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Tuesday, August 6, 2013

Pulling the blanket back

The following story is interesting for illustrating the issues when a government agency cancels a solicitation. While there is a great deal of latitude allowed to do so, the discretion to do so is not without limits. As will be discussed below, the regulations under the ABA Model Procurement Code that Guam has adopted places conditions on cancellation of bids and offers, which differ depending on when the the process the cancellation is done.

It is unfortunate that we get so little fact from the story. It is not the fault of the reporting, however, but of the redaction made in releasing it. Who would have thought that a simple moving contract should be so secretive? As usual I have edited the story to suit myself and make the use of it as a hypothetical more convenient. Always read the story at the link to reveal the original story line.

A parade of protests as FBI scraps moving contract
The FBI issued four blanket purchase awards to four companies that it hired to provide relocation and moving services. The FBI first awarded BPAs to three companies — Allegiance Relocation Services, Lexicon and WHR Group — on March 15. One week later, another company, Brookfield Relocation Inc., filed a protest with the Government Accountability Office. GAO dismissed the protest as academic when the FBI issued a BPA to Brookfield. The substance of Brookfield’s complaint remains unclear because of redactions in the complaint filed by Lexicon.

The hiring of Brookfield, however, did little to keep bid protest lawyers at bay. In fact, the move only prompted more protests. TRC Global Solutions protested the Brookfield award, though the GAO dismissed that complaint, saying the company couldn’t prove it was next in line for award. Likewise, Capitol Relocation Services filed a protest over the Brookfield award.

Weeks later, on July 16, the FBI canceled all of the BPA’s, telling GAO that it planned to start all over. Lexicon Government Services filed a complaint Monday in U.S. Court of Federal Claims, arguing that the FBI’s decision to scrap the procurement and start all over again was “arbitrary, capricious and contrary to law.”

“The FBI’s proposed corrective action to cancel Lexicon’s award and the solicitation was arbitrary and capricious because there has not been any legitimate change in the FBI’s needs that would merit the cancellation,” Lexicon argued in its Federal Claims Court complaint Monday. The company wants a judge to keep the FBI from canceling the award to Lexicon, according to the complaint.
So, what is a BPA? A Blanket Purchase Agreement is a method of source selection whereby the government establishes open accounts with a variety of vendors or service providers for specified commonly needed goods or services, to avoid repetitive competitive acquisition of these products.

The model regulations adopted on Guam at 2 GAR § 3112.1 define a BPA as
"a simplified method of filling anticipated repetitive needs for supplies or services by establishing “charge accounts” with qualified sources of supply and is to be used only if the services or supplies cannot be properly identified as to the quantity and the type of services or supplies required."
Further, Guam law limits the use of BPAs to the dollar limits applicable to "small purchases", generally under $15,000. Emphasizing the repetitive nature of the need, the regulations illustrate the circumstances justifying a BPA:
The following are circumstances under which BPAs may be approved:

1. If there is a wide variety of items in a broad class of goods (e.g. hardware) that are generally purchased but the exact items, quantities, and delivery requirements are not known in advance
and may vary considerably.
2. In any other case in which the writing of numerous purchase orders can be avoided through the use of this procedure.
They are essentially an indefinite quantity, indefinite delivery requirements contract.

One of the conditions for use of a BPA is the "all competitive sources should be given an equal opportunity to furnish supplies or services under BPAs. Therefore, if not impossible, then to the extent practical, BPAs for items of the same type should be placed concurrently with at least three separate suppliers to assure equal opportunity."

So, now, what about that cancellation issue?

The regulation regarding cancellation of solicitations is found at the same link as mentioned for BPAs above, at § 3115. The central principle applicable to cancellation of solicitations is that
"Preparing and distributing a solicitation requires the expenditure of government time and funds. Businesses likewise incur expense in examining and responding to solicitations. Therefore, although issuance of a solicitation does not compel award of a contract, a solicitation is to be cancelled only when there are cogent and compelling reasons to believe that the cancellation of the solicitation is in the territory's best interest."
The conditions allowed for cancellation of a solicitation differ depending of whether the cancellation is made before the opening of bids or offers, or afterwards.   In fact, a solicitation may only be cancelled before opening.

