NASA Adminsitrator bounced by an unusually cozy relationship with federal regulators

Although federal procurement directives are moving towards acquisitions of supplies and services described in terms of common commercial standards, some needs of the government can only be met by particularized specifications and contractors. Take, for instance, spaceships (although we are now seeing the development of private sector contractors even in the space field, a circumstance not dreamed of when space exploration began in the era of Sputnik).

Why commercial standards? In a word, competition. As the American Bar Association Model Procurement Code elucidates,

"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." Code § 3-201, Commentary 3.

Indeed, an fundamental purpose and policy of the Model Procurement Code is "to foster effective broad-based competition within the free enterprise system". §1-101((2)(g). And, this is not a mere aspiration. "It is the general policy of this [State] to procure standard commercial products whenever practicable. In developing specifications, accepted commercial standards shall be used and unique requirements shall be avoided, to the extent practicable." MPC Regulation § R4-201.01.2 "All specifications shall seek to promote overall economy for the purposes intended and encourage competition in satisfying the [State's] needs, and shall not be unduly restrictive." MPC § 4-205. Further, in general, "Correction or withdrawal of a bid because of an inadvertent, non-judgmental 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." MPC § R3-202.11.1

One of the big impediments to preferring standard commercial products and standards is the pushback and lobbying of entrenched contractors, the "good old boy" network. The basis for such a network is understandable from the standpoint of preferring the devil we know, but it runs foul of the demands of procurement when we become enamored of those well-known devils.

This post, and the article from the Washington Post that inspired it, illustrate the kind of relationship that can, and often does, call such discrimination into question. Once again, I caution that I slice and dice, rearrange, omit, and shade original articles to fit the didactic intent and space of this blawg, to be read as a hypothetical for educational purposes, and not as evidence or insinuation of guilt or wrongdoing. So, you are IMPLORED to link to and read the source material cited, and do not to rely on the rendition here.

Boeing tried to amend bid after guidance from NASA official, raising concerns it received inside information

After a top NASA official contacted a senior Boeing executive about a bid to win a contract potentially worth hundreds of millions of dollars, the company attempted to amend its proposal past the deadline for doing so, according to the article. That raised alarm bells inside the space agency, where officials were concerned that Boeing was attempting to take advantage of inside information. The conversation at the root of the investigation was between Loverro and Jim Chilton, the senior vice president of Boeing’s space and launch division, putting one of the company’s top executives in the middle of the probe.

Federal procurement regulations encourage the government to communicate with contractors about their bids to help agencies get the products and services that best fit their requirements. “The question becomes when is it okay to have those discussions, and more importantly, whether you have to have the exact same discussions with all potential bidders,” said David Berteau, the president and chief executive of the Professional Services Council, a trade group that represents federal contractors. According to the article, a person with direct knowledge of the matter who spoke on the condition of anonymity because of the ongoing investigation said: “I can tell you with 100 percent confidence that no laws were broken. What we are talking about are conversations that occurred outside the normal dictated channels but didn’t violate the sanctity of the procurement process.”

According to a congressional aide with knowledge of the matter, NASA procurement officials grew concerned earlier this year when Boeing contacted the agency, saying it wanted to change parts of its bid for the lunar lander contract. Not only was it late in the process, but the specificity of Boeing’s proposed changes raised “red flags” inside NASA that the company had received inside information improperly. NASA officials wondered, “How did they know to raise this issue or try to fix this issue?” according to the aide, who spoke on the condition of anonymity because of the ongoing investigation.

NASA officials have stressed that the agency has gone to great lengths to ensure the integrity of the contract awards, worth $1 billion combined, that went to teams led by Jeff Bezos’s Blue Origin and Dynetics, as well as Elon Musk’s SpaceX.

Ultimately, the matter was referred to NASA’s inspector general office, and NASA’s leadership last month forced Doug Loverro to resign from his position as the associate administrator of NASA’s human spaceflight directorate. In his resignation letter, Loverro wrote that he took “a risk earlier in the year because I judged it necessary to fulfill our mission. Now, over the balance of time, it is clear that I made a mistake in that choice for which I alone must bear the consequences.” The inspector general investigation could be another headache for Boeing, under fire for having an unusually cozy relationship with federal regulators, especially if it identifies wrongdoing on the part of Boeing senior executives.

In an interview with The Post last month, Loverro said he was trying to speed up the Artemis moon program to meet a White House mandate to return astronauts to the lunar surface by 2024. “It had to do with moving fast on Artemis, and I don’t want to characterize it in any more detail than that,” he said.

But the probe is also focusing on Boeing, officials said. “This certainly goes both ways. It’s one thing to have a mistake that violated the Integrity in Procurement Act,” the aide said. “It’s another if the company took that information and acted on it.”

FURTHER READING:

• Special Compliance Requirements for Government Contractors Part 1, and Part 2

• FAR 52.203-13 Contractor Code of Business Ethics and Conduct.

For-proift out of state company beats non-profit in state organizations to fountain of youth services funding

Youth services providers protest bidding process

Two Arkansas companies that operate seven Youth Services Division facilities submitted protests Friday to the state’s intention to award a contract to run the facilities to an out-of-state company that has said it will charge the state more than the current operators charge. Bidders have 14 days to submit a protest after learning of an alleged flaw in the process.

Every seven years, the state is required to seek proposals from organizations interested in operating the juvenile treatment and juvenile offender facilities. Department of Human Services spokeswoman Amy Webb said it has been eight years since bids were taken because of a previous one-year extension. Youth Opportunity Investments of Carmel, Ind., proposed charging the state $232 per bed per day, up from the $147 the state pays now per day for each of the 249 beds in the facilities.

Sen. Terry Rice, R-Waldron, whose district includes the Mansfield facilities, said Friday he has “a great deal of concern” about the plan to switch to an out-of-state provider at greater cost to the state. The current operators “have not received a dime’s increase in three years,” he said.

Sen. Stephanie Flowers, D-Pine Bluff, chairman of the Senate Children and Youth Committee, also said she has questions. “A lot of the intake providers have been asking for more money for years and we haven’t given it to them. It seems quite odd to have an out-of-state contract and offer them more money,” she said.

2 protest youth services contract; ‘robbed’ of fair shot, current operator’s letter to state says

Two nonprofits running seven Arkansas juvenile treatment and detention centers say state officials failed to document why a for-profit, out-of-state company will replace them, even though the new company's bid was more expensive.

Both Consolidated Youth Services Inc. and South Arkansas Youth Services, which have operated the centers for more than a decade, are challenging the decision. The operators are mostly concerned with how their proposals and Youth Opportunity's were reviewed and the quality of the new company's youth services program.

"They robbed the entire bidding process of equity," state Sen. Jeremy Hutchinson* wrote in a protest letter on behalf of South Arkansas Youth Services. The director of the Department of Human Services is currently drafting a "formal written response" to both organizations, Amy Webb, a department spokesman, said Monday.

In its protest letter, Consolidated Youth Services stated it held "no assurances" that the selection process was consistent. The state agencies did not provide individual score sheets used by evaluators to show how they weighed the proposals in each technical category and only a cumulative score was available, according to both nonprofits' letters. Evaluators appeared to have little experience in the youth services field, and there was no proof they attended training beforehand, the letters said.

Consolidated Youth Services' letter, written by attorney Debby Thetford Nye, called for a new evaluation -- one "untainted by significant procedural deficiencies and bias."

Both nonprofits said that Youth Services Division officials held post-bid discussions with Youth Opportunities Investments, even though post-bid conversations can disqualify vendors competing for a contract. The new company was also permitted to change its proposal and circumvent the criteria laid out in the state's request for services, the current contractors said.

Leaders of the Arkansas-based organizations say their programs cost less, strengthen communities and do not slash services. "We are a community program," said Jerry Walsh, chief executive officer of Magnolia-based South Arkansas Youth Services. His organization runs the Dermott Juvenile Correctional Facility and juvenile treatment centers in Dermott and Mansfield. "We know how to approach the community and how to work with them and to get them to support the program."

Youth Opportunities Investments plans to hire subcontractors from Louisiana and Nashville, Tenn., to carry out services, according to its proposal. The Youth Opportunities plan appears to dedicate fewer staff members to special education, GED and technical-vocational coursework and relies more on online learning, Walsh said.

"There is nothing in their proposal to suggest they would enhance the program," said Bonnie Boon, executive director of Jonesboro-based Consolidated Youth Services. Boon also said that she found the state's ability to find the extra dollars for the increase under the new company "curious."

Youth-services advocates have asked for additional funds for years, which Boon and Walsh said has been frustrating.

"It says a lot about their financial management and not funding youth services. Now all of a sudden you're throwing tons of money in this? Unbelievable," Walsh said.

The art of the protest - Procurement controversy series, Miami, Florida

Art dealer files protest in Miami Dade College project

Miami art dealer Gary Nader has filed a bid protest against Miami Dade College after losing out on a multi-million dollar development project on campus, according to paperwork obtained by FloridaPolitics.com on Sunday. The college, which wouldn’t front any money, would give away the development rights and later get to operate the “cultural centers.”

