Hide and go seek

Procurement award challenges – the disclosure dilemma, by the UK law firm Mayer Brown LLP

Disputes about public procurement contract awards can pose evidentiary problems for both tenderers and contracting authorities. Does the tenderer challenging an award have enough evidence to support its concern that something has gone wrong? If it does not, will its request for more information be rejected as a ‘fishing expedition’?

Does the contracting authority, in turn, stick to the minimum information that it has to give, or, subject to protecting its confidentiality, does it, despite the time and costs involved, try to be helpful and provide more information, at the risk of opening the door to additional requests?

Bristol City Council’s award of a new contract was challenged by the unsuccessful incumbent contractor ["BMLL"] and the new contract award was automatically suspended. The council asked the court to lift the automatic stay. In deciding that there was a serious issue to be tried and rejecting the council’s interlocutory application, the court recognised the council’s dilemma but said that it should not refuse requests for documents relating, say, to the evaluation of the successful tenderer’s bid, or the bid itself, but then, on the application to lift the suspension, provide, for the first time, evidence about the process or the successful bid in support of its case.

The decision had a number of things to say:

Disclosure in procurement disputes is a perennial problem. On the one hand, an unsuccessful tenderer, whose knowledge of the proposed contract will often be detailed (particularly if, as here, he is the incumbent contractor), may feel instinctively that something has gone wrong in the tender evaluation process. But it can be difficult for him to obtain any information to back up that concern, beyond the sometimes scanty material supplied by the contracting authority ("the authority") pursuant to the Regulations. Any application for early disclosure may often be dismissed as a 'fishing' exercise. There is a real risk that, in such circumstances, there is an unlevel playing field, and the unsuccessful tenderer may never obtain the information he requires to mount a claim.

On the other hand, I quite see that the authority may wish to stand on his rights and refuse all requests for early disclosure, in part because of the confidential nature of the information (although that can usually be dealt with by way of a confidentiality ring), in part because of the time-consuming and expensive business of dealing with such requests, and in part because the authority may feel – often with good cause – that the unsuccessful tenderer will never be satisfied with the answers provided, and will always be seeking just one more document.

It is a question of balancing the interests of justice against the background facts of the particular case.

Contracting authorities have to work out, in fairly short order, whether, having provided the unsuccessful tenderer with the statutory minimum information, they are going to retain all other documents relating to the evaluation and the successful tenderer's bid, and let the unsuccessful tenderer take his own course; or whether they are prepared to be helpful and, providing that the confidentiality of the information is protected, offer to provide as much information about the process as they can.

In my view, however, what the authority should not do is to try and have it both ways. It ought not to refuse requests to provide documents relating, say, to the evaluation of the successful tenderer's bid, or the bid itself, but then, on the application to lift the suspension, provide for the first time evidence about the process or the successful bid in support of its case, either that there is no serious issue to be tried, or that he would be prejudiced if the suspension was not lifted. That approach is at least potentially unfair, because it is relying on potentially controversial material which the unsuccessful tenderer has been given no proper opportunity to consider.

I ... conclude that controversial material, and/or material which, because of the absence of prior disclosure, the claimant is simply not in a position to address satisfactorily if it is produced for an interlocutory hearing, should not ordinarily be deployed on an application [to lift the "suspension"/stay], because of the risk of unfairness. I consider that, in this case, the Council has sought a potentially unfair advantage through its attitude to disclosure. There are two reasons for that.

First, their solicitor Ms Nugent purports to give evidence as to how the [preferred] Refuge tender was evaluated (even though she was not involved in this process). She does this by reference to documents which were sought by BMLL but the disclosure of which was refused.

As it happens, BMLL were able to download from the Council's website a document which appeared to be the Council's evaluation of the Refuge bid. The Council have complained that this document has been wrongly obtained by BMLL, but I find the evidence on that unpersuasive. It is much more likely that this document was wrongly downloaded by a Council employee to this particular part of the website, so that it could then be accessed by others, including BMLL. A Council's inability to use its own website facilities properly is hardly unusual.

But now, in order to argue that BMLL do not raise a serious issue, the Council have disclosed a detailed scoring sheet for Refuge that is in a different and fuller form to the one BMLL downloaded from their website in January. As Ms Metters of BMLL says...:

"No explanation was provided as to why it was suddenly felt appropriate to disclose that document where previously it had been withheld. This document has caused us further concern about unequal treatment because it shows that many points of criticism about Refuge's bid were taken out of the feedback that was apparently given to them with their standstill letter, potentially to justify the high scores that were awarded."

I regard it as potentially unfair for the Council to pick and choose what documents they provide and when, as it suits them.

Worse still in my view is the copious evidence in the witness statements of Mr Anderson (a Service manager with the Council) and Ms Nugent, which seeks to extol the virtues of the Refuge tender itself. This is done in order to persuade the court that there would be prejudice to the Council and the service users if the suspension was not lifted and the contract with Refuge was delayed. But it is difficult for BMLL to respond in any detail to such material, when it was not provided when they asked for it. Moreover that problem is compounded here because the evidence consists of a series of assertions based on what it is said is in the Refuge tender, as opposed to the specifics of the tender itself (which has still not been disclosed).