Conditions allowed for cancellation before opening are
"that such action is in the territory's best interest for reasons including but not limited to:
(i) the territory no longer requires the supplies, services, or construction;
(ii) the territory no longer can reasonably expect to fund the procurement; or
(iii) proposed amendments to the solicitation would be of such magnitude that a new solicitation is desirable."
After opening and before award, cancellation is not allowed, however a similar result might be reached if all bids or offers can properly be rejected in whole.  

Rejection of all bids is conditioned on a determination
"that such action is in the territory's best interest for reasons including, but not limited to:
(i) the supplies, services, or construction being procured are no longer required;
(ii) ambiguous or otherwise inadequate specifications were part of the solicitation;
(iii) the solicitation did not provide for consideration of all factors or significance to the territory;
(iv) prices exceed available funds and it would not be appropriate to adjust quantities to come within available funds;
(v) all otherwise acceptable bids or proposals received are at clearly unreasonable prices; or
(vi) there is reason to believe that the bids or proposals may not have been independently arrived at in open competition, may have been collusive, and may have been submitted in bad faith."
As is often the case, the rules in US federal government contracting are different, though principles may be the same or similar, as illustrated in the following GAO Decisions.

Matter of: Rand & Jones Enterprises Company, Inc., File: B-296483, Date: August 4, 2005
The RFP provided for the award of a fixed-price contract for the expansion and renovation of the VA’s Medical Center in Northport. Offerors were requested to propose fixed prices for a base contract line item number (CLIN) and other items.

The RFP incorporated the standard “Instructions to Offerors--Competitive Acquisition” clause of Federal Acquisition Regulation (FAR) sect. 52.215-1 that informed offerors that the agency would award a contract to the responsible offeror whose proposal represented the best value to the government considering the factors and subfactors identified in the solicitation. But, no technical or non-price related evaluation factors were identified in the solicitation.

[As an aside, I find this amusing, since GovGuam often checks the box in the general terms that says bidders must supply substantiating documentation for a bid item "as specified", but never actually specifies anything -- and then complains that substantiating documentation was not provided.]
On September 2, the contracting officer was notified by VA’s Acquisition Assistance Division that the RFP did not provide any technical evaluation factors. Thereafter, the RFP was amended to require the submission of a bid bond. The agency did not, however, amend the solicitation to provide any technical evaluation factors.

VA received proposals from four firms, including Rand & Jones and Arrow Construction/BKC, Inc. VA publicly opened the proposals and disclosed the firms’ proposed prices. VA again amended the RFP to provide a new set of construction drawings (but did not add technical evaluation factors) and to establish March 24 as a new closing date for submission of offers.

VA received revised proposals from the four firms, and again publicly opened the proposals and disclosed the firms’ proposed prices. Rand & Jones was found to have proposed the lowest price for the base CLIN. Arrow, which submitted the second lowest price for the base CLIN, protested to VA, but subsequently “withdrew” the challenge. Instead, the contracting officer cancelled the RFP because it failed to contain any technical evaluation factors and informed the offerors that the agency would issue an invitation for bids (IFB) for this requirement.

This protest by Rand & Jones of the cancellation of, and the failure to make award under, the RFP followed.

As a general rule, in a negotiated procurement the contracting agency need only demonstrate a reasonable basis to cancel a solicitation after receipt of proposals, as opposed to the “compelling reason” required to cancel an IFB where the bids have been opened. See FAR sect. 14.404-1(a)(1). The standards differ because, in procurements using sealed bids, competitive positions are exposed as a result of the public opening of bids, while in negotiated procurements there is no public opening.

