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Wednesday, January 3, 2018

Protest must be timely and protestor must show prejudice, and a footnote about issue of contract dispute vs solicitation dispute

The following is from a protest decision of the GAO. This protest involved two protests from two protestors in the same solicitation. One protest illustrates by example when a protest is not "timely". The other illustrates a protestor's lack of prejudice, and thereby standing to protest.

Bear in mind my proclivity to re-work the original articles, leave out critical citations, paraphrase and so on, so read the original decision at the link if you need to rely on it.

Matter of: AeroSage, LLC; SageCare, Inc., File: B-415607; B-415607.2; B-415607.3, January 3, 2018 AeroSage, LLC, and SageCare, Inc., protest the award of a contract to Tayrona Oil, Inc., issued by the Defense Logistics Agency (DLA), for 5,000 gallons of fuel to the Milwaukee Veterans Administration Medical Center (MVAMC).

The protesters primarily allege that DLA unreasonably modified the purchase request's delivery schedule without issuing an amendment. We dismiss SageCare's protest and deny AeroSage's protest.

MVAMC placed a purchase request with DLA for 5,000 gallons of fuel for delivery. The request (1) represented that the procurement was being conducted as a small business set-aside, (2) confirmed that delivery was for 5,000 gallons of fuel on Friday, October 13, (3) requested quotations by no later than 11:30 a.m. on Thursday, October 12, and (4) provided that award would be made on a lowest-priced, technically-acceptable basis. DLA timely received quotations from the three firms that it had solicited, Tayrona, AeroSage, and SageCare. Tayrona submitted the lowest-priced quotation of $2.3487 per gallon.

The contracting specialist represents that he notified Tayrona via telephone on the morning of October 12 that its quotation was selected for award. Shortly after contacting the awardee, however, the contracting specialist represents that he was contacted via telephone by an official with the Department of Veterans Affairs indicating that the delivery had to be rescheduled for Tuesday, October 17. The contracting specialist contacted Tayrona via telephone to confirm whether the company would agree to the revised delivery schedule at the same awarded price, and the awardee confirmed.

Following that telephone conversation, the contracting specialist then emailed Tayrona to confirm that DLA was going to award the order to Tayrona and indicated that the delivery date was now Tuesday, October 17. The contracting specialist then emailed AeroSage and SageCare respectively to indicate that neither firm submitted the lowest-priced, technically acceptable quotation. Those emails also indicated that the delivery date was now Tuesday, October 17.

AeroSage's protest:

Following receipt of the notice, AeroSage filed an agency-level protest with DLA on October 12. The primary protest allegation raised by AeroSage was that [t]he contracting officer solicited the RFQ for requirement delivery for Oct[ober] 13, 2017, but awarded the purchase order for delivery four days later, October 17, 2017 thus prejudicing the protester by changing the date, and thereby creating pricing uncertainty on the new delivery date. On Monday, October 23, AeroSage filed the instant protest with our Office.

AeroSage's protest decision:

AeroSage argues that the agency unreasonably changed the solicitation's delivery schedule without amending the solicitation and allowing all offerors to compete against the new schedule. The protester contends that "[a] four day change in a solicitation time can both dramatically impact price/availability and the risks quoters are able to accept to provide best prices to [the] government." "AeroSage was prejudiced in this solicitation with a significant change in the solicitation prior to award."

We have generally recognized that when the government changes its requirements prior to award, it must notify all offerors of the changed requirements and to afford them an opportunity to respond to the revised requirements. Moreover, a contract's period of performance is generally considered to be a material solicitation requirement.

Our Office will not sustain a protest, however, unless the protester demonstrates a reasonable possibility of prejudice, that is, unless the protester demonstrates that, but for the agency's actions, it would have had a substantial chance of receiving the award. Here, the protester has offered no evidence that it was in fact prejudiced by the agency's failure to amend the delivery schedule by four days through the issuance of an amendment. The protester has not asserted that, let alone substantiated how, it would have reduced its unit pricing by an amount that would have overcome the awardee's price advantage. AeroSage's unsupported speculation that the change in delivery schedule could have impacted its proposed price is insufficient to establish competitive prejudice.

There is another teachable moment in footnote 6: The Government argued that the change in delivery schedule was a matter of contract administration, and thus not a proper subject for a protest dispute. As discussed above, however, the change occurred after proposals were submitted and evaluated, but before the contract award was formally made on October 13. Therefore, we do not find that the schedule change can reasonably be considered as a matter of contract administration, and therefore would be proper subject matter for a protest, if only the protestor had standing.

AeroSage's protest is denied.

