Friday, January 19, 2018

GOVERNMENT WAIVER OF CONTRACT TERMS

The government can specify contract requirements even if they seem ill-advised.  In fact, the government can require contractors to perform work which, by any reasonable standard, may be unnecessary and even stupid.  It has long been held that the government "can engage a contractor to make snowmen in August, if [it spells] it out clearly."  Rixon Electronics, Inc. v. United States, 536 F.2d 1345, 1351 (Ct. Cl. 1976).

Moreover, if the contractor fails to perform the work believing it to be unnecessary or ill-advised, the contractor may be terminated for default or the government may make a downward equitable adjustment under the Changes clause  and deduct from payments owned the contractor the cost that the contractor would have incurred if it had complied with the contractor.  When all else fails, read the contract.  Then, follow it.

However, the government may waive compliance with the contractual requirements through its actions or inactions and thereby be prevented from enforcing the requirements.  We all are familiar with the doctrine of waiver of due date in default termination cases.  However, the waiver doctrine had broader application and can shield a contractor from liability for failure to follow contract requirements which, by the governments action or inactions, appeal to be unnecessary.

"There can be no doubt that a contract requirement for the benefit of a party becomes dead if that party knowingly fails to exact its performance, over such an extended period, that the other side reasonably believes the requirement to be dead."  Gresham & Co. v. United States, 470 F.2d 542- 554 (Ct. Cl. 1972).

Breaking the rule down, the contract must show the government acts "knowingly".  Then there must be an extended period of time such that the contractor reasonably believes the government is not going to enforce the requirement.  Because it is dead.  Each case turns on its facts.  So contractors are well-advised not to pronounce the requirement dead until it appears from the government's actions or inactions that the government knows of the requirement, has considered it and let sufficient time go by that a reasonable person would presume the requirement is dead.

The doctrine of waiver, akin to the doctrine of estoppel (preventing enforcement of an apparent right) is alive and well.  It may also be true that a contract requirement is dead.

bill@spriggsconsultingservices.com

Sunday, December 24, 2017

FINALLY, BETTER DEBRIEFINGS ARE COMING

We've proposed for several years that the government should improve the debriefing process.  There are too many "blind" protests, frivolous protests and far too many disappointed competitors thinking about leaving the government marketplace.  Transparency is the answer.  Thus, we have suggested that the government should release redacted versions of the written source selection award decision in response to a debriefing request.  We also have counseled clients to recite the requirements of FAR 15.505 and 506 in their debriefing request letters and propound questions they want answered.

Finally, we have a giant step in the right direction.  The National Defense Authorization Act (NDAA) for FY 2018 requires revisions to DFARS that require release of a redacted source selection award decision for awards exceeding $100 million ($10 million for small businesses).  It's called a pilot program but it still is a big step forward.  Contractors can ask questions within two business days of receiving the redacted award decision and the debriefing.  The government must respond to the questions within five business days.  When the answers are submitted, the five day requirement for a CICA stay begins.

There is nothing wrong with asking for the redacted source selection award decision in every case.  We've been suggesting that for years.  And there is no need for an aggressive redaction.  Information relating to other competitors should be protected, but that's it.  The government should not be ashamed of its decision and should stand behind it.  We have the utmost confidence that enhanced disclosure of the reasons for the decision will head off "blind" protests (protests really based on lack of information) and frivolous protests (based on misguided notions of what happened).

You can use the word search application in the upper right hand of this post to search other posts on debriefings and protests.

bill@spriggsconsultingservices.com

Saturday, December 23, 2017

WHAT IF THE GOVERNMENT SHUTS DOWN?

When the government shuts down or restricts spending, some of all of the following things may take place: solicitations may be canceled; options may not be exercised; limitation of funds clauses will be used by agencies; payments may be delayed; only minimum orders may be placed under Indefinite Delivery/Indefinite Quantity (IDIQ) contracts; the changes clause may be used with greater frequency; the level of work may be reduced; the period of performance may be revised; the stop work order clause may be used; the suspension of work clause may be used; acceleration of performance may be ordered; and contracts may be terminated for default or convenience..

