SEQUESTRATION: ONLY 3.5% REDUCTION IN PROCUREMENT OUTLAYS

The Center for Strategic and Budgetary Assessments (CSBA), a nonpartisan think tank, has just released its "Analysis of the FY 2013 Defense Budget and Sequestration" report authored by Todd Harrison.  In the report, CSBA points out that the Budget Control Act (BCA) caps apply to budget authority, not to cash outlays.  Budget authority is the amount appropriated, not the amount actually spent.  CSBA demonstrates on page 12 of its report that in FY2013, there will only be a 3.5% reduction in actual outlays of cash for procurement.

"The delay between budget authority and outlays means that while sequestration will result in an immediate cut of 10.3 percent in budget authority, the reduction in outlays will be more gradual."  Cash outlays for RDT&E would be reduced by 5.9% and 6.9% for O&M.  Sequestration would cause overall defense outlays to drop by roughly 4.6% in addition to a 2.5% reduction already expected due to the decline in war-related funding.

"The fact that sequestration acts on budget authority rather than outlays provides some insulation for defense companies because it allows more time for adjustment." Sequestration does not affect funding already obligated.  Finding out how a contract is funded requires some investigation, of course.  However, the Government Accountability Office (GAO) has a detailed instructional treatise on the law relating to all aspects of funding.  Find it at www.gao.gov.  It's called the "Red Book".

In Todd Harrison's opinion, few layoffs should occur as a result of sequestration going into effect on January 2nd because "virtually all contractors will be working on projects and activities where funding has already been obligated and thus is not subject to sequestration."  He also opines that sequestration will not directly terminate programs.  He refers to the need to renegotiate contracts to buy in smaller quantities.  Here, he falters.

There is no renegotiation clause in government contracts.  Contracts can be bilaterally modified by mutual agreement if the parties can agree.  But this then raises the question of whether the change may be protested and may possibly require reprocurement.  Moreover, a unilateral change can be challenged as a partial termination which permits the contractor to submit a termination claim and to reprice the remaining work.

We applaud CSBA for its report.  However, even viewed in the cash outlay light, sequestration means cuts and cuts mean "renegotiation" which in turn means changes, at least partial terminations, and the likelihood of claims.

This blog will be closed to the public August 31, 2012.  You may continue to access it by going to  http://govconalert.com/ .

bill@spriggslawgroup.com         www.spriggslawgroup.com

HOW TO PROTEST AGENCY "CORRECTIVE ACTION"

What does a contractor do if it wins the award, a competitor protests to the Government Accountability Office (GAO), the GAO lawyer says to the agency the protest has merit, the agency "determines" to take "corrective action" and GAO dismisses the protest as "academic"?  The corrective action includes termination of the successful awardee's contract.  This has happened many times and the successful awardee often has just taken its lumps and lost the award after the corrective action is taken.  How does a contractor protest?  Go to the Court of Federal Claims (COFC).

The Court of Appeals for the Federal Circuit (CAFC) recently has reaffirmed that the COFC has jurisdiction to hear complains about "corrective action" taken by an agency.  In the case, the successful awardee faced the very same situation where, because of some statements made by the GAO lawyer, the Army decided to terminate the protester's contract.  So, the company went to the COFC and obtained an injunction against the termination.  The government appealed.

The CAFC said the Tucker Act provides broad jurisdiction to hear bid protests, including objections to the solicitation, any alleged violation of statute or regulation and practically any complaint "in connection with a procurement or a proposed procurement" (before or after award).  "This court has made clear that bid protest jurisdiction arises when an agency decides to take corrective action even when such action is not fully implemented."

Many of us have complained that GAO washes its hands of the protest case once the agency announces corrective action.  It would seem prudent, as an administrative matter, for GAO to scrutinize what the agency intends to do before dismissing the case as academic.  As the grand protector of the integrity of the procurement system, GAO should oversee the agency's plan to make amends.  The present system allows room for mischief if the agency wants to get rid of a protest. All the agency has to do is announce corrective action and the protest goes away.

So the lesson is that judicial relief is available in the COFC if an awardee objects to the corrective action determination.  The problem is it can get expensive.

Postscript:  It is possible to go back to GAO with a new protest if the agency's corrective action is flawed and to go to the COFC if the "corrective action" recommended by GAO in a decision is objectionable.

