February 2017 Protest Roundup

by Morrison & Foerster LLP - Government Contracts Insights
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In February 2017, the Government Accountability Office (GAO) publicly released notable decisions addressing (1) the effect of the temporary lapse in GAO’s civilian task order jurisdiction; (2) discussions, clarifications, and communications; (3) reimbursement of protest costs for an agency’s failure to take prompt corrective action; and (4) unduly restrictive agency specifications.  We discuss the most salient points of these protest decisions below.

GAO’s Civilian Task Order Jurisdiction

As government contractors are now well aware, GAO’s jurisdiction over civilian task order protests expired on September 30, 2016.  See GAO’s Jurisdiction Over Protests of Civilian Agency Task Orders Set to Expire September 30, 2016.  As a result of the lapse in jurisdiction, many contractors seeking to challenge civilian task order awards were left without a forum to file their protests.  On December 14, 2016, President Obama reinstated GAO’s civilian task order protest jurisdiction through the “GAO Civilian Task and Delivery Order Protest Authority Act of 2016.”  Although the new law reestablished GAO as a bid protest forum for civilian task order awards prospectively, questions remained as to whether the law had retroactive effect.  In HP Enterprise Services, LLC—Reconsideration, B-413382.3, Jan. 26, 2017, GAO answered this question in the negative.

On October 21, 2016, HP Enterprise Services (HPES) filed a protest at GAO challenging the General Services Administration’s (GSA) award of a task order for information technology support services for the Department of Defense (DoD) Joint Service Provider.  In a decision issued on November 30, 2016, GAO dismissed the protest because GAO’s civilian task order jurisdiction had expired.

HPES subsequently filed a request for reconsideration of GAO’s dismissal.  The request alleged that GAO erred in dismissing HPES’s protest because GSA was conducting the task order procurement on behalf of a defense agency, which meant GAO had jurisdiction to decide the protest in the first instance.[1]  HPES also asserted that GAO should reconsider its decision in light of the reinstatement of GAO’s civilian task order jurisdiction.  GAO denied each of HPES’s requests.

GAO found that, contrary to HPES’s assertions, neither Section 801 of the 2008 NDAA nor FAR 17.703 authorized civilian agencies to issue task orders under 10 U.S.C. § 2304c, a statutory provision that is applicable only to defense agencies.  Moreover, GAO found that neither authority gave GAO jurisdiction to consider protests of civilian agency procurements.

GAO also declined to reconsider the protest in light of the new law reinstating GAO’s task order jurisdiction.  GAO found that the law was not intended to apply retroactively to protests filed prior to the law’s enactment because the law lacked an “express statement” calling for retroactive effect.

Given that GAO’s civilian task order jurisdiction is no longer subject to a sunset provision, it is unlikely that offerors will find themselves in a position similar to that of HPES any time soon.  Nevertheless, GAO’s decision is an important reminder of the differing requirements for civilian and defense task order procurements.  For example, the 2017 NDAA recently raised GAO’s jurisdictional threshold for defense-related task orders from $10 million to $25 million.  GAO’s threshold for civilian task order protests, however, remains at $10 million.

Discussions/Clarifications/Communications

In Alltech Engineering Corp., B-414002.2, Feb. 6, 2017, Alltech protested the Army’s rejection of its proposal to repair radial flood gates at the Hulah Lake Dam in Copan, Oklahoma.  The Army determined that Alltech’s proposal was technically unacceptable because Alltech had failed to provide a narrative explanation, including a phasing plan, crew assembly and work schedule, or safety plan, as required by the solicitation.  In its protest, Alltech conceded that it did not provide the required information, but asserted that the omission was not material and could reasonably be addressed through clarifications.

GAO disagreed with Alltech on both fronts.  First, it held that the omission of the narrative explanation was not merely a clerical error, but rather a material omission.  GAO emphasized that “[c]learly stated RFP technical requirements are considered material to the needs of the government, and a proposal that fails to conform to such material terms is technically unacceptable and may not form the basis for award.”  Because Alltech could not demonstrate that the information contemplated by the narrative explanation requirement was unnecessary for the agency to conduct a meaningful evaluation, GAO discounted Alltech’s contentions as mere disagreement.

