012 2:28 PM
In these days of fiscal austerity, the default contract type is firm fixed price. But should it be? What do the regulations say about FFP? As we've said before, budget contraints do not rewrite the regulations. They remain the same as always. So what does FAR say about FFP? FAR 16.202-1 describes FFP and goes on in 16.202-2 to state the proper application of FFP. These shift-the-greatest-risk-to-the-contractor contracts are suitable when the government 1) can write "reasonably definite functional or detailed specifications"; and 2) when "the contracting officer can establish fair and reasonable prices at the outset."
Among the tests of whether fair and reasonable prices can be established at the outset is whether "the contractor is willing to accept a firm fixed price representing the assumption of the risks involved." Since FFP contracts place the maximum risk and full responsibility for all costs and resulting profit or loss on the contractor, you would think the admonition to discover whether the contractor is willing to accept the risks might have some meaning. When was the last time you were asked whether a FFP contract was the right choice? When have you been asked by your government buyer whether you were willing to accept the risk?
Obviously, you've never been asked. These are contracts of adhension where the government dictates the terms and conditions of the sale. There is no negotition (or is there?) over the type of contract. There could be. You could protest the wrong type of contract. But who is willing to do that? So the contract by adhension rule is inviolate? Probably. But that does not prevent us from pointing out that the use of fixed price contracts must be based on an analysis of the facts against the language of FAR 16.202-2. (We've discussed how to level the playing field during performance by reminding everyone in other blogs about the implied government obligations in every government contract.)
The latest problem with the drive to make all contracts fixed priced is the bait and switch tactic we've seen and also dicsussed in other blogs. The government cannot write a firm fixed price contract and then administer it as if it is time and materials, for example. Or, use some other excuse not to pay the firm fixed price. In such a case, the contractor clearly has a remedy for breach of contract, constructive change or constructive termination. So you may be stuck with the type of contract, but you should not be holding the bag when the government changes the rules of the game.
Posted on 1/7/2012 10:27 AM
Many commentators have noticed an abuse of lowest price technically acceptable (LPTA) source selection. In fact, there is growing concern that a solicitation is called best value, the evaluaton criteria actually say there will be a cost/technical tradeoff analysis, but in practice, the source selection becomes LPTA. We'd like to set the record straight on the proper use of LPTA and call upon contracting officers to pay close attention to FAR Part 15 in writing evaluation criteria and in source selection practices.
Look carefully at FAR 15.101. There is a best value "continuum". The relative importance of cost or price may vary. May vary. Today's environment of budget austerity does not change the rule. If requirements are clearly definable and the risk of unsuccessful performance is minimal, cost or price may properly become the predominant source selection discriminator (LPTA okay). Conversely, the less definitive the requirement, the more development work is required or the greater the performance risk, the more technical excellence or past performance should come into play (LPTA not an option).
Then look very carefully at the language in FAR 15.101-2(a) dealing with LPTA. LPTA should only be used when best value is expected to result from choosing the lowest priced technically acceptable proposal. So harken back to the best value continuum. Is the risk of successful performance minimal? Will you get "best value" by ignoring the tradeoff process? If not, LPTA is proscribed. We'll wager that careful and close attention to this language in FAR 15.101 will result is fewer LPTA procurements. Again, budget contraints have not amended FAR. We believe that rules are necessary in public acquistion actions. The rules are there for a purpose and they should not be ignored.
Finally, and equally importantly, read FAR 15.304 and 305 carefully. The evaluation criteria must be clearly stated. Clearly. Too often we have seen evaluation criteria which are patently unclear. Even more importantly, they are to be rigorously adhered to in the source selection process. No deviations. That means, source selection officials are not permitted - not permitted - to change best value tradeoff criteria to LPTA (without a redo). In a recent example, LPTA was used, in our opinion, to include risky companies in what turned into a bidding war.
Contractors aggrieved by the government's failure to follow the regulation are not without remedy. The rules are meant to be enforced. Austerity does not waive procurement regulations. Cutting corners to achieve cost savings is not permitted. Unless or until Congress changes the system of rules and regulations, everyone - no exceptions - must follow them.
Posted on 12/28/2011 12:18 PM
Key provisions of the FY12 Defense Authorization Bill include allowability of costs for contractor employee compensation, improvements to the past performance databases, limitations on expenditures for contractor services, extension of the task and delivery order protest limitation, improvements in the training of the federal acquisition workforce, a five year extension of the mentor protégé program, the addition of acquisition functions to the definition of critical functions and reauthorization of the SBIR and STTR programs.
· Contractor compensation. The coverage of allowable costs now includes all contractor employees. Certain scientists and engineers can be exempted. The bill retains the current formula for determining the compensation costs.
· Past performance databases. DOD must develop away to be sure timely, accurate and complete information on contractor performance is included in the databases used for making source selection decisions. Contractors must be afforded up to 14 days to provide comments before the information is posted and they may submit information any time.
· Cap on DOD spending for contract services. Spending for FY12 and FY13 is limited to the budget request for 2010. Funding for staff augmentation contracts and contracts for functions closely associated with inherently government functions must be reduced by 10 percent. DOD is directed to adopt a negotiation objective that holds contractor labor and overhead rates at 2010 levels.
· Task and delivery order protests. GAO can hear civilian agency protests of task and delivery orders under limited circumstances. The limited circumstances: you cannot protest unless the ground for protesting is that the order increases the scope, period, or maximum value of the contract under which the order is issued; or, the protest is on an order in excess of $10M. The same rule applies to DOD task and delivery orders.
· Acquisition workforce improvements. The legislation fosters and promotes acquisition workforce training.
· Mentor-Protégé Program. Extended five years.
· Transferring work in-house. The legislation adds “acquisition workforce functions” and “critical functions” to the current functions DOD should consider for insourcing.
· SBIR and STTR reauthorized. These programs are extended for 6 years.
This is only a brief synopsis of a few provisions of the legislation. If you have any questions, we will be happy to answer them for you.
Posted on 12/24/2011 2:39 PM
Lawrence Lessig's Republic, Lost, Hachette Book Group, 2011, is a must read. "Government is an embarrassment. It has lost the capacity to make the most essential decisions. And slowly it begins to dawn upon us: a ship that can't be steered is a ship that will sink."
We as a nation have a dependency on the corruption of money in our political process. Dependency like the alcoholic's. "We have a gaggle of good souls who have become dependent in a way that weakens the democracy and we have a nation of good souls who see that dependency and assume the worst. The first flaw bends policy. The second flaw weakens the public's trust. The two together condemn the republic, unless we find a way to reform at least one."
Our Republic has been hijacked by a system run by money. Brtbes are no longer (for the most part) paid to people in Congress who keep safes for cash in their offices. Lobbyists control what happens in Congress. One way or the other, the need for money drives Congress. Up to 70% of a congressperson's time is spent on fund raising. Gifts are exchanged. Whether you are on the left or the right, you never will get your agenda considered unless you pay for it. "What both sides miss is that the machine we've evolved systematically thwarts the objective of each side . . . ." Change on the left is stopped by private interests and change on the right gets stopped because change might weaken the fund-raising machine. We, the people, are no longer in control.
Obama promised to change the system. Instead, he has joined in. Most Americans believe Congress is corrupt. Not in the old fashioned way. In a different way where contributions buy results. Only 11% of us have confidence in Congress. What more do we need to declare the institution bankrupt? This "corruption confirms the irrelevancy of democracy." We busy ourselves with our lives and we learn not to waste our time because we know Congress is not interested in us.
Like most worthy undertakings, the solutions are simple but difficult. In its simplest form, the solution is singular: make the funders of Congressional elections the people. Yes, you and me. Three states have done this with success in their local elections. Lessig lays out 4 strategies to change the system of electing our representatives. His favorite, in Chapter 20, has a better than 10% chance of working. (We'll address it in another blog.) The others, much less. It's easy to read this book as doomsday. But Lessig argues for hope. "Hopelessness is precisely the reason that citizens must fight."
Postscript: While we're musing about fixing things in Washington, D.C., here are a couple of suggestions.
First, pass the Fair Elections Now Act that almost made it through the House in 2010. "That bill would have allowed candidates to opt into a system that limited contributions to $100 per citizen, matched, after the candidate qualified, four to one by the government," Lessig notes.
Second, pass a Debt Reduction Surcharge on every taxpayer's gross income. No games, just a flat surcharge on everyone, graduated from .001 at the lower income levels to .01 at the upper end. Mandatory. No exceptions. An annual "tithe", with the collection applied to existing government debt. Voluntary for those with incomes under $50,000. For those souls who have signed the no tax pledge, belly up. This is not a tax, it's an annual surcharge to help stop the bleeding.
Posted on 12/23/2011 7:39 AM
Yesterday, Dave Grover, Pete White, Gail Young, Jen Wiley and I, (as members of the Prince William Chamber of Commerce Government Contracting Council) met with Dan Gordon on the eve of his departure as Administrator of the President's Office of Procurement Policy (OFPP). We expressed our concern about the disconnect between policy and practice regarding OFPP's myth-busting memorandum on communications between industry and government contracting officials. We gave him some examples of how sometimes, even often, contracting officers are reluctant to engage in open discussions with industry representatives.
We spoke of how debriefings often are minimal efforts to explain the reasons for source selection. Dan responded by saying contracting officials should not be seeking the minimum level of communication. He said they should strive for the maximum level of disclosure and discussion.
We did not have time to go into other issues such as misuse of fixed priced contracts and best value procurements which are actually awarded on the basis of technical leveling and award to contractors which have underbid and can't perform.
We asked that Dan pass on to his successor (with whom we also plan to meet) our concerns and suggestions for improvement. He agreed and also offered his continued involvement in his new post at the George Washington University Law School. We expect to continue the dialogue with Dan as well.
We proposed that OFPP issue a "Best Practices" Guide for contracting officers which includes specific directions on communications with contractors and proper use of contract types and source selection methods. We also suggested that OFPP issue a memorandum to procurement agencies requiring a training module for instruction of contracting officials designed to educate them on the "Best Practices" in the Guide.
We also enlisted his aid in setting up opportunities for dialogues between industry and government contracting representives. Dan agreed that by doing this, money could saved to the great benefit of the taxpayers. He expressed some pride in the success of his "Front Line Forum" during which he would communicate directly with contracting personnel in the field. Dan assured us his successor would continue to carry through with all the initatives he has started.
We are losing the best Administrator we have had, in our opinion. However, we are very optimistic that his successor and the entire OFPP staff are dedicated to continuing Dan's leadership and immense contributions to our acquisition community.
Posted on 12/21/2011 11:02 AM
We've written about Dan Gordon's myth-busting memorandum and its emphasis on the need to communicate. Specifically, we've picked up on his admonition to contracting officers to conduct oral debriefings with open communications. As we've noted, he believes, as we do, that more communication leads to less protesting. Well, as we have said over and over again, contracting officers are either ignorant of Dan's advice or they are just plain resisting it. In fact, written debriefings seem to be on the rise, which means there is less communication than ever before.
Written debriefings are the scourge of the procurement landscape. They are terse, carefully written, probably reviewed by lawyers, and they only reveal the basic information required by FAR 15.506. Take a good look at FAR 15.506 (d). "At a minimum, the debriefing information shall include . . . ." At a minimum, debriefings absolutely must include a list of six (6) items. The last one requires "reasonable responses to relevant questions" about the procurement. Now I ask you, how in the name of everything sacred, can a written debriefing satisfy this requirement? It seems to us the whole section contemplates a dialogue.
Dan says, and we agree, that the regulations do not need to be rewritten to require communication between contracting officers and industry personnel. The rules are in place. So what is needed is not more rule-making. We probably need another "best practices" guide from OFPP directed at contracting officers and adopted by senior acquisition officials. These senior officials then need to push down the best practices guide and supervise its implementation all the way down to the ground level. We also believe these officials need to authorize and order a training module for DAU and FAI that requires instruction on the best practices guide.
We believe more communication will lead to better results all the way around at every level. We would testify once more that with regard to debriefings in particular, we know that failure to communicate leads to more protests than when communications are free and open. If the contracting officer won't disclose the reasons for the award, a protester's lawyer can see the whole file in a protest. But on the broader view, in these times of the urgent need for innovation, risk assessment, industry survival and budget constraints, we believe we should be talking more, not less. One of the benefits will be saving taxpayer dollars.
Posted on 12/21/2011 9:59 AM
We've been asked the following hypothetical question: if a business is realizing $30M in revenue for a logistics contract, does that business qualify as small if it bids on a professional services contract with a lower revenue threshold NAICS code (say $7M)? In other words, can a business exclude revenue derived from a separate NAICS code category? The answer is NO, it's total revenue, period. Total revenue for all business. (See 13 C.F.R. 104, and following sections, for the rules in black and white.)
If you have $30M in business and the NAICS code for the procurment you are bidding on has a $7M threshold, you are ineligible for award. You are not a small business as defined for that procurement. Your remedy is to protest the NAICS code designation. The remedy for all other bidders is to protest your size status. And, if you knowlingly certify yourself as small, you may be guilty of a crime and go to jail.
While we are on the subject, small business size protests are fairly commonplace these days. If you are an interested party, you can protest another bidder's size. If you did not submit a bid or if you are disqualified from receiving award, you have no standing to protest. If you submitted a non responsive bid or if you are otherwise ineligible to receive the award for other reasons, you have no standing. You have five (5) days in which to protest from the earliest date on which you receive notice of the identity of the prospective awardee on a negotiated procurement. Timely protests suspend contract award until the SBA makes a size determination or ten (10) business days have passed since the SBA received the protest. If you win the protest, the award is overturned since the bidder is ineligible to receive it.
A size protest is sent to the contracting officer, who sends it to the SBA. As with any other protest, success lies in a complete statement of hard facts with reference to applicable legal authorities. Nonspecific protests will be summarily dismissed. Fortunately, the SBA Area Office will conduct an intensive investigation. That office will place what many consider to be an onerous burden on the alleged inelgible bidder to substantiate its small business status.