Often, in a suspension/injunction dispute in a procurement case, the contracting authority will accept that there was a serious issue to be tried. But in the ordinary procurement case, where there may be points to be made on both sides, it will often be unproductive for the parties (and a waste of judicial resources) to spend a good deal of time arguing about the merits or otherwise of the underlying claim. The threshold is, after all, a low one: [***] first that, in cases where there are clear issues arising out of individual scores, it will be difficult for the court to conclude that there is no serious issue to be tried; and, second, that this difficulty arises, at least in part, because the relevant documents have yet to be disclosed.

The Court then evaluated the claim to lift the stay/suspension by weighing the relative damages each party might suffer if the stay were sustained or lifted, considering factors described as "the balance of convenience". 

Central to the result was this important element:

"there is a public interest in the avoidance of delay and ... there will be a detriment to that interest if it is necessary to wait a further six weeks .... I do not, however, consider that detriment to be sufficient to outweigh the strong public interest in compliance with the law and the benefits that implementing the scheme in a lawful way may be expected to bring."

There is Guam Supreme Court judicial authority and Public Auditor administrative review authority for the proposition that parties cannot be charged with knowledge of facts unknown to them when they have been withheld by the government. See, Guam Imaging Consultants, Inc. v. GMHA 2004 Guam 15, ¶ 36 (coincidentally also a procurement case involving issues related to the stay and its lifting), and In the Appeal of Town House Dept. Stores (etc.) OPA-PA-08-011.

Guam procurement law also specifically states that procurement records are public information, generally, 5 GCA § 5251 (e.g., 2 GAR § 3114(h) re nondisclosure of proposals/tenders, which in any event would not include the evaluation records). Further, 5 GCA § 5485 provides an expedited judicial action that may be brought by "any member of the public" to obtain withheld "procurement data". The time limit for bringing a judicial review of an administrative protest decision is specifically "tolled" so long as the disclosure action is pending (5 GCA § 5481(a)).

What's in a (brand) name? Unreasonable favoritism.

Matter of: Desktop Alert, Inc., File: B-408196, Date: July 22, 2013 (Chopped, pasted and extracted; if the particulars of this case are critically important to you, read the Decision at the link.)

The protester asserts that the solicitation, which limits the competition to brand name items, is unduly restrictive of competition. We sustain the protest. Solicitation for an emergency mass notification system, telephony and training that was limited on a brand name basis is overly restrictive where the agency fails to demonstrate a reasonable basis for the brand name restriction.

DCMA awarded a Small Business Administration 8(a) set-aside contract on April 11, 2009, to Reliable Government Solutions, Inc., of Silver Spring, Maryland, to provide a product known as the AtHoc Mass Notification System. Among other things, this contract included requirements for: software; licenses; core system; software assurance; upgrades and technical support; 50 dedicated phone lines for transmitting alerts; system installation and set-up; and a back-up system. Contracting Officer’s Statement at 2. This contract ended on April 12, 2013.

On March 12, 2013, DCMA posted the RFQ for the instant procurement on the General Services Administration’s (GSA) e-Buy website. The solicitation was limited under the FSS procedures of FAR § 8.405-6 on a brand name basis to AtHoc products and services. The solicitation sought AtHoc software, upgrades, security patches, software assurance, technical support, communication services, telephony[1] and training.

A limited source procurement under the FSS, such as a brand name limitation, requires a justification that describes the reasons for limiting the competition. On March 7, prior to issuing the RFQ, the contracting officer signed a limited source justification for an AtHoc Mass Notification System. The justification explains the reason for limiting the acquisition to the AtHoc brand name system, as follows:

AtHoc is already installed in the DCMA Infrastructure and is in use by all Contracting Regions across DCMA. By using existing assets, and trained Operator and Administration personnel, DCMA saves money and time. Most of the emergency management force has already been trained on the AtHoc System, and the cost to retrain personnel is substantially lower than other systems. . . . These conditions all point to cost, time, and human resource savings by using the existing AtHoc brand software.

With regard to market research, the justification provides the following assessment, which addressed DCMA’s views of the merits of the AtHoc system:

Based upon the market research conducted, the purchase of the AtHoc brand name represents the best value solution as this product, a) exceeds the technical specifications required for this type of emergency warning system, b) reduces training, as this system is already widely utilized within all DCMA, c) the configuration of this system allows the Agency’s Emergency Management Personnel to provide quick alerts and operability within the Agency, and d) provides a high level ease-of-use for the customers at a very competitive price.

The justification also cites AtHoc’s favorable past performance--both in terms of product reliability and customer service--and states that “AtHoc is the only mass notification application on the [Defense Information Systems Agency (DISA)] Approved Product List (APL).”

On March 20, in response to the e-Buy solicitation, DCMA received one quotation, from Reliable, an AtHoc reseller. Reliable advised in its quotation that at least four of the RFQ’s contract line item numbers (CLINs) for training were listed as open market items in its quotation, because those items are not available on the FSS. On March 29, DCMA re-issued the RFQ on FedBizOpps, via amendment 0001 to the solicitation.

On April 3, Desktop Alert submitted a pre-award protest to DCMA, arguing that the solicitation’s limitation of sources to AtHoc brand name items is unduly restrictive of competition, and that the solicitation fails to describe the agency’s minimum requirements. The protester also asserted that DCMA failed to consider mass notification systems offered by other vendors. In its protest, Desktop Alert notified DCMA that it provides mass notification solutions to DOD and other government and commercial customers.

