Federal Construction Contracting Blog

The American Recovery and Reinvestment Act of 2009: What it Means for Federal Construction Contractors

MPayne@phslegal.com (Michael Payne) — Sat, 16 May 2009 09:33:19 -0500

Co-authored by Michael H. Payne and Craig A. Schroeder

On February 17, 2009, the President signed Public Law 111-5, the American Recovery and Reinvestment Act of 2009 (also known as “ARRA,” the “Recovery Act,” and the “Stimulus Act”), including a number of provisions to be implemented in Federal Government contracts. The Recovery Act’s purposes are to stimulate the economy and to create and retain jobs. The Act gives preference to activities that can be started and completed expeditiously, including a goal of using at least 50 percent of the funds made available by it for activities that can be initiated not later than June 17, 2009.

An Interim Rule issued on March 31, 2009, implements section 1512, which is also known as the ``Jobs Accountability Act.'' Subsection (c) of section 1512 requires contractors that receive awards (or modifications to existing awards) funded, in whole or in part, by the Recovery Act to report quarterly on the use of the funds. The comment period on the interim rule expires on June 1, 2009. In addition, a new section was added to the FAR, subpart 4.15, “American Recovery and Reinvestment Act – Reporting Requirements,” and a new clause was added to implement the reporting requirements, FAR 52.204-11. Contracting Officers are now required to include the new clause in solicitations and contracts funded in whole or in part with Recovery Act funds, except classified solicitations and contracts. Commercial item contracts and Commercially Available Off-The-Shelf (COTS) item contracts are covered, as well as actions under the simplified acquisition threshold.

Effective March 31, 2009, five (5) interim Federal Acquisition Regulation (FAR) rules went into effect that implement several requirements of the Recovery Act. See Federal Acquisition Circular (FAC) 2005-32, published at 74 Fed. Reg. 14,639 (Mar. 31, 2009). These new rules only apply to federal procurement contracts funded with stimulus money. Their goal is increased transparency and accountability in the spending of Stimulus Act funds. The new rules include:

1. Reporting Requirements for Recipients of Recovery Funds (See 74 Federal Register 14639);

2. Publicizing Contract Actions (See 74 Federal Register 14636);

3. GAO and IG Access to Company Employees (See 74 Federal Register 14646);

4. Whistleblower Protections (See 74 Federal Register 14633); and

5. Buy American Requirements for Construction Materials (See 74 Federal Register 14623).

Each rule is discussed, in turn, below.

1. Reporting Requirements for Recipients of Recovery Funds

This is the most onerous of the new requirements and contractors must now file quarterly reports documenting their use of stimulus funds. See FAR Case 2009-009, Interim Rule, American Recovery and Reinvestment Act of 2009 (the Recovery Act)— Reporting Requirements, 74 Fed. Reg. 14,639 (Mar. 31, 2009). Information on the Recovery Act may be found on the Recovery Act Web site (www.recovery.gov). A new website is under construction, www.federalreporting.gov, that will facilitate online reporting. The site is expected to be operational before July 10, 2009.

The new mandated contract clause, FAR 52.204-11, which must be included in all contracts receiving stimulus funds, requires the prime contractor, and first tier subcontractors, to report the following information:

(i) Contract and order number;

(ii) Amount of stimulus funds invoiced by the contractor for the reporting period;

(iii) List of significant supplies delivered or services performed;

(iv) Assessment of the contractor’s progress on the contract;

(v) Employment impact of the contract (e.g., an estimate of the number of jobs created and retained);

(vi) The names and compensation of the five most highly compensated officers of the contractor for the calendar year in which the contract is awarded if the contractor receives 80 percent and $25 million or more of its annual gross revenues from federal awards and the public does not have access to the information through periodic reports filed with the Securities and Exchange Commission or the Internal Revenue Service; and

(vii) Detailed information on first-tier subcontracts.

Reporting on invoices submitted prior to June 30, 2009 are due no later than July 10, 2009. After those dates, contractor reports must be submitted no later than the 10th day after the end of each calendar quarter. The new reporting requirements apply to all solicitations and contracts funded in whole or in part with Recovery Act funds, except classified solicitations and contracts. This includes Government-wide Acquisition Contracts (GWACs), multi-agency contracts (MACs), Federal Supply Schedule (FSS) contracts, or agency indefinite-delivery indefinite-quantity (ID/IQ) contracts that will be funded with Recovery Act funds.

2. Publicizing Contract Actions

Contracting Officers are now required to enter data in the Federal Procurement Data System for any contract action funded, even in part, by the Stimulus Act. See FAR Case 2009-010, Interim Rule, American Recovery and Reinvestment Act of 2009 (the Recovery Act) — Publicizing Contract Actions, 74 Fed. Reg. 14,636 (Mar. 31, 2009). They must now also post the following on the FedBizOpps.gov website for any covered contract action:

(i) Identification of action;

(ii) Pre-award notices for orders exceeding $25,000;

(iii) A “clear and unambiguous” description of supplies and services; and

(iv) A rationale for awarding any action that is not fixed-price and awarded through competitive procedures.

3. GAO and IG Access to Company Employees

The interim rules amend the FAR to provide new authorities to the Comptroller General, or Government Accountability Office (GAO), and agency inspector generals (IGs). See FAR Case 2009-011, Interim Rule, American Recovery and Reinvestment Act of 2009 (the Recovery Act) — GAO/IG Access, 74 Fed. Reg. 14,646 (Mar. 31, 2009).

GAO and agency IGs are now authorized to audit prime contracts and subcontracts and interview prime contractor personnel, and GAO is authorized to interview subcontractor personnel for FAR Part 12, 14, and 15 contracts funded by the stimulus plan. The rules, however, do not grant IGs the authority to interview subcontractor employees. See 74 Fed. Reg. 14,647.

Notably, a separate interim rule authorizes the Comptroller General to interview current contractor employees when conducting audits regardless of whether the contract is funded by the stimulus plan. See FAR Case 2008-026, Interim Rule, GAO Access to Contractor Employees, 74 Fed. Reg. 14,649 (Mar. 31, 2009). Commercial-item contracts not funded by the stimulus plan are exempt from the new oversight authority.

4. Whistleblower Protections

Additional protections for state, local, and government contractor whistleblowers are also provided for in a new clause of the interim rules. See FAR Case 2009-012, Interim Rule, American Recovery and Reinvestment Act of 2009 (the Recovery Act) — Whistleblower Protections, 74 Fed. Reg. 14,633 (Mar. 31, 2009). Essentially, the clause prohibits a non-federal employer receiving stimulus funds from discriminating against an employee as a reprisal for making a disclosure of what the employee reasonably believes to be evidence of gross mismanagement, misuse, or waste of stimulus funds or a violation of law related to a contract involving stimulus funds. In addition, contractors receiving stimulus funds must now post a notice of their employees’ rights and remedies relating to whistleblower protections. This whistleblower clause must be included in all stimulus-funded contracts and subcontracts.

5. Buy American Requirements for Construction

Last, but not least, the rules implement the Buy American requirements for federal buildings and public works funded by the stimulus plan. See FAR Case 2009-008, Interim Rule, American Recovery and Reinvestment Act of 2009 (the Recovery Act — Buy American Requirements for Construction Material, 74 Fed. Reg. 14,623 (Mar. 31, 2009). Essentially, it prohibits, with certain exceptions, the use of stimulus funds for the construction, alteration, maintenance, or repair of a public building or work unless all of the iron, steel, and manufactured goods used in the project are produced in the United States.

Conclusion

The new and pre-existing compliance obligations will continue to be of paramount importance due to the increased authority and funding provided to GAO and the agency IGs to perform oversight functions. Undoubtedly, the mix of new reporting obligations and increased oversight is a significant change in the compliance environment faced by government contractors and could expose contractors to new liability risks. These requirements are evolving and further changes are possible when the final rules are issued.

Michael H. Payne is the Chairman of the Federal Contracting Practice Group of the law firm of Cohen Seglias Pallas Greenhall & Furman PC

Department of Defense Expenditure Plan Provides Tremendous Opportunities for Federal Construction Contractors

MPayne@phslegal.com (Michael Payne) — Wed, 25 Mar 2009 04:13:13 -0500

Although many aspects of our economy are suffering, the federal construction market will most certainly be booming. On Friday March 20, 2009, the Department of Defense issued a 191 page Report to Congress detailing how it plans to spend the money it has received as part of the American Recovery and Reinvestment Act of 2009, also known as the “Stimulus Package.” The DoD has “identified specific investments in construction, facility improvements, and energy efficiency projects that will help improve the quality of life for our troops and their families.” Included in the Report is a very detailed breakdown of how the money will be spent. For each project anticipated, the included spreadsheet provides cost, a brief description of the work, and the project location

The Recovery Act includes approximately $7.4 billion in Defense-related appropriations, which accounts for less than 1 percent of the total $787 billion stimulus package. The Department intends to spend this funding with “unprecedented full transparency and accountability.” A website, www.Recovery.gov, is the main vehicle to provide every citizen with the ability to monitor the progress of the recovery. The DoD also has a website which links to Recovery.gov. and it may be found at http://www.defenselink.mil/recovery.

