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Sunday, June 1, 2014

Switcheroo

This post covers a couple of instances in which an award is protested after it has been made. It concerns changes made to the contract awarded. But, because the basis of the protest is the disparity between what was bid and the contract made, it was determined that this was not a contract dispute but a valid protest of the award. In some other words, the contracting formation process begun by the solicitation was so tainted that the protest related back to solicitation, not to the contract itself.

The first instance is in a recent GAO decision. It was reported about in this article: GAO dinged the Army for swapping out requirements post award. The GAO decision itself is reported here. The following is taken from the GAO decision, but selectively and somewhat rearranged, so you need to read the whole decision to keep me honest in my characterization of it. I've also eliminated footnotes and citations, so a student or practitioner would definitely want to read the original.

Matter of: System Studies & Simulation, Inc., B-409375.2; B-409375.3, May 12, 2014
DIGEST: Protest that agency improperly made award of a contract for its actual requirements that differed significantly from the requirements solicited is sustained, where record shows that agency’s actual requirements are for less than 30 percent of the requirements solicited; agencies are required to accurately specify their requirements in a manner that affords offerors an opportunity to compete for the agency’s actual requirements.

The RFP contemplates the award of a fixed-unit-price, indefinite-delivery, indefinite-quantity requirements type contract to provide instructor pilots to perform flight training on a variety of helicopter airframe models. Award was to be made to the firm submitting the low-priced, technically acceptable proposal for a base year1 and up to three 1-year options. The agency could eliminate any proposal for offering unreasonably high/unrealistically low, unbalanced, inaccurate or incomplete prices.

The RFP included a pricing matrix that offerors were required to complete. In that matrix, offerors were required to calculate the fully burdened hourly rates for various labor categories (the labor categories were: program manager, alternate program manager, UH-60 instructor pilot, AH-60D instructor pilot, OH-58D instructor pilot, AH-64D maintenance examiner, UH-60M maintenance examiner, and UH-60A/L maintenance examiner). Offerors also were required to calculate extended prices for the contract based on quantity estimates included elsewhere in the RFP.

After receiving and evaluating the offerors’ revised proposals, the agency made award to M1, finding that it had submitted the low-priced, technically-acceptable proposal.

By letter dated December 5, the agency advised S3 of its award decision.

Systems Studies & Simulation, Inc., (S3), subsequently filed a protest in our Office alleging, among other things, that M1 had engaged in an improper bait and switch relating to its proposed key personnel (its program manager and alternate program manager), and that the agency had failed to evaluate M1’s price for realism. In response to that protest, the Army advised our Office that it would take corrective action and we dismissed the protest as academic on January 15, 2014.

The record shows that the agency investigated S3’s bait and switch allegation and also evaluated the proposals of S3 and M1 for price realism. After these activities, the agency affirmed its selection of M1 on January 27, 2014.

[Here another factor is interjected: S3 already held an existing contract similar to this one being solicited.] Also on January 27, the record shows that the agency’s cognizant commanding officer sent a memorandum to the agency’s administrative contracting officer directing him to partially terminate a significant portion of the agency’s then-current contract for pilot instruction services. These services--being provided under a predecessor contract being performed by S3--were reduced due to a change in the agency’s needs.

On January 28, S3 became aware of the agency’s changed requirements because, as noted, it was the incumbent contractor for the requirement, and was sent a letter dated January 28 partially terminating its contract. The record also shows that S3 inquired as to whether the change to the agency’s requirements was confined to its predecessor contract, or represented the agency’s needs going forward. S3 was advised that the revised requirements would remain in effect for the foreseeable future because of the availability of in-house Department of Defense personnel to perform the training in lieu of contractor personnel.

Finally, the record shows that, on January 31, the agency’s administrative contracting officer sent an e-mail to the agency’s procurement contracting officer (the individual actually conducting the current acquisition, and also serving as the source selection official here) advising her of the significant reduction in the agency’s requirements.

Here, the agency has determined that its actual requirements are significantly different from the requirements that it solicited, and for which the offerors competed. This change represents a reduction in the agency’s overall anticipated requirements of more than 70 percent. It also reflects a significant change in the types of instructors and maintenance examiners required. The record therefore shows that the agency’s current requirements bear little relationship to the requirements that it solicited, and for which the offerors competed.

S3 argues that the Army altered its requirements after making award of the contract to M1. S3 asserts that the change to the agency’s requirements is substantial, and that it would have altered its proposed staffing had it known about the agency’s revised requirements. S3 therefore contends that it was prejudiced by the agency’s failure to solicit its revised, actual, requirements once it became aware of those requirements.

The agency responds that the source selection authority/contracting officer (SSA) was unaware of the change to the agency’s requirements at the time she made her source selection and did not learn of the change until several days later. The agency therefore takes the position that it did not make award with a view to substantially altering the contract after award.

In the alternative, the agency argues that, because this is a requirements contract, there was no obligation on the part of the government to order the estimated quantities included in the RFP. The agency therefore reasons that any reduction in its actual requirement--as compared to the RFP’s estimates--was contemplated by the type of contract solicited.

