Past performance need not be evaluated in lowest price, technically acceptable (LPTA) procurements if the contracting officer documents the reason past performance is not an appropriate evaluation factor. If the contracting officer decides to use past performance as an evaluation factor in LPTA selection, a comparative assessment does not apply. FAR 15.101-2(b)(1).
If the contracting officer determines that a small business' past performance is not acceptable the issue must be referred to the Small Business Administration for a Certificate of Competency in accordance with FAR subpart 19.6.
In our experience, technical acceptability in LPTA procurements have been pass/fail determinations. A comparative analysis means the proposals will be rated on some type of scale, relative to each other. However, LPTA most often is used to determine whether the proposal is acceptable or not and part of the technical evaluation includes past performance acceptability.
Past performance has been considered by GAO to be a responsibility factor. GAO views past performance as the ability of the contractor to perform the contract. Responsibility factors may be used as technical evaluation factors only when comparative evaluation is used. GAO has cautioned an agency that it cannot disqualify a small business under the guise of using relative assessment of responsibility technical factors.
If there is no real comparative evaluation, and the assessment is based on pass/fail, the decision really is one of nonresponsibility. An "unacceptable" rating on a technical criterion involving past performance really is a determination of nonresponsibility. If a small business' past performance is not acceptable, then under FAR 15.101-2(b)(1), the matter must be referred to the Small Business Administration for a Certificate of Competency. GAO consistently views past performance as a responsibility criterion where it is used as pass/fail.
bill@spriggsconsultingservices.com bill@spriggslawgroup.com
Monday, April 17, 2017
Sunday, April 9, 2017
T FOR D DEFENSE: ABUSE OF DISCRETION
There are, of course, many defenses to a termination for default. Acts or omissions of the government in its contractual capacity are among them.
One of the more esoteric defenses is known as abuse of discretion and involves failure to respond to requests for equitable adjustment (REA's).
In a case known as Ryste & Ricas, Inc., the Armed Services Board of Contract Appeals (ASBCA) reiterated the rule that a termination for default could not be based on materially erroneous information as to the contractor's responsibility for delay or materially erroneous information as to the effort and time required to finish the work. The government owes the contractor an assessment of all of the relevant circumstances when it exercises its discretion to terminate for default.
In Ryste, the contracting officer did not adequately consider whether time extensions were appropriate. The contractor had requested time extensions as part of REA's. These requests were not adequately addressed by the contracting officer. The contracting officer did not analyze the contractor's problems and did not consider whether the contract could have been substantially completed if the time extensions had been granted. In the end, the ASBCA determined the contracting officer abused his discretion by terminating the contract for default.
The ASBCA concluded the government had not met its burden of proof.
The lesson to be learned is that REA's must be fully considered. FAR 49.402-3(f) requires contracting officers to consider, among other things, the terms of the contract and applicable law and regulations in determining whether to terminate for default. The terms of the contract usually include the changes clause. The changes clause permits the contractor to submit an REA for equitable adjustment in price and schedule. FAR 43.204(b) states that contracting officers shall negotiate equitable adjustments resulting from change orders in the shortest practicable time.
If a contractor believes the contract has been changed, constructively or otherwise, and submits its REA, the contracting officer is obliged to consider it. It would seem, from a fair reading of Ryste, and the regulations, that the contracting officer also is obliged to adequately respond to the contractors REA before terminating for default. The contracting officer owes the contractor an assessment of the REA. Failure to respond altogether could well be argued as a breach of contract.
The defense to a termination for default which can be characterized as an abuse of discretion is hardly in the mainstream of defenses. However, one of the main defenses to a termination for default is acts of the government in its contractual capacity (constructive changes, breaches, etc.). Therefore, many of the defenses involve an abuse of discretion to one degree or another.
bill@spriggsconsultingservices.com
One of the more esoteric defenses is known as abuse of discretion and involves failure to respond to requests for equitable adjustment (REA's).
In a case known as Ryste & Ricas, Inc., the Armed Services Board of Contract Appeals (ASBCA) reiterated the rule that a termination for default could not be based on materially erroneous information as to the contractor's responsibility for delay or materially erroneous information as to the effort and time required to finish the work. The government owes the contractor an assessment of all of the relevant circumstances when it exercises its discretion to terminate for default.
In Ryste, the contracting officer did not adequately consider whether time extensions were appropriate. The contractor had requested time extensions as part of REA's. These requests were not adequately addressed by the contracting officer. The contracting officer did not analyze the contractor's problems and did not consider whether the contract could have been substantially completed if the time extensions had been granted. In the end, the ASBCA determined the contracting officer abused his discretion by terminating the contract for default.
