GSA Expo 2007

Government Contract Law

Formation

James J. Paris

Defense Acquisition UniversityOther

Agency Logo

Overview

• Legislation• Fiscal Law• Protests

I. LEGISLATION

• National Defense Appropriation Act for Fiscal Year 2007– §8013 A-76 Studies. Requires contractors

do not receive an advantage by not providing health insurance to its workers

– §9012 No funds available for permanent stationing of U.S. Forces in Iraq or exercising control over oil resources.

– No award fees may be paid to a contractor who does not meet contract requirements

GAO Report GAO-06-66

• Award fees “have generally not been effective at helping DoD achieve its desired acquisition outcomes.” In addition, the estimated eight billion dollars in award fees were paid regardless of how well the contractor met contract objectives.

• GAO perceived a general reluctance “to deny contractors significant amounts of fee, even in the short term.”

U.S. GOV’T ACCOUNTABILITY OFF., REP. NO. GAO-06-66, DoD HAS PAID BILLIONS IN AWARD AND INCENTIVE FEES REGARDLESS OF ACQUISITION OUTCOMES (Dec. 2005)

National Defense Authorization Act for Fiscal Year 2007

– § 814 Requires DoD to issue guidance on appropriate use of award and incentive fees.

– §818 Allows use of fixed price development contracts, repealing prohibition introduced in FY89 Defense Authorization Act.

– §842 Berry Amendment, Specialty MetalsAmends Berry Amendment provision prohibiting acquisitrion of containing specialty metal not melted or produced in USA. Now some exceptions for purchases from qualifying countries below SAT and commercial procurements of electrical components whose specialty metals are of de minimus value. DoD issued (complex) regulatory guidance on Dec. 6, 2006.

CONTRACTORS ACCOMPANYING THE FORCE

• National Defense Authorization Act for Fiscal Year 2007• Contractor employees in Iraq and Afghanistan may now

be subject to the Uniform Code of Military Justice (UCMJ).

• Until now, jurisdiction over “persons serving with or accompanying an armed force in the field” only in “time of war.” (Congressionally declared)

• Defense Authorization Act for Fiscal Year 2007 amended UCMJ to provide jurisdiction over these persons “in time of declared war or a contingency operation.”

• Although characterized as a “clarification” of the UCMJ, this is a significant change. No legislative history explains this change.

• As yet, no published guidance.

II. FISCAL LAW

• Purpose, Amount, Time Limitations

• AntiDeficiency Act• Miscellaneous Receipts Act• Prohibition of Propaganda

GAO Red Book Updating Update

• Volume I, Chapter 4, Availability of Appropriations: Purpose, provides a comprehensive examination of the Purpose rules, and application of those principles to specific categories of expenditures, incorporating all relevant Comptroller General opinions and other authorities.

• www.gao.gov

Conference Registration Fees

• National Institutes of Health—Food at Government-Sponsored Conferences, B-300826, 2005 U.S. Comp. Gen. LEXIS 42 (Mar. 3, 2005).– Agencies have often collected conference

registration fees to help offset the cost of hosting conferences, but have not necessarily been doing so in accordance with the law.

– The Miscellaneous Receipts Statute provides: “Except as [otherwise provided], an official or agent of the Government receiving money for the Government from any source shall deposit the money in the Treasury as soon as practicable without any deduction for any charge or claim.” 31 U.S.C. § 3302(b) (2005).

Contractors Collecting Fees at Agency-Hosted Conferences

• B-306663, 2006 U.S. Comp. Gen. LEXIS 2 (Jan. 4, 2006).

• GAO explained that “[a] government agency that lacks the authority to charge and retain fees may not cure that lack of authority by engaging a contractor to do what it may not do.”

• If Congress were to grant an agency authority to collect and retain a conference fee, the agency could then allow a contractor to do it on behalf of the agency.

Fiscal Year 2007 Defense Authorization

Act• Section 1051 of the Act amends Title 10 by creating

a section 2262, specifically authorizing the Secretary of Defense to collect fees, directly or through a contractor, from participants at conferences or similar events.

• If the amount of fees collected exceed the actual cost of the event, “the amount of such excess shall be deposited into the Treasury as miscellaneous receipts.”

