I. Contract Formation and Source Selection
A. Sole-Source Justifications
Although there were no startling developments with respect to contract formation and source-selection issues in the past year, it is abundantly clear that some things will not change. For example, agencies continue to find that sole-source justifications are going to undergo careful scrutiny, both at the agency level and at the Court of Federal Claims or the Government Accountability Office, if a challenge is filed. Credit must be given to the agencies that are taking advantage of the different types of market research available, including draft RFPs. A simple step like that can result in a very competitive procurement that benefits both the agency and the taxpayer. The key to such an approach is starting early enough to make it work—no small feat in many agencies.
In one GAO case, RBC Bearings, Inc., B-401661, et al., Oct. 27, 2009, 2009 CPD 207, the GAO found that the procuring agency's source justification document in support of a decision to limit competition for a purchase of bearings for the Black Hawk helicopter was deficient because the protester had been seeking source approval from the Navy for almost ten years. For that entire period, the Navy had purchased the bearings on a sole-source basis. In the GAO's view, the agency certainly had the ability to foresee a continuing need for the bearings. As a result, the GAO recommended that the agency make an "expeditious and good faith effort to complete any further reviews needed" in order to determine whether RBC could compete in future procurements.
A similar result was reached in Major Contracting Services, B-401472, Sept. 14, 2009, 2009 CPD 170, where the GAO upheld a protest against a sole-source contract extension based on alleged urgent circumstances. The GAO held that any exigencies that might exist were the result of the agency's failure to do any advance planning.
To fully appreciate these cases, it is important to understand that agency technical personnel—the customers—often have a favorite contractor in mind and will do what they can, including withholding information from their contracting people, to make sure things work out as they wish. This creates a tension within the agencies that is often palpable. Ideally, the program people and the contracting professionals can work together as a team, identifying requirements as early as possible and working together to achieve the appropriate level of competition for all requirements. When that teamwork is not present, GAO decisions like the two described above can be the result.
B. Meaningful Discussions
The concept of "meaningful discussions" continues to pop up in protest decisions. The phrase itself is found nowhere in the statutes or the regulations, but is the product of a long line of GAO decisions holding that whenever an agency engages in discussions with offerors, those discussion must be "meaningful." It has not always been easy for agencies to know if they are going to meet the GAO standard. On one hand, the GAO has held that this requirement does not require an agency to spoon-feed an offeror, but on the other hand, the offeror should have a pretty good idea of what the agency's concerns are when it reads or hears the discussion questions.
In Ashbury International Group, B-401123, et al., June 1, 2009, 2009 CPD 140, the GAO held that an agency failed to conduct meaningful discussions because it did not raise concerns about an offeror's management plan. The agency argued that it was not required to discuss the management plan because it merely led to a moderate risk rating. Rejecting that position, the GAO held that the agency specifically raised this issue, and the reasons supporting it, in its source selection decision as the sole technical discriminator. This decision is yet another reminder that an agency's documentation is critical to the resolution of a protest.
If it does not support the agency's argument, the GAO and the Court of Federal Claims may well uphold the protest. In AshBritt, Inc. v. United States, 87 Fed. Cl. 344 (2009), the U.S. Court of Federal Claims held that an agency conducted unequal and misleading discussions when it raised questions about a proposed subcontracting plan with one offeror but not with others. In that same procurement, the agency told one offeror its prices were low in comparison with the government estimate but did not do the same for other offerors, even though some had a lower price than the protester. To add insult to injury, after discussions were concluded, the agency revised its internal estimate, thereby rendering its earlier discussions misleading, and the GAO recommended that discussions be reopened to address this problem.
C. Past Performance
Past performance issues continue to surface on a fairly regular basis. One of the trickier areas relating to past performance is how to evaluate the past performance of an offeror who is part of a much larger organization. Should it get a top rating simply because it is with a Top 50 DOD contractor? Should it get a low rating because an affiliate has had a major problem recently? As the following GAO decisions show, each situation is decided on its own particular facts.
