The Association of Corporate Counsel's associated Lexocology website has posted another handy reference for procurement students and practitioners. This one is posted by attorneys Cormac Little, Claire Waterson and Sheila Tormey from the law firm William Fry. The basic advice of the article is certainly good for Guam, and may be universal.
Public procurement - a practical guide to challenging public contract decisions
A disappointed bidder should know that challenging public sector contract decisions is not easy. The EU Remedies Directive, implemented into Irish law in 2010, governs how parties might challenge contract decisions. However, time limits are strict and the grounds on which challenges can be taken are relatively restricted.
If you suspect there has been a breach of the procurement rules, you should gather your resources quickly and efficiently.
However, it is imperative for aggrieved parties to act swiftly to protect their rights.
This guide is intended to help aggrieved bidders navigate the rules for challenging decisions regarding contracts procured under EU rules. Not all contracts are subject to the full force of the EU procurement rules. For example, certain “non-priority” services (such as legal services and training services) are not subject to detailed procedural requirements and time limits. A limited number of exceptional circumstances such as urgency may also justify a departure from the normal rules. However, whichever rules apply, contracting authorities must always respect the over-riding principles of transparency, equal treatment and observance of fair procedures.
The 2010 Remedies Regulations, which implement the EU Remedies Directive and the EU Utilities Remedies Directive, establish a special form of judicial review applying to contracts governed by the EU public procurement rules. High Court litigation is unfortunately the only serious option for disgruntled bidders seeking to protect their rights. There is no Irish procurement authority with powers to investigate complaints and resolve disputes outside litigation. While a complaint to the European Commission might assist in persuading the contracting authority to terminate the infringement, this falls outside the control of the challenger. Moreover, significant delays are common. In addition, any subsequent enforcement action by the Commission becomes more about the State’s responsibility for failure to fulfil its EU law obligations than obtaining a remedy for the complainant.
Contracts which fall outside the scope of the EU public procurement rules are normally awarded under more flexible national guidelines issued by the Department of Finance. Challenges to such procedures are subject to general principles of judicial review and contract law. This guide focuses on the special procedure for challenging decisions under the EU regime.
Challenging decisions of a public body in court is subject to judicial review principles. The proceedings are not a full appeal and the Courts have repeatedly stated that their role is not to ‘second guess’ the public body’s actions. Instead, the focus is on how the decision was reached. Were there procedural errors or bias? Was the action so unreasonable it could not be objectively sustained?
Circumstances that might constitute grounds for challenge include:
Failure to advertise a relevant contract
Wrongly determining that a candidate does not meet the pre-qualification criteria
Giving one bidder important information that is not provided to other bidders
Bias in favour of one party (or against another)
Incorrect application of the award criteria; or
Changing the award criteria or their relative weightings after receipt of bids.
The burden of proof usually lies on the disappointed bidder. However, this burden might switch to the public body in certain circumstances. For example, if the challenger can show that another bidder had access to additional information that it did not receive, the contracting authority will have to explain why the apparent inequality in treatment did not breach the procurement rules.
Participants in a tender process must be informed in writing of the outcome of the process and must be given a summary of the reasons for rejection of their pre-qualification submission or tender.
Contracting authorities are precluded from awarding a contract for a certain period after this information has been communicated to unsuccessful bidders. This “standstill” period must be at least fourteen calendar days, provided the information is issued by fax or email. In other cases, the authority must wait at least sixteen days before signing a contract with the successful bidder.
A participant may also use Freedom of Information rules to seek records relating to the award process. Records requested under this legislation are unlikely, given the short time limits, to arrive in time to inform a decision to take legal proceedings under the Remedies Regulations.
Timing is a key consideration and aggrieved bidders must not delay. A company usually has 30 days after it learned of the decision (or knew or ought to have known of the infringement) in which to issue proceedings, and must inform the public body before doing so. [So much time! Guam allows only 14 days and the Attorney General has repeatedly sought to narrow that to 7.]