On April 9, DCMA denied the protest, stating: “[W]e limited our solicitation for support to the AtHoc system [because] it’s the system we currently use and it’s the system we seek to continue to use.”

On April 11, Desktop Alert filed a pre-award protest with our Office arguing the same grounds as its agency level protest. On April 12, the head of the relevant DCMA contracting activity executed a justification and approval, pursuant to FAR
§ 33.104, authorizing award of the contract notwithstanding the stay triggered by the protest to our Office, on the basis that urgent and compelling circumstances did not permit awaiting a GAO decision before proceeding with contract award. That same day, DCMA awarded contract No. S5121A-13-F-0007 to Reliable in the amount of $84,472.50, for the base year, with a total estimated contract value of $540,260.52, inclusive of the base and all option years. Reliable was the only company that submitted a quotation in response to the RFQ.

The protester argues that the solicitation fails to describe the salient characteristics of the agency’s requirement.[4] For this reason, the protester contends that the RFQ is unduly restrictive of competition and does not permit other potentially qualified vendors of similar software systems to compete. Desktop Alert also argues that DCMA’s limited source justification was unreasonable because it failed to describe the agency’s requirements, and did not consider other qualified software systems when justifying its determination to limit the solicitation on a brand name basis.

As discussed below, we find that DCMA failed to justify the use of the restrictive brand name requirements for this procurement. Specifically, we conclude that the agency’s justification is deficient because DCMA failed to adequately define the supplies or services required to meet its needs, or any essential feature of the supplies or services that is unique to the AtHoc brand name. We also conclude that the justification is deficient because the agency failed to document adequately its market research of other vendors’ similar products. For these reasons, we conclude that the solicitation was overly restrictive, and sustain the protest.

Orders placed under the FSS, while streamlined, are considered to satisfy the full and open competition requirements of FAR Part 6. 41 U.S.C. § 152(3) (2006 & Supp. V); FAR § 6.102(d)(3). Moreover, orders or blanket purchase agreements established under the FSS are exempt from the specific requirements in FAR Part 6, including the requirements for justifying restrictions to full and open competition. FAR § 8.405-6. However, to limit sources in FSS orders--such as a brand name requirement--ordering activities are required to justify the restriction in accordance with the procedures set out in FAR § 8.405-6. Id. § 8.405-6(b)(2).

As an initial matter, DCMA argues, in essence, that Desktop Alert is not an interested party to challenge the terms of the solicitation. In this regard, DCMA contends that the RFQ sought maintenance and upgrades for its existing AtHoc system, and did not seek a new mass notification system. AR at 1 (“DCMA did not want to procure a new system or switch to another system; it only wanted to maintain and upgrade the system currently in place.”). The agency asserts that its decision to limit the competition to FSS vendors who are authorized resellers of AtHoc mass notification systems is reasonable because “[b]uying software upgrades and maintenance on a system the agency already owns is far more reasonable than scrapping a functioning system and purchasing a completely new system.” Id. at 2. The agency therefore argues that because the protester requests an opportunity to provide its own mass notification system rather than maintain the existing AtHoc system, it is not an interested party.

The record, however, does not show that the RFQ is merely seeking maintenance or upgrades to the same AtHoc software system that DCMA purchased in 2009. Supp. AR at 2. As the agency’s response to the protest acknowledges, the RFQ seeks a newer version of the AtHoc system with expanded functionality. Id. For example, the newer version of the software “increas[es] the functionality” and “increas[es] the type of methods that may be used to send out warning messages, such as adding capability to provide alerts over Twitter® and using computer desktop alerts (a desktop alert is a message that shows up on a window on the employee’s computer monitor, in addition to telephonic and email alerts).” While the agency will receive “software patches and bug fixes to correct any errors discovered in the software after purchase,” this maintenance appears to be for the newer version of the software purchased, not the 2009 version of the software. Id. Moreover, more than half of the total contract value consists of training and telephony, unrelated to the particular brand name system being purchased. While an agency might reasonably limit a competition to a brand name source where it is simply upgrading an existing system, the record here does not show that the agency has sufficiently justified the limitation for this procurement.

based on our review of the record, we conclude that the agency does not adequately describe its requirements for a mass notification system, or why AtHoc is essential to the government’s requirements. The limited source justification states that “DCMA requires an emergency notification management system . . . to notify DCMA end users on short notice via phone, pager, email, etc. of continuity of operations (COOP), natural disasters, circuit and enterprise application outages, and a myriad of other scenarios that may occur on day-to-day basis.” This general description, however, fails to identify unique features of the AtHoc software system particular to the agency’s needs.

DCMA also argues that its requirement is “to maintain the current AtHoc brand since a large percentage of its workforce was already trained and using this system on a regular basis.” Essentially, the agency raises a circular argument: only the AtHoc system meets the agency’s needs, because the agency does not want to change from the AtHoc system it currently uses. Other than this general rationale, however, the record does not include a definition of DCMA’s requirement or needs that supports the agency’s assertion that the agency’s needs can be met only by the AtHoc software system.