The DoD plans to spend $2.3 billion of the Stimulus funds on military construction and family housing construction projects. The Department also indicates that it will be “pursuing architectural and engineering services greater than $1 million for 5 projects, conducting repair projects greater than $7.5 million for 56 projects, and carrying out 45 Energy Conservation Investment Program projects, respectively.” In addition, the DOD provided a list of 3,300 Facilities Sustainment, Restoration, and Modernization (“FSRM”) projects costing an estimated $3.4 billion, representing 80% of the total FSRM funds appropriated to the DOD. The FSRM projects account for over $3.83 billion of their entire Stimulus spending. The following are the areas where DoD plans to spend money as quickly as possible:

• $4.2 billion in Operation and Maintenance accounts to improve, repair, and modernize DOD facilities, including energy-related improvements
• $1.3 billion in military construction for hospitals
• $240 million in military construction for child development centers
• $100 million in military construction for warrior transition complexes
• $535 million for other military construction projects, such as housing for the troops and their families, energy conservation, and National Guard facilities
• $300 million to develop energy-efficient technologies
• $120 million for the Energy Conservation Investment Program (“ECIP”)
• $555 million for a temporary expansion of the Homeowner’s Assistance Program (“HAP”) benefits for private home sale losses of both DOD military and civilian personnel
• $15 million for DOD Inspector General oversight and audit of Recovery Act execution

The federal agency that is the most heavily involved in construction, the U.S. Army Corps of Engineers (“USACE”), has provided Congress with “informed estimates” of existing capability to perform additional work. The Corps has set forth project selection criteria as projects that will:

(1) Be obligated/executed quickly

(2) Result in high, immediate employment

(3) Have little schedule risk

(4) Be executed by contract or direct hire of temporary labor

(5) Complete either a project phase, a project, or will provide a useful service that does not require additional funding

For the USACE Civil Works Program, the Recovery Act includes $4.6 billion in funding. Of that, $2.1 billion is appropriated for construction and $2.3 billion for Operation and Maintenance (O&M). Appropriations are also included for the Mississippi River and Tributaries account. The Corps estimates that it will award contracts on approximately 400 maintenance projects with O&M funding by the end of April with contract values ranging from $250,000 to $10 million and construction durations of 6 months to 2 years. The Corps also estimates the award of approximately 300 construction contracts ranging in value from $1 million to $30 million by the end of April with construction durations ranging from 6 months to 3-1/2 years.

These projects will provide tremendous opportunities for federal construction contractors. It remains to be seen whether the government has enough procurement people to issue so many solicitations in such a short time and whether the specific agencies have the capability to properly administer all of this work. On the bright side, however, the surge of work created from all of these new projects should give our economy the boost that it needs.

Obama Issues Memorandum Ordering Reduced Wastefulness in the Federal Procurement Process

ecarlin@phslegal.com (Elise M. Carlin) — Tue, 10 Mar 2009 08:34:34 -0500

On February 18, the Office of Management and Budget (“OMB”) director Peter Orszag issued guidance to agencies regarding the administration of federal Stimulus funds. Just this past week, on March 4, President Obama signed a memorandum designed to reform federal government contracting. These directives mark the beginning of reform in the world of government contracting, and reflect the greater accountability and transparency the new administration promises to American taxpayers.

The OMB memo requires agencies to submit spending and performance data to the new website http://www.recovery.gov on a regular basis. The website is a web portal that demonstrates exactly how the Stimulus funds are being spent, and it calls itself the “centerpiece” of efforts to implement the American Recovery and Reinvestment Act with “accountability and transparency.” In a video message to Americans on the website, President Obama pledges greater accountability and transparency in government spending. In his address, he notes that the “size and scale of this effort demand unprecedented efforts to root out waste, inefficiency and unnecessary spending,” and he refers to the Stimulus as a “significant investment in our country’s future.”

The OMB memo also increases the requirements for those doing business with the federal government. Starting on March 3, agencies must submit weekly reports breaking down how they have spent Stimulus funding. They must also summarize any major actions taken as well as any future activities. Beginning May 1, they must provide recovery plans outlining their individual agency goals and any coordinating efforts. By May 8, they must being submitting monthly financial reports detailing their obligations, expenditures, and other pertinent financial information.

Under the new requirements, agencies are now required to post pre-solicitation and award notices for any task and delivery order acquisition contracts on FedBizOpps, a clearinghouse for federal government contracting opportunities. Any Stimulus-related prospects must be specially formatted to differentiate them from regular projects. For any contracts or orders over $500,000, the agencies must summarize the contract or order, provide a description of the particular goods or services required, and then post that information to the recovery.gov website, making it available to the public.

Agencies are also urged to use fixed-price contracts wherever possible and appropriate. Several types of fixed-price contracts exist. They are designed to facilitate proper pricing under varying conditions. Generally, they place more cost responsibility on the contractor than on the Government, and encourage greater efficiency in contract management. According to Orszag, these kinds of contracts “expose the government to the least risk.” Fixed-price contracts are outlined in more detail in Subpart 16.2 of the Federal Acquisition Regulation (“FAR”). More detailed instructions will be provided to agencies in the coming months.

Obama’s presidential memo comes out of the recent government responsibility summit and calls for massive overhaul in government procurement. In his announcement regarding this memo, President Obama noted that, “last year, the Government Accountability Office, looked into 95 major defense projects and found cost overruns that totaled $295 billion…That's $295 billion in wasteful spending.”

In addition to stepping up oversight within government procurement, some of the steps to be taken in overhauling the current system are to open up more opportunities for small businesses and to cease the outsourcing of services that should be performed by the government. Obama also calls for a reduction of no-bid and cost-plus contracts. No-bid contracts are another name for sole-source contracts, contracts done without the benefit of the competitive bidding process.

The justification usually offered for such contracts is that there is only one person or company that can provide the contractual services needed and that any attempt to obtain bids would only result in one person or company being available to meet the need. This kind of contract is described in greater detail in FAR Subpart 6.3. Obama notes that, “[e]xcessive reliance by executive agencies on sole-source contracts (or contracts with a limited number of sources) and cost-reimbursement contracts creates a risk that taxpayer funds will be spent on contracts that are wasteful, inefficient, subject to misuse, or otherwise not well designed to serve the needs of the federal government or the interests of the American taxpayer.”

The OMB will issue new rules regarding these changes by October 1, 2009, the beginning of the government’s next fiscal year. Obama hopes to save Americans around $40 billion annually by reforming the procurement process.

The American Recovery and Reinvestment Act of 2009 and Its Impact on Federal Construction Contracting

ecarlin@phslegal.com (Elise M. Carlin) — Wed, 18 Feb 2009 00:26:53 -0500

Since President Barack Obama was inaugurated last month, he has initiated many changes which will impact federal contracting: first, he issued an executive order requiring a successor vendor on a services contract to offer a preceding contractor’s employees jobs under the new contract; second, in another executive order, he encouraged the use of project labor agreements to ensure that federal work would not be disturbed by “labor unrest” (see earlier blog article); and, in a third order, he prohibited contractors from passing along the costs of supporting or fighting their employees’ exercise of the right to unionize or bargain collectively. Today President Obama signed the American Recovery and Reinvestment Act into law, a statute more commonly referred to as the “Stimulus Bill.” The total amount of the stimulus is approximately $787 billion and it promises great potential for more federal construction contracting work.

The purpose behind this legislation is to relieve the nation from the current state of economic distress and to create jobs. Another priority of the stimulus package is to improve the infrastructure of the country. This means more money for government contracts, and in turn, more opportunities for construction contractors. The allocation of funds within the Stimulus clearly demonstrates the growth potential for federal construction contractors: nearly 40%, or $311 billion, of the total amount is allocated to federal appropriations, with an estimated $131 billion going toward federal construction projects. Below is the breakdown:

Transportation-$49.3 billion

Defense/Veterans-$7.78 billion

Housing/HUD-$9.6 billion

Education and Schools-no specific amount is designated but $39.5 billion of the allotted $53.6 billion State Fiscal Stabilization Fund goes to local school districts who have the option of the modernizing their facilities with this money.

Energy-$30.62 billion

Buildings-$13.37 billion

Water and Environment-$20.1 billion

A major portion of this funding remains available until September 30, 2010.

The Stimulus also promises to help small businesses. The terms of the Stimulus authorize the Small Business Administration (“SBA”) to temporarily eliminate or reduce fees for participation in its loan-guarantee programs. It also increases to 90% the percentage of qualifying loans that the SBA can guarantee. Also offered is a “small business stabilization financing” which offers small businesses in distress money to pay off existing loans. These loans must be repaid within five years, can be for up to $35,000 and can be used to make up to six months of payments on prior loans. The interest on these loans will be fully subsidized with no payments due for the first year. Also offered are hiring incentives, a break on capital gains for those who invest in small businesses, increased loss accounting, and an expansion of allowable equipment expense deductions for small businesses.

White House projections anticipate that this public works spending will lead to millions of jobs for American workers. While there are legitimate questions about whether the employment generated by the Stimulus will be sustainable once the projects are completed, and whether the long-term effects of greater debt will lead to even greater economic problems in the future, there is little doubt that there will be an immediate benefit to federal, state, and local construction contractors.

Corps of Engineers Issues New Safety Manual

MPayne@phslegal.com (Michael Payne) — Tue, 17 Feb 2009 08:02:44 -0500

The U.S. Army Corps of Engineers, through its Office of Safety and Occupational Health, has released a new edition of the Corps’ Safety and Health Requirements Manual, EM 385-1-1, that streamlines information for easier access and quicker use. According to the Corps, “The safety manual is a major key to the success of the USACE safety program.” The 1,050 page book is used during construction, operations, maintenance, research The manual was last revised in 2003, and the 2008 version parallels Occupational Safety and Health Administration (OSHA) regulations and other national standards. It deviates from these standards only when research and/or accident experience deem it necessary.

The new manual went into effect Jan. 12 and can be downloaded by clicking on this link. It is also available in bid packages and from the Government Printing Office for about $27 a copy. Improvements in formatting and layout allow users of the manual to move through it with relative ease. For example, crane requirements are clearer, up to date, and most importantly, centrally located in one section, including information that was located in appendices in past editions. In the same way, all fall-protection requirements are now contained in Section 21 instead of scattered throughout the manual.

As stated on the Corps’ website, “With an organization as far-reaching as USACE, revising the safety manual was no small task. This was one of the largest revisions since the manual’s original production, and has taken nearly two-and-a-half-years.”

Use of Project Labor Agreements Encouraged in Executive Order Issued by President Obama

ecarlin@phslegal.com (Elise M. Carlin) — Tue, 10 Feb 2009 17:58:59 -0500

On February 6, 2009, President Obama issued an Executive Order encouraging agencies to use Project Labor Agreements ("PLAs") in federal construction projects with a total cost to the Government of $25 million or more. The purpose of the Order is to avoid some of the problems which typically arise during the completion of such large projects causing various delays in their timely completion.