This blog will be closed to the public on August 31, 2012.  You may gain continued access by going to  http://govconalert.com/ .

bill@spriggslawgroup.com             www.spriggslawgroup.com

GAO TO AGENCY: DON'T CHANGE PROPOSAL

The Government Accountability Office (GAO) has sustained a protest where the Department of Justice (DOJ) increased the protesters level of effort to the same level of effort proposed by the successful vendor awarded a task order under a blanket purchase agreement (BPA).  The DOJ had concluded that the protesters total labor hours were not sufficient to perform the task order's requirements.  This made protester's price higher than the successful awardee's price and the Source Selection Authority (SSA) went for the lower price.  The protest ensued and was sustained.

This was the second protest of this procurement.  GAO sustained another protest by the protester because the record did not show that DOJ meaningfully considered the protesters lower price in its selection decision and because DOJ's past performance evaluation was unreasonable and inconsistent with the requirements of the solicitation.  GAO recommended a new best value selection decision.  The second protest followed.

GAO said that while it was mindful that, when an agency places an order under a BPA, limited documentation of the source selection is permissible, the agency must at least provide a sufficient record to show that the selection was reasonable.  There are, after all, documentation requirements in FAR 8.405-2(e).  Even procurements conducted under simplified acquisition procedures require a sufficient record for meaningful review.

"The record here provides no basis to support the agency's determination that NikSoft's level of effort or labor mix was insufficient to perform the first call, or to support its determination that NikSoft's level of effort should be increased to the same level of effort proposed by LS3."  Conclusory statements were not enough.

GAO recommended still another best value determination and that the protester's costs including attorneys' fees be reimbursed.

Postscript:  This is our last public blog posting.  On August 31, 2012 we will restrict access to this site to subscribers of our new service at  http://govconalert.com/.  Please feel free to visit that site.  The services offered include new articles and access to archived word searchable postings.  WJS

bill@spriggslawgroup.com           www.spriggslawgroup.com

"BAIT AND SWITCH" BREACHED CONTRACT - LOST PROFITS RECOVERED

Administrative Judge Jack Delman of the Armed Service Board of Contract Appeals (ASBCA), has just held that the government breached its duty of good faith and fair dealing by pulling a "bait and switch" on a contractor for services at Walter Reed Army Medical Center.  He also found the contractor was entitled to lost anticipated profits resulting from the breach.

The contractor was awarded a contract but soon thereafter the contractor was advised the services were no longer needed.  In effect, the government stripped from the contract the line item for services by certain employees.  The employees, in turn, were hired as federal employees and the work therefore went in house.  So, says Judge Delman, the services for which the government had just contracted with the contractor were performed instead by federal employees.

This action served as a partial termination of most of the contractor's contract.  "A government contractor has every reason to expect, absent a lawful convenience termination of the contract, that it will have the opportunity to provide the services it has contracted for at the agreed upon contract price for the prescribed contract period."  Here, there was "a material interference with the contractor's reasonable contract expectations."

The ASBCA concluded:

We conclude that the government's whisking away of appellant's PAs and stripping appellant's contract of their services in the manner described -- and just shortly after the government had urged appellant to hire them -- in order that they perform the same PA services as federal employees was a breach of the government's duty of good faith and fair dealing.

The Board sustained the appeal of the contractor's claim and remanded the calculation of anticipatory profits to the parties for resolution.

Lesson:  There is an implied obligation or duty on the part of the government to enable the contractor to perform and not interfere in that performance.

bill@spriggslawgroup.com        wwwspriggslawgroup.com

IMPROPER TO "DOWNSIZE" POOL OF VENDORS

The Government Accountability Office (GAO) has just sustained a protest in which the General Services Administration (GSA) "downsized" the pool of vendors by excluding some of them, including the protester, which were technically acceptable without considering their lower prices.  It was a best value procurement under FAR Subpart 8.4 which requires that price be considered in establishing a blanket purchase agreement (BPA).  Moreover, although the protest was untimely, GAO considered it under its exception to the timeliness rules for previously undecided cases with a potential for widespread interest to the procurement system.

Vendors were advised GSA would "downsize quotations to the most favorably evaluated quotations based on the technical quotation only."  Pricing was not considered in the process.  FAR 8.405-3(a)(1), however, lists price as the one factor that at a minimum must always be considered when determining best value for purposes of establishing a BPA.  Moreover, said GAO, "we have previously held that a best value analysis necessarily encompasses consideration of an offeror's price or cost since, to be meaningful, a best value determination requires weighing of the value and benefits associated with a firm's approach against their associated cost to the government."