The idea for the project began as Nader’s own unsolicited pitch to the school last May: To build a world-class Latin American art museum with his family’s name on it, which he would start up with $60 million worth of pieces from his own collection. The project has since grown into a mélange of uses because the college soon grew more interested in having a theater and conference center. Related’s plan more than halves the size of the museum that Nader had first proposed. All of the proposals include luxury residential condo towers to be sold to offset the costs of the cultural parts of the development.

Among its many allegations, the 49-page protest says winning bidder and Nader’s nemesis—developer Jorge Pérez, CEO of Related Group—lowballed the college more than $100 million in an “exceedingly low valuation” of the eventual development, which would be a public-private partnership. Nader’s protest also says the college has so far failed to respond to his lawyers’ public records requests for documents related to the review and selection process.

The protest also alleges a conflict of interest by attorney Al Dotson with the South Florida law firm of Bilzin Sumberg. Dotson, it says, advised Miami Dade College during the development bidding process but also worked for Related on a separate affordable housing project before the Miami-Dade County Commission.

The document also complains of inappropriate contacts between a Related executive and a lawyer advising the college despite a communications blackout between bidders and school officials, known as a “cone of silence.” “The evidence shows that the college promoted favoritism throughout the solicitation process,” it says. “…The ‘cone of silence’ was a moving target that continued to change, for no other reason, than to support favoritism.”

The protest document asks that all action toward the project stop until the dispute is resolved. It seeks a re-evaluation of all proposals by an “impartial evaluation committee.”

Fight over Miami Dade College’s cultural center takes more legal twists

Friday’s challenge came after weeks of legal wrangling over the price of a required protest bond and public records related to an internal college investigation.

(See prior post)

Art Dealer Gary Nader Butts Heads With ‘Condo King’ Jorge Perez Over Bid for New Miami Museum

It's a heated and highly personal battle.

It’s safe to assume that Miami art dealer Gary Nader thought his pitch to Miami Dade College for a multi-million-dollar campus development, including a 90,000-square-foot museum of Latin American art with $60 million worth of work from his own collection, would be welcomed with open arms. The proposal reportedly didn’t even require the school to put up any money; it would take ownership of the culture center in exchange for giving over a parking lot.

But when college officials—citing their status as a public institution—opened up the potential development to other proposals, and then gave top ranking to a rival bid from real estate firm Related, run by Miami “condo king” Jorge Perez of the Perez Art Museum Miami, Nader struck back. His limited partnership Nader + Museu filed a detailed 49-page formal “protest bid” on August 12, which contains nearly 400 pages of accompanying exhibits directed at Miami Dade College purchasing department, opposing an agreement with Related.

The papers claim that the agreement “failed to comply with requirements for a public-private partnership, repeatedly violated the express terms and conditions of this solicitation and offered an exceeding low valuation for the right to develop private improvements on College owned land…” It notes a $158.5 million difference between “the first and second highest ranked proposers,” calling it “astounding.” (See, Abnormally low vs unreasonably low bid)

William Riley, an attorney for Nader, told artnet News via email that there is “a statutorily prescribed opportunity to resolve the protest by mutual agreement between the parties within 7 business days after receipt of the formal written protest” filed on August 12. “We have notified the college that we are available to speak and/or meet within this timeframe. They have not responded to us.”

Speak to thee only with thine ayes?

The whole purpose of corrective action and discussions in best value procurement is to make sure everyone (government and offerors alike) is on the same page. If you're already on the page, you don't need further discussion. It's a process driven more by the principle that government should maximize its spending requires by getting fair and reasonable prices for things it buys, egged on by the principle of competition (the more, the merrier) rather by the principle of fairness and equity.

In the GAO case below, there were three competing offerors for a project: the incumbent (Northrop Grumman), who pretty much already knew what was required, and two relevant others (Solers, and Pragmatics). Each offeror proposed vastly different means and methods of achieving the desired outcome. It was a best value solicitation, so price was not alone determinant, but the offered prices had to be evaluated as reasonable in the context of each bid.

The two non-incumbents protested award to the incumbent, arguing they didn't get a fair shake in the evaluation. Corrective action, including further discussions, took place, but the incumbent then protested it was disadvantaged in the process.

Of course, you should read the decision at the link below. This presentation is crafted for my own purposes and does not fully or contextually represent the original.

Matter of: Northrop Grumman Systems Corporation, B-410990.3, October 5, 2015

Northrop Grumman Systems Corporation (Northrop Grumman) of Herndon, Virginia, protests the corrective action being taken by the Department of Defense, Defense Information System Agency (DISA), in connection with earlier protests of a task order issued to Northrop Grumman for software development and integration services. Northrop Grumman contends that the corrective action, which included reopening discussions with offerors in the competitive range, is unreasonable and competitively prejudices Northrop Grumman, because its award price and evaluation ratings were disclosed after award. We deny the protest.

The RFP provided for the issuance of a hybrid task order on a best-value basis considering the following evaluation factors in descending order of importance: technical/ management approach, present/past performance, and cost/price. The non-cost evaluation factors, when combined were significantly more important than the cost/price factor. The solicitation provided detailed instructions for submitting separate technical/management approach, present/past performance, and cost/price proposals, including sanitized and unsanitized copies of cost/price proposals.

The RFP stated that cost/price proposals would be evaluated for completeness, reasonableness, unbalanced pricing, and realism. Offerors were also advised that cost/price proposals could be rejected for being unrealistically low, unreasonably high, or unbalanced.

As relevant here, the agency found that the offerors’ final cost/price proposals were complete and reasonable, and that the offerors could realistically perform the effort at their proposed costs/prices. No probable cost adjustments were made to their final proposals. DISA’s contracting officer conducted a cost/technical tradeoff among the FPRs submitted by Northrop Grumman, Solers, and Pragmatics, and determined that Northrop Grumman’s proposal provided the best value to the government.

Pragmatics and Solers were provided written debriefings that disclosed Northrop Grumman’s technical/management approach and present/past performance ratings and included summary discussions of the agency’s cost/technical tradeoff between the awardee and the respective unsuccessful offeror. Solers and Pragmatics filed protests challenging DISA’s cost evaluation, best-value determination, and selection decision. Solers also challenged the agency’s technical and past performance evaluations.

DISA advised the parties that it would take corrective action in response to the protests. The agency stated that it would reevaluate Northrop Grumman’s, Pragmatics’s and Solers’s FPRs; conduct additional discussions and request and evaluate further FPRs, if necessary; and make a new source selection decision. We subsequently dismissed Solers’s and Pragmatics’s protests as academic.

During the corrective action process, DISA determined that there were flaws in its pre-corrective action cost realism analysis that required further discussions and proposal revisions. DISA contends that the cost realism analysis and source selection decision were inadequately documented and contained conclusory statements that failed to explain the evaluators’ rationale for finding that the three offerors’ vastly different proposals were realistic.

Northrop Grumman protests DISA’s decision to reopen discussions and permit Pragmatics and Solers to fully revise their proposals. The protester contends that these actions competitively harm Northrop Grumman, because its award price and evaluation ratings were disclosed. Northrop Grumman asserts that DISA’s pre-corrective action cost realism analysis was substantively correct, and that the alleged error that DISA was trying to correct was, at most, a perceived failure to document the analysis as explicitly as agency counsel would have liked. Northrop Grumman asserts that DISA has not otherwise identified any substantive, prejudicial errors in the cost realism analysis or initial award that required reopening discussions. In this regard, the protester maintains that DISA’s corrective action was unreasonable and disproportionate to the alleged error, and yields no benefits to the procurement process that would outweigh the competitive harm to Northrop Grumman.

DISA readily acknowledges that the disclosure of Northrop Grumman’s winning price puts the protester at a competitive disadvantage, but the agency argues that it reasonably determined that reopening discussions was necessary to correct deficiencies in its cost/price evaluation and to ensure that the new award decision would be based on a fair best-value determination. DISA contends that its pre-corrective action cost realism analysis and source selection decision were inadequately documented and contained conclusory statements that failed to explain the evaluators’ rationale for finding that such vastly different proposals were realistic. In this regard, DISA maintains that in taking corrective action, the agency could not determine that its cost evaluators’ conclusions and DISA’s earlier best-value determination were reasonable, and that the other competitive range offerors were not prejudiced. DISA argues that a more accurate and comprehensive realism analysis could have a significant impact on the agency’s best-value tradeoff decision.

Northrop Grumman responds that DISA had more tailored options to address the alleged evaluation error, such as seeking clarifications, limiting discussions, or restricting Pragmatics and Solers from revising their proposed labor mixes, FTEs, or technical/management approach proposals. Northrop Grumman claims that the evaluation notices that were provided to Pragmatics and Solers had nothing to do with the alleged error, i.e., further documenting DISA’s earlier cost realism analyses. The protester also points out that simply because offerors propose different technical approaches does not necessarily mean that their proposals are unrealistic. Moreover, to the extent that DISA had new concerns during reevaluation about the offerors’ proposed labor categories, key personnel, or past performance projects, Northrop Grumman complains that the agency should have addressed such concerns during its pre-award discussions.

