Sometimes a comparison of cases best illustrates the law. This month we analyze a double pair of recent GAO decisions. First, in CharDonnay and Triple Canopy, we compare decisions dissecting the merits of best-value determinations. Second, in Orlans and Cellco, we contrast pre-award challenges to whether an agency’s market research adequately established customary commercial practices. After each, we offer the government contractor a few takeaways.
Dissecting Best Value Determinations
In CharDonnay Dialysis, the GAO agreed that the agency’s best-value tradeoff decision was flawed. The procurement at issue involved dialysis treatment services for the Department of Justice’s Bureau of Prisons. Despite faltering in challenges to the agency’s dismissal of a late proposal revision, discussions, and price and technical evaluations, the protestor ultimately succeeded in challenging the agency’s best-value determination. The agency’s defense failed because it relied solely on the adjectival ratings—rather than the relative merits—when deciding the proposals were “essentially equal.” Adjectival ratings are no substitute for the underlying merits when making a best-value tradeoff decision. Because the agency’s source selection decision referenced only the identical adjectival ratings, the GAO could not find the agency’s conclusions reasonable.
At first blush, the proposals received similar evaluations, and in fact received identical adjectival ratings under the non-price evaluation factors: The protestor’s technical rating was very good, as was the awardee’s; the protestor’s past performance rating was exceptional, as was the awardee’s. The protestor’s price was $19.6 million while the awardee’s price was $19.4 million—a difference of one percent. In the best-value decision, the first two factors—technical and past performance—were to be weighed equally to price.
During the technical evaluation, the agency identified substantive differences in the proposals, including the protestor’s weaknesses (such as encouraging, rather than requiring, communication between the contractor and the agency facility). The agency’s error lay in not citing these substantive differences when determining that the proposals were “essentially equal,” and choosing the awardee based on price. The protestor contended that in so doing, the agency impermissibly converted the best-value tradeoff decision into a lowest-price, technically acceptable decision, contrary to the terms of the solicitation.
The GAO agreed and stated, “When an agency reasonably evaluates competing proposals as essentially equal, no tradeoff is required in selecting the lower-priced proposal.” That does not excuse the agency from discussing the underlying merits. “When an agency finds offerors' proposals to be essentially equal, the selection official must explain the basis for why proposals are considered essentially equal.” In doing so, “an agency cannot simply rely on the fact that proposals have the same adjectival ratings.” The record was devoid of evidence that in the final source selection decision, the “agency meaningfully looked behind the adjectival ratings―or even attempted to compare the proposals in any fashion―before finding the proposals to be technically equal, and making the selection decision based on price.” Accordingly, the GAO could not conclude that the best-value tradeoff decision was reasonable and sustained the protest.
In Triple Canopy, the protestor’s challenge to a best-value tradeoff decision stumbled when the agency pointed to substantive differences between the proposals when justifying the selection of an offeror notwithstanding the price premium. Though awardee’s bid was significantly more costly, the GAO found no basis to object because the evaluation was reasonable and consistent with the selection criteria and terms of the solicitation.
The procurement involved a task order for base security operations and services at Shaw Air Force Base in South Carolina. Proposals were evaluated based on three factors: (1) technical, (2) past performance, and (3) price, with the technical factor evaluated on an acceptable/unacceptable basis and past performance weighed significantly more than price. On price, the protestor’s proposal cost $55 million while the awardee’s proposal cost $79 million―a whopping 45 percent higher price premium. The protestor contended that the agency’s best-value tradeoff selection decision was flawed because the agency’s underlying evaluations of past performances were unreasonable.
The GAO disagreed. While the protestor identified one past performance reference, the awardee submitted four past performance references (two as a prime contractor and two for proposed subcontractors). For the past performance factor, the awardee and protestor received the same recency and relevancy ratings of recent/somewhat relevant, but the protestor was assigned a lower confidence rating of neutral confidence, whereas the awardee was assigned a rating of satisfactory confidence.
The GAO found that agency reasonably determined that the protestor “failed to demonstrate past performance which encompassed the full scope of the PWS.” Moreover, the agency reasonably determined that because the protestor’s sole reference did not support the quality ratings that were provided with a narrative describing the nature of the work performed, the record was “so sparse that no meaningful confidence assessment rating could reasonably be assigned.” In contrast, the awardee’s narratives provided substantive details, describing the nature of the work performed and how performance exceeded task order requirements.
Because the agency reasonably compared the assessments against differences in price, the agency was justified in selecting the offeror in which it had higher confidence, despite the price premium.
- First, identical adjectival ratings do not necessarily mean proposals are equal under the non-price factors or that the lower price automatically wins. An agency must show it meaningfully considered the substantive merits of the competing proposals when determining which provides the better value. An agency that relies solely upon adjectival ratings in making its best-value determination is an agency in trouble. This may be the case even where the agency selects the lower priced offeror.
- Second, it’s not always about the money. One might think that the larger the price differential between offers, the easier to show the agency made the wrong tradeoff decision. But, as Triple Canopy shows, an agency may successfully defend a vast price premium (even 45 percent) if the agency adequately documents meaningful differences between offers.