Before an agency can select a higher-priced proposal which is technically superior to a lower priced one, the agency must support the decision with a rational explanation of why the higher rated proposal is in fact superior and explaining why its technical superiority warrants a price premium, GAO reiterated.

The protester should have filed its protest prior to the closing of the solicitation since GSA's intention was announced during the question and answer period prior to closing.  However, GAO said that it had not previously considered this issue in the context of establishing a BPA.  Additionally, because BPA's are so prevalent these days, GAO decided the issue was of such significance to the procurement community that it should decide the case under its timeliness exception.

In the end, however, although relief was granted in the form of requiring an amendment to the solicitation, revised quotations and a new source selection decision, the protester was denied its costs of protesting, including attorneys' fees, because of the delay in protesting.

Lesson:  Know the regulations.

bill@spriggslawgroup.com             www.spriggslawgroup.com

SAVE MONEY BY INSOURCING?

Stan Soloway, President and CEO of the Professional Services Council (PSC), has written senior Department of Defense (DOD) officials in reaction to suggestions that one way DOD could implement sequestration (or just save money) would be to insource currently contracted work "on the faulty assumption that doing so will 'save money.'"  Stan goes on to point out that based on recent insourcing initiatives, the assumption of saving money is not supported by the facts.

PSC urges DOD to do proper cost comparisons, complete the analysis of the impact on small businesses, provide timely notice as required by statute and assess potential cost savings that could be achieved by bilaterally modifying contracts rather than terminating them.

The relevant statute provides:

The Secretary of Defense shall establish procedures for the timely notification of any contractor who performs a function that the Secretary plans to convert to performance by Department of Defense civilian employees pursuant to subsection (a).  The Secretary shall provide a copy of any such notification to the congressional defense committees.

On March 21, 2012 we wrote about challenging the insourcing decision in court.  It is possible to undertake such an action in the Court of Federal Claims (COFC) where at least one judge has held a contractor has standing to challenge insourcing.

The propriety of insourcing also can be challenged at the Government Accountability Office (GAO).  If a solicitation requires a cost comparison of in house to contractor performance, GAO will examine the reasonableness of the decision to go in house.  GAO also will examine an agency's rationale for cancelling a solicitation to see if cancellation is as mere pretext or "flimsy excuse" for going in house.

PSC has made a clarion call to DOD that any insourcing of other than inherently governmental functions be subjected to the analysis of  complete cost comparison, consideration of impact on small business, timely and proper notice to contractors and an assessment of whether savings can be accomplished by contract modification.

Whether sequestration happens or not (we believe it won't), budgets will shrink. It's just bad business to cut contractors without performing the analyses Stan suggests.

bill@spriggslawgroup.com            www.spriggslawgroup.com

ADJUSTMENT FOR LOSS

One of the unique provisions in the Federal Acquisition Regulation (FAR) termination clauses (with the exception of the commercial item clause) is the "adjustment for loss" provision.  FAR 49.203 sets forth that:

(a)  In the negotiation or determination of any settlement, the TCO shall not allow profit if it appears that the contractor would have incurred a loss had the entire contract been completed.  The TCO shall negotiate or determine the amount of loss and make an adjustment in the amount of settlement as specified in paragraph (b) or (c) below . . . .

The contractor faces two dilemmas where the government asserts that it would have suffered a loss had the contract been completed.  First, the contractor is denied a profit on the costs incurred prior to termination.  Second, the contractor will not even recover all of its costs, but instead the contractor will be forced to bear its portion of the loss.  The philosophy behind this adjustment is that no contractor should be in a better position than it would have been had the contract been completed.

If the termination settlement is on a total cost basis, the total costs incurred on the contract are reduced by the percentage equal to the loss it would have realized on full completion.  If the settlement is on an inventory basis, the loss percentage is applied only against the costs incurred on the terminated portion of the contract, exclusive of costs allocable to completed end items accepted by the government.

