December 5, 2018 - Protests & Litigation

November 2018 Bid Protest Roundup

Protests and LitigationFor this month’s bid protest roundup, we have identified four diverse bid protest decisions coming out of the Government Accountability Office (“GAO”) and the U.S. Court of Federal Claims.  The first two, CDO Technologies and Facility Services, remind would-be protesters of the dangers that may lie in waiting for a complete picture of the facts before filing or otherwise failing to diligently pursue a protest.  We then discuss McCann-Erickson, a reminder that just because you’ve given something to agency evaluators does not mean it will be considered if it’s not in your proposal.  And lastly, we examine the GAO’s interpretation of domestic preference laws in Mechanix Wear.

  • CDO Technologies, Inc., B-416989, Nov. 1, 2018

In CDO, the protester challenged a task order award on the grounds that the agency conducted an unreasonable price realism evaluation and failed to adequately assess the performance risk related to the awardee’s proposed price.  In particular, the protester alleged that the awardee’s total proposed price was unrealistically low and would require the awardee to slash incumbent salaries, which would ultimately endanger performance.

In response to a request for debriefing, the agency revealed the awardee’s price, technical, and past performance ratings, and responded to several questions concerning the agency’s evaluation.  These questions included specific questions from the protester about the agency’s price realism evaluation.  For example, the protester inquired about the agency’s intent for offerors to propose 40 full-time equivalent (“FTE”) employees for the core labor CLIN, and whether offerors could propose fewer FTEs.  The agency responded that it intended for 40 FTEs to perform the CLIN.  The protester also asked whether the agency prepared an independent government cost estimate (“IGCE”) and how the awardee’s price compared to the IGCE.  The agency responded that it had conducted a price realism analysis in accordance with the solicitation and determined the awardee’s price was realistic.

According to the protester, approximately one month after the agency closed the debriefing, the awardee began contacting the protester’s incumbent personnel with employment offers representing a decrease in compensation of roughly 25% when compared to incumbent salaries.  Armed with this knowledge, the protester filed a protest at the GAO within 10 days of learning of the awardee’s job offers.

The GAO dismissed the protest as untimely.  In dismissing the protest, the GAO rejected the protester’s argument that knowledge of the awardee’s total evaluated price was, alone, insufficient to provide the basis for a valid protest ground because the protester would have to speculate regarding the basis for the difference in price between the protester and the awardee.  The GAO held that although it does not consider purely speculative protest arguments, that general rule does not mean that the GAO will not consider, or that a protester should not allege, protest grounds that are based on “reasonable and credible inferenced based on the information available to the protester.”

The GAO found that the protester’s allegations ultimately were premised on a comparison between the protester’s proposed price and that of the awardee, and that the protester had sufficient knowledge to raise this allegation based on the award notice and debriefing.  In fact, the GAO observed that the protester’s debriefing questions betrayed its argument it lacked sufficient information to protest, as they unequivocally demonstrated that the protest was aware that the “the likely difference in the proposals’ respective prices related to the offerors’ proposed compensation for core labor.”  Accordingly, reminding the protester that “a firm may not delay filing a protest until it is certain that it is in a position to detail all of the possible separate grounds of protest,” GAO dismissed the protest in its entirety.

Key Takeaway:  Do not let the “perfect” be the enemy of the “good.”  Although protesters generally should avoid speculative protest grounds, protesters should not wait to file protests until all facts are known.  Reasonable and credible inferences based on known facts, if uncontradicted, can provide a viable basis for protest.

  • Facility Servs. Mgmt., Inc. v. United States, No. 18-1224C (Fed. Cl. Nov. 19, 2018).

Facility Services concerns a protester’s request for a temporary restraining order (“TRO”) and preliminary injunction (“PI”) to enjoin the government from truncating a bridge contract and accelerating the phase-in of a follow-on contract.

The plaintiff was the incumbent contractor providing installation support services under a bridge contract for the U.S. Army.  On September 17, 2018, the government awarded a follow‑on contract to a different contractor.  Thereafter, on October 30, 2018, the plaintiff filed a protest at the Court of Federal Claims challenging the award and requesting a TRO and PI.[1]  In requesting emergency relief, the plaintiff alleged that the government was attempting to cut short the bridge contract, which was not set to expire until December 13, 2018, and instead accelerate the transition to the follow-on contractor.

The Court of Federal Claims denied the request for emergency relief, noting that the plaintiff had conflated two distinct contract issues in prosecuting its motion.  The Court observed that while the underlying bid protest concerned the solicitation and evaluation process for the follow-on contract for installation support services, the plaintiff’s request for emergency relief appeared to relate to the government’s obligation to allow the plaintiff to complete its performance of the bridge contract.