DISA disputes the protester’s assertion that the information needed to perform a proper cost realism analysis could be obtained through clarifications or limited discussions with the offerors. Rather, DISA argues that in order to correct key personnel discrepancies and unrealistic aspects of their cost/price proposals, offerors would have to make corresponding revisions to their technical/management approach proposals. In this respect, DISA asserts that its cost evaluators could not perform a proper realism analysis or recommend cost adjustments without knowing what each proposed labor category would be performing under each CLIN. DISA also maintains that its discussions had to be meaningful and permit the offerors to address new technical deficiencies that were uncovered as part of the agency’s reevaluation.

Contracting officers in negotiated procurements have broad discretion to take corrective action where the agency determines that such action is necessary to ensure a fair and impartial competition. As a general matter, the details of a corrective action are within the sound discretion and judgment of the contracting agency. The decision whether to reopen discussions is largely a matter left to the agency’s discretion. We have repeatedly observed that the possibility that the contract may not have been awarded based on the most advantageous proposal has a more harmful effect on the integrity of the competitive procurement system than does the possibility that the original awardee, whose price has been properly disclosed, will be at a disadvantage in the reopened competition. Where the corrective action taken by an agency is otherwise unobjectionable, a request for revised price proposals is not improper merely because the awardee’s price has been exposed.

DISA has presented both a flaw in its cost/price evaluation requiring corrective action, and a reasonable basis for reopening the competition. DISA’s concern--that the evaluators failed to explain their rationale for finding the vastly different proposals realistic--provided a reasonable basis for the agency to question its best-value determination. Based on our review of the record and the parties’ arguments, we find that any competitive harm to Northrop Grumman by the disclosure of its award price, is outweighed by DISA’s reasonable concern that its earlier best-value determination was tainted by a flawed cost/price evaluation that prejudiced other competitive range offerors.

We also find that DISA reasonably determined that it should reopen discussions and permit the competitive range offerors to submit fully revised FPRs. In our view, DISA was not required to tailor the scope of its corrective action to clarifications or limited discussions. Generally, offerors in response to an agency request that discussions be opened or reopened may revise any aspect of their proposals they see fit--including portions of their proposals which were not the subject of discussions. Moreover, as part of its corrective action, an agency can, as here, amend the RFP to add requirements that will require the submission of revised proposals and is not required to limit proposal revisions to only address these changes.

DISA discovered that the offerors’ (including the protester’s) FPRs contained deficiencies and discrepancies in their technical, past performance, and/or cost/price volumes. Where an agency identifies new weaknesses in a proposal during a reevaluation of that proposal in an acquisition where discussions have previously occurred, the agency is required to discuss the new weaknesses with the offeror. The possibility that an award may not have been based on the most advantageous proposal because, for example, discussions are not meaningful, has a more harmful effect on the integrity of the competitive procurement system than the fear of an auction; generally the statutory requirements for competition take priority over any possible concern regarding auction techniques.

Nick Wakeman, whose blog post brought this to my attention, said:

But don’t cry for Northrop; they still very well might win the contract. They are the incumbent, and despite the challenges incumbents have faced in winning recompetes, incumbency is still an advantage. As the incumbent, you would think this also gives an advantage to Northrop because of the customer intimacy. So, stayed tuned and we’ll see how this one turns out.

Protests: "the worst outcome for both parties"

Guam is in the process, over the last few years, of making some essential, if not earth-shattering, procurement reforms.  Many ideas have been floated, but sunk by the Executive Branch, including the Attorney General's office, which is fixated on the idea that protests are typically "frivolous" and all protests should be deterred with protest bonds, as well as shortened -- and "jurisdictional" -- time limits (see, How Draconian are those procurement time limits, really?).

The notion that protests are not the problem -- but that the time to it takes to finally resolve them is -- has been coolly received; efforts to give effect to the authority which procurement agencies already have, to settle and resolve them before litigation, have been beaten back.

For mine, it is worth spending a bit of up front time to try to resolve disputes and get on to the acquisition, where the dispute is clearly without merit, or get on with acknowledging and the fixing the solicitation when the dispute is meritorious or even arguably so. Better a few more days, or weeks, up front than a few more months, or years, spent litigating the dispute to finality.

As the article below opines, "when both sides get so dug into their positions and don’t listen to each other it will lead to a legal action (i.e. protest).  This is the worst outcome for both parties....". 

(As usual in this blawg, I may take great liberties with articles presented here for my own instructional purposes. You need to read the original at the provided link, and not take my version of it as what was intended.)

Deflategate and federal procurement process, by Mike Sade

As I watched the "Deflategate" story unfold, I could not help but consider the parallels between this case and government contracting.

•Source selections officials (in most cases the contracting officer) have absolute authority to make the award decision.
•Clearly identify the process, how the decision will be determined, and what the outcomes will be for failing to meet the standards.
•Fairness in the process is paramount to a successful outcome.
•If an appeal is filed, the agency must ensure that due process is afforded to both sides.

In my experience, within the federal procurement process the rules are well defined; the process is clear; and, the avenues for appeal of a source selection decision are all in statute and regulation. Similar to the process in the NFL collective bargaining agreement.

What remains unclear is the fairness of discovery within the process.

What the NFL failed to do in the case against New England Patriots quarterback Tom Brady was clear to Judge Richard Berman. He did not question the commissioner’s authority; what he questioned was the fairness of the player’s ability to question or cross examine the “right” personnel, and the failure to clearly state facts in support of the finding. Often in government procurement this is what the debrief process should afford.

So what can a source selection official learn from this case? First, a solicitation must clearly outline the requirements, proposal preparation instructions, and most importantly the source selection criteria. Then, after proposals are submitted, if there are serious questions about what a proposal includes, or what the requirements mean, there should be discussions.

Too often I have seen source selection decisions made where there are unanswered questions, or where the government might disqualify a really good proposal because they are in a hurry to get to an award instead of finding the best solution. In the NFL case the commissioner relied solely on the Ted Wells report (i.e. the technical report in government procurement) without questioning what went into the report and how they came to the conclusion.

Second, I have often seen actions in arbitration or other informal ADR processes I would equate to a debriefing. The government is too focused on defending the award decision and not listening. In the “Deflategate” case the NFL failed to ask the right questions and allow the player to address those issues.

In a government debriefing the government should understand a debriefing is an opportunity to identify the reasons for the award decision as well as learn what they might have missed in the process of reaching that decision by listening to a losing contractor’s position.

Finally, when both sides get so dug into their positions and don’t listen to each other it will lead to a legal action (i.e. protest). This is the worst outcome for both parties because it is costly in terms of personnel cost and legal fees.

One of my favorite lines from the movie “Other People’s Money” is when Danny DiVito says “Our side has lawyers because their side has lawyers, but once you use them it gets all [messed] up.” This is not a slam on lawyers but it is the worst state of events when you have a mission to accomplish and distracting resources from accomplishing that mission to defending a decision which is detrimental to the agency mission.

So how does a source selection official avoid the pitfalls of “Deflategate”? Here are my suggestions to improve communications and avoid the pitfalls:

•During market research, understand the market, listen to industry to help define the requirements and outcomes, identify what the best source selection criteria should be, and how to rank those criteria.
•During proposal evaluation, ensure the technical panel clearly identifies strengths and weaknesses in a proposal, and if a proposal has some promise to provide the best solution, give the company the opportunity to address those deficiencies through discussions.
•During a debriefing, give a company a chance to clearly articulate why they felt they had a winning proposal. If the company identifies areas where the evaluation process missed something -- or was wrong – address how you will fix that mistake. If the company is wrong, educate them on how they can improve in the future.

My message is don’t fall in to the “Deflategate” syndrome by standing your ground without listening to others and admitting you made a mistake. It can only embarrass the agency and affect the mission.

Nobody wins in this scenario.

UPDATE October 4, 2015.

Apropos the idea of this post, that resolving and settling well laid disputes, rather than denying the and girding for battle, is better for everyone:


Oak Bluffs advised to reboot bid process for North Bluff seawall project

When Oak Bluffs selectmen unanimously voted on Sept. 22 to accept a $5.25 million bid from MIG Corporation to rebuild the new North Bluff seawall, contingent on additional Community Preservation Committee funding, it appeared that the long awaited project would move ahead. However, due to a bid complaint from Northern Construction Service, Oak Bluffs selectmen, on the advice of town counsel Michael Goldsmith, have called a special meeting this Tuesday to rescind their decision, and to re-bid the project.

“We awarded the bid and then a complaint was filed in regards to the language in the bidding,” chairman of the board of selectmen Mike Santoro told The Times on Friday. “Right away we filed an appeal with the Attorney General for a hearing next Wednesday, but in the process, we found it would be easier to rescind the vote and put it back out to bid again.”