In AMI-ACEPEX Joint Venture, B-401560, September 30, 2009, 2009 CPD 197, the GAO ruled that even though the awardee's parent and sister companies were not formally teamed with the awardee, it was proper for the agency to consider the experience and past performance of those entities based upon specific proposal language stating that their resources, including workforce, management, key personnel and facilities, would be used in contract performance. In a separate protest in connection with that very same procurement, the GAO held that it was reasonable for the agency to consider an offeror's past performance as "neutral," rather than to credit it with the past performance of its parent and affiliates, because the proposal did not indicate how the resources of those entities would affect contract performance. Bering Straits Technical Services, LLC, B-401560.3 and .4, Oct. 7, 2009, 2009 CPD 201. A similar result was reached in Health Net Fed. Services, LLC, B-401652.3 and .5, Nov. 4, 2009, 2009 CPD 220.
D. Organizational Conflicts of Interest
Perhaps the most difficult challenge facing agencies and contractors alike today is dealing with organizational conflicts of interest in a pre-award context. Over the past several years, this issue has increased in importance and in frequency on bid protest dockets, and that trend does not appear to be ebbing. The topic itself is addressed fleetingly in FAR Subpart 9.5, but the increasing number of protests revolving around this issue suggests that the Office of Federal Procurement Policy might do well to consider some revisions.
The protest of L-3 Services, B-400134.11, et al., Sept. 3, 2009, 2009 CPD 171, provides a shining example of how thorny these thickets can be. In that case, an awardee had proposed a subcontractor that had been deeply involved in the agency's procurement planning, a fact that led GAO to find that the "biased ground rules" restriction had been violated because the subcontractor obviously had been in a position where it could shape the competition to favor its team. In addition, the GAO found an "unequal access to information" OCI had not been mitigated because the agency could not demonstrate that all of the competition-sensitive information that the subcontractor had been privy to had been made available to other offerors; and, to make matters worse, the so-called "firewall plan" had not been in place when the subcontractor's earlier work had begun and had never been approved by the agency. Perhaps most important, the GAO stated that there is a presumption of unfair competitive advantage where an offeror possesses competitively useful, non-public information that would help that offeror win the contract. In the GAO's view, the fact that such information might not actually have been used was irrelevant.
In The Analysis Group, LLC, B-401726, et al., Nov. 13, 2009, 2009 CPD 237, the GAO found that an impaired objectivity OCI existed where the awardee would have provided support services to develop agency strategy, policy and concept of operations for the chemical, biological, radiological and nuclear program, and would have performed detailed technical analyses relating to the agency's selection of such products and services, because the awardee had a major business selling such products and services. It was not helpful to the agency that it had not conducted any independent investigation of the market but had merely relied on the awardee's assertion that no OCI existed. This assertion was contained in the same proposal that touted the awardee's significant business selling these very same products.
In Health Net Federal Services, LLC, supra, the GAO upheld a protest on the grounds that an unfair competitive advantage existed because the awardee, Aetna Government Health Plans, had used a former high-ranking procurement official from that agency in the preparation of its proposal. This official had participated to some extent in the planning for the procurement in question and had access to competitively sensitive information. In sustaining the protest, the GAO explained that the analysis used in an "unfair competitive advantage" protest was identical to the analysis in an "unequal access to information" protest. The GAO also stated that prejudice to competitors from an offeror that possesses non-public information must be presumed if knowledge of non-public information is established. Moreover, the GAO held that the protester had presented a prima facie case of improper access to competitively sensitive information, thereby establishing an appearance of impropriety that required careful agency investigation before any award to the awardee could move forward. The fact that the former agency official had obtained clearance letters did not eliminate the contracting officer's need to consider possible unfair competitive advantage under FAR 3.101.1 On May 5, 2010, the agency conducting the procurement issued a press release announcing that it had terminated (for convenience) the contract it had awarded to Aetna and had awarded the $17 billion contract to Health Net.
On April 22, 2010, the Department of Defense issued proposed new rules to address the OIC issues. 75 Fed. Reg. 20,594. These proposed rules have already created quite a stir. Public comments are due by June 21.