A contractor should remember the following points where the government attempts to apply the adjustment for loss formula:

1. The government bears the burden of proving that the contractor would have suffered a loss if the contract were completed.  Often, the government has a difficult time proving the loss would have occurred.
2. The government must act in good faith when making the loss determination.  A coerced settlement may not be upheld.
3. Where the government is responsible for the cost increase, the adjustment for loss formula will not apply.
4. The formula also does not apply where the contractor would have been excused from performing the contract because of the impossibility of performance.
5. The adjustment for loss should not apply where the contractor is entitled to an equitable adjustment in contract price which would take the contract out of a loss position.

In several of the above numbered instances, the importance of the changes clause becomes magnified.  The various theories and principles which normally entitle the contractor to an equitable adjustment will also provide the basis for the contractor to prevent the government's successful implementation of the adjustment for loss formula.

It also is important for the contractor to keep in mind that the termination settlement may be limited by the total contract price.  If the contractor's costs exceed that price, the contractor must consider the changes clause as a means to increase the price so as to avoid the application of the price ceiling.

bill@spriggslawgroup.com          www.spriggslawgroup.com

FAILED BEST VALUE ANALYSIS BUT NO ATTORNEY FEES

Judge George Miller of the Court of Federal Claims (COFC) recently determined that the government "failed to conduct proper best-value analyses."  He pointed out that a "tradeoff process" is proper when it may be in the best interest of the government to "consider award to other than the lowest priced offeror or other than the highest technically rated offeror."  When conducting this analysis, the source selection authority (SSA) is required to comparatively assess the proposals and sufficiently document the rationale for any business judgments and tradeoffs made.  

Judge Miller concluded the contracting officer failed to meet the documentation requirements in that the SSA decision was conclusory and generalized.  The government's position was that explanatory documentation was required only when a higher priced proposal was selected over a lower priced offer.  Judge Miller was unimpressed.  He said the government had violated FAR 15.308 and granted relief.

The contractor, a small business, then went for recovery of attorney fees under the Equal Access to Justice Act (EAJA).  EAJA is a fee shifting statute that provides eligible parties the ability to recover fees and expenses provided 1) the plaintiff was the prevailing party; 2) the government's position was not "substantially justified"; 3) there exist no special circumstances that would make the award unjust; and 4) the application is timely filed.

Judge Miller denied the contractor's application saying the government's position was substantially justified.  Apparently recognizing that this test varies depending on the view of the beholder, Judge Miller was impressed that the agency's actions, although clearly wrong, were nevertheless reasonable with regard to its interpretation of FAR 15.308.  Thus, it was reasonable for the government to fight in the litigation.  Therefore, no fees to the small business.

The only solution to small businesses is amendment of EAJA as we have recommended before.  The substantially justified test must be changed to allow small business to recover their fees when they win.

bill@spriggslawgroup.com             www.spriggslawgroup.com

"I'M A FAN OF PROTESTS"

Our friend Alan Chvotkin, Executive Vice President of the Professional Services Council (PSC), was quoted in the Washington Post as saying, "I'm a fan of protests. I think that when used properly they do hold the government accountable for following the rules. That's a good thing because Lord knows the government has lots of opportunities to hold the contractor community accountable." Alan knows what he is talking about as anyone who follows his activities with PSC is well aware. And we agree with him wholeheartedly.

We've written often in these blog posts about the need for the rules and the fact that enforcement of them leads to an adversarial relationship between contractors and the government. We noticed just even the Aerospace Industries Association (AIA) acknowledges the "adversarial relationship" between industry and the government (see page 8 or the May 2012 edition of National Defense magazine). You may have heard us on the radio shows talking about why we have all the rules and how rules necessarily lead to claims and protests.

The real point here is that when the U.S. District Courts had bid protest jurisdiction (Congress took it away later), they rationalized getting involved by finding the plaintiff protesters were acting as "private attorneys general" enforcing the laws on behalf of the public. Indeed, if one protests only if the regulations have been violated -- which is the only justification for protesting in our opinion -- one actually is acting on behalf of the public, of us taxpayers. Contractors should file protests only in cases where there has been a violation of a regulation.  (We are not a fan of protests involving the contracting officer's discretion.)  That is, a mandatory requirement probably found in FAR Part 15 has been ignored, such as the requirement to follow the solicitation evaluation scheme.

But the point of the article in the Post is that protests are increasing dramatically because of the decline in government spending which has created fierce competition for fewer contract awards. The statistics certainly support that view. However, we find it appalling that frivolous protests still are being filed.