Challenges may be made to any decision that produces legal effects, not just contract awards. The strict timing rules mean that if, for example, a bidder believes that the wrong procedure was used, it should issue proceedings within 30 days of publication of the contract notice. If it does not launch a legal challenge yet continues to participate in the process until its bid is rejected, any proceedings contesting the choice of procedure will be ruled ‘out of time’. Likewise, one can challenge a decision excluding a party from the award process at pre-qualification stage, but this must normally be done within 30 days of receiving notification of the exclusion. Each application will be looked at critically, although time limits may be extended at the discretion of the High Court.
There are a number of potential remedies available to an aggrieved bidder. The availability of a particular remedy primarily depends on which stage of the procedure it is sought. The High Court has broad powers to declare the contract ineffective, indeed is required to do so in a number of circumstances, for example, a contract was awarded without prior publication of a contract notice. The Court may also grant injunctions aimed at correcting the alleged infringement or avoiding further harm to the applicant’s interests. The High Court may also award damages to compensate for any loss caused by the breach of procurement rules. Finally, the Remedies Regulations have introduced the concept of a financial penalty payable by the relevant contracting authority, separate to any damages award.
The following practical steps should help:
Act swiftly. Time limits for taking action are short, so do not delay. Seek advice early if you suspect there has been a breach of the rules. Remember that you will need some time to obtain legal advice and to make an informed decision on the options open to you.
Ask questions. You are entitled to be given reasons for the rejection of your tender. If you are not satisfied, ask for a debriefing meeting to obtain further information. Although it may be difficult to accept, there may be a valid reason for rejecting your tender: it is better to find this out at an early stage than mid-way through costly litigation.
Create a paper trail. Keep notes of any conversations that could be relevant. Where possible, record your objections or concerns in relation to the process in writing (e.g., in an e-mail to the authority’s relevant contact person).
Consider your preferred result and be realistic. Do you believe you should have been awarded the contract? Are you seeking damages? In many cases, parties would be happy for the flawed process to be abandoned and started afresh, or even to know that the authority has learnt its lesson and will apply this to future processes.
Those last 4 tips cannot be more true in Ireland or the EU than they are on Guam or in any US jurisdiction I've reviewed. The procurement law tends to help those who help themselves. Indeed, as I often repeat, the whole integrity of the procurement system relies primarily on outsourcing the policing role to the private contracting sector. The public sector may train, audit and "tut tut", but only a vigilant, empowered private sector contracting party offers real time prophylactic remedial effect.
Aggrieved contracting parties do the community a service by keeping the system accountable and on track.
Bangladesh: Transforming Procurement Outcomes Through Capacity Development and Performance Monitoring The capacity development program is now recognized as an emerging model because of its unique features. These include developing a critical mass of about 35 national trainers; establishing a procurement faculty at a local institute; implementing procurement training for about 20 different audiences, such as policy makers, procurement practitioners, bidding community and auditors; providing three-week training to about 2100 staff of the four agencies in a way so that each procuring entity within those organization has at least one trained staff; and introducing a built-in incentive mechanism for the top-performers (international procurement accreditation by the Chartered Institute of Purchasing and Supply, UK and Masters programme in procurement).
Despite a challenging context, Bangladesh has been transforming its procurement environment for better outcomes in public contracting with improved efficiency, effectiveness, and transparency at key sectoral ministries and agencies. This has been demonstrated by: reduced procurement delays; improved competitiveness; and enhanced transparency. About 65% of small value large number of contracts at decentralized level are now awarded within initial bid validity period, the average number of bidders has increased to six, and around 60% of the contract awards are published in the website.
Results:
• Improved efficiency and effectiveness of procurement with reduced procurement delays: About 65% small value contracts at decentralized levels have been awarded within the initial bid validity period in 2012, up from only 10% in 2007.
• Enhanced transparency: About 60% contracts awards in 2012 were published at the Central Procurement Technical Unit (CPTU) website, up from only 15% in 2007. Invitation for bids published in newspaper has increased to almost 100% in 2012 from 70% in 2005. In addition, complaints handling mechanism using the independent review panel’s approach and administrative reviews has contributed significantly in improving the accountability of public sector organizations. This has brought about better confidence of the bidding community in the public procurement system. Furthermore, all policy related documents are available on the website of CPTU including laws, rules, bidding documents, guidance notes.
