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Sunday, July 31, 2011

Government contracting does not need a steering committee

Labor Department appointee resigns after contractor findings
A disabled veteran with degrees from West Point and Harvard Business School, Jefferson has a long history of military, academic and professional accomplishment. But an investigation by the Labor Department's Office of Inspector General found that he allegedly pressured subordinates to force federal contractors to add his choices as subcontractors onto their projects.

Raymond Jefferson, assistant secretary of labor for veterans' employment and training service and a presidential appointee, showed a "consistent disregard of federal procurement rules and regulations, federal ethics principle and the proper stewardship of appropriated dollars," according to an internal Labor Department investigation.

Jefferson oversaw the department's Veterans' Employment and Training Service, known as VETS, a federal effort to help veterans find jobs and protect their employment rights.

[Read more.]

Raymond Jefferson leaves Labor Department after ethics finding
Jefferson engaged in “a pattern of conduct . . . which reflects a consistent disregard of federal procurement regulations, federal ethics rules and the proper stewardship of appropriated dollars,” according to the report from the Labor Department’s inspector general.

Peter Choharis, a lawyer representing Jefferson, said Thursday: “This report . . . relies on hearsay, has many internal inconsistencies and contradictions, and omits substantial exculpatory evidence. We look forward to rebutting the report in its entirety when we have full access to the record.”

Jefferson told investigators that he did not receive any training in federal government contracting or procurement. He said he told his deputies “to move quickly, and also legally, ethically and properly” in hiring Liff.

The report says that McWilliam and VETS Chief of Staff Amit Magdieli “placed VETS employees in untenable positions, forcing them to utiltize existing federal contracts in order to hire Liff without competition.”

“This is the kind of boondoggle that taxpayers have every right to expect would come to a screeching halt,” said Sen. Claire McCaskill (D-Mo.), who in December requested that the inspector general investigate whistleblowers’ allegations of misconduct within the VETS program.

McCaskill said that Jefferson’s appointment to the job by the White House was appropriate, given his qualifications. “I would challenge anybody to look at his resume and not be impressed,” she said.

[Read more.]

Taking the stinger out of the bee?

Or, adding more venom?

Ethics commission could see major reorganization
State ethics commission leaders are proposing a sweeping overhaul of the agency that would farm out some duties to a private attorney, hire a new auditor and lean more on the state attorney general for investigative help.

Commission Chairman Patrick Millsaps and Vice Chairman Josh Belinfante told The Atlanta Journal-Constitution on Friday that the changes -- which they'll present at an Aug. 5 commission meeting -- would help the agency operate more efficiently under a tighter budget.

The commission has faced criticism over the past year from lawmakers and government watchdogs who have complained that the agency has been shoddy in its interpretation of state ethics law and lax in its enforcement. But following a shake-up last month that saw the top two employees leave under pressure, commissioners are looking for a change.

Among the changes they'll recommend:

Contracting with a private attorney to write advisory opinions and answer questions from elected officials, candidates and the public about what the law allows.
Hiring a receptionist and an additional auditor to help oversee the filing of required reports and with the initial review of ethics complaints.
Using the state attorney general's office for more assistance in investigating complaints.

The changes are necessary, Belinfante said, in an era of government austerity.

"We have to fix our budget," he said. The question is "how can we do that and still meet our statutory obligations."

[Read more.]

OCI - at the nuclear family level

We've looked at Organizational Conflicts of Interest (OCI) before. Conflict of interest is at the heart of most ethical considerations.

This story takes it to the nuclear level -- the family.

State Department Fires Official Over Allegations She Steered Contracts to Family's Firm
The State Department has fired a contract specialist following allegations that she was using her influence to steer lucrative contracts to a company apparently run by her husband and daughter.
Emphasis on "apparently". This is, after all, a News of the World affiliate.

State Department worker awarded 'secret husband and daughter $52 million in state contracts'
Kathleen McGrade is accused of helping husband Brian Collinsworth and daughter Jennifer Herring - Vice President and CEO of Sterling Royale Group respectively - win 43 government contracts for construction projects and security work at U.S. sites overseas.

But when reporters at website The Daily Caller contacted Collinsworth, he denied being married to Mrs McGrade, the site reported.

Mr Collinsworth added there was no connection between the couple other than 'a professional one of a CO to a company.'

But the site then uncovered a library of pictures on MySpace showing Collinsworth and McGrade together under the caption: 'Happily married to my beautiful wife of one year, Kathy.'

Collinsworth continued: 'I have four children from a previous marriage and one brand new step-daughter.

[Read more.]

Friday, July 29, 2011

Lapping up overlapping transition benefits

The following article and dispute is confusing at a casual read, which is all I have conducted. The discussion, however, if based on an analysis of principles, is not so concerned with the facts of the case as with the facts as perceived, treating this as a hypothetical in that sense.

With that caveat, I will assume that this case involves the following: Performance of certain obligations during a transition period by an incumbent contractor, performance of certain obligations during the transition period by a new contractor (which might turn out to be the incumbent if it wins the award), and then full obligation to perform the contract once the transition phase is completed.

The dispute is cast in the following two news articles.

Deloitte's $250 million state Department of Public Welfare contract object of court fight
People familiar with the state government purchasing of computer services tease that bid requests for those services ought to come with a disclaimer: “If you are not Deloitte, don’t bother.”

pn_20080222184704-1.jpgMichael Fernandez, The Patriot-NewsDeloitte's office in Susquehanna Township.
Deloitte Consulting LLP, a New York-based global information technology company with an office in the midstate, has cornered most of the market on filling state government’s outsourced computer services needs.

It has garnered just shy of $1 billion in business from the state over the past decade, with much of that stemming from work done on the state Department of Public Welfare’s computer systems.

One of the new Deloitte contracts, worth around $250 million, is the subject of a court challenge.

Computer Aid Inc., a global computer services firm based in Allentown that has been the recipient of nearly $256 million of state government work over the past decade, says the process used to evaluate the bids was flawed.

Welfare officials dispute that.

The department “is very confident the process was open, fair and appropriate. The procurement process is intended to obtain the best possible services at the lowest possible price, and we are confident both of these objectives were achieved,” department spokesman Michael Race said in emailed responses to questions.

At the center of the dispute is the process that the Welfare Department used to evaluate bids for the five-year contract, according to court and departmental documents.

During that process, CAI alleges that state officials erroneously directed Deloitte to subtract six months’ worth of costs from its pricing. The department then compared Deloitte’s revised price for 54 months of work to CAI’s price for 60 months of work.

Department officials, however, maintain that adjustment was necessary to make a fairer bid comparison. They claim CAI’s pricing included costs associated with setup work during the first six months and 54 months of ongoing services.

But Deloitte’s pricing included the first six months of setup costs plus 60 months of ongoing services. So the department said that once that was adjusted, the final pricing put the cost of hiring Deloitte at $243.4 million versus $246.8 million for CAI.

[Read more.
]
Commonwealth Court rules in Department of Public Welfare's favor over its bid award to Deloitte Consulting LLP
Senior Judge Barry Feudale on Wednesday issued a ruling that said the department's bidding process was not flawed that led to a bid award to Deloitte Consulting LLP, a New-York based international information technology firm.

The welfare department last year sought bids for an information technology upgrade. After a six-month bid submission and review process, the welfare department selected Deloitte for the two largest of seven five-year contracts it was issuing for computer services, with three others firms getting the other contracts.

Deloitte has had a longstanding business relationship with the department. Its most recent contract with the welfare department for computer services was to expire on June 30 but Race had said it was extended for 90 days.

According to state Department of Treasury records, Deloitte has received nearly $1 billion in business from the state over the last decade, with much of that stemming from work on the welfare department's computer systems.

[Read more.]

Here, the solicitation required bidders to submit pricing for various elements, broken down into three categories: deliverables, modifications, and maintenance.

The solicitation allowed for "a transition period for the selected offeror’s orientation/knowledge acquisition of up to six months from the contract effective date." During this period, the government (DPW) "would pay the selected offeror only for accepted deliverables.... DPW would not pay for maintenance and modification" elements until after that transition period.

The facts get confusing on a cursory read because it appears the requesting pricing included a monthly calculation of all three elements for the entire 60 month contract period, notwithstanding the new contractor would not be paid for 2 of the elements, or evidently asked to provide them, during the transition period.

The protester, in its Best And Final Offer (BAFO), thus deducted the price of the 2 elements for the transition period. The incumbent, evidently, offered pricing over the full 60 month period. The hearing officer, evidently, to "compare apples with apples" then reduced the incumbent's bid in the same manner, that is, reducing the price to account for the 2 elements not paid for in the transition period.