At issue is the wording of the RFP which asked for the bid to be broken into sections—the “base bid” was for construction of the steel sheet seawall and boardwalk from the harbor to the fishing pier, along with hazardous waste removal. Addendums to the bid were requested for the cost of continuing the wall and boardwalk to the SSA terminal. Northern Construction did have the lowest bid for the entirety of the project, at $5.9 million.

However, all bids, including MIG’s, came in well over the $5.6 million the town had received in state grants for the project, once management fees and a 5 percent contingency fund was added to the bottom line. So a decision was made to begin with the most crucial part of the project, e.g. the base bid, where MIG Corporation came in lower than Northern Construction by $103,000.

Once selectmen rescind the bid on Tuesday, the project will go back out to bid, which is a 30 day process. Despite the month long delay, project manager David Lager told The Times that the re-bid would not significantly delay the project.

“It’s in our best interest to deal with the ambiguities in the RFP (Request For Proposal) and start with a clean slate,” town administrator Robert Whritenour told The Times. “A bid protest that goes to hearing and then an appeal can take a lot longer than a month.”

Mr. Whritenour said it is possible that the re-bid process could reduce, and possibly eliminate, the overage that required selectmen to request $230,000 in additional funds from the Community Preservation Committee (CPC), which was approved at last Monday’s CPC meeting.

Can we have a discussion clarifying the solicitation?

Following on from the prior post and topic: discussions during the solicitation process. Along the way, "clarifications" are distinguished from "discussions". This case concerns my backyard -- Wake Island. But, America wakes to a new day in the Mariana Islands, not Wake Island. The same caveats apply here, and in all posts on this blawg, as mentioned in the prior post.

Matter of: International Waste Industries, B-411338, July 7, 2015

International Waste Industries (IWI) protests the Department of the Air Force’s award of a contract to Mahto Construction, Inc. (Mahto), of Wasilla, Alaska, under request for quotations (RFQ) for a solid waste incinerator for use at Wake Island. IWI contends that the agency unreasonably determined that its quotation was technically unacceptable and also engaged in unequal discussions.

The RFQ provided for award of a fixed-price contract for a solid waste incinerator to be delivered to Joint Base Pearl Harbor Hickham, for use on Wake Island by the Missile Defense Agency. Award was to be made to the vendor submitting the lowest‑priced technically acceptable quotation that conformed to the terms of the solicitation. The RFQ advised that to be technically acceptable, vendors must meet all of the specifications in the statement of work. In this regard, the statement of work included 11 specific requirements, including, as relevant here, that the incinerator be lined with replaceable ceramic refractory material.

he RFQ also provided, with regard to discussions, that:

The Government intends to evaluate offers and award without discussion, but reserves the right to conduct discussions. Therefore, the offeror’s initial offer should contain the offeror’s best terms from a price and technical standpoint. However, the Government reserves the right to conduct discussions if later determined by the contracting officer to be necessary.

As relevant here, Mahto’s quotation stated the following with regard to installation costs:

Mobilization to and from Jobsite by EWS technicians (air travel, taxi etc.) and Room and Board on-site. To be billed separately at $ per diem. In addition, with regard to “Payment Terms,” Mahto’s quotation listed a “Schedule of Payments” as follows:
[deleted]
[deleted]
[deleted]
[deleted]

After reviewing Mahto’s quotation, the Air Force contacted Mahto regarding the terms of its quotation set forth above. Specifically, the agency and Mahto engaged in the following exchanges:

[Agency Question] No. 1 - This requirement is intended to be awarded as a “Firm Fixed Price Contract.” Part II; page 6; item 11 lists Per Diem rates for technicians[.] CLIN [Contract Line Item Number] 0002 of the solicitation document asked for up-front pricing in regards to training and setup/support on Wake Island. Does the price quoted for CLIN 0002 encompass all travel, per diem, lodging costs and all other associated costs with commissioning/installing this Incinerator at Wake Island?

[Mahto Answer] The price quoted in CLIN 0002 encompasses all travel, per diem, lodging costs, and all other costs associated with commissioning/installing of the incinerator at Wake Island. For greater clarity, no additional costs will be invoiced/charged beyond the amount listed in CLIN 0002 for commissioning/installation of the incinerator at Wake Island without discussion and agreement by the USAF [U.S. Air Force].

[Agency Question] No. 2 - Page 8 of the Combined Synopsis Solicitation has a fill in section for “Net Terms.” Part II; page 6 of your pricing schedule lists your payment terms as a “Schedule of Payments” or progress payments. Acquisitions procured using FAR Parts 12 and 13 for the purchase of commercial items are typically paid using Net 30 Payment Terms, i.e., you would be paid within 30 days of the customer/end user accepting your invoice. The question here is do you accept Net 30 Payment Terms?

[Mahto Answer] Mahto Construction accepts a Net 30 payment term. Having stated this, we would prefer a progress payment schedule, which could be discussed/agreed-to at the time of po [purchase order] but if this is a non-starter for the contract, Net 30 terms are completely agreeable.

After conducting this exchange, the agency determined that Mahto’s quotation was technically acceptable. The agency, however, evaluated IWI’s quotation as technically unacceptable because, among other things, the agency found that IWI’s quotation did not specifically state whether its ceramic refractory material was replaceable.

After evaluating quotations, the Air Force concluded that Mahto, the highest-priced vendor, submitted the only technically acceptable quotation.

WI contends that the agency improperly held discussions with other vendors, but not with IWI. IWI argues that, had the agency conducted discussions with all of the vendors, IWI could have clarified the issues in its proposal that led to the agency’s conclusion that its quotation was technically unacceptable. In any case, asserts the protester, the agency unreasonably determined that its quotation was technically unacceptable.

As noted above, this procurement was conducted under the simplified procedures for evaluation of commercial items. Simplified acquisition procedures are designed, among other things, to reduce administrative expenses, promote efficiency and economy in contracting, and avoid unnecessary burdens for agencies and contractors. When using these procedures, an agency must conduct the procurement consistent with a concern for fair and equitable competition and must evaluate proposals in accordance with the terms of the solicitation.

Our Office reviews allegations of improper agency actions in conducting simplified acquisitions to ensure that the procurements are conducted consistent with a concern for fair and equitable competition and with the terms of the solicitation. Although an agency is not required to conduct discussions under simplified acquisition procedures, where an agency avails itself of negotiated procurement procedures, the agency should fairly and reasonably treat offerors in the conduct of those procedures. In this regard, FAR § 15.306 describes a range of exchanges that may take place when the agency decides to conduct exchanges with offerors during negotiated procurements.

Clarifications are “limited exchanges” between an agency and an offeror for the purpose of eliminating minor uncertainties or irregularities in a proposal, and do not give an offeror the opportunity to revise or modify its proposal. Clarifications are not to be used to cure proposal deficiencies or material omissions, or materially alter the technical or cost elements of the proposal, or otherwise revise the proposal.

Discussions, on the other hand, occur when an agency communicates with an offeror for the purpose of obtaining information essential to determine the acceptability of a proposal, or provides the offeror with an opportunity to revise or modify its proposal in some material respect.

As a general matter, when an agency conducts discussions with one offeror, it must afford all offerors remaining in the competition an opportunity to engage in meaningful discussions. Further, it is the actions of the parties that determines whether discussions have been held and not merely the characterization of the communications by the agency.

The Air Force asserts that its communications with the Mahto were clarifications, not discussions. We disagree.

Mahto was permitted to revise portions of its quotation that did not comply with the solicitation’s terms. In this regard, the RFQ did not include any provision for progress payments, and instead incorporated FAR § 52.212-4, which provides that: “Payment shall be made for items accepted by the Government that have been delivered to the delivery destinations set forth in this contract.” Mahto’s quotation, however, instead quoted a schedule of payments under which payments would be made in four installments at various contract milestones. When the agency communicated with Mahto about this discrepancy, Mahto altered its quotation, dropping the requirement for progress payments, and instead agreed to accept the agency’s proposed “Net 30” payment terms.

In addition, although the RFQ required vendors to propose a fixed price for 16 days of training, setup, and support on Wake Island, Mahto’s quotation stated that the costs associated with its technicians’ work on Wake Island would be “billed separately” on a per diem basis. Where, as here, a solicitation requests proposals on a fixed-price basis, a price offer that is conditional and not firm cannot be considered for award. Thus, Mahto’s statement that the costs of transporting technicians to and from the jobsite would be billed separately failed to comply with the RFQ’s requirement that vendors quote fixed prices for that work.

The agency’s communications with the awardee invited a response from Mahto that was necessary to determine the acceptability of Mahto’s quotation and, in fact, resulted in Mahto being permitted to supplement or alter its quotation. This is quintessentially the nature of discussions, not clarifications. Accordingly, we conclude that the Air Force, having conducted discussions with Mahto, was required to also conduct discussions with all other vendors in the competition, including IWI. We sustain the protest on that basis.

A case of unequal and misleading discussions?