• Increased competitiveness: The reform has resulted in more competition among bidders as demonstrated by increased number of bidders; average number of bidders at the key sectoral agencies increased to six in 2012 from four in 2007.
• Improved capacity development: Developed a core group of about 35 national trainers; provided three-week procurement training to over 2900 officials; about 35 staff received international procurement accreditation in core competence from the Chartered Institute of Purchasing and Supply (CIPS/UK), MCIPS, and all of them are also completing Masters in Procurement and Supply Management from a leading local university (BRACU- Institute of Governance).
• Increased electronic tendering: Four key agencies, after completing the pilot phase, has rolled out the e-GP across all of their procuring entities, and as of December 2012 covered at least one e-GP tender in 50% of the procuring entities of each agency.
• Increased stakeholder participation: Public-private stakeholders committee (PPSC) made fully functional; government-contractors forum established; communication workshops held in all districts.
The stories throughout years, probably decades, of large government contractors continuing to get work in spite of poor performance, questionable billing practices and other contracting disgraces are legend. Small contractors get the "non-responsible" book thrown at them all the time, preventing any further government work. Large contractors are too big to flail. But is that right?
So finally, a large contractor with a dismal display of irresponsible work and coverup gets the boot, and what does it want to do? Continue getting work through its subsidiaries. And it is suing to do so.
BP sues U.S. government over contract suspensions after oil spill
Last November the U.S. Environmental Protection Agency (EPA) sprung the ban on BP (BP.L), citing BP's "lack of business integrity" after the Deepwater Horizon blowout that killed 11 workers and gushed millions of barrels of oil into coastal waters. The company is currently paying out millions of dollars to settle damage claims from Gulf residents in a contentious process that BP says is being mismanaged by the administrator, Louisiana lawyer Patrick Juneau. The suit, filed in U.S. District Court in southern Texas, claims keeping the ban in place risks causing the company "irreparable harm."
BP Sues EPA to Get New Contracts
BP says it has lost out on billions of dollars of potential contracts, such as supplying fuel to the U.S. military, because the EPA refuses to lift the prohibition on new contracts first put in place in November 2012. That was when BP said it would pay $4.5 billion in fines and plead guilty to criminal charges including obstruction of justice, involuntary manslaughter and a misdemeanor violation of the Clean Water Act.
At the time, BP said it believed the suspension would be brief and that it was working with the EPA on an agreement that would effectively end the suspension. But according to the court filing, which was reported earlier by the Houston Chronicle, the EPA refused to lift the ban even after the company entered its formal pleas and the criminal case was closed.
BP sues US government over federal contracts ban
BP is one of the biggest suppliers of fuel to the US government.
Anybody writing a blog for a "Sunlight Foundation" must know a thing or two about, and have a predilection for, transparency. So when they conclude that transparency is not a total cure for corrupt procurement practices, you have to pay attention. Why not?
Case Study: Public Procurement in the Slovak Republic
Transparency and open data policies and initiatives have reached a state of maturity where it is crucial for us to evaluate them to learn what works, what doesn’t and why. Transparency is not likely to be a cure-all, but we think it is a cure-some; so, we need to figure out where and how it should be best applied. As part of that process, we have been conducting a series of in-depth case studies on the impact of technology enabled transparency policies around the world. Our initial case studies look at transparency in public procurement and we have chosen four countries to study. This analysis discusses our findings about public procurement disclosure by the Slovakian government.
Corruption in public procurement in Slovakia has been a long-standing problem. By 2010, immediately prior to the reforms studied here, businesspeople and entrepreneurs listed corruption as the number one barrier to doing business in Slovakia according to a survey conducted by the Slovakian Business Alliance.
However, according to Juraj Nemec, a Czech economist at Masaryk University who studies public procurement in Slovakia, the actual decision making process followed by procurement authorities has never been the primary locus of corruption. Manipulation of public procurement has tended to occur either before or after the awarding of the bid, rather than during the decision process itself, which is heavily regulated.