We represent small businesses in prosecuting and defending size protests and appeals. And, we do so at a fixed fee.
IMPORTANT NOTE: This blog addresses the narrow issue of whether total revenue can be divided up by NAICS code for the purpose of qualifying under a lower threshold. It does NOT address any other issues involving how to calculate total revenue, of which there are several. We will address these other issues in subsequent discussions.
Posted on 12/18/2011 9:37 AM
Recently, a small business appealed the decision of the Small Business Administration (SBA) Area Office that it was economically dependent upon its largest customer, was thereby affiliated with the large business and was therefore ineligible for award of a contract set aside for small businesses. The Area Office relied on a prior decision which concluded "that when one firm relies on a second firm for 70% or more of its revenue, the first firm is economically dependent upon the second firm."
The pertinent regulation defines affiliates to include situations where one controls or has the power to control the other and it does not matter whether that control is exercised provided the power to control exists. SBA precedent holds that even in the absence of other ties between the companies, the dependence by one firm on another for the large majority if its revenue is sufficient to uphold a finding of affiliation between the firms. However, there must be a longstanding relationship between the firms; economic dependence cannot be assumed from one contract of short duration.
In analyzing affiliation, the litmus test is whether one concern has the power to control another. It's the power to control that counts. It does not matter whether control is exercised. In the recent size appeal of TPG Consulting, LLC, the SBA's Office of Hearings and Appeals (OHA) concluded that the record supported the conclusion that TPG was economically dependent upon Toyota as its main souce of revenue and that Toyota could therefore control TPG.
The lesson from the decision is that economic dependence, which can kill small business status, may be found in the context of a vendor/customer relationship. Also, if the 70% total revenue threshold is exceeded in only one of the prior three years, it is sufficient to disqualify a small business under the affiliation rule. TPG argued it was not heavily dependent upon Toyota for its revenues. Nevertheless, any percentage greater than 70% equates to economic dependence as a matter of law.
Once heavy economic dependence is shown, OHA has not found the presumption of affiliation has been rebutted.
One of the more interesting aspects of the TPG case is the OHA really did not go into an analysis of the ability to control. It was enough that dependency created the possibility of control. We would like to have seen a discussion of just how and why this seemingly unrebuttable presumption justifies such a severe penalty to a small business.
Posted on 12/13/2011 5:54 PM
Government officials may meet one on one with potential offerors provided no vendor receives preferential treatment. Moreover, even after the solicitation is issued, FAR Part 15 encourages exchanges of information with interested parties up until the time for receipt of proposals. There is no requirement that all possible offerors be involved and one on one meetings are permitted. The only warning is that any information shared in a meeting that could directly affect proposal preparation must be shared with all potential vendors. That's the law. And we have paraphrased from Dan Gordon's myth busting memorandum.
Restricting communications during debriefings (to say nothing of doing them by email) will not prevent a protest. Protests are rare and rarely successful. Contracting officers should concentrate on conducting meaningful and constructive communications during the course of the procurement. If they do so, issues that could cause protests can be eliminated. Again, this is straight from Dan Gordon's myth busting memorandum. Frankly, in our experience, failure to conduct a thorough, face to face, meaningful debriefing causes more protests. Hiding behind a few choice platitudes in an email often leads to protests just to find out the information which could have been divulged at the debriefing.
Finally, FAR 15.506(d) says "at a minimum, the debriefing information shall include" six, count them, 6, items of information. At a minimum. And look at that list: the complete evalutation of the offeror's proposal, the overall evaluated price and technical rating of the successful offeror and the debriefed offeror, the overall ranking of all offerors, a summary of the rationale for award and reasonable responses to relevant questions about whether the agency followed the evaluation criteria in the solicitation and the applicable regulations.
Always ask for a debriefing. Cite the regulation. FAR Part 15 applies in one shape or another to nearly every procurement. Dan Gordon's memorandum applies to all acquisitions and is based on a sound analysis of the regulations. In your request for the debriefing, cite FAR 15.506(d) and quote the list of items on the mandatory agenda.
It's time everyone paid attention to Dan's message on the government's duty to communicate.
Posted on 12/9/2011 12:33 PM
Recently, GAO denied a protest brought by three travel agencies in which the protesters argued the restrictions on submitting claims for faulty estimates of work on a solicitation for a requirements type contract unduly restricted competition and imposed undue risks on small businesses. The solicitation said travel fees would be fixed priced and would not be adjusted if actual quantities of transactions varied from the estimated quantities. “Out of scope” changes would be recognized, whatever that means in this context.
GAO denied the protest largely based on the agency’s showing that the historical data on ordering was fully disclosed to all bidders and it showed some consistency in ordering. The risk level was acceptable to the folks in the GAO ivory tower.
The important point about the protest decision is that the bidders (we use bidders generically to also cover offerors) are well advised to protest solicitation issues in a timely fashion which is before the time for submission of offers. Often the solicitation contains ambiguities. If they are apparent on the face of the solicitation (bidders are not required to ferret out hidden ambiguities), they should be raised with the agency and if necessary protested to GAO. If the solicitation inhibits or restricts competition or creates undue risks, the time to raise the issue is before submission of offers.
Recently, we’ve written about a particular blight on the procurement landscape: the tendency to solicit indefinite quantity work on fixed priced basis. It is an effort by the government to use time and materials as required and yet disguise the uncertainty by asking for fixed prices on what appears to be the maximum amount (not stated as such). This bait to fixed prices is then switched to what amounts to time and materials. Bait and switch.
We’ve heard too many stories of companies bidding fixed prices only to be told they will not be paid the fixed prices because all of the work really is not needed or it is going in house. The time to raise the problem is before you bid. If you have any doubt about the meaning of the language in the solicitation, you should immediately raise the issue with the contracting officer. If you are not satisfied with the response, protest to GAO.
Posted on 12/7/2011 7:40 AM
Get in step, contracting officers. Your acquisition leaders are speaking out and you are not listening. Listen to what one of industry's brightest and best has to say. Stan Soloway, President/CEO of the Professional Services Council recently has spoken about 3 disconnects roiling the government market. One of them is very dear to our hearts.
Stan speaks of the continuing disconnect between the acquisition leadership and the front line, the "misalignment", as he calls it. We say contracting officers are not listening to their leaders. Contracting officers almost uniformly are resistant to or ignorant of Dan Gordon's myth busters campaign to foster better and more consistent communications between government and industry. Who has really paid any attention to Dan's Memorandum, undoubtedly passed down by our community's leaders?
Then there is the tendency of contracting officers, despite leadership guidance to the contrary, to use fixed priced contracts even when it is wrong to do so. Even worse, the contracting officers then treat them as if they were cost reimbursement or time and materials contracts anyway, penalizing contractors in the process. On top of that, the tendency to go technically equal, low price as if it is the only way to go in the present economic environment, is foolhardy. When will contractors step up and protest the improper use of this everything is a commodity approach?
We must say that for all its faults (potential for abuse is the main one), best value best suits buying complex items and services. The use of low price is often very risky. The use of technically equal, low price leads to dumbing down the technical requirements and underbidding which in turn leads to terminations for default (the underqualified, improvident bidder can't perform).
So this is a call to contracting officers to listen to the government leadership. If you have any sense of responsibility at all, you will practice what they preach.
Posted on 12/3/2011 8:15 AM
You may be familiar with the Equal Access to Justice Act. It is specifically designed to help small businesses. Actually, its more descriptive name would be the Almost Equal Access to Justice Act. Here is why.
The Act says the "prevailing party" may recover its fees and expense in an action against the United States unless the position of the United States was substantially justified or special circumstances make an award unjust. The applicant must be elgible for an award based on its net worth ($2M for individuals and $7M for companies). The applicant is the prevailing party if it succeeds on any significant issue in litigation which achieves some of the benefit it sought in bringing the action in the first place. Once the applicant crosses that threshold, the amount of recovery may be reduced depending on the degree of success.
Fees and expenses under the Act may be denied totally if the position of the United States was "substantially justified". The tribunal deciding the application must make a judgment call whether the government's position throughout the dispute had a reasonable basis in both law and fact. The determination is made on a case by case basis. Thus, since the decision is based on subjective judgment, it really is another test of what is seen by the eyes of the beholder.
Finally, under the Act, a $125 per hour cap applies to attorneys' fees unless the applicant can show an increase in the cost of living or a special factor, such as where the limited availability of qualified attorneys for the proceeding involved justifies a higher fee. Good luck with that one. Special factors are very rarely applied and one tribunal recently applied the cost of living formulas to arrive at a whopping $155 per hour. (The $125 rate was set in 1996). How many experienced lawyers charge $155 per hour?
The Act needs to be amended to remove the "substantially justified" takeaway and the hourly rate needs to be increased. Pure and simple. Either that or it should be renamed, perhaps, the Almost Equal Access to Justice Act.
Posted on 12/1/2011 9:30 AM
Lately, we have run across a number of cases where the government has issued delivery orders on indefinite delivery contracts at fixed prices or straight fixed priced contracts based on labor hour calculations only to refuse to pay the fixed price. The "menu" agreement says the delivery orders will be fixed priced. They are issued at fixed prices, even for the labor hour portion of the delivery order, but the government only pays for the number of hours actually used. In straight fixed priced contracts, the government simply refuses to pay the full fixed price if it decides not to use all the labor hours.
Do you really have a fixed priced contract? Yes, you do. What is going on is this. The government is supposed to move away from time and materials to fixed priced work. But, the government contract administrators are used to paying only hours actually worked and they also have a mandate to save money. So, what do they do? They issue a firm fixed priced delivery order or straight firm fixed priced contract with projection of hours at a fixed price. If the delivery order or contract line item actually is stated in fixed price terms, the contractor is able to recover the fixed price even if the total hours are not used. This may be "counter-intuitive" to quote one expert, but the law is the law.
This issue is far from resolved, however. There are cases pending now before judicial tribunals to answer this question once and for all. However, in the meantime, examine the terms and conditions of your basic agreement or contract line items and the precise language on pricing. If the contract says the delivery orders or contract line items are to be fixed priced and the order or line item displays the pricing, even for labor hours, in terms of fixed prices, you can recover the total. You are obliged to have the personnel available for the total. You have the risk of having them at the ready under threat of termination for default. You are entitled, one way or the other, to be compensated for accepting that risk. You can recover the fixed price for the entire amount as breach of contract damages or you can submit a constructive termination for convenience settlement proposal for the costs of having your personnel at the ready.
And do not forget your consulting fees for putting together your claim or termination for convenience settlement proposal and negotiating the settlement all are recoverable under FAR from the government.
Posted on 11/17/2011 2:19 PM
In February of this year, Dan Gordon, Administrator for Federal Procurement Policy issued a memorandum entitled “Myth-Busting: Addressing Misconceptions to Improve Communication with Industry during the Acquisition Process”. Dan’s memorandum passed the word to chief acquisition officers, senior procurement executives and chief information officers that early, frequent and constructive engagement with industry is important and authorized under the Federal Acquisition Regulation (FAR) (citing as one example FAR 10.002(b)(2) which authorizes a wide range of market research techniques).
Our sources say the chiefs and senior executives got the message and passed the word down. They also tell us few contracting officers, if any, paid heed. It’s business as usual. Don’t talk to the contractors.
Dan is the best Administrator for Federal Procurement Policy we’ve ever had and I have seen them all from the creation of the Office of Federal Procurement Policy (OFPP). Dan is leaving OFPP at the end of the year. However, he has left his mark and the next Administrator will not back down from Dan’s myth-busting crusade. (If you’ve heard one of his many speeches you know “crusade” is a pretty accurate description.)
Let’s all help. Spread the word. Here are some of the “misconceptions and facts about vendor communications”:
1. Misconception – “We can’t meet one-on-one with a potential offeror.” Fact – Government officials can generally meet on-on-one with potential offerors as long as no vendor receives preferential treatment.
2. Misconception – “A protest is something to be avoided at all costs – even if it means the government limits conversations with industry.” Fact – Restricting communication won’t prevent a protest and limiting communication might actually increase the chance of a protest – in addition to depriving the government of potentially useful information.
3. Misconception – “Getting broad participation by many different vendors is too difficult; we’re better off dealing with the established companies we know.” Fact – The government loses when we limit ourselves to the companies we already work with. Instead, we need to look for opportunities to increase competition and ensure that all vendors, including small businesses, get fair consideration.
These are only 3 of 10 myths busted. What can we do? Remind contracting officers of what I will call “Dan’s Rules” and also of the implied obligation in every contract awarded to communicate with the contractor (see our blogs on the implied contractual obligations of the government).
Posted on 11/17/2011 2:17 PM
One of the handicaps of being a society of laws is that we use the laws to define the line between acceptable and unacceptable behavior. We set the line of aspirational behavior at the level or laws. We then often explore how far short of that line we can come without being noticed. The law becomes our highest expectation and we even forgive ourselves for falling short. Ethics and morality are vague concepts not clearly defined and often described through the eyes of the beholders. Those standards elude us and today we seen them drift farther into obscurity.
We could ask, “Where are our moral leaders”? We should not look to institutions. Any moral leaders there must ascend the walls of political correctness to be seen. Our true moral leaders are those of us doing the right thing, often in total obscurity. And what is the right thing, after all? It’s trite but true: we can’t enact morality into law. We can’t even codify all the “principles”. All we can do is catalog actual cases of ethical and moral behavior. We literally make up such behavior as we go along. Each case of doing the right thing is unique. Just exactly what is right is in the eye of the beholder. Moral leadership through preaching so called principles is illusory without reference to the examples.
The law is not our line of aspirational behavior. The law actually is the line of minimally acceptable behavior. That’s the point. When confronted with the moral question, we each should aspire to find the right the right behavior and then act. Each of us can be a moral leader when we see the opportunity. Failing to know what is right is one thing. Failing to act when we see the opportunity leads us to a double fault. We leave the scene excusing ourselves as the one not responsible for the moral leadership. Or, we follow the minimal behavior required by law.
