United States: October 2016 Protest Roundup

In October, the Government Accountability Office ("GAO") and the U.S. Court of Federal Claims ("COFC") issued notable decisions addressing (1) competition, (2) price realism and best value, and (3) organizational conflicts of interest ("OCI"). Below we address these decisions, which offer the protest bar further clarity regarding agency evaluation and award obligations.

Competition

  • Areaka Trading & Logistics Co., B-413363, Oct. 13, 2016.

Areaka Trading & Logistics Company involved a pre-award protest alleging that a Department of Defense solicitation failed to include an authorization requirement as a definitive responsibility criterion and as a precondition for contract award. The protester argued the agency should have required offerors to demonstrate they had been authorized by the Royal Jordanian Air Force to sell jet fuel in Jordan before the agency could determine that they were eligible for award, because such a requirement was consistent with Jordanian law and would avoid undue delay after contract award. In denying the protest, GAO explained that the protester's allegation was, in effect, an attempt to make the procurement more restrictive of competition. Noting that its role in reviewing bid protests was "to ensure that the statutory requirements for full and open competition are met, not to protect any interest a protester may have in more restrictive specifications," GAO found that Areaka's protest was without merit.

Areaka is a reminder that GAO will not countenance attempts to impose additional requirements on a procurement, especially where the effect of such imposition will be potentially to limit the number of contractors able to compete for contract award. Although an agency has the discretion to include those requirements it deems reasonably necessary to achieve its stated needs, GAO ordinarily will not step in to require the Agency to impose additional restrictions.

Price Realism and Best Value

  • Heartland Tech. Grp., LLC, B-412402.2, Sep. 29, 2016.

In Heartland Tech. Grp., LLC, Heartland, the incumbent contractor, brought a post-award protest alleging that the U.S. Department of Agriculture failed to properly perform a price realism evaluation or make a reasonable best-value tradeoff determination in its award of an IT services contract. After taking corrective action and reevaluating proposals, the agency again awarded to a lower-priced offeror and Heartland renewed its price realism and best-value tradeoff arguments.

Price Realism

First, GAO rejected Heartland's contention that the only way the agency could have performed a meaningful price realism analysis was to compare the awardee's proposed rates to the rates Heartland charged under the incumbent contract and found that the agency's price realism analysis was meaningful. GAO noted that the agency performed an analysis that led it to conclude that the awardee's proposed rates presented "an overall moderate risk," but that the agency determined this risk was modulated by the location at which the higher-risk labor categories would be performed –- in areas like Washington DC, with high concentrations of highly educated recent college graduates who may be willing to work for less. The agency also noted that, because the solicitation did not dictate experience levels for the labor categories, and because the agency's rate comparison was based on average market rates, it was reasonable to assume that qualified individuals would be available at rates both above and below the average rates. GAO concluded that this analysis was neither inadequate nor unreasonable, and therefore it denied Heartland's challenge of the agency's price realism analysis.

Additionally, GAO rejected Heartland's argument that the agency was required to compare the awardee's rates to Heartland's incumbent rates because the awardee had proposed to retain "100% of the incumbent staff." GAO took issue with Heartland's characterization of the awardee's proposal, which said that it would retain all "qualified incumbents," and stated that there is no general requirement that an agency price realism analysis must include a comparison to the incumbent's prices.

Best-Value Determination

The GAO also denied Heartland's protest of the agency's best-value determination. The solicitation provided that the technical/management and past performance evaluation factors were significantly more important than price, and Heartland took issue with the agency's determination that Heartland's better non-price evaluations did not justify the $19 million price difference between it and the awardee. Heartland's scores on both technical/management and past performance were certainly better than the awardee's: Heartland received a technical/management score of "Excellent" to the awardee's "Very Good" and a past performance score of "Substantial" to the awardee's "Satisfactory." Heartland argued that RFP provided that price would "only be given a major consideration" if the vendors' quotations were considered equal under the non-price factors, and that its price should have been "of minor importance" since Heartland's quotation was rated higher than Ace's with regard to past performance and technical/management approach.