To the extent the plaintiff’s request for injunctive relief related to the award of the follow-on contract, the Court found that it was untimely.  Following the government’s award decision on September 17, 2018, the plaintiff signed a Joint Status Report that explicitly acknowledged the government’s intention to phase in the awardee’s performance before the expiration of the bridge contract.  The Joint Status Report also stated that the plaintiff did not seek to prevent the government from moving forward with its award.  Nevertheless, the plaintiff ultimately allowed six weeks to lapse before seeking injunctive relief.  Although the plaintiff argued it needed documents in the administrative record before it could determine whether emergency relief was warranted, the Court found this justification for delay untenable, as the plaintiff still waited another three weeks after the agency filed the record to file its motion for emergency relief.

The Court similarly found the plaintiff had no basis for emergency relief with respect to the bridge contract.  The Court noted that to the extent the plaintiff was challenging the government’s actions with respect to the bridge contract – which the Court believed was the plaintiff’s actual intention – such a challenge to contract administration was not within the Court’s bid protest jurisdiction.  Rather, the proper avenue for such a dispute was to file a claim pursuant to the Contract Disputes Act.  Accordingly, the Court denied the motion for emergency relief.

Key TakeawayFacility Services offers a good reminder to contractors to keep protest and contract administration issues separate.  It also demonstrates that although the Court of Federal Claims does not have GAO’s strict timeliness rules, the Court will not tolerate clear failures to diligently prosecute protests.

  • McCann-Erickson USA, Inc., B-414787.2, Nov. 14, 2018

Those following the GAO’s bid protest docket are frequently reminded that the Government can have a strict hand when rejecting proposals for things that, in a commercial setting, would appear trivial.  The advertising giant McCann Erickson (think “I’d Like to Buy the World a Coke” and “Army Strong”) learned this lesson the hard way recently when competing for the Army’s latest 10-year, $4 billion advertising and marketing services contract.

In fact, the firm had its proposal rejected twice in this procurement – first in the Agency’s initial “compliance review,” and then, after a successful protest, a second time when the firm accidentally filed its final proposal revision without a disc containing material portions of its cost/price proposal.  The firm, reportedly upon finding this disc in an employee’s computer and recognizing it must have been omitted, called the contracting officer to explain and mailed the disc to the agency immediately, with it arriving the day after final proposals were due.  The agency refused to open the package or consider the documents on the disc inside.  Relying only on McCann Erickson’s incomplete cost/price proposal, the Army evaluators determined they could not perform a meaningful cost realism analysis, and the agency rejected McCann Erickson’s proposal on that basis.

At the GAO, McCann Erickson conceded it failed to include critical information in its final proposal, and appears not to have challenged the Army’s refusal to consider its forgotten disc.  Instead, it argued the Agency had all the information it needed to evaluate McCann Erickson’s proposal in the materials it submitted during discussions.  The GAO was not persuaded for three reasons:

First, the GAO noted discrepancies between McCann Erickson’s total evaluated cost/price in its discussion materials and that in its final proposal revision.  McCann Erickson argued that this difference was attributable to its removal of a certain cost element, but the GAO found no contemporaneous evidence to support this claim.  The GAO also referenced other discrepancies noted in the cost evaluators’ memoranda that it said were not explained in the contemporaneous record.

Second, the GAO noted McCann Erickson had made changes to its technical proposal in its final proposal revision.  There was no way, the GAO reasoned, for the agency to evaluate these technical changes – and their potential impact to McCann Erickson’s total cost/price ‑ without a complete cost/price proposal included with the firm’s final proposal revision.

Third, and finally, the GAO noted the Army had repeatedly warned McCann Erickson that the agency would not consider information included in discussion responses that was not also included in an offeror’s final proposal revision.  In this regard, the GAO repeated some advice from the agency that all offerors would do well to remember in any procurement:  “Do not assume that the Government will attempt to trace back through the data that was received as a result of Discussions in an attempt to evaluate the revised Cost/Price Volume.

For these reasons, the GAO found no basis to object to the Agency’s refusal to consider the disc McCann Erickson initially forgot to include or the (purportedly) comparable information in McCann Erickson’s discussion responses.  The protest was denied and McCann Erickson’s exclusion from the competition upheld.

Key Takeaways:  It is critical that offerors check and double-check all proposal submissions to ensure they comply exactly with the content and format requirements in the solicitation.  When it comes time to submit final proposal revisions, it is also critical to ensure all changes responding to the agency’s evaluation notices and all information included in an offeror’s formal responses are actually captured in the final proposal itself.  Further, offerors should carefully read through their entire revised proposal to ensure all changes are carried throughout the document consistently, even to affected areas the agency may have omitted in its evaluation notices.  Otherwise, you may risk elimination or a negative evaluation for easily correctible errors.