That seems fair enough, but only if my assumption is wrong where I assume the incumbent is not being paid under the prior contract to provide those services. If so, then, in addition to already being paid to provide the services, the incumbent is getting a credit advantage in this solicitation for a prior award. If the government is trying to analyze the whole cost of services for the "new" 60 month contract period, the credit allowed for the transition expenses should not be ascribed to the incumbent but only to those not being paid for the services. Or though it seems to me.

To understand this by comparison of an analogous situation, see the GAO decision discussed in this post, Incumbent on government to level playing field.

A different way to look at bid responsiveness vs bidder responsibility

Under common procurement regimes in the US, including the ABA Model Code (followed by Guam) and the Federal Acquisition Regulations, bid/proposal analysis tends to go down two forks, responsiveness and responsibility. The usual catch phrase is to award to the lowest, or best value, "responsive and responsible" bid or offer.

That is normally easier to state than apply and people are often confused by the substance and process in identifying the separate forks. The rubric is that responsiveness is meant to evaluate whether the bid offers the government exactly what it was that the government asked for in its specifications. Responsibility, on the other hand, is meant to determine whether the bidder has the integrity and capability to get the job done in the time and on the conditions the government required.

A bid's responsiveness is said to be determined based on what's in the bid envelope. That is, it is determined at bid opening and material deviations beyond the scope of the specifications are not allowed after bids are opened.

A bidder's responsibility, on the other hand, is determined after the proposed award winner is selected, but before the award is finalized. Indeed, some final proofs of bidder responsibility may not be required until after the award, up until the time of performance. The focus is on the capability of the bidder to perform, an expectation of performance, when required to do so. Determination of responsibility is not a guarantee of complete and perfect performance, but a reasonable expectation that the government can rely on the promise of performance. If the bidder does not perform, there will be contract liability, and a mark will be noted against any future bid, suggesting the bidder is not responsible.

Terminology is sometimes tricky, but these concepts tend to be universally observed. In Europe, Canada and elsewhere, rather than "bids" or "proposals", the terminology often is "tender", and the notions of responsiveness and responsibility are referred to, respectively, as "tender compliance" and "contract performance", as this following Canadian article describes.

Transfer station requirement sparks compliance dispute
The case dealt with a municipal tender call for waste-removal services. The tender call included the requirement of an in-town garbage transfer station. The winning bidder did not have an in-town transfer station but was awarded the contract. The plaintiff, a competing bidder, challenged the process, alleging that the contract was awarded to a non-compliant bidder. The town claimed that the selected tender was compliant.

At issue was whether the tender call requirement for an in-town transfer station was a tender compliance requirement or whether it was a contract performance requirement that needed to be met after contract award. The court ultimately found that the transfer station was a contract performance requirement rather than a tender compliance requirement:

It is important to note that Tantramar was the only party which already had a transfer station in the Town and that therefore, according to them it appears that nobody else in the world could have submitted a compliant bid. Their argument leaves no room for other bidders and does not allow the required period to obtain a permit and open a transfer station.

Tantramar’s bid was, for the five year period, $480,000.00 higher than PBS’s bid. For the year 2004 alone Tantramar’s bid was $82,350.56 higher than PBS’s bid. The Town had not budgeted for such an increase. The tax rate to realize such an additional amount would see an increase of between 1.5 and 2 cents per mill.

The main issue in this case is whether PBS’s bid was materially non-compliant. The British Columbia Court of Appeal said at paragraph 34 of its decision in Graham Industrial Services Ltd. v. Greater Vancouver Water District, [2004] B.C.J. No. 5:

“According to these definitions, in the context of the present case, material non-compliance will result where there is failure to address an important or essential requirement of the tender documents, and where there is a substantial likelihood that the omission would have been significant in the deliberations of the owner in deciding which bid to select.”

In the case at bar, PBS was compliant on the face of its bid.

There was no requirement to have been pre-approved for the permit. The Town knew that only Tantramar had a transfer station and that another bidder would have to obtain a permit and proceed to put one in place. The delay in obtaining the permit was beyond the control of the parties.

A transfer station is only a convenience and not a requirement that goes to the essence of this contract for garbage collection and disposal.

[Read more.]

The case above might be contrasted with the following dispute. It involves a solicitation in Arizona. The bidder did not submit proprietary confidential data required in a "bidder qualification" statement in its bid, but did say it was "available upon request" to the government. It's bid was rejected as nonresponsive.

Bidder qualification information is classic data going to a determination of bidder responsibility. The financial information sought is expressly referred to in the kinds of data described as "standards of responsibility" in the ABA Model Procurement Code. That data is not necessary to be included in the bid envelope, and is meant to be obtained by an "inquiry" after bid opening if the bidder's responsibility is called into question or unknown.

Cases generally hold that a bid solicitation cannot transform a matter of bidder responsibility into an issue of responsiveness by requiring responsibility information to be put in the bid package; that requirement is ignored and the information is presentable in the time and manner specified for the determination of responsibility. (This is all discussed in the Guam Procurement Process Primer if you want to have a look at it; click the link and follow instructions in the sidebar panel, top.)


Contractor files protest over rejected bid
B's Contractors has filed what may be an unprecedented formal protest with the Yavapai County Board of Supervisors after the three-member board threw out the company's low bid on a county construction project Thursday, citing missing information on the bid application.

The project is the County Facilities Office/Warehouse job. B's, a local company, submitted a bid of $1,449,000, which was the lowest. However, the forms sent with the bid included the phrase "available on request" on the Qualification Statement, which includes a financial statement.

District 2 Supervisor Tom Thurman acknowledged that B's might have submitted the form without the information on purpose. "They're all getting scared now about putting out this personal information."

That was precisely what B's had in mind, as the information would become public if submitted. "We don't like to put out financials - there's some information people don't need to see," said Brian Bombardieri of B's Contractors.

Jim Holst, county capital improvements coordinator, said that such information was needed to make decisions on whether a company was financially able to handle a job, and pointed out that other contenders for the job had supplied it.

The supervisors decided that the omission made the bid ineligible for consideration.

[Read more.]

Thursday, July 28, 2011

Procurement controversies -- US Insular Areas

The US Department of Interior has oversight responsibility for certain so-called "insular areas" of the United States, being wholly-owned, unincorporated, non-state subsidiaries of the US, all of whose citizens are US citizens, which is generally executed through its dedicated and hard-working staff in the Office of Insular Affairs. The US Virgin Islands and the Commonwealth of the Northern Marianas Islands are two such insular areas, as is the Territory of Guam.

As part of that oversight, DOI's Office of Inspector General provides certain audit and other functions. The following two procurement-related reports in the last year are examples of such reports:

Procurement Deficiencies Plague the Virgin Islands Port Authority (September 2010)
Our recent audit of the Virgin Islands Port Authority's (Authority) administration of capital improvement projects (see attachment) revealed program weaknesses that leave the Authority vulnerable to fraud, waste, and mismanagement. Specifically, the Authority's procurement and financial reporting deficiencies have resulted in inefficient and opaque operations, as well as loss of Virgin Island Government (Government) revenues. The problems we observed are not new, having been identified and reported on 5 years ago. We provided recommendations then that have gone unheeded.

Specifically, we found that the Authority regularly circumvented or inadequately documented the procurement process in the issuance of its capital improvement projects. We had, therefore, little or no assurance that contracts were issued to the most qualified, responsive, and deserving contractors. Further, capital improvement files were generally disorganized and incomplete. The files were in such disarray that we could not determine if the Authority followed basic procurement procedures. The disorganization so impeded our audit that we were forced to meet with the Authority's Executive Director and the Engineering Director in an attempt to obtain missing documents. Despite our best efforts at this meeting, the Authority still could not produce the documents that we requested. We therefore questioned over $5.5 million in project costs.

In addition, we found a myriad of deficiencies in the Authority's financial reporting, such as inaccurate records of payments to contractors and service providers, unreported payments, and non-issued tax forms. Those deficiencies resulted in $84.3 million in unreported income to contractors and $12.6 million in taxes lost to the Virgin Islands Government.

[Read more.]


CNMI ARRA Management (July 2011)
The Office of Inspector General investigated allegations of fraud connected to the sole-source award of a service contract for the management of the Commonwealth of the Northern Mariana Islands (CNMI) American Recovery and Reinvestment Act (ARRA) funds to Integrated Professional Services (IPS). IPS is a company owned in part by former CNMI Secretary of Commerce, Michael Ada. Upon Ada’s resignation from his position as Secretary of Commerce in October 2010, IPS was awarded a $392,406 sole-source contract as authorized by CNMI Governor Benigno Fitial.