Prior to the submission of bids, procuring authorities can limit competition and manipulate the results of the tender process by custom tailoring a contract or setting unreasonable conditions on who can submit a bid in the first place. Concern over manipulating procurement outcomes by setting conditions prior to tendering was widely shared amongst our interview subjects. Gabriel Sipos, the Director of Transparency International Slovakia, expanded on this point.
In Slovakia there is a big problem that some participants are excluded from tenders because the conditions of participating in the tender are illogical or irrational. For example they need to submit documents proving their experience in fields which are not directly connected to the award itself. One example would be when the state in Slovakia once wanted to create a website. One of the requirements on the tender participants was that the company needed to have experience in taking photographs from a plane.
[One Guam bid recently raised eyebrows when it required that a manufacturer of a firetruck have at least 2 manufacturing facilities in the US. The Slovaks did not invent that little charade.]
Our interview subjects also highlighted the problem of public procurement manipulation during the contract management phase. This form of manipulation occurs through not fully enforcing contracts, or through various addendum, amendments and changes to the contract. Prior to reforms, it was possible for this to result in the final contract differing significantly from the bid accepted during tendering.
There have been three major changes to public procurement since 2010 in Slovakia: 1) the introduction of e-procurement, in which dissemination of tenders, tender documents, the submission of bids and the publication of notification of awards is done publicly through a single portal; 2) the introduction of reverse auction mechanisms for procuring goods and services; and 3) the mandatory publication of all public contracts on a centralized online government contract repository.
There was wide agreement amongst all interviewees that the central contract repository is immensely useful. Peter Kunder, data analyst at Fair Play Alliance, summarized the general view: “the central repository of contracts is a big help to us.” In particular, the central contract repository has made post tender procurement manipulation more observable, and enabled much greater public participation in uncovering suspect procurements.
Gabriel Sipos noted that all of the newly available data enables a different kind of oversight from that made possible by FOI. The data makes it possible “to compare who is a better contractor, and what kind of supplier is giving the government the best deal.“ Not only are these high level comparisons now possible, “there are other kinds of data that are not necessarily related to procurement that you can connect with [the procurement data]. The company register gives you information about the owners so you can tie the tender results to the owners so you can see if some cities or government institutions are buying from only some companies and you can try to track if it is donor related or these guys are friends or maybe somebody worked in that company before and now he is a purchaser. You can look at those links…You can connect it to other data.”
The widespread publication of procurement data online has fundamentally reshaped the civil sector and media oversight ecosystem. The value of the change from reactive publication of information in response to FOI requests to default publication of all materials should not be underestimated.
The availability of the data online in an easily digestible form, through the Open Public Procurement Portal, has also changed the character of who brings suspect tenders to the attention of journalists and researchers. Before the reforms, leakers or whistleblowers had to alert journalists or watchdogs of suspicious proceedings. Once alerted a reporter or researcher would then file FOI requests. In these circumstances corruption could only be exposed from within: “someone would have to know that something wrong was going on and try to get that information from the public body.” ) According to Adam Valček, “Previously, only a few people have read the contract, because contracts were unavailable.” As a result, “Most of the tips came from the interior of authorities.” Now, it is possible for journalists and CSOs to proactively monitor procurement and highlight suspicious cases.
These lower barriers have also made a difference for participants in the business community. Robert Kicina noted that the only way to discover tender restriction manipulation is through public control and access to tenders. According to him, it is now easy for competitors to “look this up and send it to the media. This is the only mechanism that works in Slovakia…It is used by entrepreneurs to protect themselves from unfair competition and unfair procurement.“
This is a variant on what I call the outsourcing of policing of the procurement system. My reference point for that claim is a robust review system, in which competitors are allowed if not encouraged to blow the whistle on questionable procurement practices through a protest system that responds to the protest without favor and has teeth to sanction or change the wayward behavior. In the Slovak system, it seems, the public is empowered to perform that role. In contrast, the protest system of the ABA Model Procurement Code and the Federal contracting regime prevents the public from direct policing; it requires that protestors must be "aggrieved" or have some kind of "economic interest". Public interest, taxpayer concerns, do not pass standing muster.
