RECENT DEVELOPMENTS IN BID PROTESTS

Presented by the American Bar Association Section of Public Contract Law, Government & Public Sector Lawyers Division and Center for Professional Development and The Coalition for Government Procurement

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The materials contained herein represent the opinions of the authors and editors and should not be construed to be the action of the American Bar Association Section of Public Contract Law, Government & Public Sector Lawyers Division or Center for Professional Development unless adopted pursuant to the bylaws of the Association. Nothing contained in this book is to be considered as the rendering of legal advice for specific cases, and readers are responsible for obtaining such advice from their own legal counsel. This book and any forms and agreements herein are intended for educational and informational purposes only. © 2016 American Bar Association. All rights reserved. This publication accompanies the audio program entitled “Recent Developments in Bid Protests” broadcast on July 21, 2016 (event code: CE1607DBP).

Recent Developments in Bid Protests Thursday, July 21, 2016| 12:00 PM Eastern

Sponsored by the Section of Public Contract Law, Government & Public Sector Lawyers Division, The Coalition for Government Procurement, and the ABA Center for Professional Development

www.americanbar.org | www.abacle.org

Recent Developments in Bid Protests Panelists: Judge Marian Blank Horn, U.S. Court of Federal Claims Nora Adkins, Government Accountability Office Alexis Bernstein, Air Force Legal Operations Agency Elizabeth Ferrell, Bradley Arant Boult Cummings, LLP Moderator: Sharon Larkin, Steptoe & Johnson, LLP July 21, 2016

Topics Covered I.

Updates from the Forums: GAO and the Court of Federal Claims

II. Improvements to the Protest Process in both Forums III. Areas of Distinction between GAO and the Court of Federal Claims A. Standing of IDIQ Awardee B. Standing vs. Prejudice C. Late Proposals D. Breadth of Corrective Action IV. Primer on Cost Realism, Price Realism, and Reasonableness at GAO and the Court of Federal Claims

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Updates from the Forums: GAO and COFC  Updates from GAO (Nora Adkins) – GAO Annual Report to Congress (5 most common sustain bases) – Electronic Protest Docketing System (EPDS)

– Update to Regulations – NDAA provisions

 Updates from the Court of Federal Claims (Judge Marian Horn) – ADR Appendix H Revisions – Bid Protest Statistics – New Acting Clerk of Court, Lisa Reyes 4

Improvements to the Protest Process Thoughts from the Forums:  GAO – Initial protest filing – Responding to a protest – EPDS

 COFC – Early discussions among the parties – Notification by defendant to potential intervenors – Contents of initial protest filing, i.e. GAO record and/or opinion – Prompt adjudication of injunctions 5

Improvements to the Protest Process Thoughts from the Practitioners:  Agency debriefing  Use of outcome prediction  Redactions  Sealing of complaints  Delineation of supplemental protests grounds vs. comments  Length of filings  DOD Source Selection Procedures

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Areas of Distinction:

Standing of IDIQ Awardee at GAO and COFC GAO: National Air Cargo Group, Inc., B-411830.2, Mar. 9, 2016, 2016 CPD ¶ 85. COFC: National Air Cargo Group, Inc. v. United States, 126 Fed. Cl. 281 (2016). Facts of Air Cargo decisions:  Department of Defense TRANSCOM procurement for international commercial transportation services.  RFP anticipated award of approximately four IDIQ contracts, each for a one-year base period with two one-year options. Each awardee was guaranteed a minimum quantity of order value at no less than $2,500.  Agency initially made five contract awards, including to National Air Cargo, and thereafter made a sixth award to United Air.  National Air Cargo protested to GAO and then COFC, asserting that the sixth award to United Air was improper on the basis that the RFP anticipated approximately four contracts and the agency failed to follow the RFP’s reopening procedures.  GAO dismissed the case for lack of interested party status. COFC held that protester had standing (after which agency took corrective action).

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Areas of Distinction:

Standing of IDIQ Awardee at GAO and COFC Interested Party Definition (CICA): Actual or prospective offeror with direct economic interest in the award GAO Holding:  GAO dismissed because the protester was not an interested party to protest sixth award, where protester did not credibly allege “that its contract would be reduced, increased, or otherwise affected by the agency’s decision to award a sixth contract.” COFC Holding:  Court found interested party status existed, focusing on fact that government illegally increased the task order pool. Larger pool meant less chance for future task orders. Takeaway:  At GAO, awardees under multiple-award contracts lack standing to protest award to another offeror, but standing likely exits at COFC. Holding limited by COFC?  GAO relied on COFC decision in Automation Technologies, Inc. v. United States, 73 Fed. Cl. 617 (2016), but COFC in National Air Cargo distinguished on the grounds that Automation Technologies solicitation contemplated a single award and protester did not argue that government illegally tried to increase the number of awards.

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Areas of Distinction: Standing vs. Prejudice

At GAO, protester must be next in line or have substantial chance for award to establish interested party status or prejudice.  Oasis Systems, LLC; Quantech Services, Inc., B-408227.10 et al,, Apr. 28, 2016, 2016 CPD ¶ 124 (protester not prejudiced by evaluation error since it “would not be next in line for award”).