GAO also found that Alltech’s omission could not be addressed through clarifications, which GAO defined as “limited exchanges between the agency and offerors that may occur when contract award without discussions is contemplated.”  GAO explained that because Alltech’s failure to provide a narrative explanation was a material omission, the defect could be cured only through discussions.  GAO also determined that even if the omission were not considered material, an agency is not required to engage in clarifications.  Accordingly, the Army could not have been obligated to seek clarifications regarding Alltech’s omission in any event.

The key takeaway from Alltech is that an agency is never required to conduct clarifications with an offeror.  Even if the Army could have resolved Alltech’s omission through a clarification question, whether the Army chose to do so was firmly within its discretion. Offerors therefore should not count on GAO requiring agencies to clarify proposal defects.

In addition, GAO’s decision in Alltech is notable because it appears to conflate clarifications and communications, which are distinct types of exchanges under FAR 15.306.  Although not significant to the outcome in Alltech, offerors should be mindful that communications and clarifications serve different purposes.  Whereas clarifications are intended to clarify minor or clerical errors, communications may be broader in scope and lead to the establishment of the competitive range.  Neither clarifications nor communications may be used to cure proposal deficiencies.

Reimbursement of Protest Costs for Agency’s Failure to Take Prompt Corrective Action

In KWR Contruction, Inc.–Costs, B-412914.2 (Feb. 3, 2017, issued Feb. 7, 2017), GAO recommended that KWR be reimbursed for its costs of filing and pursuing a protest because the Air Force failed to take prompt corrective action in the face of KWR’s “clearly meritorious” protest.

The RFP, set aside for firms in the SBA’s 8(a) program, sought four vendors to provide general construction services at Davis-Monthan Air Force Base in Arizona through individual delivery orders over five years.  The contracts themselves were to be design-build, indefinite-delivery, indefinite quantity (IDIQ) contracts.  The total estimated construction cost for all the awards under the RFP was not to exceed $45,000,000.  The RFP identified the initial project, which it called the “seed project,” and required offerors to submit proposals for the seed project to be eligible for an ID/IQ contract award.  The RFP contemplated a lowest price technically acceptable source selection process and required each firm to submit a detailed construction schedule for the entirety of the 480-day project; it also set a page limit of 28-pages total.

Six offerors submitted bids.  Though it was the lowest priced offeror, KWR was eliminated as one of two firms that the agency deemed technically unacceptable.  The Air Force awarded contracts to the four offerors deemed technically acceptable.  KWR challenged the agency’s determination that it was not technically acceptable.  When the Air Force filed its report and included portions of the awardees’ proposals that addressed the scheduling requirement, it became clear that one of the awardees, “Vendor C,” had submitted a schedule spanning a mere five week period.  Because of the agency’s redactions it was not clear, however, whether this schedule was complete or whether Vendor C had submitted addition schedule information.

In its comments, KWR argued that the agency had engaged in unequal treatment when evaluating the schedules.  In particular, it took issue with Vendor C’s five week schedule.  It pointed out that, if the agency’s report included Vendor C’s entire submission, the five week schedule did not meet the agency’s requirements for a detailed schedule to address the entire 480-day project.  If, on the other hand, the five week portion (which took up four pages) was just an excerpt, Vendor C’s proposal must have exceeded the agency’s stringent page limitations.  The agency responded that it had included Vendor C’s entire schedule and asserted that Vendor C did not need to finish the schedule to meet the standard of acceptability because “its list of tasks and their duration rendered it acceptable.”  KWR submitted a response pointing out numerous issues with Vendor C’s submitted schedule and GAO ultimately convened a teleconference to discuss the agency’s evaluation of project schedules.

Only after this teleconference, did the agency decide to take corrective action.  KWR then filed for reimbursement of its protest costs, maintaining that its protest allegations were clearly meritorious and the Air Force had delayed in taking corrective action.  The Air Force responded that the protest was not clearly meritorious because additional record development followed the filing of KWR’s comments and it did not unduly delay corrective action because KWR raised its allegations with specificity only in its comments on the agency report.