Morality is not too amorphous to define and describe. Countless examples through history paint a clear picture. We’re just not spending enough time observing it. However, observation is only one part of the equation. Having the will to act when given the opportunity and then taking action completes the record. We need not look far to see glaring examples of moral lapses in today’s society. They, too, can teach us. Examples of bad behavior can instruct us as well. Will we learn?
Posted on 11/11/2011 9:26 AM
We just can’t help but applaud any decision which upholds the very highest of ethical standards. But do OCI's really turn on the appearance of impropriety? See the postscript below.
GAO recently reiterated as “one of the guiding principles” the obligation of contracting agencies to avoid the appearance of impropriety in government procurements. The purpose of the procurement was to provide internet protocol communications as part of the Defense Information Systems Agency (DISA) Satellite Communications (SATCOM) program. One of the bidders had hired the agency’s former SATCOM Special Interest Program Manager. The contracting officer determined that although there may not have been an actual impropriety, there was an appearance of impropriety which could not be avoided, neutralized or mitigated. The contracting officer found that documentary evidence showed the Program Manager had access to source selection information and provided advice to the bidder in preparation of its proposal.
In addition to relying on several of its own decisions, GAO referred to an opinion by the Court of Appeals for the Federal Circuit (COFC) which overturned the lower court’s opinion that the appearance of an impropriety, alone, is not a sufficient basis to disqualify an offeror. GAO also pointed out that an unfair competitive advantage is presumed to arise where an offeror possesses competitively useful non-public information without the need to inquire as to whether the information was actually used.
GAO is synchronizing its decisions in this area with the opinions of the COFC. GAO went on to cite COFC opinions that “hard facts” of the existence or potential existence of a conflict are necessary and the mere inference or suspicion of an actual or potential conflict is not enough. Based on the COFC precedent, GAO will review the reasonableness of the contracting officer’s investigation and not overturn the contracting officer’s decision unless there is clear evidence it was unreasonable.
The protester complained that the SATCOM PM’s participation in the procurement was very limited and that the PM was “walled off” from the proposal effort. GAO was impressed with the contracting officer’s thorough investigation. The facts showed that the PM was not really walled off and that the PM was very much involved in the proposal effort. The PM also had access to and received acquisition sensitive non-public information while working at SATCOM. GAO concluded: “These facts, as identified by the contracting officer, created the presumption that an unfair competitive advantage has arisen, without the need to inquire as to whether the information was actually used by [the offending offeror] in the preparation of its proposal.” (Emphasis added.)
IMPORTANT POSTSCRIPT: Reconciling the OCI opinions of the COFC and the decisions of GAO is somewhat daunting. And just what are "hard facts" and whether they support the contracting officer's decision that those "hard facts" create an appearance of impropriety certainly is in the eye of the beholder. So what is the rule? It appears that whatever the contracting officer decides probably will be supported by either the court or the GAO provided the decision is based on a thorough investigation of the hard facts. If, however, that investigation falls short, the court or GAO must substitute its judgment and the result probably will be based on a view of the hard facts which avoids speculative appearances.
Posted on 11/3/2011 10:17 AM
Recently, a large business protested the decision by the Army to set aside a buy for small business competition. The protester contended the contracting officer unreasonably determined that two responsible businesses were capable of satisfying the RFP's requirements at fair market prices.
Prior to deciding to set aside the solicitation for small businesses, the Army issued three sources sought notices. The third notice sought information regarding the capabilities of small businesses' teaming partners, as well as the small businesses themselves. On the basis of this information, the Army concluded a small business set aside was appropriate.
GAO looked at FAR 19.502-2 for the rule. Procurements such as this one must be set aside for exclusive small business participation when there is a reasonable expectation that offers will be received from at least two responsible small business concerns and that award will be made at fair market prices. GAO said it will not question a set aside determination if there is a reasonable basis for the contracting officer's conclusion that small business competition may be expected.
The large business argued the small businesses must be "responsible". GAO said that does not mean there must be a responsibility determination. All that is required is an informed business judgment that there are small businesses capable of performing who will likely submit offers. So, GAO examined the evidence of capabilities and sided with the Army. GAO determined that the record demonstrated a reasonable basis for the contracting officer's conclusion that two small businesses were capable of performing. GAO will not question a small business set aside determination where the record demonstrates a reasonable basis for the contracting officer's conclusion that small business competition may be expected.
What are the lessons? The rule of two is alive and well. Shall still means shall. In this context, "two responsible" small businesses means "capable of performing". Capability is a matter of business judgment for the contracting officer.
Posted on 10/28/2011 3:09 PM
Let’s take a view from outer space, an alien’s view. It’s a view of reality we often cannot see, here in the trenches. Government contracting is an adversarial system. Face it. An alien can see it. Once we do see it, perhaps we can write a user’s guide for how to deal with it: something besides a FAR. We’re writing that book, one chapter at a time.
Government contracts are contracts of adhesion. That simply means the federal government dictates the terms and conditions. Why is that so? Because we taxpayers require rules and regulations on how our dollars are spent in the acquisition system. We demand a stack of statutes, regulations, executive orders, regulations supplements, memoranda and directives more voluminous than the tax code. We want government contracting to be the most regulated enterprise in the world.
All these rules and regulations produce an adversarial environment. We stick our heads in the sand or try to find the moral high ground and deny the parties to the contract are not really partners. But the aliens see the realities: a changes clause permitting unilateral changes and requiring performance despite what should be a breach of contract; a termination for convenience clause allowing the government to walk away from the contract; a disputes clause requiring continued performance while litigating whether it is necessary to do so; and a procedure to protest that the rules were broken.
We worry ourselves to death about whether our “partner” will be offended if we submit a claim under the changes clause, we dispute a contract interpretation or we protest an award. The alien scratches his head in disbelief. What do you expect? How can any reasonable person be offended by a contractor using the rule book it did not even write? It’s not even its rulebook!
It’s time we faced up to reality: the acquisition system, because of its rules and regulations, its contracts of adhesion and its available accusatory remedies, is adversarial. That’s not to say it needs to be contentious and unfriendly. Civility can live in even in our courtrooms. But there is no excuse for being in denial and not facing reality.
The user’s guide to government contracting in reality starts with simple maxims: 1) it’s okay to protest; 2) it’s okay to submit a claim; and 3) it’s okay to engage in a dispute under the disputes clause. It’s okay because that’s the way the system is set up, as any alien can see.
Posted on 10/26/2011 3:22 PM
It’s about time someone called the federal government to task for requirements type contracts and IDIQ ordering contracts, to say nothing of BPA’s. They are patently unfair and they are only available in the government arena where the government makes all the rules. It’s time we contractors organized ourselves and presented a united front to put an end to contractual abuse.
There’s even the awful aura of bait and switch afoot. Contractors are inveigled into indefinite delivery contracts with the promise of a fixed price. Sharpen your pencils and join in the reverse auction, the government says. The order is fixed price but now that you’re signed up, we’ll only pay if we really decide to go through with the bargain.
We used to think FAR Part 16 was contracts 101. But government buyers are finding sophisticated ways to use contract types to trap the unwary. Requirements contracts were all the rage 40 years ago. Then, because they were so unfair, they went into disuse only to be resurrected and introduced to a new generation of contractors.
Requirements type contracts are idiotic and legally illusory. They really are not contracts from a business point of view. Except for off the shelf commercial commodities, they have no counterpart in the real world of commercial commerce. Come price based on estimates but never mind our estimates because we really don’t know how to estimate, says the government. A guaranteed minimum order is not even required under FAR 16.503.
IDIQ’s do not fare better, in our opinion. They are requirements contracts with a guaranteed minimum. But that guarantee is so unrealistically low as to be minimal. FAR 16.504 states the minimum must be “more than nominal”. What does that mean? And when have you ever seen a minimum which even approaches a reasonable estimate of a value worth bidding on? This is a call to arms to insist on guaranteed minimums which realistically state what the government expects to order. Don’t expect a fixed price unless we have a solid minimum guarantee!
And what is this requirement that contracting officers MUST make multiple awards of IDIQ contracts for the same supplies or services and then re-compete every order? Let’s see, sharpen your pencil and compete once. Oh yes, then sharpen your pencil and compete again. Even when there is no double competition, multiple awards most assuredly result in less than reasonably anticipated work for one of the multiple award contractors.
It’s time to quit fooling around with contract types to try to save money at the contractor’s expense. It’s really pretty simple. If the scope of work is well defined, the contract should be straight firm fixed price. Even fixed price incentive could be fair. If the scope of work is ill-defined, cost reimbursement or time and materials is the fair way to go. That’s the way you and I do business in real life. The government’s bait and switch is unfair. Definitely!
Posted on 10/19/2011 12:58 PM
Can it be that the drafters of the FAR dedicated a whole subpart’s worth of guidance to how and when to identify such conflicts, as well as how and when to mitigate the conflicts so identified, yet subscribed to the notion that the failure to follow these procedures could be cured by having the awardee swear up and down it did nothing improper? Of course not.
If swearing up and down were enough, why would the drafters of the FAR have bothered to develop an extensive set of rules to deal with such conflicts, he asks. If swearing after the fact that no wrong was done was enough, the regulation would be meaningless, he suggests.
In his opinion permanently enjoining the performance of the awarded contract in Netstar-1, Judge Allegra says the contracting officer’s delayed identification of the potential organizational conflict of interest and efforts to mitigate that conflict well after the fact were arbitrary, capricious and otherwise contrary to law. The expediency of obtaining after the fact declarations denying wrongdoing just do not cut it.
So, the Court of Federal Claims (COFC) will not “defenestrate” (read, “throw out the window”) the FAR provisions by countenancing the “post-award palliative” urged by the government. The agency has neither the discretion to ignore the FAR nor to render any of its provisions useless. To hold otherwise runs counter to the reasons for having the OCI regulations in the first place.
We’ve written about this case at the preliminary injunction stage. This is its last chapter at the COFC. On a day we’ve been thinking about agency discretion (October 19, 2011), Judge Allegra most poignantly and eloquently upholds the virtue of sticking to the regulations, book, chapter and verse. After all, why have them if the government can run rough shod all over them?
Posted on 10/19/2011 11:45 AM
GAO almost always gets it right in its protest decisions. Occasionally, the Court of Federal Claims (COFC) disagrees. But on one issue, all tribunals agree: shall means shall. GAO and the COFC agreed on the mandatory language in the HUBZone statute and regulation. Congress changed that to provide parity. But what about the VA? Is it required to conduct market research to determine if its procurements should be set aside for small business concerned owned by veterans before using the Federal Supply Schedule? According to GAO, emphatically, yes.
You would not think there would be a debate over the meaning of the word shall. And yet it has happened over and over again over the last 50 years (and beyond, we are sure). Again and again, we must consult our dictionary for the meaning of shall. If this seems ludicrous, remember federal agencies believe in the sacrosanctity of their discretion to do what they want to do. Hence, the invention of the fiction that shall really means may.
In Aldevra, B-405271; B-405524. October 11.2011, GAO went to the Veterans Benefits, Health Care, and Information Technology Act of 2006 which reads: “A contracting officer of [the VA] shall award contracts on the basis of competition restricted to small business concerns owned and controlled by veterans if the contracting officer has a reasonable expectation that two or more small business concerns owned and controlled by veterans will submit offers and that the award can be made at a fair and reasonable price that offers best value to the United States.”
The VA argued discretion. GAO saw no discretion in the language. Why? It says “shall”. GAO also quickly disposed of the VA’s other argument that FAR exempts the FSS program from small business preference programs. GAO said the exception in FAR permitting agencies to award task and delivery orders under the FSS without regard to government-wide small business programs does not govern or apply to the program created in the mandatory language of the Veterans Benefits, Health Care, and Information Technology Act of 2006.
And, the protester gets its attorney fees and costs (as is always the case when you win a protest).
Most of us learned the meaning of shall before we walked.
UPDATE: VA recently argued in a Congressional hearing that it need not comply because it is meeting its goal of awards to small veteran owned businesses. GAO saw no such exception. [Posted 12/1/11]
ADDITIONAL UPDATE: GAO also sustained a protest on December 19, 2011, holding the VA improperly used non-mandatory FSS procedures to procure services, rather than using a set-aside for service-disabled veteran-owned small businesses. [Posted 12/21/11]
Posted on 10/5/2011 10:14 AM
What is the first thing you should do when you get a solicitation for a competitive government buy? Find the evaluation factors, read them, make sure you understand them, make sure they are fair, make sure they comply with the regulations and use them to manage your proposal effort. If they are not clear, fair or if they do not comport with the regulations, protest immediately. After 40 years of handling protests, we can assure you most problems in competitive procurements are caused by improperly articulated evaluation factors. The time to solve these problems is when the solicitation is first issued.
We are against protesting unless a regulation is violated. We also are against writing stuff people do not understand. If the evaluation factors are not written clearly and if they do not strictly follow regulatory requirements, protesting is an absolute necessity. This is probably the one situation where there is no doubt about the propriety of protesting all the way up the line. First, “protest” to the contracting officer. Write a letter (emails are legal letters) thoroughly explaining what is unclear or illegal about the evaluation factor section of the solicitation. Yes, it is illegal to fail to follow the regulation on evaluation factors. If that doesn’t work, protest to GAO. If that doesn’t work, protest to the Court of Federal Claims (COFC).
Evaluation factors are discussed In FAR Parts 12, 13, 14 and 15. All competitive procurements implicate FAR Part 15 principles, according to GAO. Part 15 has the most thorough discussion of evaluation factors. Although Parts 12, 13 and 14 have their own discussions and Parts 12 and 13 allow much more discretion as to what factors are used, Part 15 is the gospel on evaluation factors. The main point to remember is that all competitive procurements require a solicitation contain evaluation factors. They must also be written in plain English.