• The law also contains an annual reporting requirement, requiring the Secretary of Defense to submit to Congress “a budget justification document summarizing the use” of the new authority.

No Federal Funds for Publicity and Propaganda

• Purpose violation of Anti-Deficiency Act.• GAO addressed this issue again in a 6 July

2006 letter to Dept of Education concerning “No Child Left Behind Act” promotional activities: – Production and distribution of prepackaged news

stories promoting the activities of that agency w/o disclosure of agency as the source of the story

– DOJ disagrees; argues that issue is whether a particular position is advocated.

– Armstrong Williams subcontract.

Armstrong Williams subcontract

• GAO concluded the agency violated the ADA by using appropriated funds for a contract to pay an individual to comment on the agency’s programs pursuant to the No Child Left Behind Act during his weekly television and radio programs.

• No disclosure of government’s role in funding commentary.

Use of Wrong Appropriation Is Not a Ground for Protest

• United Pac. Ins. Co. v. United States, 464 F.3d. 1325 (Fed. Cir. 2006).

• The fact that the government may have used the wrong appropriation to fund a contract does not render the contract void, thereby allowing contractor to recover, on a quntum meruit basis, an amount greater than the stated contract price.

• Congress’s intent in creating fiscal law is not to create new rights of action against the government.

III. PROTESTS

GAO SCOREBOARD

Common Protest Issues

• Procurement Planning Errors• Failure to Consider Sources• Misuse of Federal Supply Schedule

Contracts• Restrictive Requirements• Problems with Evaluation and Source

Selection Decision• Improper Discussions• Improper Sole Source Awards

Procurement Planning

Europe Displays, Inc., Comp. Gen. B-297099, Dec. 5, 2005,

2005 CPD ¶ 214• Successful protest against an FTA sole

source procurement to Connexion for the design, construction, maintenance, and dismantling of a pavilion at the Mobility and City Transport Exhibition held in Rome, Italy

• Contracting officer’s negligence can erode the grounds for a sole source procurement

• Under the mistaken impression that the exhibition organizer required the participants to use Connexion to build and maintain the exhibitions.

Europe Displays, Inc.,

• Exhibitor’s handbook actually provided for a thirty days approval process for custom built stands.

• By the time the agency realized its mistake, the exhibition was less than thirty days away and the organizers denied FTA’s request for a waiver of the thirty-day deadline.

• FTA (J&A) based upon the exception allowing award of a follow-on contract for the continued development of a major system or highly specialized equipment when it is likely that an award to a source other than the incumbent would result in unacceptable delays in fulfilling the requirement. FAR, supra note 14, at 6.302-1(a)(2)(ii)(B).

Europe Displays, Inc.,

• GAO protest alleges that the J&A did not support award to Connexion; agency had no reasonable basis to determine that the this was the only firm permitted to design and construct the exhibits.

• In response, the agency claimed that the acquisition was conducted under the simplified acquisition procedures and, therefore, FAR part 13 applied. No J&A requirement applied.

• Performance continued as being in the best interest of the government

Europe Displays, Inc.,

• GAO: FTA still required to obtain competition “to the maximum extent practicable.” While an agency may solicit from a sole source, the contracting officer has to determine that only one source is reasonably available.

• Belief was not reasonable given that the information in the handbook specifically addressed custom designs there was no basis for a sole source award.

Synopsis Must Disclose Desired Services

• M.D. Thompson Consulting, LLC; PM Tech, Inc., 2006 CPD ¶ 41, at 1.

• Sole Source “bridge contract” stating its intent to extend the contract with CSC Systems & Solutions LLC for “unspecified services” for up to nine months.

• Agency rejected both in part because the firms did not propose personnel experienced in “isotope separation technology,” although such a requirement was not apparent from the synopsis.

M.D. Thompson Consulting, LLC; PM Tech,

2006 CPD ¶ 41, at 1.• GAO determined that the agency failed to

meaningfully describe the requirement. The synopsis identified the contract being extended and that it involved “critical, highly specialized technical and administrative support,” but did not provide any details concerning specifics needed for successful performance. Instead, the synopsis in this case discouraged responses.