SageCare's protest:

On November 22, SageCare filed a request to intervene in AeroSage's protest. On the same day, our Office denied the request to intervene on the basis that SageCare was a disappointed offeror, not the awardee of the protested contract.[3] We further explained that "[t]o the extent that SageCare, a disappointed offeror, believes that there were errors in the procurement, SageCare must file its own protest subject to our Bid Protest Regulations." SageCare subsequently filed its protest on November 24.

DLA moved to dismiss SageCare's November 24 protest as untimely because it was filed more than 10 days after the protester's owner and president had actual knowledge that SageCare had not been selected for award and of the change to the delivery schedule. Our Bid Protest Regulations contain strict rules for the timely submission of protests. Under these rules, a protest based on other than alleged improprieties in a solicitation must be filed no later than 10 calendar days after the protester knew, or should have known, of the basis for protest, whichever is earlier.

SageCare's protest decision:

SageCare seems to measure the timeliness of its protest from when SageCare's president received the awardee's price information through the agency report submitted in response to AeroSage's protest. DLA's October 12 notice to SageCare's president, however, clearly indicated that the protester's quotation was not the lowest-priced, technically-acceptable quotation, and that delivery was moved to Tuesday, October 17. Thus, the protester was aware of the material facts relevant to its asserted protest ground related to the modification of the delivery schedule as of October 12. Its November 24 protest, filed more than 40 days later, is untimely, and therefore the protest is dismissed.

SageCare's protest is dismissed.

Methinks they do protest too much about frivolous protests

Whenever there are contracts to be had or performed, there will be disputes. Thus, procurement protests are endemic to government contracts and contracting.

And, since government contracting is the means by which most of our tax money is spent, the government provides an administrative process to resolve the disputes more expediently than available by courts, which is where private contract disputes usually end up, absent some form of ADR (alternative dispute resolution) process the circumvents court action. In this light, the administrative dispute process is another form of ADR.

It must also be added that the procurement dispute process is the only means of assuring our tax moneys are being spent properly (if not wisely) by policing the system in real time (as contrasted with an audit some years hence).

I feel quite certain that the boring and routine procurement protest system would receive no more attention than the run-of-the-mill ADR procedure but for two things: it provides a "train wreck" story for the media to monetarize; and, it provides a platform for politicians to politicize. The theme in both cases is by question and answer. Question: why is this procurement being held up when the need is obvious and immediate? Answer: because of the frivolous action of a disreputable vendor.

In this blawg, I have often posted about frivolous protests, because the issue is so constantly being brought up. See, here, here, here, here, here, and here, for example.

And it is only being brought up because it is "good" (money making) media and "good" (vote and/or attention-getting) politics. It is not being brought up because it is a real problem, and to the extent it may be some kind of problem it blown all out of proportion to the seriousness of the matter.  It is not brought up in good faith to address a real issue.  It is simply a concocted drama.

Here is another illustration of the meme from Bloomberg. As always, read the original article at the link. I can end up taking extreme liberties and artistic license to the subject for my own didactic purposes, and you cannot rely on this blawg to provide the full, accurate, true-to-form, or intended iteration. So, go on, read the original.

Pentagon Contract Protests Aren't Frivolous, Rand Study Finds, by Anthony Capaccio, January 4, 2018
The Defense Department’s process for buying weapons, goods and services isn’t being overwhelmed or delayed by frivolous contract protests filed by major defense contractors as critics have contended, according to a study mandated by Congress. Instead, “bid protests are exceedingly uncommon for DoD procurements,” the report by the Rand Corp.’s federally funded National Defense Research Institute said. The report was based on a review protests in years fiscal 2008 through 2016.

Congress directed the study to examine 14 areas, including how much the government spends on manpower to defend its actions. Rand said it was unable to quantify those costs for lack of data. This lack of data could undercut a provision in this year’s defense policy bill that requires the Pentagon set up a three-year pilot program in 2019 requiring losing protesters to pay the Defense Department’s costs for handling GAO challenges.

More than half of challenges were brought by small businesses, it said, and the protest process was more effective than generally realized at compelling a military service to change its initial contract solicitation terms or its decision after a protest was filed.

The data-driven assessment is significant because it’s likely to be the basis of future congressional and Pentagon decisions on improving the process that lets bidders that have complaints before an award or those who lose a competition file appeals to the Government Accountability Office. The report underscores that most challenges are routine, unlike the few that end up in the spotlight.

“Policymakers should avoid drawing overall conclusions or assumptions about trends from one case when it comes to the efficacy of the bid protest system,” Rand said. The percentage of contracts protested is very small -- less than 0.3 percent per billion dollars of military contract spending, Rand said.