This is quite a list and most commentators believe government agencies will use any or all of these actions.  So what should contractors do?  The preparations guide is simple but difficult.

Any interference in the contractor's performance gives rise to a constructive change for the breach of the government's obligation to cooperate with the contractor and not interfere in its performance.  Explicit contract clauses may be implicated.  So, contractors should set up separate charge accounts for the financial effects of a government shutdown.  The immediate effect may be a failure to pay or the inability to reach the contracting officer for direction.  The contracting officer may issue a suspension or stop work order because she is concerned about the Anti-deficiency Act (discussed elsewhere in these blog posts).

There is no question that a government shutdown is a government act in its sovereign capacity and therefore an excusable delay.  There should be no trouble extending schedules for delays caused by the government shutdown.  However, with regard to claims arising under the Changes, Suspension or Stop Work clauses, the government may assert the sovereign act defense.  We've written about this elsewhere in these blog posts.  Simply put, the government can defend itself by showing the action was not undertaken to benefit it in its contractual capacity but rather was undertaken for the broad benefit of the public at large.  There are arguments on both sides.  The government will argue the shutdown was necessary for the public good.  Contractors may argue the action was in part self serving and designed to further the government's interests in its contractual capacity.

So, what should a contractor do?  Document the effects of the shutdown.  Treat it as any other potential claim for equitable adjustment.  Set up a separate charge account to collect the financial impact of the shutdown.  Consider submitting a request for equitable adjustment or claim.  But most importantly, try to keep in touch with the contracting officer and request direction.  If she is unavailable, put in writing what you intend to do in response to the shutdown and ask for confirmation from the contracting officer.

 bill@spriggsconsultingservices.com

Friday, December 22, 2017

GET RID OF LPTA?

We never thought we would ever say this but forget FAR on best value and LPTA. Listen to the Government Accountability Office (GAO) and the Court of Federal Claims (COFC).  As we have written over and over again, GAO and COFC have said it is illegal to turn a solicitation announcing a best value tradeoff analysis into a lowest price technically acceptable (LPTA) procurement without amending the solicitation to announce the change to the prospective competitors.

And we also have written about the confusing language in the regulation which apparently suggests to some contracting officers that there is a continuum along which they can slide in the source selection process which results in awarding on the basis of LPTA when the agency has stated in the solicitation that a tradeoff analysis will be performed.  Again, and hopefully for the last time, best value, in the real world use of the language, means a tradeoff analysis will be performed.  Best value and tradeoffs are synonymous.  LPTA proscribes tradeoffs.  They are two different animals.  Read our prior discussions.

What often happens in the real world is that best value technical evaluations have been scored as equal (everybody gets a good) and then the award goes to the lowest priced proposal.  No, there is nothing wrong with that if in fact the evaluations really are valid and defensible.  However, equalization that is forced by a desire to get to the lowest price, is wrong.  And we believe LPTA, whether properly announced or not, is no way to seek best value, to say nothing of the way in which LPTA inhibits innovation and competition for excellence.

If the government specifies in detail what it wants (the old detailed specification approach), LPTA, and for that matter FAR Part 14 sealed bidding, are appropriate. But if the government issues a performance specification and wants innovative solutions, best value tradeoffs should be used.  Once that decision is made, it is improper to change the rules in the middle of the game without amending the solicitation and starting over.  You'd think by now everyone would have this message.  We'd like to see LPTA go.  Best value is tradeoffs.  LPTA is FAR Part 14.

bill@spriggsconsultingservices.com

BEST VALUE TRADEOFFS VERSUS LPTA

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 remind you to reread the best treatise published to date on best value procurements and it is found at http://www.uscfc.uscourts.gov/sites/default/files/opinions/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 conclusions 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.

The lessons?
· 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.

bill@spriggsconsultingservices.com


 






 


 

Thursday, December 21, 2017

THE PROPER USE OF LPTA

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 evaluation 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 constraints have not amended FAR. We believe that rules are necessary in public acquisition 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.
bill@spriggsconsultingservices.com. www.spriggsconsultingservices.com
  

THE ALMOST EQUAL ACCESS TO JUSTICE ACT

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 eligible 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.
bill@spriggsconsultingservices.com