Neither the justification, nor the record submitted in response to this protest, however, state any rationale explaining why the AtHoc software system is the only system that can meet DCMA’s requirement.

The record also fails to support the agency’s contention that limiting the acquisition to AtHoc software is reasonable because its staff has already been trained on the software. the agency concedes that although the agency currently has approximately 300 personnel who have been trained on the 2009 version of the AtHoc software, the “DCMA workforce is not static,” and that training for new personnel will be required: As new personnel join the agency and others depart there exists a requirement that these new employees receive training,” and that “the use of [the AtHoc software] is a perishable skill and employees who were trained on this system in previous years could benefit from refresher training provided by the vendor. Given the amount of training that the contract requires, in combination with the agency’s recognition that it will be required to re-train its staff even if it purchases the AtHoc software system, we find that the agency’s justification limiting the procurement on this basis is insufficient and unreasonable.

Another reason stated in the limited source justification for limiting the competition is that DCMA will save costs and time by upgrading its existing AtHoc system and relying on personnel already trained for that system. FAR subpart 8.4, however, does not cite cost or time savings as a basis for restricting sources. Moreover, the agency has not provided any support for this rationale, either in the justification or its response to the protest. In contrast, the protester asserts that it can provide an upgrade to DCMA’s current installed software by replacing the software system with its current software, and that based on its published FSS pricing, its Desktop Alert software system would cost the Government 20 percent less than the award price to the intervenor. The protester argues that since the original award in 2009, mass notification systems have improved significantly, and generally, the cost has been decreasing.

Next, we conclude that the justification also fails to adequately comply with the market research requirement of FAR § 8.405-6, which requires documentation of the agency’s finding that “other companies’ similar products, or products lacking the particular feature, do not meet, or cannot be modified to meet, the agency’s needs.” FAR § 8.405-6(b)(1). Specifically, the justification fails to show whether DCMA conducted market research concerning other companies’ products. Instead, the agency’s justification merely states that, based upon market research, “the purchase of the AtHoc brand name represents the best value solution” as it exceeds the technical specifications, reduces training, allows the agency to provide quick alerts, and provides a high level ease-of-use at a very competitive price. AR, Tab E, Justification at 1. This analysis does not support the brand name restriction, because, for example, it does not discuss any “technical specifications” that the AtHoc software system exceeds.

DCMA did not adequately define its requirements or specify any special features of the AtHoc supplies and services that make this brand name essential to the agency’s needs. DCMA also did not demonstrate with adequate market research or otherwise that it considered whether other companies’ similar products, or products lacking a particular feature, do not meet, or cannot be modified to meet, the agency’s needs. We find the agency’s limited source justification fails to comply with requirements of FAR § 8.405-6, and is therefore unreasonable.

Because DCMA failed to adequately justify its limitation of the procurement on a brand name basis, the award to Reliable was improper. However, because DCMA moved forward with contract award due to urgent and compelling circumstances, we do not recommend the termination of the contract with Reliable. Instead, we recommend that the options under Reliable’s contract not be exercised and that the agency assess and define its requirements for an emergency notification management system, and either properly justify its need to limit competition to a single brand name system, or recompete its requirement beyond the base year. We further recommend that the agency reimburse the protester the costs of filing and pursuing its protest, including reasonable attorneys’ fees.

Doth we protest too much? Methinks not

Protests delay Air Force contracts for firefighting, war planes

Protests have jumped 87 percent to a record 2,475 in the fiscal year ended Sept. 30 from fiscal 2006, which may be partly due to increased competition over declining awards in recent years. U.S. contracts fell about 4 percent to $512 billion last year from fiscal 2010, according to data compiled by Bloomberg.

The U.S. Air Force was set to deliver aircraft to the Afghan military in April. Its suppliers have only now started building them — after the contract was contested, canceled, re-bid, re-awarded, and contested yet again. Instead, they won’t be delivered until mid- to late 2014, as the U.S. plans to withdraw the last of its combat troops from Afghanistan.

The Air Force contract, with a maximum value of $950 million, was awarded to closely held Sierra Nevada Corp. and Brazilian subcontractor Embraer in December 2011. It has since been protested by Beechcraft. At the U.S. Forest Service, a protest of a contract for up to seven air tankers used to drop flame retardant means the 2013 wildfire season may be over by the time the planes are flying, said a spokesman for Sen. Mark Udall, D-Colo. Sierra Nevada officials had planned to supply the first of Embraer’s 20 turboprop aircraft in April 2013, said Taco Gilbert, a vice president at Sparks, Nev.-based Sierra Nevada, which is providing avionics and instruction under the contract.

For companies such as closely held Beechcraft, securing contracts is key as the Pentagon and other agencies slow spending. The company’s direct military contracts plunged about 68 percent to $331 million in fiscal 2012 from fiscal 2009, according to data compiled by Bloomberg. Beechcraft announced on Feb. 19 that it had emerged from bankruptcy protection. For Embraer, the award is a coup. The company is trying to tap the U.S. military market and expand its defense unit, which produced 15 percent of its 2011 sales.

There’s little the agencies can do to prevent the automatic, 100-day work delays triggered by protests to the U.S. Government Accountability Office, which arbitrates contract disputes. As a last-ditch effort, the government can supersede the stays with an override, which requires the officials to justify an urgent need or show that it’s in the best interest of U.S. taxpayers.