This GAO decision involved an RFP for shipping/logistics services to GITMO. It was to be awarded based on a basis of Lowest Priced Technically Acceptable proposals (in a variant of the "multi-step bid" method of the ABA Model Procurement Code as adopted on Guam). For purposes of this post, technical acceptability was not an issue.   At the end of the first round, the protestor was low priced. But, the government agency, TRANSCOM, had issues with both bidders' prices, saying in most respects they were too high (unreasonable) and in some cases too low (unrealistic, resulting in the appearance of unbalanced pricing).

Discussions were had with each of the bidders in which TRANSCOM aired its concerns about pricing. Subsequently, the protestor raised its overall price and the awardee lowered its price, with the result the protestor was no longer low priced; it priced itself out of the contest.

Was it something the government said?

The usual caveats apply: read the case at the link. This rendition is not complete, is not accurate and may not be entirely a fair characterization, regardless of my intention. So, you are warned.

Matter of: TransAtlantic Lines, LLC, B-411242; B-411242.2, June 23, 2015

TransAtlantic Lines, LLC, protests the award of a contract for cargo transportation services. The RFP sought proposals for dedicated liner service for containerized and breakbulk cargo between Jacksonville/Blount Island, Florida and the U.S. Naval Station Guantanamo Bay, Cuba (GTMO). The RFP contemplated the award of a fixed-price requirements contract for a base year and two option years, with award to the lowest-priced, technically‑acceptable (LPTA) offeror. The RFP identified the following non-price technical evaluation factors, under which proposals would be rated as acceptable or unacceptable: technical capability, past performance, and information assurance and cyber security. If the proposal clearly met the minimum requirements of the solicitation, an acceptable rating would be assigned.  If a proposal was rated unacceptable under any subfactor, the proposal’s overall technical rating would be unacceptable.

With respect to technical capability, the RFP instructed offerors to submit written narratives demonstrating the offeror’s understanding of the Performance Work Statement (PWS) requirements and explaining how the offeror would meet the solicitation requirements. In addition, the RFP identified three technical capability subfactors: equipment, management of operations, and schedule. With respect to equipment, the RFP first instructed offerors to “identify the vessel(s) . . . to be utilized for this contract” and to “[d]escribe the quantity and type of equipment proposed to perform the requirements.” The RFP advised that offerors’ descriptions of the proposed vessel(s) and equipment had to be “sufficient to ascertain compliance” with several specific PWS sections, including those related to vessel cargo space, equipment, and GTMO’s port characteristics. With respect to the management of operations subfactor, the RFP required, among other things, that offerors describe their planned approach to meeting and managing several PWS requirements, such as port operations and transportation of hazardous cargo. With respect to the schedule subfactor, the RFP required that offerors propose a liner schedule that met the PWS’s departure, arrival, and transit requirements.

With respect to price, the RFP instructed offerors to complete a pricing schedule listing proposed individual rates for 105 line items under four categories: accessorial, ocean, single factor, and fuel. The RFP advised that TRANSCOM would evaluate individual rates, the proposed price for each period of performance, and the total proposed price to ensure fair and reasonable prices. The RFP further provided, “Unreasonably high prices may result in elimination of an offeror from further consideration.”

Two offerors, TransAtlantic and Schuyler, submitted proposals. A four-person technical evaluation team (TET) evaluated the two proposals and ultimately assigned both proposals acceptable ratings. However, with respect to price, the agency’s source selection evaluation board (SSEB) initially concluded that TransAtlantic’s total proposed price of $17,782,987.50 and Schuyler’s total proposed price of $19,692,588.50 were not fair and reasonable due to high rates for certain line items.

More specifically, the price analysis concluded that six of TransAtlantic’s individual rates were “significantly overstated.” In addition, the SSEB also noted “the presence of significantly overstated and significantly understated line items rates,” which raised the concern of unbalanced pricing. (As an illustrative example, the price evaluation team highlighted that TransAtlantic’s “extremely high container rates are being offset by the low container rates in an attempt to maintain a specific Total Evaluated Price.”) With respect to Schuyler’s proposed rates, the evaluators found that 12 line items in the accessorial and single factor categories were “unreasonably high,” and concluded that two individual mileage rates in the base year, as well as the firm’s [deleted] percent escalation in the option years, were also unreasonable.

Consequently, TRANSCOM entered into discussions with the two offerors in an effort to remedy the pricing concerns. The agency conducted multiple rounds of discussions with both offerors. Ultimately, the firms reduced their rates for the line items at issue and provided sufficient substantiation for their prices such that the price evaluators were able to deem the proposed prices fair and reasonable.

Notably, in addition to reducing its rates for certain line items, TransAtlantic also increased rates for other line items. In its final proposal revision (FPR), TransAtlantic’s total proposed price increased to $20,841,427.50, whereas Schuyler’s total proposed price decreased to $16,812,960.50.

TransAtlantic complains that TRANSCOM engaged in unequal and misleading discussions with the offerors. As noted above, the SSEB initially deemed both offerors’ prices as not fair. The EN required TransAtlantic to “substantiate the rates” or submit a revised pricing schedule for evaluation. In addition, the EN identified 21 other rates that, in conjunction with the unreasonably high prices, suggested unbalanced pricing.

In response to the EN, TransAtlantic reduced its proposed rates for the six line items identified as unreasonably high, as well as for another line item already deemed fair and reasonable (and not singled out in the EN). The firm also raised its rates for five other line items, including three of the 21 line items called out in the EN. In response to the agency’s concerns of unbalanced pricing, TransAtlantic explained that it already owns some of the equipment and other equipment is being provided by subcontractors. The firm also submitted a more general discussion to explain its low-priced items, referring to historical prices and changes in the PWS (as compared with previous contracts for similar liner service) as justification.

The price evaluation team reviewed TransAtlantic’s response and determined that only one of the six unreasonably high rates was reduced enough to be deemed reasonable and that TransAtlantic’s written explanation “did very little to substantiate” the high rates. In addition, the price evaluators found that one of the other rates that TransAtlantic increased resulted in that rate no longer being reasonable. Finally, the price evaluators noted that the firm’s “atypical prices still suggest unbalanced pricing.” For instance, the evaluators expressed concern that TransAtlantic had priced certain line items into others.

The price evaluation team also found that Schuyler had not reduced all of its prices enough or sufficiently substantiated its rates to deem them fair and reasonable, so the contract officer began a round of oral discussions with each, during which he provided each firm TRANSCOM “target rates” for the offerors’ line items still priced unreasonably high. Specifically, the contracting officer provided TransAtlantic target rates for six line items and provided Schuyler target rates for four other line items. The contracting officer requested from both offerors further substantiation to support the high prices or reductions in the high rates.

In response to oral discussions, TransAtlantic reduced its rates for five of the six line items the agency had identified as unreasonably high; the firm’s total proposed price decreased by $10,450. The firm also provided additional explanation justifying its rates. A seventh line item was also increased to a rate such that it was no longer considered reasonable. The price evaluators noted that many of TransAtlantic’s rates appeared “illogical and inconsistent with customary commercial practice,” and that the firm’s pricing strategy -- trying to stay within a certain total price--still suggested unbalanced pricing. Schuyler, on the other hand, provided additional price substantiation such that the price evaluation team was able to determine that all of its proposed rates were fair and reasonable.

By letter of January 28, 2015, the agency provided TransAtlantic with a last opportunity to “further explain and support the rates in question.” The letter explained that TransAtlantic “risks removal from further award consideration” if its prices could not be deemed fair and reasonable or were unbalanced.[15] Id. In response, TransAtlantic further reduced its rates for the line items at issue. The firm also increased rates for four line items that the price evaluators previously deemed reasonable. Notably, an increase in the rate for one line item in particular that had not been questioned by the agency had a $900,000 impact in the base year and option year 1. Based on the firm’s rate decreases and additional rate substantiation, the price evaluation team deemed TransAtlantic’s proposed prices fair and reasonable. The price evaluators also assessed the risks associated with any unbalanced pricing and determined that because line item rates were no longer overstated.

But ultimately, TransAtlantic’s rate decreases, coupled with the firm’s rate increases for several line items, resulted in a net increase of $4,176,360 in the firm’s total proposed price. Consequently, after the third round of discussions, Schuyler’s proposal was now the lowest-priced. TransAtlantic further reduced its prices in its FPR, as did Schuyler, but Schuyler remained the lowest‑priced, technically‑acceptable offeror by more than $4 million.

TransAtlantic first complains that it was misled into increasing its price during discussions because the agency’s concerns regarding unbalanced pricing were erroneous. The protester also argues that the agency engaged in unequal discussions when it disclosed to the offerors target prices for different line items.

In negotiated procurements, whenever discussions are conducted by an agency, they are required to be meaningful, equitable, and not misleading. In conducting discussions with offerors, an agency may not consciously mislead or coerce an offeror into raising its price. However, we will not find discussions to be improper where the agency in good faith provides accurate information to an offeror, even where the offeror uses that information to its ultimate competitive detriment. Agencies have broad discretion to determine the content and extent of discussions, and we limit our review of the agency’s judgments in this area to a determination of whether they are reasonable.