For the public protest system to work effectively, there must be a particularly robust independent news reporting regime and an enforceable right of free speech. And a people with backbone to stand up and be counted upon to demand accountability from their government. That is not found in a people who continually elect the same old faces. Transparency is lost on people who have long ago ceased to be surprised -- and outraged to action.
Business complaints over public sector procurement contracts soar by 167%
The coalition has always looked to the private sector to run hospitals, schools and other frontline services but new contracts are often at low margins as the government looks for cost-savings. This puts bidders under pressure to win more work to compensate for reduced profits.
All of this puts significant strain on business, says David Isaac, head of the advanced manufacturing and technology services sector at Pinsent Masons. "Bidding for public sector contracts requires substantial upfront investment with no guarantee of return. In that context, bidders have a right to know that any procurement process is fair, transparent and run with integrity."
According to an FoI request our firm sent to the government, business complaints over how public sector contracts are awarded soared by 167% in the last 12 months to 196 – up from 73 in the previous year.
One tactic that some businesses have deployed is to challenge the procurement process and litigate if their bid is unsuccessful. That is not to say all complaints are motivated by a commercial agenda: at times there may be cause to challenge the process. However, a significant increase in the number of complaints being made indicates that something else is going on.
Complaining to the Cabinet Office is one way to stop a rival gaining an advantage in the procurement process. For example, businesses will complain about the procurement strategy that a public sector body is following if they think that strategy favours their competitor. Another way to gain an advantage is to look to external expertise for advice on submitting a successful bid. We have witnessed an increasing number of private sector bidders looking to their lawyers for this type of advice.
But does complaining work? Complaints to the Cabinet Office can sometimes lead to the bidding rules for a government procurement contract being changed while bidding for the contract is still progressing. Making a complaint while the bidding process is still open can delay things long enough to give a business crucial extra time to prepare and submit its bid, although a court challenge would be needed to actually overturn a contract that has been signed.
Simon Colvin, a partner at Pinsent Masons who advises central government departments on national IT outsourcing projects, points out that contracting authorities are increasingly conscious of market pressures. "Time invested at the outset of a procurement is key to ensuring that processes are fair and transparent. This approach together with ongoing monitoring as the procurement progresses towards contract award should ensure that bidders complaints are minimised and, if they do arise, can be handled effectively."
While the pressure to protest is obvious, it is not in anyone's interest to protest in ignorance. Ignorance of facts may always be a justifiable excuse to protest, but ignorance of the legal requirements for procurement, which are often not intuitive to non-government contractors, is not. It is as imperative that the private sector know the rules of government contracting as the public sector. Knowledge of the rules of the road will not only temper expectations of the desperate business person, but minimize their costs by knowing when not to chase shadows or rainbows.
By the way, the ABA Model Procurement Code also recognizes the need for a fair, transparent procurement system run with integrity. In a comment to MPC § 3-201, it is declared "fair and open competition is a basic tenet of public procurement. such competition reduces the opportunity for favoritism and inspires public confidence that contracts are awarded equitably and economically".
Zoltan Kovacs of firm SZECSKAY - Attorneys at Law reports, on the Mondaq website, on some changes in the rules governing Hungarian public procurement procedures. One such change involves greater disclosure of bids.
Hungary: Changes In Hungarian Public Procurement Law
During public procurement procedures, participants/bidders were in the habit of declaring that – except for the information sheet containing their basic data – their entire submission qualified as a business secret and that, as such, they expected the entity calling for bids to treat the entire submission as a business secret which was not open for review for other participants/bidders. In practice, this oftentimes made it impossible for the other participants/bidders to seek remedy (since they could not even review the submission of their competitors and, therefore, could not tell if the submission made was in compliance with the applicable laws and tender requirements).