There have been no significant changes to the automatic delays in almost two decades. Congress in 2009 requested that GAO assess whether frivolous protests were rising. The office responded that attempts to discourage those challenges might backfire by adding costs and deterring “good-faith protests.”

Protests can serve as checks and balances to a sometimes opaque and flawed contracting process.

A prime example is the Air Force’s attempt to procure aerial refueling tankers. Chicago-based Boeing eventually prevailed against competitors European Aeronautic, Defence & Space Co. and Northrop Grumman.

Boeing’s first attempt at the $35 billion contract was derailed in 2004 by a scandal involving former top Air Force procurement official Darleen Druyun and then-Boeing Chief Financial Officer Michael Sears. Sears offered Druyun a job in October 2002 during the initial tanker negotiations. She was hired in January 2003. Sears and Druyun were convicted of violating federal conflict-of-interest laws.

Boeing was awarded the contract in February 2011, about 10 years after the Air Force first proposed the tanker-replacement program.

In March, the Air Force chose to override the latest protest from Wichita, Kansas-based Beechcraft, authorizing Sierra and subcontractor Embraer to resume work. Beechcraft has called the override unjustified, saying in a statement that the Air Force’s decision would lead to higher costs to taxpayers. It lost its challenge of the override at the U.S. Court of Federal Claims. The GAO has until June 17 to make a decision on the company’s protest of the contract.

Agency officials rarely use overrides. Even as protests soared, overrides have dropped by almost half to 33 in fiscal 2012 from 62 in fiscal 2006, according to GAO data obtained through a Freedom of Information Act request. Their waning popularity may be a result of increasing scrutiny from the Court of Federal Claims, which has let agencies know that it’s “not going to give them a free pass,” said Daniel Forman, a partner and co-chairman of the government contracting unit at the Washington-based law firm Crowell & Moring LLP.

Sue Payton, who was assistant secretary for acquisition at the Air Force from 2006 to 2009, said she used to build potential delays into the timeline for planning contracts. “Getting the requirements right up front saves you from protest hell,” Payton said.

The most effective way of avoiding challenges, though, is making sure the contracting process is fair and complete from beginning to end, according to current and former military officials. The Army tries to deter protests with contract solicitations that are “thoroughly scrubbed” to make sure they are clear, concise and compliant with federal regulations, said Matthew Bourke, a spokesman for the service. It also works to keep “a very open dialog with our industry partners,” he said in an e-mail.

Overriding the GAO automatic stay override

This post is about the '''best interest" of the government. The vehicle for this discussion is the government's right to override an automatic stay of a contract or award when there is a protest of a US federal government solicitation to the Government Accountability Office (GAO).
The government can choose to override the automatic stay when it is in the government's "best interest" or, alternatively but similarly, there are "urgent and compelling circumstances that significantly affect the [government's] interest".

A body of law is developing from cases reviewing the government's decisions to override the automatic stay. This serves a broader purpose as an analogous approach to analyze other cases in procurement law of actions that can only be taken in the "best interest" of the government. +

For instance, under Guam law, the government can only cancel a bid if there is a written determination, made by the highest procurement authority in the purchasing agency, that such cancellation is in the "best interest of the Territory". Also, comparable to the "significant interest" prong in federal law, Guam law allows, among other requirements, the automatic stay to be lifted upon a showing by the agency or Attorney General of substantial government interest. Though the standards of review may vary, the analysis may be similar in either case.

The following is excerpted from an outstanding review of the developing body of law regarding the override of agency override of the automatic stay in the Air Force Law Review, Vol 66, beginning at page 135, written by highly credentialed authors, Lieutenant Colonel Kevin J. Wilkinson and Captain John M. Page. It is a follow-up work done by them from a previous article in the Air Force Law Review in 2007.

You really need to read the whole article from the linked Volume 66 to fill in the many blanks created by this brief excerpting. The footnotes in the article are especially helpful.

CICA STAYS REVISITED: KEYS TO SUCCESSFUL OVERRIDES

The Competition in Contracting Act (CICA) of 1984 provides for the automatic stay of a contract award and suspension of performance of a newly awarded contract after the timely filing of a bid protest at the Government Accountability Office (GAO) and notice to the procuring agency. Agencies must withhold contract award when they receive notice of a protest from GAO.

Although the “CICA stay” is automatic, there are narrow ways around it. Under both CICA and the Federal Acquisition Regulation (FAR), agencies may override a CICA stay if they meet certain defined circumstances. If the protest is in the pre-award stage, an agency may only override the stay where “urgent and compelling circumstances that significantly affect interest of the United States will not permit waiting for the decision of the Comptroller General.” If the protest comes post-award, the urgent and compelling circumstances standard still applies, but CICA adds an alternative “best interests” standard as well. Under the “best interests” standard, an agency may override the stay “upon a written finding that performance of the contract is in the best interests of the United States.”

In the original article, we showed how, in the beginning, CICA stay overrides had become so common that it appeared that the exceptions were swallowing the rule.

Agencies commonly justified an override with procurement circumstances that did not present truly urgent, compelling, or sufficiently significant Government interests, as least not as the courts interpreted and applied those standards.

