We've written often about the contractor's duty to inquire and seek clarification of solicitation ambiguities before submitting its bid. The rule is clear. If the solicitation is obviously unclear, the contractor has a duty to inquire and seek clarification of the ambiguous language or assume the risk of error. A protest later will fail as untimely. But what about the government? Does the government have a duty to seek clarification of apparent mistakes in the contractor's offer in a negotiated procurement under FAR Part 15? Yes, says the Court of Federal Claims in a recent opinion by Judge Charles Lettow.
Procurement officials have authority to act regarding clerical errors in sealed bidding and negotiated procurements. Where sealed bidding is concerned, the rules regarding clerical and other mistakes in bids "are cast in mandatory terms," says Judge Lettow. In contrast, the regulatory provisions regarding mistakes discovered before award in offers for negotiated procurements are "largely discretionary". Judge Lettow cites the discretionary language in FAR 15.306(a)(2) permitting the contracting officer to provide the offeror an opportunity to "clarify certain aspects of proposals . . . or to resolve minor or clerical errors." He does not mention FAR 15.306(b)(3)(i) which permits clarification and refers specifically to FAR 14.407 which recites the mandatory requirements.
Judge Lettow sees a fairly sharp dividing line between the rules in negotiated and sealed bidding procurements. However, he says, "the permissive language of the clarification provisions in Part 15 does not mean that those provisions are not susceptible to judicial enforcement."
The protesting contractor mistakenly submitted the wrong information regarding the experience of one of its subcontractors. The subcontractor was proposed by a competitor with the correct project experience information. The government took the position it had no duty in inquire about the possible error by the protester. The government rejected the protester's proposal as incomplete.
Interestingly, the court focused on whether competitive negotiation is so far removed from sealed bidding that a contracting officer's reaction to a clerical mistake can be "diametrically different" in the two types of procurement despite factually compelling reasons to seek clarification.
The court decides the government had the duty to inquire and grants relief to the contractor. The contracting officer abused her discretion. She "improperly refused to seek clarification . . . ."
The lesson here? In negotiated procurements, contractors should attempt to correct mistakes or make clarifications in their proposals even where negotiations are not going to be conducted. Clarifications are not negotiations. Moreover, contractors should argue, in appropriate cases, that it would be an abuse of discretion not to allow the correction. Their proposals should not be rejected.
bill@spriggsconsultingservices.com
Thursday, September 26, 2013
Thursday, June 13, 2013
SSA MUST ADEQUATELY EXPLAIN DECISION
The Government Accountability Office (GAO) has just sustained a protest because the source selection authority (SSA) failed to substantively consider differences between proposals, and also failed to adequately explain and properly document the source selection decision. B-408046; B-408046.2.
This is a case where the award was made to the lower priced, lower-rated offeror. The differences on the technical scores were not great but the protester's were better than the successful awardee's. As we've noted over and over again, in these days of budget constrains, agencies tend to award to the lower priced offeror even in a best value procurement where the technical/management and past performance factors are significantly more important than cost or price. Here, GAO signals again that it is watching the store to see if the agency is following the rules.
While an agency has broad discretion in making a tradeoff between price and non-price factors, says GAO, "an award decision in favor of a lower-rated, lower-priced proposal must acknowledge and document any significant advantages of the higher-price, higher-rated proposal and explain why they are not worth the price premium." Put this rule in the book: An award decision in favor of a lower-priced proposal must acknowledge, explain and document any significant advantages of the higher-price, higher-rated proposal and explain why they are not worth the price premium.
In this very recent case, GAO said the solicitation stated that technical/management approach was more important than the past performance factor, and when combined the non-cost factors were significantly more important than the cost factor. The SSA's decision acknowledged that the protester's proposal was higher rated on past performance but the SSA found that the "slightly better" past performance ratings were not significant enough to warrant paying the higher evaluated price. The record did not explain why the SSA concluded that the protester's past performance as only "slightly better" and the record did not support the decision that this difference was not worth the price premium for the protester's proposal.
As we've reported before, conclusory statements are not enough to justify the source selection decision. The rule is that the SSA must explain the rationale for the decision and specifically justify awarding to a lower-priced offeror, in a best value procurement, by going on to explain (and document) the reasons why the higher-rated (for the non-price factors) offeror's higher price is not worth the premium.
Would that we all would finally get this message.
bill@spriggsconsultingservices.com
This is a case where the award was made to the lower priced, lower-rated offeror. The differences on the technical scores were not great but the protester's were better than the successful awardee's. As we've noted over and over again, in these days of budget constrains, agencies tend to award to the lower priced offeror even in a best value procurement where the technical/management and past performance factors are significantly more important than cost or price. Here, GAO signals again that it is watching the store to see if the agency is following the rules.
While an agency has broad discretion in making a tradeoff between price and non-price factors, says GAO, "an award decision in favor of a lower-rated, lower-priced proposal must acknowledge and document any significant advantages of the higher-price, higher-rated proposal and explain why they are not worth the price premium." Put this rule in the book: An award decision in favor of a lower-priced proposal must acknowledge, explain and document any significant advantages of the higher-price, higher-rated proposal and explain why they are not worth the price premium.
In this very recent case, GAO said the solicitation stated that technical/management approach was more important than the past performance factor, and when combined the non-cost factors were significantly more important than the cost factor. The SSA's decision acknowledged that the protester's proposal was higher rated on past performance but the SSA found that the "slightly better" past performance ratings were not significant enough to warrant paying the higher evaluated price. The record did not explain why the SSA concluded that the protester's past performance as only "slightly better" and the record did not support the decision that this difference was not worth the price premium for the protester's proposal.
As we've reported before, conclusory statements are not enough to justify the source selection decision. The rule is that the SSA must explain the rationale for the decision and specifically justify awarding to a lower-priced offeror, in a best value procurement, by going on to explain (and document) the reasons why the higher-rated (for the non-price factors) offeror's higher price is not worth the premium.
Would that we all would finally get this message.
bill@spriggsconsultingservices.com
Saturday, June 1, 2013
TIPS ON CLAIM RESOLUTION
Contractors hate to litigate claims. They have better things to do. It takes too long and diverts important resources into a speculative, risky enterprise with no hope of a new product or service line. But some contractors are either forced or choose to treat losses written off as possible profit enhancers in tough times. There are other reasons to pursue claims particularly when they involve contract interpretation issues which may apply to ongoing contract performance, or defending a termination for default by arguing affirmative relief claims.
So we thought we would provide a list of tips for contractors preparing for the possibility of claim litigation.
So we thought we would provide a list of tips for contractors preparing for the possibility of claim litigation.
- Prepare a professional request for equitable adjustment (REA) and convert it to a claim only after negotiations with the contracting officer fail. See www.spriggsconsultingservices.com for a list of 14 tips on how to negotiate a settlement of the REA. Submit the claim with the proper certification (do not change a word) and ask for a prompt final decision as required by the regulation. Remind the contracting officer interest is running on the claim.
- Appeal the failure to issue a decision if it is not rendered either within 60 days or a reasonable time (usually 90 days), whichever is appropriate under the regulation.
- Make your choice of forum based on sound professional advice. This usually means going to the Board of Contract Appeals (Board).
- Always file your complaint with your notice of appeal. Always. There is no need to wait the 30 days.
- Always ask opposing counsel to agree to mediation right away. Always. The first step in the litigation should be an attempt to set up a mediation meeting presided over by a Board judge. In fact, it is possible to engage the services of a Board judge even before commencing the litigation.
- Consider forgoing discovery and arguing that opposing counsel's discovery should be limited. If you have prepared your case properly, you may be able to proceed to trial without discovery or after limited discovery. Control of the other side is difficult and depends on the judge.
- Consider carefully dispositive motions. Legal issues can be disposed of on motion. Try to narrow or completely eliminate the factual issues so that the only issues that remain are legal issues susceptible to disposition on motion.
- If mediation has not worked early on, forget alternative dispute resolution (ADR). Go ahead and go to trial as fast as you can or file your dispositive motions.
- There is a reason for the hackneyed "settlement on the court steps." It happens. But it most likely happens before the parties have invested too much time in witness preparation and before they come close to the courthouse steps.
- The Boards like to adjudicate entitlement and leave quantum (damages) to the negotiation of the parties. Even the slightest headway on entitlement can lead to settlement.
bill@spriggslawgroup.com http://www.spriggslawgroup.com/
DOD REA CERTIFICATION REQUIREMENT
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 we are experts at preparing REA's and claims.
WHEN, WHY AND HOW TO CONVERT THE REA TO A CLAIM
One of our most popular discussions deals with how to prepare a request for equitable adjustment (REA). In response, we've had a number of questions about when, why and how to convert the REA to a claim. Again, there is no guidance in the regulations in answer to these questions so we suggest answers based on our experience.
The REA is not defined in FAR Part 2. A claim is defined there as follows:
A claim arises when the "submission" (the word used in the above referenced quote for which we substituted "routine request" in brackets) is disputed or is not acted upon in a reasonable time. FAR Subpart 33.2 covers the initiation and certification of a claim, interest on claims and all the rules relating to the contracting officer's decision on a claim. The distinguishing characteristics between the REA and a claim are a claim must be certified (if over $100K), interest runs on it from date of receipt and the contracting officer is obliged to render a decision on it from which the contractor can appeal to the tribunal of its choice.
In practice, unless it knows its request will be disputed, the contractor usually submits the REA first. Then, if the contractor meets resistance, either in the form of delay or denial, the contractor should "convert" the REA to a claim, certify it (probably in any event) and request the contracting officer's final decision. Most often this is accomplished by simply resubmitting the REA with a cover letter providing the requisite certification and request for decision.
A claim, in any event, must be submitted within 6 years of its accrual. The REA can be submitted any time before final payment. The judicial tribunals do not have jurisdiction to hear the claim unless it has been certified (if over $100K) and the contracting officer has either rendered a decision or failed to do so within a reasonable time (60 days for small claims).
bill@spriggslawgroup.com http://www.spriggslawgroup.com/
The REA is not defined in FAR Part 2. A claim is defined there as follows:
"Claim" means a written demand or written assertion by one of the contracting parties seeking, as a matter of right, the payment of money in a sum certain, the adjustment or interpretation of contract terms, or other relief arising under or relating to the contract.The regulation goes on to say a routine invoice is not a claim. It then states:
The [routine request] may be converted to a claim, by written notice to the contracting officer as provided in 33.206(a), if it is disputed either as to liability or amount or is not acted upon in a reasonable time.We believe it is reasonable to treat the REA as if it were a routine request for payment. It is a request, not a claim. The intent is to negotiate a settlement of the matters raised in the submission. The costs of preparing, presenting, negotiating and settling the request are allowable costs. The intent behind the request is to reach agreement to modify the contract to provide some or all of the relief requested.
