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Monday, March 16, 2015

Bridge contracts vs Planning principle

This post involves a GAO decision involving, on one hand, the planning principle, and on the other the concept, replete with moral hazard, of a "bridge contract". Since Guam will soon be debating the adoption of bridge contracting as a method of source selection, I thought this is an instructive case study.

The planning principle is a core principle of American procurement philosophy, and likely other robust regimes. In the federal sphere, the Federal Acquisition Regulations ("FAR") devote SubPart 7 to it. The main theme of this policy is: 
     Agencies shall perform acquisition planning and conduct market research for all acquisitions in order to promote and provide for—
(1) Acquisition of commercial items to the extent practicable;
(2) Full and open competition to the extent practicable;
(3) Selection of appropriate contract type; and,
(4) Appropriate consideration of the use of pre-existing contracts, including interagency and intra-agency contracts, to fulfill the requirement, before awarding new contracts.

The importance of (2), "full and open competition", is underscored by FAR Subpart 6.301(c): "Contracting without providing for full and open competition shall not be justified on the basis of — (1) A lack of advance planning by the requiring activity...."

The importance of (2), "full and open competition", in this case runs up against the "to the extent practicable" qualifier when the contract awarded is based on the Section 8(a) Small Business rules.

This particular case seems to be concerned primarily with the interplay of (2) and (4), in circumstances involving the granting of a bridge contract. Here, it is worth pointing out that a bridge contract is, or should be, an absolute last resort, tailored to the particular circumstances, because it is awarded without competition, a pillar principle of procurement. It is the feature of no competition which saturates bridge contracts with moral hazard.

In should be noted that the ABA Model Procurement Code, which forms the basis for most of Guam's procurement law, has broadly similar principles and purposes. Though not as fully formed as the FAR version, the ABA version as reflected in Guam law provides "All procurements of supplies and services shall, where possible, be made sufficiently in advance of need for delivery or performance to promote maximum competition and good management of resources." (5 GCA § 5010.)

In Guam law, the emphasis on and primacy of planning is emphasized by the limitations placed on "emergency procurement" of supplies ("goods and supplies" per the literal statute, but "goods" is not a defined term in the procurement law, but "supply" is defined as somewhat analogous to the term "goods" under the UCC). Notwithstanding the gubernatorial power to declare emergencies for whatever cause or effect, the procurement law proscribes contracting for supplies and services in an "emergency" unless the "emergency" is not man-made: "Emergency means a condition posing an imminent threat ... which could not have been foreseen through the use of reasonable and prudent management procedures...." (5 GCA § 5030(x).)

And so, to the chase, but note: This case also involved the particular requirements of the Small Business Set Aside preference scheme (Section 8(a)), which impinged on the outcome of the decision, the details of which I skim over (read the whole decision at the link):

Matter of: eAlliant, LLC: B-407332.4; B-407332.7, December 23, 2014
eAlliant, LLC, of San Diego, California, protests the award of a sole-source bridge contract (No. N65236-15-C-1003), for a period of 1 month, followed by up to five 1‑month options, to Systems Integration and Management, Inc. (SIM), of Arlington, Virginia.

The Navy currently fulfills its requirement for service desk operations through a contract for business operations administrative support services (BOASS) at its New Orleans office. SIM is the incumbent contractor; the incumbent contract was due to expire on September 30, 2014.

The Navy began the acquisition process for the follow-on contract in October 2011. On December 9, 2011, the Navy issued a request for proposals. Following the receipt of proposals, award was made to eAlliant on September 7, 2012.

TRESCOS Joint Venture, which was an offeror and whose team included SIM, filed a protest in our Office on September 14 challenging the award. The agency advised our Office that it would take corrective action, and we dismissed the protest. The Navy again made award to eAlliant on January 25, 2013. On January 29, TRESCOS filed a protest in our Office challenging this second award. On March 15, the Navy decided to take corrective action, and our Office subsequently dismissed the protest.

The Navy issued an amendment to the RFP on May 17, 2013, conducted discussions, and on June 17 received revised technical and cost proposals. On July 29, 2014, the agency again made award to eAlliant. Based on information the agency identified during debriefings, the agency concluded that corrective action was required to address concerns regarding the cost realism evaluation. On August 1, TRESCOS filed another protest with our Office. Also on August 1, the agency took corrective action by terminating eAlliant’s award. Our Office subsequently dismissed TRESCOS’s protest.

Following the termination of the award to eAlliant, the Navy decided it would reevaluate offerors’ technical and cost proposals. Based on the projected award date for the contract of October 3, and the need for adequate time to transition to the new contractor, the agency concluded that an unacceptable break in service could not be avoided without awarding a bridge contract to ensure continuity of the critical services. Based on the limited time remaining prior to the expiration of the incumbent contract, the agency concluded that SIM was the only viable source capable of maintaining continuity of services, given its experience and large qualified workforce.

The Navy’s J&A (a written determination of justification and approval for the non-competitive award of a bridge contract) approved the sole-source award of a 1-month bridge contract, with five 1-month options, to SIM for the following reasons: (1) SIM currently is performing the same work under the incumbent contract; (2) the incumbent contract was due to expire on September 30, 2014; (3) several rounds of protests and corrective actions had delayed the award of the follow-on contract causing difficult acquisition planning; (4) a transition period would be required for any contractor who would be awarded the follow-on contract; (5) SIM possessed the required workforce in place in New Orleans capable of meeting the requirement without a transition; and (5) an interruption in service was unacceptable due to the critical nature of the agency’s functions being supported by the services.

eAlliant contends that the sole-source award of a bridge contract to SIM was improper for the following reasons: (1) the J&A improperly excluded eAlliant from consideration for the bridge contract; (2) the need for a sole-source contract was caused by the agency’s lack of advance planning....