As a result, a protester (frequently the incumbent) often turned to the only avenue of relief available and filed suit in federal court alleging a CICA violation. Faced with obvious examples of Government overreaching in CICA stay overrides, the courts did not hesitate to prevent agencies from awarding or continuing the performance of an awarded contract where the court found the agency’s justification for an override decision to be weak or unsupported.

Since our article was published, seven published opinions addressing CICA stays provide exclamation marks to our existing recommendations and expressly address other areas of emphasis. These recent cases all highlight the need for thorough, objective decision making in the CICA stay override process.

2006 was a watershed year for CICA stay override cases. The U.S. Court of Federal Claims (COFC) overturned four CICA stay overrides. In a fifth override-related case, the court let the agency’s override stand, but only after the agency’s third attempt at demonstrating that the contract at issue involved “interests of national defense and national security.” Before 2006, the history of CICA stay jurisprudence in the federal courts was deferential to the agency, and sustaining agency overrides was the rule more than the exception.

Most notable among the 2006 cases is Reilly’s Wholesale Produce v. United States. In Reilly’s, Judge Allegra distilled from prior COFC cases the “relevant” factors—i.e., factors the agency “must consider” and address when considering an override decision—and those that are “offlimits” —i.e., “irrelevant.” The “must consider” factors include:

(i) whether significant adverse consequences will necessarily occur if the stay is not overridden;
(ii) conversely, whether reasonable alternatives to the override exist that would adequately address the circumstances presented;
(iii) how the potential cost of proceeding with the override, including the costs associated with the potential that the GAO might sustain the protest, compare to the benefits associated with the approach being considered for addressing the agency's needs; and
(iv) the impact of the override on competition and the integrity of the
procurement system, as reflected in the Competition in Contracting Act.

Judge Allegra’s two “irrelevant” factors are

(i) that the new contract would be better than the old one, and
(ii) that the agency would prefer override and continuation of the contract.

As noted, for its override decision to be upheld, the agency must not only sort through relevant and irrelevant factors, addressing the relevant ones; it must also base its decision and findings on the relevant factors that do not “run[] counter to the evidence before the agency.”

The court did note that some of the cases it cited for the factors that are legally relevant and irrelevant were cases in which the agency override decision was based upon the “best interests” standard. However, “in the court’s view, the rationale employed in those cases has, where indicated, application to the review of an override decision based upon urgent and compelling circumstances.”

Over the last three years [2007 - 2010] seven published COFC opinions involved CICA stay overrides. The seven cases show mixed results when the Government attempts to override a CICA stay.

In e-Management Consultants, Superior Helicopter, and Nortel Government Solutions, the court found against the Government, holding in each case that the Government’s decision to override was arbitrary, capricious, and contrary to law. In e-Management, the National Highway Traffic Safety Administration (NHTSA) justified its override by claiming that continuing with the contract was within the Government’s best interests. The court methodically went through each of the Reilly’s factors and found that the Government had not passed the test.

The court in the other cases came to similar conclusions, again relying on a thorough analysis of the Reilly’s factors to determine whether the Government complied with the law. In each case, the court found that the Government had failed to meet all of the factors, noting in Nortel Government Solutions that “[f]ailure by an agency to consider just one of these factors is fatal to an override decision based on urgent and compelling circumstances.”

On the other hand, in three other cases, EOD Technology, PlanetSpace, and Analysis Group, the court sided with the Government and upheld the Government’s decision to override the CICA stay. Contrary to EOD Technology, the PlanetSpace court specifically ignored the Reilly’s factors, saying, “We did not consider the Reilly factors at the hearing because Congress limited the court’s review of an agency’s decision in a CICA override action to the Administrative Procedure Act standards.”

This was followed by the October 2009 Analysis Group case in which the court listed the “four Reilly factors” and stated “while these four additional factors may be helpful in analyzing the agency’s override decision, they are not dispositive.” The court cited PlanetSpace, following its holding that “when considering injunctive relief in override cases, the Court should only apply the APA four-factor test for injunctive relief and not the additional four Reilly factors.”

These cases make clear (whether the override is upheld or not) that the analytical approaches cross the spectrum. They range from the assertion of strict APA review and express rejection of any consideration of the Reilly’s factors, (PlanetSpace and Analysis Group) all the way to considerably heightened scrutiny and the full application of the Reilly’s factors (Superior Helicopter and Nortel Government Solutions).

As we acknowledged in the 2007 article, the outcome seems to rest largely on which judge has been assigned to the case. The lack of unified precedence among COFC cases seems to prompt “luck of the draw” decisions, although there have been no appeals of the COFC decisions and no demand in academic circles for the Court of Appeals for the Federal Circuit to lay the factors to rest.

In light of the 2006 cases, we labeled our advice as “keys to ensuring overrides are reasonable, supportable, and less vulnerable to attack” and heavily footnoted our observations and recommendations with case law. This [article] supplements such advice.

The agency should assert interests of national defense and national security when they are present; however, be sure not to overstate the interest, because the courts are clearly wary when this assertion is made and demand that the record back it up. Also remember that all other issues pertaining to overrides must be addressed as well.

