An August 2016 bid protest decision highlights the importance of
government contractors having, and being able to demonstrate, an
effective export controls compliance program. As described in the
U.S. Government Accountability Office's ("GAO")
decision in Microwave Monolithics, Inc., B-413088
(Aug. 11, 2016), the Army eliminated Microwave
Monolithics' ("MM") proposal from competition due to
MM's failure to meet the solicitation's requirements
pertaining to compliance with the International Traffic in Arms
The solicitation at issue required that offerors and their
subcontractors demonstrate ITAR compliance, or have a viable plan
to become ITAR compliant prior to contract award. Specifically, the
solicitation required that the contractor show that it had
appointed an employee to be responsible for ITAR compliance and had
established written policies and procedures for employees
performing activities subject to ITAR. Offerors' proposals also
had to show that the contractor had established procedures for the
receipt, handling, storing, implementation, and testing of
ITAR-controlled items and data, procedures for the restriction of
access by foreign nationals to ITAR-controlled items or data, an
auditing procedure for ITAR compliance, and procedures for actions
to be taken if violations were discovered.
In challenging its elimination from the competition, MM argued
that its proposal stated that it was ITAR compliant. In addition,
MM noted that it was registered with the Directorate of Defense
Trade Controls ("DDTC"), and that this registration
demonstrated the required compliance. Specifically, MM argued that
DDTC registration "by default requires a designated security
officer and maintenance of records showing compliance per ITAR
Section 122." In response, the Army argued that MM's
proposal was insufficient because the Army was not looking merely
for ITAR registration with DDTC. Rather, the Army argued, the
solicitation made clear that the agency was looking for more detail
regarding a contractor's ITAR compliance.
GAO sided with the agency, finding that MM's "brief
statements in its proposal with regard to how it would implement
ITAR requirements were both conclusory and limited." Because
MM's proposal did not provide the level of information
regarding ITAR compliance required by the solicitation, GAO
concluded that the Army acted reasonably in rating the proposal
unacceptable and eliminating it from the competition.
This decision is a significant affirmation of the importance of
being able to demonstrate how a contractor will comply with
regulatory requirements in performing government contracts.
Companies should ensure not only that they are ITAR compliant, but
also, as this GAO decision demonstrates, that their proposals
provide enough detail to demonstrate full compliance with a
solicitation's requirements regarding ITAR compliance.
The Committee on Foreign Investment in the United States (CFIUS, commonly pronounced "syphius") reviews M&A transactions that may pose a risk to national security through foreign control of a US business.
On February 24, 2017, US President Donald Trump issued an executive order on regulatory reform, directing federal agencies to take steps to strengthen their implementation of various executive orders...
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