Can Contractors Ask the Government for More Price Information?

With budget cuts making price more important in winning government contracts, contractors should know that the government is allowed to provide more helpful information during price discussions than the standard “sharpen your pencil” refrain.  FAR 15.306 (e)(3) lets the government “inform an offeror that its price is considered by the Government to be too high, or too low, and reveal the results of the analysis supporting that conclusion. It is also permissible, at the Government's discretion, to indicate to all offerors the cost or price that the Government's price analysis, market research, and other reviews have identified as reasonable.”

Unfortunately, the government rarely uses this broad authority. Contracting officers can be reluctant to get more specific on price, and prefer to err on the side of caution when it comes to price discussions. In the end, they disclose only the bare minimum that they have to disclose.  This safe approach, however, is not always the right one. In one GAO decision, an agency told an offeror simply that its price was “overstated” when its price was 8 times the government estimate. GAO said that the agency had to tell the offeror much more than “overstated.”  Creative Information Technology, Inc.  B- 293073.10, Mar. 16, 2005.

If the government is stingy with price information, it might help to remind the agency that the FAR lets the government be more helpful in discussing price with government contractors.  In one case, the GAO had no problem with an agency telling offerors during the first round of discussions about those line item prices which varied from the government estimates by more than 20%, nor with telling offerors during the second round all of the agency's estimates. Kaneohe General Services, Inc., B- 293097.2, Feb. 2, 2004.

More recently, the GAO concluded that there was nothing wrong with the VA telling each offeror in the competitive range where its price stood in comparison to the average of all current offers in the competitive range. Walsh Investors, LLC, B-407717, B-407717.2, January 28, 2013.  These decisions show that an agency can often give government contractors information more helpful pricing than to just “sharpen your pencil.”  Because there is no harm in asking the government for more information, contractors should ask.

Terry O’Connor is the Director of  Government Contracts with Berenzweig Leonard, LLP, a DC region business law firm. Terry can be reached at toconnor@BerenzweigLaw.com.

What Are Common Bid Errors to Avoid?

The procurement process is fraught with many procedures and regulations, and therefore submitting a flawless solicitation is a difficult task.  But there are some errors committed with enough frequency that contractors can readily learn from the mistakes of others. Recent protest decisions of the Government Accountability Office (GAO) show good examples of common errors that government contractors make in submitting proposals for a contract or task order.  Here are five common proposal errors for all contractors to avoid in the proposal process.  

1. When in doubt, treat the words ‘may’ or ‘should’ as ‘shall.’  

Last year, we reported a decision in which GAO treated the word “should” as “shall”, concluding that a solicitation telling offerors they “should” submit resumes of some personnel really meant that offerors “shall” submit their resumes. According to GAO, “terms like ‘may’ and ‘should’ are capable of expressing a mandate." KPMG LLP, B-406409; B-406409.2; B-406409.3; B-406409.4, May 12, 2012.  In another case, “may” turned out to be “expressing a mandate” in a recent GAO opinion. The RFP warned offerors that the agency “may evaluate the past performance of subcontractors that would perform major or critical aspects of the requirement.” An offeror failed to provide past performance information for all subcontractors that would be performing the work. GAO concluded that the agency properly downgraded the offeror for failing to do so, even though the information was not required.  According to GAO, offerors were on notice that it would be wise for them to submit past performance information on major subcontractors. Paragon Technology Group Inc., B-407331, December 18, 2012.

2. Confirm that the government has actually received your offer. 

It may sound elementary, but make sure the proposal you send to the agency is actually received.  A vendor carries the burden of proving that the government received its quote and any requested vendor verification of that quote.  In one noteworthy case, the vendor claimed it had sent its quote and follow-up verification to the agency by email prior to the deadline.  After the agency awarded the work to another contractor, the vendor checked with the agency to see why its quote had not been selected.  After doing an email trace, the agency informed the contractor that it had not received the vendor’s verification.  The company’s protest to GAO included an email chain with a message, allegedly sent before the agency deadline to the relevant contract specialist, containing the vendor’s necessary verification. In denying the company’s protest, GAO stated that “although the protester has presented evidence that it timely sent an email verifying information about its quote, there’s no question that the agency did not receive B&S’s email verification prior to the contract specialist’s deadline.”  In addition, “the record does not show that the offeror took steps to confirm that its email message was received.” GAO cited a number of prior decisions agreeing with an agency and rejecting a quote where vendors could not prove that the agency timely received it.  B&S Transport Inc., B-407589, December 27, 2012.