Our investigation collected evidence suggesting that the contract to IPS violated multiple CNMI ethics rules, including 1 Commonwealth Code (CMC) § 8543: Post-Employment Restrictions; 1 CMC § 8531: Use of Office, Staff or Employees of Public Office; and 1 CMC § 8532: Restraint on Use of Public Position to Obtain Private Benefit; and 1 CMC § 8544: Negotiating for Nongovernment Employment. In addition, we found that the contract may have violated CNMI Procurement and Supply Regulations, Part 700, “Ethics in Public Contracting.” Under the terms and conditions, the contract is null and void if the procurement processes or execution fails to comply with CNMI Procurement and Supply Regulations.

The U.S. Attorney’s Office for the District of Guam and the Northern Mariana Islands declined prosecution of this investigation. We conducted this investigation jointly with the CNMI Office of Public Auditor (OPA). OPA will provide its opinion separately to the CNMI Government.

[Read more.]

And on a somewhat related note:

Report on CNMI Agencies’ Implementation of Audit Recommendations, as of December 31, 2010, Report No. TR-10-02, July 26, 2011
OPA tracked a total of 46 audit recommendations in 2010. Of the 46 audit recommendations, 6 were closed and 40 remained either open or resolved. Of the 40 open or resolved recommendations, 26 were considered delinquent.

Agencies with delinquent recommendations as of December 31, 2010 include the Office of the Attorney General, Commonwealth Ports Authority, Department of Finance, and Department of Public Safety. The recommendations addressed to these agencies were classified as delinquent as OPA was not informed by these agencies within the last 180 days of any corrective action taken to implement OPA’s recommendations.

As of December 31, 2010, audit recommendations in 7 audit reports were referred to the Attorney General’s Office for legal action to recover monies improperly expended. According to these 7 audit reports, approximately $2.6 million is potentially recoverable. The AGO did not provide OPA an update on these referral cases during OPA’s follow-up process, therefore, the status of these referrals remains unchanged.

[Among the funds found recoverable were these items:]
cost of a washing machine for the period December 1993 to March 1996.

Funds misused by the former Secretary of Finance during fiscal years 1995 to 1997.

Recovery of the balance of a loan receivable made to a CNMI constituent by the former Washington Representative.

to recover overpayment of $543,375 from the consultant on grounds of unjust enrichment, conversion, fraud and breach of fiduciary duty and recovery of $195,971 from three other individuals for breach of fiduciary trust.

Overpayments of professional services contracts. Balance of overpayments totaling $1,315,102

Recovery of $164,534 in improper payments made to a surveying contractor and adverse action against contractor for misrepresentation.

Audit of Travel Transactions for fiscal years 1996 - 2001. The potential recovery amount for outstanding advances of $406,925 was reduced by $14,747.


OPA identified potential recoveries of approximately $3.6 million in 8 audit reports addressed to various agencies. During its semi-annual follow-up process for the period July 1, 2010 through December 31, 2010, OPA received updates from the Department of Public Lands and the Northern Mariana Islands Retirement Fund on the status of recovery of funds. Of the $4,726,434 identified as potentially recoverable, $1,054,605 has been partially recovered leaving a balance of $3,671,829 still recoverable as of December 31, 2010.

[Items mentioned in this regard include:]
Collection of rentals from 8 quarry operators for six lease years from 1990 to 1995 totaling $4,690,708, less $946,968 write-off for one bankrupt quarry operator
resulting in an amount recoverable of $3,743,740.

Nonresident Worker Application Process. Amount recoverable consists of uncollected fees of $330,835 from Company A and $181,575 from Company B.

improper payments to two former CPA officials for retirement benefits and compensatory time claimed.

Double payment of travel expenses and overpaid per diem allowances

Promissory note for $96,100 on overpayment of two professional services contracts

Funds misused by the former Secretary of Finance from fiscal years 1995 to 1997.

[Read more. There's plenty plenty.]

Saturday, July 16, 2011

When investment advice turns to litigation advice

I was initially interested in this story because, in its introduction, it recites Guam law to a "T", indicating that New Mexico also bases its procurement law on the ABA Model Procurement Code, at least as far as its general purposes and policies. Reading further just became more interesting. You might like to read the whole article yourself (click on the article's headline).

N.M. AG sees problem with state contract given to firm
The Procurement Code imposes certain safeguard requirements on the contracting process.

"The purposes of the Procurement Code are to provide for the fair and equitable treatment of all persons involved in public procurement, to maximize the purchasing value of public funds and to provide safeguards for maintaining a procurement system of quality and integrity."

The code also sets up a series of mechanisms for public bodies to procure services from companies in a transparent process.

New Mexico Attorney General Gary King, in an advisory letter issued last month, said a State Investment Council ["SIC"] contract with a law firm "has problems."

The SIC, Jennings explained, originally entered into the contract with the law firm in August 2005.

Pursuant to the contract's "scope of work," the firm would "(s)erve as legal counsel to the SIC for the purpose of reviewing documentation relating to direct securities investments, and advising the General Counsel (of the SIC) as to securities law matters generally" and "(c)onduct negotiations, if requested, with respect to investments or other investment management matters."

The original contract term was for one year and the compensation paid to the firm during the term was not to exceed $30,000.

Since entering into the original contract, the SIC and the law firm have amended the contract six times. amendments also increased the compensation, up to $5.8 million under the last amendment.

In addition to the original scope, the fifth amendment provided that the law firm would "(p)rovide advice and assist with reviewing documentation and responding to subpoenas, requests and inquiries from regulators and other government agencies, and document requests made pursuant to public disclosure laws."

The sixth amendment added that the firm would "(c)onduct, and provide advice relating to and in connection with an internal review of issues raised in connection with the matters described [in the fifth amendment]."

Assistant Attorney General Elaine Lujan, in her June 14 advisory letter, said while the original contract may not have been subject to the code, the contract became subject to the code once the scope of work was expanded in the fifth and sixth amendments.

Additionally, Lujan said, the contract fell within the parameters of the code once the scope of work was broadened to include matters that were not investment-related.

However, once the scope expanded outside the parameters of subsection CC, the SIC should have issued a request for proposals and otherwise followed the Procurement Code, she said.

The story included discussion of another topic and AG opinion regarding the right of school districts to hire their own legal counsel for certain matters, concluding:
The Legislature also has expressly granted public school boards the authority to "contract for the expenditure of money" as long as it is done according to the provisions of the Procurement Code, it said.

a public school district may contract with consultants or lawyers to represent the district during collective bargaining negotiations, provided the district complies with the Procurement Code.

Thursday, July 14, 2011

Running a government like a business

I have started reading James F. Nagle's compendious History of Government Contracting. It's US history through a lens you have never before perceived.

He tells us that until the early 1800's the Americans ran their procurement system like a business. It hired some of the country's most successful and honorable merchants to look after its fiscal needs on essentially a cost-plus agency or contract basis. And it led to favoritism, collusion, over pricing, shoddy contracting and self dealing.

All of which is mere irrelevant backdrop for the following article in today's Guam Pacific Daily News.

Airport chair challenges bid process
Price should be one of the factors in determining who wins a government contract, according to airport board Chairman Michael Ysrael, who yesterday expressed concerns about the way the airport is selecting a company to operate its pay parking lot.

Ysrael expressed concerns as the airport board gave Torres permission to begin negotiating with the highest-rated company for the airport parking lot job -- Pacair Ltd., which already is operating the airport lot, but whose contract is up. Ysrael said in the private sector, if you find two companies interested in working for you, you let them fight it out in order to get the best price.

That's the way the government procurement process works, Executive Manager Mary Torres told airport board members during their meeting yesterday morning.

According to local procurement law, companies that submit proposals for government contracts are rated according to their ability to do the job, and price is negotiated only with the top-rated company. Only if they fail to agree on a price does the government negotiate with the next highest-rated company.

"It is what it is," Torres told the board. She noted there have been times when the airport didn't give a contract to the highest-rated company.

That is about half right.

Under Guam's RFP (request for proposal) procedure, offerors are first ranked qualitatively in descending order from most to least qualified to offer the services sought. Ranking is not based on any consideration of price, qualities of offeror being singularly paramount at that juncture.

But ranking does not determine who wins the contract. Once ranked, negotiations begin with the most qualified offeror to come to agreement on a "fair and reasonable" price. Here other many factors come into play to value the fairness and, separately, reasonableness of the price. General market prices and the offeror's costs and many other factors are considered. Only if the best qualified offeror agrees to the government's assessment of fair and reasonable price does the best qualified get the contract. If that agreement is not reached, then the government goes to the next offeror and starts again.

The part of this story that I find troublesome is that the RFP process is being used to obtain services for the operation of a car park. Guam's RFP process is only meant to be used to obtain "professional" services, which should generally be limited to licensed, traditional professional services.

The Guam Supreme Court has held that the RFP is the wrong method of source selection to use to acquire services for the operations, management and maintenance of a bus mass transit system. The Guam Public Auditor has determined that the RFP process is the wrong way to solicit debt collection services.