A claim arises when the "submission" (the word used in the above referenced quote for which we substituted "routine request" in brackets) is disputed or is not acted upon in a reasonable time. FAR Subpart 33.2 covers the initiation and certification of a claim, interest on claims and all the rules relating to the contracting officer's decision on a claim. The distinguishing characteristics between the REA and a claim are a claim must be certified (if over $100K), interest runs on it from date of receipt and the contracting officer is obliged to render a decision on it from which the contractor can appeal to the tribunal of its choice.
In practice, unless it knows its request will be disputed, the contractor usually submits the REA first. Then, if the contractor meets resistance, either in the form of delay or denial, the contractor should "convert" the REA to a claim, certify it (probably in any event) and request the contracting officer's final decision. Most often this is accomplished by simply resubmitting the REA with a cover letter providing the requisite certification and request for decision.
A claim, in any event, must be submitted within 6 years of its accrual. The REA can be submitted any time before final payment. The judicial tribunals do not have jurisdiction to hear the claim unless it has been certified (if over $100K) and the contracting officer has either rendered a decision or failed to do so within a reasonable time (60 days for small claims).
bill@spriggslawgroup.com http://www.spriggslawgroup.com/
Thursday, May 9, 2013
UNREALISTICALLY LOW PRICE: PROTEST SUSTAINED
The Government Accountability Office (GAO) has just sustained a protest in which the protester argued that the awardee's proposal should have been rejected as unacceptable on the basis that its price was too low. The solicitation established that the agency would evaluate whether bidders' prices were unrealistically low and the record reflected a failure by the agency to perform a price realism evaluation of the awardee's low price.
The solicitation advised offerors that "unrealistically" low prices "may" serve as a basis for rejection of a proposal. GAO said: "Implicit in the solicitation's reference to 'unrealistically' low prices is the presumption that the agency would actually consider whether an offeror's price is in fact unrealistic and, as a consequence, unacceptable."
The Air Force in this case argued that the evaluation for price realism was optional because the solicitation said unrealistically low price proposals "may" be found unacceptable. Wrong, says GAO. The use of the term "may" refers to the agency's discretion to reject an unrealistically low price, as opposed to reserving to the agency the right to evaluate prices for realism in the first place.
GAO sustained the protest because the agency failed to contemporaneously evaluate whether the awardee's low price, which was 17 percent below the government's estimate, was realistic.
What is a price realism analysis? Price analysis is covered in FAR 15.404-1(b), There are various techniques listed with preference for the first two. Price realism is covered in FAR 15.404-1(d)(3) where the regulation states cost realism may be used on competitive fixed-price contracts in certain circumstances. GAO has made it clear that if the solicitation uses the magic words indicating unrealistically low prices may be cause for rejection, the agency must then carry through and perform the analysis. What is the analysis? It is to determine whether the proposed price is realistic for the work to be performed, reflects a clear understanding of the contract requirements and is consistent with the contractor's technical proposal.
In our opinion, also implicit in such solicitation language is the requirement to check whether the pricing is unbalanced. See FAR 15.404-1(g).
bill@spriggslawgroup.com www.spriggslawgroup.com
The solicitation advised offerors that "unrealistically" low prices "may" serve as a basis for rejection of a proposal. GAO said: "Implicit in the solicitation's reference to 'unrealistically' low prices is the presumption that the agency would actually consider whether an offeror's price is in fact unrealistic and, as a consequence, unacceptable."
The Air Force in this case argued that the evaluation for price realism was optional because the solicitation said unrealistically low price proposals "may" be found unacceptable. Wrong, says GAO. The use of the term "may" refers to the agency's discretion to reject an unrealistically low price, as opposed to reserving to the agency the right to evaluate prices for realism in the first place.
GAO sustained the protest because the agency failed to contemporaneously evaluate whether the awardee's low price, which was 17 percent below the government's estimate, was realistic.
What is a price realism analysis? Price analysis is covered in FAR 15.404-1(b), There are various techniques listed with preference for the first two. Price realism is covered in FAR 15.404-1(d)(3) where the regulation states cost realism may be used on competitive fixed-price contracts in certain circumstances. GAO has made it clear that if the solicitation uses the magic words indicating unrealistically low prices may be cause for rejection, the agency must then carry through and perform the analysis. What is the analysis? It is to determine whether the proposed price is realistic for the work to be performed, reflects a clear understanding of the contract requirements and is consistent with the contractor's technical proposal.
In our opinion, also implicit in such solicitation language is the requirement to check whether the pricing is unbalanced. See FAR 15.404-1(g).
bill@spriggslawgroup.com www.spriggslawgroup.com
Tuesday, May 7, 2013
PROCUREMENT TRENDS SO FAR IN 2013
We can only report on what we see. We don't see everything and report only on what is happening in our corner of experience. However, there are some noticeable trends so far in 2013 worthy of note. They involve source selection, protests, sequestration related pullbacks of outsourced work and claims. Here are some of the things we've noticed.
Protests seem to be trending upward. GAO publishes its statistics once a year and the last publication does not show what we're seeing now. More contractors are seriously considering and actually filing protests. And, the rate of sustained protests, particularly over the last few months, is trending downward. Frankly, we can't even remember the last protest sustained by GAO. The grounds for protesting seem to center around allegations of unreasonable evaluations and source selection decisions that don't follow the published evaluation factors. There is an increase in claims that best value procurements have been turned into lowest price, technically acceptable (LPTA). One thing is clear: agencies are finding ways to go to the lowest priced offeror. Contractors beware. The lowest price may win no matter what the evaluation factors may say.
Evaluation factors are not clear. That's often been the case in the past, but it appears there may now be a purpose in lack of clarity. Contractors need to clear up any ambiguity in how they will be judged before they submit their proposals. They should especially beware of best value procurements which leave any question as to whether the agency really is looking for the lowest price. Agencies should be candid and spell out exactly what they mean when they suggest the that as the technical proposals are subjectively judged to be close to equal, price becomes more important. What does close to equal mean? How important will price become?
With regard to claims, we also see a trend that they are increasing. We've seen several examples in which the agency has reduced work on task orders because of sequestration. The problem is that on fixed priced orders, cutting back is a partial termination which permits the contractor to submit a termination settlement proposal which also reprices the remaining work. The real problem arises in commercial item contracts where the agency proposes a modification descoping the work. The changes clause in these contracts says changes can only be made by mutual agreement. Unilateral changes are a breach of the contract. And then there is the problem contractors have with the way the commercial item contract termination for convenience clause is written. It has been interpreted to restrict the type of recovery afforded under the non commercial item clause.
We've also seen a trend in which agencies are treating fixed priced work as if it were time and materials. In a time and materials contract, contractors have precious little opportunity for relief when hours are reduced. We are seeing some contractors struggling with the way to reprice the remaining work.
In the case of fixed price commercial contracts, we are seeing some contractors resorting to the old breach of contract claim. (As we've written, constructive changes were a fiction of the past to make breaches of contract compensable under the changes clause so the Boards of Contract Appeals would have jurisdiction.) Again, agencies cannot impose unilateral changes in commercial item contracts. That's a breach. Unilaterally imposed reductions of work are terminations for convenience. It remains to be seen whether contractors can successfully argue these reductions are breaches of contract.
So as far as trends go from our little corner of the world, protests and claims trend upward and successful protests trend downward. Claims are still in their infancy. The need for careful review of evaluation factors could never be more more important.
bill@spriggsconsultingservices.com www.spriggsconsultingservices.com
Protests seem to be trending upward. GAO publishes its statistics once a year and the last publication does not show what we're seeing now. More contractors are seriously considering and actually filing protests. And, the rate of sustained protests, particularly over the last few months, is trending downward. Frankly, we can't even remember the last protest sustained by GAO. The grounds for protesting seem to center around allegations of unreasonable evaluations and source selection decisions that don't follow the published evaluation factors. There is an increase in claims that best value procurements have been turned into lowest price, technically acceptable (LPTA). One thing is clear: agencies are finding ways to go to the lowest priced offeror. Contractors beware. The lowest price may win no matter what the evaluation factors may say.
Evaluation factors are not clear. That's often been the case in the past, but it appears there may now be a purpose in lack of clarity. Contractors need to clear up any ambiguity in how they will be judged before they submit their proposals. They should especially beware of best value procurements which leave any question as to whether the agency really is looking for the lowest price. Agencies should be candid and spell out exactly what they mean when they suggest the that as the technical proposals are subjectively judged to be close to equal, price becomes more important. What does close to equal mean? How important will price become?
With regard to claims, we also see a trend that they are increasing. We've seen several examples in which the agency has reduced work on task orders because of sequestration. The problem is that on fixed priced orders, cutting back is a partial termination which permits the contractor to submit a termination settlement proposal which also reprices the remaining work. The real problem arises in commercial item contracts where the agency proposes a modification descoping the work. The changes clause in these contracts says changes can only be made by mutual agreement. Unilateral changes are a breach of the contract. And then there is the problem contractors have with the way the commercial item contract termination for convenience clause is written. It has been interpreted to restrict the type of recovery afforded under the non commercial item clause.
We've also seen a trend in which agencies are treating fixed priced work as if it were time and materials. In a time and materials contract, contractors have precious little opportunity for relief when hours are reduced. We are seeing some contractors struggling with the way to reprice the remaining work.
In the case of fixed price commercial contracts, we are seeing some contractors resorting to the old breach of contract claim. (As we've written, constructive changes were a fiction of the past to make breaches of contract compensable under the changes clause so the Boards of Contract Appeals would have jurisdiction.) Again, agencies cannot impose unilateral changes in commercial item contracts. That's a breach. Unilaterally imposed reductions of work are terminations for convenience. It remains to be seen whether contractors can successfully argue these reductions are breaches of contract.
So as far as trends go from our little corner of the world, protests and claims trend upward and successful protests trend downward. Claims are still in their infancy. The need for careful review of evaluation factors could never be more more important.
bill@spriggsconsultingservices.com www.spriggsconsultingservices.com
Sunday, April 7, 2013
A T FOR C MAY BE A BREACH OF CONTRACT
Judge Nancy B. Firestone, of the U. S. Court of Federal Claims COFC), has just handed down an opinion in which she holds that the government's termination for convenience (T for C) may be a breach of a non-commercial item procurement contract for security services in Iraq and Afghanistan. The Department of Defense (DOD) awarded two contracts to the plaintiff but then terminated each for its convenience. After reviewing all the relevant Court of Appeals for the Federal Circuit (CAFC) opinions, she concludes:
She begins her discussion pointing out that the government's right to terminate a contract for convenience without giving rise to a breach of contract claim has its roots in military contracts. The military needed the clause so as to avoid large, unneeded military procurements upon cessation of war and other hostilities. She then acknowledges that the CAFC has held a T for C may give rise to a breach claim where there is bad faith or an abuse of discretion. The CAFC also has recognized a T for C can be a breach when the government "contracts with a party knowing full well it will not honor the contract."