"Project Labor Agreements" are defined as, "pre-hire collective bargaining agreement with one or more labor organizations that establishes the terms and conditions of employment for a specific construction project and is an agreement described in 29 U.S.C. 158(f)." Title 29 governs the relationship between management and labor as well as national labor relations and section 158 governs unfair labor practices. While the Order is effective immediately, the FAR Council has been given 120 days-until June 6, 2009-to take "whatever action is required" to implement this order. President Obama also instructs the Director of the Office of Management and Budget, in consultation with the Secretary of Labor and other appropriate officials, to evaluate whether broader use of such PLAs would help promote the economical, efficient and timely completion of such projects.

This Order repeals George W. Bush's Executive Order 13202 which forbade federal agencies and other recipients of federal funding to require contractors to sign union-only PLAs as a condition of performing work on federal projects. Interestingly enough, the history behind the most recent Order clearly demonstrates the divide between the Democratic and Republican Parties' divergent view of the role of unions. Bush's Order repealed an Order issued by former President Clinton, the purpose of which was to overrule an Order issued by his predecessor George H.W. Bush.

Many in the construction industry are concerned about this order and feel that the implementation will negatively impact the 84% of U.S. construction workers who are not union members. However, the Order only encourages PLAs for large-scale construction projects, it does not mandate them. "Executive agencies may, on a project-by-project basis, require the use of a project labor agreement by a contractor where use of such an agreement will...advance the Federal Government's interest in achieving economy and efficiency in Federal procurement..." Under the terms of the Order, the government cannot compel a contractor to enter into these agreements, and cannot exclude from competition those contractors that choose not to use them. Additionally, contractors are not required to obtain their labor from any particular labor organization. We will just have to wait and see how the FAR is updated before we can determine the ramifications for federal construction contractors.

Early Contractor Involvement - Another Experiment by the Corps of Engineers in "Creative Contracting"

jah@phslegal.com (Joseph Hackenbracht) — Fri, 06 Feb 2009 18:04:54 -0500

In recent years, the U.S. Army Corps of Engineers has attempted to employ "innovative" contracting methods but, in doing so, has often limited the number of contractors who have had the opportunity to perform major construction projects. One of the justifications for these “innovative” methods has been that there will be a reduction in the administrative workload resulting in a "savings" for the government. As a result, it seemed as though fewer solicitations were being issued using the sealed bidding procedures in FAR Part 14, with a corresponding increase in the procurement of construction under FAR Part 15, Contracting by Negotiation. Construction contractors began to find that competition was no longer based on price alone, but on subjective factors as well, such as past performance, technical ability, or client satisfaction. Of course, even though these procurements were purportedly “negotiated,” the instances where discussions or negotiations actually occurred were relatively few in number. It was for that reason that we continued to wonder whether the Corps ever actually intended to “negotiate” a negotiated contract. Could the reason possibly be that the Corps wants to be able to use subjective evaluation factors, under the guise of “best value,” as an excuse not to award construction contracts to responsible, bonded, contractors who offer the lowest price?

In a further extension of the use of "Contracting by Negotiation," the Corps has also adopted the Multiple Award Task Order Contracting (“MATOC”) procedures provided under FAR Part 16.5, "Indefinite-Delivery Contracts," to the procurement of major construction projects. We have been involved in on-going legal challenges to the use of MATOC for construction because we believe that the preference for sealed bidding in construction, as expressed in FAR Part 36, is being ignored by the Corps. Through the use of MATOC, the Corps has found a way to limit the competition for the design and construction of facilities in entire regions of the country to only a few of the very largest construction companies.

Just as the shift to large, regional MATOCs has decreased the number of contractors, both large and small, who are able to perform these projects as prime contractors, the adoption of design-build as the favored mechanism for major construction projects has also tended to limit competition. Design-build contracting has permitted the government to shift more and more risk and responsibility to the contracting community, but it seems to be a community that is shrinking in size. Does this make any sense at a time when the country is suffering from rapidly increasing unemployment and the government is planning to spend billions of dollars on improving the infrastructure? There are many small and medium-sized business concerns who have capably performed thousands of federal construction projects over the years under sealed bidding. We continue to wonder why that successful system is being systematically abandoned.

Now the Corps is beginning to issue solicitations for major construction projects under the provisions of FAR Part 16.403, Fixed Price Incentive Contracts, using a project delivery method referred to as "Early Contractor Involvement," or “ECI” for short. Under ECI, the Corps engages the services of a general contractor to provide "preconstruction services" concurrent with the design of a project that is being performed by a design firm. The construction contractor reviews the partially completed design for constructability and biddability. As the design work nears completion, construction is then procured through the exercise of an option under the ECI contract. An ECI procurement requires the construction contractor to compete on both technical and price factors long before the project's design is developed to the point that facilitates meaningful and well-informed cost proposals, however. With so little detailed information on the construction that is being procured, the competition among construction firms has the real possibility of being nothing more than a popularity contest in which the government procurement officials make choices based on who they think they want to work with, rather than the contractor they should be working with based on the technical aspects of a particular project. The competitors also must provide a ceiling price for the project as part of their proposals, long before the design has reached the point where a price estimate is anything more than an educated guess. Although a Corps spokesman, in an article published in Engineering News-Record, indicated that the Corps is turning to ECI for classic reasons, that it is "better, faster, cheaper," we wonder what the basis is for such a bold conclusion.

In a recent press release, the New Orleans District of the Corps reported that it will use Early Contractor Involvement (ECI) to construct the $500 Million Gulf Intracoastal Waterway West Closure Complex project. Colonel Alvin Lee, New Orleans District Commander, indicated that although "the New Orleans District has never used ECI as an acquisition strategy before," the District was "excited about the benefits it brings to this momentous project.” In addition to the West Closure Complex project, the New Orleans District is proposing to employ ECI on a series of levee improvement projects on the Chalmette Loop Levee in St. Bernard Parish, Louisiana. These additional ECI contracts will total between $850 Million and $1.75 Billion.

Other Corps districts have had some experience using a similar method of procurement under a strategy known as "IDBB," or "Integrated-Design-Bid-Build." Two of these IDBB projects are the new Community Hospital and the National Geospatial Intelligence Agency Complex at Fort Belvoir, Virginia. Very recently, other Corps districts have advertised the intention to issue ECI solicitations, notably for the construction of a Replacement Hospital at Fort Riley, Kansas ($250 to $500 Million). Other Federal agencies can be expected to increasingly employ the ECI procurement method; the U.S. Navy already intends to construct a $68 Million Helicopter Maintenance Hanger in San Diego using ECI. In private construction, ECI is called Construction Management (or Manager) at-risk, "CM@R." A joint committee of the AIA and AGC have described CM@R as follows:

Construction management at risk (CM@R) approaches involve a construction manager who takes on the risk of building a project. The architect is hired under a separate contract. The construction manager oversees project management and building technology issues, in which a construction manager typically has particular background and expertise. Such management services may include advice on the time and cost consequences of design and construction decisions, scheduling, cost control, coordination of construction contract negotiations and awards, timely purchasing of critical materials and long-lead-time items, and coordination of construction activities. In CM@R the construction entity, after providing preconstruction services during the design phase, takes on the financial obligation for construction under a specified cost agreement. The construction manager frequently provides a guaranteed maximum price (GMP). CM@R is sometimes referred to as CM/GC because the construction entity becomes a general contractor (GC) through the at-risk agreement. Primer on Project Delivery, AIA/AGC (2004).

A question remains as to whether the government can exercise the flexibility that a private entity can employ to insure that the ECI, or CM@R, process can be successful. Whether or not such flexibility is possible, use of ECI will certainly further diminish the competitive nature of the government procurement of construction projects in the future.

The Importance of Proposal Preparation in Responding to an RFP

MPayne@phslegal.com (Michael Payne) — Wed, 14 Jan 2009 15:02:52 -0500

As the government has expanded its uses of Contracting by Negotiation through the issuance of RFPs ("Requests for Proposals"), as opposed to Sealed Bidding and the issuance of IFBs ("Invitations for Bid"), contractors have had to adapt to this new way of doing business. All too often, a perfectly capable contractor is not selected for award, even though its price was the lower than its competitors, because it failed to adequately address the evaluation factors listed in the solicitation. A recent decision by the GAO in the Matter of Capitol Drywall Supply, Inc. ("CDS"), decided on January 12, 2009, highlights the difficulty that a contractor faces when the agency and the GAO conclude that a proposal misses the mark.

The proposal by CDS was one of six submitted to the Corps of Engineers, and was the second lowest in price. The problem, however, was that CDS was rated as the lowest on the technical merit evaluation factor due, primarily, to a lack of detailed information describing the firm's proposed procedures to perform the statement of work requirements, as well as a failure to demonstrate experience performing contracts similar in size, scope, and complexity, and which were valued at $1 million or more. Finding that the lowest-priced and third lowest-priced proposals, which received significantly higher technical ratings than the CDS' proposal, represented the best value to the agency, awards were made to those firms; with respect to the latter award, the agency concluded in a price/technical tradeoff determination that the higher technical merit of the higher-priced proposal warranted the payment of the price premium associated with it.

Specifically, the agency evaluators found that while the firm's proposal provided a brief response to the detailed technical approach requirements, in which CDS mentioned the firm's intention to maintain inventory and warehouse operations, specific statement of work requirements were not referenced, as was required (e.g., regarding subcontractor relationships, safety and health plans, quality control, and planned communication and information management), and no planned procedures or detailed methodologies were provided to explain how the firm intended to perform the statement of work requirements. Similarly, under the delivery evaluation factor, while the CDS proposal mentioned the use of certain vehicles and noted that certain reports could be produced, the evaluators found that insufficient detail was provided to ensure an adequate number and type of vehicles would be readily available for simultaneous deliveries, as required, and no detailed methodology was presented to either explain what procedures would be followed to ensure that materials would be expeditiously obtained and delivered, including delivery to remote locations, or to explain in any meaningful detail the firm's planned procedures to meet stated reporting requirements.