If asked, I'd have to say that the services sought here, based only on the information available to me in the news article, should be solicited by competitive sealed bid. But, of course, it is not for me to say.

Guam's RFP process is extensively discussed in the Guam Procurement Process Primer, Article VIII, available free online as mentioned in the top of the side bar in the right column of this blawg.

Procurement controversies -- Cayman Islands

Miller asks AG for names
The former chair of PAC said he is concerned that without a Public Accounts Committee in place the recent damning report by the auditor general will not get the attention it deserves.
That "damning report", from the Office of the Auditor General of the Cayman Islands, is here. It is, by its own admission, quite general in a top down sort of way, but promises more detail subsequently. A few excerpts arbitrarily chosen follow:

Management of Government Procurement 5 July 2011
Procurement is a key administrative function in a typical public sector organization that is as important in how it is managed as, for example, the finance, personnel and information technology functions. Procurement is normally carried out by officers who are highly trained individuals that have qualifications and specialized experience in the field of procurement.

The Financial Regulations were amended in 2007 so that the procurement regulations extended to all government entities including statutory authorities and government companies.

Procurement is not a clearly identifiable function in the Government. We were not able to find any individual at the centre of government or in the entities we visited during our audit that was responsible for managing the procurement function. Some senior managers claimed responsibility for managing certain aspects of the procurement process, but no one we interviewed felt it was their responsibility to establish and implement procurement policies and procedures for use throughout the Government or even in their entity and various departments.

As there is no individual or group responsible for government procurement, no assurance is being provided to the Legislative Assembly that the laws and regulations pertaining to procurement are being followed. In the absence of such an individual or group, Legislators must rely on all entities to not only individually develop, implement and operate good procurement principles and practices in
their respective organizations, but also rely on the individuals involved in the performance of the procurement functions to abide by these practices.

Recommendation #1: The Government should appoint someone as a Chief Procurement Officer who would be accountable for the overall development, management and reporting on the Government’s procurement activities. The reporting relationships for this individual would depend on the organization chosen by the Government to implement this crucial function.

Recommendation #2: The Government should develop policies, procedures and practices for procurement of supplies, services and assets that would ensure clear direction to officials.

We found that the Government does not have good information about its procurement activities. For example, we found that there is no information about how much business is done with one vendor across the Government. We would expect the Government to have good procurement information as part of a management framework for this function. Government entities are effectively working in silos with little or no information sharing between organizations which can potentially lead to a lack of information on supplier capability and availability.

Centralized and up-to-date source lists of individuals and firms, local and overseas, that do business with the Government do not exist and need to be developed and maintained to ensure consistency, economy, effectiveness and fairness in procuring best value.

For example, a construction company that was unsuccessful on one of the Government’s largest recent building projects when it had been found to be unqualified ended up as the contractor for another significant project without management knowing what had previously happened. Unfortunately, the contractor ended up being terminated before the project was complete which resulted in several million dollars in extra costs.

We found that procurement throughout the Government is generally being carried out by officials with little or no expertise to conduct the work required of them, or with little available advice on how to perform their day to day procurement management activities. Notwithstanding the expertise currently available in entities where there is significant procurement activity, such as Public Works, our interviews with several entities indicated that most individuals involved in purchasing supplies and services for their organizations do not possess the level of expertise one should expect to find in public sector procurement groups. As a result, it is not possible for these organizations to realize the benefits of procurement efficiency and effectiveness that would be associated with having highly skilled and knowledgeable procurement staff.

We were informed that approximately three years ago, there was a conference held by the Government to discuss good procurement practices and that it was attended by a number of senior government officials. Out of that conference, we were told that the Government implemented a formal training program at UCCI for the development of procurement officers in the Government. However we were informed that the program has had little take up and is not coordinated with any plan to develop additional procurement capability in the Government.

Recommendation #4: The Government should develop and implement a plan to develop the
expertise necessary for an effective procurement function both centrally and in the entities.

The Cayman Islands Government does not have fundamental principles for its management of procurement that would form the basis for the development of a management framework. These would, for example, include:
• value-for-money;
• open and effective competition;
• probity and ethical behaviour
Principles become the basis for the development of directives and guidance for how public servants should act and conduct their business. Without this kind of guidance, more direction cannot be developed.

We found no evidence of policies that covered all aspects of the procurement process. Other than a broad set of rules established in the Financial Regulations regarding preference to local suppliers and tendering for requirements over $50,000 and CTC guidelines for tenders over $250,000, the Government’s laws, regulations and policies are insufficiently detailed to provide the necessary guidance for how procurement should be conducted.

The development and use of standard procurement documents also plays a significant role in providing transparency and efficiency in the procurement process. Standard procurement forms ensure that the language used is simple and consistent; they eliminate redundancies and contradictions; and they present a common look and feel for suppliers doing business with Government. While they may not be appropriate for complex, one-time or innovative requirements which may need considerable research and drafting of specific terms and conditions, clauses or schedules, they are an important in ensuring efficient and effective procurement.

Standard form contracts are useful for the consistency, predictability and efficiency of contract development as well as other aspects of contracting such as finalizing the contract and its later management. There are benefits for staff that become familiar with their content and the way they operate and/or undertake training in regard to the use of the standard form. It is good practice to have standard form contracts when entities have common, ongoing contracting requirements.

There are no procedures in place to ensure that contracts are legal. We have found that in the absence of contract policies and procedures and without the benefit of using standard contract forms, there is no assurance that contracts contain the necessary clauses and conditions one would expect to find in legally binding contracts. This is particularly important in high value, high risk contracts to ensure the Government’s interests are protected and that there is compliance with Cayman Island laws and policies. Legal advice should be sought early in the planning stage of the procurement process, particularly for the high risk, complex, or strategic procurements. Specific documentation may need to be developed, including a draft contract if necessary, to accompany procurement documents. Legal advisors should be involved in developing standard contract templates and also be consulted, when necessary, on development of business cases for particular procurements.

There are no procedures in place to ensure due diligence is undertaken of potential suppliers, either at the tendering or contracting stages. Suppliers must be held accountable for representations submitted in their offers and proposals in response to requests for tenders or quotes. Appropriate wording should be used in contracts to ensure that these assertions are formally acknowledged by the supplier and represent accurate and truthful statements. Project authorities, or their authorized representatives, in entities must be thorough in ensuring that deliverables of supplies or services are in strict accordance with contract terms and conditions. Contractors should be officially notified without delay in situations where there are concerns that contract expectations have not been met.

There is no formally documented appeal process for bidders to the tendering process and suppliers providing supplies and services to the Government. Arrangements should be in place that describe to whom and where a complaint should be addressed as well as the entity’s procedures for responding to the complaints. In cases where the supplier is not satisfied with an entity’s official response, it may be appropriate for an independent review to be conducted. All entities should have a process in place to deal with these situations to avoid the perception of unethical and nontransparent behaviour in the procurement process by suppliers and the general public.

While internal audit has done some limited work on procurement activities in the past, they have no intention at this time to audit these activities in the near future. Reporting to senior management on the effectiveness of its operations is a key component of the accountability framework to ensure the economy, efficiency and effectiveness of government programs or, in other words, due regard for value-for-money. there is no government-wide regularized internal audit program for procurement activities.

Recommendation #10: Because of the significant risks and lack of controls identified with the management of the procurement function in the Government, we strongly urge that a compliance audit regime be implemented to conduct a rigorous review of government procurement.

There is much more. As I said, this is an arbitrary selection of excerpts, but I imagine they would be salient issues for anyone anywhere reviewing their own procurement regimes.

Guam scores relatively well on the factors mentioned, but could use some refresher courses, too.

Procurement controversies -- Philippines National Police

DILG uncovers more anomalies in PNP
Authorities pushed for the procurement of rubber boats late 2009 after storm “Ondoy,” which left many parts of Metro Manila submerged in floodwater. National Police Commission (Napolcom) issued guidelines for the procurement but the PNP-BAC junked the order and justified the negotiated/emergency procurement because of Ondoy.

Interior and Local Government Secretary Jesse Robredo has ordered the filing of charges against active and retired police officials involved in the anomalous procurement in February 2010 of P131 million worth of rubber boats and outboard motor engines. Robredo said the people behind the questionable procurement of rubber boats could also be in-charge of the purchase of two second-hand helicopters.

The DILG chief however said the PNP Maritime Group Technical Inspection Committee on Watercrafts found out numerous defects and deficiencies in the acquisition.

“To make it short, the rubber boat and its outboard motor were not compatible and won’t fit for each other. The Napolcom standard specification calls for a 40 horsepower outboard motors but those delivered were 60 horsepower,” Robredo added.

Robredo also pointed out that that more than P1 million freight cost for the distribution of the rubber boats were not included in the contracts.

