Protest challenging the reevaluation–after corrective action in response to an earlier protest–of an awardee’s proposed transition approach is denied where the agency reasonably concluded that the approach could be achieved within the time required by the solicitation, even though the approach was inconsistent with solicitation guidance indicating that such an approach would not likely be successful; protester cannot claim to have been prejudiced by the agency’s revised views about the solicitation guidance because there is no reason to think, based on the record, that the protester would have offered a different approach had it known of the agency’s revised views.

The GAO sustained the protest because the “agency improperly amended the solicitation.”  

Specifically, the agency eliminated unique aspects of the proposed helicopters (including maintenance requirements) as a consideration in the agency’s calculation of certain aspects of the evaluated Most Probable Life Cycle Cost, and substituted a subjective consideration of potential maintenance efficiencies, but precluded offerors from generally revising their proposals to take this change into account.”  Since those changes could have had an impact on the proposals, the GAO “recommended that the Air Force permit offerors to revise both the cost/price and non-cost/price aspects of their proposals in response to the changed evaluation scheme.

The GAO “further recommended that the agency terminate Boeing’s contract if the evaluation of revised proposals resulted in a determination that its proposal no longer represented the best value to the government, and that LMSI and Sikorsky be reimbursed the costs of filing and pursuing their protests, including reasonable attorneys’ fees.” 

After amending the solicitation and allowing revised proposals, all as recommended by the GAO, the Secretary of Defense terminated the CSAR-X program.  As a result, the Air Force terminated the solicitation.  Thereafter, Lockheed and Sikorsky requested that the GAO modify its direction to require the Air Force to award them their costs of preparing their proposals, and the costs of the protest.  In its December 15, 2009 decision, the GAO rejected the request:

As is clear from the record, the agency promptly implemented our recommended corrective action following our decision, and the protesters were furnished an opportunity to compete for the contract. LMSI and Sikorsky participated in the reopened competition on the same footing as the other competitive range offeror, Boeing, and all three offerors faced the same potential risk of a proper decision by the agency to cancel the procurement. This is the same risk that is inherent in any competitive acquisition. Since the protesters have made no showing that the cancellation of the CSAR-X solicitation was unreasonable or otherwise improper, the fact that the reopened competition did not ultimately result in an award provides no basis for us to recommend reimbursement of their proposal preparation costs.

Ball argued that the GSA erred in its evaluation of AT&T’s cost and technical quotes.  The GAO dismissed the protest, in part, as untimely and denied the remainder as lacking merit.  In its decision, the GSA concluded that:

many of the challenges raised by the protester argue, in essence, that the price evaluation scheme set forth in the solicitation did not result in a meaningful evaluation of the likely cost to the government. As discussed below, we find that these arguments are untimely challenges to the terms of the solicitation, and merit dismissal. With regard to the other price and technical evaluation challenges–which timely address whether the evaluation was consistent with the scheme set forth in the solicitation–we find no merit to these arguments and deny the protest.

By doing so, the GAO upheld the award of the contract worth approximately $876,000 to AT&T.  This decision highlights the importance of promptly challenging defects in the solicitation. 

In its request for quotations, the Coast Guard stated that the “award would be made based on the evaluation of past performance and price, with past performance considered to be ‘significantly more important than price.’”  Although Riverhawk’s quote was more than $150,000 higher than Commissioning Solutions’, the GAO affirmed the award to Riverhawk since the Coast Guard reasonably gave Riverhawk more points based on its experience.  According to the GAO:

In a best value procurement involving the evaluation of past performance and price, agency’s selection of a higher-priced quotation from a vendor that received an “excellent” rating for past performance as compared to the protester, who received a “neutral” rating, was reasonable and consistent with the solicitation, where the agency made reasonable assessments of the relevancy of vendors’ past performance and reasonably determined that the quotation from the vendor with the more relevant performance record was worth the higher price.

This case is a blatant example of the importance of filing a timely and complete bid protest.

Aside from the lawsuit, PMT apparently alleges, among other things, that the contract is being awarded without following a competitive bidding process.

