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

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.

1. 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.
2. 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.
3. Make your choice of forum based on sound professional advice.  This usually means going to the Board of Contract Appeals (Board).
4. Always file your complaint with your notice of appeal.  Always.  There is no need to wait the 30 days.
5. 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.
6. 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.  
7. 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.
8. 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.
9. 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.
10. 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.

These are just a few suggestions on resolution of claims.  We are a big fan of ADR. However, it should be used early in the process.  It's an excellent technique for discovering the other side's position and it is the best opportunity you have to hear a judge (as mediator) point out the strengths and weaknesses of the parties' positions.

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

                                                   http://spriggsconsultingservices.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:

"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/