Recently, we saw a commercial buy competitive RFQ under FAR Part 12, using FAR Part 13 simplified procedures, which contained no evaluation factors. I was flabbergasted. How, in today’s world, with all the education about our procurement system, can this happen? FAR 12.602(b) says: “Offers shall be evaluated in accordance with the criteria contained in the solicitation.” FAR 12.602(c): “Select the offer that is most advantageous to the Government based on the factors contained in the solicitation.” FAR 12.603 mandates describing the evaluation factors in the solicitation. FAR 13.106-2 allows “broad discretion” but requires evaluation factors, nonetheless. See FAR 13.106-1(a)(2) and 13.106-2(a)(2).
If nothing else, failure to state evaluation factors is egregiously unfair. How in the world can you compete if you don’t know how you will be judged? Why would you engage in any competition without knowing the rules of the game?
We review solicitations for legal sufficiency and handle protests.
Posted on 10/4/2011 9:37 AM
We've been asked to comment further on how to win protests. Let's get really practical about this. You have submitted your proposal and have called the contracting officer to be sure you will get the required notification of award promptly. Notification is required, but you need to stay alert and if necessary prompt the proper response. You get the notification and you did not win. What next?
You need someone with considerable protest experience to guide you through the next steps. The analysis of whether to protest is the first critical step. The timeliness rules, discussed in another blog in more detail, also are of the utmost importance. Asking for a debriefing is almost always smart and such a request tolls the running of the time limits on a protest. FAR 15.506 includes a list of specific items the government must cover in the debriefing. Insist on disclosure of all the required information. Even if a debriefing is not required or you are told FAR Part 15 does not apply, insist nonetheless on a thorough debriefing. Almost all competitive procurements implicate the principles set forth in FAR Part 15.
The debriefing should give you some (although usually very limited) insight into why you lost the award. Unfortunately, agencies generally do not heed Dan Gordon's advice to be forthright, forthcoming and candid in these debriefings. Agencies still are concerned that too much information will only lead to the inevitable protest. Nevertheless, in our opinion, more transparency actually does avoid protests. We have too much experience to allow our clients to waste time, money and customer relations on losing protests.
Now we go to the critical step: the evaluation of the merits and the decision to protest. As we have said until we are blue in the face, do not protest unless a regulation has been violated. Here, again, you need an outside expert with extensive experience to help you with the analysis. If you decide to protest, you must do so through an outsider who can gain access to the complete record under a protective order. The analysis of whether a regulation has been violated is grist for the person who has been there many times before. We've listed the relevant regulations in the prior discussion of the Anatomy of a Successful Bid Protest.
Finally, here is the secret. The debriefing only gave you a slight hint as to what is in the record and yet it looks as if a regulation may have been violated. What do you do? Often, the only way to find out whether you have solid ground to protest is to protest. An outside consultant will be able to see the entire record. The secret is you must file a "speculative" protest that is not "too speculative". We used to call these blind protests. No one likes to talk too much about this. But since agencies are not forthcoming in debriefings, contractors have to engage in a type of speculation about what actually happened. The key is to make the protest stick, get the record for the outside consultant to examine, and then decide whether to continue the protest. Just where is the line between acceptable speculation and too much speculation? Frankly, only an experienced protest consultant can tell you.
We handle protests. If you have questions, please let us know.
firstname.lastname@example.org (540) 439-9250
Posted on 10/2/2011 9:14 AM
On September 27, 2011, Judge Susan G. Braden of the Court of Federal Claims (COFC) granted a preliminary injunction stopping work on a contract awarded by the government to perform security services for the United States Court of Appeals for the Fourth Circuit. The injunction is to remain in effect until November 15, 2011 by which time Judge Braden will have an opportunity to decide the merits of the case. The government refused to delay the start date for the contract voluntarily.
What is unique about this case? To answer this question, it is important to review the factors the court must consider in granting an injunction. There are four factors the court must weigh: (1) the immediate and irreparable injury to the plaintiff; (2) the plaintiff's likelihood of success on the merits; (3) the public interest; and (4) the balance of the hardship on all parties.
As to the first factor, the court said the lost opportunity to compete was sufficient. As to the second test, Judge Braden said the court is unable to render a judgment about the likelihood of success on the merits. As to the third factor, she said the public interest certainly requires that the court be afforded a reasonable opportunity to review the documents, consider the arguments, determine the merits and write a decision. As to the last factor, she said both parties will be equally inconvenienced but the plaintiff is entitled to the process.
What makes the case unique is that Judge Braden made no determination of the likelihood of success on the merits. All she said was that the weakness of a showing on one factor may be overcome by the strength of others. However, she did not discuss how, in her view, the strength of the other factors outweigh the total absence of any determination on the likelihood of success on the merits. This, in our view, is a fatal flaw. In fact, we fail to see how Judge Braden possibily could make such a determination in this situation. Perhaps that is why she did not discuss the issue.
We should note she left open the possibility that the injunction could be extended past November 15th if the case is not ready for her final decision by that time.
The case is indeed unique. In our opinion, it is unlikely another judge would grant an injunction without any determination of the likelihood of success on the merits. In our experience, the plaintiff has a heavy burden in these cases and most often the merits of the case weigh heavily in the decision to grant relief.
Speaking of our experience, we have practiced before the COFC and the Court of Appeals for the Federal Circuit (CAFC) since our admission in 1965. If you have any questions about cases before those courts, you should contact us. You might also wish to pass this along to any of your friends interested in bid protests or claims.
Posted on 9/28/2011 8:51 AM
We have written about best value awards and protests pointing with particularilty to FAR 15.308 in "Anatomy of a Successful Bid Protest". Yesterday, Judge Bush of the Court of Federal Claims (COFC) overturned a best value contract award, permanently enjoined the award and ordered the government to cancel or amend the solicitation. The ruling was based on a violation of FAR 15.308. The agency failed to conduct a proper best value analysis and to document the decision.
In the words of Judge Bush:
"The source selection decision statement here is nothing more than the unsupported adoption of the SSEB report, along with a conclusory assertion that the intervenor's proposal represents the best value to the government. The court has held that the SSEB failed to perform a proper best-value tradeoff analysis. The court further holds that the SSA's adoption of the flawed SSEB recommendation does not show that the SSA conducted a comparative assessment of proposals, in this case a best-value determination, as required by the RFP. Furthermore, the documentation requirements of FAR 15.308 were not satisfied by the SSA in this procurement. In so holding, the court has essentially set forth the core of its ruling in this case, i.e., that the source selection decision in this procurement, as manifested in the SSEB report and the SSA's award decision, was fatally flawed and cannot stand."
Well said, Judge Bush. The best value decision must:
- Be independently made by the SSA;
- Show analysis of the recommendations of the SSEB;
- Demonstrate a careful, in depth best-value tradeoff analysis; and
- Be thoroughly documented in accordance with FAR 15.308.
And, the SSEB also must perform and document a best-value analysis.
As we have pointed out before, to find out just how the government arrived at its best value decision, you must seek assistance from someone outside your firm authorized to view the source selection documents under a protective order. We represent clients in such cases before GAO and the COFC. Contact us if you have a best value award issue or pass this along to someone you know who may be interested.
Posted on 9/23/2011 1:24 PM
What is a tort? It’s a personal injury or property damage inflicted negligently or intentionally. If someone rear ends your car, he has committed a tort. Government contractors can be sued for the alleged torts they commit. The U.S. Government, however, as a sovereign, is immune unless one of the exceptions in the Federal Tort Claims Act applies. The Supreme Court has extended this sovereign immunity in certain cases to the government’s contractors.
Which certain cases? If a government contractor is following government directions it can share the government’s immunity. Although the doctrine originally was applied to products, it now extends to services as well. We were instrumental in conceiving the concept in the l980’s, creating the principles from the long standing 1918 Supreme Court ruling that the government guarantees the contractor’s performance if it follows the government specifications. When we first applied the doctrine in the asbestos litigation, the plaintiffs' attorneys called it the Nuremburg defense.
We have continued to assert the government contractor defense in many tort claims against government contractors. Most recently, we were successful in asserting the defense in a Katrina damage cleanup case. The debris remover, which was following government orders, removed the claimant’s home from a public right of way (the hurricane had moved the house) and the home owner sued. The court dismissed the case based on our argument that the contractor was merely following government directions and therefore shared the government’s immunity. End of case.
And that is what happens. The case goes away on a motion to dismiss. If you are a government contractor, do you even know about this doctrine and more importantly, has your insurance carrier ever heard of it?
What brings all this to mind is a recent ruling in Virginia by the United States Court of Appeals for the Fourth Circuit which has dismissed a suit against CACI International, Incorporated by Iraqi citizens detained at Abu Ghraib prison, near Baghdad, and allegedly tortured. Although this was a preemption of state law case, the federal law involved was the Supreme Court’s opinion in the 1988 Boyle v. United Technologies Corp. case (the seminal government contractor defense opinion). CACI was relieved of liability based on the government contractor defense.
So if a third party makes a claim against you as a government contractor, carefully consider whether you may be able to avail yourself of the so called government contractor defense.
Posted on 9/21/2011 11:01 AM
Secretary of Defense Robert S. McNamara thought they were the cat's meow. He ordered the military services to use incentive contracts instead of cost plus fixed fee contracts in 1962. They are complicated. Perhaps that is why they fell into disuse starting in the 1980's. But they are back. DOD has directed again that the military services use FPI firm target contracts instead of cost reimbursement contracts when it makes sense to do so.
This type of contracting is not for the faint of heart or brain. The FPI firm target contract is the most complex of all contracts in FAR Part 16. Contract managers and administrators need to know all they can about how the incentives operate.
Fortunately, there is a must read document on the subject which is still a great resource: Ralph Nash's Government Contracts Monograph on "Incentive Contracting". The paper can be downloaded free of charge from the Social Science Research Network at http://ssrn.com/abstract=1928629.
In simple, general terms, FPI contracts predetermine profit based on certain variables. The parties can tie profit to cost or to a combination of cost, delivery and technical performance. Profit becomes a mathematical formula which depends upon how things turn out in performance of the contract. The parties predetermine the formula upon which profit is based thereby objectively forecasting the ultimate profit position for the contractor.
The Monograph goes into considerable detail on how to negotiate and administer the geometry of the incentive structure. Chapter 2 is an absolute must read. Anyone who studies it carefully will be a master of the subject.
Welcome back, FPI contracting. But follow Ralph's advice carefully. These contracts only work if you work out the proper formulas.
A simple example: Target cost $100, target profit $10, ceiling price $120, sharing 50/50. If costs come in at $80, the contractor gets another $10 or a total of $20 profit (still within ceiling price). If costs are $120, contractor share of overrun is $10 so contractor gets no profit.
Posted on 9/12/2011 12:29 PM
OFPP’s policy letter on inherently governmental, closely associated with inherently governmental and critical functions, issued September 12, 2011, complements The Federal Activities Inventory Reform Act (FAIR) and contemplates changes to FAR Subpart 7.5 which currently covers inherently governmental functions. The letter raises significant issues of concern to the services industry and to small businesses, in particular.
The Policy Letter expands the definition of inherently governmental functions and adds two new categories of functions (which contractors can perform) to be reviewed carefully by agency management: 1) closely associated with inherently governmental functions; and 2) critical functions. Many examples are provided. The problem with adding layers of definitions and providing examples which are not exclusive is that the definitions increase the chances that they will be more confusing and the listing of examples actually will drive work in house.
Work closely associated with inherently governmental functions and critical functions may be contracted out. But agencies are to scrutinize these functions carefully and if the work is outsourced, they must exercise careful management to assure proper control and to prevent the work from drifting into what really is inherently governmental. Moreover, although the work in the two additional categories may be performed by contractors, it also may be performed by federal employees. Essentially, then, there is a longer list of functions which may stay in house.
The letter says “OFPP does not anticipate a widespread shift away from contractors as a result of the requirements in the policy letter.” But this whole policy, including FAIR, is a response to criticism that the federal government relies too much on contractor services. Although it is not OFPP’s stated intention to do so, the inevitable conclusion is that work will be taken away from contractors and have it performed by federal employees. It already is happening. For example, all contract management type work, as we have defined it in these blogs, is now being treated as inherently governmental.
There is one bright spot in the letter for small businesses. When prioritizing what out sourced work should be reviewed for potential insourcing, agencies are encouraged to place a lower priority on reviewing work performed by small businesses (assuming the work is not inherently governmental) and “where continued contractor performance does not put the agency at risk of losing control”. If work under scrutiny remains out sourced, the rule of two is to be strictly enforced. That is, if there are two or more responsible small businesses or subsets of small businesses capable of performing the work at a fair market price, the work must be set aside for them.
WHERE CAN YOU GO TO COMPLAIN ABOUT THE IMPLEMENTATION OF THIS POLICY AND THE RESULTING DECISION TO INSOURCE?
We have briefed this question extensively in our webinar “How to Deal with Insourcing” available by contacting us at email@example.com
. In summary, GAO will not get involved unless there is a solicitation on the street (A-76 type) or canceled to take work back in house. However, there is precedent at the Court of Federal Claims for hearing cases involving decisions to insource work. In a case called Santa Barbara Applied Research, Judge Firestone held this year that the court had jurisdiction and the plaintiff had standing to challenge the agency’s insourcing decision.
Posted on 9/8/2011 2:37 PM
We’ve heard complaints that best value awards often appear biased. The good news is most, if not all, of these awards are fairly made. The bad news is, any bias is built in. Best value is designed to be a subjective judgment in the end, if not all the way through the evaluation process.
Let’s dispose of personal bias once and for all. Public officials are presumed to be acting in good faith, without bias or prejudice. That’s the law. It takes “ irrefragable proof” to prove otherwise. In other words, it practically takes a confession of wrongdoing. But legally permissible bias is permitted by regulation.
Best value is discussed throughout FAR Part 15. FAR Subpart 15.1 describes the best value continuum and the tradeoff process. “This process permits tradeoffs” and the “perceived benefits” are dead giveaways about the subjective nature of best value awards. When you talk of continuums, tradeoffs and perceptions, you are in the land of the eye of the subjective beholder.
Even the evaluation process itself is subjective. See FAR 15.305 which describes and prescribes an “assessment” of the contractor’s ability to perform successfully. And, that’s not the only time the word assessment is used. Then there is FAR 15.308 which clearly states the source selection authority’s (SSA) decision is based on a “comparative assessment”. The award decision is a “business judgment” involving “tradeoffs”.