  • Mechanix Wear, Inc., B-416704; B-416704.2, Nov. 19, 2018

At times, the GAO is asked to weigh in on the United States’ few but often labyrinthine domestic-preference statutes and regulations, in particular where an agency may be applying them in an overly restrictive manner.  Mechanix Wear is a good example of such a case, in that it attempts to navigate a confusing series of cross-referencing regulations and also deals with a fairly obscure material one might not expect to be the subject of federal regulation:  pickled-state goat/kidskin.[2]  Specifically, the GAO found that the Department of Defense cannot require items made of goat or kidskins – or any other of the materials designated in the Federal Acquisition Regulation (“FAR”) as “nonavailable articles” for purposes of the Buy American Act, 41 U.S.C. §§ 8301 et seq. – to be sourced domestically on the basis of the Berry Amendment, 10 U.S.C. § 2533a, alone.  Let’s unpack that a little.

The Berry Amendment, enacted in 1941 to ensure U.S. troops in World War II wore uniforms and ate food produced wholly in the United States, now prohibits the Department of Defense from spending money on food, clothing, tents, other items made from fibers and yarns, or hand tools that have not been “grown, reprocessed, reused, or produced” in the United States.  The statute identifies a number of exceptions, including for such items where the Secretary of Defense “determines that satisfactory quality and sufficient quantity . . . cannot be procured as and when needed at United States market prices.”

The Buy American Act separately requires all Federal agencies to implement formal preferences for goods manufactured, mined, or produced in the United States when purchasing certain supplies.  As with the Berry Amendment, the Buy American Act also contains an exception for articles that are not made in “sufficient and reasonably available commercial quantities” and are not of a “satisfactory quality.”  Regulators have generated a list, at FAR 25.104(a), of articles that have been determined to be “nonavailable” for these purposes: among many other things, bamboo shoots, talc, swords, and, as relevant in Mechanix Wear, goat and kidskins.  By regulation, this list also serves to identify items that fall within the Berry Amendment’s nonavailability exception, i.e., the provisions in the Department of Defense FAR Supplement (“DFARS”) implementing the Berry Amendment state unambiguously that they “do[] not apply . . . to items listed in section 25.104(a) of the [FAR].”  DFARS 252.225-7012(c); see also DFARS 225.7002-2(c).

In Mechanix Wear, the Defense Logistics Agency (“DLA”) was defending its requirement that all goat and kidskin be sourced domestically for its procurement of up to one million touchscreen-compatible combat gloves.  The agency recognized these articles were facially exempt from the requirements of the Buy American Act and Berry Amendment, but argued that because regulation related to the Buy American Act requires a contracting officer to conduct market research on available domestic sources before relying on the list in FAR 25.104(a), the same applies when considering the list for purposes of the Berry Amendment.

Mechanix Wear, a small glove producer in Valencia, California, disagreed.  It argued that the plain text of the Berry Amendment regulations exempted all articles listed in FAR 25.104(a) and made no reference to the Buy American Act’s market research requirement.  Without any regulatory requirement that goat or kidskins be purchased from domestic sources, DLA’s requirement was unduly restrictive of competition, Mechanix Wear argued, because it was not reasonably necessary to meet the agency’s needs.  The GAO agreed, finding nothing in the language of the DFARS anticipating an override of this list of exceptions to the Berry Amendment where a contracting officer finds an item to be domestically available in sufficient quantity and quality to meet the agency’s need.  Thus, because DLA had failed to identify any other reasonable basis for the restriction, the protest was sustained.

Key Takeaway:  Pay close attention to domestic sourcing requirements in solicitations and contracts, and be aware of the many exceptions that may apply.  These regulations can be very tricky to navigate, and we suggest engaging early with legal counsel to address any questions about compliance.[3]  And if you find the Government insisting on overly restrictive domestic sourcing requirements without a statutory or regulatory basis, you may want to consider raising your concerns in a pre-award protest.  In that case, keep in mind all such protests must be filed prior to the submission of proposals, lest it run the risk of being dismissed as untimely.

[1] The plaintiff commenced its proceeding before the Court on August 15, 2018, through a pre-award protest alleging solicitation improprieties.  Following the agency’s award decision on September 17, 2018, the plaintiff filed a second amended complaint to challenge the award decision.

[2] Kidskin as in the skin of a kid goat.

[3] We have published on this blog a high-level guide for determining compliance with certain domestic preference laws, including the Buy American Act.  This guide is helpful, but it only begins to scratch the surface.