Yes, we too believe in protests, for "when used properly they do hold the government accountable for following the rules." They are an integral part of our procurement system and are required to help us citizens protect the integrity of that system.

bill@spriggsconsultingservices.com   www.spriggslawgroup.com

AFFILIATE'S PAST PERFORMANCE COUNTS

The Government Accountability Office (GAO) has just reiterated the rule that an agency properly may attribute the past performance experience of a parent or affiliated company to an offeror if the firm's proposal demonstrates the resources of the parent or affiliate will affect the offeror's performance.  The relevant question is whether the workforce, management, facilities or other resources of the parent or affiliate will be used in a meaningful way in contract performance.      There has to be a "significant nexus" between the parent or affiliate and the contractor.

GAO was impressed with a letter from Chief Executive Officer (CEO) of the contractor's parent who stated the program was a top corporate priority.  The contractor's proposal stated clearly that the contractor would be calling upon the parent's and an affiliate's resources.

The protester complained, however, that the procuring agency did not contemporaneously document its analysis and therefore, GAO should not give it any credence.  Here is where GAO may have gone too far.  In fact, if this case goes to the Court of Federal Claims (COFC), the second bite of the apple, the result may be different.  GAO said:

While we generally give little or no weight to reevaluations and judgments prepared in the heat of the adversarial process, (citation omitted), post-protest explanations that provide a detailed rationale for contemporaneous conclusions, and simply fill in previously unrecorded details, will generally be considered in our review of the rationality of selection decisions so long as those explanations are credible and consistent with the contemporaneous record. (Citation omitted.)

Sound good?  The problem is the question of whether the after the fact analysis meets this test or not, is subjective.  Moreover, the test itself is tilted a little too much in the favor of accepting the after the fact rationale. We suspect a judge might reach a different conclusion.  Most judges are singularly unimpressed with after the fact explanations regarding the making of a decision when a complete contemporaneous record is required.  In fact, a judge might even find against the agency based on an inadequate record.

So the lesson for contractors is thoroughly document how the parent or affiliate will support your effort on the contract.  For contracting officers, the lesson is always complete the contemporaneous record. Do not rely on after the fact rationalizations.

bill@spriggslawgroup.com          http://www.spriggslawgroup.com/index.html

OPINION: REMOVE "CONTINUUM" FROM FAR 15.101

On March 22, 2012, we reported on an opinion by Judge Bush of the Court of Federal Claims (COFC) in which she said it was illegal to convert a best value tradeoff procurement to a lowest price, technically acceptable (LPTA) buy (without revising the solicitation and notifying the offerors of the change).  She pointed out that FAR 15.101-1 and 15.101-2 contain entirely different procurement methods.  As we've pointed out, best value has become synonymous with the tradeoff analysis described in FAR 15.101-1.  Also, tradeoffs are specifically not permitted in LPTA buys.

On August 5, 2012, we reported on a Government Accountability Office (GAO) decision that an agency cannot turn a best value tradeoff procurement into LPTA without revising the solicitation and notifying the offerors.

In today's procurement world, agencies are always trying to find ways to get prices down.  In the extreme, this has led to reverse auctions where bidders are actually bidding against themselves and their published competitor's prices.  In other cases, hard nosed negotiating forces offerors to revise prices down out of pure fear.  In still others, nearly all procurements are fixed price even when they should be time and materials or cost reimbursement.  Finally, the current cost/price cutting environment has led to a belief that any procurement can be turned into LPTA so long as the evaluation of proposals is reasonable (the position the agency took in the case Judge Bush addressed).

We believe one of the problems is that procurement officials think best value is a continuum and that means they can shift the evaluation along a line from tradeoff to lowest price.  The word continuum must be removed.  It is misleading and ambiguous.  Even if intellectually one can look at these two types of procurement as part of a package, there is no room for language which has no practical effect and which leads to misunderstanding and errors in how contracts get awarded.  There are two types of procurements: best value tradeoff and LPTA (call if best value if you must).

What we really are concerned about is that now is not the time to abandon best value tradeoffs in favor of LPTA (to say nothing of the inappropriateness of using LPTA for the wrong purposes).  It's the old penny wise and pound foolish issue.  It's why we invented best value in the first place: to be sure we got the very best deal, all things, including price, considered.  With all its subjectivity, best value tradeoffs nevertheless are supposed to assure the best overall deal.

