Agency’s Discussions Only With Awardee Were Improper, Says GAO

When a procurement agency opens discussions with one offeror, it must open discussions with all offerors within the competitive range.

In a recent bid protest decision, the GAO held that a procuring agency conducted improper discussions when it limited discussions to only one offeror.

The GAO’s decision in International Waste Industries, B-411338 (July 7, 2015) involved a solicitation for the delivery of a solid waste incinerator to Joint Base Pearl Harbor Hickham. The solicitation notified offerors that the government planned to procure the incinerator using simplified acquisition procedures.  Award was to be made to the lowest priced, technically acceptable offeror.

The government received eleven timely quotations in response to the solicitation. One of the offerors, Mahto Construction, Inc., proposed certain terms that deviated from the solicitation’s requirements. First, Mahto proposed billing the incinerator installation costs on a per diem basis despite the proposal’s requirement that offerors provide a fixed price for 16 days of training and installation. Second, Mahto proposed receiving payment on a schedule as an alternative to the “Net 30” terms set out in the solicitation.

After reviewing Mahto’s proposal, the Air Force initiated communications with Mahto regarding these issues. The Air Force asked Mahto if the pricing for the installation costs was fixed and all-inclusive. Mahto responded that the price quoted for the line item included all of the installation costs and further clarified that no subsequent changes would be made regarding installation. The Air Force also asked if Mahto would accept Net 30 payment terms instead of the payment schedule Mahto had proposed. Mahto agreed to Net 30 terms.

Following these communications, the Air Force determined that Mahto’s proposal was technically acceptable. Although Mahto’s proposed price was higher than the prices proposed by the other 10 offerors, Mahto’s proposal was the only one evaluated as technically acceptable. The Air Force awarded the contract to Mahto.

An unsuccessful competitor, International Waste Industries, filed a GAO bid protest.  IWI argued that the Air Force had improperly opened discussions with Mahto, but not with IWI.

The Air Force contended that it had no obligation to open discussions with IWI. The Air Force characterized its communications with Mahto as “clarifications,” not “discussions.”  According to the Air Force, because its communications with Mahto were mere clarifications, IWI had not been treated unfairly.

The GAO wrote that clarifications are “limited exchanges between an agency and an offeror for the purpose of eliminating minor uncertainties or irregularities in a proposal, and do not give an offeror the opportunity to revise or modify its proposal.”  Clarifications “are not to be used to cure proposal deficiencies or material omissions, or materially alter the technical or cost elements of a proposal or otherwise revise the proposal.”

Discussions, on the other hand, “occur when an agency communicates with an offeror for the purpose of obtaining information essential to determine the acceptability of a proposal, or provides the offeror with an opportunity to revise or modify its proposal in some respect.”  And, as a general matter, “when an agency conducts discussions with one offeror, it must afford all offerors remaining in the competition an opportunity to engage in meaningful discussions.”

In this case, “[t]he agency’s communications with the awardee invited a response from Mahto that was necessary to determine the acceptability of Mahto’s proposal and, in fact, resulted in Mahto being permitted to supplement or alter its proposal.” The GAO concluded: “[t]his is quintessentially the nature of discussions, not clarifications.” The GAO sustained IWI’s protest.

As the International Waste Industries case demonstrates, an agency cannot allow one offeror the opportunity to make material revisions to its proposal, while denying that same opportunity to other offerors in the competitive range. Rather, when an agency opens discussions with one offeror, all other offerors in the competitive range are also entitled to discussions.

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