GAO sided with KWR entirely.  It reiterated that it does not recommend reimbursement of costs in every case in which an agency takes corrective action, but only where an agency unduly delays in the face of a clearly meritorious protest “thereby causing the protester to expend unnecessary time and resources to make further use of the protest process to obtain relief.”  It found that the Air Force had done so here.  KWR’s protest was meritorious because reasonable inquiry by the Air Force into the KWR’s allegations revealed facts–specifically Vendor C’s defective schedule–that would have shown the absence of a defensible legal position.  It rejected the Air Force’s argument that because GAO had to conduct further record development, KWR’s allegations were not clearly meritoriousGAO had had to conduct further development to determine whether the schedule was complete because of the Air Force’s own extensive redactions.  GAO also rejected the agency’s claim that the Air Force had taken prompt corrective action.  GAO determined that KWR had raised its clearly meritorious allegation regarding Vendor C’s schedule in its comments and the Air Force, rather than taking corrective action at that point, had responded to KWR’s comments, by subjecting KWR “to the additional expense of replying to the agency’s response.”

This decision is a good reminder that costs are recoverable when an agency fails to take prompt corrective action in the face of protest allegations with clear merit.  It also serves as a reminder that, while it is GAO’s “general rule” that where further record development is necessary, GAO is not likely to consider the protest “clearly meritorious,” there are exceptions to the rule.

Unduly Restrictive Technical Specifications

In Pitney Bowes, Inc., B-413876.2 (Feb. 13, 2017, issued Feb. 28, 2017), GAO determined that the IRS had not adequately explained why certain technical specifications in its RFQ for the procurement of mail inserter/folder machines were necessary, and sustained a Pitney’s protest on the ground that the IRS’s specifications were unduly restrictive of competition.

The RFQ was issued in November 2016 via GSA’s e-Buy system and contemplated award of a fixed price contract on a lowest-priced, technically acceptable basis.  It sought quotations for four machines to be used for document processing and mailing at the IRS’s National Distribution Center in Bloomington, IL.  The distribution center an IRS facility that processes and mails a high volume of letters, including Affordable Care Act compliance and earned income tax credit letters.  The statement of work (SOW) included certain specifications with which Pitney took issue, including requirements for machines that had (1) a “high capacity sheet feeder with a capacity of up to 1,000 per feeder with the capability of loading on the fly” and (2) “[o]ne envelope feeder to handle all types of envelopes from letters to flats.”  Pitney argued that the requirements unduly restricted competition because they were more stringent than the agency’s needs warranted and amounted to a de facto sole source requirement.

As to the first issue–“load-on-the-fly capability”–Pitney maintained that the IRS did not need it because Pitney could ensure continuous operation by using two high capacity sheet feeders, each holding 1,000 sheets, rather than a single machine with load-on-the-fly capability.  The IRS had said this capability was required “to minimize production time by allowing the equipment to be loaded while in operation.”  With two machines, however, employees could insert any additional sheets they needed to add to the second machine while the first was operating.  This would allow items to be pulled from one feeder while the other feeder is filled.  Moreover, Pitney’s solution had the added benefit of allowing one machine to continue to operate in the event of a problem or breakdown of the other machine.  GAO found this argument compelling and determined that the IRS had not established that load-on-the-fly capability was necessary.

GAO also found that the IRS had not established that it needed an envelope feeder that could handle all types of envelopes from letters to flats.  Pitney argued that its equipment could handle a wide range of the most common types and sizes of envelopes and that it would take just 30 seconds to remove a feeder and replace it with a new one that could accommodate a more unusual size.  The IRS did not explain why it needed a feeder that could handle sizes and types that were not standard.  It also failed to provide information about whether and how often insertion of non-standard feeders would even be necessary.  GAO therefore found that the agency had not provided a reasonable justification for requiring the machines to come equipped with a single feeder that could handle all types of envelopes.

GAO recommended that IRS make a documented determination of its needs and revise its RFQ to include specifications necessary to meet those needs.  It also gave Pitney its protest costs, including attorneys’ fees.

The takeaway here is that companies looking to respond to RFQs should think critically about whether their products  could meet requirements even if they do not meet stated agency specifications and consider protesting if the stated specifications seem unnecessarily stringent or restrictive.

[1] The 2013 National Defense Authorization Act (NDAA) repealed the sunset provision for DoD task orders, which meant that GAO’s jurisdiction of defense-related task orders did not expire on September 30, 2016.

[View source.]

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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