“The rubber boats can be used only with the paddle thereby defeating its intended purpose,” Robredo said, adding that officials of the Maritime Group requested Bacalzo to suspend the use of rubber boats as it would be risky.

Robredo noted 41 of the rubber boats were made in France, 24 came from Korea, and a third supplier was Costa Rica, and that some were recreational boats.

“Former PNP chief Jesus Verzosa, the members of the PNP Bids and Awards Committee (PNP-BAC) and others involved in the acquisition of defective and deficient rubber boats and outboard motors could be held liable for this irregular and anomalous transaction,” Robredo said in a press conference held at the DILG main office in Quezon City.

Verzosa, in a text message sent by his lawyer Benjie de los Santos, meanwhile said he welcomes any investigation.

“Procurements and procedures are in place in the PNP bidding processes. Complete staff action is undertaken before it reaches me for approval and have no knowledge or information of any irregularities or violation of the procurement law,” the text message said.

“The PNP chief (Verzosa) is not expected to go through the details as head of bureau. Unless it is shown that he has prior knowledge of wrongdoing of his subordinates,” it added.

Monday, July 11, 2011

Interested party determination not based on responsibility

Other cases have made the point that bid responsiveness and bidder responsibility are entirely separate and independent issues, judged by separate criteria and standards and at separate times in the solicitation process.

This US Federal GAO case reiterates that "interested party" status is similar to responsiveness, and that it is inappropriate to test it by reference to matters of bidder responsibility.

Here, the protester sought to turn a requirement in the solicitation that the bidder provide information about bidder responsibility with the proposal into a test of "interested party" status. Based on the principle that issues of bidder responsibility cannot be transformed into issues of bid responsiveness by the dictates of a solicitation requirement, the protester failed.

There is also some interesting sidelights about the way GAO integrates ADR processes in its review processes.

Curiously, though, the protester was awarded costs and legal fees: "Request for reimbursement of costs for filing and pursuing an earlier protest is granted where the protester raised a clearly meritorious protest ground, and the agency did not take prompt corrective action."

There were other issues in this case, including what it takes to overturn an evaluation, but those will not be discussed here.

Matter of: Waterfront Technologies, Inc., B-401948.16, June 24, 2011
DOL argues that Waterfront is not an interested party to challenge the award to 21st Century because the protester did not meet a mandatory solicitation requirement to have an interim secret facility clearance.

As relevant here, the RFP stated that offerors would be required to hold “at a minimum, an interim secret facility clearance prior to the RFP closing date.”

The RFP did not expressly state that offerors were required to provide documentation concerning this requirement in their proposals.

However, in an email to the protester on August 28, 2009, after receipt of proposals, the agency asked Waterfront to address the following question: “Does your company hold at a minimum an ‘INTERIM SECRET FACILITY CLEARANCE’ prior to the RFP closing date as referenced in the subject SOW?”

The protester responded that it did not have an interim secret facility clearance.

Based on the foregoing, DOL has argued throughout the various protests that Waterfront’s proposal did not meet a mandatory solicitation requirement and therefore should not have been considered eligible for award.

Our Office has held that the ability to obtain a security clearance is generally a matter of responsibility, absent an express requirement in the solicitation to demonstrate the ability prior to award.

SBA has conclusive authority to determine the responsibility of small business concerns. Thus, when a procuring agency finds that a small business is not eligible for award based on a nonresponsibility determination or a failure to satisfy definitive responsibility criteria, the agency is required to refer the matter to the SBA for a final determination under its certificate of competency (COC) procedures.

On October 15, 2009, prior to the submission of an agency report on that protest, the GAO attorney assigned to the protest conducted an outcome prediction ADR, in which she advised that Waterfront’s asserted failure to provide an interim facility security clearance was a matter of “responsibility,” rather than “responsiveness” or technical acceptability, and predicted that our Office would likely sustain Waterfront’s protest. She also advised the parties that since Waterfront was a small business concern, a finding of non-responsibility would require the DOL to submit the matter to the SBA for a COC review.

DOL took corrective action in response to the ADR and advised our Office that it would refer the matter of Waterfront’s responsibility to the SBA for a COC determination. In its referral to the SBA, however, DOL stated that Waterfront was not the apparent successful offeror for the procurement, and for this reason, the SBA declined to consider whether to issue a COC to the protester.

In connection with Waterfront’s subsequent protest DOL again argued that Waterfront was not eligible for award based on the protester’s lack of an interim secret facility clearance. Our Office asked the SBA to address this issue. SBA again concluded that it need not evaluate Waterfront for a COC, but would consider a COC referral in the event that Waterfront was rejected as nonresponsible or unacceptable on the basis of a definitive responsibility criterion. Waterfront asserts that it is compliant with the RFP’s interim secret facility clearance requirement.

On this record, we think that Waterfront is therefore an interested party eligible to challenge the award to 21st Century.


This case is consistent with a long line of federal authority for the proposition that it is responsiveness, not responsibility, that lies at the heart of the inquiry into interested party status, e.g.:

U.S. v. International Business Machines Corp., 892 F.2d 1006 (C.A.Fed., 1989)
The Brooks Act empowers the board to hear protests of disappointed bidders who are "interested parties." An "interested party" is in turn defined as "an actual or prospective bidder or offeror whose direct economic interest would be affected by the award of the contract or by failure to award the contract." In contrast to statutes like the Administrative Procedure Act, under which Congress has extended the traditional basis for standing beyond direct economic injury, in the Brooks Act Congress has deliberately and substantially narrowed the class of persons entitled to invoke the authority of the board.

We have suggested above that Congress intended the phrase "interested party" to be a meaningful limitation on the authority of the board to entertain, and this court to review, protests of an agency's conduct of a Brooks Act procurement. We see responsiveness as another facet of the interested party inquiry. When responsiveness is an issue, it must be resolved before the board can proceed. If a bid is not responsive, the protester has no more right to invoke the office of the board than the proverbial man on the street. A nonresponsive bidder is the epitome of one who lacks a direct economic interest.

Testing the evaluation of best value

Best value, value for money, best anything: like beauty, best is often in the eye of the beholder. Given that simple low price may not be the most optimal selection criteria when purchasing decisions extend beyond the realm of commercially standard products, especially when used to try to choose the most optimal service on offer, some amount of "best" must enter into the equation.

But also given that objective nature of the best choice is not always verifiable due to the subjective lens of the evaluator, to insure procurement integrity, a review of the best value evaluation process must require a more critical review of that process. More critical than the entirely deferential review from days of old, anyway.

The following three recent GAO cases suggest that, while a deferential review is still somewhat reverential, some rigorous examination of such evaluation is being conducted. The first case exemplifies deference reverence, and the other two hint at a more critical standard of review.

It should be remembered that most articles mentioned in this blog include only excerpts, often re-arranged, to give a general nature and taste of the original, while trying to keep the content short. You really need to read the original for the full context -- and to make your own evaluation of it. Remember, this is the internet, not an encyclopedia. Not that you should take an encyclopedia at face value, either.

Matter of: L-3 STRATIS, B-404865, June 8, 2011
L-3 STRATIS, the protester, argues that the agency’s evaluation of its proposal was unreasonable. We deny the protest.

The RFP, which was issued on March 24, 2010, contemplated the award of a 6-year indefinite-delivery/indefinite-quantity contract to the offeror whose proposal represented the best value to the government, with technical factors considered significantly more important than price in determining best value. The technical factors (and their corresponding weights) were as follows: (1) technical approach-
25 points; (2) technical qualifications of key personnel and technical staff-15 points; (3) corporate experience and past performance-20 points (10 points each for corporate experience and past performance); (4) program management-20 points; and (5) subcontracting-20 points.

After evaluating the final proposals, the source evaluation panel (SEP) furnished the source selection official (SSO) with a report summarizing the proposals’ strengths and weaknesses. After reviewing the SEP’s findings, the SSO determined that Perot’s proposal represented the best value to the government.

In his source selection determination, the SSO explained that while L-3’s proposal had demonstrated a number of strengths, one of which was the protester’s innovative plan [deleted] for delivering IT infrastructure services to agency users, the proposal’s strengths were offset by several concerns.

The SSO’s first concern was that the protester’s timeline for implementation of [deleted] was unclear, which called into question the value of the benefits associated with L-3’s [deleted] approach. The SSO went on to explain that he considered the lesser degree of uncertainty associated with Perot’s more clearly defined timeline to be worth a price premium.

[There were other issues, as well.]

The SSO concluded that the uncertainty regarding L-3’s [deleted] transition timeframe and its ability to implement ITIL v3, along with the vagueness concerning its use of subcontractors, was not mitigated by its lower price. The SSO further concluded that the advantages of Perot’s proposal in terms of a clear path forward, solid ITIL v3 grounding, and a defined small business subcontracting plan were worth a price premium of approximately 15 percent vis-à-vis L-3’s proposal.