As a general rule, agencies may not properly award a contract on a basis that is fundamentally different from the basis upon which the competition for the requirement was conducted. Where, for example, there is a significant change in the government’s quantity requirements, the appropriate course of action is for the agency to apprise the offerors of its revised requirements, and afford them an opportunity to submit proposals responsive to those revised requirements, even where, as here, a source selection decision has been made.

In addition, the fact that a requirements-type contract is being used does not relieve the agency of its fundamental obligation to conduct a competition on the basis of the most accurate or realistic estimates of the total quantity of goods or services likely to be ordered. This is because, without such realistic estimated quantities, firms cannot prepare offers that reflect the agency’s actual, anticipated needs.

In responding to the protest, the Army essentially relies on the temporal lack of knowledge on the part of its SSA concerning the agency’s revised requirements. The agency therefore maintains that the original award was proper, and that the change to its requirements is a matter of contract administration.

However, the agency’s reliance is misplaced, since the record shows that the organization as a whole--and more particularly, the agency’s cognizant commanding officer--had to have been aware of the Army’s changed requirements prior to the agency’s revised source selection decision. Nonetheless, the record compels the conclusion that the commanding officer was aware of the change to the agency’s requirements. As noted, the record includes his instruction to partially terminate the protester’s predecessor contract, which was executed on January 27, the same date on which the revised source selection decision was made. In any event, where an agency’s requirements change due to the passage of time occasioned by protest litigation, the agency is nonetheless still required to afford offerors an opportunity to submit proposals responsive to the agency’s revised requirements.

The agency also asserts, based on calculations it has performed, that S3 was not prejudiced by the agency’s failure to solicit its revised requirements because its price still would not have been low. The agency’s calculations are based on hourly rates proposed by the offerors in response to the earlier requirement. The protester maintains, however, that it would have changed its proposed staffing profile, as well as proposed personnel had it known of the agency’s actual requirements.

The agency’s calculations provide no basis for our Office to conclude that the protester was not prejudiced. As correctly noted by the protester, those calculations are based on personnel that the offerors may, or may not, have proposed had the agency advised them of its actual requirements (protest sustained where record showed reasonable possibility of prejudice to protester).

We recommend that the agency either amend its current solicitation to reflect its actual requirements, or cancel the current RFP and issue a new solicitation that reflects its actual requirements. Should M1 not be identified as the successful offeror, we further recommend that its contract be terminated for the convenience of the government, and that the agency make award to the firm identified as the successful concern, if otherwise proper.
This decision was characterized in a post by Nicholas T. Solosky of law firm Fox Rothschild LLP on the Mondaq website as follows:
GAO recently sustained a protest filed concerning the difference between the government's actual needs and what was solicited from contractors as part of the RFP. The protestor challenged the award of a fixed-unit-price, indefinite-delivery, indefinite-quantity requirements contract to provide instructor pilots to perform helicopter flight training. 

After the contract was awarded, however, the government made unilateral changes to its scope – reducing the agency's overall anticipated requirements by more than 70 percent. Based on these significant alterations, the GAO noted that: "The record therefore shows that the agency's current requirements bear little relationship to the requirements that it solicited, and for which the offerors competed."
After considering the reduced scope of services, GAO sustained the protest and recommended "that the agency either amend its current solicitation to reflect its actual requirements, or cancel the current RFP and issue a new solicitation that reflects its actual requirements." The basis for GAO's decision is the long-standing rule (well-established in GAO case law) that agencies may not properly award a contract on a basis that is fundamentally different from the basis upon which the competition for the requirement was conducted.

It may be helpful to remind here that a "requirements" contract is a particular variant of an indefinite quantity contract. A requirements contract obligates the government to acquire its actual needs. It is not a discretionary decision of the government. See 2 GAR 3119(i) of the Guam Procurement Regulations, based on the ABA Model Procurement Code and regulations for a description of and the requirements for an indefinite quantity contract (subsection ii), how it differs from a definite quantity contract (subsection i), and the description and requirements for a requirements contract (subsection iii).

The other case, promised above, is a Guam Public Auditor's appeals decision on a bid protest, OPA-PA-11-002. I will not discuss the details of this case (I represented the protestor and the case is still on appeal to the courts by the awardee) other than to point out that it involved a solicitation for a variety of pieces of copier equipment, ranging from lower to higher cost items. 

After the low bidder was determined and announced to be the intended awardee of the contract, the contract actually made increased the numbers of high cost items and reduced the numbers of lower cost items, with the result that the contract price increased roughly 25% over the bid amount. 

The Public Auditor found that the quantity changes were in violation of law and, by virtue of the remedies allowed by Guam law, terminated the contract. (As the matter continues through the court by virtue of the judicial appeal, the decision of the Public Auditor terminating the contract is stayed and the "terminated" contract looks at this point to become fully or at least mostly performed before a final decision is rendered.)

This highlights one distinction between federal GAO protest cases and local ones: a federal protest stays not just the solicitation but also contract performance; not so locally.








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