Importantly, a claim for breach of contract based on breach of the implied duty of good faith and fair dealing is different than a claim for breach based on an improper T for C. The implied duty of good faith and fair dealing is inherent in every contract. This duty requires each party "do everything that the contract presupposes should be done by a party to accomplish the contract's purpose." A party must not destroy the reasonable expectations of the other party.
The breach of the obligation to exercise good faith and fair dealing also includes, as we have written many times, the duty to cooperate, communicate with and not interfere in the other party's performance. Again, and very importantly, proof of bad faith is not required to show a breach of the implied duty of good faith and fair dealing in most cases. As Judge Firestone notes: "Evidence of government intent to harm the contractor is not ordinarily required."
Judge Firestone agrees with the government that breach of the covenant of good faith and fair dealing cannot be the basis for a claim of an improper T for C. However, animus toward the contractor is not required. The government can abuse its discretion by not intending for the contract to go forward, by terminating for convenience in order to get a better price for itself and by entering into a contract without intending to allow the contractor to perform. These are breaches of the duty of good faith and fair dealing and are therefore an abuse of discretion.
Judge Firestone concludes with the language quoted above: the government can breach the contract by some form of "improper self-dealing for its own benefit" such as terminating a contract just so it can award it to another contractor (which was the alleged case before the judge).
Can the government breach this duty of good faith and fair dealing by walking away from an awarded contract just so as to take the work in-house due to sequestration or budget limitations? Perhaps. Is it "improper self-dealing" or not?
bill@spriggsconsultingservices.com www.spriggslawgroup.com
The court reads these precedents to include liability for breach of contract based on an improper termination for convenience where the government has engaged in some form of improper self-dealing for its own benefit or to the benefit of another contractor.Her discussion hinges on the linchpin of the duty of good faith and fair dealing.
She begins her discussion pointing out that the government's right to terminate a contract for convenience without giving rise to a breach of contract claim has its roots in military contracts. The military needed the clause so as to avoid large, unneeded military procurements upon cessation of war and other hostilities. She then acknowledges that the CAFC has held a T for C may give rise to a breach claim where there is bad faith or an abuse of discretion. The CAFC also has recognized a T for C can be a breach when the government "contracts with a party knowing full well it will not honor the contract."
Importantly, a claim for breach of contract based on breach of the implied duty of good faith and fair dealing is different than a claim for breach based on an improper T for C. The implied duty of good faith and fair dealing is inherent in every contract. This duty requires each party "do everything that the contract presupposes should be done by a party to accomplish the contract's purpose." A party must not destroy the reasonable expectations of the other party.
The breach of the obligation to exercise good faith and fair dealing also includes, as we have written many times, the duty to cooperate, communicate with and not interfere in the other party's performance. Again, and very importantly, proof of bad faith is not required to show a breach of the implied duty of good faith and fair dealing in most cases. As Judge Firestone notes: "Evidence of government intent to harm the contractor is not ordinarily required."
Judge Firestone agrees with the government that breach of the covenant of good faith and fair dealing cannot be the basis for a claim of an improper T for C. However, animus toward the contractor is not required. The government can abuse its discretion by not intending for the contract to go forward, by terminating for convenience in order to get a better price for itself and by entering into a contract without intending to allow the contractor to perform. These are breaches of the duty of good faith and fair dealing and are therefore an abuse of discretion.
Judge Firestone concludes with the language quoted above: the government can breach the contract by some form of "improper self-dealing for its own benefit" such as terminating a contract just so it can award it to another contractor (which was the alleged case before the judge).
Can the government breach this duty of good faith and fair dealing by walking away from an awarded contract just so as to take the work in-house due to sequestration or budget limitations? Perhaps. Is it "improper self-dealing" or not?
bill@spriggsconsultingservices.com www.spriggslawgroup.com
Saturday, April 6, 2013
From Federal Times: As budgets tighten, contract attorneys expect uptick in bid protests
Two weeks after sequestration began, contract lawyer Bill Spriggs got a call from a vendor client upset that a federal contracting official had just ordered it to cut its price by 10 percent for “sequestration-related cuts” without a change in service levels.
Spriggs declined to name the contractor or agency, but said the dispute involved a non-defense civilian agency and a commercial item contract where changes can’t occur unless by mutual agreement.
“It’s the first time I’ve seen something like that,” said Spriggs, who runs the Spriggs Law Group in Virginia.
While lawyers sort out the dispute, the larger question is whether the incident was just an anomaly or perhaps an early sign that the sequester will bring about more contract disputes and bid protests.
For more, click on the link:
http://www.federaltimes.com/article/20130403/ACQUISITION03/304030007/As-budgets-tighten-contract-attorneys-expect-uptick-bid-protests?odyssey=nav%7Chead
Spriggs declined to name the contractor or agency, but said the dispute involved a non-defense civilian agency and a commercial item contract where changes can’t occur unless by mutual agreement.
“It’s the first time I’ve seen something like that,” said Spriggs, who runs the Spriggs Law Group in Virginia.
While lawyers sort out the dispute, the larger question is whether the incident was just an anomaly or perhaps an early sign that the sequester will bring about more contract disputes and bid protests.
For more, click on the link:
http://www.federaltimes.com/article/20130403/ACQUISITION03/304030007/As-budgets-tighten-contract-attorneys-expect-uptick-bid-protests?odyssey=nav%7Chead
Thursday, April 4, 2013
SUE THE CONTRACTING OFFICER?
Occasionally, we've been asked if it is possible to sue the contracting officer personally. For a lot of reasons, we discourage such an action, not the least of which is the questionable motivation for doing it. Not too long ago, a contractor terminated for default decided to sue the contracting officer in U.S. District Court and the Court of Appeals for the Second Circuit very recently decided the appeal of that suit. Let's take a look at the facts and briefly review what the circuit court decided.
The contractor sued the procuring contracting officer (PCO), the Chief of Contracting, the administrative contracting officer (ACO) and the Program Manager for the New York District Corps of Engineers. The suit alleged that the contractor's contracts were terminated in retaliation for the contractor's criticism of the Corps' mismanagement of construction projects, that the terminations negatively impacted the contractor's business and that, as a result, the contractor was deprived of its constitutionally protected rights to free speech and substantive due process. The contractor had appealed the terminations of its contracts to the Armed Services Board of Contract Appeals (ASBCA) but those appeals were dismissed (for reasons not germane here) without prejudice.
In a case called Bivens, the U. S. Supreme Court ruled in 1971 that a cause of action existed for victims of unreasonable searches and seizures against the government agents conducting the complained of searches and seizures. The Court said it would infer a private right of action for monetary damages where no other federal remedy is available based on the principle that for every wrong, there must be a remedy. Three Justices dissented, saying such "legislating" should be left to Congress. Thus, there was born what became know as a "Bivens action" in court. (The Second Circuit was reversed in Bivens.)
In revisiting the issue last month, the Second Circuit considered whether the Contract Disputes Act (CDA) of 1978 precluded the contractor's Bivens action. It noted that other circuit courts had decided just such a preclusion existed.
The court started its discussion noting that precisely because the Bivens action is a judicially created remedy (not based on statute), federal courts have been reluctant to recognize a broad application of such implied judicial relief. The remedy is an extraordinary thing that should rarely if ever be applied in new contexts. If there is an alternative remedy available, the implied relief should not be granted.
The court concluded that in the face of the comprehensive CDA scheme of relief, federal courts should decline to infer new substantive legal liability without legislative aid. Although the CDA does not allow contractors to bring actions against government employees in their individual capacities for alleged violations of constitutional rights, nevertheless, the CDA affords a meaningful and exclusive remedy against the government. In effect, the CDA remedy is exclusive for all claims arising out of or related to government contracts. Therefore, contractors cannot sue the government employees in their individual and personal capacities.
So contractors have an exclusive remedy under the CDA and cannot sue the contracting officer personally. And if contractors still have retribution on their minds, they also should be wary of alleging bad faith. Government employees are legally presumed to be acting in good faith and successfully overcoming that presumption requires a showing of well-nigh irrefragable proof.
And the obvious question: can the contractor sue the PCO and others personally for pre-award actions and inactions? We're looking for a case but it would seem the Competition in Contracting Act CICA) provides what may be described as a meaningful and exclusive remedy through the bid protest procedures.
bill@spriggslawgroup.com www.spriggsconsultingservices.com
The contractor sued the procuring contracting officer (PCO), the Chief of Contracting, the administrative contracting officer (ACO) and the Program Manager for the New York District Corps of Engineers. The suit alleged that the contractor's contracts were terminated in retaliation for the contractor's criticism of the Corps' mismanagement of construction projects, that the terminations negatively impacted the contractor's business and that, as a result, the contractor was deprived of its constitutionally protected rights to free speech and substantive due process. The contractor had appealed the terminations of its contracts to the Armed Services Board of Contract Appeals (ASBCA) but those appeals were dismissed (for reasons not germane here) without prejudice.
In a case called Bivens, the U. S. Supreme Court ruled in 1971 that a cause of action existed for victims of unreasonable searches and seizures against the government agents conducting the complained of searches and seizures. The Court said it would infer a private right of action for monetary damages where no other federal remedy is available based on the principle that for every wrong, there must be a remedy. Three Justices dissented, saying such "legislating" should be left to Congress. Thus, there was born what became know as a "Bivens action" in court. (The Second Circuit was reversed in Bivens.)
In revisiting the issue last month, the Second Circuit considered whether the Contract Disputes Act (CDA) of 1978 precluded the contractor's Bivens action. It noted that other circuit courts had decided just such a preclusion existed.
The court started its discussion noting that precisely because the Bivens action is a judicially created remedy (not based on statute), federal courts have been reluctant to recognize a broad application of such implied judicial relief. The remedy is an extraordinary thing that should rarely if ever be applied in new contexts. If there is an alternative remedy available, the implied relief should not be granted.
The court concluded that in the face of the comprehensive CDA scheme of relief, federal courts should decline to infer new substantive legal liability without legislative aid. Although the CDA does not allow contractors to bring actions against government employees in their individual capacities for alleged violations of constitutional rights, nevertheless, the CDA affords a meaningful and exclusive remedy against the government. In effect, the CDA remedy is exclusive for all claims arising out of or related to government contracts. Therefore, contractors cannot sue the government employees in their individual and personal capacities.
So contractors have an exclusive remedy under the CDA and cannot sue the contracting officer personally. And if contractors still have retribution on their minds, they also should be wary of alleging bad faith. Government employees are legally presumed to be acting in good faith and successfully overcoming that presumption requires a showing of well-nigh irrefragable proof.