Even though, in our view, the practice described above was definitely not in line with the provisions of the Public Procurement Act and of the Civil Code governing business secrets, unfortunately the entities calling for bids and even the Public Procurement Board (which is the authority in charge of making administrative decisions based on requests for remedy filed with it) accepted and agreed to this practice and did not challenge it in any way.
The law-maker recognized the above discrepancy concerning business secrets and adopted a change in the provisions of the Public Procurement Act. Under the new rules, also with regard to the definition of business secrets under the Civil Code, only that information, the publication of which would cause a considerable harm to the participant's/bidder's business, may qualify as business secrets. Taking the new rule into account, it is expected that the entities calling for bids and the Public Procurement Board will no longer follow their previous practice and that, as a consequence, participants/bidders will be able to review the bids of their competitors to the extent that they do not qualify as a business secret. As a result, participants/bidders will hopefully be put in a position to seek remedy if, based on the findings of their review of a bid, they detect a violation of the public procurement rules and/or the tender requirements.
Guam procurement regulations, based on the ABA Model Regulations, requires a bit more transparency for bids. 2 GAR § 3109(l) spells them out.
Subsection 3109(l)(2) requires that,
The opened bids shall be available for public inspection except to the extent the bidder designates trade secrets or other proprietary data to be confidential as set forth in Subsection 3109(l)(3) of this section. Material so designated shall accompany the bid and shall be readily separable from the bid in order to facilitate public inspection of the nonconfidential portion of the bid. Prices and makes and models or catalogue numbers of the items offered, deliveries, and terms of payment shall be publicly available at the time of bid opening regardless of any designation to the contrary.
Subsection 3109(l)(3) puts the onus on the government to affirmatively examine claimed confidential information to verify it qualifies as a trade secret or proprietary data.
The Procurement Officer shall examine the bids to determine the validity of any requests for nondisclosure of trade secrets and other proprietary data identified in writing. If the parties do not agree as to the disclosure of data, the Procurement Officer shall inform the bidders in writing. If the parties do not agree as to the disclosure of data, the Procurement Officer shall inform the bidders in writing what portions of the bids will be disclosed and that, unless the bidder protests under Chapter 9 (Legal and Contractual Remedies of this Guam Procurement Regulations, the bids will be so disclosed. The bids shall be opened to public inspections subject to any continuing prohibition on the confidential data.
One large international corporation doing a substantial amount of government contract work on Guam has had the habit in recent times of declaring practically its whole bid to be confidential, including contract terms it tries to unilaterally impose as part of its bid. I have had two occasions to protest that circumstance, at the appeal level, because the government agency has bent unquestionably to the designation. Fortunately, the administrative review tribunal has not been so reluctant, in contrast to the circumstances in Hungary as reported in the article above, that " unfortunately the entities calling for bids and even the Public Procurement Board (which is the authority in charge of making administrative decisions based on requests for remedy filed with it) accepted and agreed to this practice and did not challenge it in any way."
I was doing some research into the restrictive effects of "bundling" in contract solicitations, and came across this illuminating article (which I've chopped and paraphrased) by Pat Wittie (once?) of the law firm Kilcullen, Wilson & Kilcullen:
What is a “Bundled” Procurement? And When is It Improper?
Regardless of how the term is defined, bundling’s effect is to group a variety of segregable requirements into a single solicitation, so that all bidders/offerors must be able to satisfy all of the requirements. Offerors that can provide only some are excluded from the competition.
The backdrop for this discussion is the Competition in Contracting Act, which requires full and open competition and states clearly that solicitations may contain restrictive provisions and conditions only to the extent necessary to satisfy the needs of the agency, or as authorized by law. 10 U.S.C. § 2305(a)(1)(B)(ii); 41 U.S.C. § 253a(a)(2)(B). Over the years, GAO has evaluated bundled procurements in a variety of contexts, and with a few important exceptions, it has come down squarely on the side of competition and against bundling.
[After discussing cases declaring this general principle, the article continues:] Bundling, then, is strongly discouraged, carefully scrutinized, and seldom upheld in a protest. There are, however, a few situations in which bundling has been adequately justified, at least in GAO’s view. Most of those situations fit into one of three categories:
(i) Design integrity/interoperability: the requirements to be bundled all relate to a single integrated system, where design integrity and interoperability are critical.