CICA (the federal Competition in Contracting Act) requires that agencies solicit offers from as many potential sources as is practicable when using the unusual and compelling urgency exception to limit competition. As our Office has held, an agency nonetheless may limit a procurement to the only firm it reasonably believes can properly perform the work in the time available.

Noncompetitive procedures may not properly be used where the agency created the urgent need through a lack of advance planning. While an agency may not justify a noncompetitive award on the basis of urgency where the agency’s requirements have become urgent as a result of a lack of advance planning, such planning need not be entirely error-free or successful. Our review of an agency’s decision to conduct a noncompetitive procurement focuses on the adequacy of the rationale and conclusions set forth in the J&A; where the J&A sets forth a reasonable justification for the agency’s actions, we will not object to the award.

To the extent eAlliant argues that the Navy failed to meet its obligation to solicit offers from as many potential sources as practicable in seeking to enter into a sole-source 8(a) bridge contract, we find that there was no obligation for the agency to do so. The section 8(a) program has both competitive and noncompetitive components, depending on the dollar value of the requirement. Generally, where the acquisition value exceeds $4 million, a section 8(a) contract must be competed among section 8(a) firms; section 8(a) acquisitions with values less than $4 million, such as the one initially sought by the Navy for the bridge contract, may be awarded on a noncompetitive basis. Because of the broad discretion afforded a contracting officer to award a noncompetitive contract under section 8(a) of the Small Business Act, our review of actions related to noncompetitive acquisitions under the 8(a) program is generally limited to determining whether government officials have violated regulations or engaged in fraud or bad faith.

We therefore see no merit in eAlliant’s argument that the Navy’s attempt to enter into a sole-source 8(a) contract was improper, given the authority of agencies to do so on a noncompetitive basis. In any event, the protester conflates the process for award of a sole-source 8(a) contract and the requirements for awarding a sole-source contract under CICA’s urgent and compelling exception to full and open competition. Whereas FAR § 6.302-2(c)(2) requires agencies to solicit offers from as many potential sources as is practicable, the 8(a) sole-source provisions do not have such a requirement.

Next, to the extent eAlliant argues that after the Navy abandoned its attempt to award a bridge contract to an 8(a) firm on a noncompetitive basis, the agency failed to meet its obligation to solicit offers from as many potential sources as is practicable in awarding the 1-month sole-source bridge contract to SIM, we disagree. As discussed above, while an agency must solicit as many offerors as practicable when seeking to award a sole-source contract under the urgent and compelling exception to full and open competition, the agency may limit a procurement to the only firm it reasonably believes can properly perform the work in the time available.

Here, the Navy concluded by August 22, 2014, that its needs for the bridge contract could not be met through the 8(a) program within the timeframe needed to avoid a disruption in services. The agency therefore concluded that it needed to execute a 1-month sole-source bridge contract under the urgent and compelling exception to full and open competition. The agency executed a J&A which stated that SIM was the only firm capable of meeting the agency’s need to ensure continuity of service after the expiration of the incumbent contract on September 30.

Assuming, as the agency states, that the transition to a new contractor would require up to three weeks, and the agency’s abandoned pursuit of a sole-source 8(a) contract on August 21, the record shows that the agency would have had approximately two and a half weeks to issue a solicitation for the bridge contract, receive and evaluate proposals, and make an award. Although the protester argues, generally, that there was enough time to accomplish these tasks, we do not think that the protester demonstrates that the agency unreasonably concluded that there was not enough time to conduct a competition, and ensure a timely transition that would avoid an interruption of services. On this record, we find that the Navy reasonably concluded that SIM was the only firm that could meet the agency’s requirement to ensure uninterrupted services.

Next, eAlliant argues that the Navy’s need to award a 1-month sole-source bridge contract on an urgent and compelling basis was the result of the agency’s failure to conduct adequate advance planning. In this regard, eAlliant argues that the Navy improperly delayed making an award for its underlying requirement until July 2014. As discussed above, however, the record reflects that the agency began its acquisition for the follow-on requirement in December 2011, more than 2 years prior to the expiration of the incumbent contract on September 30, 2014. The agency made awards on September 7, 2012, and January 25, 2013, each of which was followed by protests and corrective action.

The Navy again attempted to award the on-going contract for these services on July 29, 2014, which left two months for transition--which, the agency stated, was “more than sufficient time” for transition. The Navy contends that the urgency that justified the award of the disputed bridge contract to SIM arose from the protest that followed the award to eAlliant on July 29, 2014, rather than the history of the procurement prior to that award. We agree with the agency. As our Office has held, an immediate need for services that arises as a result of an agency’s implementation of corrective action in response to a protest does not constitute a lack of advance planning.

Next, eAlliant argues that the Navy could have conducted a competition for the bridge contract following its corrective action on August 1, and the failure to do so demonstrates a lack of advance planning. In this regard, the protester cites the agency’s acknowledgement that there was “more than sufficient time” for transition to a new contractor at the time of the July 29, 2014, award. eAlliant contends, therefore, that the agency should have also had enough time to conduct both the transition as well as a competition for the bridge contract. We disagree with the protester.

The Navy first attempted to bridge its needs with a short-term sole-source 8(a) award. As also discussed above, the agency’s decision to pursue a sole-source 8(a) contract was a matter within the agency’s discretion. Although this attempt was not successful, our Office has recognized that such efforts do not need to be error-free, nor do they need to be successful. In light of the agency’s unsuccessful attempt to enter into an 8(a) contract, and the time lost to that effort, we think the agency reasonably concluded that an noncompetitive 1-month sole-source bridge contract was required.

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