E. Choice of Protest Forum
Pre-award protests may be filed at the procuring agency, with the Government Accountability Office, or with the U.S. Court of Federal Claims; however, the GAO handles far more protests than the Court of Federal Claims. In FY 2009, the GAO experienced a 20 percent increase in the number of protests it received (1,989) (as compared to a 17 percent increase the year before), issuing 315 decisions on the merits and sustaining 57, for a "sustain rate" of 18 percent. That signified a drop of three percent from the prior year and the fourth decline in a row since FY 2006 when the sustain rate was 29 percent. In addition, the GAO used Alternative Dispute Resolution procedures in 149, nearly double the number from the year before protests. By comparison, the U.S. Court of Federal Claims was chosen for 74 bid protest cases, 22 of them pre-award and 52 post-award.
Each of these forums treats a protest as a de novo matter, i.e., the other forum's decision is not given any deference. For example, it is theoretically possible for a company to lose at the agency level, then lose in a protest at the GAO, and finally prevail at the Court of Federal Claims. For example, in Geo-Seis Helicopters, Inc., B-299175 et seq., March 5, 2007, 2007 CPD 135, the GAO cited a long list of GAO decisions in support of its ruling that it was proper for the procurement agency to extend the closing time for receipt of proposal revisions in order to accept a late proposal revision. The agency contended, and the GAO agreed, that it enhanced competition to do so. Not to be denied, Geo-Seis filed suit at theCourt of Federal Claims, which reached the opposite conclusion. Geo-Seis Helicopters, Inc. V. United States, 77 Fed. Cl. 633 (Fed. Cl. 2007).
I. Protecting Unit Pricing Information
Over the past few years, we have pointed out the continuing state of confusion surrounding the protection to be accorded a company's unit pricing. As a general rule, most companies understand that the total contract price is a matter of public record, but at the same time believe that their unit pricing should be exempt from release under Exemption 4 of the Freedom of Information Act, 5 U.S. C. 552, which prohibits the release of "trade secrets and commercial or financial information obtained from a person and privileged or confidential."
In FAR Part 15, however, there are two provisions that indicate that disappointed offerors are to be provided with an awardee's unit pricing. See FAR 15.503, "Notification to Unsuccessful Offerors," and FAR 15.506, "Postaward Debriefing of Offerors." In the past few years, some court decision have held that such pricing is not releasable under certain circumstances, See, e.g., Canadian Commercial Corp. v. Air Force, 514 F.3d 37 (D.C. Cir. 2008), but the FAR has not been amended to reflect those decisions.
The federal courts in the District of Columbia continue to lean against releasing such information. In Essex Electro Engineers, Inc. v. United States Secretary of the Army, 2010 WL 710595 (D.D.C. 2010), the U.S. District Court for the District of Columbia held that the disclosure of unit prices would likely cause substantial harm to a company's ability to compete, and upheld the Army's refusal to release such documents pursuant to a FOIA request. The court said that the target company need not establish actual harm, but could meet its burden by furnishing evidence supporting the existence of potential competitive injury or economic harm. Although the plaintiff contended that the alleged harm was speculative, the court found that disclosure could reveal the target company's business strategy and cost structure. The court also said that revealing unit pricing could damage the company's ability to compete for future projects, might limit its bargaining power with subcontractors, and might disclose the economies of scale that the company hoped to achieve. As in other recent decisions, the court made it clear that FAR 15.506's mandate to disclose unit pricing does not apply if doing so would violate the FOIA.
This case is instructive for several reasons: First, it serves as a reminder that competitors will constantly and aggressively seek market information, including proposals and contracts. Second, when agencies advise you that a FOIA request has been filed for your proposal or your contract, you need to treat that request seriously and make a compelling case to the agency (including an affidavit from a senior executive, if necessary) demonstrating that release of certain information will cause your company competitive harm. You can't save your best arguments for a court. Third, the starting point for protection is to educate your employees about the rules for protecting information and the need to mark all proposal information, and anything else submitted to the government, appropriately when your documents contain important competitive information. See, FAR 52.215-1(e), "Restriction on Disclosure and Use of Data." Finally, over-marking your data may serve to undercut your position if, at a later date, a competitor files a FOIA request for your information.
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