We’ve been concerned for years that the best value approach, although perfectly designed for the way you and I do business, is not well suited for public contracting based on strict rules and regulations. We have been concerned that best value in the public contracting context provides too much room for mischief (bias). If we had our way, all procurements would be FAR 15.101-2 lowest price technically acceptable which is almost totally objective and leaves hardly any room for bias.
But best value is here to stay and we must, for the time being, acknowledge its built in open invitation to bias. The only way to police such a system is to scrutinize the SSA’s decision empirically, analytically and thoroughly for any signs or signals of possible personal bias. For, although best value is subjective, personal bias is not countenanced if discovered.
Posted on 9/8/2011 10:20 AM
We have often said, “Do not protest unless the government violates a statute or regulation.” We mean it. Bid protests are rarely, very rarely, successful without showing a statutory or regulatory violation. So let’s take a look at the skeleton and circulatory system of a successful bid protest.
GAO says, it is fundamental that contractors should be advised of the basis on which their proposals will be evaluated. The Competition in Contracting Act (CICA) requires that contracting agencies state all evaluation factors and their relative importance in all solicitations. FAR also requires it. GAO will sustain a protest where contractors are misled as to how they will be evaluated. Likewise, GAO has consistently and often said contractors must be treated equally in the evaluation process. That is, the stated evaluation factors must be applied equally to all contractors.
There are 4 regulations in FAR Part 15 which the government must strictly follow.
1. FAR 15.304. This is the regulation stating the award decision must be based on the evaluation factors and significant sub factors set forth in the solicitation. Any deviation or unequal treatment among contractors is illegal.
2. FAR 15.305. This is a companion to 15.304 which makes it abundantly clear how contractors are to be evaluated. Any deviation from this regulation is illegal.
3. FAR 15.306. This section sets forth the rules on discussions (negotiations) with contractors. Once the decision is made to discuss (negotiate) proposals, the contracting agency must negotiate with all contractors within the competitive range and provide each contractor the opportunity to revise its proposal when discussions are concluded. It is illegal to favor one contractor over another, reveal one contractor’s solution to another contractor or reveals one contractor’s price or references to another contractor.
4. FAR 15.308. The source selection decision must be based on the independent judgment of the source selection authority (SSA) and it must be thoroughly documented to include the rationale for any business judgments and tradeoffs made or relief on by the SSA.
Frankly, as we’ve said before, if your complaint is bias or prejudice, we advise you not to protest. The protest system is set up to assure strict compliance with the rules. The system asks you to complain if the rules are violated. But do not just be a sore loser.
Finally, you must prove your case. How do you do it? You must see the complete agency administrative record. How do you get to see it? You must hire an outside consultant to help with the protest. You will not be allowed to see the complete agency file, but your consultant will be given access under a protective order. There is just no way around it. In order to see the complete file, you must retain outside help.
Posted on 9/7/2011 11:23 AM
The first rule is not to protest unless the government has violated an acquisition regulation. The most common violation is the government’s failure to follow the announced evaluation factors.
The second rule is to move fast.
After you find out you lost the award, you must request a debriefing, in writing, within 3 calendar days. If the last day falls on a weekend or holiday, the deadline is the next business day and this is true of all the calendar day calculation rules. (Insist that the government adhere strictly to the requirements of FAR 15.506.) You then have 10 calendar days after the debriefing to file a protest at GAO. If you don’t ask for a debriefing, you have 10 calendar days after notification of award to protest to GAO.
When the government receives notice of a protest from GAO (be sure GAO promptly provides this notice), within 10 calendar days after award or within 5 days after a debriefing, whichever is later, the contracting officer must immediately suspend performance on the awarded contract. Notice the rule here is 10 days after award, not 10 days after you receive notice of the award. This is another reason to request the debriefing to allow time for imposition of the automatic suspension of performance pending GAO’s decision on the protest. Note also the rule is 5 days after debriefing for suspension of performance.
If you miss these deadlines, you are out of luck in protesting at GAO. However, if you act with reasonable promptness, you can still protest at the Court of Federal Claims (COFC). In fact, you can get a second bite at the apple at the COFC even if you lose at GAO. The COFC has disagreed with GAO on several occasions.
Suspension of performance can be overridden by the head of the contracting activity, on a non-delegable basis if urgent and compelling circumstances that significantly affect the interests of the government will not permit waiting for the GAO decision or contract performance is in the best interests of the government. The resumption of contract performance, however, can be challenged in the COFC in an action testing the propriety of the decision to override the suspension of performance. In a good number of these cases, the COFC has disagreed with the government.
If your grounds for protest involve the propriety of language in the solicitation, you already are too late. Those protests much be sent to GAO before the time for submission of bids.
YOU DON’T HAVE TO REMEMBER ALL OF THIS. JUST HEED THIS WARNING THAT THESE TIME LIMITS ARE STRICTLY ENFORCED AND YOU MUST MOVE QUICKLY IF YOU THINK YOU MAY WANT TO PROTEST.
Posted on 9/2/2011 11:18 AM
Let’s say you are a small to medium sized company with government contracts and subcontracts. You recognize you are in the most highly regulated industry in the world. You also know the regulations are more voluminous and complicated than the U. S. Tax Code. You understand there are profound differences between government work and your work in the commercial world. But you also have become familiar with how solid your accounts receivable have become and you have seen the positive impact government work has on your cash flow. Finally, things seem to be going well so what could possibly be missing?
What is missing? Who is your contract manager? What is a contract manager? Why do you need a contract manager? Every government contract and subcontract firm needs at least one contract manager. Here’s why.
What a Contract Manager Does. Here’s a list:
1. Knows the statutes, regulations and case law thoroughly and in depth;
2. Knows, writes and speaks the English language clearly and concisely;
3. Reviews solicitation documents for clarity and legal sufficiency;
4. Assures proposals are well written and meet solicitation and regulation requirements;
5. Handles discussions, clarifications and negotiations of proposals;
6. Handles debriefings and protests;
7. Monitors performance and assures compliance with all contract terms and conditions and regulation requirements;
8. Handles all contract interpretation issues and questions about regulations;
9. Investigates, identifies, analyzes and solves all contractual performance issues;
10. Keeps a daily diary of contract performance and communications with the contracting officer;
11. Handles all requests for equitable adjustment, claims, terminations and disputes;
12. Handles all communications with the contracting officer;
13. Prepares, reviews and signs all contractual documents;
14. Reads all publications relating to acquisition news and keeps current on all statutes, regulations and case law; and
15. Handles contract closeout.
This list is not all inclusive.
So, why do you need a Contract Manager? Ask your friends at Lockheed Martin. Ask any member of the National Contract Management Association. Or, just ask yourself whether you are really good at doing the things on the list yourself or if you really have anyone else who is performing those duties. If not, you need a contract manager. You can’t do business with the government without one.
Posted on 8/30/2011 4:25 PM
Yes, there is a judicial remedy if you are aggrieved by a negative performance evaluation. The Court of Appeals for the Federal Circuit (CAFC) handed down an opinion today affirming an opinion by the Court of Federal Claims (COFC) that it had jurisdiction to hear a complaint that a contractor had been wronged by a negative performance evaluation. Jurisdiction was based on the Contract Disputes Act (CDA) which also gives jurisdiction for such claims to the Armed Services Board of Contract Appeals (ASBCA) and the Civilian Board of Contract Appeals (CBCA). Thus, you also can go to the Boards for redress.
But be wary. Todd Construction ended up losing the case. It tried to get the court's attention on procedural (due process type) issues but failed because it could not show that it was prejudiced by a significant procedural error. That is, it failed to show that but for the error, it would have taken curative action or that the performance evaluation would have been different. Todd therefore lacked standing to sue with respect to the procedural violations.
Todd then tried to show the government acted arbitrarily and capriciously in assigning an inaccurate and unfair performance evaluation. However, Todd admitted that some of the performance problems were not the government's fault but were instead caused by Todd's subcontractors. Don't forget, the prime contractor is not excused unless the subcontractor also has encountered excusable causes of nonperformance. Todd was just blaming subcontractors. The CAFC said: "To raise a plausible inference that the ratings were arbitrary and capricious, the contractor would, at the very least, need to allege facts indicating that all of the substantial delays were excusable."
The teaching of the case is that you can seek judicial relief from negative performance evaluations. But you had better be sure your failure to perform is excusable. And, don't forget, all compensable changes are excusable causes of delay and failure to perform.
This reaffirmation of the jurisdiction of judicial tribunals under the CDA to grant declaratory relief suggests some creative approaches to contract administration. If you have a dispute of significant importance regarding interpretation of the contract, interpretation of regulations relating to the contract, propriety of termination for default or for that matter nearly any dispute relating to the contract and your contracting officer stonewalls you, consider certifying a claim for declaratory relief and demand a final decision. Avail yourself of the disputes clause mechanism early to provoke a response and if necessary, get the matter before a judge. And, don't forget alternative disputes resolution (ADR). Judges can act as mediators even if the case is not officially before the tribunal.
Posted on 8/25/2011 10:30 AM
Lately, we’ve noticed several contractors were surprised to find out their contracts contain FAR Part 12 Commercial Item clauses. In fact, in one case, commercial item clauses were improperly used in a construction contract. So, check your contract to see if it contains any of the clauses set forth in FAR Subpart 12.3. If so, here is what to expect.
You essentially have no changes clause. That is, the changes clause says changes can only be made by mutual agreement (bilaterally). The government has no right to make unilateral changes. Any attempt to change the contract unilaterally is a breach of contract. Therefore, there are no constructive changes. If the government breaches any of its implied obligations (see our editorial on “The Big Five Implied Contractual Obligations”), your remedy is based on straight breach of contract principles. That in turn means you may be able to recover lost anticipated profits in the event of a breach of contract.
Welcome to the new world of government contracting. Actually, it’s the old work of contract law working its way back into our new world of government contract law.
But there is even a bigger surprise. The old government contract termination for convenience (T for C) clause is replaced with a new clause purporting to limit T for C recovery to a percentage of the price which represents the percentage of completion plus “charges” associated with the termination itself. This new T for C clause has been interpreted to severely limit your T for C recovery. However, the issue is very much up in the air and subject to further analysis by judicial tribunals.
It really makes no sense to limit T for C recovery on commercial item contracts. At least that is what a U.S. District Court in Maryland thinks. Since FAR Part 49 applies as a guide in the termination of commercial contracts, the Maryland court says most of the old rules should apply. But be wary. The law is very much in a state of flux on this issue of T for C recovery on commercial item contracts.
One of the interesting twists (which feeds the legal analysis controversy) is FAR Part 12 makes it clear the FAR Part 31 cost principles do not apply in commercial item contract terminations for convenience and the government has no right to audit your proposal.
Have you checked your contract? Does it have the FAR Subpart 12.3 clauses? Surprised? You may be having to learn a new language.
For more information contact firstname.lastname@example.org
Visit our website at www.spriggsconsultingservices.com
Posted on 8/24/2011 10:21 AM
In times of fiscal austerity, we usually see an increase in terminations for convenience. The government has an almost unfettered right to terminate a contract for its convenience. Only in very rare cases has a termination been treated by a judicial tribunal as a breach of contract. These cases involve bad faith attempts to just get the contract switched to another contractor. In some cases we’ve also seen the termination rules abused by contracting officials who terminate for default when they should terminate for convenience. The remedy in such a case is conversion to a termination for convenience.
The distinction between breach of contract and termination for convenience is important since one of the hallmarks of a T for C is the inability to recover lost anticipated profits or any form of incidental or consequential damages. These remedies are available, however, in the case of breach of contract.
A T for C places many responsibilities on the contractor. These are all covered not only in the T for C clause but also in FAR Part 49, one of the best written regulations the government has ever written. Among the responsibilities is the requirement to submit a T for C settlement proposal. There even are special forms. See FAR 53.301-1436, 37, 38 and 39.
It is extremely important to remember the rules for termination settlement proposals are very different if your contract is a commercial type contract under FAR Part 12. These rules also are currently undergoing some controversial judicial interpretations. However, if your contract is not a FAR Part 12 contract, there are four important things to keep in mind when submitting a T for C settlement proposal:
- The cost principles in FAR Part 31 apply. Only the costs allowable under that regulation can be recovered.
- Your proposal very likely will be audited.
- Your recovery is limited by the original contract price unless that price is increased through the changes clause.
- The adjustment for loss formula may be applied when the government projects you would have lost money if you completed the contract but the changes clause can be used to avert that result.
In any event, the government should be guided by the following language in FAR 49.201:
“A settlement should compensate the contractor fairly for the work done and the preparations made for terminated portions of the contract, including a reasonable allowance for profit. Fair compensation is a matter of judgment and cannot be measured exactly. In a given case, various methods may be equally appropriate for arriving at fair compensation. The use of business judgment, as distinguished from strict accounting principles, is the heart of a settlement.”
For more information contact email@example.com or visit our website: www.spriggsconsultingservices.com
Posted on 8/23/2011 10:45 AM
Your job is productivity in performance of contracts and subcontracts. Our purpose in writing these notes is to enhance your productivity. You need to keep up with the latest procurement news and you need helpful pointers on government contract rules and regulations. Our goal is to be your one stop for all of this. We are trying to enhance your productivity by eliminating the need to search far and wide for the answers.
We are a member of all the important government contract organizations. We keep tabs on recent developments by attending meetings and reading all the recent industry association publications. We subscribe to all the relevant sources of acquisition information. We have an intelligence network of people who keep track of what is going on. In sum, one of our jobs is information intelligence.
We don't report on everything. We try to separate the wheat from the chaff. We also give you our opinions based on over 40 years of experience in acquisition management and litigation. We are not omniscient. We don't see and know everything. And we don't purport to report on everything you may be interested in. But that's your job. Let us know what subjects you'd like us to cover.