- Third, it is always about the record. The successful protestor must ground arguments both in law and facts. The same legal strategy of challenging the best-value decision succeeded when the contractor caught the agency summarily relying on adjectival ratings but failed when the agency could reasonably point to substantive differences in justifying a far higher price tag.
Challenging Agencies’ Customary Commercial Practice Findings
In Orlans, the protestor successfully alleged that various terms of the agency’s commercial services solicitation were “contrary to customary commercial practice,” and thus contrary to law. The solicitation sought nationwide default management services for the USDA’s Rural Development Single Family Direct Loan portfolio. The Federal Acquisition Regulation (FAR) requires an agency to assess customary commercial practices via market research before issuing a solicitation for commercial items or services. Moreover, agencies may not tailor solicitations for commercial items in a manner inconsistent with customary commercial practices (without a waiver). Here, the protestor contended that several requirements pertaining to fees and invoicing were inconsistent with customary commercial practices, and thus unduly restrictive of competition. The GAO agreed, sustaining the protest.
The agency raised two defenses, to no avail. First, the agency argued that the protestor’s allegations were legally and factually insufficient because they failed to establish what the customary commercial practices were and therefore could not show that the terms of the request for proposal (RFP) were contrary to such practices. Second, and relatedly, the agency argued its market research showed no customary commercial practices existed for the services sought because responses to its request for information (RFI) varied considerably.
The GAO considered each defense in turn. First, the GAO noted, “a protester bears the initial burden of sufficiently alleging how the provision is contrary to customary commercial practice.” However, the protestor met this burden by pleading with sufficient detail how the solicitation deviated from customary practices and supported its allegations with a sworn declaration from an employee with substantial commercial experience. The burden of production thus shifted to the government to respond to the allegations.
Second, the GAO found the agency’s RFI did not seek information establishing the customary commercial practices. Instead, the RFI prompted potential offerors to answer open-ended questions regarding recommended pricing structures and how the agency should seek to price services. One question, for example, asked, “[d]o you have any suggestions on pricing for each service…?” The GAO found such questions failed to demonstrate “either what customary commercial practices are or that no customary commercial practices exist.” The GAO also waved aside the agency’s claim that these were the same terms it used for six years prior. The GAO said that it was generally not reasonable for the agency to “rely on other government contracts as a basis for establishing customary commercial practice.”
The GAO therefore found the agency did not demonstrate “with adequate market research or otherwise” that the objected-to pricing terms are consistent with customary commercial practices. Thus, the agency was unable to adequately respond to the protestor’s challenge to the solicitation’s terms, and the GAO sustained the protest.
In Cellco, the GAO decided on the opposite result, finding the VA conducted sufficient market research to establish that the terms of its solicitation comported with established commercial practices. The VA here sought to acquire enterprise-wide mobile communications devices and services on a FAR Part 12 commercial basis. The protestor argued that the VA impermissibly sought to use commercial acquisition procedures to obtain non-commercial products and services.
The agency’s initial market research indicated that only the nation’s three largest providers were technically capable of meeting the agency’s requirements. However, when the protestor sent the agency several questions challenging whether the requirements were consistent with customary commercial practices, the agency responded with a second round of market research, asking the big three providers about their customary commercial practices. At least one of the three major providers indicated that it offered all requirements as a part of its customary commercial products and services.
The GAO denied the protestor’s argument that because the agency was unable to purchase its requirements from the GSA FSS contracts, the requirements were not commercially available. The GAO pointed out that “GSA FSS contracts are government contracts, not commercial contracts,” and so were a poor indication of what was commercially available. Instead, it was the agency’s market research which showed “what is actually available commercially.”
The GAO also declined to be bound by an earlier decision in Red River Waste Solutions, LP,
B–411760.2, Jan. 20, 2016, 2016 CPD ¶ 45, which found that the mere “fact that a single firm offered its services on [a given] basis did not establish that it was a customary commercial practice.” The GAO pointed out that the FAR does not “stipulate any particular market share thresholds for determining commerciality.” The GAO then distinguished Red River, in which “thousands” of vendors performed the sought-after services locally, from the present situation in which only three vendors in the entire country were even capable of providing the services, and one already did so commercially.
The GAO concluded, “The simple fact of the matter is that the contested services are offered commercially.” Thus, the agency properly solicited its requirements on a commercial basis, and the GAO sustained the protest.
- To successfully protest a decision based on market research, an offeror must provide legally and factually sufficient allegations by stating precisely how the solicitation deviated from customary commercial practices and provide supporting documentation. While not always required, a signed declaration may be powerful evidence that is sufficient to shift the burden of production to the agency.
- When contemplating a challenge to a solicitation’s requirements as contrary to customary commercial practices, a contractor must consider the offerings of its competitors. The FAR does not “stipulate any particular market share thresholds for determining commerciality.” How many competitors must offer a good, service, or feature to establish it as a customary commercial practice depends on the circumstances. Where just a few competitors exist, the commercial offerings of just one may suffice.
Cody Kornack, a Law Clerk in our Washington, D.C. office, contributed to the writing of this article.