In reiterating its position when a protester has failed to adequately respond to the requirements of a solicitation, the GAO stated that "In reviewing protests of alleged improper evaluations and source selections, our Office examines the record to determine whether the agency's judgment was reasonable and in accord with the solicitation's stated evaluation criteria and applicable procurement laws. See Abt Assocs. Inc., B-237060.2, Feb. 26, 1990, 90-1 CPD para. 223 at 4. It is an offeror's responsibility to submit an adequately written proposal that establishes its capability and the merits of its proposed technical approach in accordance with the evaluation terms of the solicitation. See Verizon Fed., Inc., B-293527, Mar. 26, 2004, 2004 CPD para. 186 at 4. A protester's mere disagreement with the evaluation provides no basis to question the reasonableness of the evaluators' judgments. See Citywide Managing Servs. of Port Washington, Inc., B-281287.12, B-281287.13, Nov. 15, 2000, 2001 CPD para. 6 at 10-11. Further, where, as here, technical factors are to be given greater importance than price in the determination of which proposal offers the agency the best overall value, price/technical tradeoffs may be made, and we will not disturb awards to offerors whose proposals have higher technical ratings and higher prices so long as the result is consistent with the evaluation factors and the agency has reasonably determined that the technical superiority outweighs the price difference. See Structural Preservation Sys., Inc., B-285085, July 14, 2000, 2000 CPD para. 131 at 7."

Author's Note: The lesson to be learned from this case, and others like it, is that a contractor cannot take anything for granted when responding to an RFP. It is a mistake to assume that the agency knows about your capabilities as a result of previous contracts, and it is similarly a mistake to assume that the government evaluators will learn about your capabilities even though you do not provide detailed information. Every proposal stands on its own and it is important to prepare your proposal in a manner that provides information that is responsive to the evaluation factors. Contractors need to make certain that every evaluation factor is addressed clearly and thoroughly. It is no longer enough to be the best contractor, you now need to be the "best" at putting proposals together, as well. Most assuredly, you should do everything possible to avoid a conclusion like the one the GAO reached in the CDS case that "[g]iven the lack of detail in CDS's proposal under each technical evaluation factor, we have no basis to question the evaluation."

Government Postpones E-Verify Requirement

ecarlin@phslegal.com (Elise M. Carlin) — Tue, 13 Jan 2009 04:59:57 -0500

The Department of Homeland Security has postponed the start date of the E-verify requirement (please see our earlier article). The new rule will go into effect no earlier than Friday February 20, 2008. Proponents of the new rule insist that the rule remains intact with as much legal force as before and that it is only being postponed. Opponents of the new rule hope that the delay will allow the Obama administration ample time to evaluate the impact it could have on the world of government contracting.

Corps of Engineers and EPA Roll Back Definition of "Discharge of Dredged Material" for Section 404 Permits to 1999 Regulation Status

jah@phslegal.com (Joseph Hackenbracht) — Sat, 10 Jan 2009 10:57:30 -0500

For over twenty years, the federal government and private industry, including contractors, mining companies, developers and builders, have debated the extent to which land clearing and dredging activities should be regulated. Since the 1970's, the U.S. Army Corps of Engineers and the U.S. Environmental Protection Agency have regulated the discharge of pollutants into the waters of the United States under 33 U.S.C. §1251 et seq., [the Clean Water Act]. Section 404 of the Act includes the discharge of dredged or fill materials as a regulated activity, and the Corps, by issuance of Section 404 permits, has regulated excavation activities in navigable waters and wetlands.

In the 1980's, "discharge of dredged material" was not considered by the agencies to include the “de minimis incidental soil movement that occurs during normal dredging.” In the early 1990's, the Corps and EPA redefined the term to include the redeposit of dredged material. This regulatory definition was challenged in court, and in 1998 the U.S. Court of Appeals for the District of Columbia Circuit ruled that the agencies could not regulate "incidental fallback." National Mining Association v. U. S. Army Corps of Engineers, 145 F.3d 1399. In August 2000, the Corps and EPA included a definition of the term "incidental fallback" in the regulations. The agencies also added that the use of mechanized earth-moving equipment in waters of the United States was presumed to result in the discharge of dredged material, except where the equipment usage could be shown to only result in incidental fallback. The adoption of these definitions was apparently the agencies' "reasoned attempt to more clearly delineate the Clean Water Act jurisdiction" rather than develop a "bright line" rule for determining which activities would require a Section 404 permit.

In response to an adverse decision issued by the United States District Court for the District of Columbia in January 2007, National Ass'n of Home Builders v. U.S. Army Corps of Engineers, Civil Action No. 01-0274, January 30, 2007, the U.S. Army Corps of Engineers and the Environmental Protection Agency recently adopted a Final Rule on December 31, 2008, 73 FR 79641, that deleted the definition of "incidental fallback" from 33 CFR 323.2(d)(2)(ii) and 40 CFR 232.2(2)(ii), as well as the language indicating that the Corps and EPA "regard" the use of mechanized earthmoving equipment as resulting in a discharge subject to regulation.

With the re-issuance of the Section 404 regulations, the situation now will be as it was in 1999 where the decision as to when a particular redeposit of dredged material is subject to Clean Water Act jurisdiction will entail a case-by-case evaluation. This regulatory roll back may create additional burdens to parties that engage in activities that involve incidental fallback and the use of mechanized earthmoving equipment. Corps and EPA guidance in the 1990's identified these activities as including:

· Mining activities, including sand and gravel mining, aggregate mining, precious metals and gem mining, recreational mining, and small instream hydraulic dredges

· Ditching and draining activities, including ditching to lower the water table, ditching to drain

wetlands, and removal of beaver dams

· Maintenance dredging activities and excavation for currently used flood control projects or for

previously abandoned flood control, and irrigation or drainage projects

· Channelization and the reconfiguring or straightening of streams

(See 1997 Corps/EPA Memorandum)

Department of Homeland Security Sued Over E-Verify Requirement

ecarlin@phslegal.com (Elise M. Carlin) — Wed, 31 Dec 2008 18:32:34 -0500

In November, 2008, the Department of Homeland Security (DHS) implemented a new rule through the Federal Acquisition Regulation (FAR) that would force companies doing business with the federal government to clear their workers through a verification database. This database is called E-Verify and it electronically confirms whether a new hire is in the United States legally and therefore eligible to work on a federal project. It works by comparing the name of the queried worker against submitted I-9 forms - the Social Security Administration’s paper based means of verifying worker status - and the DHS’s 60 million records of immigrants. Currently participation in E-Verify is voluntary. According to the October 23, 2008 DHS press release, over 92,000 employers have used E-Verify, with nearly 7 million queries made in Fiscal Year 2008, and 450,000 queries so far in Fiscal Year 2009. In 96% of the queries made, the worker is deemed eligible to work on a federal project.

The new rule was placed into effect on June 6, 2008 by President Bush as part of an Executive Order, and pending the outcome of the case discussed below, it will be implemented on January 15, 2009. If implemented, it will require contractors and subcontractors who win federal contracts to verify their employees’ status and makes it very difficult for any company to knowingly employ illegal immigrants. In the past, illegal immigrants have been discovered working on U.S. military bases and in other federal offices on multiple occasions. The rule is not without limitation - it would only apply to contracts valued at over $100,000.00 and subcontracts valued over $3,000.00, and to the workers assigned to that particular project.

The legality of this new requirement is being challenged in federal court where many groups, including the U.S. Chamber of Commerce and Associated Builders and Contractors among other co-plaintiffs, have filed suit to prevent its implementation. The Complaint names Michael Chertoff, Secretary of Homeland Security, et. al., as Defendants and was filed on December 23, 2008 in the United States District Court for the District of Maryland. The lawsuit contends that it is illegal to require participation in a program such as E-Verify. The law in question, an amended version of the Illegal Immigration Reform and Immigrant Responsibility Act of 1996, designated E-Verify as one of several pilot programs that contractors can enroll in, but it also asserts that their participation cannot be made mandatory, as it would be if this new rule were implemented.

The rule has the potential to impact a very large number of contractors. The rule could make participation in federal government contracting more costly for contractors: the Complaint notes an estimated increased cost of $188 million to private employers if the rule is implemented, a very negative outcome given the current state of the economy. In a statement issued by the U.S. Chamber of Commerce, Randy Johnson, Vice President of Labor, Immigration and Employee Benefits stated that, “The DHS intends to expand E-Verify on an unprecedented scale in a very short timeframe, and to impose liability on government contractors who are unable to comply.” He adds that, “Given the current economy, now is not the time to add more bureaucracy and billions of dollars in compliance costs to America’s businesses.” Additionally, the press release includes comments regarding the legality of the rule from Robin Conrad, executive vice president of the National Chamber Litigation Center (NCLC), the Chamber’s public policy law firm, who stated that, “This massive expansion of E-Verify is not only bad policy, it’s unlawful,” adding that, “The Administration can’t use an Executive Order to circumvent federal immigration and procurement laws. Federal law explicitly prohibits the Secretary of Homeland Security from making E-Verify mandatory or from using it to re-authorize the existing workforce.” Considering all of the changes we are expecting to see with the inauguration of Barack Obama in January, it will be interesting to see how this all plays out in the coming months.

The Right of Contractors to Challenge Unfair Performance Evaluations is Further Expanded by the U.S Court of Federal Claims

MPayne@phslegal.com (Michael Payne) — Fri, 26 Dec 2008 04:06:46 -0500

We recently reported (see our earlier blog article) the decision of the United States Court of Federal Claims in BLR Group of America, Inc. v. United States, issued on November 25, 2008, in which the Court opened the door to contractor challenges of unfair or incorrect performance evaluations. Coming literally on the heels of the BLR case, the Court issued another decision on December 9, 2008, Todd Construction Co., Inc. v. United States, denying a government motion to dismiss and holding that the Court had the jurisdiction to consider a challenge to a contracting officer’s decision regarding a contractor’s performance evaluation. The Court held that Todd had submitted a “claim” within the meaning of the Contract Disputes Act of 1978 because, on March 22, 2006, the Government issued its proposed final evaluations of Todd’s work, and on April 20, 2006, Todd submitted its comments protesting those evaluations. The Government issued final evaluations on July 21, 2006, and Todd submitted both a claim and a supplemental claim to the Department of the Army, asserting regulatory violations in the preparation of the evaluations and lack of factual accuracy. On April 25, 2007, the contracting officer wrote to Todd, indicating the letter “serves as my final decision regarding your performance on the above Task Order” with a subject line “Final Contracting Officer Decision.” Based upon these facts, the Court held that “this is a final decision of the contracting officer upon a written demand.”