In Nortel Government Solutions, the court recognized that the Drug Enforcement Agency was “essentially asserting a national security argument regarding the necessity of the override.” The court quoted Superior Helicopter, saying, “Ultimately, the public’s interest in a fair, competitive federal procurement system outweighs unsubstantiated claims, even those related to the public safety.”

Again, a word of caution: justifications cited as “interests of national defense and national security” must be legitimate, significant— paramount to the procurement itself—and above all supported by the record. Do not overstate or make bald assertions that the record cannot support.

Some of the recent cases addressed supplementing the administrative record, usually with discouraging results for the Government. The e-Management Consultants court decided that “in an override case ‘the focal point of judicial review should be the administrative record already in existence.’” The court denied the agency’s request to add to the record with Supplemental Declarations, finding that “the information contained in the [administrative record] and [override memorandum] is sufficient for this court to conduct ‘meaningful judicial review.’” The court also found that “the Supplemental Declarations [were] written, intentionally or not, with the perspective obtained through the ‘lens of litigation’” and so should be treated with skepticism.

Our observations and recommendations are to inform decision makers and reviewers that their decisions to override CICA stays must be made judiciously and are subject to intense scrutiny. Gone is the era of extreme deference to the agency.

Access Systems demonstrates a reasonable compromise between competing interests of necessary performance of a contracted service and complying with the letter and spirit of Congressionally mandated CICA stays. Agencies will have to consider the reasonableness of properly tailored bridge contracts as an alternative for each override. As Reilly’s showed, courts are willing to treat bridge contracts as overrides and overturn them. Therefore, just as with overrides themselves, agencies should not abuse the use of bridge contracts.

In terms of general fairness and integrity of the procurement system, bridge contracts are plausible alternatives to overrides provided they are tailored appropriately to bridge gaps in necessary services and not to circumvent federal procurement law.

The Court of Federal Claims jurisprudence in CICA stay override cases remains unsettled. The prudent approach [for an agency] in deciding whether to override a stay would be to:

(1) start with the four APA factors,
(2) because the “Reilly's factors” still linger, agencies must consider them, and,
(3) because the courts are mixed on whether injunctive relief or declaratory relief is necessary, agencies have to consider that the court will apply the four factors for injunctive relief.

Nothing short of such a comprehensive analysis will do.

POST UPDATE October 2014 (posted 9 September 2015):

Court Upholds Bid Protest Stay Override

The U.S. Court of Federal Claims ruled against a bid protester seeking to stop performance on NASA's $6.8 billion commercial space program. The court's ruling upheld NASA's unusual decision to override the automatic stay of contract performance during a GAO bid protest. In addition to highlighting an unusual wrinkle in the normal bid protest process, this case also underscores the importance of venue selection in bid protests. Protests generally may be filed with the GAO, the Court of Federal Claims or the agency itself. Filing at the court usually is slower, more expensive and does not trigger the automatic CICA stay. On the other hand, as part of its bid protest procedure, the court can grant an injunction prohibiting the agency from moving forward. An agency might well face a tougher fight arguing against an injunction than it would in overturning the CICA stay.

While a GAO protest triggers the CICA stay, only a federal court maintains the authority to direct a federal agency to enforce the stay. So, if an agency like NASA decides to override the stay, then the protester's only recourse is to request an injunction from the U.S. Court of Federal Claims. The court could have enjoined NASA from continuing in performance of its contract. Instead, the court sided with NASA and allowed NASA to continue working with Boeing and SpaceX pending the protest decision.

POST UPDATE 16 JUNE 2012:

See, also the ARMY CONTRACTING AGENCY CICA Automatic Stay Override Guide April 2004.

POST UPDATE 6 April 2012:

WIFCON.com has a page devoted to "4 CFR 21.6: Withholding Award, Suspending Contract Performance, Override of Stay, Injunction", which keeps an ongoing review of cases related to the topic in this post above.

Debating transparency in Kenya: a case for reform

Note: This post contains a number of labels, as the opinion piece in this post is a comprehensive critique of the procurement situation in Kenya. You should read the full article, particularly if you do not understand the reference to any particular label.

Transparent and competitive public procurement system key to a functioning economy

all governmental entities are struggling in the face of unrelenting budget constraints, downsizing, public demand for increased transparency in public procurement and greater concerns about efficiency, fairness and equity. Additionally, public procurement professionals have faced a constantly changing environment typified by rapidly emerging technologies, increasing product choice, environment concerns, and the complexities of international and regional trading agreements.

Further, policy makers are increasingly using public procurement as a tool to achieve socioeconomic goals. In this environment, public procurement has become much more complex than ever before, and public procurement officials must deal with a broad range of issues.

They have been walking on a tight rope in balancing the dynamic tension between (a) competing socioeconomic objectives, (b) national economic interests vis-à-vis- global competition as required by regional and international trade agreements, (c) satisfying the requirements of fairness, equity and transparency, (d) maintaining an overarching focus on maximising competition; and (d) utilising new technology to enhance procurement efficiency, including e-procurement and purchase cards.

A sound procurement system is based on four major elements or pillars: legislative and regulatory framework, institutional framework and management capacity, procurement operations and market practices, and integrity of procurement system. A weakness in one of the four pillars inevitably leads to an unsound public procurement system. This contribution highlights the weakness in the current legal and regulatory framework on public procurement—the Public Procurement and Disposal Act 2005.