3. Put the right information in the right section of the proposal. 

It is a bad idea to make the agency evaluators hunt for required information. They can hunt for it if they want to, but they need not do so.  For example, an agency properly did not assign a “strength” to a company’s home office management and support portion of its proposal when that information did not appear in the relevant section of its proposal, “but instead was presented in an executive summary of its past performance and in its discussion of its approach to design requirements.” Clark Construction Group, LLC, B-407334.2; B-407334.3, December 18, 2012.   One caveat here is that, although an agency may ignore information in an unrelated section, the agency “does not have license to ignore information in a proposal that is readily apparent.”  For instance, an agency’s evaluation of corporate experience required offerors to provide a range of information, including “contracting method.”  One vendor described its project experience in both his proposal narrative and in proposal exhibits. Although the proposal did not address the contracting method as required, the information was included on the general contractor reference form in its proposal exhibits. GAO concluded that the agency should have considered that information.  J.R.Conkey and Assoc., B-406024.4, Aug. 22, 2012.

4. Don’t be ambiguous that you intend to comply with the solicitation requirements.

Some contractors’ proposals will be less than clear regarding their intent to adhere to the solicitation requirements, thus jeopardizing any chance of getting the award.  The FAR mandates that a proposal that “contains an ambiguity as to whether the offeror will comply with a material requirement of the solicitation renders the proposal or quotation unacceptable."  In one recent case, an agency required an offeror to provide an item that would comply with "ISO 17357." One offeror promised to comply with "ISO 17357:2000 (E) /eqvt. ASTM standard," which on its face signaled that the contractor may choose to comply with an equivalent standard as opposed to the stated requirement.  GAO concluded that this "qualified designation created ambiguity regarding the offeror's intentions and introduced uncertainty regarding whether the offeror intended to perform in accordance with the terms of the RFP." In other words, was the offeror promising to comply with ISO 17357:2002 (E) or in accordance "with what it viewed to be an equivalent ASTM standard?"  GAO agreed with the agency that the proposal was ambiguous and, therefore, unacceptable.  Kirti International, B-407612, January 16, 2013.

5. Promptly correct any bid deficiencies that the agency points out.

Contractors should consider it a gift when an agency points out a proposal error. In one case, an agency told an offeror that its technical approach did not include a necessary component. Rather than revise the proposal, the offeror responded along the lines that it could do the work.  After being told that its proposal remained deficient on this technical issue and provided an opportunity to correct it, the offeror again failed to address it in its final revision.  GAO agreed with the agency that the proposal was deficient: “although the offeror insists that it will adequately perform the required work, it failed to adequately explain this approach in its proposal as required by the RFP.” Tidewater, Inc., B-407483: B-407483.2, Jan. 8, 2013.

Terry O’Connor is the Director of  Government Contracts with Berenzweig Leonard, LLP a DC region business law firm. Terry can be reached at Toconnor@BerenzweigLaw.com.

Bidders Must Not Delay Protesting Solicitation Amendments

Filing a protest before the agency even awards a contract can be a very difficult business decision because it seems like you are suing your potential customer to get the order. But sometimes that difficult decision must be made and, as we will see, might not be a bad business decision at all.

Recently, the U.S. Court of Appeals for the Federal Circuit (CAFC) set a firm timeliness rule for pre-award protests: If the agency amends the solicitation and in the process hurts a bidder’s chances of winning the contract, a bidder cannot wait until after losing the contract to protest that amendment. Any protest must be filed right away, before award. Failing to do so waives a bidder’s right to protest the amendment after award.

DoD issued a solicitation that initially made contract award dependent on the evaluation of the bidder’s proposals for a “basic contract” and 2 specific task orders. Only those offerors providing the best value for the basic contract would be considered for award of the task orders. Later, the agency issued Amendment 5 stating that only the basic contract would be awarded, that the task orders would be converted to sample task orders, that the proposals for task orders would be used for evaluating the pricing factor for the basic contract, and that no proposal revisions would be accepted.

After award, an unsuccessful bidder protested, arguing that the amendment was improper because it prohibited changes to proposals.

The appeals court concluded that the bidder should have protested Amendment 5 before award. By not doing so, the bidder had waived its right to protest after award. The court’s explanation was based on keeping the solicitation process fair: “a contractor with knowledge of the solicitation defect could choose to stay silent… If his proposal loses to another bidder, the contractor could then come forward with the defect to restart the bidding process, perhaps with increased knowledge of its competitors.”