In 2003, Todd Construction received two task orders from the United States Army Corps of engineers (“Corps”) for roof repair of buildings at the Seymour Johnson Air Force Base in North Carolina, and the work was completed in September of 2005. On March 26, 2006, the Corps issued proposed final evaluations rating Todd’s overall performance on the work as unsatisfactory. Todd submitted comments to the contracting officer explaining why, in its view, those ratings were unmerited, but the contracting officer nonetheless issued final unfavorable evaluations on July 23, 2006. In August of 2006, Todd appealed the contracting officer’s decision to Ms. Rita Miles of the Department of the Army, alleging that the Government (1) violated the applicable performance review procedures set forth in Army Corps of Engineers Regulation 415-1-17 and (2) arbitrarily issued evaluations unsupported by the facts. Ms. Miles apparently provided some documents to a vice-president of Todd, and Todd responded to that communication on October 2, 2006. Ms. Miles rejected Todd’s appeal on April 25, 2007. The negative evaluations were then made part of the Construction Contractor Appraisal Support System (“CCASS”).

The government’s motion to dismiss contented that the Court lacked jurisdiction because Todd’s challenge to the accuracy and procedural propriety of performance evaluations was not a “claim” within the meaning of the Contract Disputes Act because it is not made “as a matter of right” and does not arise from or relate to the contract. Specifically, the government contended that [w]here, as here, the contractor’s claim is that the Government breached its internal policies, rather than the provisions of the contract, such a claim cannot properly be considered a claim ‘relating to the contract.’” The Court disagreed and concluded that “this is a ‘final decision’ of the contracting officer upon a ‘written demand,’ and the Court further concluded that Todd made that written demand ‘as a matter of right.’”

The Court further stated that Federal regulations require that for construction contracts the “contracting activity shall evaluate contractor performance and prepare a performance report” “in accordance with agency procedures,” and that the report must be “reviewed to ensure that it is accurate and fair.” FAR 36.201. The Corps has set forth detailed procedures to be followed in assessing contractor performance, with additional steps to be taken when the rating will be unfavorable. Army Corps of Engineers Regulation 415-1-17(5)(c)(1). In this case, Todd alleges that those procedures were not followed and that the evaluations it received were not, in fact, accurate and fair. To the extent plaintiff asserts that when the Government prepares a performance evaluation that will be made part of the record upon which its future submissions will be judged, it is entitled to an accurate and fair performance evaluation prepared in accordance with the regulations, it makes that request “as a matter of right.” Alliant Techsystems, Inc. v. United States, 178 F.3d 1260, 1265 (Fed. Cir. 1999) (observing that the “claim must be a demand for something due or believed to be due rather than, for example, a cost proposal for work the government later decides it would like performed”); BLR Group of Am. v. United States, No. 07-579C, at 10 (Fed. Cl. Nov. 25, 2008).

While the Court has scheduled further briefing by the parties as to what should be the appropriate remedy, the decision comes as yet another welcome advance in the willingness of the Court to look into the fairness of contractor performance evaluations. In the past, government agencies have acted with impunity and have leveraged their power to issue poor performance ratings in order to extract concessions from contractors during performance. There is no question, moreover, that the power to reduce a performance rating has had a chilling effect on the filing of claims – a right that is granted by law and regulation. The Court further noted that “the creation of mandatory performance reviews, databases archiving those reviews, and the requirement to consider those archived materials in future contract awards means that a negative review is potentially devastating to a contractor, who may have no opportunity—or very little opportunity—to mitigate the impact that review will have on future awards.” Accordingly, “there are sound reasons, as Judge Sweeney recently explained, to address performance evaluations as issues of contract performance rather than as part of a bid protest when the contractor seeks future government contracts.” See BLR Group of Am. v. United States, No. 07-579C, at 17 (Fed. Cl. Nov. 25, 2008).

The BLR and the Todd cases make it clear that contractors do not have the right to simply challenge a performance evaluation by filing an appeal directly to the Court. There must first be a “claim” that is submitted to the contracting officer challenging the decision and explaining why the contractor believes that the performance rating should be changed. If the contracting officer then issues a decision denying the “claim,” or if the contracting officer fails or refuses to respond within a reasonable time, the contractor may then appeal the contracting officer’s decision to the Court of Federal Claims. (The jurisdiction of the boards of contract appeals is not as broad as the Court’s and the boards have not been as receptive to contractor challenges to performance evaluations). Because this is an evolving area of the law, however, and because there are procedural hurdles that must be overcome, it is strongly suggested that contractors seek legal counsel before undertaking an appeal of this nature.

GAO Rules that the VA Failed to Conduct Meaningful Discussions

jah@phslegal.com (Joseph Hackenbracht) — Mon, 15 Dec 2008 16:07:20 -0500

A decision just published by the Government Accountability Office ("GAO"), Matter of Burchick Construction Co., mpany, involved a request for proposals issued by the Department of Veteran Affairs ("VA") for the construction of an ambulatory care center . After receiving five proposals and evaluating the technical evaluation factors, the VA conducted discussions with the offerors that only addressed their price proposals. The VA determined that the offeror providing the best value was Massaro Corporation at a firm fixed price of $38,530,000. Burchick Construction Company, whose price proposal of $36,686,000 was the lowest price offered, challenged the award of the contract to Massaro.

During the evaluation of technical proposals, the VA had determined that Burchick's proposal contained "weaknesses" in a number of factors, including past performance, identification of key personnel, and small business participation. Based on these perceived weaknesses, the VA scored Burchick with a total of 50.8 points out of a possible technical score of 100 points. The VA had given Massaro a score of 67.3 points. When the VA decided to discuss the price proposals, it also decided that it would not conduct discussions with the offerors with respect to the firms' technical proposals, because "none of the offerors could materially improve its technical proposal."

Burchick contended that the VA did not conduct meaningful discussions since the VA did not apprise Burchick of, or provide it with the opportunity to address, the significant evaluated weaknesses in its technical proposal. Burchick explained that it could have addressed each of the VA's concerns that resulted in the downgrading of its technical evaluation.

While the GAO conceded that agencies have considerable discretion in determining whether and how to conduct discussions in a negotiated procurement, it found that where discussions are conducted, an agency must identify deficiencies and significant weaknesses, at a minimum, in the proposals of each offeror in the competitive range. The GAO concluded that discussions must be meaningful, meaning that the discussions must be sufficiently detailed so as to lead an offeror into the areas of its proposal requiring amplification or revision.

The GAO found that the VA failed to conduct meaningful discussions with Burchick, and that there was a reasonable possibility that Burchick was prejudiced, given that it offered the lowest price and could have addressed the VA's concerns such that it may have been offering the "best value" to the government. The GAO sustained the protest and recommended that the VA conduct discussions with the offerors about the technical proposals, and make a new source selection decision.

The GAO also criticized the agency's reliance on a numerical comparison of the proposals to determine "best value." While not specifically challenged by Burchick, the GAO noted that a mechanical comparison of the technical and price point scores is not a valid substitution for the qualitative assessment of the technical differences or the benefits associated with a higher priced proposal. Point scores are merely guides, and the record must contain adequate documentation of the price/technical tradeoff to support an agency's judgment concerning the significance of the differences is reasonable and adequately justified in light of the evaluation scheme.

It should be noted that the Federal Acquisition Regulation does address the extent of the discussions which are to be conducted with offerors in the competitive range. FAR 15.306(d)(3) provides that:

At a minimum, the contracting officer must, subject to paragraphs (d)(5) and (e) of this section and 15.307(a), indicate to, or discuss with, each offeror still being considered for award, deficiencies, significant weaknesses, and adverse past performance information to which the offeror has not yet had an opportunity to respond. The contracting officer also is encouraged to discuss other aspects of the offeror’s proposal that could, in the opinion of the contracting officer, be altered or explained to enhance materially the proposal’s potential for award. However, the contracting officer is not required to discuss every area where the proposal could be improved. The scope and extent of discussions are a matter of contracting officer judgment.

While it is not uncommon for the GAO to defer to the discretion afforded the agency in negotiated procurements, that deference, as demonstrated in the Burchick decision, is not absolute. In instances where, as here, the agency's actions are clearly not in accordance with the requirements of the FAR, seeking redress in a protest before the GAO can sometimes result in a favorable outcome.

Court of Federal Claims Decision Paves the Way for Contractors to Challenge the Accuracy and Fairness of Performance Appraisals

MPayne@phslegal.com (Michael Payne) — Fri, 12 Dec 2008 07:45:38 -0500

In an interesting decision issued by the United States Court of Federal Claims on November 25, 2008, in a case entitled BLR Group of America, Inc. vs. United States, the Court ruled that it had jurisdiction to consider a contractor’s claim that a Contractor Performance Assessment Report (“CPAR”) was “false and highly prejudicial.” The case arose because the Air Force had assigned a final performance rating of “Marginal” to the contractor in several categories, and had refused to amend the rating pursuant to a rebuttal presented by the contractor. Instead, the Air Force disseminated the rating by posting it on the Past Performance Informational Retrieval System (“PPIRS”), a database of performance ratings accessed by contracting officers while making contractor responsibility determinations and while conducting past performance evaluations during the source selection process on negotiated procurements. At a time when contractors are experiencing the rapidly growing use of “best value” negotiated procurements, the accuracy and fairness of contractor performance evaluations can be critical to a contractor’s ability to successfully compete for government contracts.