Posted on 8/23/2011 10:42 AM
In CIB No. 10, I reported on a proposed DFARS subpart addressing requirements for safeguarding unclassified DOD information. The rule would apply across the board to all DOD contractors and subcontractors at any tier.
The rule purports to treat unclassified data (vaguely defined) as if it were classified, essentially. This rule has been under considerable fire from industry groups. So the time for comments has been extended until November 30, 2011. This means it could not possibly be implemented before next year.
However, the proposed rule brings to mind the standard advice I give about protecting your proprietary data. Marking does not make it so. That is, proper marking of data is not an automatic protection. Marking is important. See FAR 52.215-1(e) and FAR 15.609(a) for the proper Use and Disclosure of Data legends. But you must go beyond just marking data. You must have policies, procedures and physical protections in place as well. You must actually treat the data as a secret and limit its release and who has access.
Perhaps if we just protected our trade secrets a little better, compliance with the new FAR rule would not be onerous. Most of you, I hope, are way ahead of this curve and already essentially comply with the proposed regulation.
Posted on 8/23/2011 9:23 AM
GAO has just handed down a decision in an OCI case sustaining a protest where the Army Corps of Engineers investigated the awardee's alleged unequal access to information based on the awardee's hiring of a high-level government employee from the office responsible for the project but limited its review to the former government employee had and did not consider his access to non-public information. The former government employee also continued daily contact with members of the source selection team and access to inside information.
Protesters alleged an impermissible OCI in that the Corps failed to reasonably investigate or mitigate a possible OCI. GAO points out that FAR requires that contracting officials avoid, neutralize or mitigate potential significant conflicts of interest so as to prevent an unfair competitive advantage or the existence of conflicting roles that might impair a contractor's objectivity. FAR expressly directs contracting officers to examine the facts carefully. GAO goes on to quote the Court of Appeals for the Federal Circuit's "hard facts" rule -- suspicions are not enough. GAO concludes that the contracting officer did not conduct a reasonable investigation to determine if an unfair competitive advantage existed. The CO focused only on the precise role the former government had at the Corps.
This is a lengthy decision. In sum, GAO found that hard facts exist to suggest the existence of a potential, if not actual OCI that the Corps failed to evaluate and avoid, neutralize or mitigate. The Corps failed to consider whether the former government employee had important inside information and whether his having this information provided an advantage to the awardee. GAO determined this failure to investigate tainted the integrity of the procurement process and therefore sustained the protest (it also was sustained on other grounds).
Hiring former government employees may be a great business move. But be wary of the OCI pitfalls.
Posted on 8/18/2011 2:24 PM
Most disputes involve contract interpretation. One side thinks something means one thing and the other thinks it means something else. What does the contract say?
A judicial tribunal will start by examining the plain language of the contract, reading its terms together to give reasonable meaning to all parts of the contract. The tribunal will not allow extrinsic evidence (evidence outside the contract such as witness testimony, documents, etc.) to be introduced on the issue unless the language is ambiguous. Ambiguous is defined as capable of two (or more) reasonable interpretations. If the contract is not ambiguous, meaning there is only one reasonable interpretation, there will be no testimony and no documents allowed in evidence to help interpret the meaning.
Since most disputes arise over interpretations, I must repeat my admonition that you thoroughly and carefully scour the solicitation and contract documents for possible ambiguities BEFORE you bid.
If you miss something and become entangled in the thicket of "what does it mean", read the language carefully, in the context of the entire contract. Try to discern the plain meaning first. If you are hopelessly entwined in differing possible reasonable interpretations, apply the rules of resolving ambiguities, which start with extrinsic evidence of meaning and end with resolving ambiguities against the drafter of the language.
Posted on 8/17/2011 3:10 PM
The standard FAR Disputes, Changes and Termination clauses are not mandatory subcontract flow down clauses. In fact, it is improper to flow down the standard FAR Disputes clause. Here is a model subcontract Disputes clause:
1) If a dispute arises in the performance of this subcontract, the parties will first attempt to negotiate a settlement. If negotiation is unsuccessful, they agree to submit the dispute to mediation. If mediation does not resolve the dispute, either party may seek redress in any court of competent jurisdiction. Pending resolution of any dispute, the parties shall proceed diligently with the performance of the work.
2) However, if any dispute gives the subcontractor recourse against the U.S. Government through the prime contractor's prime contract, the parties may agree to pass the subcontractor's dispute through the prime contract to the U.S. Government. The subcontractor must submit the disputed claim within 5 years after it accrues; the prime must cooperate fully with the subcontractor in prosecuting the claim; the parties agree to be bound by the outcome; the subcontractor must certify its claim in a form approved by the prime contractor; each party will bear its own costs in prosecuting the claim; and any other dispute or portion of the dispute not resolved in paragraph 1) above may be decided by a court of competent jurisdiction. Pending resolution of the dispute, the parties shall proceed with performance.
3) This subcontract shall be government by the laws of the State of ______________. However, any FAR, DFARS or other federal agency clause or any clause substantially based on such federal agency clause shall be construed and interpreted according to the federal common law of government contracts as applied by federal agency judicial tribunals.
Subcontract terms and conditions under federal government prime contracts can be tricky. There is nothing in FAR, DFARS or any other federal regulation which provides a single source guide to mandatory flow down clauses. Moreover, many flow down clauses need to be rewritten or modified for subcontracts. The disputes clause is probably the best example of a clause which has to be totally rewritten for subcontracts.
Posted on 8/11/2011 1:52 PM
Don’t be the blind leading the blind. Chances are your newly minted contracting officer does not know what an REA or a claim is supposed to look like—what is must contain. There is no form in FAR, no outline, not even a discussion of what goes in this type of document. That’s a bit odd, in my view.
Here’s the outline:
1. A statement of the relevant contract requirements;
2. A statement of the government direction, actions or omissions which caused the problem;
3. Detailed descriptions of the added work or effect on performance;
4. Computation of the cost and profit impact; and
5. A legal brief stating the theories of recovery and damages.
This document should be a whopper. It must contain thorough and complete statements of fact and be supported by all the documentary evidence you can find. Five pages will not do. Put it together now and save yourself a lot of grief later. Be specific. Provide names and places. Don’t just say the work was delayed and disrupted. Be specific.
Too many times, the uninitiated submit a rambling tale of woe with accusations of bias and prejudice. Wrong! Or, they submit a lengthy discussion of the law which is short on facts. Also wrong. There is a tried and true method of preparing REA’s and claims even though it is not found in FAR, DFARS or any other regulation.
Finally, unless you are a lawyer or accountant, you should not try to do the damage calculation yourself. The cost allowability rules are complicated and you will need assistance on just what damage theories apply. Although the general concept is to make you whole, the whole is your contract and not normally the impact on other contracts and your business generally.
Posted on 8/11/2011 12:42 PM
What do Requests for Equitable Adjustment (REA’s) and muscle cars have in common? Both are kind of dying out, slowly but surely.
REA’s have always been and will continue to be necessary when seeking an adjustment under the standard government contract changes clause. Prior to 1978, there was an explosion of REA’s based on the constructive change doctrine development by the administrative boards. They found they had to construct the doctrine to get around the fact they had no jurisdiction to hear breach of contract cases. Since l978, however, they have all dispute jurisdiction. Theoretically there is really no need for constructive changes.
All constructive changes were based on some type of contract breach. The duty to be clear (contract interpretation), the duty to provide error, omission and conflict-free documents, the duty to cooperate, communicate and not interfere, the duty to disclose superior knowledge and even acceleration claims were based on breach concepts.
But there really is little need for constructive change REA’s today. It still may be smart to file them since you can recover your administrative expenses including consultant fees in the process. And, calling your claim an REA may help with negotiations. However, these really all are breach claims and at some point you may have to certify them if you can’t settle. If you know you won’t settle, certify and call them by their correct name: claims.
If you have a FAR Part 12 commercial item contract, you have no changes clause and hence no opportunity for an REA. (The changes clause is illusory since changes must be bilateral and there is no equitable adjustment language anyway.) So, what you have is a breach claim pure and simple.
This is not just so much semantics. Damages for breach claims can vary from REA’s. More about that later . . . . I need to take a ride in my GTO.
Posted on 8/9/2011 1:31 PM
I just reported in a CIB on a proposed FAR regulation which addresses documenting contractor performance evaluations. The proposed regulation (comments are due by September 8, 2011) provides that agency evaluations of contractor performance, including both negative and positive information, must be provided the contractor "as soon as practicable" after completion. Contractors are given 30 days to submit comments, rebutting statements or additional information to the agency. Agencies then kick the package to a level higher than the contracting officer for the final agency decision. The evaluation file may then be used in source selection decisions.
This seems more than a little unfair in the case of negative evaluations. It's a little like the fox guarding the hen house. Sure, it's too time consuming and expensive to provide for complete judicial review of disputed performance evaluations. But it does seem as though a bit more due process is in order when so much is at stake. It's a little like getting negative points on your driver's license without the opportunity to contest the ticket. We need at the very least a traffic court judge to take a look at these negative performance evaluations.
So, our comment on the regulation is this: please, let's appoint an impartial contracting person outside the accusing agency to pass judgment on negative performance evaluation disputes. I treat this as one of the many things we need to do to encourage more participation in the industrial manufacturing and services base for government contracts. Competition will be enhanced if we just introduce a little more fairness and impartiality into the procurement process.
Posted on 8/6/2011 9:21 PM
As I stated in writing about the "Big Five" government duties, there is an implied obligation in every government contract that the government cooperate with the contractor and not interfere in its performance. This all started in 1876 with a pronoucement from the U.S. Supreme Court. In the 20th Century, the doctrine evolved to require the government to do whatever was reasonably necessary to assist the contractor to perform and included the duty to communicate with the contractor and disclose information vital to the contractor's performance.
The government can violate the duty to cooperate and not interfere without acting in bad faith or with the intention of harming the contractor. In fact, to sustain a claim for breach of these duties, the contractor need not prove bad faith.
These duties are read into the contract as a matter of law. They are just as binding as if they were stated expressly in the contract terms and conditions.
Unhappily, contracting officers often seem unaware of these legally required duties. Although, in my opinion, the relationship is not a partnership and the system of procurement laws and regulations creates an adversarial atomosphere, there is no excuse for foot dragging, stonewalling, failure to be responsive, ignoring pleas for assistance, turning down ADR and insourcing through bait and switch to name but a few breaches of these duties. When the government enters the marketplace, it is required to follow the rules. After all, it made the rules in the first place.
Posted on 8/6/2011 9:01 AM
Just how do you get the government to the table? FAR 33.214 does not require the parties to conduct ADR. But it does require the contracting officer to answer your request stating the reasons for denial which are somewhat limited. The new DFARS (and we hope a new FAR clause) should help (See In Praise of Mediation below). We certainly need strong government acquisition leadership to make ADR work.
But my favorite form of ADR is what DFARS calls "structured unassisted negotiation". What is that and how does it work? It is not in DFARS or FAR. See www.spriggsconsultingservices.com/resolve_disputes.shtml.
If that does not work, get your case to the ASBCA or CBCA as quickly as possible. File your notice of appeal from the contracting officer's decision (or deemed denial), file your complaint and ask for a settlement judge. You cannot formally without making it a joint request. However, you can ask for a status conference during which you politely invite the judge's assistance in getting the parties to the table. I assure you, the judges at these Boards love to encourage negotiated settlements.
Posted on 8/6/2011 7:51 AM
Just what all does it take to win a bid protest? Generally, two things: 1) a winning argument based on solid facts; and 2) an outside consultant to ferret out those facts.
Specifically, what kind of arguments win protests? Let's get rid of the losing arguments first. If you are dead set on arguing the source selection official's best value determination was a bad judgment call, you lose. If you absolutely must argue bias and prejudice, you lose. In these instances, I will not help you.
So let me list the winning arguments:
- The solitication language is ambiguous and must be clarified (pre bid protest).
- The source selection official's justification is not thoroughly thought out and justified in writing (post award protest).
- The source selection official failed to use all the announced evaluation factors, changed them or applied them unequally between you and the winner (post award protest).
- The source selection official used an evaluation factor not announced in the solicitation (post award protest).
The first argument depends upon a thorough analysis of the solicitation documents including, in particular, the statement of work and the evaluation factors. If they are ambiguous, go to the contracting officer pronto. If he or she stonewalls you, protest.
The other arguments depend on what actually shows up in the agency record. How do you see the complete agency record? You must hire an outside consultant. You will not be allowed to see the record, but your consultant can. (I can explain.)
How do you protest without seeing the record? How could you lose without the source selection official failing to apply an evaluation factor, changing the factors, introducing a new one or applying them unequally?
Posted on 8/6/2011 6:35 AM
The interrelationship of the changes and terminations clauses in government contracts and subcontracts is so important I feel the need to reiterate what I said in CIB No. 5 below.
If you face termination for default or you have been terminated for convenience, you must also consider the implications of the changes clause. Every compensable change is an excusable cause of delay or failure to perform. Thus, if you are given a cure notice or show cause notice, look to whether you have compensable changes. They are defenses to the threatened T for D. And, if you are terminated for default, your appeal should include your changes claim. It also is important to file immediately a pro forma termination for convenience settlement proposal including changes claims to set the stage for negotiation of a settlement of the T for D.
If you are terminated for convenience, part 49 of FAR requires the contracting officer to consider all changes claims. You will need the changes clause to justify a price increase if your total T for C proposal exceeds the original contract price. You also will need changes as a vehicle to argue against the application of the adjustment for loss formula, should the government choose to assert the contract was in a loss position.
How do you identify changes? A good starting point is in our blog on the big five implied obligations in every contract.
All of these principles apply with equal force and effect to subcontracts under government prime contracts if the subcontracts contain flowdown changes and termination clauses.
Posted on 7/31/2011 10:03 AM
There is a new DFARS coming out (the proposed rule went out in April and comments are in) encouraging the expanded use of dispute resolution and conflict management practices as an integral part of normal DOD business practices. It encourages such techniques as structured unassisted negotiation, joint or collaborative problem-solving, coaching and the design of an integrated conflict management system.