The protester argues that the agency’s evaluation relied on unstated factors, that the agency ignored information contained in its proposal, and that the agency failed to conduct meaningful discussions. The protester maintains that these errors resulted in an unsupported best value tradeoff determination.

In reviewing protests objecting to an agency’s technical evaluation, our role is limited to ensuring that the evaluation was reasonable and consistent with the terms of the solicitation. As explained below, based on our review of the record here, we think that the agency’s evaluation was reasonable.

To the extent the agency believed that L-3’s proposal failed to provide sufficient detail regarding its timeline for implementation, L-3 argues that the agency should have raised the matter during the various rounds of discussions it held with the offerors. Having failed to do so, L-3 argues the discussions conducted by the agency were inadequate.

Although discussions must address at least deficiencies and significant weaknesses identified in proposals, the scope and extent of discussions are largely a matter of the contracting officer’s judgment. In this regard, we review the adequacy of discussions to ensure that agencies point out weaknesses that, unless corrected, would prevent an offeror from having a reasonable chance for award.

An agency is not required to afford offerors all encompassing discussions, or to discuss every aspect of a proposal that receives less than the maximum score, and is not required to advise an offeror of a weakness that is not considered significant, even where the weakness subsequently becomes a determinative factor in choosing between two closely ranked proposals.

While the weakness at issue may have served as a discriminator for the purpose of the SSO’s award decision, as previously indicated, the mere fact that a weakness becomes a determinative factor in choosing between two closely ranked proposals, does not mean that the agency was required to raise the issue during discussions.

Agencies are not required to “spoon-feed” offerors during discussions, but rather need only lead offerors into the areas of their proposals that require amplification or revision. Having sufficiently led L-3 to the area of concern in the first round of discussions, NRC was not required to raise the matter again in any subsequent round of discussions, even where it continued to be considered a concern by the agency.


Matter of: One Largo Metro LLC; Metroview Development Holdings, LLC; King Farm Associates, LLC, B-404896, June 20, 2011
[This case was the subject of a Washington Post report, which summarized the dispute as follows: "One Largo Metro, Metroview Development Holdings and King Farm Associates each filed bid protests with the GAO after the agency, which oversees development for the executive branch, awarded the lease for 1 million square feet of office space to JBG this year. JBG has held a five-year, $108 million lease on the HHS office space in Rockville while the procurement process continued. Meanwhile, the Prince George’s developers have been trying to win the HHS bid.

"The GAO ruled that the GSA’s award to Fishers Lane/JBG Cos. should be reevaluated and that three other developers who were trying to entice the U.S. Department of Health and Human Services to move from Rockville to Prince George’s County should get another chance to win the nearly $450 million, 15-year lease agreement."]

DIGEST
1. Protest is sustained where the agency failed to consider both the variety and quantity of amenities offered under the access to amenities subfactor, as required by the solicitation.
2. Protest is sustained where the head of the contracting activity did not meaningfully consider the evaluated differences in the offerors’ proposals in her selection decision.

Offerors were informed that award would be made on a “best value” basis, considering price and three technical factors: location; building characteristics; and past performance and key personnel. Under the location factor, the access to existing Metrorail subfactor was stated to be significantly more important than the access to amenities subfactor and more important than any other subfactor. The location and building characteristics factors were stated to be of equal weight, and to be each significantly more important than the past performance and key personnel factor. Price was stated to be significantly less important than the combined weight of the technical factors.

With regard to access to amenities, offerors were informed that “[o]ffers will be evaluated for amenities within the building or otherwise available” within one mile of the building’s main entrance, and that evaluations would consider “the quantity and variety of the following amenities: fitness facilities, postal facilities . . . restaurants, day care center, fast food establishments, dry cleaners, [banks and ATMs], convenience shops, card/gift shops, hair salons, automotive service stations, and drug stores.” The SFO further advised that the best rating would be given to offers that provide the greatest variety and quantity of amenities existing [if not then existig] at the time of occupancy within the building or within 1,500 wlf of the building.

[There were many other such objectively verifiable detailed, salient requirements, a point I take as a good example of the kind of detail a proper best value solicitation will contain.]

Offers were evaluated by the agency’s technical evaluation teams9 (TET), which assigned adjectival ratings under each non-price evaluation factor supported by a narrative discussion that identified the offerors’ respective strengths and weaknesses. GSA assigned a separate technical evaluation team for each non-price evaluation factor. The evaluation reports were provided to the agency’s source selection evaluation board (SSEB), which also evaluated the offerors’ revised proposals. The SSEB assigned adjectival ratings under each subfactor and for the proposals overall, but did not, at this juncture, provide an adjectival rating for the three top-level evaluation factors.

The SSEB conducted a tradeoff analysis and recommended that the lease be awarded to King Farm as reflecting the best value to the agency. The SSEB found that the proposals of Fishers Lane, One Largo, and Metroview were essentially technically equal, and that the price of Fishers Lane was lower than the prices of One Largo and Metroview. The SSEB then compared the Fishers Lane higher-rated proposal to King Farm’s lower-priced proposal. The SSEB found that the higher technical rating of the Fishers Lane proposal primarily reflected that offeror’s proposal of a building that was closer to the nearest Metrorail station. The SSEB also found, however, that King Farm had mitigated that advantage by offering a free shuttle service. The SSEB concluded that although the Fishers Lane proposal had a higher rating, the two offerors’ proposals approached “technical equality,” and the perceived benefit in the Fishers Lane proposal did not merit the additional cost to the agency.

The SSEB’s January 2011 evaluation report and award recommendation were provided to the agency’s source selection authority (SSA). The SSA was concerned with the SSEB’s rationale for its ratings of the offers and directed the SSEB to reevaluate and review its source selection recommendation.

The SSA stated, among other things, that the SSEB’s report did not indicate that the evaluation board had recognized that the location and building characteristics factors were of equal weight and that price was significantly less important than the technical factors.

Because the SSEB found that all offers were technically equal, the board again recommended that the lease be awarded to King Farm on the basis of its low price.

The SSA reviewed the SSEB’s addendum evaluation report and agreed with the board’s subfactor ratings and its recommendation to make award to King Farm. The SSA, however, disagreed with the SSEB’s conclusion that the offers were technically equal. The SSA concluded that, although the proposals were technically very close, One Largo’s offer was technically superior to the proposals of Fishers Lane, Metroview, and King Farm. In performing a tradeoff analysis, the SSA compared One Largo’s superior offer with King Farm’s low-priced, highly successful-rated offer. At the conclusion of her review, the SSA agreed with the ultimate conclusions of the SSEB, and decided that King Farm’s offer represented the best value to the government.

The SSA’s selection decision was provided to GSA’s commissioner for the National Capital Region Public Buildings Service, who also serves as the Head of the Contracting Activity (HCA) for this region. The HCA reviewed the SFO, SSP, TET reports, SSEB reports, and the SSA’s decision, and disagreed with the SSA’s conclusion that King Farm’s proposal offered the best value to the government.

While the HCA relied on the SSEB’s earlier ratings, she did not accept the SSEB’s tradeoff analysis or its recommendation for award. The HCA ranked the offers, based on the percentage of superior ratings received. The HCA stated that the Fishers Lane offer presented the best value to the government and selected Fishers Lane for award.

The HCA’s tradeoff between the proposals of One Largo and Fishers Lane did not, however, identify One Largo’s technical advantages or explain why these advantages did not justify the higher price. Id. Similarly, the HCA found that Metroview’s offer was not the best value to the government, based on Metroview’s lower rating and higher price than One Largo, but without any further explanation of the underlying merits of the proposals.

The HCA also compared the Fishers Lane offer with King Farm’s lower-priced offer, observing that the King Farm and Fishers Lane offers received the “same or similar” adjectival scores for all technical subfactors except for access to an existing Metrorail station. In reaching a tradeoff decision, the HCA acknowledged that, for this procurement, price is significantly less important than the combined weight of the technical factors, but that the importance of price increases as offers approach technical equality.

As noted above, the Fishers Lane offer was rated highly successful under the access to existing Metrorail subfactor, and King Farm’s offer was rated marginal. The HCA stated that this was the distinguishing difference between the offers, and selected the Fishers Lane higher-priced offer as the best value to the government.

these protests followed. GSA has stayed award of the lease pending our resolution of these protests.

The protesters raise numerous objections to the evaluation of offers and the HCA’s selection decision. As explained below, we sustain the protesters’ challenges to GSA’s evaluation of offers under the access to amenities subfactor, and to the agency’s source selection decision. We deny the remainder of the specific challenges

King Farm argues that GSA’s evaluation of proposals under the access to amenities subfactor was not in accordance with the SFO. Specifically, King Farm contends that offerors were advised that the agency would consider the quantity, variety, and proximity of amenities offered. Instead of considering the quantity and variety of amenities, King Farm argues that the agency only considered the number of amenity categories offered.