The report also described “a lack of trust on each side” between the defense industry and the Pentagon’s acquisition bureaucracy about the protest process. For example, military personnel say the rules allow “protesters to make excessive numbers of ‘weak allegations,’” it said. The report concluded that “firms are not likely to protest without merit,” debunking the notion that losing incumbents protest a loss merely to extend their contracts for a few months while the case is open, according to Daniel Snyder, an analyst with Bloomberg Government.

While the GAO sustained 2.6 percent of defense protests filed since fiscal 2008, the study found that’s not the whole measure of effectiveness. “The majority of relief to protesters takes the form of corrective actions” by the contracting agency while a challenge is pending before the GAO or withdrawn based on the potential for solving issues short of a decision, the study said. “Roughly 40 percent of all protest actions result in some change to the initial procurement decision or terms,” Rand said.

Rand concluded the steady record of effectiveness it documented “refutes the claim that meritless protests (some use the term frivolous)” account for the increased challenges.

Methinks we doth not protest so much after all?
Doth we protest too much? Methinks not

Monday, December 25, 2017

Crikey! Wot a rort!

I remind my reader to click the links to the articles presented and read the originals, as I slice and dice the material for didactic purposes in order to try to present a "teachable moment". These posts are mostly to be considered as hypothetical procurement case studies, not news or other literary content, and omit, paraphrase and rearrange a lot of original material. You've been warned, again.

Allegations of systemic fraud sparked Defence Department internal audit
Confidential documents drafted by a senior defence department investigator reveal allegations of systemic fraud spanning several years inside the government's biggest spender. The 10-month investigation, which finished in February this year, was prompted by an anonymous disclosure about fraud and corruption made to the department in April 2016.

One of the most concerning aspects involved the department awarding companies contracts without a competitive tender process and only a flimsy justification they met "value for money" requirements. In other cases the department was unable to tell whether a contract breached procurement rules or not because important paper work could not be found.

In 2015-16 the Department of Defence reported the largest yearly contract spend of any agency within the public service. The department dialled-up a bill of $30.5 billion on contracts, amounting to 54 per cent of total government contractor spending.

The investigation raised serious questions about the department's use of "single source" tenders, where a single company is awarded a contract without having to compete against other providers. "It is questionable whether true value for money is achieved when [redacted] continually conduct single source limited tenders," Dr Clarke wrote. "Whilst there is less administration and quicker decision making with this approach, it provides limited opportunity for Defence to achieve the best possible outcome. "Single source limited tenders increase the risk of contractor underperformance and corruption."
Defence spending data unreliable, incomplete, national audit office says
Transparency and accountability for billions of dollars of annual defence spending remains suspect despite recent reforms, the Australian National Audit Office (ANAO) has found.

Last year, the Defence Department spent $8.3 billion on keeping its equipment in working order, known as "sustainment" in military jargon. Yet, the audit office found that despite small recent improvements, information about where that money went and whether it was being spent wisely was often unreliable or not available.

The report also questions a claim from Defence that reforms to its sustainment policies had saved $2 billion. "Defence has not been able to provide the ANAO with adequate evidence to support this claim, nor an account of how $360 million allocated as 'seed funding' for Smart Sustainment initiatives was used," it read.

Auditors were also critical of inconsistencies between figures given to the Government during the budget process and those provided in the department's annual report. "It's absolutely not good enough," Andrew Davies, director of defence and strategy at the Australian Strategic Policy Institute, told AM.
Oz military megahack
An Australian Signals Directorate (ASD) presentation to the Australian Information Security Association (AISA) conference yesterday detailed the hack. Suffice to say that a medium-sized defence contractor was breached and gigabytes of aerospace data and commercial arrangements for military aircraft and naval vessels were delivered into the hands of the attackers. The ASD used it as a case study for the AISA conference yesterday.

The government has since said the information was commercial-in-confidence, but not classified. This is not an isolated incident: in Australia, as elsewhere, attackers thwarted by a network's defences then seek out third-party contractors as an easier mark.

This suggests a problem in sub-contractor oversight – you can win a government contract without proving you have adequate network security.

Minister for Defence Industry Christopher Pyne seems to agree. This morning, he told Radio National's Breakfast programme that the government can't be held responsible for a contractor's lax security.
Fat and mismanaged public sector is eating us alive
In a Crikey article, carried by the Community and Public Services Union, Eric Beecher chronicles appalling mismanagement in service delivery.

Then there’s the $11 billion spent by the Defence Department managing 119 bases around Australia which the ANAO says is well in excess of the $9.3bn “expected value” of the 10 services contracts, signed in 2014, to do the work. The department has defended its performance, saying the vast project to renegotiate the contracts has delivered value for money, when considered against increased service demands and changing expectations of the ADF. Yet a new $120 million IT system, meant to manage contracts ­between Defence and the private companies servicing the bases, was $39m over budget and five years late.