As mentioned above, not all pre-award protests are bad business decisions. For example, a protest alerting the Contracting Officer to ambiguities in the solicitation might be welcomed and not counter-productive. Berenzweig Leonard for years has helped its government contract clients decide whether to protest pre-award and, if so, whether to protest to the agency, the Government Accountability Office, or the U.S. Court of Federal Claims. Although a pre-award protest can be a difficult business decision, it can also be the right one.

Terry O’Connor is the Director of  Government Contracts with Berenzweig Leonard, LLP a DC region business law firm. Terry can be reached at Toconnor@BerenzweigLaw.com.

Equal Justice Under Law?

“Equal Justice Under Law.” Those words are engraved above the entrance to the United States Supreme Court building. They express an aspirational goal rarely achieved. The dispensing of “justice” is, more often than not, unequal. It is no secret that in litigation rich people have a great advantage over the less affluent. Or to put it in contemporary terms, the one percent has a big advantage over the ninety-nine percent. Just to illustrate the point, I recall a story that a friend told me long ago. One day he was in the federal courthouse at Foley Square in Manhattan. It was at a time when the paparazzi were pestering Jackie Kennedy Onassis, and she was in the midst of litigation against one of the paparazzi. My friend peeked into the courtroom, and there was Jackie Onassis sitting at counsel table with no less than six lawyers from a large, blue-stocking New York law firm. Can most people afford that style of representation? Obviously not! When it comes to legal disputes, big, well-heeled litigants can not only grind down less well-financed adversaries, but they are also far better able to defend against actions by the government, such as debarment. Justice is not exactly equal.

The lack of equal justice certainly applies to the debarment system. Big contractors have a huge advantage. The government rarely debars big contractors, or even proposes them for debarment; and that is not just because big contractors are clean as a whistle. The disparity results mainly from the sheer size and “market power” of big contractors. Big contractors employ thousands of people; they have operations in multiple states; they perform many contracts; they have numerous subcontracts; they have plenty of lawyers and lobbyists on retainer; they have political clout. Debarring a large contractor would throw many people out of work, adversely affect important government programs, and create headaches for elected officials and political appointees. So, it just isn't done. Several years ago, I heard a government official make an astonishing statement, astonishing for its candor and truth. He said: “If a small contractor does something wrong, we will debar the contractor; if a big contractor does something wrong, we will work it out.” There it is! Big contractors can rest easy, but small contractors, watch out. More often than not, debarment is lethal for small contractors. If debarred, or even proposed for debarment, a contractor cannot be awarded new business – no new contracts, task orders, options, etc. – and that includes subcontracts. (FAR 9.405) Debarment cuts off a contractor’s oxygen supply, and suffocation follows. The period of debarment is typically three years, and three years without new government business will end the life of most small government contractors.

The author, John W. Polk, is senior counsel to the law firm of Berenzweig Leonard LLP, a law firm located in the Washington D.C. Metropolitan Area. John can be reach at jpolk@berenzweiglaw.com.

Government Contractor’s Non-Compete Deemed Enforceable

The Virginia Supreme Court recently sent a strong message in favor of enforcing narrowly-drawn non-compete clauses in subcontracts between government primes and subs.

Preferred Systems Solutions, Inc. (PSS) was on a team led by Accenture that won a Blanket Purchase Agreement to support a Defense Logistics Agency (DLA) program called the Business Systems Modernization (BSM) Program. PSS had a subcontract with GP Consulting Services (GP) for the services of a GP programmer.  The subcontract had a non-compete clause in it that said GP “will not, either directly or indirectly, enter into a contract as a subcontractor for Accenture LLP and/or DLA to provide the same or similar support that PSS is providing to Accenture and/or DLA and in support of the DLA Business Systems Modernization (BSM) program."

In 2007, the BSM program became operational so the agency then needed only periodic maintenance of the program.  Money for that work came out of a new source: the Enterprise Business Systems (EBS) program, a program that also paid for projects that were not part of the BSM program.

In 2010, while doing work on the EBS for PSS, GP properly terminated the subcontract with PSS, but three days later began working for Accenture on EBS.  In the words of the lower court, the GP employee “three days after leaving PSS went to work for Accenture on the same DLA project, at the same desk, at the same computer, and on the same problems."

In a case that went all the way to the Virginia Supreme Court, PSS successfully enforced the non-compete agreement. Three rules can be drawn from the decision.

