This month's bid protest spotlight considers two recent protests.
J.E. McAmis Inc. v. U.S. is an important decision by the U.S. Court of Federal Claims concerning the court's lack of authority to review the U.S. Small Business Administration's issuance of a certificate of competency.
Matter of Sierra7 Inc. is a decision by the U.S. Government Accountability Office concluding a contracting officer was not required to investigate whether an offeror's proposed devices were covered by the Section 889 ban on Chinese telecommunications equipment before awarding a delivery order.
J.E. McAmis [1]
When a contracting officer determines that an apparent successful small business bidder is nonresponsible, the matter is referred to the SBA, which will offer the small business an opportunity to apply for a certificate of competency, or COC.
A COC certifies that a small business concern meets the standards of responsibility for a particular government contract. COC issuance is significant because it overrides a determination of nonresponsibility made by the procuring agency.
In this case, the U.S. Army Corps of Engineers strongly believed the plaintiff, J.E. McAmis, was the best contractor for the job, but the SBA decided otherwise by granting Trade West Construction Inc., the defendant-intervenor, a COC.
The plaintiff brought a post-award protest challenging the SBA's issuance of the COC. The court, however, determined it lacked jurisdiction to overrule the SBA because Congress had allocated that decision-making ability to the SBA.
Background
The procurement at issue was for repair of the Coos Bay Jetty in Charleston, Oregon. The invitation for bid included “special standards of responsibility” under Federal Acquisition Regulation 9.104-2, which stated:
To be found responsible, a bidder must provide information demonstrating that the bidder has completed one jetty OR breakwater OR heavy marine construction project on the western coast of the United States with a total contract value greater than $15M performed within the last 15 years and that required procurement, delivery, AND placement of individual stones weighing at least 25 tons. If a bidder cannot or does not provide this information meeting the minimum standards, it will be determined nonresponsible and ineligible for award.
After receiving various questions and requests for clarification from prospective bidders, including Trade West, the agency issued Amendment 0001, which replaced the “western coast” requirement with “Pacific shore” — including Alaska.
The agency chose not to lower the $15 million total contract value requirement but did agree to lower the stone weight from 25 tons to 22 tons.
Trade West filed a preaward bid protest with the agency regarding the responsibility criteria, arguing that it was unduly restrictive and limited competition.
The agency denied Trade West's protest because the special-responsibility criteria applied to all offerors and ensured that the successful bidder would be able to satisfy the requirements of the Coos Bay North Jetty Repair project.
Two companies submitted bids: McAmis and Trade West. Trade West submitted the lowest bid, so the agency asked Trade West, the apparent successful bidder, to confirm its compliance with the special- responsibility criteria. Trade West responded that its experience “substantially complies with the experience requirement” to perform the work.
The agency determined Trade West's bid was nonresponsible for failing to meet the special- responsibility criteria in the solicitation. Because Trade West could not meet the responsibility criteria, the agency concluded it was ineligible for award.
The agency submitted a COC referral package to the SBA. The SBA contacted Trade West to inform it of the COC referral, and Trade West requested a COC determination.
The agency submitted documents to support its nonresponsibility determination, including an explanation that the contracting officer had identified special standards of responsibility that went beyond general standards of responsibility under FAR 9.104-1 “due to the challenging and unique nature of the requirement.”
Additionally, the agency commented that, should the SBA find Trade West responsible by issuing a COC, the SBA would be substituting its own judgment for that of the agency experts as to what constitutes appropriate special standards of responsibility for this procurement. Despite the agency's concerns, the SBA issued a COC to Trade West.
McAmis first filed a small-business size protest challenging Trade West's size status, which was denied. After the agency awarded the contract to Trade West, the plaintiff filed a protest with the GAO. The GAO denied McAmis' protest, concluding:
- The special standards of responsibility are a matter of responsibility, not responsiveness;
- Bidders may provide responsibility information “any time prior to contract award”;
- McAmis had not established that the agency's submission of documents to the SBA was inaccurate, incomplete or misleading; and
- The record did not support that the SBA failed to follow its own regulations when it issued Trade West's COC.
Furthermore, the GAO stated that, to the extent McAmis was protesting the merits of the SBA's decision, the GAO does not review challenges to SBA determinations to issue a COC. Following the GAO's denial, McAmis filed a complaint with the Court of Federal Claims.
Protest
The plaintiff protested the agency's award to the intervenor, Trade West, arguing that (1) the agency erred in its responsibility determination of Trade West and subsequent referral to the SBA; (2) Trade West had used the COC process to challenge the terms of the solicitation; and (3) the SBA failed to follow the solicitation's responsibility criteria.
In response, the agency and Trade West contended that (1) the plaintiff conflated the responsibility standards with responsiveness; (2) Trade West was not attempting to change the terms of the solicitation — rather it was defending the SBA's responsibility determination; and (3) the plaintiff's claims against the SBA were without merit.