GSA acknowledges that the SFO provided for the evaluation of the variety, quantity, and proximity of amenities but argues that this was accomplished by assessing the number of amenity categories offered by each offeror. GSA also argues that even if their ratings under the access to amenities subfactor were improved, King Farm and Metroview were not prejudiced by GSA’s actions because this subfactor represented only [Deleted] percent of the total evaluation, and thus would not have altered the overall technical ratings or the results of the tradeoff analysis.

We find that GSA’s approach to evaluating this SFO provision was inconsistent with the terms of the provision. The SFO provided:
Offers will be evaluated for both the quantity and variety of the following amenities:.... The final evaluation will consider all of the available amenities and the offers will be scored based on the quantity, variety, hours and proximity of such amenities.... The best rating will be given to offers that provide the greatest variety and quantity of amenities....
The plain language of the SFO requires GSA to evaluate both the overall number of amenities offered as well as the number of amenity categories (i.e., the variety).

but GSA’s simple counting of categories, such as hair salons or automotive service stations, ignores the type of amenity being offered. GSA’s counting of amenity categories disregarded King Farm’s identification of three restaurants and three fast food establishments within 1,500 wlf of its building, as compared to identification by Fishers Lane of only one restaurant and four fast food establishments within 1,500 wlf. Similarly, GSA’s evaluation does not account for the fact that 7 of 18 amenities offered by Fishers Lane were automotive service stations. In short, we find that GSA’s assignment of adjectival ratings based only upon how many amenity categories were offered was not reasonable.

As set out below, all three of the protesters here raise challenges to the HCA’s selection decision. King Farm argues that the HCA failed to perform the required tradeoff analysis, and failed to articulate any rationale for paying the price premium for the Fishers Lane proposal.

One Largo, the highest-rated offeror, argues that the HCA’s recitation of offerors’ scores and prices--without additional explanation weighing the strengths and weaknesses of each proposal--was insufficient to support the HCA’s determination that the Fishers Lane proposal represented the best value to the government. One Largo complains that the HCA failed to credit One Largo for its evaluated technical superiority by looking behind its higher ratings to discern the substantive differences in the proposals. For example, the HCA failed to evaluate the true difference in distances from a Metrorail station. Fishers Lane location was more than four times farther.

Finally, Metroview argues that the HCA failed to meaningfully consider whether Metroview’s proposal, which received a higher percentage of superior ratings than the Fishers Lane proposal, merited the cost premium, based on each proposal’s strengths and weaknesses. Metroview argues that the HCA did not substantively discuss the technical strengths and weaknesses of the two proposals to determine whether they were technically equal or whether one was technically superior, but instead mechanically applied the adjectival ratings to determine technical superiority.

Moreover, Metroview asserts that the evaluation record does not provide clear support for any one proposal. In this regard, Metroview notes that the SSEB concluded in its final evaluation report that all proposals were technically equal and recommended King Farm based on its lower price; the SSA disagreed with the SSEB’s determination of technical equality and selected King Farm’s proposal after a tradeoff analysis; and the HCA disagreed with the conclusions of both the SSEB and the SSA to select the Fishers Lane proposal.

In reviewing an agency’s evaluation of proposals and source selection decision, we examine the supporting record to determine whether the decision was reasonable, consistent with the stated evaluation criteria, and adequately documented.

Although source selection officials may reasonably disagree with the ratings and recommendations of evaluators, they are nonetheless bound by the fundamental requirement that their independent judgments be reasonable, consistent with the stated evaluation scheme, and adequately documented.

In this regard, ratings, whether numerical, color, or adjectival, are merely guides for intelligent decision making.

An agency’s source selection decision cannot be based on a mechanical comparison of the offerors’ technical scores or ratings per se, but must rest upon a qualitative assessment of the underlying technical differences among competing offers.

GSA argues that the HCA reasonably exercised her discretion in determining that the Fishers Lane proposal represented the best value to the government. GSA further argues that the HCA’s review of the SSEB report and the SSA decision, which each contained a detailed discussion of the merits of each proposal, provided sufficient basis for the HCA’s selection decision. In particular, GSA notes that the HCA adopted the overall technical ratings assigned by the SSEB in its January 2011 report. GSA also contends that our prior decisions do not require agency selection officials to discuss every detail regarding the relative merit of the proposals in the selection decision document.

We recognize that while agency selection officials may rely on reports and analyses prepared by others, the ultimate selection decision reflects the selection official’s independent judgment. However, the independence granted selection officials does not equate to a grant of authority to ignore, without explanation, those who advise them on selection decisions.

HCA did not concur with the recommendations of the lower-level evaluators. Although the HCA adopted the subfactor-level adjectival ratings assigned by the SSEB, she did not adopt either the SSEB’s or the SSA’s analyses concerning the relative merits of the proposals or selection recommendations. Rather, without explaining the basis for her disagreement with the conclusions of the lower-level evaluators, the HCA proceeded to make conclusory pronouncements concerning which proposal offered the best value to the government.

We find from our review of the record no evidence of any meaningful consideration by the HCA of the evaluated differences in the firms’ offers. Rather, the HCA’s tradeoff assessment was based upon a mechanical comparison of the percentage of superior and highly successful ratings assigned to each offer. Where, as here, a solicitation provides for award on a best value basis, the decision as to the relative technical merit of the offers must be based upon a comparative consideration of the technical differences of the proposals.

As noted above, the SSEB documented a number of differences between the offerors’ proposals, which would appear to provide discriminators for a determination of the relative technical merit of the offers. For example, under the most important subfactor, access to existing Metrorail, the offerors’ proposed buildings were at differing distances from a Metrorail station. Also, King Farm, which offered a building at the greatest distance from a Metrorail station, proposed a shuttle service plan to mitigate that weakness. Similarly, under the planning efficiency and flexibility subfactor, the SSEB noted a number of differing strengths and weaknesses in the offerors’ proposed building layouts.

In the absence of a documented, meaningful consideration of the technical differences between the offerors’ proposals, the HCA could not perform a reasonable tradeoff analysis. That is, the HCA had no basis to determine that the Fishers Lane higher-priced proposal outweighed the cost savings offered by the King Farm lower-rated, but lower-priced offer. Similarly, the HCA had no basis to conclude that the Fishers Lane proposal was more advantageous than the proposals of One Largo and Metroview. Accordingly, we sustain the protesters’ challenge to GSA’s selection of the Fishers Lane offer as the best value to the government.

We recommend that GSA reevaluate offers under the access to amenities subfactor in accordance with the terms of the SFO and perform and document a new selection decision consistent with our decision.

We also recommend that the protesters be reimbursed their reasonable costs of filing and pursuing the protest, including attorneys’ fees.


Matter of: Mission Essential Personnel, LLC, B-404218.2, June 14, 2011
Protest of agency evaluation is sustained where record reflects that agency failed to consider one of evaluation factors established by terms of solicitation.

The RFQ, which was issued on April 18, 2010, contemplated issuance of an order for a fixed-price level-of-effort labor contract with a 1-year base period and four 1-year options to the FSS contract holder whose quotation represented the best value to the government.

Best value was to be determined based on a consideration of price and several non-price factors, with the non-price factors being given greater importance. The non-price evaluation factors specified in the RFQ were: (1) management plan; (2) quality control plan; (3) transition plan; (4) resumes; (5) past performance risk; (6) small business subcontracting plan; and (7) facility clearance (which was to be rated on a pass/fail basis).

The RFQ established the management plan factor as being the most important factor; the quality control plan factor was the second most important factor; the transition plan and resumes factors were of equal weight, and ranked third in terms of importance; and the past performance risk and small business subcontract plan factors were of lesser importance.

Under all of the foregoing factors except past performance risk, quotations were to be rated as exceptional, very good, acceptable, or unacceptable. Under the past performance risk factor, performance risk was to be rated as low, moderate, high, or neutral. Vendors’ proposed prices were to be evaluated for reasonableness and realism.

As it relates to the protest, the solicitation provided that under the management plan factor, the agency would consider the vendor’s reporting mechanisms; the relevant experience of its proposed management team “in relation to the scope and context of the Statement of Work [(SOW)]”; the proposed continuing education, professional development, and retraining opportunities for employees; and the vendor’s experience in hiring and retaining qualified personnel.

Regarding the resumes factor, the RFQ required vendors to submit resumes for certain key personnel (i.e., floor manager, workflow manager, workflow coordinator, outsource coordinator, and database operations coordinator). The RFQ further provided that the resumes would be evaluated in accordance with the following standard: Each resume will be evaluated against the requirements in the SOW and will receive its own rating from the Factors above. Resumes failing to meet the minimum requirements will be rated as Unacceptable. The overall evaluation for the Resume factor per company will be the average of each panel member’s rating for each resume.