The Court did not address the merits of the contractor’s contention that the performance rating was “false and highly prejudicial,” but simply ruled that the Court had jurisdiction to consider the case. The government had filed a motion to dismiss and cited a number of Armed Services Board of Contract Appeals decisions where the Board had declined to consider appeals based on challenges to performance evaluations. The Court refused to follow the Board’s decisions (the Court of Federal Claims is not bound by the decisions of the various boards of contract appeals) and concluded that a contractor could file a claim under the Contract Disputes Act of 1978. In doing so, the Court focused on the Federal Acquisition Regulation (“FAR”), which provides that a claim is “a written demand or written assertion by one of the contracting parties seeking, as a matter of right, the payment of money in a sum certain, the adjustment or interpretation of contract terms, or other relief arising under or relating to this contract.” See FAR 52.233-1. The Court also noted that the contractor was not appealing the performance evaluation itself, and concluded that a contractor’s claim requesting a change to a performance evaluation is a proper mechanism, and provides the proper jurisdictional predicate, to challenge an adverse performance evaluation in the Court of Federal Claims.

In addition, even though the contracting officer had not issued a final decision, the Court ruled that the contractor had made its claim to the contracting officer for a fair and accurate CPAR on January 12, 2007, and that the contracting officer, more than twenty-two months later, had failed to issue a final decision in conformance with 41 U.S.C. 605(a). The Judge then stated that “Because twenty-two months exceeds the length of time that the court considers “reasonable” for the contracting officer to issue a decision in this case, the court deems the claim denied by operation of 41 U.S.C. § 605(c)(5), which allows plaintiff to pursue the instant appeal.” In other words, the failure of the contracting officer to issue a decision within a reasonable time was treated as a “deemed denial” entitling the contractor to file an appeal.

The Court not only held that it had the jurisdiction to consider the case, but it also stated that a contractor is legally entitled to a fair and accurate performance evaluation. In view of what has frequently been the use of performance evaluations as a tool to unfairly punish contractors, and to intimidate them into not filing claims for fear that they will receive lower performance ratings, this decision comes as a welcome leveling of the playing field. We have always felt that the statutory right that contractors have to file claims and appeals should not be diminished by fear of reprisal. All claims should be evaluated on their merits.

Please see the Federal Construction Project Manager’s Bulletin, November 2008, a publication of Construction Contract Specialists, Inc., for an excellent article entitled "The Contractor Performance Evaluation System (Revisited)," authored by Paul Perkins, that addresses the BLR decision and revisits an earlier article. Mr. Perkins presents interesting background information on the contractor performance evaluation system and provides the author’s perspective as a former contracting officer, project manager, and construction consultant.

Department of Justice Adds Teeth to Current Contractor Ethics Rules

ecarlin@phslegal.com (Elise M. Carlin) — Fri, 14 Nov 2008 17:51:32 -0500

This has been a banner year for ethics in government contracting. This intense focus on integrity and honesty in business is evident in the evolution of the rules of the game-the Federal Acquisition Regulation. Just last December, changes to the FAR mandated contractors to “conduct themselves with the highest degree of integrity and honesty” and to document how they planned to achieve this standard in a Code of Business Ethics and Conduct (see our January 2008 blog article). In addition, the requirements for contractors were stepped up to include prominently displayed hotline posters to facilitate the reporting of violations.

Before the initial changes were passed, public comments were sought regarding the proposed legislation. Review of these comments revealed two paramount concerns: the exemption of foreign contracts, and the exemption of contracts for the acquisition of commercial goods. The first of these was addressed in April when the House voted to close a loophole in the original ethics provisions (see our April 2008 blog article). Initially, contracts performed outside of the United States were exempt from the requirements-an odd exception considering that the new rules were initially drafted in response to the flagrant abuses of the federal procurement system abroad. The second concern regarding commercial contracts was addressed shortly thereafter.

Early this summer, the Department of Justice demonstrated its continued commitment to cracking down on ethics in contracting when they went a step further and proposed additional modifications to the FAR. These proposals gave teeth to the earlier provisions by including the foreign and commercial contracts mentioned above under the business ethics umbrella. Additionally, they imposed new requirements on contractors such as reporting violations of the civil False Claims Act, while adding knowing failure to timely report such violations as an additional cause for debarment or suspension under FAR subpart 9.4. As in the original ethics rules, small business were still not required to have a formal awareness/training program and internal control system, but the requirement to report violations of the civil False Claims Act did apply to them, along with the inclusion of foreign contracts and contracts for the acquisition of commercial goods to the ethics rules.

These new ethics rules were enacted on June 30, 2008, when President Bush signed the supplemental appropriations bill, H.R. 2642 . While this bill required contractors to report violations of federal law and overpayments received, many questions remained, such as to whom contractors would report. These ambiguities and were left to the FAR Council to iron out.

Just two days ago, on November 12, 2008, the FAR Council revealed its final rule regarding the “Contractor Business Ethics Compliance Program,” clarifying the murky details of the newly-enacted fraud-busting proposals. These more stringent requirements become effective on December 12, 2008, and will require federal government contractors to establish and maintain specific internal controls to detect and prevent improper conduct in connection the award or performance of any government contract; and timely disclose to the agency Office of the Inspector General, with a copy to the contracting officer, whenever, in connection with the award, performance or closeout of a government contract performed by the contractor or a subcontract awarded thereunder, the contractor has credible evidence of a violation of Federal criminal law involving fraud, conflict of interest, bribery or gratuity violations found in Title 18 of the United States Code; or a violation of the civil False Claims Act (31 U.S.C. §§ 3729-3733).

The new rules also make a cause for suspension or debarment the knowing failure by a principal, until three years after final payment on any government contract awarded to the contractor, to timely disclose to the government, credible evidence of any of the following in connection with the award, performance or closeout of the contract or a subcontractor thereunder: violation of federal criminal law involving fraud, conflict of interest, bribery or gratuity violations found in Title 18 of the United States Code; violation of the civil False Claims Act; or significant overpayment(s) on the contract, other than overpayments resulting from contract financing payments as defined in FAR 32.001, Definitions. Lastly, these augmented ethics requirements will apply to contracts (and subcontracts) outside of the United States as well as to contracts (and subcontracts) for the acquisition of commercial items.

It is now crucial for government contractors to be vigilant in their adherence to all laws and regulations, and for them to implement and maintain a visible program demonstrating their commitment to doing everything possible to inform their employees. Our firm is available to assist contractors to assure prompt compliance with these heightened ethics requirements.

GAO Sustains Boeing's Aerial Refueling Tanker Protest and Cites Significant Errors in the Procurement Process

ecarlin@phslegal.com (Elise M. Carlin) — Thu, 19 Jun 2008 09:25:41 -0500

The GAO announced yesterday that it had decided to sustain Boeing’s protest of the Air Force’s selection of Northrop Grumman (who included the European company Airbus on its team) over Boeing for the $40 billion aerial tanker contract - a contract that could ultimately be worth $100 billion. Considering the GAO’s history of denying most of the protests that come before it, today’s outcome is likely a surprise to the many who expected the Office to stand behind the Air Force’s source selection. The much-discussed dispute has been waging since March 11, 2008 when Boeing filed its protest. Prior to this award, Boeing had been the Air Force’s only supplier of this type of aircraft for fifty years. The actual sixty-nine page decision was filed under a protective order and has not yet been released. A public version will be made available once all interested parties review it and identify all sensitive information that must remain confidential.

The GAO reached its decision after extensively reviewing voluminous documents produced by the Air Force and hearing testimony from Air Force witnesses. In its press release today, the GAO made it clear that it did not consider the merits of either company’s proposal and that it examined only whether the Air Force complied with the standards established in the statutory and regulatory schemes governing the federal procurement process. “Our decision should not be read to reflect a view as to the merits of the firms’ respective aircraft. Judgments about which offeror will most successfully meet the governmental needs are largely reserved for the procuring agencies…” In their evaluation they concluded that the Air Force made “significant errors that could have affected the outcome of what was a close competition between Boeing and Northrop Grumman.” Senator Richard C. Shelby (R-Ala.) commented that “I cannot believe that in the most highly scrutinized procurement in the history of the United States, the GAO found so many errors.”

The GAO sustained Boeing’s protest for seven specific reasons, including: failure to review the proposals in lights of the solicitation criteria; violating the evaluation provisions of the solicitation, specifically the provision that, “no consideration will be provided for exceeding [key performance parameter] objectives; failure to demonstrate that the Air Force’s determination that Northrop Grumman’s tanker could refuel all current tanker-compatible receiver aircraft in accordance with current Air Force procedures, as required by the solicitation”; conducting misleading discussions with Boeing; “administrative oversight” in making an award despite “clear exception to a material solicitation requirement” in one of the requirements; unreasonable evaluation of military construction costs in “calculating the offerors’ most probably life cycle costs for their proposed aircraft,” an evaluation that if done properly would have resulted in Boeing having the lowest probable life cycle cost; and the improper increase of Boeing’s estimated non-recurring engineering costs in calculating, as well as the improper use of a simulation model in determining those costs.

The Office recommended that the Air Force “reopen discussions with the offerors, obtain revised proposals, re-evaluate the revised proposals, and make a new source selection decision, consistent with our decision.” It also recommended that the Air Force amend its solicitation if it does not “adequately state its needs” before conducting further discussions with the companies. Additionally, if the Air Force chooses to award the contract to Boeing, the GAO recommends that it terminate the contract with Northrop Grumman, reimburse Boeing’s protest costs, including attorneys’ fees. By law, the Air Force has sixty days to inform the GAO of its response. As Tom Schatz, president of the Citizens Against Economic Waste put it, “Air Force Officials didn’t miss it by a little, they apparently missed it by a mile.”

Cumulative Impact Claim Allowed by the United States Court of Federal Claims

MPayne@phslegal.com (Michael Payne) — Wed, 30 Apr 2008 07:47:50 -0500

In a decision issued on April 21, 2008, Bell BCI Company v, United States, the United States Court of Federal Claims issued a decision that can only be described as a “slam dunk” for the contractor. The case arose from the construction of a laboratory building at the National Institutes of Health (“NIH”) in Bethesda, Maryland. Approximately nine months into construction, NIH decided to add a new floor to the building. NIH issued more than 200 contract modifications that delayed the completion of the project by 19-1/2 months, and increased the contract price by $21.4 million, or 34 percent. The prime contractor, Bell BCI Company (“Bell”), received payment for performing most of the changed work, but asserted an impact claim for the cumulative effect of the changes on Bell’s overall performance. The decision includes a number of conclusions of law that will be very interesting to contractors who face unwarranted denials of cumulative impact claims, or the unfair application of leverage by the Government. The description below is based upon excerpts from the decision, but a reading of the entire decision is strongly recommended.