Here, the record reflects that the price evaluators had legitimate concerns regarding unbalanced pricing and properly raised those concerns during discussions. The record further demonstrates that TransAtlantic ultimately increased several rates -- resulting in an increase in its total proposed price by more than $4 million -- based on the firm’s business judgment and not misleading discussions.

The record here supports the price evaluators’ concerns regarding unbalanced pricing. Unbalanced pricing exists when, despite an acceptable total evaluated price, the price of one or more contract line items is significantly overstated, while others are understated. FAR § 15.404-1(g)(1). As a general matter, unbalanced pricing may increase risk to the government and can result in payment of unreasonably high prices. Moreover, as noted above, the firm deliberately built the price for certain line items into the price for others, even though the agency may not require both line items at the same time, thereby exposing the agency to paying for services not performed.

Because the evaluators’ concerns regarding unbalanced pricing were reasonable, we find nothing misleading about the agency raising the issue with TransAtlantic during discussions.

In any event, notwithstanding the reasonableness of the discussion inquiry, the record reflects that TransAtlantic’s rate increases were not connected entirely to the agency’s unbalanced pricing concerns. In this regard, of the 21 line items identified in the initial EN as suggestive of unbalanced pricing (when coupled with the unreasonably high rates), the record shows that TransAtlantic ultimately increased its rates for only four of those line items. Accordingly, the record does not support TransAtlantic’s assertion that TRANSCOM misled it into increasing its price due to an unreasonable discussion of unbalanced pricing. Ultimately, TransAtlantic’s decision to revise certain prices upward reflected the exercise of the firm’s own business judgment and not improper conduct by the agency.

Next, TransAtlantic contends that discussions were unequal because the agency provided target prices for different line items to the offerors.

In connection with the requirement that discussions be meaningful, offerors may not be treated unequally; that is, offerors must be afforded equal opportunities to address the portions of their proposals that require revision, explanation, or amplification. However, the requirement for equal treatment does not mean that discussions with offerors must, or should, be identical. To the contrary, discussions must be tailored to each offeror’s own proposal.

We find nothing improper about the conduct of discussions here. As discussed above, after the submission of responses to the ENs, TransAtlantic’s proposal still included six rates deemed unreasonable and Schuyler proposed four rates (for different line items) that the evaluators considered unreasonable. As a result, the contracting officer provided TransAtlantic with government target prices for the six line items at issue in its proposal and provided Schuyler target prices for four different line items.

Here, because the rates deemed unreasonable were different for the two offerors, we find nothing improper with the agency only having disclosed target prices to the offerors for the rates at issue in their respective proposals. In this regard, the record reflects that the price discussions, including the provision of target prices, were properly tailored to address the concerns associated with each firm’s proposal. TransAtlantic had already proposed reasonable rates for the four line items that Schuyler was provided target prices for, so the agency was under no obligation to provide this information to TransAtlantic. (agency had no obligation to raise during discussions the issue of pricing with the protester where the protester’s pricing was not unreasonable; discussions unobjectionable where agency advised one offeror that two line item prices exceeded a government budget ceiling but did not provide protester with same information where protester’s prices did not exceed budget ceilings).

In any event, the record confirms that TransAtlantic was not prejudiced by the agency’s selective disclosure of target prices. In this respect, competitive prejudice is an essential element of a viable protest; where the protester fails to demonstrate that, but for the agency’s actions, it would have had a substantial chance of receiving the award, there is no basis for finding prejudice, and our Office will not sustain the protest.

Here, the four target prices that TRANSCOM provided to Schuyler amounted to $10,500 (based on the estimated volume) over the course of the contract’s entire period of performance. Moreover, the record reflects that TransAtlantic already had proposed rates that were equal to or below the government’s targets for the four line items at issue. Thus, given the LPTA nature of this procurement and the fact that the awardee was lower‑priced by more than $4 million, we fail to see how TransAtlantic was prejudiced by the agency’s decision not to provide TransAtlantic with the target prices for the four line items that TRANSCOM discussed with Schuyler.

Protest of Navy's BOSS contract on Guam upheld

As of November 2017, this contract is still being protested.  For an update, see The laborious SAGA of the US Navy's BOSS contract on Guam.

Matter of: CFS-KBR Marianas Support Services, LLC; Fluor Federal Solutions LLC,: B-410486; B-410486.2; B-410486.3, January 2, 2015 (The redacted version was approved for public release. The version below is my own, unofficial version.)

DIGEST

1. Protest challenging agency’s cost realism evaluation of proposals is sustained where record shows that agency’s evaluation was based on the mechanical application of a government estimate that did not take into consideration each offeror’s unique technical approach, and therefore was not consistent with the terms of the solicitation and applicable procurement statutes and regulations.

2. Protest alleging that agency engaged in misleading discussions is sustained where record shows that agency’s discussions questions were based on the results of its underlying, irrational, evaluation of proposals.

CFS-KBR Marianas Support Services, LLC, of Baton Rouge, Louisiana, and Fluor Federal Solutions, LLC, of Greenville, South Carolina, protest the award of a contact to DZSP 21 LLC, of Hagatna, Guam, under request for proposals (RFP) issued by the Department of the Navy for base operations support services for the Joint Region Marianas on the island of Guam.

The RFP contemplates the award of a cost reimbursement-type contract. The RFP advised offerors that the agency would make award on a best-value basis, considering cost and several non-cost evaluation factors. For cost evaluation purposes, the RFP advised offerors that the agency would evaluate proposals for completeness, reasonableness, balance, and realism, and that all five non-cost factors, when combined, were approximately equal in importance to cost.

After performing an initial evaluation, the agency established a competitive range comprised of six concerns and engaged in discussions with those offerors. After conducting discussions, the agency solicited and obtained final proposal revisions (FPRs), which the agency evaluated. On the basis of that evaluation, the agency assigned the protesters and awardee the following technical ratings and evaluated costs:

On the basis of these evaluation results, the agency made award to DZSP, finding that its proposal offered the best value to the government.

After being advised of the agency’s selection decision and requesting and receiving debriefings, CFS and Fluor filed protests in our Office. CFS maintains that the agency misevaluated proposals and failed to engage in meaningful discussions; Fluor maintains that the agency misevaluated proposals and engaged in misleading discussions. We sustain Fluor’s protest and dismiss CFS’s protest as academic.

Fluor essentially argues that, because the agency’s initial evaluation was irrational, it led the agency to engage in misleading discussions with the protester which led, in turn, to Fluor adding unnecessary personnel to its proposal and, ultimately, to proposing a cost that made it uncompetitive. Secondarily, Fluor maintains that the agency’s cost realism evaluation after the agency engaged in discussions also was unreasonable.

Fluor asserts that, in its initial evaluation of proposals, the agency never performed a meaningful cost realism evaluation in connection with the offerors’ proposed staffing. According to Fluor, the agency mechanically applied a government estimate in evaluating the sufficiency of the offerors’ proposed staffing. Fluor argues that the agency’s actions were improper because any meaningful cost realism evaluation is required to take into consideration the offerors’ respective technical approaches to accomplishing the requirements.  [Remember, this is a best value evaluation for a cost-reimbursement contract, and cost alone does not determine who gets the award.]

When an agency evaluates proposals for the award of a cost-reimbursement contract, an offeror’s proposed estimated cost of contract performance is not considered controlling since, regardless of the costs proposed by the offeror, the government is bound to pay the contractor its actual and allowable costs. As a consequence, a cost realism analysis must be performed by the agency to determine the extent to which an offeror’s proposed costs represent what the contract costs are likely to be under the offeror’s unique technical approach, assuming reasonable economy and efficiency.   In addition to these broad considerations, while an agency can utilize a reasonably derived estimate of labor hours based on the government’s experience as an objective standard to measure the realism of proposed costs, an agency may not mechanically apply its own estimates for labor hours or costs--effectively normalizing cost elements of an offeror’s proposal to government estimates--without considering the offeror’s unique technical approach.

The record here shows that, in evaluating the offerors’ initial proposals, the agency mechanically applied a government estimate to evaluate the sufficiency of the offerors’ proposed staffing. In particular, the record shows that the agency evaluated all proposals against an undisclosed government estimate of the number of full time equivalent staff (FTE) that the agency considered sufficient to perform the requirements. In each instance where a proposal offered less FTEs than the agency had identified as necessary for any given part of the contract ("annex"), the agency evaluators described the offeror’s proposed staffing as unrealistic and insufficient to perform in the annex identified.

In performing this evaluation, the agency concluded that Fluor’s proposed staffing was insufficient.  The record thus shows that the agency’s initial evaluation was based on a mechanical application of the government estimate to the proposals that did not consider the offerors’ varying technical approaches. In the absence of a cogent explanation for the Navy’s actions, such a mechanical application of the government estimate in the evaluation of proposals is unreasonable. We therefore sustain this aspect of Fluor’s protest.