There’s also the flawed tendering and contracting processes overseen by the Immigration ­Department, which resulted in the waste of “tens and possibly, hundreds of millions of dollars”. Given these practices were subject to a scathing ANAO report, they could hardly be ignored.

We’re reminded of last year’s Australian Bureau of Statistics census “stuff-up”, the Australian Taxation Office’s massive and damaging IT outage, the Department of Health’s decade-long mismanagement of e-health records, and the embarrassing release of identifiable Medicare information. There’s also the Department of Finance’s lax oversight of ministerial travel arrangements. But not raised is the $576m public service travel bill — a blowout of $75m in just four years.

While this shocking record is acknowledged, Beecher argues the blame lies mainly with outsourcing to powerful private contractors.
Outsourcing failures expose weaknesses in both government and business
The problems of dealing with private sector providers and contractors are a persistent theme in the analysis of government shortcomings. For example, recent Australian National Audit Office reports highlighted contracting problems in Air Services Australia, the Defence Department and the Immigration Department. Contract management issues were at the heart of last year's failed online census and have been a constant factor in the turbulent administration of Australia's controversial offshore detention centres. Over-reliance on contracted consultants was a major cause of the botched home insulation scheme.

Given the extent to which governments rely on private contractors for a large range of goods and services, it is unsurprising that contractors are often in the frame when things go wrong. But many of the recurring issues arise out of factors specific to the contracting process.

A common complaint is that the use of contractors has caused agencies to run down their in-house expertise and technical resources. As a result, it can be argued, agencies lack the capacity to assess whether the contracts they are agreeing to give the government and taxpayer adequate value for money. Without their own professional judgment, grounded in technical knowledge and practical experience of the area in question, public service managers are ill-equipped to decide matters of all-round quality. Instead, they tend to fall back on generic checklists of assessment criteria that emphasise easily specifiable factors, such as cost and timeliness.

Alternatively, if funds allow and time permits, they may contract in an external consultant or commissioner to give an expert opinion on a proposed contract. But such advice carries the risks of perverse incentives attached to all forms of external contracting and consulting. The consultants' objective is to gain future contracts, which encourages them to say what they think governments want to hear in preference to what they ought to hear. Once again, without the professional judgment to tell the difference and without their own in-house, trusted staff to advise them, public service managers are at the mercy of self-interested outsiders. This vulnerability is compounded by the lack of transparency that surrounds contracting. Overuse of commercial-in-confidence provisions has shielded public servants from the bracing effects of public scrutiny.

The lack of in-house capacity can affect not only the initial process of drawing up contracts but also the oversight of how contracts are implemented. However, as the constant stream of scandals illustrates, many commercial providers are more interested in profit than in good service and cannot be trusted to do the right thing. As a result, governments are being driven to impose tighter controls and regulations. Even then, in the face of determined rorting and corner-cutting, most government agencies lack the resources to prevent opportunistic contractors from wrongfully expropriating public funds.

After two decades of wholesale outsourcing, some general conclusions are clear. Contracting out is an efficient and effective alternative to in-house provision where the objectives are clear and easily monitored, and where there is a competitive market of alternative providers. It also works well for more complex services where providers can be trusted to pursue public-interest objectives for their own reasons. However, where these conditions of either simplicity or trust do not apply, the risks that governments will not receive value for money start to build. Moreover, extensive experience with outsourcing has itself compounded these risks by reducing governments' capacity to effectively draw up and monitor outsourcing contracts. Some complex service contracts that could have been safely contemplated a generation ago are now beyond the professional expertise of public servants to administer.

politicians need to recognise that outsourcing complex government services requires the development of trust between the parties, which means looking beyond the short-term bottom line and not always preferring the cheapest option. In addition, successful contracting depends on well-resourced government agencies with the skills and experience necessary to manage ongoing relationships with contractors. Running down government staffing levels while relying more on private contractors is a recipe for continuing policy failure.

Contractors, for their part, must earn the right to be treated as trusted partners. They must be prepared for the long haul and willing to learn from experience. They must also be ready to submit to the level of public scrutiny and accountability that public servants take for granted. Indeed, given that the commercial private sector is not imbued with the same commitment to serving the public interest, there is a case for subjecting private contractors to more scrutiny than the public service, not less.

Tuesday, November 28, 2017

The limits of procurement law - agency authoriity

This GAO decision is a short example of the limits of procurement law, or government contracting as the feds say. Procurement law is not part of the common law, it is statutorily imposed by the legislature, with regulations made by the executive branch, to allow the executive branch to acquire stuff to meet its operational and other legislatively allowed needs.

NB: I take liberties when presenting material in this blawg. You must read the source material at the link and not rely on this, or other, post(s) for information that comes from the horse's mouth. Some have characterized this matter as coming from the other end.