With regard to the resumes factor, specifically, the SSP memorandum reflects the identical entry for MEP and SAIC, indicating that they were without identifying “advantages” or “disadvantages.”

MEP takes issue with multiple aspects of the agency’s evaluation, arguing, among other things, that the agency failed to evaluate vendors’ quotations under the resumes factor as contemplated by the RFQ. We sustain MEP’s protest on this issue.
When an agency conducts a formal competition under the FSS program for award of a task order contract, we will review the agency’s actions to ensure that the evaluation was reasonable and consistent with the terms of the solicitation.
MEP argues that the agency did not evaluate vendors’ quotations under the resumes factor as provided for by the terms of the RFQ.

The agency concedes that it did not evaluate the resumes in the manner described by the RFQ. Instead, the agency explains that due to an “administrative oversight,” the evaluators were given an incorrect evaluation standard for the resumes factor. That is, rather than being advised of the above standard, the evaluators were instructed simply to verify that the vendors had furnished resumes for the key personnel positions.

The fact that the evaluators did not further evaluate vendors’ quotations with respect to the resumes factor is further confirmed by the fact each evaluator worksheet for this factor is completely blank, with no documentation of any evaluation or assignment of relative strengths or weaknesses.

Applying this instruction, the evaluators essentially reviewed the resumes factor on a pass/fail basis--i.e., they merely determined whether vendors had provided resumes for their key personnel and did not further review the resumes to determine any strengths or weaknesses for the purpose of determining a rating under the resumes factor.

Notwithstanding this clear deviation from the evaluation criteria established by the RFQ, the agency attempts to excuse its admitted error by suggesting that it effectively considered the qualifications of the vendors’ key personnel under the management plan factor, which provided for consideration of the relevant experience of the proposed management team in relation to the SOW.

The agency’s analysis conflates two evaluation factors that the RFQ established as separate and distinct from one another, and, in so doing, undermines the of the resumes factor. By considering the resumes factor as subsumed under the management plan factor, rather than assigning it the separate adjectival rating and weight provided for in the RFQ, the agency conducted its evaluation in a manner that was contrary to the evaluation scheme expressly established by the RFQ.significance.

Moreover, the single management plan factor standard upon which the agency relies was qualitatively different from the evaluation contemplated under the resumes factor. Specifically, the relevant management plan standard provided for a general assessment of the relevant experience of the vendors’ key personnel “in relation to the scope and context” of the SOW, whereas under the resumes factor, evaluators were specifically to rate resumes “against the requirements in the SOW.” In this regard, the SOW established specific minimum qualification requirements, as well as highly desired skills and proficiencies, which do not necessarily translate to an evaluation based solely on experience.

Finally, the record reflects that the agency’s failure to adhere to the evaluation scheme set forth in the RFQ resulted in the failure of the agency to recognize that a resume submitted by SAIC for a key position did not in fact identify the individual as possessing the appropriate minimum security clearance. Given the agency’s failure to evaluate vendors’ quotations according to the ground rules established by the RFQ, MEP’s protest of the agency’s evaluation under the resumes factor is sustained.

A "new" way to look at "beyond the scope of a contract"

It is a common principle in procurement regimes, and certainly one under Guam procurement law, that changes sought or made to a contract or a solicitation which are "outside the scope" of the original contract expectations require a new solicitation. It is improper to simply give the work to the incumbent contractor as an amendment or what have you.

The following GAO Decision was not exactly about that principle, but I extrapolated the lesson when I read it. The facts of the case require a bit of background about the Small Business Administration's role in US government contracting, which the Decision describes like this:
Section 8(a) of the Small Business Act authorizes SBA to contract with other government agencies and to arrange for the performance of those contracts by awarding subcontracts to socially and economically disadvantaged small businesses. These subcontracts may be awarded on a competitive or noncompetitive basis, based primarily on the size of the contracts. The Act affords SBA and contracting agencies broad discretion in selecting procurements for the 8(a) program.

Under the Act’s implementing regulations, SBA may not accept any procurement into the section 8(a) program if doing so would have an adverse impact on an individual small business, a group of small businesses in a specific geographical location, or other small business programs. The adverse impact concept is designed to protect small business concerns that are performing the same requirement under a government contract awarded outside the 8(a) program.
In this case, the government awarded a contract to one SBA qualified small business and another small business concern claimed to be adversely affected by the decision to award the particular contract. But, as we shall see, being SBA qualified as a "small business" is not the same thing as being a small business concern.

The protest grew out of restoration/construction work on the historic Kilauea Lighthouse, Kilauea Point National Wildlife Refuge, Kauai, Hawaii. There were a number of different structures and projects associated with the whole project, which the government characterized to be performed in two "phases".

Phase I of the project was the subject of an indefinite-delivery/indefinite-quantity multiple-award task order contract (MATOC). The protester, a small business concern, won the task order contract for Phase I under competitive bidding, not any 8(a) preference.

When it came time to award the Phase II work, the government initially put it out to competitive bid to the MATOC holders and chose its preferred contractor, but then decided to go with its preferred choice, a qualified 8(a) contractor, under the Section 8(a) SBA program instead of the original competitive bid process. The Decision doesn't say why, but government agencies have a quota of 8(a) monies to spend, and this could have been behind the reason to switch from competitive bid to a sole source 8(a) selection, especially since the competitive bid process had already qualified the preferred contractor.

But there was a hold up processing the SBA documentation, so the government back tracked and decided to go ahead and award the contract under the original MATOC plan.

At this point, the protester objected, saying that the Phase II work exceeded the scope of the original MATOC contract. Although the government initially rejected that protest, when the protester appealed to the GAO, the government again back tracked. It decided to terminate the task order contract, and to then award the Phase II work to the preferred contractor under an 8(a) sole source contract after all.

Now at this point, you need to recall that "the adverse impact concept is designed to protect small business concerns that are performing the same requirement under a government contract awarded outside the 8(a) program", and that the protester was performing under the existing contract requirement as a small business concern.

You also now need to know that "adverse impact" does not apply to a "new requirement", that is (as I understand this case), a different contract, one whose subject matter is outside the scope of the initial "requirement".

The case is, the Matter of: Ohana Industries, Ltd., File: B-404941, June 27, 2011.
FWS [had] represented to SBA that no small business contractor had performed this specific requirement during the preceding 24 months. [Thus,] SBA has advised our Office that an adverse impact analysis was not required because the Phase II work constituted a new, separate and distinct restoration/construction requirement.

Ohana contends that FWS incorrectly represented to SBA that the Kilauea Lighthouse restoration contract had not been previously awarded to a small business firm when, in fact, Ohana, a small business concern, had performed Phase I of the work. Ohana argues that FWS’s misinformation resulted in SBA concluding that an adverse impact determination was not required.

However, SBA regulations explicitly provide that an adverse impact determination need not be performed where a “new” requirement is offered to the 8(a) program. As is pertinent here, the regulations specifically note that “[c]onstruction contracts, by their very nature (e.g. the building of a specific structure), are deemed new requirements.”

Here, as noted above, SBA determined that the Phase II requirement constituted separate and distinct construction services, such that an adverse impact analysis was not required. SBA concluded that Ohana’s Phase I contract was limited to restoration/construction work on the lighthouse lantern, which is separate and distinct from the Phase II work, which involves work on the lighthouse, lightkeeper’s quarters, the oil storage building and the landing station.

While Ohana disagrees, arguing that the Phase II work simply is the completion of the lighthouse restoration work currently in progress, its disagreement, without more, does not demonstrate that SBA’s determination was made in bad faith or was otherwise inconsistent with applicable regulations. To the contrary, SBA’s determination was consistent with applicable SBA regulations, inasmuch as those regulations specifically define construction work as “new” work. Consequently, we have no basis to object to SBA’s determination that there was no requirement to conduct an adverse impact analysis prior to accepting the new, Phase II requirement under the 8(a) program.

To me, this may provide some bright lines, at least in construction cases, as to when work is in or beyond the scope of the original contract. Added work on separate property "by its nature" might be argued to be beyond the scope of a contract.

Notice, though, that this bright line test might be said to be based on the unique SBA regulations distinguishing new from old "requirements" and would have no persuasive effect outside the scope of SBA "requirement" determinations. However compelling that argument may or may not be, that was not how the Comptroller General applied it in this case.

The Comptroller General only referred to the regulatory distinction between new and old requirements to corroborate his conclusion that SBA's determination was not made in bad faith. That is, he didn't look to the regulation for the basis on which to make the determination that there was a new requirement. He only looked to the regulation to hold that the determination was made in good faith in the first instance.