And the obvious question: can the contractor sue the PCO and others personally for pre-award actions and inactions? We're looking for a case but it would seem the Competition in Contracting Act CICA) provides what may be described as a meaningful and exclusive remedy through the bid protest procedures.
bill@spriggslawgroup.com www.spriggsconsultingservices.com
Friday, March 22, 2013
ASBCA APPLIES THE SOVEREIGN ACT DEFENSE
The Armed Services Board of Contract Appeals (ASBCA) has just applied the sovereign act defense in a case involving a contract for improving vehicle armor and upgrading and painting vehicles for the Iraqi National Police under a contract awarded by the government. The government moved for summary judgment on the contractor's claims asserting among other things the sovereign act defense. The contract contained the standard commercial items clause. The contractor claimed there were design problems which were later addressed in contract modifications.
As the contractor performed the contract, it encountered delays throughout the performance period. In one case, the contractor said it could not pick up its steel truck from the convoy area due to blocked roads by the Iraqi Police Forces and the U.S. Army. The Iraqi police were not able to deliver vehicles due to security reasons and check point issues. The contractor claimed unabsorbed overhead based on the delays. The government argued accord and satisfaction based on the bilateral modifications to the contract. The ASBCA denied the government's motion, saying the modifications did not cover delay costs.
The ASBCA then addressed the sovereign act defense. With regard to road blockages and border and gate restrictions imposed by the government, the contractor did not allege that such actions were targeted at the contractor or were taken to achieve some sort of financial advantage in connection with the particular contract. The Board stated the contractor in effect admitted that the requirements complained of were imposed in connection with general government regulations and operations.
The Board said: "Such acts, being of a public and general nature, not targeted at a specific contractor, would constitute sovereign acts. Actions taken by the United States in its sovereign capacity shield the government from liability for financial claims resulting from those acts, although a contractor is allowed additional time to perform." The Board's opinion does not include a detailed and in depth discussion of the sovereign act defense.
With regard to the road blockages and border and gate restrictions imposed by the government of Iraq, since the U.S. government was not liable in its contractual capacity (not at fault), it could not be held responsible for the delay costs resulting from security actions undertaken by the government of Iraq.
We've written often about the application of the sovereign act defense to claims arising from actions of the government taken as a result of sequestration. Although this ASBCA case does not involve sequestration, it signals in a general sense how the ASBCA may address the defense if raised by the government with regard to actions undertaken as a result of sequestration. In many prospective cases there may be no clear causal nexus between sequestration and the action taken by the government. Nevertheless, expect the government to assert the sovereign act defense.
It would appear the ASBCA may look to the general nature sequestration and it may recognize the sovereign act defense by rationalizing that sequestration did not target any particular contract or contractor. In the broader sense, however, as in the Winstar Supreme Court case, it would appear Congress fully intended that its actions would result in changes, cancellations and terminations of procurement contracts, in which case the defense would not apply. We'll see. The Supreme Court probably eventually will have to decide the issue.
bill@spriggslawgroup.com www.spriggsconsultingservices.com
As the contractor performed the contract, it encountered delays throughout the performance period. In one case, the contractor said it could not pick up its steel truck from the convoy area due to blocked roads by the Iraqi Police Forces and the U.S. Army. The Iraqi police were not able to deliver vehicles due to security reasons and check point issues. The contractor claimed unabsorbed overhead based on the delays. The government argued accord and satisfaction based on the bilateral modifications to the contract. The ASBCA denied the government's motion, saying the modifications did not cover delay costs.
The ASBCA then addressed the sovereign act defense. With regard to road blockages and border and gate restrictions imposed by the government, the contractor did not allege that such actions were targeted at the contractor or were taken to achieve some sort of financial advantage in connection with the particular contract. The Board stated the contractor in effect admitted that the requirements complained of were imposed in connection with general government regulations and operations.
The Board said: "Such acts, being of a public and general nature, not targeted at a specific contractor, would constitute sovereign acts. Actions taken by the United States in its sovereign capacity shield the government from liability for financial claims resulting from those acts, although a contractor is allowed additional time to perform." The Board's opinion does not include a detailed and in depth discussion of the sovereign act defense.
With regard to the road blockages and border and gate restrictions imposed by the government of Iraq, since the U.S. government was not liable in its contractual capacity (not at fault), it could not be held responsible for the delay costs resulting from security actions undertaken by the government of Iraq.
We've written often about the application of the sovereign act defense to claims arising from actions of the government taken as a result of sequestration. Although this ASBCA case does not involve sequestration, it signals in a general sense how the ASBCA may address the defense if raised by the government with regard to actions undertaken as a result of sequestration. In many prospective cases there may be no clear causal nexus between sequestration and the action taken by the government. Nevertheless, expect the government to assert the sovereign act defense.
It would appear the ASBCA may look to the general nature sequestration and it may recognize the sovereign act defense by rationalizing that sequestration did not target any particular contract or contractor. In the broader sense, however, as in the Winstar Supreme Court case, it would appear Congress fully intended that its actions would result in changes, cancellations and terminations of procurement contracts, in which case the defense would not apply. We'll see. The Supreme Court probably eventually will have to decide the issue.
bill@spriggslawgroup.com www.spriggsconsultingservices.com
Saturday, March 16, 2013
LPTA IS FAR PART 14
In our opinion, lowest price technically acceptable (LPTA) is not best value. It is not part of the best value continuum. It should be removed from FAR Part 15 along with the misnomer "continuum". LPTA has become the way in which agencies inveigle contractors into the best value game only to change the rules to LPTA in the source selection process. What the contractor thought was best value becomes LPTA. But the contractor thought that innovation in the technical proposal would be to its advantage. No, sorry, we're going with the lowest price. Time after time, complaint after complaint, we continue down the LPTA path deluding ourselves into thinking that we are reaching the best value decision.
Best value is a term of art reserved for a special process of cost versus technical superiority tradeoffs. The agency is asked to look at technical superiority to see if that superiority is worth the price premium. If, indeed, and in honest reality, the technical proposals are equal, then the best value axiomatically is the lowest price. But how often does that happen? Equal. Hardly. Evaluators have not done their job, most likely.
What's lost on the contemporary crowd is the history of advertised and negotiated procurement. It's time for a lesson. In the old days, there was what was known as advertised procurement and there was negotiated procurement. In advertised, the government specified exactly and in detail what it wanted the the contractor promised to comply in every respect. If the contractor demonstrated it would meet the requirements, the contract went to the lowest priced bidder. (That's where the term bidder came from - advertised procurement involved bidders - not offerors.) The bids were opened in public in front of anyone who wanted to see them, anyone could look at them and the winning price was chalked up (literally). There even was a dance called the two step which was a kind of qualifying round where the bidders were thoroughly checked out and pronounced qualified before they even submitted their prices.
FAR Part 14 is the lost part of FAR. The old advertised procurement is now called sealed bidding. It used to be all the rage and now you hardly ever hear of it. (I have not see a sealed bidding procurement in years.) Well, guess what. LPTA procurements belong in Part 14 where they can be handled properly just as they were in the old advertised procurement days.
The problem with the way LPTA is administered today is that it is used for performance specifications. We got away from the detailed specifications the government used in advertised procurements because Senator Chiles went on TV with a 4 inch mousetrap specification in his hands. Well, the government needs to specify exactly what it wants, in detail, if it is to use the likes of LPTA. We pretty much agree on that. If we are looking at whether the technical requirements are met, it seems we ought to specify with particularity what we require. As soon as you go there, you are in Part 14.
We need to rediscover FAR Part 14 and start using it where the government can specify what it wants. Follow those rules. Once the contractor is qualified and we have confidence it can do what we want, we should go to the lowest price. And, we really ought to consider the old two step as well. Use of LPTA today is entirely misplaced and misleading. Too many contractors think they are in a best value procurement when they are not. Let's call it what it is. If the government wants a performance specification, do a true best value tradeoff analysis. If it knows what it wants, use FAR Part 14 to find a qualified contractor with the lowest price.
Come to think of it, this is just another reason we need to hear from the old timers. How many of you understand what we just said? Too few, I fear. But the old timers are applauding and saying let's rediscover the virtues of FAR Part 14 and rid ourselves of the vices of Part 15.
bill@spriggsconsultingservices.com www.spriggslawgroup.blogspot.com
Best value is a term of art reserved for a special process of cost versus technical superiority tradeoffs. The agency is asked to look at technical superiority to see if that superiority is worth the price premium. If, indeed, and in honest reality, the technical proposals are equal, then the best value axiomatically is the lowest price. But how often does that happen? Equal. Hardly. Evaluators have not done their job, most likely.
What's lost on the contemporary crowd is the history of advertised and negotiated procurement. It's time for a lesson. In the old days, there was what was known as advertised procurement and there was negotiated procurement. In advertised, the government specified exactly and in detail what it wanted the the contractor promised to comply in every respect. If the contractor demonstrated it would meet the requirements, the contract went to the lowest priced bidder. (That's where the term bidder came from - advertised procurement involved bidders - not offerors.) The bids were opened in public in front of anyone who wanted to see them, anyone could look at them and the winning price was chalked up (literally). There even was a dance called the two step which was a kind of qualifying round where the bidders were thoroughly checked out and pronounced qualified before they even submitted their prices.
FAR Part 14 is the lost part of FAR. The old advertised procurement is now called sealed bidding. It used to be all the rage and now you hardly ever hear of it. (I have not see a sealed bidding procurement in years.) Well, guess what. LPTA procurements belong in Part 14 where they can be handled properly just as they were in the old advertised procurement days.
The problem with the way LPTA is administered today is that it is used for performance specifications. We got away from the detailed specifications the government used in advertised procurements because Senator Chiles went on TV with a 4 inch mousetrap specification in his hands. Well, the government needs to specify exactly what it wants, in detail, if it is to use the likes of LPTA. We pretty much agree on that. If we are looking at whether the technical requirements are met, it seems we ought to specify with particularity what we require. As soon as you go there, you are in Part 14.
We need to rediscover FAR Part 14 and start using it where the government can specify what it wants. Follow those rules. Once the contractor is qualified and we have confidence it can do what we want, we should go to the lowest price. And, we really ought to consider the old two step as well. Use of LPTA today is entirely misplaced and misleading. Too many contractors think they are in a best value procurement when they are not. Let's call it what it is. If the government wants a performance specification, do a true best value tradeoff analysis. If it knows what it wants, use FAR Part 14 to find a qualified contractor with the lowest price.