Matter of: A-Z Cleaning Solutions
DIGEST: The United States Mint, a federal agency within the Department of the Treasury, is not subject to the Government Accountability Office’s bid protest jurisdiction under the Competition in Contracting Act of 1984, because the Mint is statutorily exempt from all federal procurement laws and regulations.

A-Z Cleaning Solutions, of Pittsburg, California, protests the award of a contract to Clean Solutions Services, Inc., of San Francisco, California, under a solicitation issued by the Department of the Treasury, United States Mint for janitorial and laundry services in San Francisco. The protester contends that the agency erred in its evaluation of proposals and in its best-value tradeoff decision.

The United States Mint, an agency within the United States Department of the Treasury, asserts that it is statutorily exempt from our bid protest jurisdiction, and therefore this protest should be dismissed. We agree. We dismiss the protest for lack of jurisdiction.

Under the Competition in Contracting Act of 1984 (CICA), our Office has jurisdiction to resolve bid protests concerning solicitations and contract awards that are issued “by a Federal agency.” CICA provides that the term “Federal agency” has the meaning given in statute that defines the term “Federal agency” as including any “executive agency,” which is defined as any executive department or independent establishment in the executive branch of the government.” The Mint, as part of the Department of the Treasury, is an executive agency that otherwise would be subject to our bid protest jurisdiction under CICA.

In 1996, however, Congress established the United States Mint Public Enterprise Fund (USMPEF) to finance the programs and operations of the Mint. Of note, the establishing legislation for the USMPEF included the following proviso: “Provided further, That provisions of law governing procurement or public contracts shall not be applicable to the procurement of goods or services necessary for carrying out Mint programs and operations.” The same provision defines Mint programs and operations as follows:
(1) the activities concerning, and assets utilized in, the production, administration, distribution, marketing, purchase, sale, and management of coinage, numismatic items, the protection and safeguarding of Mint assets and those non-Mint assets in the custody of the Mint, and the Fund; and (2) includes capital, personnel salaries and compensation, functions relating to operations, marketing, distribution, promotion, advertising, official reception and representation, the acquisition or replacement of equipment, the renovation or modernization of facilities, and the construction or acquisition of new buildings.
The provision further contemplates that all receipts from Mint operations and programs be deposited in the USMPEF, and that all expenses incurred for operations and programs of the Mint that the Secretary of the Treasury determines to be ordinary and reasonable incidents of Mint operations and programs be paid out of the USMPEF. As a result of these provisions, the agency represents that the Mint is entirely funded by and operates within the USMPEF.

Because the establishing legislation provides that federal procurement laws and regulations do not apply to the procurement of goods or services necessary for carrying out the Mint’s operations and programs, and those operations and programs are defined broadly enough to encompass substantially all of the Mint’s activities, we conclude that the Mint is not subject to the terms of CICA. Furthermore, because the bid protest jurisdiction of our Office derives from CICA, we must conclude that the Mint is not subject to that jurisdiction.

Our Office reached a similar conclusion when considering whether our bid protest jurisdiction extended to the United States Postal Service (USPS). The USPS is an independent establishment of the executive branch, and thus it is a federal agency, like the Mint, that would otherwise be subject to our bid protest jurisdiction. However, by law, the USPS is expressly exempted from any “Federal law dealing with public or Federal contracts.”

Similarly, the Presidio Trust, a wholly-owned government corporation, would otherwise be subject to our jurisdiction, but is statutorily exempt from all federal procurement laws and regulations but for certain enumerated exceptions, which do not include CICA.
Thus, for an instrumentality of the executive branch to be free from the procurement requirements imposed on the executive branch by the legislature, the instrumentality must be given express leave by the legislature. 

We have seen on Guam, for instance, the Mayor's Council of Guam create a non-profit organization to take responsibility for operating the annual Liberation Day Carnival and festivities for the sole purpose of doing so without restrictions imposed by the procurement law. This case illustrates the wishful thinking of such action.

Smack-down of Forestry Service over claim an unduly restrictive specification was reasonable for its needs

This GAO decision is Matter of: Global SuperTanker Services, LLC, File: B-414987; B-414987.2.

This post will be brief, while the decision itself is extensive. Extensive in its unrelenting smack-down of an agency trying to defend a specification the decision hails as "a post hoc attempt to justify" an unreasonable restriction on competition. "[T]he agency’s decision to restrict those assets at this time does not withstand logical scrutiny.

If you ever want to see what a comprehensive, almost frolicking, dismantling of lumbering argument looks like, this will give you an entertaining read. Clearly, the Forest Service was unable to see the forest for its own trees.