We invite your views.  To avoid confusion and the possibility that even one more procurement may go the way we described in the COFC and GAO cases, we should take the word "continuum" out of the regulation and our lexicon.  It was cute, but it should go.

bill@spriggslawgroup.com           www.spriggslawgroup.com

COURT SAYS BUYING IN CAN BE FALSE CLAIM

In a case of "first impression" the U.S. Court of Appeals for the Ninth Circuit (9th Circuit) has just held that underbidding on a contract can constitute a violation of the False Claims Act.  The case arose in the context of a whistle blower suit involving Lockheed Martin.  The was the first time the 9th Circuit had addressed the issue and it is the first opinion we are aware of in which any court has said low ball pricing can be a violation of the False Claims Act.

The 9th Circuit defined a violation as the fraudulent underbidding of a contract in which the "bid is not what the defendant actually intends to charge." The contractor has to know it is bidding below costs and in the case against the contractor the plaintiff would also have to show an intention not to actually end up charging those costs.   It's this latter point that we think is crucial in the analysis.

If indeed an element of proof is that the contractor fully intended not to charge the underbid amount, we see a difficult row to hoe in proving a contractor's violation of the False Claims Act.  Proving the knowing underbid of costs is one thing but proving the intention not to end up charging the quoted amount is quite another.

As we have pointed out before, buying in is not illegal under the Federal Acquisition Regulation (FAR).  However, there is a legal obligation on the contracting officer not to let the contractor get away with recovering from the underbid by changes claims or on follow on contracts.  With that burden on the contracting officer, perhaps it would be wise also to turn over to the Department of Justice (DOJ) any suspicions of underbidding.

The lesson for contractors is that underbidding has just become dangerous.  In these tough times, the temptation to underbid costs to win contracts is greater than ever.  The 9th Circuit has sent a warning to contractors that intentional underbidding (meaning not what the contractor actually intends to charge) is a violation of the False Claims Act.  That's serious.  One would think the result would be fewer cases of buying in or underbidding.

bill@spriggslawgroup.com         www.spriggslawgroup.com

DCAA RULES OF ENGAGEMENT: ARE THEY WORKING?

We are coming up on the two year anniversary of the Defense Contract Audit Agency (DCAA) "Rules of Engagement" memorandum designed to improve auditor/contractor and auditor/requester communications.  We can remember it took a lot of Freedom of Information Act (FOIA) litigation to obtain the release of DCAA's audit manual and it took some criticism from GAO to disgorge the memorandum of September 9, 2010 on better communications by and with auditors.  Have communications improved?  Not in our experience.  So maybe it's time for a few reminders.

The memorandum addresses communications with the contracting officer and the contractor during each phase of the audit.  Effective communication, it says, is an "essential part" of performing an audit. Moreover, auditors are told they must communicate with the contractor to gain a full understanding of the contractor's submission and continue to communicate throughout the audit to ensure that audit conclusions are based on a complete understanding of all the facts. Auditors should obtain the contractor's views of the audit conclusions for inclusion in the audit report.

There should be an entrance conference, communication with the contractor and the requester during the audit and an exit conference to discuss the findings, conclusions and recommendations for inclusion in the report.

Importantly, except in the case of forecasted costs, the auditor should provide the contractor a copy of the draft report or at a minimum the results of audit section of the report which includes opinions and recommendations.  This is to be done to "facilitate the discussion" of the audit results and to obtain the contractor's views on the audit results.  This sounds an awful lot like an award debriefing for which the purpose also is to enhance competition by providing guidance to contractors on how to better meet government requirements.

We saluted the National Aeronautics and Space Administration (NASA) on its debriefing guide.  Two years ago, we saluted DCAA on its "Rules of Engagement" but we wonder just how effective the "Rules" have been.

bill@spriggslawgroup.com          www.spriggslawgroup.com

COURT SAYS DON'T CHANGE EVALUATION CRITERIA MIDSTREAM

The Court of Federal Claims (COFC) recently has reiterated that it is illegal to change evaluation criteria during the evaluation process.  In the case, the agency made past performance at a satisfactory level an eligibility for award requirement. The offerors were not on notice that so-called critical elements would be evaluated in isolation and that the failure to satisfy the "critical elements" would result in immediate elimination from the competition.  An agency must disclose that a failure to satisfy a selection criterion or subcriterion will result in automatic rejection, says the COFC.