The Court found in favor of the contractor, and awarded damages of $6,200,672, the full amount of its claim, plus Contract Disputes Act interest measured from April 5, 2002. The record demonstrated that NIH, despite its best intentions, lost control of the project beginning in September 2000, and could not prevent the scientists who would occupy the building from demanding changes. The addition of a new floor after construction had begun proved to be a disastrous idea, particularly in causing many mechanical and electrical changes after the work already had been installed. As changes and delays mounted, NIH and its quality management firm only made matters worse by directing Bell to perform extra work without time extensions, or authorizing Bell to accelerate performance. In issuing 200-plus contract modifications, NIH actually addressed more than 730 Extra Work Orders (“EWOs”).

The Court found that there was evidence that NIH failed to satisfy its implied duty of good faith and fair dealing in the administration of the project. NIH asserted a liquidated damages claim against Bell knowing that such a claim lacked a factual basis. NIH lodged this claim only to gain negotiating leverage after Bell submitted a request for equitable adjustment. Further, NIH’s quality construction manager recanted the Contracting Officer’s approval of various extra work items after Bell had completed the extra work. The Court noted “a contracting officer’s review of certified claims submitted in good faith is not intended to be a negotiating game where the agency may deny meritorious claims to gain leverage over the contractor.” Moreland Corp. v. United States, 76 Fed. Cl. 268, 292 (2007). The same principle applies where the agency asserts an unfounded liquidated damages claim solely to gain negotiating leverage.

The Court stated that Bell’s claim for damages from delay and cumulative impact on the NIH project sometimes is called a “delay and disruption” claim. There is a distinction in the law between: (1) a “delay” claim; and (2) a “disruption” or “cumulative impact” claim. Although the two claim types often arise together in the same project, a “delay” claim captures the time and cost of not being able to work, while a “disruption” claim captures the cost of working less efficiently than planned. Bell BCI Co. v. United States, 72 Fed. Cl. 164, 168 (2006); see also U.S. Indus., Inc. v. Blake Constr. Co., Inc., 671 F.2d 539, 546 (D.C. Cir. 1982) (holding that, unlike a delay claim that provides redress from not being able to work, a disruption claim compensates for damages when the work is more difficult and expensive than anticipated).

The contractor must prove for either claim the elements of liability, causation, and resultant injury. When the contractor is asserting a delay claim, the contractor has the burden of showing the extent of the delay, that the delay was proximately caused by government action, and that the delay caused damage to the contractor. While the law requires “reasonable certainty” to support a damages award, damages do not need to proven with mathematical exactness. Rather, “[i]t is sufficient if a claimant furnishes the court with a reasonable basis for computation, even though the result is only approximate.” Ace Constructors, Inc. v. United States, 70 Fed. Cl. 253, 274 (2006)

The preferred method for proving costs is through the submission of actual cost data. Delco, 17 Cl. Ct. at 321 (citing Cen-Vi-Ro of Texas, Inc. v. United States, 210 Ct. Cl. 684, 538 F.2d 348 (1976)). However, where actual cost data is not available, estimates of the costs may be used. Estimates of costs “should be prepared by competent individuals with adequate knowledge of the facts and circumstances,” and should be “supported with detailed substantiating data.” Delco, 17 Cl. Ct. at 321 (citations omitted). The Court also must be alert to cases where the Government has caused the circumstances making the ascertainment of damages difficult. As the Court of Claims previously noted “The constant tendency of the courts is to find some way in which damages can be awarded where a wrong has been done. Difficulty of ascertainment is not to be confused with right or recovery. Nor does it exonerate the defendant that his misconduct, which has made necessary the inquiry into the question of harm, renders that inquiry difficult. The defendant who has wrongfully broken a contract should not be permitted to reap advantage from his own wrong by insisting on proof which by reason of his breach is unobtainable. (Citations omitted).

Government change orders on building projects such as NIH Building 50 may add or subtract to the contractor’s cost of performance, and may affect the time required to complete the work. Bilateral modifications agreed to by the parties generally cover the costs and time of performing the changed work. On a project where the Government issues many change orders, bilateral modifications will compensate the contractor for the cost of performing the changed work, but the cumulative effect of the changes may add to the contractor’s time and effort in performing the unchanged work as well. Unless provided otherwise, the bilateral modifications will compensate the contractor for performing the changed work, but not for the impact of multiple change orders on the unchanged work.

Multiple change orders on a construction project potentially can be accommodated if the owner acknowledges that additional time and money will be required, and if the parties carefully plan the sequencing of the changed work. However, if the owner as here denies the additional time or money to perform changed work, but nevertheless continues the flow of change orders to the contractor, a chaotic project inevitably will result. In this case, there were 279 EWOs and 113 contract modifications issued after August 30, 2000, while NIH project personnel were maintaining that no further changes would be issued. The project environment was contentious, as NIH representatives bordered on bad faith in denying payment to Bell for extra work performed. Based upon the evidence presented, the Court was satisfied that Bell had established a reasonable basis for its cumulative impact claim, and Defendant, NIH, has failed to show that the claim should be denied or reduced in any respect.

Significantly, the Court was not willing to accept NIH’s argument that release language in one of the principal contract modifications prevented the contractor from recovering its damages. None of the 206 contract modifications issued on the project included any NIH payment or other consideration to Bell for a disruption, cumulative impact, or labor inefficiency claim. Similarly, none of the modifications contained any language explicitly waiving or releasing such a claim. While language sporadically appeared in some modifications purporting to reserve rights, the Court concluded that no meeting of the minds between the parties ever occurred. The Court found that there was no evidence that NIH ever provided any consideration to Bell to settle a cumulative impact claim and that many of the events relevant to the cumulative impact claim did not even arise until after the parties signed Modification 093.

House Votes to Close Code of Ethics Loophole on Contracts Performed Outside the United States

MPayne@phslegal.com (Michael Payne) — Wed, 23 Apr 2008 21:38:54 -0500

The requirement found at FAR 52.203-13 was implemented on December 24, 2007 and requires any contractor who is awarded a contract in excess of $5 million to have a written Code of Business Ethics and Conduct within thirty days after award. Large business firms must also implement a training and compliance program within ninety days (see our earlier blog article for additional information). The requirements, however, did not apply to contracts that were to be performed outside of the United States. This “exemption” for foreign projects has now received the attention of the U.S. House of representatives.

As reported today by the Associated Press, the House has voted to close a multibillion-dollar loophole in a crackdown on contract fraud, approving plans to force the Bush administration to act within six months. At issue is a Bush administration rule requiring government contractors to report misuse of taxpayer dollars to the Justice Department. The rule, as originally published last November, included a loophole to exempt contracts performed overseas. Administration officials told lawmakers at a House Oversight and Government Reform hearing earlier this month that the loophole was a "drafting error" and likely would be removed. The administration since has stripped the loophole from the proposed rule, which likely will be finalized later this year. At the House hearing, a top official for the White House Office of Management and Budget predicted the exemption would not be included in the final rule. The Justice Department said has charged at least 46 people in investigations over the past several years into kickbacks, bribes and other abuses of government-funded contracts in Iraq, Afghanistan and Kuwait. It opposed the loophole. (Excerpted from "House moves to close contract fraud loophole" as published by the Associated Press).

We agree that there is no reason to treat projects performed overseas any differently than projects performed in the United States. After all, it was the Justice Department’s concern about the millions of dollars of fraud, waste, and abuse in Iraq, Afghanistan, and Kuwait that give rise to the rule in the first place.

Court Enjoins Awards of Government-wide Task Order Contracts Because of "False Precision" in the Numerical Ratings of the Offerors

MPayne@phslegal.com (Michael Payne) — Thu, 13 Mar 2008 11:25:34 -0500

An important decision, Serco, Inc. v. United States was issued by the United States Court of Claims last week in a case involving a government-wide acquisition contract (“GWAC”) awarded by the General Services Administration (GSA) to provide technology products and services to the entire federal government. Sixty-two offerors competed for a chance to perform task orders under this GWAC. In ranking the technical proposals of these offerors, GSA teams assigned adjectival ratings to various subfactors and then converted them into whole numbers ( e.g., 3, 4, 5). Combining, averaging and weighting these figures, the agency ended up with technical scores that were carried out to three decimal points ( e.g., 3.817), and it made critical distinctions among the sixty-two offerors based upon the thousandths of a point. Based upon these technical scores, twenty-eight contractors were designated by the agency as “presumptive awardees.” GSA then purported to conduct price reasonableness and tradeoff analyses to take into account price-but, conspicuously, none of these comparisons resulted in any of the “presumptive awardees” being displaced by a lower-priced offeror. Indeed, GSA ultimately made awards to offerors whose prices were 59th, 60th and 61st out of the sixty-two offers-prices that the agency claims were “fair and reasonable” despite being twice as high as the lowest winning offer, as much as thirty percent higher than the independent government cost estimate, and more than two standard deviations to the mean of the evaluated prices for all the offerors.

The so-called “Alliant” GWAC is to be administered by GSA pursuant to section 5112(e) of the Clinger-Cohen Act. Alliant is designed to provide federal agencies with a broad range of information technology (IT) products and services, including computers, ancillary equipment, software, firmware and similar applications, network design, support services, and related resources such as telecommunication and security. Alliant contemplates the multiple-award of indefinite delivery, indefinite quantity (MA/IDIQ) contracts, with a ceiling of $50 billion, to be performed, on a task order basis, during a five-year base period and one, five-year option period. Under the Alliant Solicitation No. TQ2006MCB0001 (the Solicitation), individual task orders could range as high as $1 billion in value; successful offerors, however, are guaranteed a minimum take of only $2,500. Alliant offers a wide range of contract types, including fixed-price, cost reimbursement, labor-hour and time and material.