With references to past performance

This GAO decision is interesting in that, factually, it arises in connection with a solicitation conducted in Malawi. Its official government website on my Google search suggests the site might be hacked. The CIA World Factbook describes Malawi's economy as ranking "among the world's most densely populated and least developed countries. The country’s economic performance has historically been constrained by policy inconsistency, macroeconomic instability, limited connectivity to the region and the world, poor infrastructure, rampant corruption, high population growth, and poor health and education outcomes that limit labor productivity. The economy depends on substantial inflows of economic assistance from the IMF, the World Bank, and individual donor nations." In other words, there is likely not a deep history and trained understanding of the niceties of the procurement norms we are accustomed to.

Such as the role of past performance in evaluating bidder responsibility or bid responsiveness. The decision involves many issues, but this post is limited to the past performance controversy, because I suspect Malawians may not be alone in the failure, seen in this decision, to appreciate the past performance evaluation. It is not a "tick the box" evaluation, though it often seems that way.

The usual caveats apply: I take terrible liberties with the presentation of source material, so you are admonished to go to the source at the links.

Matter of: Fattani Offset Printers
On June 23, 2017, the United States Agency for International Development (the agency) issued an RFP for printing, binding, and distribution services to be performed pursuant to a fixed-price contract over a two-year period. The RFP specified, among other matters, that “[t]he purpose of this contract is printing, binding, and distribution of 773,025 English Standard Four Learners’ Books (LBs) and 6,000 Stock Management Cards.” Fattani Offset Printers, of Blantyre, Malawi, protests the award of a contract to Kris Offset & Screen Printers, Ltd., also of Blantyre, Malawi, alleging the agency unreasonably evaluated its proposal.

Award would be made on a best-value tradeoff basis considering two evaluation factors, technical and price. RFP at 50. For the technical factor, the RFP divided a total of 100 points between technical understanding and past performance, with 85 points allocated to technical understanding and 15 points to past performance. Fattani, low offeror, was awarded 35 out of 100 points. Kris Offset was awarded 92 points, and the contract.

GAO considered all of the firm’s allegations and found no basis to sustain the protest, noting at the outset that, in reviewing protests challenging an agency’s evaluation of proposals, our Office does not reevaluate proposals or substitute our judgment for that of the agency; rather, we review the record to determine whether the agency’s evaluation was reasonable and consistent with the solicitation’s evaluation criteria, as well as applicable statutes and regulations.

Past Performance

The RFP instructed offerors to provide a list of at least five organizations to serve as past performance references. For each organization, offerors were instructed to provide a contact name, address, telephone number, description of the work performed, and date of performance. The RFP also stated that proposals would be evaluated based on successful completion of previous similar projects.

Fattani provided reference letters from five different organizations. Each reference letter provided a positive review of Fattani’s performance. The record shows that the agency contacted three of Fattani’s references, and it also contacted references outside of Fattani’s listed references. Following its review, the agency assigned Fattani’s proposal two weaknesses and several significant weaknesses. Chief among the agency’s concerns was that Fattani had received negative past performance evaluations. The agency also determined that Fattani had not performed any projects of similar size and complexity (i.e., contracts of $5 million in value with distributions to over 5,500 outlets). The agency assigned Fattani’s past performance proposal only 5 out of a total of 15 points.

Fattani asserts that the agency’s evaluation was unreasonable because the RFP did not expressly permit the agency to seek additional past performance references. Additionally or alternatively, Fattani contends that the agency improperly determined that none of Fattani’s past performance references were of similar size and complexity.

In light of the RFP’s stated evaluation criteria, we find that the agency reasonably evaluated Fattani’s past performance references. Contrary to Fattani’s view, our cases explain that an agency is generally not precluded from considering any relevant past performance information, regardless of its source. Consequently, the agency acted reasonably when it solicited additional past performance references beyond those listed in Fattani’s proposal, notwithstanding the fact that the solicitation did not specify that the agency could seek alternate past performance information sources. Furthermore, GAO’s in camera review of the record reveals that Fattani received negative reviews of its performance from some of its listed references and other entities the agency had contacted.

As to Fattani’s alternate allegation, we find that the agency reasonably evaluated Fattani’s past performance references for similar size and complexity. Of Fattani’s five references, only one adequately describes the performance, and that job was not similar in size or complexity to the instant contract. That job required distribution to only 90 stores, while the instant contract requires distribution to over 5,500 outlets. Thus, Fattani’s past performance proposal did not demonstrate that it had successfully completed previous similar projects. Accordingly, based on the record before us, we find that the agency reasonably evaluated Fattani’s proposal under the past performance factor.

The protest is denied.

The laborious SAGA of the US Navy's BOSS contract on Guam

This post is a follow-up to a prior post almost 3 years ago, Protest of Navy's BOSS contract on Guam upheld.