• Since the synopsis inadequately described the services, the GAO sustained the protest.

Self-Generated Urgency Does Not Support Sole Source Procurement

• Bausch & Lomb, Inc., B-298444, 2006 U.S. Comp. Gen. LEXIS 147 (Sept. 21, 2006), at 1.

• VA sole source procurement of ophthalmology equipment used in cataract procedures. The VA based the sole source procurement on unusual and compelling urgency exception of the CICA.

• Need identified after several patients developed eye infections from improperly cleaned machines.

• Since current machines were outdated and needed replacing, the staff recommended a machine they were familiar with; the Infiniti machine produced by a company named Alcon.

Bausch & Lomb

• Although two sources express interest in response to synopsis, J&A justified the sole source because the other machines lacked the “advanced design features,” referring in particular to a “torsional phaco handpiece” and “aqualase technology.”

Bausch & Lomb

• Bausch & Lomb alleged that the J&A did not justify a sole source award, but revealed a lack of advanced planning. And claimed it’s machine was the “most advanced system on the market.”

• GAO recognized the need for a replacement machine, but found the agency failed to reasonably demonstrate why a limited competition including those firms expressing an interest was unreasonable.

• There was no evidence that the VA ever considered the response. GAO found the sole source award unjustified when the agency failed to consider the equipment of other interested vendors

If it’s not in the FSS contract, it’s not in the contract!!

• Tarheel Specialties, Inc., Comp. Gen. B-298197, B-298197.2, July 17, 2006, 2006 CPD ¶ 151.

• DHS competes task order among offerors who had a current Federal Supply Schedule (FSS) with the General Services Administration (GSA) which included each of the applicable labor categories listed, and provided the best value to the government, based on “demonstrated technical capability, past performance/ experience, and price (including discount terms).”

Tarheel

• Offer rejected because“none of the labor categories in the PWS (Performance Work Statement) were mapped to the positions listed in Tarheel’s schedule contract.”

• Based upon its conversations with the GSA, Tarheel believed that the positions did not need to be in the present GSA contract, just added later as new categories on the FSS contract after award.

• Agency argued that although awardee’s FSS labor catagories did not exactly align with the requirement, the descriptions were “sufficiently similar” to those required in the RFP.

GAO sustains protest

• “When a concern arises that a vendor is offering services outside the scope of its FSS contract, the relevant inquiry is not whether the vendor is willing to provide the services that the agency is seeking but whether the services or positions offered are actually included on the vendor’s FSS contract, as reasonably interpreted.”

RESTRICTIVENESS- Is this Requirement Really

Necessary?

• MadahCom, Inc., Comp. Gen. B-298277, Aug. 7, 2006, 2006 CPD ¶ 119.

• Mass Notification System must – be Compliant with Association of Public Safety

Communications Officials International Project 25 (APCO 25)

– & possess 10 KM range

Protest Grounds

• APCO 25 standard was unduly restrictive because it was not required by DoD policy requirements and not necessary to meet the agencies general requirements for a MNS.

• Transmitting and receiving station range requirements should have been stated in terms of coverage area for the individual installations as opposed to the ten-kilometer-range standard.

Agency Response

• The GAO sustained the protest, in part because the agency did not prove that therequirement had a reasonable basis.

• RFP did not require the LMRs accompanying the system to be APCO compliant and the agency did not know how the requested radios would be used by installations that would receive the MNS

• Agency was unable to articulate its rationale for the 10 km range as well, only claiming it would facilitate future expansion of the system.

Documenting the Source Selection Decision

• York B-296948.2, 2005 CPD 202 – Failure to document rationale for source

selection consistent with technical evaluation factors

• Intercon B-298292, 2006 CPD 121– Brief evluation record inconsistent, factully

incorrect, contradictory, cryptic.