On September 26, 2007, Serco, Inc. (Serco) filed a complaint in this court challenging the award decisions and seeking a variety of injunctive relief. Subsequently eight other unsuccessful offerors filed protests and were joined in the Serco protest. GSA issued the Solicitation on September 29, 2006. The Solicitation advised that GSA “contemplate[d making] approximately 25 to 30 awards ... but reserves the right to place fewer or more awards, depending upon the quality of the proposals received.” Those receiving awards under the Solicitation are eligible to perform task orders under the contract. The Solicitation indicated that “[a]ward will be made to responsible Offerors whose proposals are determined to provide the ‘best value’ to the Government.”

In a scholarly opinion, by Judge Francis M. Allegra, the Court concluded that GSA, “in attaching ”talismanic significance to technical calculations that suffer from false precision, made distinctions that, in their own right, likely were arbitrary, capricious and contrary to law, but certainly became so when the agency failed adequately to account for price and to make appropriate tradeoff decisions. Those compounding errors prejudiced the plaintiffs and oblige this court to set aside the awards in question and order appropriate injunctive relief.” The Court did not agree that there was a rational basis to make distinctions between offerors on the basis of thousandths of a point. Judge Allegra ruled that “Precision of thought is not always reflected in the number of digits found to the right of a decimal point – indeed, as with other constructs, there can be, to paraphrase Holmes, a “kind of precision that obscures.” Ultimately, Court ruled that the agency made award decisions that were “arbitrary, capricious and otherwise contrary to law.”

The Government intimated that the court should afford the agency more slack than usual, on account of the size of this procurement and the number of offerors to be evaluated. But, the Court found that “given the extraordinary breadth of discretion already afforded to agencies in government procurements, it is hard to fathom what form a still more relaxed rule of deference might take. Would such a rule permit the adoption of procedures that would allow the agency to rely on performance information that is unverified and unresponsive to its stated evaluation criteria? Not, it would seem, without a wholesale revision of the fairness principle embodied in CICA and the FAR - ‘a cornerstone of effective competition.’ Cibinic & Nash, supra, at 899. Would such a rule allow the agency to treat demonstrably imprecise statistics as being precise? Not unless deference somehow magically makes insignificant digits significant. And would this heightened deference permit the agency to dispense with any reasonable consideration of price, leaving that question for a later day? Certainly not, again, without some substantial modification of CICA and FASA-and with Congress heading the opposite direction in tending, in recent years, toward enhancing, rather than diminishing, the importance of price. But whatever the reach or meaning of the salvific rule defendant would have this court apply, one thing is certain-it has no foundation in the Solicitation, the FAR or the governing procurement statutes. Per contra. While an agency certainly may choose to pursue a GWAC pursuant to its mandate to ‘efficiently fulfill the Government's requirements,’ it may not obtain efficiencies in derogation of the FAR and other governing statutes. Nor, as should be obvious, does the raw size of a procurement afford an agency the license to engage in what otherwise would be arbitrary and capricious conduct.”

Bid Protests to GAO to be Allowed on Task Orders in Excess of $10 Million

ecarlin@phslegal.com (Elise M. Carlin) — Sat, 08 Mar 2008 14:41:42 -0500

Effective May 23, 2008, there will be important changes that pertain to a contractor’s ability to protest task and delivery orders. These changes are embodied in Section 843 of the 2008 Defense Authorization Act, "Enhanced Competition Requirements for Task and Delivery Order Contracts," and legislators expect the new provisions to increase competition for task and delivery order contracts. Most notably, the new law allows a contractor to protest a task order in excess of $10 million to the GAO. Previously, the Federal Acquisition Streamlining Act of 1994 (“FASA”) prohibited task order protests, except in very limited circumstances. In addition, the new law requires that DOD task or delivery order contracts in excess of $100 million be awarded to multiple contractors, with certain exceptions, and the establishment of enhanced competition requirements, such as a requirement for debriefings on task or delivery orders in excess of $5 million under such multiple award contracts. The GAO is currently revising its bid protest rules to address the newly acquired jurisdiction over task order protests. (The new rules will be posted on this blog as soon as they are issued).

At the April 19, 2007 hearing of the Senate Committee on Armed Services regarding the DOD’s management of costs under the Logistics Civil Augmentation Program (“LOGCAP”) contract in Iraq, Senator Carl Levin (D-MI) asked why ithe Army waited five years to split the contract among multiple contractors, allowing for competition of individual task orders. The response from the Assistant Secretary of the Army for Acquisition, Technology, and Logistics was: "I don't have a good answer for you." The provisions of Section 843 ensure that, absent compelling reasons not to, there will be competition in the award of task and delivery orders on future contracts of this type. As far as we are concerned, however, there is an open question as to whether Multiple Award Task Order Contracts (‘MATOC”) are legally authorized under the Federal Acquisition Regulation for the procurement of construction. A protest raising that issue was filed by our firm and is pending before the United States Court of Federal Claims.

Section 843 of the Defense Authorization Act lifts the ban imposed by the Federal Acquisition Streamlining Act on protests to the Government Accountability Office (GAO) of task or delivery orders valued over $10 million. This provision may be short-lived though: it contains a “sunset” provision and expires three years after it becomes effective. Congress enacted Section 843 in response to the need for enhanced competition requirements, and apparently believed that federal agencies had too little oversight when permitted to issue task order procurements that were not subject to protest. After the FASA was enacted, federal agencies increasingly employed the indefinite delivery, indefinite quantity (“IDIQ”) contracts for expensive projects, purportedly to utilize “streamlining” but, in part, to circumvent the bid protest process. It will be interesting to see whether the newly enacted right to file bid protests will have a “chilling” effect on agency plans to issue IDIQ contracts in the future.

The exclusive jurisdiction granted to the GAO means that the Court of Federal Claims (CFC) will not adjudicate these protests. Under the current protest regime, both the GAO and the CFC are authorized to hear bid protests, and we would have preferred for that dual jurisdiction to have continued on task order protests, as well. An advantage of the current system for contractors is that if they are unhappy with the outcome of a GAO protest, they can obtain de novo review of that same protest at the CFC. Under Section 843, this second chance will not be available for task or delivery order protests. This has serious implications for contractors because only a small fraction of protests heard by the GAO are sustained.

Additional means of enhancing competition are also set forth by Section 843. For task or delivery orders in excess of $5 million, the government agency is required to provide a fair opportunity to be considered. This means that at the very least, the following must be provided to all contractors: 1) a notice of the task or delivery order that includes a clear statement of the agency’s requirements; 2) a reasonable period of time to provide a proposal in response to the notice; 3) disclosure of the significant factors and subfactors, including cost or price, that the agency expects to consider in evaluating such proposals, and their relative importance; 4) in the case of an award that is to be made on a best-value basis, a written statement documenting the basis for the award and the relative importance of quality and price or cost factors; and 5) an opportunity for a post-award debriefing. Unless certain exceptions apply, the current law requires the agency to give all multiple-award IDIQ contract holders a fair opportunity to be considered for each order in excess of $2,500.

Section 843 targets sole source awards. The new rules establish further requirements for agencies awarding IDIQ contracts valued over $100 million to a single awardee, as opposed to multiple sources. In order for this to happen, the head of the agency must make a written determination that (i) all task orders under the contract are so integrally related that only a single contractor can reasonably perform the work; (ii) the contract provides only for firm, fixed-price task or delivery orders at specified unit prices; (iii) only one source is qualified and capable of performing the work at a reasonable price; or (iv) it is necessary in the public interest to award the contract to a single source. Additionally, Congress must be notified within 30 days of the determination to award an IDIQ contract to a single source. These new requirements are similar to those of the Federal Acquisition Regulation (FAR) Part 6.3 which justify awarding a contract to a single source.

The most potentially controversial provision of the enhanced competition framework of Section 843 is the authorization of task or delivery order protests. In 2003, the Services Reform Act (SARA) authorized the Acquisition Advisory Panel (the "Panel") to review and recommend any necessary changes to acquisition laws and regulations and government-wide acquisition policies. Included in the Panel’s draft report of 2006, was a similar provision, which was met with opposition from interest groups who feared that an increased number of bid protests would raise costs for federal contracts and impede the procurement process. The final legislation gives exclusive jurisdiction to the GAO over task or delivery award contract protests, and is likely a compromise between the recommendations of the Panel and the concerns of the interest groups.

Section 843 is silent on some procedural matters regarding task or delivery order protests. For instance, the automatic stay requirement of the Competition in Contracting Act is not mentioned. Under the CICA, the contracting agency is required to stay the award or suspend performance of a protested contract upon the commencement of a timely protest to the GAO. Further questions are raised by the silence of Section 843 regarding time limitations for filing task or delivery order protests at GAO. It would seem that current rules for protests where debriefings were requested would stand. This means that the deadline for filing a task or delivery order protest will likely be 10 days from the date of the debriefing (five days to obtain the automatic CICA stay) in post-award protests-regardless of when the protester learned the basis of the protest. However, the new GAO rules must be reviewed after they are issued to determine whether there are any new or unusual requirements that affect the filing of task order protests.

Congress’ grant of exclusive jurisdiction to the GAO for task and delivery award protests also precludes agency level protests. This seemingly creates a conflict with current federal acquisition policy, which encourages parties to resolve controversies over procurement at the agency level whenever possible. The NDA, however, does not alter the existing statutory requirement, first implemented in the FASA, that each federal agency appoint a task and delivery order ombudsman to review complaints from contractors claiming they were not afforded a fair opportunity to be considered for task or delivery orders.

For task orders valued below $10 million, the ombudsman remains the only reviewing authority for disappointed contractors. Under Section 843 task order procurements between $5 million and $10 million are subject to the new procedural requirements but still exempt from GAO’s protest jurisdiction. This implies that contractors can still seek to enforce compliance with the new procedures for procurements in this dollar range by submitting a complaint to the ombudsman.