Fluor further argues that the mechanical application of the government’s estimate discussed above led the agency to pose misleading discussion questions to the firm regarding the sufficiency of its proposed staffing. The protester maintains that it initially proposed staffing that it considered sufficient to perform the contract in light of its proposed technical approach. Fluor argues that, when it attempted to respond to the agency’s concerns during the discussions that were based on the agency’s mechanical application of the government estimate, it effectively priced itself out of the competition.

It is a fundamental principle of negotiated procurements that discussions, when conducted, must be meaningful; that is, discussions must identify deficiencies and significant weaknesses in an offeror’s proposal that could reasonably be addressed so as to materially enhance the offeror’s potential for receiving award.  Here, the record shows that the agency asked each offeror a specific question that identified precisely the number of FTEs by which the agency considered the proposal deficient.  An agency may not mislead an offeror through the framing of a discussion question into responding in a manner that does not address the agency’s actual concerns, or otherwise misinform the offeror concerning a problem with its proposal.

The agency subsequently issued a clarification to these questions, stating that it was not the intent of the agency to dictate the number of FTEs proposed, but to verify that the offeror had a methodology to accomplish the work with the number of FTEs proposed.  Nonetheless, the agency did not retract its original discussion questions.

The record shows that Fluor revised its proposal to precisely the number of FTEs identified by the agency as lacking in its initial proposal.   Ultimately, Fluor’s high evaluated cost led the agency not to select it for award, even though its proposal had been ranked first from a non-cost standpoint.  Because the record shows that Fluor’s revised staffing was raised in direct response to the agency’s discussion question, we conclude that the firm was misled to its competitive prejudice.

As a final matter, Fluor maintains that the agency essentially abandoned the original staffing estimates that it used to evaluate the offerors’ initial proposals, thereby demonstrating the arbitrary nature of the original evaluation. Fluor maintains that the agency’s final evaluation confirms that its initial evaluation bore no relationship to the offerors’ unique technical approaches, and also demonstrates that the agency’s evaluation of revised proposals failed to meaningfully evaluate the offerors’ proposals for realism purposes.

Notwithstanding the fact that the other two firms also offered additional staffing in response to the agency’s initial evaluation and discussion questions, the evaluators nonetheless assigned DZSP an outstanding rating for its proposed staffing and resources, and assigned the CFS proposal a good rating for its proposed staffing and resources (both proposals originally had been rated unacceptable under this evaluation factor).

The agency’s technical evaluators articulated no reasoned analysis for why, despite the fact that these firms did not propose the staffing initially identified by the agency as inadequate, the firms nonetheless merited these better ratings.  For reasons unexplained in the record, the agency did not evaluate the realism of the offerors’ proposed staffing where it exceeded the government estimate.  The agency’s unexplained and inconsistent application of the government estimate further highlights the underlying irrationality of its evaluation.

In effect, the agency’s evaluators appear to have abandoned the initial government estimates, as well as their evaluation findings based upon those estimates. In addition, since the evaluators did not explain why they considered the offerors’ revised staffing adequate in light of their respective technical approaches, we have no basis to find the agency’s reevaluation of proposals reasonable.

In this connection, agencies are required to adequately document their evaluation results in order to facilitate our examination of the record; where, due to a lack of documentation, we are unable to understand the agency’s evaluation conclusions, we will sustain a protest challenging the agency’s evaluation.

We have carefully considered all of CFS’s allegations and find no basis to sustain the firm’s protest. We find no merit to its allegations concerning the agency’s evaluation of technical proposals, and we also find no merit to its allegation concerning the agency’s alleged failure to engage in meaningful discussions with CFS. In addition, while CFS arguably may be correct concerning the agency’s evaluation of cost proposals, we are not persuaded that CFS was prejudiced by the agency’s evaluation in that area, and therefore find no merit to that aspect of its protest.

In light of our discussion above, we sustain Fluor’s protest. We recommend that the agency reevaluate proposals in a manner consistent with our discussion above.  After performing its reevaluation, we further recommend that the agency afford the competitive range offerors meaningful discussions based on its reevaluation of proposals.

After engaging in discussions, we recommend that the agency solicit, obtain, and evaluate revised proposals and make a new source selection decision based on that reevaluation.  Notwithstanding our conclusions regarding the merits of CFS’s protest, we point out that the firm will, in fact, benefit from our recommended corrective action because it will be afforded an opportunity to participate in any reopened competition.

Finally, we recommend that the agency reimburse Fluor the reasonable costs of filing and pursuing its protest, including reasonable attorneys’ fees. The protester’s certified claim for costs, detailing the time expanded and costs incurred, must be submitted to the agency within 60 days after receipt of this decision.

Girl talk

No offense intended to anyone, but this post is about confidential discussions, which immediately leads me to recall one of my favorite songs, called Girl Talk (get a taste of it here), by a sweet Hawaiian duet team that call themselves Hula Honeys.

It also happens that the articles cited here are written, in some cases co-written, by Attorney Michelle E. Litteken of the law firm Mayer Brown LLP, and collected on the Lexology website.  Attorney Litteken has produced a very informative collection of articles on the "problems" of engaging in discussions in the solicitation process of negotiated contract formation. I have already posted one such article here, and just came across these others, which add texture and color to this confusing and complex subject. Taken together, they provide a welcome tonic to the headache that comes from trying to sort out the ins and outs of permissible discussion.

Again, the caveat: read the whole article at the link. I cut, paste, leave out important stuff, paraphrase, rearrange and otherwise use great license to present articles on this post, doing them no justice, I am sure, but I do so with the best intention of bringing the subject to you, for you to discover and discern. Here, I have left out all discussions of cited cases, and that must be read to appreciate the nuances the cases deal with.

When does an agency cross the line from clarifications to discussions?

FAR 15.306 defines clarifications as “limited exchanges, between the Government and offerors, that may occur when award without discussions is contemplated.” The FAR does not expressly define “discussions,” but it explains that “discussions” include negotiations that “are undertaken with the intent of allowing the offeror to revise its proposal.” The FAR used to limit clarifications to communications about relatively small matters, such as eliminating clerical mistakes or minor irregularities. However, the rules were revised in 1997 to allow a free exchange of information without requiring discussions. Decisions from the GAO and CFC reveal that the two protest forums apply the FAR provisions differently, with the CFC appearing to embrace a more substantial exchange of information that can still be characterized as clarifications.

Both GAO and the CFC recognize that, if an offeror is given an opportunity to revise its proposal, the agency has engaged in discussions. Several GAO and CFC cases refer to this as the “acid test.” The tough cases come when either (i) questions (often called “clarifications” by the agency) seek information that is necessary to determine technical acceptability of the proposal, or (2) the agency seeks a substantial amount of “clarify[ing]” information and an offeror’s response approaches (or crosses) the line of changing the proposal.

Don’t be misled: what contractors should know about misleading discussions

Discussions can be useful to contractors because the questions asked and issues raised can direct an offeror to areas of its proposal needing improvement. In some situations, discussions can help a contractor turn an unacceptable proposal into a successful offer. However, information provided by an agency during discussions can also lead an offeror in the wrong direction. If the agency selects another proposal, the disappointed offeror may file a protest and argue that the discussions were misleading. But what qualifies as misleading discussions? How specific does an agency need to be when it engages in discussions? These are issues that contractors should be mindful of as they engage in discussions—and that they must understand to frame potential protest issues when they are not the prevailing offeror.

Although the FAR does not define misleading discussions, decisions from GAO and CFC provide guidance on when discussions are misleading. Both forums have stated: “An agency may not inadvertently mislead an offeror, through the framing of a discussion question, into responding in a manner that does not address the agency’s concerns; or that misinforms the offeror concerning its proposal weaknesses or deficiencies; or the government’s requirements.”

To succeed in a misleading discussions protest, the protester must show that the allegedly misleading discussions were prejudicial, i.e., made its proposal less competitive. For example, in Tech Systems, Inc., the protester claimed that the agency misled it by focusing on its proposed technical approach, which led the protester to overemphasize management, but refused to discuss pricing, which proved to be the determinative factor in source selection. The court rejected the protester’s argument that the discussions misled it into proposing a high-cost approach because the protester did not show that is costs were higher because of the management-centric approach the agency purportedly encouraged it to propose.

As is the case in challenges to the meaningfulness of discussions, the amount of specificity required to avoid misleading an offeror is highly fact dependent. Contractors should be aware of an agency’s obligation to refrain from misleading offerors as they engage in discussions and litigate bid protests.

What is required for discussions to be meaningful?

It’s basic procurement law that, when an agency engages in discussions with offerors under FAR Part 15, the discussions must be meaningful. FAR 15.306, which provides for exchanges with offerors after receipt of proposals, does not specifically define “meaningful” in the context of discussions. Instead, the FAR states that an agency must discuss “deficiencies, significant weaknesses, and adverse past performance information to which the offeror has not yet had an opportunity to respond.” GAO and the CFC have based their analyses of what discussions qualify as meaningful on this FAR provision. Issues that arise with respect to whether discussions were sufficiently meaningful include:

• When is a weakness significant?
• Do weaknesses that are discriminators have to be discussed?
• How specific does the agency need to be?
• Does an agency need to discuss a weakness if it first appears in an offeror’s FPR?