Evaluations Must be Reasonable, Consistent with Evaluation Criteria

• Awardee fails to address material requirements. Wiltex B-297234, 2006 CPD 13

• SSA disagreement with majority of evaluators and acceptance of minority recommendation unobjectionable where SSA determined awardee’s lower priced proposal deserved a higher technical rating than assigned by the majority of the evaluators. Tru Logic B-297252 2006 CPD 26

Improper Discussions

• Failure to Raise Defeciency. Al Long Ford, Comp. Gen. B-297807, Apr. 12, 2006, 2006 CPD ¶ 67.– Agency must reopen discussions if the agency

realizes, while reviewing an offeror’s final proposal revision, that a problem in the initial proposal was vital to the source selection decision but not raised with the offeror during discussions.

Improper Discussions

• Unequal Opportunity to Revise Defeciency. University of Dayton Research Institute– The GAO, in its review of the record, found that

in the so-called clarifications, several offerors were allowed to make dozens of changes to the rates initially proposed.

– .

Past Performance

• United Paradyne Corp., – GAO criticized the Air Force’s past performance

methodology as improper because its mechanical application of numerical scores resulted in skewed final ratings.

– The end result was incongruous; essentially a contractor with four excellent highly relevant contracts would be rated higher than a contractor with four excellent highly relevant contracts and four excellent non-relevant contracts (which would bring down his total average)

– GAO, ultimately, would have preferred a more through analysis of individual contracts.

Sikorsky Aircraft Company; B-299145.4

• Agency reasonably determined that protester’s recent, seriously deficient performance on a highly relevant contract for a similar aircraft warranted a past performance rating of little confidence, notwithstanding that protester also had very good performance on another highly relevant contract.

Family Entertainment Services, Inc. B-298047.3

September 20, 2006 • Protest that the agency’s evaluation of the protester’s past

performance was unreasonable is sustained where the record evidences that the protester and awardee were not treated equally with regard to the agency’s efforts to contact past performance references, and the record does not provide a reasonable explanation for the agency’s conclusions regarding the protester’s past performance, including what if any impact the agency’s receipt of contract performance assessment reports had on its evaluation.

• The agency failed to evaluate the awardee’s past performance in accordance with the terms of the solicitation where there is no evidence that the agency, when rating the awardee’s past performance, took into account the solicitation’s provision that past performance information concerning predecessor companies and key personnel would not be as highly rated as past performance information for the principal offeror.

V. FEDERAL CASELAW

• Authority• CICA Override Decisions

Brunner v. United States, 70 Fed. Cl. 623 (2006)

• (1) Authority can be created either expressly or by implication;

• (2) public entities act publicly, using the same means to communicate the grant of authority to their agents that they use to communicate this to third parties;

Brunner v. United States, 70 Fed. Cl. 623 (2006)

• (3) apparent authority describes the situation when a principal has placed restrictions on an agent that are not known to a third party;

• (4) restrictions on government agents are accomplished in the open, through laws and regulations; that this notice/inquiry feature is the extent of any difference.

Brunner v. United States, 70 Fed. Cl. 623 (2006)

• (5) everyone, including contractors, are supposed to know the laws and regulations of our government; and thus

• (6) the concept of “apparent authority” is often inapt when dealing with the government, insofar as the only cognizable restrictions on the agent’s authority are deemed known to third parties, shattering any appearance of authority.

• When opinions include language to the effect that ‘actual, not apparent authority is needed to contract on behalf of the government,’ this is all they mean..

CICA Override

• Cigna v. U.S., 70 Fed. Cl. 100– Override contradicted statements agency had

made to Congress about the flexibility of the acquisition schedule, failed to consider all relevant factors and used inaccurate estimates of cost savings

• Advanced Systems Dev v. U.S. 72 Fed. Cl. 25– Justification failed to show contract performance

would be “in the best interest of the United States.” Court stated it “will almost always be the expectation that the new contract will be an improvement over the old.”

CICA Override

• Automation Tech v U.S. 72 Fed Cl. 723– Projected monthly savings of $103,196.77 does

not justify override

SUMMARY

• FISCAL – Be Careful!• Contract Formation –

– Avoid unnecessary complexity in Source selection methodology

– Evaluate with consistency, accuracy, thoroughness.

– Evaluate and Discuss in an even-handed manner, avoid even the appearance of bias.

– Follow your own rules!– Use judgment in the source selection decision;

don’t apply procurement process mechanically.

SUMMARY

• Contract Formation – – Document accurately and carefully– Act ethically.