The ASBCA concluded the government had not met its burden of proof.
The lesson to be learned is that REA's must be fully considered. FAR 49.402-3(f) requires contracting officers to consider, among other things, the terms of the contract and applicable law and regulations in determining whether to terminate for default. The terms of the contract usually include the changes clause. The changes clause permits the contractor to submit an REA for equitable adjustment in price and schedule. FAR 43.204(b) states that contracting officers shall negotiate equitable adjustments resulting from change orders in the shortest practicable time.
If a contractor believes the contract has been changed, constructively or otherwise, and submits its REA, the contracting officer is obliged to consider it. It would seem, from a fair reading of Ryste, and the regulations, that the contracting officer also is obliged to adequately respond to the contractors REA before terminating for default. The contracting officer owes the contractor an assessment of the REA. Failure to respond altogether could well be argued as a breach of contract.
The defense to a termination for default which can be characterized as an abuse of discretion is hardly in the mainstream of defenses. However, one of the main defenses to a termination for default is acts of the government in its contractual capacity (constructive changes, breaches, etc.). Therefore, many of the defenses involve an abuse of discretion to one degree or another.
bill@spriggsconsultingservices.com
Saturday, April 8, 2017
THE JUDICIAL ROLE OF THE CONTRACTING OFFICER
It's time we reminded ourselves of the judicial role of the contracting officer in government contracts. Contracting officers are required by law to act impartially and function in a judicial role when resolving disputes. The history is clear but very often overlooked.
Abraham Lincoln once said: "It is as much the duty of the government to render prompt justice against itself, in favor of citizens, as it is to administer the same between private individuals." In 1912, the United States Supreme Court, in addressing the duties of the contracting officer, said: "But the very extent of the power and the conclusive character of his decision raised a corresponding duty that the agent's judgment should be exercised not capriciously or fraudulently, but reasonably, and with due regard to the rights of both contracting parties."
The most resounding pronouncement, however, was made by the Court of Claims in a 1950 opinion when, after referring to the 1912 Supreme Court opinion, the Court of Claims said the contracting officer must not represent either side but must "act as an impartial, unbiased judge." The Court of Claims went on to say the contracting officer's function was "to act impartially, weighing with an even hand the rights of the parties on the one hand and on the other." The court recognized the obligation of the contracting officer to represent the government's interests in procurement matters, but it went on to state clearly that "in settling disputes this is not his function."
This is pretty clear. So why are there so many complaints about contracting officers failing to act judicially when disputes arise?
It's time to get back to basics and take heed of judicial precedent. And just to bring all this up to date, read FAR 1.602-2(b) again. "Contracting officers shall ensure that contractors receive impartial, fair and equitable treatment." It's mandatory. Impartial, fair and equitable treatment. Sounds like something Abraham Lincoln might say.
bill@spriggslawgroup.com
Abraham Lincoln once said: "It is as much the duty of the government to render prompt justice against itself, in favor of citizens, as it is to administer the same between private individuals." In 1912, the United States Supreme Court, in addressing the duties of the contracting officer, said: "But the very extent of the power and the conclusive character of his decision raised a corresponding duty that the agent's judgment should be exercised not capriciously or fraudulently, but reasonably, and with due regard to the rights of both contracting parties."
The most resounding pronouncement, however, was made by the Court of Claims in a 1950 opinion when, after referring to the 1912 Supreme Court opinion, the Court of Claims said the contracting officer must not represent either side but must "act as an impartial, unbiased judge." The Court of Claims went on to say the contracting officer's function was "to act impartially, weighing with an even hand the rights of the parties on the one hand and on the other." The court recognized the obligation of the contracting officer to represent the government's interests in procurement matters, but it went on to state clearly that "in settling disputes this is not his function."
This is pretty clear. So why are there so many complaints about contracting officers failing to act judicially when disputes arise?
It's time to get back to basics and take heed of judicial precedent. And just to bring all this up to date, read FAR 1.602-2(b) again. "Contracting officers shall ensure that contractors receive impartial, fair and equitable treatment." It's mandatory. Impartial, fair and equitable treatment. Sounds like something Abraham Lincoln might say.
bill@spriggslawgroup.com
Thursday, September 26, 2013
GOVERNMENT'S DUTY TO INQUIRE
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
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, 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
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