Come to think of it, this is just another reason we need to hear from the old timers. How many of you understand what we just said? Too few, I fear. But the old timers are applauding and saying let's rediscover the virtues of FAR Part 14 and rid ourselves of the vices of Part 15.
bill@spriggsconsultingservices.com www.spriggslawgroup.blogspot.com
THE TILTED PLAYING FIELD
Sean Stackley called our acquisition system the most "complex, chaotic, over regulated and overseen process in the world." We may disagree with him. We are not so sure about the chaotic part. But it is time to remind ourselves that the federal procurement system is by design a tilted and uneven playing field. The government writes the rules. How many of us participate in any way in the rule making process? The best we can do is join a trade association. But how many of us actively participate in the efforts to affect the rules? And with what result? What influence does industry really have in how the game is played? We elect our representatives to Congress. But how many of us sit with the staff members to suggest less micromanagement or changes to the statutes?
It is high time to remind ourselves that federal procurement is based on contracts of adhesion. What are contracts of adhesion? In this context, and in the legal sense, they are contracts in which the government dictates the terms and conditions. Our mentor, Gil Cuneo, was fond of reminding all of the audiences before which he spoke that one must start with the understanding that when you enter the government marketplace, you must be prepared to deal with contracts of adhesion. The closest commercial counterpart is the insurance contract, to which we all can relate. The insurance company dictates the terms and conditions. How many times has each of us negotiated the terms of our insurance policies?
Yes, government contract terms and conditions are dictated by the government. And if the term or condition is not written in the contract, chances are it will be read into the contract by operation of law. See our article on the Christian doctrine. There are no changes or termination for convenience clauses in the commercial marketplace contracts. Making changes unilaterally and terminating for convenience would be breaches of contract there. But, like it or not, the government contract will contain these clauses whether they are written in the contract or not. (Of course, if the contract is for a "commercial item", the unilateral change is eliminated in government contracts.) Here, we've picked but two of the hundreds of clauses dictated by the government that will be found in government contracts. In most every case, the contractor has no control over whether the clause is included or not. And in many instances, it is there even if you can't see it.
So, what do we make of these contracts of adhesion? Contractors play on a tilted and even uneven playing field. Tilted in the sense that the government controls the entire system, from clauses to remedies. Uneven, in the sense that the professional contract administration staff for the government often does not understand the rules and applies them unevenly and even unfairly. Is it any wonder that in order to invite contractors into its marketplace the government employs ombudsmen? That's a warning to let the seller beware.
What's the point of all this? The government owes its contractors a special duty. It's known as the duty of good faith and fair dealing. It's known as the obligation to cooperate, communicate, not interfere and disclose information vital to performance. We've written about these corollary duties over and over again. Some accuse us of taking sides. But put all this in the proper perspective. The contracting party with this unusual control occupies a position of special trust. And since it is public contracting, that trust is owed to all citizens, all taxpayers, but including all contractors. That position of trust brings with it certain obligations. Our trustees should not be driving unreasonably hard bargains and bullying contractors into submission. They should be assisting contractors to succeed.
bill@spriggsconsultingservices.com www.spriggslawgroup.blogspot.com
It is high time to remind ourselves that federal procurement is based on contracts of adhesion. What are contracts of adhesion? In this context, and in the legal sense, they are contracts in which the government dictates the terms and conditions. Our mentor, Gil Cuneo, was fond of reminding all of the audiences before which he spoke that one must start with the understanding that when you enter the government marketplace, you must be prepared to deal with contracts of adhesion. The closest commercial counterpart is the insurance contract, to which we all can relate. The insurance company dictates the terms and conditions. How many times has each of us negotiated the terms of our insurance policies?
Yes, government contract terms and conditions are dictated by the government. And if the term or condition is not written in the contract, chances are it will be read into the contract by operation of law. See our article on the Christian doctrine. There are no changes or termination for convenience clauses in the commercial marketplace contracts. Making changes unilaterally and terminating for convenience would be breaches of contract there. But, like it or not, the government contract will contain these clauses whether they are written in the contract or not. (Of course, if the contract is for a "commercial item", the unilateral change is eliminated in government contracts.) Here, we've picked but two of the hundreds of clauses dictated by the government that will be found in government contracts. In most every case, the contractor has no control over whether the clause is included or not. And in many instances, it is there even if you can't see it.
So, what do we make of these contracts of adhesion? Contractors play on a tilted and even uneven playing field. Tilted in the sense that the government controls the entire system, from clauses to remedies. Uneven, in the sense that the professional contract administration staff for the government often does not understand the rules and applies them unevenly and even unfairly. Is it any wonder that in order to invite contractors into its marketplace the government employs ombudsmen? That's a warning to let the seller beware.
What's the point of all this? The government owes its contractors a special duty. It's known as the duty of good faith and fair dealing. It's known as the obligation to cooperate, communicate, not interfere and disclose information vital to performance. We've written about these corollary duties over and over again. Some accuse us of taking sides. But put all this in the proper perspective. The contracting party with this unusual control occupies a position of special trust. And since it is public contracting, that trust is owed to all citizens, all taxpayers, but including all contractors. That position of trust brings with it certain obligations. Our trustees should not be driving unreasonably hard bargains and bullying contractors into submission. They should be assisting contractors to succeed.
bill@spriggsconsultingservices.com www.spriggslawgroup.blogspot.com
Thursday, March 14, 2013
UNCONSCIONABLE CENSORSHIP BY THE GOVERNMENT
Yesterday, we published one of our brief articles on Unconscionability in Contracting. Today, we received a comment from a dear reader who pointed out that the Air Force has blocked access to our blog site with its Bluecoat AFNet firewall. Apparently, this firewall controls all Air Force Internet links and it denies access to our blog site. The category that Bluecoat blocks is called Government/Legal; Blogs/Personal Pages.
Perhaps this censorship was an unintended mistake. Perhaps we were just caught up in an understandable attempt to keep employees from spending time reading personal emails. Or, perhaps the Air Force purposefully seeks to limit access to what we say. We'd like the Air Force to come forward and tell us this is not censorship. And, we'd like the Air Force to recognize our purpose is to educate the public.
Our editorial policy is to protect and preserve the integrity of the procurement system and enlighten its practitioners, both in industry and government, on critical policy and legal issues of current interest. We do not take sides. Federal procurement is the most highly regulated marketplace in the world. Everyone needs to know the rules. We talk about rules. They are meant to be followed by government and contractor employees alike. Let the chips fall where they may.
We do not take censorship lying down. To the extent any of you, dear readers, have any influence in making sure our words get out, please help.
Finally, we are humbly grateful for your really astonishingly positive reaction to our blog. We now have over 40,000 page views in less than one year in publication. We hope we have made a small difference in improving knowledge of the federal procurement system. Please let us know what we can do to improve both the content and dissemination of our communications. Thank you.
bill@spriggsconsultingservices.com www.spriggslawgroup.blogspot.com
Perhaps this censorship was an unintended mistake. Perhaps we were just caught up in an understandable attempt to keep employees from spending time reading personal emails. Or, perhaps the Air Force purposefully seeks to limit access to what we say. We'd like the Air Force to come forward and tell us this is not censorship. And, we'd like the Air Force to recognize our purpose is to educate the public.
Our editorial policy is to protect and preserve the integrity of the procurement system and enlighten its practitioners, both in industry and government, on critical policy and legal issues of current interest. We do not take sides. Federal procurement is the most highly regulated marketplace in the world. Everyone needs to know the rules. We talk about rules. They are meant to be followed by government and contractor employees alike. Let the chips fall where they may.
We do not take censorship lying down. To the extent any of you, dear readers, have any influence in making sure our words get out, please help.
Finally, we are humbly grateful for your really astonishingly positive reaction to our blog. We now have over 40,000 page views in less than one year in publication. We hope we have made a small difference in improving knowledge of the federal procurement system. Please let us know what we can do to improve both the content and dissemination of our communications. Thank you.
bill@spriggsconsultingservices.com www.spriggslawgroup.blogspot.com
Wednesday, March 13, 2013
UNCONSCIONABILITY IN CONTRACTING
Yesterday, a contracting officer told a contractor to decrease its price by 10% "for sequestration related cuts, without any changes to contractual services levels." Yes, believe it or not, one of our government employees, with a warrant, who is supposed to be the conscience of our system, asked a contractor to provide the same level of service for 10% less money. This is unconscionable behavior. Sequestration may cause a reduction in services and therefore the price of those services. But it is strikingly unfair and unjust (the meaning of unconscionable) to require a contractor to provide the same services for less money. Naturally, the contractor did not agree but offered to provide reduced services for a reduced price. That sounds reasonable.
Unconscionability doesn't get talked about much. The Armed Services Board of Contract Appeals (ASBCA) occasionally uses the term to describe egregious government behavior, usually in the context of the failure to cooperate or communicate or where the government seeks to impose drastic contractual penalties. The Uniform Commercial Code (UCC) uses the term to describe strikingly unfair behavior in the commercial marketplace.
We believe that contracting officers are indeed the conscience of the procurement system. Or, they should be. FAR 1.602-2, dealing with the responsibilities of contracting officers, states at sub paragraph (b) that the responsibility of the contracting officer is to "ensure that contractors receive impartial, fair and equitable treatment." The duty of good faith and fair dealing falls most heavily upon the shoulders of contracting officers and that duty is implied in all phases of government contract activity.
Sequestration is here and budget constraints are here to stay forever. But Congress did not intend to place the burden on contractors to provide the same services for less money. That is not sequestration. That is unconscionable manipulation. And, if combined with the threat of termination, it is unconscionable extortion.
We expect more from the people to whom we entrust the warrant to act on our behalf in spending our taxpayer money. Yes, we want them to spend it wisely. But we do not expect them to drive contractors from the marketplace we depend upon because they are not treated impartially, fairly and equitably. The point of this piece is that it is not enough to be fair. Contracting officers are the conscience of the system and must avoid unconscionable behavior, especially in times of severe budget constraints.
bill@spriggslawgroup.com www.spriggslawgroup.com
Unconscionability doesn't get talked about much. The Armed Services Board of Contract Appeals (ASBCA) occasionally uses the term to describe egregious government behavior, usually in the context of the failure to cooperate or communicate or where the government seeks to impose drastic contractual penalties. The Uniform Commercial Code (UCC) uses the term to describe strikingly unfair behavior in the commercial marketplace.
We believe that contracting officers are indeed the conscience of the procurement system. Or, they should be. FAR 1.602-2, dealing with the responsibilities of contracting officers, states at sub paragraph (b) that the responsibility of the contracting officer is to "ensure that contractors receive impartial, fair and equitable treatment." The duty of good faith and fair dealing falls most heavily upon the shoulders of contracting officers and that duty is implied in all phases of government contract activity.
Sequestration is here and budget constraints are here to stay forever. But Congress did not intend to place the burden on contractors to provide the same services for less money. That is not sequestration. That is unconscionable manipulation. And, if combined with the threat of termination, it is unconscionable extortion.