DOD components will be required to establish and implement programs to resolve disputes at the earliest possible stage of the dispute and at the lowest possible organizational level. One can only hope the FAR Council picks up on this and makes it government agency wide. I think FAR should have some real teeth in it. FAR 33.214 must be made mandatory. The government should not be able to turn down the contractor's request.
Much has been written and spoken about ADR (Alternative Dispute Resolution). Frankly, the words mostly fall on deaf ears. In my experience, it is extremely difficult to get the government to the table. The federal court system and many state court systems are leaders in ADR: don't file a law suit unless you expect to be told you must go to mediation. Judges at the Court of Federal Claims and the Boards of Contract Appeals encourage ADR in the strongest of terms.
As you know, I favor face to face negotiation over all other forms of ADR. My second choice is mediation. I insist on mediation in all of my cases unless it gets too lawyered up. One or one and a half days with the mediator and the principals should be enough. Too much lawyering really gets in the way. That's why I abhor arbitration, which is just another form of litigation.
Posted on 7/30/2011 10:32 AM
The Court of Appeals for the Federal Circuit has said the government, acting through the contracting officer, must act impartially and judiciously when it makes decisions. Penner Installation Corp. v. United States, 89 F. Supp. 545 (Ct. Cl.), aff'd, 340 U.S. 898 (1950). The Court also has said that this duty is akin to the duty to act in good faith with due regard to the contractor's rights and to cooperate with and not interfere in the contractor's performance.
These duties are implied in every government prime contract and may well also be implied in subcontracts as well. Failure to discharge these duties clearly is a breach of contract. Even actions which strain the financial capacity of the contractor, such as delayed payments, are breaches of the government's implied duties.
Thus, it is responsible to conclude that any action of the government which interferes with the contractual rights of the contractor gives rise to breach of contract remedies such as the risky (because it invites litigation of termination for default) stopping of work and recovery of damages. Recovery of damages will not include all the incidental and consequential damages available in non government contract cases, but it does include the recovery of lost anticipated profits.
What the government risks, among many other things, when it shuts down, partially shuts down, furloughs employees and delays or stops making payments is that contractors will sue for damages.
So far so good for contractors. However, the government may assert the sovereign act defense to any claim for breach resulting from a failure to appropriate the necessary funds to make contractual payments. The failure to make appropriations to pay contractual debts may be a sovereign act. However, there is precedent for the argument that shutdown of government offices so interferes with the contractor's contractual rights that the doctrine does not defeat a claim for damages based on breach of contract.
Posted on 7/26/2011 1:16 PM
Subcontracting has its advantages. One of them is the flexibility to negotiate terms and conditions. The prime contractor may well treat your subcontract as a contract of adhesion by dictating its terms and conditions. However, if you are knowledgeable about mandatory flow down clauses and skillful in your negotiations, you can reduce your risks and enhance your profits.
You cannot go to FAR or DFARS to find a list of mandatory subcontract flow down clauses. FAR Subpart 52.3 does contain, however, a matrix of mandatory and optional prime contract clauses. The only places to find a list of mandatory subcontract flow down clauses are "Service Subcontract Terms and Conditions" and "Fixed-Price Supply Subcontract Terms and Conditions" published by the Public Contract Law Section of the American Bar Association. (See www.americanbar.org.)
Changes, termination for convenience, termination for default and disputes are not mandatory flow down clauses.
At the very least, limit the application of changes and terminations to situations where the actions are taken by the federal government. The disputes clause has to be totally rewritten. You should preserve your common law and state law rights and remedies against the prime contractor while at the same time allow yourself the option to pass your dispute through to the government where appropriate.
Pay attention to the choice of law provision. Your state law should apply to disputes not implicating federal law. The federal common law of contracts should apply in all other situations. Primes usually go for this. After all, it is eminently fair that the federal law apply when the subcontract is under a prime U.S. Government contract.
Avoid arbitration clauses. Preserve your right to litigate but always seek to mediate disputes. Prefer ADR forms other than arbitration. Arbitration has become another form of litigation.
Posted on 7/23/2011 12:24 PM
The government has no right to audit your FAR Part 12 commercial contract breach of contract or termination for convenience claims. Pure and simple.
FAR 15.403-1(b)(3) and (5) prohibit obtaining cost or pricing data for commercial item contracts and when modifing a commercial contract. FAR 12.503(c)(2) says the Truth in Negotiations Act and FAR 15.403 do not apply to Part 12 buys. FAR 12.403(d)(1)(ii) says the government has no right to audit a termination for convenience settlement proposal. FAR Part 12 does not address breach of contract claims and the changes clause says changes may be made by mutual agreement only. Conclusion? The government has no right to audit a termination for convenience settlement proposal/claim or breach of contract claim.
Some may argue FAR 15.404-1(a)(2) gives the government the right to conduct a price analysis of such proposals/claims. Probably not. In any event, this regulation only permits the contracting officer to request the advice and assistance of other experts in analyzing whether the price is right. The contractor's submission of pricing information may be scrutinized in this way, but in this way only.
As you know, the onerous opinion in the Red River case has been reversed and remanded on appeal. Your termination for convenience settlement proposal recovery rights under a Part 12 termination now more closely resemble the full recovery permitted under other types of government contracts.
Posted on 7/23/2011 10:56 AM
The federal common law of contracts implies the government has 5 obligations in every contract. (The obligations extend to subcontracts in many if not most cases.) The government has the duty to:
- Write contractual documents which are clear;
- Write contractual documents which are free of errors, conflicts and omissions;
- Write contractual documents which are commercially practicable and not impossible to perform;
- Communicate and cooperate with the contractor and not interfere in the contractor's performance; and
- Disclose information vital to the contractor's performance.
Breach of these obligations gives rise to affirmative contractor claims and each breach is an excusable cause of contractor non performance under the default clause.
On the other hand, the government can assert an absolute defense: that the contractor assumed the risk. How does the contractor assume the risk? With regard to numbers 1 through 3, the contractor loses if, upon review of the documents before bidding, a reasonable contractor would have seen the problem.
It gets a little more complicated with subcontracts. If the subcontract contains a choice of law clause referring to the federal common law of contracts or FAR clauses are flowed down, it is likely these same obligations flow down as well.
Posted on 7/23/2011 10:30 AM
Just what does the Antideficiency Act say? It prohibits:
- Making or authorizing an expenditure from, or creating or authorizing an obligation under any appropriation or fund in excess of the amount available (unless authorized by law);
- Involving the government in any obligation to pay money before funds have been appropriated;
- Accepting voluntary services for the United States (with certain exceptions); and
- Making obligations or expendiures in excess of apportionments or agency regulations.
The government may not make payments or commit the United States to make payments in the future for goods or services if it does not have the money available. There are both administrative and penal penalties for violations.
What does not having the money available mean? The prevailing interpretation is that it means money appropriated. But what does "or funds" in the statute mean? What if the money is appropriated, but it is not "in the bank"? What did Congress intend?
Posted on 7/23/2011 9:25 AM
GAO takes the position that it generally will not review protests of an agency decision to perform work in house because that is a matter of executive branch policy. However, GAO recognizes that the Competition in Contracting Act allows it to decide protests involving alleged violations of procurement statutes or regulations.
GAO will review decisions to cancel solicitations if the solicitation involves a cost comparison between contracting out and performing the work in house, where a statute or regulation requires such a cost comparison and where the rationale for canceling a solicitation is a mere pretext for going in house. As to the latter situation, GAO once sustained a protest because it determined the excuse for going in house was flimsy.
I asked a government official today about the fact that I could not find contract/acquisition management opportunities on FedBizOps. I told him my firm is looking for contract work to help the federal workforce handle some of its contract administration workload. The official told me to forget about it. All that work is being "insourced".
We have prepared a webinar/seminar on "How to Deal with Insourcing." We've sent the 36 presentation slides out to our clients and friends. Let us know if you would like to hear and see the presentation.
Posted on 7/23/2011 9:11 AM
Abraham Lincoln once said: "It is as much the duty of the Government to render prompt justice against itself, in favor of citizens, as it is to administer the same between private individuals." This statement is emblazoned over the entrance to the Court of Federal Claims and Court of Appeals for the Federal Circuit building not far from the White House.
In 1950, the Court of Claims (predecessor to the present Court of Appeals for the Federal Circuit) said:
Some contracting officers regard themselves as representatives of the defendant charged with the duty of protecting its interests and of exacting of the contractor everything that may be in the interest of the Government, even though no reasonable basis therefor can be found in the contract documents; but the Supreme Court has said that in settling disputes this is not his function; his function, on the other hand, is to act impartially, weighing with an even hand the rights of the parties on the one hand and on the other. (The emphasis is mine.)
Posted on 7/22/2011 9:53 AM
We all know about the Obama Administration's emphasis on fixed price contracts. We've heard this repeated by Dan Gordon and all the executive agency acquisition chiefs. The government has gone through these exercises before (DOD's Robert McNamara, for example) with very mixed results (some would say very bad results). In this era of fixed pricing and attempts to negotiate the lowest possible price, we have what some call a perfect storm brewing. In the heat to get the work, contractors may be tempted to underbid costs and hope to get well with changes. Yes, that is always the risk, but now it is perhaps more pronounced than ever.
The trend away from best value and toward technically capable, lowest price is part of the equation. Best value in its worst application may provide too much opportunity for favoritism. But technically capable, lowest price will almost certainly lead to bidding wars, most experienced acquisition leaders agree.
One of the often overlooked realities is that changes claims are part of the federal acquisition scheme. Contracts of adhesion (where the government dictates the terms and conditions), and regulations more complex than the tax code, countenance protests and claims as part of the process of making things fair.
My purpose here is to remind you that on April 1, 2002, Angela Styles, Administrator of OFPP (Dan Gordon has that job now), issued a memorandum from the Executive Office of the President to all agency procurement executives which stated:
"The filing of protests, the filing of claims or the use of ADR must not be considered by an agency in either past performance evaluations or source selection decisions." She specifically said: "Contractors may not be given 'downgraded' past performance evaluations for availing themselves of their rights by filing protests and claims or for deciding not to use ADR." (The emphasis is mine.)
The key words are "their rights". In the federal acquisition scheme, contractors have the right to avail themselves of their remedies.
Posted on 7/21/2011 11:02 AM
1. Recent OCI Opinion
In a case called NetStar-1 Government Consulting, Inc., Judge Allegra of the Court of Federal Claims recently has enjoined an award of a DHS/ICE contract for support services because DHS failed to properly mitigate an organizational conflict of interest. The successful awardee, ALON, Inc., had access as an incumbent contractor to databases of proprietary information which included labor rates for its competitor NetStar-1 Government Consulting, Inc. ALON also had access to the government’s budget plan and other non-public information.
The contracting officer failed to obtain a nondisclosure agreement from ALON, belatedly reacted to the obvious conflict of interest and did nothing more to mitigate the situation than obtain declarations from ALON employees that they had not obtained NetStar-1’s information or shared it with ALON officials. ALON did put up a firewall but it was merely a pledge that the ALON employees would not participate in ALON’s proposal. Said the Court: “This is a far cry from the sorts of detailed and verifiable firewall provisions that have been found adequate to mitigate other organizational conflicts of interest.”
The Court concluded that it was unprepared to accept the DHS remedy of obtaining declarations from the winning bidder that it did not take advantage of the unequal access to information that its employees possessed. Judge Allegra went on to conclude that a preliminary injunction should issue to stop performance of the awarded contract to ALON.
As you know, the final FAR rule on OCI, which expands the flexibility of contracting officers in deciding proper mitigation techniques, is still in the comment stage. Meanwhile, we continue to watch GAO and COFC decisions and opinions in this area.
2. Commercial Contracts Under FAR Part 12; Terminations; Accelerated Payments
You may have a commercial type FAR Part 12 contract (and not realize it). If you do, you will have a special termination for convenience clause which limits your recovery to the percentage of the contract price representing the performance of work performed plus “charges” directly related to the termination itself. The Armed Services Board of Contract Appeals (ASBCA) has held in a case called Red River that this language precludes normal termination for convenience cost recovery (in particular, eliminating costs incurred in preparing to perform). Fortunately that opinion has been reversed by the appellate court. You can now recover all your costs subject to the test of reasonableness. The new opinion also recognizes the policy reasons why the FAR Part 31 Cost Principles do not apply in this context and the government has no right to audit.
Also, as you probably know, there is an interim DOD rule to accelerate payments to all small businesses. It will be final soon. However, it does not apply to subcontracts, so you should insist that your prime contractor or higher tier subcontractor insert this new requirement in your subcontract. While we are on the subject of subcontracts, remember such clauses as changes, termination for convenience and default and disputes are not mandatory flow down clauses. In fact, mandatory flow down clauses are limited to socio-economic and certain pricing clauses. Let us know if you need assistance in reviewing what should and should not be in your subcontract terms and conditions.
3. GAO Will Hear Protests on IDIQ Task Orders; Advice on Protests
Recently, the GAO has decided it now does have jurisdiction to decide protests in IDIQ Task Orders. Technatomy Corporation, B-405130 June 14, 2011.
With regard to protests, our practical advice is simple. If there are errors, conflict, omissions or lack of clarity in the solicitation documents and the contracting officer either refuses or fails to correct them, protest or don’t bid (you will assume the risk of the problems if you bid). If you lose a contract award, ask for a debriefing and consider protesting only if it appears a regulation has been violated. The most common successful protests involve cases where the agency failed to follow the announced evaluation factors or treated the offerors unequally. Forget protesting bias and whether the source selection decision was correct (we can explain). However, the source selection decision is always vulnerable to attack if it is not thoroughly rationalized and supported in the record.
4. Funding; The Anti-Deficiency Act; Investigation
During our recent seminar in Fredericksburg, I told the audience about a recent phone call I had received from a government criminal investigator looking into possible Anti-Deficiency Act violations by government employees. He asked me, off the record, to give him my opinion about situations he had found where the government employees were using current funds to liquidate prior year’s debts. (The funding had expired or was exhausted.) I told him unequivocally that it is illegal for the government to use current funds to liquidate prior debts. The Anti-Deficiency Act clearly prohibits the government from obligating itself in advance of funding. I passed out an article I had written on the subject.