Be careful in drafting a non-compete clause because all the words will be given meaning. The non-compete clause had two phrases in it: GP could not be a sub to Accenture (1) for the same support PSS was providing Accenture and (2) in support of the BSM program. GP unsuccessfully argued that the clause was unenforceable because it was ambiguous. According to GP, the phrase “in support of the BSM program” could be read two ways: as a critical phrase narrowing the scope of the non-compete clause or as an extraneous phrase simply providing an additional description of the PSS work.

The court concluded that there was no ambiguity that would make the clause unenforceable: “although the language of the non-compete clause is not a model of artful construction, the ordinary meaning of the conjunctive ‘and’ suggests an additional requirement rather than a descriptive phrase. Moreover, if the phrase in question was merely descriptive, it would have been needlessly redundant."

Whether a non-compete clause is enforceable is based on the “function, geographical scope and duration” of the restriction in the non-compete clause.  The court then concluded that the non-compete clause was enforceable based on the three-prong test considering the clause’s restriction on “function, geographic scope, and duration.”

Here, the “function” of the restriction was “narrowly drawn to work in support of a particular program run under the auspices of the particular government agency, limited to the same or similar type of information technology support offered by PSS on the BSM program." There were 400 – 500 jobs “in the Washington DC area alone that were not proscribed by this agreement.”

Also, the narrowly drawn “function" of the clause eliminated any concern about the “geographical scope” of the restriction because it “is so narrowly drawn to this particular project and a handful of companies in direct competition with PSS."

In addition, the 12 month “duration” of the non-compete clause was narrow.

Using the word “indirectly” need not invalidate a non-compete clause. Although words like "indirectly" could make the clause unenforceable as overly broad, that was not the case here: "This wording merely bars circumvention of the otherwise valid restrictive covenant by engaging in the series of subcontracts so as not to directly enter into a contract with the proscribed competitors. In other words, GP cannot do indirectly what it is directly prohibited from doing. The clause, in sum, does not prohibit indirect competition but rather prohibits GP from entering into a contract as a subcontractor or sub-subcontractor with Accenture, DLA or any other competing business to provide the same or similar support that PSS is providing in support of the BSM program."

Terry O’Connor is the Director of Government Contracts with Berenzweig Leonard, LLP, a DC region business law firm that routinely drafts and litigates non-compete agreements in the Washington, DC area. He can be reached at TOConnor@BerenzweigLaw.com.      

Termination for Convenience Can Be Tricky

A recent Washington Post article pointed out that the government is increasingly terminating government contracts for convenience in order to stockpile agency funds in anticipation of severe budget cuts in FY 2013. According to the Post, terminations for convenience have doubled in just over several years.
Unfortunately for government contractors, getting fairly paid for terminations for convenience can be a significant problem because the specific termination for convenience clause in their contract could be one of almost a dozen different clauses available to the government. Not only are the compensation terms different-so are the paperwork requirements.  For example, the commercial item termination for convenience clause limits the government’s right to audit the contractor’s records.

The government may not use the right clause. Berenzweig Leonard has recently had to inform a Contracting Officer that the government had invoked a termination for convenience clause that was not even in the client’s contract. The clause the government wanted to use gave the government more rights than the correct clause.

Berenzweig Leonard can quickly review and advise government contractors on whether the government is doing a termination for convenience properly. And our advice would be at no cost to the client because legal fees associated with a termination for convenience are generally fully reimbursable as termination settlement expenses.

Terry O’Connor is the Director of  Government Contracts with Berenzweig Leonard, LLP a DC region business law firm. He can be reached at Toconnor@BerenzweigLaw.com.

Small Business Subcontractors: Accelerated Payments

The Office of Management and Budget has told federal agencies that they should accelerate their payments to prime contractors in order for the primes to pay their subcontractors sooner.  Instead of paying primes 23-30 days after they submit an invoice as is typical, agencies should now pay the prime’s invoices 15 days after submission and the primes are “required …to the maximum extent practicable” to make accelerated payments to their subcontractors.

The new policy is being carried out by a new clause in the Federal Acquisition Regulation (FAR), FAR Sec. 52.232-99, Providing Accelerated Payment to Small Business Subcontractors (DEVIATION).

Although technically this new policy can apply only to government solicitations issued on or after August 16, 2012, agencies can insert this new clause into existing contracts “with appropriate consideration.”
Berenzweig Leonard’s government contract experience is something prime contractors as well as small business subcontractors can count on to help them take advantage of this new accelerated payment policy.

Terrence M. O’Connor is the Director of Government Contracts at Berenzweig Leonard, LLP, a business law firm in the Washington, DC area. He can be reached at TOConnor@BerenzweigLaw.com.