 Booz Allen Hamilton Engineering Services, LLC, B-411065, May 1, 2015, 2015 CPD ¶ 138 (protester not an interested party where would not be next in line for award even if its protest were sustained).

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Areas of Distinction: Standing vs. Prejudice

At COFC, “next in line” not necessary to establish interested party status.  Preferred Sys. Sols., Inc. v. United States, 110 Fed. Cl. 48 (2013) (protester had standing to challenge the award, even when it was not “next in line for award” but where its chance for award “was not insubstantial”)  “Substantial chance of award” satisfied “where, but for the government's alleged error, the protestor would have been ‘within the zone of active consideration’” i.e. “the protestor's chance of securing the award must not have been insubstantial.” What’s the distinction? “Next in line” at GAO vs. “zone of active consideration” at COFC

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Areas of Distinction:

Late Proposals at GAO and COFC GAO: Federal Acquisition Services Team, LLC, B-410466, Dec. 31, 2014, 2015 CPD ¶ 20. COFC: Federal Acquisition Services Team, LLC v. United States, 124 Fed. Cl. 690 (2016). Facts of the “FAST” Decisions: 

FAST protested the U.S. Special Operations Command’s (SOCOM) rejection of its proposal as untimely after FAST attempted to timely submit and email its proposal to the email address designated in the Solicitation.

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FAST emailed its proposal more than 4 ½ hours before the deadline but it was “bounced back” from the agency’s server for exceeding the size limitation and preventing its delivery to the destination mailbox..

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Solicitation limited the maximum size of “any files coming through on any one email” to 20 megabytes (MB). Dispute existed as to size of FAST’s proposal.

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Email to SOCOM was redirected to the Defense Information Security Agency (DISA) for security screening. Upon completion of screening, the DISA server attempted to forward the e-mail to the SOCOM, but delivery failed.

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A few minutes after transmitting its proposal, FAST received a bounce back notice that delivery failed because “size limit exceeded.”

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Areas of Distinction:

Late Proposals at GAO and COFC GAO: Federal Acquisition Services Team, LLC, B-410466, Dec. 31, 2014, 2015 CPD ¶ 20. Holding:  GAO denied FAST’s challenge to SOCOM’s failure to consider its proposal on the basis that it was late. Rationale:  It is the offeror’s responsibility to deliver its proposal to the proper place at the proper time. Proposal was never received by SOCOM.  FAST took no action after receiving notice that proposal was undeliverable due to size.  GAO did not address the Government Control Exception or the actual size of FAST’s proposal email, but rather observed that FAST could have divided and resent its proposal. Takeaway: Late is late at GAO.

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Areas of Distinction:

Late Proposals at GAO and COFC COFC: Federal Acquisition Services Team, LLC v. United States, 124 Fed.Cl. 690 (2016) Holding:  Court of Federal Claims sustained FAST’s challenge to agency’s rejection of its proposal. Rationale:  FAST’s proposal was within the acceptable 20MB size limit when submitted  FAST’s proposal was in the government’s control when it reached DISA’s server, and therefore timely received under the Government Control Exception.  GAO protest was resolved on “less than a full record,” and after considering more information, Court found several offerors had issues with emails below the size limit successfully reaching SOCOM’s server. Takeaway: Late is late at COFC, EXCEPT . . .

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Areas of Distinction:

Breadth of Corrective Action at GAO  American Systems Corp., B-412501.2; B-412501.3, Mar. 18, 2016, 2016 CPD ¶ 91 (GAO denied protest challenging agency’s voluntary corrective action as overbroad).  Gaver Technologies, Inc., B-409535.3, Apr. 2, 2015, 2015 CPD ¶ 115 (GAO denied protest challenging broad corrective action taken in response to GAO decision identifying limited evaluation errors).  Trandes Corp., B-411742.4, Feb. 22, 2016, 2016 ¶ 61 (GAO denied protest where agency took narrow corrective action that limited the scope of discussions).  But see Security Consultants Group, Inc., B-293344.2, Mar. 19, 2004, 2004 CPD ¶ 53 (GAO sustained protest where reopening discussions to address a non-prejudicial defect provided no benefit to procurement system to justify harm to protester)

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Areas of Distinction:

Breadth of Corrective Action at GAO GAO’s View Of Corrective Action:  Agencies have broad discretion to take corrective action to ensure fair and impartial competition. Details of implementing the corrective action are within the sound discretion and judgment of the agency. GAO generally “will not object to any particular corrective action, so long as it is appropriate to remedy the concern that caused the agency to take corrective action.” Takeaway:  GAO will rarely disturb corrective action, whether voluntary or in response to GAO decision on merits.