In situations like this one, our Office has stated that cancellation of an RFP, even after one or more of the offerors’ prices have been revealed, is proper where the agency has a reasonable basis to cancel, and the record contains plausible evidence or a reasonable possibility that a decision not to cancel would be prejudicial to the government or the integrity of the procurement system.

Here, the record contains no evidence, or even argument, that the government or the integrity of the procurement system would be prejudiced if the RFP were not cancelled and award were made thereunder. VA’s only asserted basis for cancellation is that the RFP did not contain evaluation factors.[6] However, where, as here, a negotiated procurement does not provide technical evaluation factors, award is to be made to the responsible offeror with the lowest-priced, technically acceptable offer. Thus, the competition for award under the RFP was solely based on price.

The agency does not assert that it will change any of its requirements but will issue an IFB, under which the sole basis for award is price, for the same requirements. Thus, since the basis for award under the RFP and IFB would be the same, the agency lacks a reasonable basis to cancel the RFP. Moreover, not only is neither the government nor the integrity of the competitive procurement system prejudiced by not cancelling the RFP here, but Rand & Jones, whose low competitive price for this same requirement has been been publicly disclosed, would be prejudiced if this requirement were recompeted on the basis of price.

We sustain the protest.
See also, Matter of: Gonzales-McCaulley Investment Group, Inc., File: B-299936.2, Date: November 5, 2007:
Agency’s decision to cancel a solicitation, after a protest was filed, due to a lack of valid delegated procurement authority, was essentially pretextual when no other solicitations issued under the invalid delegation were cancelled. GMIG protested that the agency’s decision to cancel the solicitation was solely for the purpose of having its protest dismissed. In response, the agency argued that its decision to cancel was reasonable because the acquisition was unauthorized as it was conducted under an invalid delegation of acquisition authority and that the reason for cancellation was not pretextual.

A contracting agency need only establish a reasonable basis to support a decision to cancel a request for quotations. So long as there is a reasonable basis for doing so, an agency may cancel a solicitation, no matter when the information precipitating the cancellation first arises, even if it is not until quotations have been submitted and evaluated.

As here, however, where a protester has alleged that the agency’s rationale for cancellation is but a pretext to avoid awarding a “contract” on a competitive basis or to avoid the resolution of a protest, we will closely examine the reasonableness of the agency’s actions in canceling the solicitation.

Here, it appears from the record that HHS is correct in its assertion that the GETA acquisition authority had not been validly delegated to HHS-U. We believe that this lack of authority would ordinarily provide a reasonable basis to cancel a solicitation. However, based on our review of HHS’s actions here, we conclude that the cancellation of this solicitation was pretextual. The record shows that this was the only acquisition, out of the hundreds that had been conducted by HHS-U without properly delegated authority, that was cancelled when HHS became aware of the lack of authority, even though a number of the other HHS‑U acquisitions were ongoing.

Nevertheless, even where the cancellation of a solicitation was a pretext to avoid further scrutiny and review of a protest, we will not sustain a protest of the cancellation on this basis unless the protester was prejudiced, for example, if its initial protest would have been sustained but for the cancellation. While it may be that there was a reason that GMIG should not have been selected to provide these courses, the record here shows that HHS-U’s Center Manager did not attempt to reasonably investigate her suspicions of plagiarism prior to rescinding GMIG’s selection and, on this record, we find the rescission was not reasonably based.
See also, Matter of: Superlative Technologies, Inc., File: B-310489; B-310489.2, Date: January 4, 2008
Agency did not have a reasonable basis for canceling solicitation where agency states that cancellation was necessitated by the agency’s disclosure of source selection information, which the agency believed gave an “unfair advantage” to at least one offeror, and where the agency subsequently awarded a sole-source contract to a contracting team that included the same contractor to whom the source selection information was disclosed.