But, as of September 3, 2009, Arizona had awarded 47 statewide highway contracts totaling only about $135. million.  Arizona has granted only 2  contracts for local highway construction.  Apparently, that is because of a lack of local “shovel-ready projects.”   According to GAO, “the lack of projects was due to some localities not understanding the allocations that they would receive as well as their unfamiliarity with federal highway requirements.”

There are strings attached, however, including “use it or lose it” provisions. For example, within 120 days following the date of apportionment of the monies to the States, 50% of the monies awarded to a State for highway projects that are not obligated will be lost and redistributed. Additionally, if a State does not obligate highway funds one year from the date of apportionment, the monies will be redistributed to other states, unless the State can establish that it has encountered “extreme conditions that create an unworkable bidding environment or other extenuating circumstances.”

The new law also contains a special provision with regard to contracts that it funds. It calls for fixed-price contracts garnered through the use of competitive procedures to the “maximum extent possible.”  This provision ratifies and reinforces the central theme of government contracting- contracts should generally be awarded to the  lowest bidder that will provide the most beneficial product and/or service to the government.  For example, Arizona has adopted the Arizona Procurement Code.  A.R.S. § 41-2501 et seq. and associated regulations.  The Code includes numerous provisions governing State contracts, competitive bidding and disputes (including bid protests). 

Although price is important and is sometimes determinative, price is not the only factor the government generally considers in making an award.  The government is also entitled to consider “responsibility.”  “Responsibility” involves evaluating the bidder’s experience, skill, facilities, integrity, prior performance and other factors affecting the bidder’s ability to successfully perform the proposed contract at the specified price within any applicable deadlines.  Some discretion is inherent in determining the responsibility of each bidder.  But, that discretion is not without limit.  As one Arizona court stated, “‘in exercising the power to reject any or all bids, and proceeding anew with the awarding of the contract, the officers cannot act arbitrarily or capriciously, but must observe good faith and accord to all bidders just consideration, thus avoiding favoritism, abuse of discretion, or corruption. Although the courts generally will not disturb an honest exercise of discretion, it has been said that they will intervene to prevent the arbitrary rejection of a bid when its effect is to defeat the object to be attained by competition.’” 

But, Arizona does have a statute that actually permits the State to enter a contract with the higher bidder, a legal preference.  For example, licensed Arizona contractors who have paid taxes in Arizona for at least two years are entitled to a preference over non-Arizona companies where the non-Arizona company bid is less than 5% lower than the Arizona company’s bid.  So, if the Arizona company’s bid is less than 5% more than the non-Arizona company’s bid, the Arizona company’s bid “shall be deemed a better bid.”  It remains to be seen whether these legal preferences are allowed under the stimulus Act.

The new law also gives protection to whistle-blowers that report violations related to agency contracts awarded involving covered funds.  Specifically, an employer may not discharge, demote or otherwise discriminate against an employee as a reprisal for the employee reporting the employer for  “(1) gross mismanagement of an agency contract or grant relating to covered funds; (2) a gross waste of covered funds; (3) a substantial and specific danger to public health or safety related to the implementation or use of covered funds; (4) an abuse of authority related to the implementation or use of covered funds; or (5) a violation of law, rule, or regulation related to an agency contract (including the competition for or negotiation of a contract) or grant, awarded or issued relating to covered funds.”  If an employee makes such a report and then believes that the employer has made a reprisal, the employee may file a complaint with the inspector general.  If the employer is found to have violated the prohibition on reprisals, the federal agency may order the employer to abate the reprisal, reinstate the employee with back pay and order the employer to reimburse the employee for costs and attorneys’ fees in making the complaint.  After the expiration of certain deadlines, the employee may file a civil action for damages resulting from the employer’s violation of the Act.