We expect more from the people to whom we entrust the warrant to act on our behalf in spending our taxpayer money. Yes, we want them to spend it wisely. But we do not expect them to drive contractors from the marketplace we depend upon because they are not treated impartially, fairly and equitably. The point of this piece is that it is not enough to be fair. Contracting officers are the conscience of the system and must avoid unconscionable behavior, especially in times of severe budget constraints.
bill@spriggslawgroup.com www.spriggslawgroup.com
Sunday, March 3, 2013
SEQUESTRATION AND THE ANTIDEFICIENCY ACT
One of the possible consequences of sequestration is that there may well be a greater risk now of violations of the Antideficiency Act. Unless the meat ax cuts are squarely and precisely made, some obligations and expenditures may be made which exceed the actual amounts obligated and committed to be expended.
What is the Antideficiency Act? That Act prohibits making or authorizing an obligation or expenditure in excess of the amount available under any appropriation, apportionment, administrative subdivision of funds, allowance or allocation of funds unless authorized by law. It also covers involving the government in any obligation to pay money before funds have been appropriated and it prohibits accepting voluntary services except in cases of emergency involving the safety of human life or the protection of property. Finally, it prohibits making obligations or expenditures in excess the amount permitted by agency regulations.
Federal employees who violate the Act can be disciplined administratively, suspended without pay or removed from office. They may also be subject to criminal penalties and actually be sent to jail. We are not aware of any public employee who has ever been sentenced to jail time for violation of the Act.
Agency heads are required to report violations to the President and to Congress. OMB has issued further instructions which can be found in OMB Circular No. A-11 (2012). That document describes violations as: "obligations or expenditures in excess of the lower of the amount in the affected account, the amount apportioned, or any administrative subdivision of funds specified in your agency's fund control regulations as being subject to the Antideficiency Act." It also explains that "obligations and expenditures that exceed allowance and allocations are violations of the Antideficiency Act."
(A friend of ours told the story of a contracting officer saying to the contractor, go ahead and perform the service, we cover it with next year's funding. Yes, that's a violation.)
As if the job of the contracting officer were not already hard enough, our public servants must now be even more careful to see exactly where the meat ax falls in sequestration. They must question carefully whether they are making obligations and expenditures which exceed funds which have been chopped off. And, as Sean Stackley recently said, "We ask our acquisition folks and program managers to navigate the most complex, chaotic, over regulated and overseen process in the world." And then we ask them to take a 20% pay cut.
bill@spriggslawgroup.com www.spriggslawgroup.com
What is the Antideficiency Act? That Act prohibits making or authorizing an obligation or expenditure in excess of the amount available under any appropriation, apportionment, administrative subdivision of funds, allowance or allocation of funds unless authorized by law. It also covers involving the government in any obligation to pay money before funds have been appropriated and it prohibits accepting voluntary services except in cases of emergency involving the safety of human life or the protection of property. Finally, it prohibits making obligations or expenditures in excess the amount permitted by agency regulations.
Federal employees who violate the Act can be disciplined administratively, suspended without pay or removed from office. They may also be subject to criminal penalties and actually be sent to jail. We are not aware of any public employee who has ever been sentenced to jail time for violation of the Act.
Agency heads are required to report violations to the President and to Congress. OMB has issued further instructions which can be found in OMB Circular No. A-11 (2012). That document describes violations as: "obligations or expenditures in excess of the lower of the amount in the affected account, the amount apportioned, or any administrative subdivision of funds specified in your agency's fund control regulations as being subject to the Antideficiency Act." It also explains that "obligations and expenditures that exceed allowance and allocations are violations of the Antideficiency Act."
(A friend of ours told the story of a contracting officer saying to the contractor, go ahead and perform the service, we cover it with next year's funding. Yes, that's a violation.)
As if the job of the contracting officer were not already hard enough, our public servants must now be even more careful to see exactly where the meat ax falls in sequestration. They must question carefully whether they are making obligations and expenditures which exceed funds which have been chopped off. And, as Sean Stackley recently said, "We ask our acquisition folks and program managers to navigate the most complex, chaotic, over regulated and overseen process in the world." And then we ask them to take a 20% pay cut.
bill@spriggslawgroup.com www.spriggslawgroup.com
Saturday, February 9, 2013
TINA: AGENCY MUST SHOW DAMAGES
Judge Peacock of the Armed Services Board of Contract Appeals (ASBCA) has sustained the appeal of Lockheed Martin in a Truth in Negotiations Act (TINA) claim made by the Air Force. After a thorough discussion of the many faults in the Air Force's argument in favor of its claim, Judge Peacock simply points out that for an agency to prevail on such a claim, it must show damages or prejudice. Having failed in the attempt, the ASBCA denies the Air Force's claim for $14+ million.
TINA was first passed in 1962 to put the government on an equal footing with contractors in contract negotiations where submission of cost or pricing data is required. TINA now applies to any negotiated contract expected to exceed $700,000, a modification of a contract exceeding $700,000 and in certain cases a subcontract exceeding that same amount. Of course, there are exceptions not relevant here. And there are other arguments a contractor can make in defending the government's defective pricing claim.
In the Lockheed Martin case, the Air Force claimed that Lockheed's failure to disclose date resulted in overstatement of the prices the Air Force paid. And the Air Force grounded its argument on the rule of law that there is a presumption that the non-disclosure of data resulted in an overstatement of the price. Fair enough. There is such a rule. But Judge Peacock pointed out that the ASBCA analyzes the evidence carefully in applying the presumption. And, he pointed out, the presumption can be rebutted and is not a substitute for specific proof establishing the amount of damages.
The government has the ultimate burden of showing a causal relationship between incomplete or inaccurate data and an overstated contract price. "In this case, the government not only has failed to prove the amount of any increase, appellant has rebutted the presumption that an overstated CCIP contract price resulted from the alleged nondisclosure of the data in question." Judge Peacock concluded that it was not necessary for him to address the other issues and defenses raised by Lockheed Martin. Even whether the data were timely disclosed was something he did not need to address.
"To establish defective pricing, it is axiomatic that the allegedly undisclosed data lead to a higher negotiated price. Here, the evidence establishes that any nondisclosure of the Bridge prices did not contribute to an overstatement of the CCIP contract prices. Even if all the other elements of the government's claim were established, its damages are zero." Repeat, even if all the other elements of the government's claim were established, its damages are zero.
The lesson? Cut to the chase. What were the damages, if any. If none, there is no claim.
bill@spriggslawgroup.com www.spriggslawgroup.com
TINA was first passed in 1962 to put the government on an equal footing with contractors in contract negotiations where submission of cost or pricing data is required. TINA now applies to any negotiated contract expected to exceed $700,000, a modification of a contract exceeding $700,000 and in certain cases a subcontract exceeding that same amount. Of course, there are exceptions not relevant here. And there are other arguments a contractor can make in defending the government's defective pricing claim.
In the Lockheed Martin case, the Air Force claimed that Lockheed's failure to disclose date resulted in overstatement of the prices the Air Force paid. And the Air Force grounded its argument on the rule of law that there is a presumption that the non-disclosure of data resulted in an overstatement of the price. Fair enough. There is such a rule. But Judge Peacock pointed out that the ASBCA analyzes the evidence carefully in applying the presumption. And, he pointed out, the presumption can be rebutted and is not a substitute for specific proof establishing the amount of damages.
The government has the ultimate burden of showing a causal relationship between incomplete or inaccurate data and an overstated contract price. "In this case, the government not only has failed to prove the amount of any increase, appellant has rebutted the presumption that an overstated CCIP contract price resulted from the alleged nondisclosure of the data in question." Judge Peacock concluded that it was not necessary for him to address the other issues and defenses raised by Lockheed Martin. Even whether the data were timely disclosed was something he did not need to address.
"To establish defective pricing, it is axiomatic that the allegedly undisclosed data lead to a higher negotiated price. Here, the evidence establishes that any nondisclosure of the Bridge prices did not contribute to an overstatement of the CCIP contract prices. Even if all the other elements of the government's claim were established, its damages are zero." Repeat, even if all the other elements of the government's claim were established, its damages are zero.
The lesson? Cut to the chase. What were the damages, if any. If none, there is no claim.
bill@spriggslawgroup.com www.spriggslawgroup.com
Wednesday, February 6, 2013
VIOLATIONS OF SOLE SOURCE RULES
Judge Lynn Bush of the Court of Federal Claims (COFC) recently entered judgment for the protester in a sole source procurement of a bridge contract by the Air Force. "The violations of procurement regulations in the sole-source award to Harris are numerous, troubling and prejudicial to IDEA," she said. "These were not technical errors." Although there was no indication of bad faith, regulatory mandates were needlessly sacrificed, she concluded. She then went through a litany of transgressions of which the Air Force was guilty, reminding all of us that the violation of rules has consequences.
The Air Force relied on FAR 6.302-1 and 6.302-2 which Judge Bush noted was misplaced since FAR 6.302-1(b) forbids reliance on FAR 6.302-1 when 6.302-2 is applicable. She noted the court is unaware of any prior attempt to rely on both of these authorities for the same sole source award. If a contracting officer is faced with a situation where unusual and compelling circumstances exist, it is impermissible to rely on the only one responsible source provision to justify a sole source award. FAR 6.302-1(b) "forces the agency to solicit offers from as many sources as is practicable, in situations of unusual and compelling urgency, before resorting to soliciting offers from only a single source, in circumstances which may also present unusual and compelling urgency. The goal is to obtain maximum competition.
Judge Bush went on to find the Air Force violated FAR Part 10 in that the Air Force did not conduct any significant market research. She characterized this violation as serious. Moreover, no contract synopsis was posted as required by FAR 5.207(c)(15)(ii) and FAR 6.302-1(d)(2). Here there was no posting, no statement encouraging potential sources to submit proposals and no consideration by the Air Force of information received in response. In addition, there was no explanation in the justification and approval (J&A) for the failure to post a synopsis and no citation to authority justifying such a failure as required by FAR 6.303-2(a)(6).
Finally, there was no mention of the protester's interest as required by FAR 6.303-2(a)(10). A sole source justification requires a listing of contractors that have expressed an interest in the contract requirement. The protester had repeatedly expressed an interest, in writing. And the Air Force violated FAR 6.302-2(c)(2) by not making the required effort to solicit offers from as many sources as practicable. Judge Bush pointed out that GAO has repeatedly sustained protests where an agency has made only minimal efforts to expand its consideration of potential sources beyond an incumbent contractor. The Air Force "neglected to look in its own files" to find the protester's interest.
The Air Force suggested the protester was not qualified. Nonsense says Judge Bush. Yes, there was one superior contractor. "Superiority, however, is not adequate justification for a sole-source award."