Note: As always, I take considerable liberties with the source documents when presenting them here. For instance, critical citations are often omitted, parts are re-arranged and/or paraphrased, etc. Read the source at the link if accuracy, completeness and fidelity is important to you. (If it is not important to you, reconsider wandering around the web without an escort.)

Before the GAO in re Matter of: Fluor Federal Solutions, LLC, File: B-410486.9, January 18, 2017
DIGEST: Fluor maintains that the agency misevaluated proposals and made an unreasonable source selection decision. Protest challenging agency’s evaluation of staffing and resources proposals is sustained where record shows that agency evaluated the protester’s and awardee’s proposals disparately in a manner that prejudiced the protester. We sustain the protest.

This is our third occasion to consider the propriety of the Navy’s actions in connection with this acquisition. In a prior decision, we sustained a protest filed by Fluor relating to the agency’s evaluation of proposals and conduct of discussions in connection with this acquisition. We recommended that the agency reopen discussions with the offerors, solicit, obtain and evaluate revised proposals, and make a new source selection decision.

The Navy implemented our recommended corrective action and again selected DZSP for contract award. Fluor filed a second protest challenging the agency’s selection of DZSP in the wake of the agency’s corrective action. After full development of the record in that case, we conducted an outcome prediction alternative dispute resolution (ADR) procedure at the request of the Navy. We advised the parties that the agency’s evaluation of DZSP’s proposed cost in the area of its exempt employee compensation (discussed in detail below) appeared to have overlooked certain significant features of DZSP’s proposed costs. As a result, the GAO attorney advised that our Office likely would sustain the protest. The agency advised our Office that it intended to take corrective action to address the concerns we identified, and on that basis we dismissed Fluor’s second protest as academic.

After dismissal of Fluor’s second protest, the agency engaged in limited discussions with the protester and DZSP and solicited, obtained and evaluated revised proposals. The agency again selected DZSP for award, and the current protest followed.

The RFP advised offerors that the agency would make award on a best-value basis, considering cost and several non-cost evaluation factors. The non-cost factors were as follows: past performance, occupational safety, staffing and resources, technical approach, and small business utilization. For cost evaluation purposes, the RFP advised offerors that the agency would evaluate proposals for completeness, reasonableness, balance, and realism. The RFP stated that the agency would assign past performance examples relevancy ratings of very relevant, relevant, somewhat relevant or not relevant, and would assign each offeror’s past performance a confidence rating of substantial confidence, satisfactory confidence, limited confidence, no confidence or unknown confidence. Finally, the RFP stated that past performance was approximately equal in importance to the other four non-cost evaluation factors combined, and that all five non-cost factors, when combined, were approximately equal in importance to cost.

DZSP had proposed 113 exempt labor categories, and claimed that it was escalating the direct rates of compensation for these employees by [deleted] percent for each year of contract performance. A careful examination of the record showed, however, that in addition to applying an escalation factor of [deleted] percent, DZSP also was applying what it termed a “decrement factor” of [deleted] percent to these same rates of compensation. The net result of these calculations was that, rather than escalating its direct labor by [deleted] percent per year, DZSP actually was reducing the rates of compensation for these employees by [deleted] percent during each year of contract performance. The contemporaneous record showed that the agency failed to recognize this decrease in DZSP’s proposed compensation, and that its cost realism evaluation failed to take it into account.

The record further showed that Fluor had been found technically superior to DZSP under the non-cost evaluation factors. While both firms received the highest ratings (substantial confidence and outstanding) under the past performance, occupational safety, staffing and resources, and small business utilization factors, Fluor’s proposal received an outstanding rating under the technical approach factor, while DZSP’s proposal was assigned a rating of good under that factor.

The agency’s selection of DZSP’s lower-rated proposal was based on its conclusion that it represented a savings of approximately $6.9 million over the life of the contract. However, we concluded, based on the error associated with the agency’s failure to recognize DZSP’s decrease in its exempt employee compensation, that this apparent cost savings was largely non-existent. We therefore concluded that the agency’s source selection decision was not reasonable.

Subsequently, the agency elected to allow Fluor and DZSP to make limited revisions to their proposals.
Both firms revised their proposals and the agency reevaluated them on the basis of those revisions. The agency made no changes to the adjectival ratings assigned to the offerors’ non-cost proposals (Fluor was again found superior under the technical approach factor). Both firms revised their proposed costs: Fluor proposed a total cost of $494,519,656, and DZSP proposed a total cost of $491,894,166. The agency made no adjustments to either firm’s proposed cost for purposes of evaluating realism. On the basis of these evaluation results, the agency again made award to DZSP, concluding that, although Fluor’s proposal was technically superior, it did not merit the approximately $2.6 million cost premium.