There is also a “Buy American” provision that, with certain exceptions, mandates the use of American iron, steel, and manufactured goods in connection with constructing, maintaining or repairing public buildings and works funded by the new law. Specifically, Section 1605(a) of the Act, provides that “none of the funds appropriated or otherwise made available by this Act may be used for a project for the construction, alteration, maintenance, or repair of a public building or public work unless all of the iron, steel, and manufactured goods used in the project are produced in the United States.”  However, there are broad exceptions where the “Buy American” restriction  “(1) would be inconsistent with the public interest; (2) iron, steel, and the relevant manufactured goods are not produced in the United States in sufficient and reasonably available quantities and of a satisfactory quality; or (3) inclusion of iron, steel, and manufactured goods produced in the United States will increase the cost of the overall project by more than 25 percent.”  Finally and perhaps most importantly, if there is other law prohibiting a trade restriction, the other law would govern.  For example, there are various laws and regulations establishing thresholds for foreign trade.  Depending on how those laws are interpreted and applied to the Act, the Buy American provision may only affect smaller contracts (i.e., those under $7,433,000, the current Trade Agreements Act threshold for several countries).

At the same time that many state and local governments are dealing with being understaffed and over budget, the new stimulus package may very well present them with the added pressure of quickly having to conduct competitive bid processes. This may lead to mistakes and shortcuts in a process that is supposed to be free of even the appearance of impropriety.

The new law calls for the creation of a website that is to provide, among other things, information about contracts awarded by the Government, including information about the competitiveness of the contracting process, as well as a link to information about solicitations for contracts to be awarded.

Contractors who are looking to sustain or revive their businesses should consider the many government projects and business opportunities that will likely result from the new law. Contractors should also consider the possibility that more bid protests may result due to the amount of money at stake and time pressures created by the new law, and the overall state of our economy.

Bid protests provide a beneficial “check and balance” in government contracting, helping to ensure that the process is truly competitive and in the best interests of the government. Interestingly, according to federal bid protest statistics, bid protests are surprisingly successful. According to the U.S. Government Accountability Office (GAO) 2008 annual report, there were 1,652 protests filed in 2008, which was an increase of 17% from 2007, and protesters were “effective” (meaning a protester received “some form of relief from the agency”) in 42% of the cases.

(A) knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval;

(B) knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim;

(C) conspires to commit a violation of subparagraph (A), (B), (D), (E), (F), or (G);

(D) has possession, custody, or control of property or money used, or to be used, by the Government and knowingly delivers, or causes to be delivered, less than all of that money or property;

(E) is authorized to make or deliver a document certifying receipt of property used, or to be used, by the Government and, intending to defraud the Government, makes or delivers the receipt without completely knowing that the information on the receipt is true;

(F) knowingly buys, or receives as a pledge of an obligation or debt, public property from an officer or employee of the Government, or a member of the Armed Forces, who lawfully may not sell or pledge property; or

(G) knowingly makes, uses, or causes to be made or used, a false record or statement material to an obligation to pay or transmit money or property to the Government, or knowingly conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money or property to the Government.

Violatrors are “liable to the United States Government for a civil penalty of not less than $5,000 and not more than $10,000, as adjusted by the Federal Civil Penalties Inflation Adjustment Act of 1990 (28 U.S.C. 2461 note; Public Law 104-410 [FN1]), plus 3 times the amount of damages which the Government sustains because of the act of that person.”

Given the huge amounts of money being infused into the economy, the government has recognized the increased potential for fraud.  As a result, there are currently efforts to broaden and clarify the already apparent broad sweep of the FCA.

The potential for mistakes is heightened because of the emphasis on speed. The focus of Congress and state governments is on putting people to work, awarding contracts, and placing shovels in the ground quickly. As we do so, we must take pains to balance speed with care. The public has reason to be wary. A recent wave of stories from various states about apparent corruption, fraud, and “pay to play” abuses in the awarding of government contracts and other benefits have shaken confidence in the ability of government to steward public funds wisely. Add to that the lax oversight and accountability at the root of the current economic crisis and it is perfectly understandable why people are so skeptical.

Bid protests provide an important “check and balance”, especially now.  According to Attorney General Coakley, “Speed must be balanced with critical public bidding protections necessary to ensure that contracts are competitively and impartially awarded based on the value and quality of the goods and services to be provided. The procurement laws that currently govern public projects generally strike the right balance. They ensure that contracts are awarded based on value and merit, not because of friendships, campaign contributions, fraud, or simple sloppiness.”  March 25, 2009 testimony.