The COFC also noted that it could not discern the "mysterious" process the agency used to evaluate the contractors.  Although the COFC will not "wade into the minutiae" of the procurement process and will defer to the agency's rational reasoning, deference to the agency is inappropriate where the agency fails to provide a reasoned explanation for its decision supported by the record.  Here, all the COFC could conclude was that the decision was inconsistent with the contemporaneous record and the agency failed to provide a reasonable explanation for its decision.

Where an agency specifies an evaluation and selection process, it must follow the disclosed process.  The COFC merely determines whether the evaluation was reasonable and consistent with the stated evaluation criteria.  Past performance was not a stand alone eligibility test.  Therefore, when it became such a test, the protester was prejudiced, says the Court.

Interestingly, although Judge Damich is willing to enter a permanent injunction against the award of the contract, he withholds the judgment to permit the agency to consider taking corrective action on its own.  If the parties cannot agree, he says, he will issue an appropriate permanent injunction.

How will a contractor know if the evaluation factors were changed in the evaluation process?  A face to face debriefing question and answer period is the answer. Failing that, the only recourse is to protest.

Postscript:  GAO just sustained a protest saying the agency used an evaluation methodology inconsistent with the evaluation factors in the solicitation.

bill@spriggslawgroup.com              www.spriggslawgroup.com

GAO SAYS DON'T TURN BEST VALUE INTO LPTA

GAO has just reiterated the rule that an agency cannot turn a best value procurement into lowest price, technically acceptable (LPTA).  Again, the source selection authority (SSA) cannot reasonably determine proposals are technically equal unless it explains this judgment fully and does so on the basis of facts in the contemporaneous record.

Despite GAO conducting a hearing to receive further explanation from the SSA on the equal rating determination, the record did not explain why the strengths identified in the higher rated technical proposal did not reflect technical superiority that should have been considered in a tradeoff analysis as contemplated in a best value procurement.  An agency's evaluation of proposals and source selection decision should be documented in sufficient detail to allow for a review of the merits of a protest.

Thus, SSA's should have protest in mind when writing up the source selection decision.  An agency which fails the documentation test "bears the risk" that its determination will be considered unsupported.  Absent such support, GAO may be unable to determine whether the agency had a reasonable basis for its determination.  In this case, the evaluation team could not agree on  a best value recommendation and there was no documentation in the record that any member of the team considered the proposals to be technically equal.

The SSA's finding that the proposals were "similar" was not enough because it was unsupported by any discussion of respective strengths and weaknesses.  GAO accords greater weight to contemporaneous evaluation and source selection material than to later explanations and arguments by the agency.

Where a solicitation calls for a best value award, the SSA's decision must be based on a comparative analysis of the technical differences of the proposals.

The GAO decision also reminds us that agencies are required to sufficiently record their judgments, including documenting the relative strengths, deficiencies, significant weakness, and risks supporting their proposal evaluations.  And they must do so "in a manner that is fair and equitable and consistent with the terms of the solicitation."

Postscript:  Don't forget the FAR prohibits trade offs in LPTA.  Trade offs are the hallmark of best value.  In our opinion, the "continuum" is illusory.  Best value really is trade offs only.  LPTA is the complete absence of trade offs.  Judge Bush agrees as we  reported in our March 22, 2012 article.

bill@spriggslawgroup.com            www.spriggslawgroup.com

SUBCONTRACTS: CHOICE OF LAW CLAUSE

We sometimes overlook the singular importance of the choice of law clause in subcontracts under government contract prime contracts.  The choice of the law to be applied in the event of any dispute is important because of the uniqueness of these subcontracts.  As a corollary, the forum for resolution of such disputes also should be spelled out in the subcontract document.  Finally, it is important to separate disputes arising under or related to the prime contract that implicate the subcontract from disputes between the prime contractor and the subcontractor that are unrelated to the prime contract.

We suggest a choice of law clause which makes it clear that all disputes between the prime contractor and the subcontractor be governed and construed in accordance with the federal common law of contracts.  In the absence of federal law on the subject, the parties should select the state law that will be applied irrespective of that state's choice of law rules.  The parties should then agree to submit to the exclusive jurisdiction of that state's courts and the federal courts sitting in that state.

We continue to believe that disputes arising under or related to the prime contract should be the subject of a separate clause binding the parties to follow the disputes procedures applicable to the prime contract.  The subcontract should incorporate a so-called "pass through" clause permitting the parties to cooperate in passing through the dispute to the government under the prime contractor's disputes clause.