Since the FAR only requires that deficiencies and significant weaknesses be discussed, and because there is no obligation to discuss garden-variety weaknesses within a proposal, a protest ground regarding the failure to discuss such issues (absent an unequal discussions issue) would be dead on arrival.

The FAR (15.001) defines a “weakness” as “a flaw in the proposal that increases the risk of unsuccessful contract performance.” A weakness is “significant” when the concern “in the proposal is a flaw that appreciably increases the risk of unsuccessful contract performance.” So the distinction between a weakness and a significant weakness turns on the judgment of whether there is an “appreciable” effect on the risk of unsuccessful contract performance.

There are numerous bid protests in which offerors’ proposals are closely matched and a weakness that was not discussed (or group of such weaknesses) becomes the discriminator. Substantial precedent makes clear that the fact that a weakness eventually becomes the deciding factor does not create an obligation to conduct discussions.

In cases in which there is no dispute about the significance of a weakness, the parties may disagree over whether the discussions directed the offeror to the area of its proposal needing improvement. The boilerplate legal concepts applied by the CFC and GAO are clear. An agency is not required to “spoon feed” offerors during discussions; instead, the agency is merely required to lead offerors into the areas of their proposals requiring amplification or correction. Consistent application of these rules can be tricky.

In sum, although the failure to engage in meaningful discussions is a common protest ground, there are nuances in the law that may add complexity to what seems like a familiar argument.

“That wasn’t fair!”—protests based on unequal discussions

The principles of fair and equal competition drive many aspects of procurement law and policy. These principles are evident in the FAR’s requirement that when an agency engages in discussions with offerors, the agency cannot “engage in conduct that [f]avors one offeror over another.” Discussions often occur as part of the procurement process, and can be beneficial to the agency and offerors. However, discussions have their drawbacks. If an unsuccessful offeror believes that other offerors were given better direction or provided with more information, discussions can provide the basis for a protest based on purportedly unequal discussions.

At first glance, the rule that discussions between the Government and offerors must be equal and not favor one offeror over another seems clear. However, application of the rule can be complicated because agencies are not required to conduct identical discussions with offerors, and because discussions must be tailored to offerors’ different proposals. As such, when GAO or the CFC is faced with a protest alleging unequal discussions, it is not a simple matter of determining how many questions were asked, how long discussions were conducted, or the type and number of issues that were addressed. Instead, the question is whether the agency’s questions or statements made during discussions gave an offeror an unfair advantage.

One difficult aspect of unequal discussions issues is that in most cases, the issues can only be understood by bid protest counsel examining an administrative record released under a protective order (PO), and the issues usually cannot be discussed in any detail with the client (as doing so would be inconsistent with the PO).

When considering pursuing a protest, contractors should be mindful of an agency’s obligation to conduct equal discussions. It is important to remember that the number of questions raised or issues addressed is not decisive regarding whether discussions were unequal. Instead, contractors must consider the substance of the discussions—and whether they have any basis to believe the agency provided another offeror with an unfair advantage.

Finishing off her series is this reported on Mondaq: Discussions Round-up: Recent Protests Challenging Discussions

As this series has shown, disappointed offerors often raise protest allegations related to discussions. Although protesters frequently allege that discussions were unequal, misleading, or not meaningful, challenges based on these allegations can be difficult to win. In researching decisions to include in this round-up, I found only two decisions issued in 2014 sustaining a protest based on a discussions issue: Kardex Remstar LLC, which was discussed in the series' first post, and Marathon Medical Corp.). Of course, although many of the protests discussed didn't result in sustained protests based on the facts presented, they often provide useful insights for contractors in developing new claims and are worth close study.

When Does an Agency Cross the Line from Clarifications into Discussions?

The 2014 Windstream Communications protest followed a 2013 protest in which Windstream challenged the exclusion of its proposal from the competitive range. The agency took corrective action, and during the reevaluation, the agency contacted Windstream about its pricing. After reevaluating Windstream's proposal, the agency assessed two deficiencies under the "technical and management approach" subfactor and determined that Windstream's proposal was unacceptable. Windstream argued that the agency failed to engage in meaningful discussions because it raised concerns about Windtsream's prices but not the technical and management approach deficiencies. The Agency argued that it was not required to address the deficiencies with Windstream because it did not engage in discussions – the exchanges were clarifications. Windstream attempted to bolster its claims that the exchanges were discussions by pointing to the fact that it had submitted new detailed pricing information in response to the agency's questions – thereby revising its proposal – the "acid test" for discussions. However, in its submission to the agency, Windstream wrote: "We did not change any of our prices.". GAO denied the protest, finding that although the format of the pricing information was different, the elements and its proposed price were the same. As such, the exchanges were clarifications – not discussions – and the agency was not required to address the proposal's deficiencies.

What Does It Take for Discussions to Be Meaningful?

In our What Is Required for Discussions to Be Meaningful? post, we discussed Sentrillion Corp., a decision in which GAO sustained the protest because the agency failed to raise its concerns about the completeness of some of Sentrillion's business license applications. Based on GAO's recommendation, the agency reopened the competition and issued discussion letters. In its letter to Sentrillion, the agency stated that if Sentrillion was proposing to partner with other companies to perform the work, it must submit evidence of a partnership agreement along with any business licenses or applications. During the reevaluation, the agency deemed Sentrillion's proposal technically unacceptable because the teaming agreements it had submitted—which provided that the parties would negotiate a subcontract if Sentrillion was awarded the contract—were not binding partnership agreements. Sentrillion protested at the CFC, asserting (among other protest grounds) that the discussions were not meaningful because the agency never told Sentrillion to submit binding subcontract agreements or that teaming agreements were unacceptable. The court denied the protest, finding that the discussion letter adequately conveyed the need for finalized agreements.

What Constitutes Unequal Discussions?

In Bannum Inc., the agency determined that because the awardee was rated slightly better for past performance and technical/management, the benefits of its proposal justified paying a three percent price premium. During discussions, the agency had told the awardee that its proposed price was high but did not comment on the protester's pricing, and the protester asserted that discussions were unequal. GAO denied the protest, stating: "unless an offeror's proposed price is so high as to be unreasonable or unacceptable, an agency is not required to inform an offeror during discussions that its proposed price is high in comparison to a competitor's proposed price, even where price is the determinative factor for award." GAO stated that the requirement to conduct discussions does not depend on how an offeror's proposed price compares to the Independent Government Estimate (IGE). However, in support of its decision, GAO noted that the protester's price was the lowest received and less than the IGE–and the awardee's initial proposed price had been above the IGE.

No Matter What, a Protester Must Show Prejudice

As is the case in all bid protests, prejudice is a central requirement in challenging the way in which an agency conducted discussions. In some instances, GAO or the CFC may not address whether the agency violated the FAR provisions governing discussions because the protester failed to demonstrate how it was prejudiced by the alleged violation. For example, in Inchape Shipping Services, the protester argued that the agency engaged in unequal discussions because it allowed the awardee to revise its proposal by replacing the individual proposed for a key personnel role with another employee after the individual it initially proposed was placed on leave. GAO determined that it need not decide whether the change in key personnel constituted discussions because the protester had not demonstrated competitive prejudice.

On that last sentence about no competitive prejudice, I note that the notion of competitive prejudice is hard in the first instance to get hands around.  But it is easier once the concept is grasped. 

In this case, for instance, the protestor's competitor was allowed to change the name of a person with a key role to play in the performance of the contract. Whether a bidder or offeror has the capability to perform is an issue of "responsibility". In the framework of ABA Model Procurement Code law, such as is Guam's, "capability" is one of the standards of responsibility and need not be finally determined until just before award.

Bidder or offeror capability is not an issue that determines whether the bid or offer is responsive. Only issues concerning responsiveness affect bidder prejudice, and only if the matter is material. As the Guam regulations state, "Minor informalities are matters of form ... or insignificant mistakes that can be waived or corrected without prejudice to other bidders; that is, the effect on price, quantity, quality, delivery, or contractual conditions is negligible." (2 GAR § 3109(m)(4)(B).) 

Thus, when the government determines responsibility, it is given great deference to make that judgment call about the person it wants to do business with; but, when it is determining whether a bid or offer proposes to provide the very thing or performance specified, to make sure everyone is proposing, say, apples if it is apples the government wants, the government must reject a bid or offer that proposes oranges, and it prejudices the other bidders if the government goes ahead and chooses an orange.   

Matters of responsiveness are scrutinized more carefully and early in the game, by the time bids and offers are opened or considered, and cannot be waived or altered unless the matter is immaterial or negligible.

Issues dealing with whether the government wants to or should deal with a particular bidder or offeror relate to responsibility.  Issues dealing with price, quantity, quality, delivery or contractual terms or other specifications describing the product or service required to be delivered are issues of responsiveness.  Prospective contractor responsibility must be distinguished from product or service accepetability and responsiveness.