First, the Claims Court considered the agency's motion to dismiss under Rule 12(b)(1) for lack of subject matter jurisdiction, stating that the issue was whether it has jurisdiction to review the SBA's issuance of a COC.
The plaintiff's complaint alleged that the SBA is obligated “to evaluate responsibility criteria in accordance with the requirements of the solicitation and applicable regulations, including the FAR,” and that under FAR 9.104-2(a), this criterion applied to all offerors.
The plaintiff further alleged that because the SBA found Trade West responsible, after the agency determined that Trade West did not meet the solicitation's definitive responsibility criteria, the SBA's determination ignored “the specific, objective requirements provided by the Solicitation.”
The agency argued in a cross-motion for judgment on the administrative record that the Claims Court lacked jurisdiction because the SBA's decision to grant a COC is “conclusive with respect to all elements of responsibility of prospective small business contractors,” and “the SBA's issuance of a COC is not reviewable.”
The court agreed with the agency, explaining that Congress empowered the SBA to certify and issue a final disposition to government procurement officers on all elements of responsibility. Once a small business concern is certified by the SBA as a responsible contractor for a specific government contract, the procuring agency must accept such certification as conclusive and award the contract to the small business concern, without requiring it to meet any other requirement of responsibility or eligibility.
Because the Small Business Act confers power exclusively on the SBA to make the final decision regarding responsibility, the court concluded it does not have jurisdiction to review SBA decisions granting a COC. Therefore, the court granted the agency's motion to dismiss that portion of the plaintiff's complaint for lack of subject matter jurisdiction.
Second, the court addressed the plaintiff's error in conflating responsiveness with responsibility. In its motion for judgment on the administrative record, the plaintiff argued that the agency “should have deemed Trade West's bid as nonresponsive and rejected its bid for failing to provide any information required by the special instructions.”
According to the plaintiff, the agency's action violated the express terms of the solicitation, which in the special instructions required bidders to provide the information requested with their written proposals to demonstrate responsibility
In finding that the special standards in the solicitation concerned responsibility, and not responsiveness, the court's decision provides a helpful comparison of responsiveness and responsibility — two separate but commonly confused determinations made prior to award.
Responsiveness is a review of the bidder's proposal to determine whether it complies in all material respects with the solicitation's requirements. The purpose of this analysis is to ensure that all bidders stand on an equal footing.
In contrast, responsibility is a review of the bidder's ability to satisfy its contractual commitments. In evaluating responsibility, contracting officers are not limited to the contents of the bidder's proposal; a contracting officer may seek additional information from the bidder to demonstrate that the offeror is capable of performing the contract work.
Because the special standards pertained to responsibility, the contracting officer was permitted to request additional information from Trade West to complete its responsibility determination prior to award. Therefore, the court found that the agency did not act arbitrarily or capriciously, nor did the agency violate the law, when it did not eliminate Trade West from the competition for failing to demonstrate responsibility through its bid submission.
Third, the court considered the plaintiff's argument that the agency failed to provide vital information to the SBA in its referral. Specifically, the plaintiff argued that the agency did not provide the pre-bid questions and answers from potential bidders, and that this information was relevant because potential bidders asked the agency to change the eligibility requirements and the agency stated that “it was not going to budge on the definitive responsibility criteria.”
According to the plaintiff, an award to Trade West would undermine fair competition, and this would have been evident to the SBA if it saw the pre-bid questions and answers.
The agency responded that it was not required to provide the SBA with every document related to the procurement. The agency had followed the governing regulation, which lists the required documents that the agency must include in its COC referral. Furthermore, the SBA received the bid inquiries prior to rendering its COC decision.
The court agreed with the agency because there is no requirement obligating the agency to provide the pre-bid questions and answers to SBA.
Fourth, the court considered the plaintiff's argument that the SBA violated FAR 9.104-2, the special standards of responsibility regulation, by not requiring the solicitation's special-responsibility criteria to apply to all bidders.
The agency responded that the plaintiff had not identified a Title 13 regulation violated by the SBA, that the SBA was not bound by the special-responsibility standards the contracting officer developed under FAR 9.104-2, and that Congress gave the SBA conclusive authority to determine whether a small business is responsible to perform a government contract.
The court agreed with the agency because applicability of FAR 9.104-2 to the SBA's COC determination would be contrary to congressional intent. Title 13 confers conclusive authority as to responsibility determinations of small businesses to the SBA. If the plaintiff's argument were to succeed, it would dilute the SBA's COC authority and bind it to any special standards of responsibility developed by agency contracting officers.
Interestingly, the plaintiff also argued that Trade West used the COC process to change the terms of the solicitation. According to the plaintiff, to be timely, Trade West should have protested the special- responsibility criteria prior to bid opening or the time set for receipt of initial proposals — instead of asking the SBA to invalidate the special standards later.