Much has been written about the pros and cons of the pass through agreement.  It has been said a subcontractor should never agree to such an arrangement and that prime contractors always should insist on it.  We think it is good business to pass through disputes to the government when they truly arise because of an action or inaction of the government which implicates the subcontract.  These disputes should be governed, construed and adjudicated exclusively by the federal common law of contracts and the federal contract tribunals established to resolve them.

So, we suggest separating the disputes clauses as we suggest.  It is fair, neutral and even handed.  And it should preserve the relationship of the parties.

There is an excellent article on this subcontract choice of law by Joel Pearman in the August 2004 edition of Contract Management magazine.  I take the American Bar Association (ABA) approach to which he refers at the end.

bill@spriggslawgroup.com      www.spriggslawgroup.com

IN PRAISE OF NASA'S DEBRIEFING GUIDE

Why can't we all just follow the best practices debriefing guide published by the National Aeronautics and Space Administration (NASA)?  Right up front the guide says it is designed to facilitate open, appropriate and meaningful exchanges that reduce misunderstandings and protests.  It covers both pre-award and post-award debriefings relying heavily on the language in FAR 15.505 and 15.506.

The Guide says that in addition to the requirements in FAR 15.505(c) with regard to pre-award debriefings, NASA will provide 6 additional categories of information regarding evaluation of the debriefed offeror.  In addition to the information listed in FAR, NASA also will provide 8 categories of information during post-award debriefings.

Those categories are: number of offerors, identity of the offerors, those in the competitive range, some of the awardee's adjectival ratings and point scores, level of confidence rating of the awardee, a cost comparison between the awardee and the debriefed offeror and a summary of the impact of discussions and proposal revisions on the final result.

"It is important that the contracting officer schedule the debriefing at the earliest possible date."  Even if the contractor's request for the debriefing is untimely, the Guide suggests the debriefing be conducted nonetheless.

Among the items which "serve as a foundation for successful debriefings" are: cordial treatment of offerors; availability of procurement personnel during the pre-proposal stage; careful development of evaluation factors; "professional" drafts and solicitations; meaningful consideration of issues raised during the pre-proposal stage; an "open door" policy prior to proposal submission; a sincere effort to obtain good competition; and a "fair and unbiased" approach to the procurement.

We are fans of best practices guides.  NASA has given us a really good one for debriefings.  We think the National Contract Management Association (NCMA) should publish a practical, down to earth best practices guide for all of contract management.

bill@spriggslawgroup.com       www.spriggslawgroup.com

ILLEGAL ACTION BUT NO REMEDY

Chief Judge of the Court of Federal Claims (COFC) Emily C. Hewitt has just issued an opinion that the government violated FAR 15.307(b); however, she denies relief to the contractor because it failed to show that but for the violation the contractor would have had a substantial chance to receive the award.

In an extensive and thorough discussion of the facts, Chief Judge Hewitt determined that the government violated the regulation by failing to properly establish a common cut-off date for the receipt of final proposal revisions (FPRs) and by failing to convey to the offerors that it intended to make award without obtaining further revisions.

So, this is a reminder that FAR 15.307(b) states:

The contracting officer may request or allow proposal revisions to clarify and document understandings reached during negotiations.  At the conclusion of discussions, each offeror still in the competitive range shall be given an opportunity to submit a final price revision.  The contracting officer is required to establish a common cut-off date only for receipt of final proposal revisions.  Requests for final proposal revisions shall advise offerors that the final proposal revisions shall be in writing and that the Government intends to make award without obtaining further revisions.  

In this case, the contracting officer's post discussion letter was unclear in that it implied further negotiations might take place.  It also did not clearly state that a common cutoff date was established for receipt of FPRs.  The court therefore concluded that the government failed to issue a request for FPRs as required by the regulation.

But the contractor failed to establish that it was prejudiced by the government's violation of the regulation.  To succeed on a post award protest action, the contractor must show that if the government had properly followed the regulation, the contractor would have had a substantial chance of receiving the award.

On the facts, the court concluded that the contractor's prices would not have been competitive and it therefore would not have had a substantial chance to receive the award.  So the second lesson of the case is that a contractor really should not protest unless it can show it would have had a substantial chance of receiving the award but for the violation.  It may be illegal, but there's no remedy.

bill@spriggslawgroup.com      www.spriggslawgroup.com