But GAO was not convinced. It found that the agency's source selection decision document demonstrated that the agency undertook an extensive comparison of the evaluated strengths and weaknesses in both vendors' quotations. Specifically, with regard to the technical/management evaluation factor, the agency performed a subfactor-by-subfactor comparison that recognized that Heartland's proposal was superior, but it assessed the relative value of the superiority of each subfactor and concluded that, overall, Heartland's advantages were not significant. For the past performance analysis, the agency found that Heartland's higher ratings were due in large part to its incumbent status, and, given that the awardee had a positive past performance rating, the value of Heartland's incumbency was not large. Finally, the agency determined that the $19 million price difference was "beyond substantially more" than the awardee's price, and it concluded that the price premium outweighed the "minimal gains" provided by Heartland's higher ratings.

From this, GAO concluded that the agency's analysis was not unreasonable; it had specifically recognized the evaluated superiority of Heartland's quotation under the non-price factors, made assessments regarding the relative value of that superiority; considered the magnitude of Heartland's price premium, and concluded that the benefits offered by Heartland's higher-rated quotation were not worth Heartland's substantially higher price.

Heartland is a reminder that, even where a solicitation emphasizes the importance of technical factors and past performance over price, agencies unwilling to pay a price premium for superior proposals can justify the decision to GAO's satisfaction with sufficient analysis. It also shows the benefit for agencies in looking "behind the ratings" to the actual strengths and weaknesses, and it demonstrates the discretion the GAO will afford an agency when it does so.

OCI

  • AEgis Techs. Grp., Inc. v. United States, No. 16-863C (Fed. Cl. Sep. 28, 2016).

AEgis Technologies Group, Inc. v. United States is the latest OCI decision imposing the high burden of proof for establishing an OCI set by the U.S. Court of Appeals for the Federal Circuit in the seminal decision of Turner Construction Co. v. United States, 645 F.3d 1377 (Fed. Cir. 2011). In Turner, the Federal Circuit held that "an OCI must be based on hard facts; a mere inference or suspicion of an actual or apparent conflict is not enough. Turner, 645 F.3d at 1387. In AEgis Technologies, Judge Firestone found that AEgis failed to meet this high bar in alleging that the awardee was ineligible.

AEgis had alleged that the awardee should have been ineligible for the contract award because one of its subcontractors, Booz Allen Hamilton, had biased ground rules, unequal access to information, and impaired objectivity OCIs. With respect to each allegation, however, Judge Firestone found that AEgis had failed to set forth the "hard facts" necessary to establish an OCI.

With respect to its biased ground rules allegation, AEgis argued that Booz Allen provided systems engineering and technical direction under a support services contract that resulted in the development of requirements for the subject contract. To substantiate its claim, AEgis relied principally on a description of Booz Allen's past performance in the awardee's proposal and a declaration by an AEgis Vice President. The Government, however, responded that despite the contents of the awardee's proposal and the provided declaration, Booz Allen did not, in fact, provide systems engineering or technical direction for the support services contract. The Court agreed, finding that there was no evidence in the record that Booz Allen created specifications, developed testing requirements, or supervised the design of the subject procurement.

AEgis similarly relied on its Vice President's declaration for its unequal access to information OCI allegation. The declaration stated that Booz Allen had access to cost/price data and models, as well as AEgis's proprietary information and processes, due to Booz Allen's work under the support services contract. The Government responded that the agency had released information regarding contract requirements to all interested parties, and that Booz Allen did not have access to AEgis's proprietary information. The Court found that the agency's release of information was acceptable to mitigate an unequal access to information OCI, and that AEgis had failed to show that Booz Allen had access to proprietary information or had a competitive advantage in the procurement beyond that ordinarily attributable to incumbency.

Finally, relying once again on its Vice President's declaration, AEgis asserted that Booz Allen had an impaired objectivity OCI. As with the AEgis's other OCI allegations, however, the Court found that AEgis had failed to establish the hard facts necessary to prevail. The Court held that AEgis failed to show that Booz Allen drafted requirements or determined changes to the subject contract to steer the contract to the awardee, or that Booz Allen unduly criticized AEgis's performance of the incumbent contract to make it easier for the awardee to get the contract.

The key takeaway from AEgis Technologies is that OCI allegations, whether raised before GAO or COFC, must be based on record-based evidence. AEgis principally relied on a declaration from its Vice President to advance its OCI allegations, but the Court found that declaration unpersuasive given the record-based evidence to the contrary. In the aftermath of Turner Construction, contractors must recognize that "hard facts" means record-based facts.

Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Morrison & Foerster LLP. All rights reserved

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Sandeep N. Nandivada
 
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