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Areas of Distinction:

Breadth of Corrective Action at COFC  WHR Grp., Inc. v. United States, 115 Fed. Cl. 386 (2014) (COFC concluded that corrective action was not rationally related to any procurement defect and unreasonable under the circumstances).  Sheridan Corp v. United States, 95 Fed. Cl. 141 (2010) (COFC held the corrective action was unreasonable and not rationally related to any identifiable defect in the procurement and permanently enjoined the agency corrective action.  But see Sierra Nevada Corp. v. United States, 107 Fed. Cl. 735 (2012) (COFC found corrective action to be reasonable under the circumstances, recognizing broad agency discretion).

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Areas of Distinction:

Breadth of Corrective Action at COFC COFC’s View Of Corrective Action:  Court recognizes that agencies have discretion in taking corrective action. However, court looks to whether agency's corrective action decision was “reasonable under the circumstances.” Evidence of reasonableness can be the relatedness of the corrective action to the procurement defect. Takeaway:  Court tends to look more carefully at corrective action than does GAO.

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Cost and Price Reasonableness v. Realism  Government must consider price or cost in every evaluation.  The proposal analysis techniques used depend on who bears the risk of performance (FAR 15.404-1).  Understanding the terms of art: – Price Reasonableness (FAR 15.404-1(b)(2)) – Cost Reasonableness (FAR 15.404-1(c)(2)) – Price Realism (FAR 15.404-1(d)(3)) – Cost Realism (FAR 15.404-1(d)) – Unbalanced Pricing (FAR 15.404-1(g))

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Cost and Price Reasonableness v. Realism Price or Cost Reasonableness  Whether price or cost is too high (not too low)  Fair market price: the price a prudent business person would pay for an item or service under competitive market conditions, given reasonable knowledge of the marketplace.  Use price or cost analysis, as appropriate  Burden is on the contractor to establish that price or cost is reasonable

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Cost and Price Reasonableness v. Realism Price Realism  Whether low price evidences lack of understanding or technical risk  No price adjustment in evaluation  Fixed price contracts only  Not required unless solicitation states it is required

– Exception: where a solicitation states low price may form the basis for rejecting a proposal OR where a solicitation states that the agency will review price to determine whether it reflects a lack of technical understanding and also states that proposal may be rejected on the basis of low price.  No risk to the government; contractors get to “low ball” their bids and make business decisions to take a loss on the work 20

Cost and Price Reasonableness v. Realism Cost Realism  The process of independently reviewing and evaluating specific cost elements to determine whether . . . – The proposed costs are realistic for the work to be performed – Reflect a clear understanding of the requirements – And are consistent with an offeror’s unique methods and technical approach

 Must be performed on cost reimbursement contracts  Agency must perform a “most probable cost” analysis and adjust (for evaluation purposes) costs up or down  Why? Because government is bound to pay the contractor its reasonable, allocable, and allowable costs  What information can the agency consider in performing an MPC analysis?

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Cost and Price Reasonableness v. Realism Unbalanced Pricing  Exists when, despite an acceptable total evaluated price, the price of one or more contract line items is significantly over or understated as indicated by the application of price or cost analysis.

 All offers with separately priced line items must be evaluated for unbalanced pricing  If price is unbalanced, contracting officer must consider: – Risks to the government associated with the unbalanced pricing – Whether award to offeror with unbalanced pricing will result in paying unreasonably high prices for contract performance

 Unbalanced price may be a basis for proposal rejection  Tip: Just because realism analysis is not required does not mean agency is not required to assess unbalanced pricing

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Hypothetical RFP calls for fixed price contract, LPTA evaluation. Price factor says agency will evaluate price for reasonableness, realism, and unbalanced pricing.  What evaluation is required?  Any difference if RFP contemplated BV evaluation?  What if RFP was silent as to realism? Would one need to be performed?  What if the RFP was for a cost contract. Would realism analysis need to be performed if RFP was silent? What kind?

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Hypothetical RFP calls for fixed price contract, states that proposals will be evaluated for reasonableness, silent as to realism, asks only for overall base and option pricing.  How is low price considered in the evaluation? RFP calls for fixed price proposal, states proposals will be evaluated for reasonableness, silent as to realism, but asks for lots of price data to support price proposal. RFP also includes numerous references to technical risk in the evaluation factor and states that proposals “may” be eliminated for low price or unbalanced pricing.  What price or cost evaluation is required?

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Hypothetical RFP contemplates award of fixed price and cost CLINs for anticipated IDIQ contract award. Solicitation identifies labor categories and estimated hours to be used in the evaluation and seeks only labor rate components (direct and indirect). Solicitation expressly states that no technical approach is being sought. Evaluation criteria are experience in certain subject matter areas and cost/price.  Is cost realism analysis required and, if so, is agency required to consider technical approach? How does the agency perform a realism analysis? – See Booz Allen Hamilton, Inc., B-412744, B-412744.2, May 26, 2016, 2016 CPD ¶ __.

 Could this solicitation be challenged as a pre-award protest? – Stay tuned for Encore III protest decisions from GAO

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Wrap Up  Questions from the audience  Final comments from the panelists

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Wrap Up

Thank you for attending today’s webinar!

Special thank you to Raquel Parker, Steptoe & Johnson, LLP, for her assistance in preparing the presentation materials

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