Rule, rules, rules. They are there for a purpose (taxpayers). They will be enforced. They must be learned and followed.
bill@spriggslawgroup.com www.spriggslawgroup.com
The Air Force relied on FAR 6.302-1 and 6.302-2 which Judge Bush noted was misplaced since FAR 6.302-1(b) forbids reliance on FAR 6.302-1 when 6.302-2 is applicable. She noted the court is unaware of any prior attempt to rely on both of these authorities for the same sole source award. If a contracting officer is faced with a situation where unusual and compelling circumstances exist, it is impermissible to rely on the only one responsible source provision to justify a sole source award. FAR 6.302-1(b) "forces the agency to solicit offers from as many sources as is practicable, in situations of unusual and compelling urgency, before resorting to soliciting offers from only a single source, in circumstances which may also present unusual and compelling urgency. The goal is to obtain maximum competition.
Judge Bush went on to find the Air Force violated FAR Part 10 in that the Air Force did not conduct any significant market research. She characterized this violation as serious. Moreover, no contract synopsis was posted as required by FAR 5.207(c)(15)(ii) and FAR 6.302-1(d)(2). Here there was no posting, no statement encouraging potential sources to submit proposals and no consideration by the Air Force of information received in response. In addition, there was no explanation in the justification and approval (J&A) for the failure to post a synopsis and no citation to authority justifying such a failure as required by FAR 6.303-2(a)(6).
Finally, there was no mention of the protester's interest as required by FAR 6.303-2(a)(10). A sole source justification requires a listing of contractors that have expressed an interest in the contract requirement. The protester had repeatedly expressed an interest, in writing. And the Air Force violated FAR 6.302-2(c)(2) by not making the required effort to solicit offers from as many sources as practicable. Judge Bush pointed out that GAO has repeatedly sustained protests where an agency has made only minimal efforts to expand its consideration of potential sources beyond an incumbent contractor. The Air Force "neglected to look in its own files" to find the protester's interest.
The Air Force suggested the protester was not qualified. Nonsense says Judge Bush. Yes, there was one superior contractor. "Superiority, however, is not adequate justification for a sole-source award."
Rule, rules, rules. They are there for a purpose (taxpayers). They will be enforced. They must be learned and followed.
bill@spriggslawgroup.com www.spriggslawgroup.com
Saturday, February 2, 2013
COST REALISM RULES
Cost estimates on cost reimbursement contracts are not to be taken at face value. FAR 15.404-1(d) says a cost realism analysis is the process of independently reviewing and evaluating specific elements of proposed cost estimates to determine if they are realistic for the work to be performed, reflect an understanding of what's required and are consistent with the contractor's technical proposal. The analysis is mandatory on cost reimbursement contracts. The purpose is to determine probable costs. The probable (not face value) costs are then used to determine best value. That's the regulation.
What does GAO say? In a recent decision, GAO said that when an agency evaluates proposals, the offeror's proposed estimated costs are not controlling because the government is bound (in cost reimbursement contracts) to pay actual allowable costs. Based on the cost realism analysis, proposed costs should be adjusted. FAR 15.404-1(d)(2)(ii). Government agencies are obliged to employ analysis methods which provide a "measure of confidence" that the "most probable costs" are "reasonable and realistic" in view of the information available at the time of evaluation.
In another decision within the last year, GAO sustained a protest where the agency failed to conduct a meaningful analysis of why it accepted the contractor's proposed costs at face value. GAO said: "When an agency evaluates proposals for the award of a cost-reimbursement contract, an offeror's proposed costs are not controlling since such costs may not accurately reflect the actual costs the government will incur." It's really a "should cost" exercise. GAO will test the agency evaluation to see if it is "reasonable, not arbitrary, and adequately documented." GAO will sustain a protest where the cost realism analysis is not adequately documented.
The government is not required to conduct an in-depth cost analysis or to verify each and every cost item. Determination of the probable cost is, after all, a matter of informed judgment. But the judgment must be rational. The cost realism analysis must be performed with an eye to what the contractor proposes in its technical proposal. It is not rational for an agency to apply the same mechanical test and analysis to all contractors without reference to their specific technical approaches. And even where the contractor puts a cap on its costs, an agency must still consider whether capping costs may so constrain the contractor that its ability to perform the work may be impaired.
Perhaps the biggest area of costs open to question is the estimated number of labor hours required to perform the work. Proposed staffing levels may be unrealistic according to any number of measurements (the technical proposal itself and prior staffing levels for similar work). Whether labor rates are realistic also is often challenged.
In the end, the cost analysis should be used to test the contractor's risk of nonperformance. Performance risk in today's world is of the highest concern. A proper cost analysis should inform the government's assessment of the performance risks.
bill@spriggslawgroup.com www.spriggslawgroup.com
What does GAO say? In a recent decision, GAO said that when an agency evaluates proposals, the offeror's proposed estimated costs are not controlling because the government is bound (in cost reimbursement contracts) to pay actual allowable costs. Based on the cost realism analysis, proposed costs should be adjusted. FAR 15.404-1(d)(2)(ii). Government agencies are obliged to employ analysis methods which provide a "measure of confidence" that the "most probable costs" are "reasonable and realistic" in view of the information available at the time of evaluation.
In another decision within the last year, GAO sustained a protest where the agency failed to conduct a meaningful analysis of why it accepted the contractor's proposed costs at face value. GAO said: "When an agency evaluates proposals for the award of a cost-reimbursement contract, an offeror's proposed costs are not controlling since such costs may not accurately reflect the actual costs the government will incur." It's really a "should cost" exercise. GAO will test the agency evaluation to see if it is "reasonable, not arbitrary, and adequately documented." GAO will sustain a protest where the cost realism analysis is not adequately documented.
The government is not required to conduct an in-depth cost analysis or to verify each and every cost item. Determination of the probable cost is, after all, a matter of informed judgment. But the judgment must be rational. The cost realism analysis must be performed with an eye to what the contractor proposes in its technical proposal. It is not rational for an agency to apply the same mechanical test and analysis to all contractors without reference to their specific technical approaches. And even where the contractor puts a cap on its costs, an agency must still consider whether capping costs may so constrain the contractor that its ability to perform the work may be impaired.
Perhaps the biggest area of costs open to question is the estimated number of labor hours required to perform the work. Proposed staffing levels may be unrealistic according to any number of measurements (the technical proposal itself and prior staffing levels for similar work). Whether labor rates are realistic also is often challenged.
In the end, the cost analysis should be used to test the contractor's risk of nonperformance. Performance risk in today's world is of the highest concern. A proper cost analysis should inform the government's assessment of the performance risks.
bill@spriggslawgroup.com www.spriggslawgroup.com
Monday, January 14, 2013
VOLUNTEER CORPS AND HELP HOT LINE
On December 27, 2012, we wrote about antidotes for the "unabated crisis" raised by the Professional Services Counsel (PSC) and Grant Thornton LLP in their recent study report. In that piece, we suggested more myth busting memos from the Office of Procurement Policy (OFPP), instituting a help hot line, fixing the debriefing and LPTA debacles, educating the lawyers and training by the case study method. We believe we should establish a corps of experienced volunteers who are willing to spend time on the phone with less experienced professionals on the acquisition team (as defined in FAR 1.102(d)) advising them on areas within the experience and expertise of the volunteers.
We remember when a government investigator called us out of the blue and asked us questions about the Anti-deficiency Act. The investigator had read that we had written a case history about a violation of the Act occurring some time ago. We were more than happy to explain our understanding of that Act.
Our suggestion that the government rehire the retirees is impracticable and unworkable. It can and will never happen. We need not belabor the point. However, many of us are willing to reply to a request that we volunteer our time and supply answers to questions about our experience and expertise. The government could set up a help hot line which monitors could use to match the questioner with the appropriate experienced volunteer. This advice would be case specific answers to real time questions with the explicit disclaimer that the volunteer would not be speaking for the government but would instead be offering counsel and suggested solutions.
The big questions are whether any of the experienced people are interested in joining the corps, whether the government would accept the idea and whether anyone would actually use the help hot line. Big questions. And, Congress would have to approve this (because of the Anti-Deficiency Act) and provide a liability shield. The purpose of this piece is to elicit your reaction to see if it is appropriate to seriously suggest and promote this approach with the appropriate government acquisition executives.
So let us hear from you. We have thick skins so go ahead and tell us if you think this notion stinks.
bill@spriggsconsultingservices.com
We remember when a government investigator called us out of the blue and asked us questions about the Anti-deficiency Act. The investigator had read that we had written a case history about a violation of the Act occurring some time ago. We were more than happy to explain our understanding of that Act.
Our suggestion that the government rehire the retirees is impracticable and unworkable. It can and will never happen. We need not belabor the point. However, many of us are willing to reply to a request that we volunteer our time and supply answers to questions about our experience and expertise. The government could set up a help hot line which monitors could use to match the questioner with the appropriate experienced volunteer. This advice would be case specific answers to real time questions with the explicit disclaimer that the volunteer would not be speaking for the government but would instead be offering counsel and suggested solutions.
The big questions are whether any of the experienced people are interested in joining the corps, whether the government would accept the idea and whether anyone would actually use the help hot line. Big questions. And, Congress would have to approve this (because of the Anti-Deficiency Act) and provide a liability shield. The purpose of this piece is to elicit your reaction to see if it is appropriate to seriously suggest and promote this approach with the appropriate government acquisition executives.
So let us hear from you. We have thick skins so go ahead and tell us if you think this notion stinks.
bill@spriggsconsultingservices.com
Friday, January 11, 2013
FAR'S GUIDING PRINCIPLES
Today, we heard Joe Jordan, Administrator of the Office of Procurement Policy (OFPP), at a meeting of the Government Affairs Committee of the Professional Services Council (PSC), allude to the statement of guiding principles for the federal acquisition system set forth in FAR 1.102(d). Essentially, he said that if your proposed action is not proscribed by FAR you probably can take it provided it is in accordance with sound business judgment. Let's remind ourselves what the regulation says:
So if the strategy, practice, policy or procedure "is not addressed in the FAR", you can do it, provided it is not prohibited by a statute or case law, executive order or other regulation. (In these articles we are constantly calling attention to the case law which teaches both what to do and what not to do.) Joe Jordan's emphasis is on taking the initiative to try something new unless the law just flat out says you can't do it.
In our comments on what needs to be done to fix the procurement system, we have emphasized that senior leadership needs to pass down best practices and see to it they are followed in the field. But we also have criticized people at the working level for lack of initiative. We hope to hear more from Mr. Jordan about exercising initiative. Giving us some exemplary case histories of success stories would help.
But he also made a solid point that the acquisition team needs to increase its tolerance for taking risks. Initiative may lead to mistakes. They are to be expected. Our philosophy is that if you are not making mistakes, you are not improving the process.
bill@spriggsconsultingservices.com
The role of each member of the Acquisition Team is to exercise personal initiative and sound business judgment in providing the best value product or service to meet the customer's needs. In exercising initiative, Government members of the Acquisition Team may assume if a specific strategy, practice, policy or procedure is in the best interests of the Government and is not addressed in FAR, nor prohibited by law (statute or case law), Executive order or other regulation, that the strategy, practice, policy or procedure is a permissible exercise of authority.Notice the word "initiative" is used twice as if to suggest the entire statement is designed to engender such behavior. Also noteworthy is the reference to the Acquisition Team, which Mr. Jordan described in other remarks as including program management and all people supporting the contracting officer.