The focus of Fluor’s latest protest centers on a change in the proposed approach to managing and compensating its exempt personnel that DZSP introduced in response to the agency’s latest round of discussions. The agency had provided DZSP a discussion question relating to the fact that, in its earlier proposal, it had offered to reduce its exempt employees’ compensation by a net factor of [deleted] percent during each year of contract performance. The agency advised DZSP that such an approach was not considered by the government to be reasonable or realistic because it implied that every exempt position would be replaced with a new hire at a lower rate of compensation for each year of contract performance.

In response to the agency’s discussion question, DZSP essentially introduced an entirely new approach to how it would manage and compensate its exempt employees. In effect, DZSP’s new approach was that it would replace incumbent workers at a rate of [deleted] percent of its exempt workforce per year and hire new, lower paid, employees in their place. These new employees would be paid [deleted] percent of the hourly rates identified in DZSP’s proposal. The employees that were not replaced in a particular contract year would be given a [deleted] percent escalation to their hourly rates of compensation (until such time as they were replaced), and this would result in [deleted] hourly rates of compensation that would [deleted] over the life of the contract.

Fluor raises various challenges to the agency’s evaluation of DZSP’s proposed approach to maintaining [deleted] wage rates for its exempt employees. Among other arguments, Fluor alleges that the agency engaged in disparate treatment in connection with evaluating its proposal and DZSP’s proposal in the area of staff recruitment and retention.

For the reasons discussed below, we agree with the protester that the agency evaluated the two proposals disparately in connection with the question of recruitment and retention of staff. It is axiomatic that agencies are required to evaluate proposals on a common basis and in accordance with the terms of the RFP; agencies may not properly engage in disparate treatment of offerors in the evaluation of proposals.

Under the express terms of the RFP, the agency was required to evaluate the adequacy of the offerors’ staffing approach as it related to the recruitment and retention of staff.

The record shows that Fluor’s staffing approach for exempt employees involved recruitment of 95 percent of the incumbent staff. Fluor represented to the agency that it was confident in its ability to do this based on the wage rates it was proposing. Of significance, Fluor specifically represented that, in the event it was unable to attract the incumbent staff with the rates of compensation it was proposing, Fluor proposed to [deleted] for exempt employees. Notwithstanding this representation in the Fluor proposal, the record shows that the agency’s evaluators and source selection authority expressed a concern that Fluor would be unable to recruit the incumbent exempt employees at the wage rates it had proposed. The agency’s technical evaluators questioned Fluor’s ability to recruit the incumbent exempt staff based on the wage rates it had proposed, and suggested that Fluor’s approach could result in employee morale and retention issues. The agency’s cost evaluators echoed these same concerns.

In contrast, the evaluators did not give meaningful consideration to similar implications of DZSP’s proposed approach described above, or how it would impact the firm’s retention of employees, as required by the RFP. In this connection, the evaluators gave no consideration to the fact that DZSP expressly proposed to replace its incumbent staff at a rate of [deleted] percent per year for each year of the 8-year potential life of this contract. The agency technical evaluators confined their observations to consideration of whether or not it was realistic for DZSP to replace its existing, incumbent exempt employees, and concluded that it was “very realistic” for DZSP to do so because approximately [deleted] percent of DZSP’s overall workforce was comprised of an aging population. In addition, the technical evaluators observed only that DZSP’s claimed 95 percent retention rate for its exempt employees would “not be applicable” to future contract periods, but did not criticize the firm’s proposal for this reason. The cost evaluators, for their part, did not give consideration to DZSP’s proposed plan to replace its exempt workforce, and instead confined their observations to whether or not DZSP’s proposed rates of compensation were reasonable and realistic.

In addition to these inconsistencies, the agency’s source selection authority (SSA) specifically found the DZSP proposal superior to the Fluor proposal in the area of employee retention and used that as a discriminator for making her selection decision. In fact, she apparently was unaware of DZSPs’ proposed approach of essentially replacing its exempt workforce more than once over the life of the contract.

In sum, the record shows that the agency evaluated the offerors disparately under the staffing and resources factor, criticizing Fluor’s proposed approach as possibly involving a risk that it would not be able to recruit the incumbent workforce, while at the same time failing to meaningfully consider whether a similar risk was raised by DZSP’s proposed approach of repeatedly replacing its exempt employee workforce over the life of the contract. In light of these considerations, we sustain Fluor’s protest.

We recommend that the agency reevaluate proposals in a manner that is consistent with this decision and make a new source selection decision after performing that reevaluation. Should the agency conclude that DZSP is no longer in line for award, we further recommend that the agency terminate DZSP’s contract for the convenience of the government, and make award to Fluor, if otherwise proper.