(ii) Overwhelming administrative burden: the agency’s administrative burden will be truly overwhelming if the work is not bundled. (Although agencies often defend solicitations that involve bundled requirements on grounds of administrative efficiency, they seldom win. GAO’s threshold for administrative convenience is low, and its tolerance for inconvenience to the agency is high, at least when balanced against the statutory requirement for competition.)
(iii) National security: the agency can provide a well-documented justification based on national security or military readiness considerations.
IDIQ Contracts Are Governed By Slightly Different Considerations. Historically, the “bundling” issue has arisen in garden-variety supply, service, or construction contracts, but more recently the concept has spilled over into IDIQ and task order contracts. In fact, amendments to the Competition in Contracting Act (CICA) that were passed in 1994 as part of the Federal Acquisition Streamlining Act created: (i) a scheme for “multiple awards” under IDIQ procurements, which is effectively a statutory preference in favor of unbundling, and (ii) a requirement for unbundling on task order contracts for advisory and assistance services where the amount is expected to exceed $10 million over 3 years. Legislative history clearly focuses on the benefits of constant, head-to-head competition among multiple awardees as tasks or delivery orders are identified and released.
These statutory provisions have been implemented through the FAR at 16.500 et seq. FAR 16.504(c)(1) establishes the general preference for multiple awards on IDIQ contracts, but identifies six situations in which multiple awards “should not” be made. With IDIQ contracts, bundling into a single award is likely to be permitted when an agency can demonstrate that only one contractor can provide the requirement, or if administrative costs of multiple awards are overwhelming, or if design integrity or interoperability are critical, or if “more favorable terms and conditions” will prevail with a single award.
The analysis does not stop there, however, since GAO has grafted a “void for vagueness” standard onto IDIQ solicitations. In fact, in connection with a protest that it dismissed as untimely last year, GAO took the extraordinary step of writing a letter to the Air Force and the Army, chastising those agencies for violation of CICA and FAR 16.504 even though it did not address the protest on the merits. (Letters to the Air Force and Army Concerning Valenzuela Engineering, Inc., B-277979, Dec. 9, 1997, Jan. 26, 1998, 98-1 CPD ¶ 51.) GAO reviewed the statement of work in this IDIQ solicitation and concluded that it was so broad that it did not “reasonably describe the scope of services needed,” thus failing to provide potential offerors notice of the work that would be within the scope of the resulting contract. GAO took pains to point out that:
inclusion of broad categories of work in one statement of work constitutes a form of bundling, since different kinds of work (or tasks in different geographical or technical areas) are combined into one procurement, and an overly broad statement of work can unjustifiably diminish competition, just as bundling does, by deterring businesses, particularly small businesses, from competing for a contract, notwithstanding their ability to perform some of the work at issue.
Thus a solicitation with a broad, vague, undifferentiated statement of work can constitute a prohibited form of bundling, at least in connection with IDIQ contracts. GAO has not addressed whether this would be true even if the agency could make persuasive arguments in favor of a single, bundled award on grounds of quality, design integrity, or national security.
[And then there are] amendments to the Small Business Act passed in 1997 [which] are driving the SBA’s proposed regulation. The approach taken by Congress in the statute and by SBA in the proposed regulations, however, shows only passing interest in competition as a principle. Instead, the primary consideration - the principal focus - is on process, i.e., maximizing small business access to federal procurements. Toward this end, the proposed regulations impose a strict quantitative analysis requirement. The exercise of judgment and discretion by an agency-to which GAO typically defers-is far more tightly circumscribed than it has been in the typical GAO decisions. Under the proposed regulation, the effect of bundling must be quantified and its justification must involve “measurably substantial benefits.”
Impressed by the comprehensiveness of the paper (even if dated), I looked around for its source, and discovered this new procurement resource link, actually more of a link of links:
The Government Contracts Law Report
Sometimes even an old link can prove to be a rich vein to mine.