So if the strategy, practice, policy or procedure "is not addressed in the FAR", you can do it, provided it is not prohibited by a statute or case law, executive order or other regulation. (In these articles we are constantly calling attention to the case law which teaches both what to do and what not to do.) Joe Jordan's emphasis is on taking the initiative to try something new unless the law just flat out says you can't do it.
In our comments on what needs to be done to fix the procurement system, we have emphasized that senior leadership needs to pass down best practices and see to it they are followed in the field. But we also have criticized people at the working level for lack of initiative. We hope to hear more from Mr. Jordan about exercising initiative. Giving us some exemplary case histories of success stories would help.
But he also made a solid point that the acquisition team needs to increase its tolerance for taking risks. Initiative may lead to mistakes. They are to be expected. Our philosophy is that if you are not making mistakes, you are not improving the process.
bill@spriggsconsultingservices.com
Tuesday, January 8, 2013
COURT PROTESTS: ILLEGAL VS. ARBITRARY
Judge Susan Braden of the Court of Federal Claims (COFC) reminds us in a recent opinion of the difference between protests in that court based on a regulatory or procedural violation and award decisions challenged on the grounds that an agency acted in an arbitrary or capricious manner. The protest before her involved a design-build contract for medical facilities for the Army. After a lengthy opinion, she granted a preliminary injunction against the Army.
In the process of reaching her decision, she noted that the Court of Appeals for the Federal Circuit (CAFC) has emphasized that "best value" solicitations afford the contracting officer a great deal of discretion so that relative merit is primarily a matter of administrative discretion not to be interfered with by the court. However, that discretion does not allow the procuring agency the liberty to deviate from the requirements of the solicitation and ignore rules in the Federal Acquisition Regulation (FAR). Moreover, the agency must not ascertain best value in a manner that is arbitrary. Finally, discretion does not allow the court to overlook the fact that the administrative record does not contain sufficient information on which an agency could even make a rational decision.
When a bid protest is based on a regulation violation or deviation from the solicitation (illegality), the protester must show a clear and prejudicial violation of the regulation or solicitation provision. The burden is even greater when the procurement is best value. In deciding whether an agency has complied with the regulation on best value, the court may overturn the agency's decision if it is not grounded in reason. The inquiry becomes whether the agency provided a coherent and reasonable explanation of its exercise of discretion.
Alternatively, if the award decision is challenged on the grounds that an agency has acted arbitrarily or capriciously, the court intervenes only in very limited circumstances. An agency must entirely fail to consider an important aspect of the procurement. Or, it must offer an explanation for its decision that runs counter to the evidence before the agency or render an implausible explanation for its decision.
In the case before her, Judge Braden sided with the protester because the administrative record evidenced violations of the Competition in Contracting Act (CICA) and FAR. The agency decision contained no documents showing that the Army even considered the protester's "betterments" and omitted any discussion of their merits. This, she found, was arbitrary. and prejudicial to the protester. She also was completely put off by the paucity of the administrative record which failed to contain worksheets evidencing whether and how the Army evaluated the offerors.
In granting injunctive relief, Judge Braden was not persuaded by the Army's argument that an injunctive would imperil the Army's mission. The harm to the Army was self-inflicted.
A word to the wise. Follow FAR. Follow the solicitation. Document, document, document. Government lawyers: keep looking over the contracting officer's shoulder and put your foot down. Promptly redo things before there is protracted litigation which threatens the mission.
bill@spriggslawgroup.com www.spriggslawgroup.com
In the process of reaching her decision, she noted that the Court of Appeals for the Federal Circuit (CAFC) has emphasized that "best value" solicitations afford the contracting officer a great deal of discretion so that relative merit is primarily a matter of administrative discretion not to be interfered with by the court. However, that discretion does not allow the procuring agency the liberty to deviate from the requirements of the solicitation and ignore rules in the Federal Acquisition Regulation (FAR). Moreover, the agency must not ascertain best value in a manner that is arbitrary. Finally, discretion does not allow the court to overlook the fact that the administrative record does not contain sufficient information on which an agency could even make a rational decision.
When a bid protest is based on a regulation violation or deviation from the solicitation (illegality), the protester must show a clear and prejudicial violation of the regulation or solicitation provision. The burden is even greater when the procurement is best value. In deciding whether an agency has complied with the regulation on best value, the court may overturn the agency's decision if it is not grounded in reason. The inquiry becomes whether the agency provided a coherent and reasonable explanation of its exercise of discretion.
Alternatively, if the award decision is challenged on the grounds that an agency has acted arbitrarily or capriciously, the court intervenes only in very limited circumstances. An agency must entirely fail to consider an important aspect of the procurement. Or, it must offer an explanation for its decision that runs counter to the evidence before the agency or render an implausible explanation for its decision.
In the case before her, Judge Braden sided with the protester because the administrative record evidenced violations of the Competition in Contracting Act (CICA) and FAR. The agency decision contained no documents showing that the Army even considered the protester's "betterments" and omitted any discussion of their merits. This, she found, was arbitrary. and prejudicial to the protester. She also was completely put off by the paucity of the administrative record which failed to contain worksheets evidencing whether and how the Army evaluated the offerors.
In granting injunctive relief, Judge Braden was not persuaded by the Army's argument that an injunctive would imperil the Army's mission. The harm to the Army was self-inflicted.
A word to the wise. Follow FAR. Follow the solicitation. Document, document, document. Government lawyers: keep looking over the contracting officer's shoulder and put your foot down. Promptly redo things before there is protracted litigation which threatens the mission.
bill@spriggslawgroup.com www.spriggslawgroup.com
Wednesday, January 2, 2013
PAST PERFORMANCE NEED NOT BE CONSIDERED
Judge Victor Wolski of the Court of Federal Claims (COFC) observes that past performance of all offerors need not be considered under FAR 15.304(c)(3) and that consideration of past performance in commercial buys is not mandated. He specifically holds that a bidder can waive consideration of its past performance if the solicitation language alerts bidders that unacceptable technical proposals will not be further considered and a protesting contractor fails to raise objection prior to the close of the bidding process.
The case arose when the protester's proposal was rejected as ineligible based on the technical evaluation factor. The protester argued that if the agency considered past performance, it would have seen that all of the deficiencies in the technical proposal were addressed. But the solicitation clearly stated that an unacceptable technical proposal "will not be further evaluated." Based on court precedent, Judge Wolski rejected the protester's argument because the protester failed to object to the terms of the solicitation prior to the close of the bidding process.
But Judge Wolski went on to address the question of whether every offeror is entitled to a past performance evaluation. No, he says. Under commercial item buys, past performance should be evaluated but should is not mandatory. More broadly, FAR 15.304(c)(3) which makes evaluation of past performance mandatory (by using the word "shall"), does not refer to "all offerors" and "nothing in this provision precludes federal agencies from using an approach that weeds out offerors under other non-cost factors before past performance is considered."
To support his conclusion, Judge Wolski notes that price must be considered without exception when an award is made. However, it need not be considered for proposals that are technically unacceptable. "It is difficult to see how the less mandatory language of section 15.304(c)(3) could impose a greater obligation on agencies that is imposed for evaluation of price."
In conclusion, Judge Wolski opines:
bill@spriggslawgroup.com www.spriggslawgroup.com
The case arose when the protester's proposal was rejected as ineligible based on the technical evaluation factor. The protester argued that if the agency considered past performance, it would have seen that all of the deficiencies in the technical proposal were addressed. But the solicitation clearly stated that an unacceptable technical proposal "will not be further evaluated." Based on court precedent, Judge Wolski rejected the protester's argument because the protester failed to object to the terms of the solicitation prior to the close of the bidding process.
But Judge Wolski went on to address the question of whether every offeror is entitled to a past performance evaluation. No, he says. Under commercial item buys, past performance should be evaluated but should is not mandatory. More broadly, FAR 15.304(c)(3) which makes evaluation of past performance mandatory (by using the word "shall"), does not refer to "all offerors" and "nothing in this provision precludes federal agencies from using an approach that weeds out offerors under other non-cost factors before past performance is considered."
To support his conclusion, Judge Wolski notes that price must be considered without exception when an award is made. However, it need not be considered for proposals that are technically unacceptable. "It is difficult to see how the less mandatory language of section 15.304(c)(3) could impose a greater obligation on agencies that is imposed for evaluation of price."
In conclusion, Judge Wolski opines:
The FAR does not appear to contain any impediment to an agency's restricting past performance evaluations to offerors who have met some other non-cost factor threshold, such as suitably explaining how the requirements of a contract would be met.So this case if a reminder that objections to language in the solicitation must be raised prior to the closing of the bidding process. The case also is a lesson in shall vs. should and a clear indication that an agency can reject a proposal without consideration of past performance data.
bill@spriggslawgroup.com www.spriggslawgroup.com
Tuesday, January 1, 2013
THE MOST IMPORTANT PART BY (IN) FAR
This will be short and sweet. By far the most important section in the Federal Acquisition Regulation (FAR), for these trying times in particular, is FAR 15.201. We need to keep reminding ourselves and everyone in the procurement community about it. Following it is the cornerstone of any successful acquisition.
15.201 Exchanges with industry before receipt of proposals
Language in the myth busting memos lends further support to this basic admonition.
Nearly all the problems we've seen with procurements could have been avoided or ameliorated by following the clear and simple encouragement in FAR 15.201 to communicate. And, as we've pointed out, once the contract is inked, there is an obligation read into all contracts, as a matter of law, that the parties communicate with each other.
bill@spriggsconsultingservices.com
15.201 Exchanges with industry before receipt of proposals
(a) Exchanges of information among all interested parties, from the earliest identification of a requirement through receipt of proposals, are encouraged. Any exchange of information must be consistent with procurement integrity requirements (see 3.104). Interested parties include potential offerors, end users, Government acquisition and supporting personnel, and others involved in the conduct or outcome of the acquisition.Agencies are encouraged by the regulation to promote early exchanges of information. Among the techniques encouraged are: industry conferences, one-on-one meetings and draft solicitations.
Language in the myth busting memos lends further support to this basic admonition.
Nearly all the problems we've seen with procurements could have been avoided or ameliorated by following the clear and simple encouragement in FAR 15.201 to communicate. And, as we've pointed out, once the contract is inked, there is an obligation read into all contracts, as a matter of law, that the parties communicate with each other.
bill@spriggsconsultingservices.com
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