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Monday, April 15, 2013

Responsive does not mean precise, but does require no bidder prejudice

Canada Allows Firms To Fix Bid Errors
The Canadian government has introduced a provision to allow defense firms to repair their bids on military equipment programs. The provision is an attempt to head off situations in which companies vying for a contract are disqualified over minor infractions.

Over the past two years, Canada has disqualified a number of bids for military programs because of a draconian system that prohibits any errors, even minor ones, in bid proposals. The disqualifications have delayed projects and have cost companies millions of dollars, industry sources say.

The new process would allow companies to submit more information to meet the bid requirements, even after bidding is closed.

A bid by Thales Canada was rejected because one official involved in the company’s proposal lacked the proper security clearance, according to government and industry representatives. The name of the individual, a health and safety officer, had been submitted in error and Thales asked Public Works to remove the name from its bid. Instead, Public Works refused and disqualified the bid. Public Works rejected another company’s bid for the project because information provided in two charts outlining spare parts acquisition did not exactly match up.

Tim Page, president of the Canadian Association of Defence and Security Industries, welcomed the change. “Any way for the government to exercise some reasonable discretion that doesn’t affect the reasonableness of a procurement is of value.”

But others say it opens up the bidding process to potential manipulation. “It could be used as a loophole to favor a company that should be disqualified and to give them a second chance at bidding,” said one defense industry executive. “I can see this as opening the way to potential abuse.”

Page said he doesn’t believe the change will allow abuse of the system. “If you’ve got knowledgeable and experienced procurement officers in the federal government who understand the business of procurement, then the risk of abuse will be significantly reduced,” he said.
Under the American Bar Association Model Procurement Code, and most if not all US jurisdictions whether or not they adopt the ABA MPC, a bid must be responsive to the Invitation for Bid, which includes specifications and contract requirements. A bid is responsive if it conforms in all material respects to the Invitation for Bids. Materiality is the operative standard, not conformity.

Ultimately, of course, materiality is a judgment call. In an ideal procurement world, judgment would be based on objectively verifiable criteria, not subjective ones. That is not often possible in the real procurement world. Some form of flexibility ("reasonable discretion" as mentioned above") is required when matching bids with IFBs to avoid absurd, slavish insistence on exact conformance to terms which are not always clear, let alone material.

To minimize the influence of extraneous, subjective factors, I think an appropriate balance of the principles of integrity and effectiveness should demand a robust determination process, and made accountable by written reports setting forth a rational rendition of facts and analysis supporting the determination and suppressing the suspicion of bias. Then, even a determination made in error will dispell the tainting suspicion that undermines faith in the system.

The ABA MPC sets out a comprehensive and elaborate framework to facilitate the flexibility required. It may not be perfect in application, or theory, but it is better than the elimination of all flexibility.

In the Guam regulations, the relevant model regulations are adopted in 2 GAR § 3109(m), and speak of the needed flexibility in terms of "mistake" and "informality" and distinguishes between an "error in judgment" and a "nonjudgmental mistake".

The general rule applicable in all circumstances is that
"Correction or withdrawal of a bid because of an inadvertent, nonjudgmental mistake[] in the bid requires careful consideration to protect the integrity of the competitive bidding system, and to assure fairness.  If the mistake is attributable to an error in judgment, the bid may not be corrected.  Bid correction or withdrawal by reason of a nonjudgmental mistake is permissible, but only to the extent it is not contrary to the interest of the territory or the fair treatment of other bidders."
To implement this general rule,
When the Procurement Officer knows or has reason to conclude that a mistake has been made, such officer should request the bidder to confirm the bid. Situations in which confirmation should be requested include obvious, apparent errors on the face of the bid or a bid unreasonably lower than the other bids submitted. If the bidder alleges mistake, the bid may be corrected or withdrawn [under certain prescribed conditions]."
Regulations also apply different rules, standards and procedures, depending on if a mistake is discovered before bid opening, after opening but before award, and after award. The rule for mistakes discovered after bid opening but before award are instructive as to what is meant by a bid that "materially conforms" to the IFB. It says a minor informality or insignificant mistake can be waived. It describes an insignificant mistake as one "that can be waived or corrected without prejudice to other bidders". Thus a only a nonconformity that does prejudice other bidders is material.

But what is it that is deemed to prejudice other bidders? 

Obviously another bidder is benefited by tossing out a lower bid, thus any mistake that is waived, in one sense, burdens the higher bidder.  But the regulation is not so broad as to equate benefit or burden with materiality. It specifically limits the scope of what is meant by "prejudice".  It says of prejudice,
 "Minor informalities ... or insignificant mistakes ... can be waived or corrected without prejudice to other bidders; that is, the effect on price, quantity, quality, delivery, or contractual conditions is negligible."
Thus, it is only those traditional "material" items of contract law -- "that is, ... price, quantity, quality, delivery or contractual condition" -- which are deemed to prejudice other bidders. Those are items which each bidder can and does specify in its race for the contract; when accepted, the bidder has determined these material terms.  

Allowing a bidder to modify any such material item, with knowledge of another's bid, is obviously unfair advantage.  But, allowing a bidder to modify other matters which are not under the control of the bidders is, to an extent, none of their business; it is the government's business. That extent, of course, is based in principle: the duty to maintain the integrity of the procurement law and to treat all bidders fairly and equitably.

Only material nonconformity is, under the ABA model, deemed sufficient to require that the bid be set aside as nonresponsive. And it is only those matters that affect bidder prejudice that are considered to be "material": price, quantity, quality, delivery or contractual condition.

Not all nonconforming bids are nonresponsive. Nor is bidder prejudice implied by any change of terms.


And on the topic of bidder prejudice, note this case comment by Attorney Claude P. Goddard of lawfirm Husch Blackwell LLP, with its tip to making a successful protest (be able to show prejudice). The GAO case is BC Peabody Constr. Serv., Inc., B-408023 (May 10, 2013) and is reported here.
Without prejudice, procurement errors are not enough to sustain a protest
The GAO agreed the Corps’s action was procurement error. “Where multiple proposals propose the same contractor, once the agency becomes aware of that subcontractor’s experience . . . it cannot reasonably assign one proposal a higher score than another based on that experience.” GAO nevertheless denied the protest.

During the protest, it came to light that BC Peabody had failed to provide a required letter of commitment from Bauer, an omission that would have been deemed a deficiency. GAO concluded that BC Peabody could not show that it was prejudiced by the Corps’s improper evaluation. Even if the procurement error had been corrected, BC Peabody could not have won the contract because its proposal still would have been considered unacceptable.

A protester must be prepared to show that it would have had a substantial chance of receiving the award but for the agency’s improper actions. A fourth-ranked offeror, for example, must be able to show not only that it would have received a better technical evaluation score, but also that it would have beat out the second and third-ranked offerors and been in contention for the contract award.

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