Normally, this would seem like a compelling timeliness argument under the Blue & Gold rule. However, as the court explains in its decision, Trade West was not opposing specific terms of the solicitation in this protest.
Rather, Trade West seems to agree with SBA and brings forth no disagreement regarding the Solicitation's responsibility criteria. Therefore, this case does not fall under the gambit of Blue & Gold Fleet v. United States.
Finally, because the court was not persuaded by the plaintiff's arguments that the agency and the SBA committed any error in the procurement process, the court concluded the plaintiff had not been prejudiced by the alleged procurement flaws.
Takeaway
The court's decision that it had no authority to review the SBA's determination that Trade West was a responsible bidder is significant. Unless Congress provides otherwise, the unique circumstances of the Small Business Act create a judicial barrier preventing plaintiffs from challenging the issuance of a COC to a competitor and shielding the SBA's issuance of COCs from judicial review.
Claims Court Judge Loren Smith, who wrote the opinion, appears to share the plaintiff's frustration with this outcome, stating, “It is the duty of a court to follow the law, not make it.”
Sierra7 [2]
In Sierra7, the GAO determined the U.S. Department of Veterans Affairs was not required to investigate whether an offeror's proposed devices were covered by the Section 889 ban on Chinese telecommunications equipment before awarding it a delivery order for personal computers.
Rather, it determined the contracting officer was entitled to rely on the self-certification of the offeror representing that it did not provide covered equipment.
Background
The prohibition on contracting for certain telecommunications and video surveillance services or equipment in FAR clause 52.204-25 implements Section 889 of the National Defense Authorization Act for Fiscal Year 2019.
As relevant to this protest, Section 889(a)(1)(A) prohibits the federal government from procuring “any equipment, system, or service that uses covered telecommunications equipment or services as a substantial or essential component of any system, or as critical technology as part of any system.”
The clause defines “covered equipment or services” as telecommunications equipment produced by Huawei Technologies Company, ZTE Corporation, or other entities that the secretary of defense reasonably believes are entities owned or controlled by, or other otherwise connected to, the People's Republic of China.
A list of prohibited equipment produced or provided by entities identified by the secretary of defense is published in the System for Award Management.
Protest
Two disappointed offerors — Sierra7 and V3Gate LLC — protested the issuance of delivery orders to Minburn Technology Group LLC and AATD LLC under a request for quotations for personal computers. The protesters raised several protest allegations. In particular, V3Gate alleged that the agency failed to meaningfully consider whether purchasing Lenovo products from AATD complied with FAR clause 52.204-25.
V3Gate argued that the Lenovo computers quoted by AATD fell within “the expansive definition” of covered equipment found in FAR clause 52.204-25, as equipment linked to the Chinese government. According to V3Gate, the agency was required to analyze whether issuing a delivery order to AATD complied with FAR clause 52.204-25.
The agency responded that it fully complied with the applicable regulatory prohibition by including the pertinent FAR clauses in the solicitation and requesting that vendors self-certify whether they provide covered telecommunications equipment. According to the agency, the contracting officer reasonably relied on AATD's representation that it did not provide covered equipment or services.
The GAO stated in its decision that “where an agency has no information prior to award that would lead to the conclusion that the vendor, or the product or service to be provided, fails to comply with the solicitation's eligibility requirements, the agency can reasonably rely upon a vendor's representation/certification of compliance.”
The GAO agreed with the agency that “upon receiving a self-certification from AATD, representing that the company did not provide or use covered equipment, the agency could rely on the veracity of that representation.”
The GAO concluded there were no concrete indications that AATD was offering prohibited telecommunications equipment and Lenovo was not subject to any exclusion listing.
Although the protester asserted that there was a “well-known connection between Lenovo and the Chinese Government,” and cited to several publications warning of cyber-espionage risks associated with Lenovo products, there was no evidence that the contracting officer was aware of these sources or should have been. Therefore, the GAO did not find that this information obligated the agency to investigate AATD's compliance representations.
Takeaway
The GAO's decision that a contracting officer is entitled to rely on an offeror's representation that it complies with the prohibition on Chinese telecommunications equipment and services is noteworthy given the government's increasing focus on cybersecurity.
The decision emphasizes that it is the offeror's responsibility to review the excluded entities list in the System for Award Management before self-certifying compliance with the prohibited telecommunications regulations.
The contracting officer may then rely on an offeror's “does not” or “will not” representations in FAR clauses 52.204-24 or 52.204-26, unless the contracting officer has reason to question the representation.
[1] J.E. McAmis Inc., No. 22-570 (March 27, 2023), available at https://ecf.cofc.uscourts.gov/cgi- bin/show_public_doc?2022cv0570-55-0.
[2] Sierra7 Inc.; V3Gate LLC, B-421109 et al. (Jan. 4, 2023) (publicly released on March 28, 2023), available at https://www.gao.gov/assets/820/818391.pdf.