The solicitation contemplated award of a contract for a 12‑month base period, with four 12-month option periods, and a total estimated value of $13.5 million. The solicitation provided for award based on the proposal “most advantageous to OJP,” and established various technical and cost/price evaluation factors, stating that “technical merit is more important than cost or price.” Proposals were submitted by three offerors, including SuperTec and ManTech. Thereafter, the agency determined that, although ManTech’s proposal “came the closest” to meeting the solicitation requirements, none of the initial proposals met all of the solicitation requirements, and that discussions were necessary.

the ITSD director, who was also the contracting officer’s technical representative (COTR) and had been involved in developing the statement of work (SOW) for this solicitation, sent an email to the contracting officer and the deputy chief information officer stating that she (the COTR) should be “recused from further proceedings.” The email revealed that, prior to submission of proposals, the COTR had “consulted with ManTech and [the third offeror]” regarding “requirements, pricing and labor categories,” and that her communications “may have provided an unfair advantage to ManTech and [the third offeror] because they had an idea what the labor categories might be in advance.” She concluded that she “needed to disclose what [she] had done in order to protect the reputation of OJP as well as [her own] reputation as Director of ITSD.”

Thereafter, the contracting officer cancelled the solicitation, summarizing the basis for cancellation as follows: "Prior to receipt of revised proposals, [I] learned of a potential procurement integrity issue that occurred during market research activities. The COTR, an OCIO employee, engaged in activity that appeared to raise concerns about the integrity of the pending procurement because of the disclosure of information about pricing and labor categories to the offerors."

the agency states that it “conducted additional market research in order to identify other schedules and procurement vehicles.” In this regard, the record contains an email from the COTR to the contracting officer in which, under the heading of “Contract Vehicles,” the COTR lists various existing contracts--all of which are ManTech contracts.

On August 24, the agency issued RFQ No. 2007Q-045, which contained a SOW virtually identical to the SOW contained in the cancelled solicitation.

On September 19, in response to a request from SuperTec regarding the status of the procurement, the agency advised SuperTec that the contract “will be a directed source...." [Sole sourced, essentially.]

SuperTec protests, among other things, that the agency’s cancellation of RFQ No. 2007Q-025 was merely a pretext to avoid conducting a competitive procurement and resolving a potential bid protest. Because we find, based on the specific facts presented, that the cancellation was improper, we sustain the protest on this basis.

We recognize that contracting agencies generally enjoy broad discretion in determining whether to cancel a solicitation, and need only have a reasonable basis for doing so. In this regard, a contracting agency’s determination that the integrity of a procurement has been compromised may form a reasonable basis for cancellation.

Nonetheless, where a protester has alleged that an agency’s rationale for cancellation is but a pretext, that is, the agency’s actual motivation is to avoid awarding a contract on a competitive basis or to avoid resolving a protest, we will closely examine the reasonableness of the agency’s actions in canceling the acquisition. Further, in considering a protest raising that concern, we view an agency’s discretion, though broad, as not unfettered. In that regard, the overarching guidance of the FAR has direct relevance:
Government business shall be conducted in a manner above reproach and, except as authorized by statute or regulation, with complete impartiality and with preferential treatment for none. Transactions relating to the expenditure of public funds require the highest degree of public trust and an impeccable standard of conduct. The general rule is to avoid strictly any conflict of interest or even the appearance of a conflict of interest in Government-contractor relationships.
Based on the record here, we conclude that the agency did not have a reasonable basis for canceling the RFQ. Specifically, as explained above, the COTR disclosed information to ManTech that she believed may have provided ManTech with an “unfair advantage.” Thereafter, the agency cancelled the procurement citing concerns about “the integrity of the pending procurement,” “potential organizational conflicts of interest,” and “a possible bid protest”--but then awarded a sole-source contract for the canceled requirements to a contracting team that included ManTech. Further, the sole-source award was based on a ManTech-developed proposal that was substantially similar to the earlier ManTech proposal for which the COTR suggested ManTech had obtained an “unfair advantage.”

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