The principal reason for the enactment of the Act was to have a legal regime that weeds out inefficiencies in the procurement process, remove patterns of abuse, and the failure of the public purchaser to obtain adequate value in return for the expenditure of public funds.

However, these objectives have never been fully achieved in practice. Key provisions of the Act and the regulations are replete with textual weaknesses that have often been abused by procuring entities. Moreover, the Act does not envisage contemporary market realities hence the need to continuously revise it to keep pace with these developments.

The authors’ review of more than 100 decisions from the Review Board and the High Court has revealed an inconsistent implementation of these policy objectives. There are no set guidelines, judicial or statutory, that ought to guide decision makes in the interpretation and application of the policy objectives. It is proposed that the Act is amended to restate and redefine the stated policy objectives.

transparency and non-discrimination are the key pillars of the legal regime on public procurement and disposal. A transparent and openly competitive public procurement system with clear procedures and contract award criteria is a prerequisite to a functioning economy.

A good procurement system must therefore provide watertight provisions amongst others , (a) requiring procuring entities to publish tender notices in good time to allow adequate responses from bidders, (b) clearly stipulating any technical specifications and procedures, (c) outlining bid opening procedures and detailing the terms and conditions of the contract awarded, and (d) requiring the procuring entity to maintain reliable record of proceedings, disclose all relevant information and avail for inspection the name and address of the successful bidder and the value of the winning bid.

the right of unsuccessful tenderer to challenge the award of the tender is a key feature of the public procurement process. An ideal public procurement legal regime should contain bid-challenge procedures that are non-discriminatory, timely, transparent and effective.

A critical review of the Act reveals that while the mere fact of lodging of a request for administrative review to the Review Board automatically operates to suspend the procurement proceedings, there are no concomitant provisions for automatic interim measures when an applicant seeks to challenge the decision of the Review Board by way of judicial review to the High Court.

This conflict was played out in the case of Republic Versus the Public Procurement Administrative Review ex parte Egerton University where the Review Board’s decision to direct procuring entity to extend the disputed contract for three months was stayed by the High Court. This created a hiatus that led to the completion of the original project thereby rendering the judicial and administrative review proceedings nugatory.

Hitting the pause button on procurerment

As with most wrongs, the sooner they are righted the less damage is done. When the procurement process seems to be going wrong, most procurement regimes have a "pause button", to maintain the status quo while the alleged wrongdoing is examined.

Under Guam law, based on the ABA Model Procurement Code, once a protest is filed, there is an automatic "stay" which stops the procurement process in its tracks. The stay is, in legal effect and parlance, the equivalent of an injunction.

Under US Federal law, the stay is not automatic but is available upon application. The significant difference between Guam law and Federal law is that, under Guam law, the stay only enjoins the procurement process. Once an awarded contract is made, the automatic stay is unavailable (although there is some possibility of obtaining an injunction of the contract under a common civil injunction action, outside of the procurement law and process)..

Federal law, however, enjoins not only the procurement process but contract performance as well.

The global law firm, Morrison Foerster has published a Client Alert about the way the United Kingdom handles the "pause button". The UK law is intended to follow, and implement, European Union law on the subject. The authors, Alistair Maughan and Masayuki Negishi, explain:

Under the public procurement remedies regime, a public contract procurement process must be suspended if an aggrieved bidder brings a legal challenge; and the contracting authority will have to apply for a Court order to lift this automatic suspension. The test which the Courts will apply in determining such an application will be no different from the test that the Courts have traditionally applied in assessing applications for interim injunctions made by aggrieved bidders under the old regime.

Whilst the tables appears to have been turned in bidders’ favour by the new remedies regime, bidders still need to make sure that their complaints have a sound legal foundation in order to derive a meaningful benefit from the new automatic suspension remedy.

In the context of public procurement challenges, applications for interim injunctions were typically brought by an aggrieved bidder who was disqualified at an early stage in the procurement process before the final award, and sought to suspend the on-going public procurement process pending a full trial.

Under the “old” remedies regime, an interim injunction was seen as the only really meaningful remedy (albeit a difficult one to obtain) available to an aggrieved bidder, due largely to the fact that, once the contracting authority and the winning bidder had concluded the contract or framework agreement in question, the Court could only award damages if a claimant managed to establish a breach of the procurement rules.

Under the new regime, the position has changed considerably, and not only is the set-aside of an illegally awarded contract available as a potential remedy, but also, where an aggrieved bidder challenges a contracting authority’s decision by formally initiating legal proceedings, a contracting authority is now legally obliged to suspend its procurement process.

This automatic suspension of the procurement process essentially turns the tables around by requiring the contracting authority facing the legal challenge to make an application for an interim order to lift the automatic suspension, if it wishes to continue the procurement.

The Client Alert provides instructive review of recent case law applying these principles, including the tests and standards which are applicable to obtaining, and keeping, the "pause button" on.

It might be noted, also, that MoFo (as the firm is "affectionately" known in legal circles) provides very good practical advice on procurement matters, and other legal issues, such as this
Legal Updates & News Bulletin.

For another discussion of the EU suspension process (at least the UK version), see "
When and how to challenge public procurement contracts" by Wragge & Co. LLC, solicitors.