As I told the investigator, as I told the audience, that I likewise was concerned that if a contractor is award of the funding manipulation, the contractor could be criminally complicit (the Anti-Deficiency Act includes criminal penalties). If you are aware of such scheme, you should immediately report it to the proper authorities. In these days of funding delays, austerity and scrutiny, one must be careful not to run afoul of the Anti-Deficiency Act. The spotlight was on the Act during the threatened government shutdown and it is still shining brightly on all contracts.
5. Interrelationship of Changes and Termination Clauses
At our recent seminar, I explained the interrelationship of the changes and termination clauses in government contracts and subcontracts. (I pointed out these clauses are not mandatory flow down clauses in subcontracts.) Every compensable change is an excusable cause of delay or failure to perform in termination for default cases.
These sometime called constructive changes include the breach of the government’s implied obligation in every contract to: 1) provide clear language in its solicitations and contracts; 2) provide solicitation and contract documents free of errors, conflicts and omissions; 3) provide commercially practicable requirements; 4) cooperate and communicate with the contractor and not interfere in its performance; and 5) disclose information vital to the contractor’s performance. Yes, these obligations are implied in every contract and subcontract.
In the case of termination for default, use the changes clause both as a shield and a sword. Changes are defenses and affirmative avenues for recovery of costs and profit. (Even if the termination for default is upheld, you can still recover costs and profit under the changes clause.) In the case of termination for convenience, changes can eliminate the application of the adjustment for loss formula and provide a means for recovery of costs and profit beyond the original contract price. A changes claim (we explained in detail at our seminar how these claims are written) should always be considered when you are facing termination for default or convenience, especially at the cure notice or show cause stage.
The interrelationship of these clauses is so critical that I sometimes refer to them as one clause, the “termanges” clause. Let us know if you’d like to hear more.
6. Proposed FAR on Past Performance; How to Review Solicitations
Yesterday, (June 28, 2011), DOD, GSA and NASA announced a proposed FAR amendment to provide standardization of past performance evaluation factors and to require all past performance information to be placed in CPARS. There are five evaluation factors and a five scale rating system. Both negative and positive evaluations must be provided the contractor as soon as practicable after completion of the evaluation. Performance issues are to be documented during performance to ensure details are covered. Agencies are required to provide timely assessments and quality data. The entire proposed regulation is attached for your convenience. Comments are due by August 29, 2011.
What should you do when you get your government solicitation? Five things. (There are 10. Stay tuned for the other five.) Parse the statement of work for clarity, practicability, possible restrictions on competition and errors, conflicts or omissions. If you find lack of clarity, impracticability, restrictions on competition or errors conflicts or omissions, immediately notify the contracting officer. Communication is critical. Next, check the evaluation factors (Section M) for compliance with FAR 15.304. In fact, check the solicitation for compliance with FAR 15, Part 2 as well. Third, go to FAR 53 Part 2 and check to make sure the proposed contract terms and conditions (Section I) match the Matrix requirements. The Matrix tells you which clauses are required and which are optional. If optional, you may wish to suggest removal. (Reminder: Neither this Matrix nor any other FAR provision contains a list of mandatory subcontractor flow down clauses.) Next, check the special terms and conditions in Section H. Finally, read very carefully the instructions on how to prepare your proposal. The devil is in the details. Be sure the contracting officer is allowing enough time to respond.
Many disputes can be avoided if you review the solicitation documents carefully. Often an outside set of eyes can catch things you may overlook. If a problem exists which is not hidden and you fail to raise it before submitting your bid, you have assumed the risk. Almost all disputes involve issues of interpretation of the solicitation and contract documents.
7. OCI Comment Extension; New Interest Rate; More on RFP Review
As predicted, the time for comment on the proposed Organizational Conflicts of Interest FAR regulation has been extended to July 27, 2011. We support this proposal totally. It will help reduce litigation and provide contracting officers needed flexibility.
The new interest rate for prompt payment and claim purposes is 2 ½ percent for the period July 1 through December 31, 2011.
In CIB No. 6, we listed 5 things to do when you get your solicitation. Here’s the rest of the list:
List of Ten Things To Do When You Get Your Solicitation
1) Parse the statement of work for clarity, practicability, possible restrictions on competition and errors, conflicts and omissions.
2) Check the evaluation factors for compliance with FAR 15.304. Check for restrictions on competition.
3) Check the FAR 53 Part 2 Matrix to be sure the right terms and conditions are included.
4) Check the special terms and conditions.
5) Read the instructions on how to prepare your proposal.
6) Be sure the right type of contract for the work is contemplated.
7) Hire a proposal writer to help you prepare your proposal.
8) Plan to be on time and deliver your proposal the way delivery is specified.
9) Raise any questions you have about the solicitation promptly. If you don’t get a satisfactory answer, consider protesting to GAO.
10) Most disputes involve solicitation and contract language interpretation issues. Hire a legal expert to help with your solicitation review.
8. Protesting IDIQ Task Orders
In our CIB No. 3, we reported that in Technatomy Corporation, GAO decided it had jurisdiction to hear protests of GSA IDIA task order awards. We need to explain further.
Clearly, GAO may now decide civilian agency task order protests without limitation. However, on July 5th, DOD, NASA and GSA published an interim rule amending FAR to extend the limitation on such protests for DOD, NASA and the Coast Guard. So, although one may protest IDIQ task order awards in all other cases, if the task order is under a DOD, NASA or Coast Guard contract, the limitation on protests continues until September 30, 2016. That limitation is as follows: you cannot protest unless the ground for protesting is that the order increases the scope, period or maximum value of the contract under which the order is issued; or the protest is on an order in excess of $10M.
There is likely to be some confusion about this because the interim rule incorrectly recites the current status of civilian agency protests under the Technatomy decision.
9. Cutting Back on Contracts for Services
Whether it’s Congress (see Section 823 of the FY12 National Defense Authorization Act), or the White House (see the attached Federal News Radio story), it’s beginning to look as if there will be serious cutbacks on contracts for services. Didn’t we learn anything from DOD’s undisciplined approach to insourcing? We applaud buying smarter and even the use of fixed price contracts. But here we go again with the prospect of undisciplined dollar reduction targets and goals. That approach is just flat wrong. We have hope Dan Gordon (OFPP) comes out with some clearer guidance and we intend to talk with him about it.
In the meantime, be wary. These cutbacks may take odd forms. Often reductions in work are constructive terminations for convenience or even breaches of contract. We may even see terminations for default because myopic buyers may opt for trying to avoid responsibility altogether.
In any event, look for a speedier death of time and materials. Get ready for fixed pricing nearly all services.
10. Safeguarding Unclassified DOD Information
As you may know, DOD is proposing a new DFARS subpart addressing requirements for safeguarding unclassified DOD information. The proposed rule is in 76 Fed. Reg. 38089, June 29, 2011. Comments are due August 29, 2011. No date has been set for implementation. The new rule would apply across the board to all DOD contractors and subcontractors at any tier.
In a nutshell, this rule purports to treat unclassified data (the description is vague) as if it were classified, whether it's sent by the government or developed by a contractor of subcontractor. The rule also forces contractors and subcontractors to divulge details to DOD of cyber attacks waged against them within 72 hours after they become aware the attacks occurred.
This could well be unwieldy and difficult and expensive to implement. We'll be preparing comments and summarizing comments from industry associations as they are developed. We'll be happy to discuss this further with you if you desire.
11. Recent OCI Court of Appeals Decision
The Court of Appeals for the Federal Circuit recently has affirmed a Court of Federal Claims opinion which overturned a GAO decision that an organizational conflict of interest required an awarded contract to be terminated. The COFC had reinstated the contract holding there was no prejudicial OCI.
The Court of Appeals and the COFC criticized GAO for assuming the successful contractor's employees had access to nonpublic information without any evidence of "hard facts". GAO was not rational because it concluded there was only a possibility of access but with no supporting evidence. The Court pointed out that the existing regulation in FAR 9.505 says the identification of OCI's, their evaluation and the consideration of mitigation proposals are all fact-specific, requiring considerable discretion. In this case, the contracting officer engaged in an extensive fact finding mission to determine there was no conflict.
So, the Court concluded that although the hard facts need only show a potential, not actual conflict, the mere suspicion of a conflict clearly is not enough. There must be "hard fact" evidence that the contractor's employees obtained nonpublic information and that there was at least a potential for unfair use in the procurement process.
With this carefully written exposition of the law by the Court, I wonder just how important it is to be making all these regulatory changes. Meanwhile, the regulation stays the same as it was when the Court reached its conclusion.
12. Cuts in Service Contracts
The White House wants to cut spending on management support service contracts by 15% ($6B) by the end of FY 2012. Government spending on all contracts declined by $80B last year and time and materials contracts were cut by $1B. Meanwhile, the federal workforce already is handicapped by hiring freezes and pay restrictions. But the requirements for the work do not go away. Although Dan Gordon denies this is an insourcing move, it is an insourcing move.
If your contract ends and the work does not go in house, you obviously have no remedy. But if 1) your solicitation is canceled and the work goes in house, 2) your option is not exercised and your work goes in house, 3) your task/delivery order work dries up and the work goes in house or 4) you lose an A-76 competiton, you do have a remedy. GAO and the Court of Federal Claims will hear cases involving solicitations. If you have a contract, both the COFC and the ASBCA have jurisdiction to hear your constructive termination or breach of contract complaint.
But the really important point is that any remedy must be based on hard facts. Did your work actually go in house? You must have the hard facts to pursue the remedy.
13. Debt Ceiling Crisis
Well, I was not going to do this because I am so certain the debt ceiling crisis will be averted, but just in case, here is my take on the situation (PSC and others will weigh in next week).
The possible government shutdown over failure to pass the FY 2011 appropriation legislation was a little different. You saw my piece on that. This time, if checks don't go out and offices are shuttered, we just don't know yet the order in which the administration will take action. But the government will not have money to spend. So, guess what? Here comes the Anti-Deficiency Act again. The government cannot make or authorize an expenditure or obligation in excess of the amount available. Moreover, it cannot accept voluntary services unless authorized by law. Violations could result in administrative or criminal sanctions. (We can send you our article on the Anti-Deficiency Act.)
My take is that if there is no money to spend, procurement must be shut down and your remedies are the same as I outlined during the shutdown crisis. (I also can send you that press release.) President Obama probably will outline the order in which payments will not be made, allowing some functions and payments to go forward initially. Again, I don't see going into any more analysis because I see the meltdown will be avoided.
But this is another warning to beware of the Anti-Deficiency Act and your obligation not to engage in any conspiracy with the contracting officer to violate it by trying to work around it. It's also another reminder that this kind of crisis is a defense to a termination for default and gives rise to claims for breach of contract.
14. Debt Ceiling Crisis Revisited
My friend Alan Chvotkin believes the Anti-Deficiency Act is not implicated this time (as contrasted to being in the forefront during the possible shutdown over FY 2011 appropriations). He notes Congress has appropriated money. However, he does not address the "or funds" available language in the Act and the fact that Congress must have known when it passed appropriations that the debt ceiling limitation loomed. But I feel obliged to report that Stan Soloway and Alan Chvotkin of PSC believe the government and its contractors are facing a cash flow only problem this time. This means existing contracts continue, new contracts may be awarded if appropriations cover them but payments may be delayed. (I'll revisit the ADA.)
The Prompt Payment Act requires the government to pay interest on the late payments. Most contracting officers don't keep track of contractor payments, so notify the contracting officer if payments are late. Try to negotiate accelerated payments in the days left in July.
To add insult to injury, we also are approaching the end of fiscal year 2011 and it is highly unlikely appropriations will be in place for FY 2012 by October 1st. So, once we get through this crisis, we run smack up on the edge of the shutdown cliff again.
No one knows how President Obama will prioritize payments in August if a deal isn't reached. (There will be $203B in revenue in August, with obligations to pay out $362B). Your contracting officer will have no idea when you will be paid.
We all are betting these crises will be averted. The only practical advice we can give now is to try to accelerate payments in July and be ready for possible delay in payments in August.
One last word on the Anti-Deficiency Act. GAO describes the Act as prohibiting making payments or commitments to pay if there is not enough money in the bank to cover them. What is the bank? Is it the appropriation? The Act says "or fund". Fund connotes cash. As things sit right now, there will not be enough cash in the bank for the government to pay its bills in August. The implication? It would be illegal to make payments or create new obligations. I continue to advise that a shutdown is a breach of contract with all the attendant remedies for damages.
Two of our group and I met with Dan Gordon today and among other things, we discussed the 15% reduction in services contracting. I told Dan that if the requirements don't change, this really is an insourcing move. Dan explained that the plan is for all agencies to examine their requirements to see where there may be unnecessarily redundant and otherwise unnecessary requirements, perhaps due to unintended duplication. Then, if the carefully reviewed requirements remain, the direction is to negotiate lower prices either through fixed prices, fixed price discounts or labor rate discounts. Clearly, he is trying to avoid arbitrary cuts and insourcing as he has claimed.. It was a great meeting. Dan is a stand up guy who, as I have said before, is the best ever Administrator of OFPP and I've lived with all of them since Hugh Witt.
That said, we will visit this subject often with Dan often. Perhaps the best thing about the meeting was his promise to keep listening to us. So, I invite, no I urgently request, your comments on this subject. Give me hard facts. What is going on in the field? How are contract managers dealing with the 15% reduction goal in your experience. I will collect your comments and pass them on to Dan. And, send me your questions and concerns. We have an opportunity for a dialogue with a real acquisition leader and we ought to take advantage of it.
On a related subject, one of our members reminds us that Dan recently has said that he has told the Federal Acquisition Regulatory Council (which issues new rules) not to issue any more interim rules before any public comments only when the urgent and compelling need is fully justified. He also has told the Council to extend the periods for comment and post comments on line. Amen. Kudos to Dan.