GAO Sustains Protest Where Contract Modification Fell Outside the Contract’s Scope

GAO protests typically address issues that occur before contract award. For example, GAO will review a solicitation’s terms. It will also review an agency’s evaluation of proposals submitted in connection with a solicitation. But as a general rule, GAO won’t insert itself into disputes arising after award, which fall under the contract administration umbrella. But there is an exception–and an important one . . . one that all federal contractors should be aware of.

So what is this exception? GAO will consider protests alleging that a post-award contract modification improperly exceeds the contract’s scope. GAO polices this space because these protests essentially argue that the modification should have been a new and separate procurement.

GAO applied this limited exception in a recent case, Leupold Stevens, Inc., B-417796 (Comp. Gen. Oct. 30, 2019), involving a gun scope procured by the Navy Surface Warfare Center.

There, the awardee had offered a scope with a wire reticle (the markings in scope the scope that provide measurement references) at a price of approximately $14 million. The protester and the other offers proposed scopes using more expensive glass-etched or hybrid reticles, and their prices ranged from $27 million to $41 million. Ultimately, the awardee was given the contract due, in large part, to its lower price.

A few months after award, the Navy discussed replacing the wire reticle with a reticle whose unique capabilities could only be leveraged using a glass-etched reticle. The eventual contract modification raised the contract price by an additional $9.3 million. The Navy characterized the change as an in-scope modification.

The protester argued that adding the glass-etched reticle fell outside the contract’s scope. Specifically, it argued that changing from a wire reticle to a glass-etched one required a change to the illumination mechanism, which was, in its opinion, prohibited by the contract. In that respect, the solicitation required the scope to be designed so that, when changing the reticle, no other design changes would be necessary to the scope. But, here, the Navy confirmed that the changing the scope from a wire to a glass-etched reticle, the scope design had to change in other aspects. But the Navy essentially argued that the solicitation anticipated this kind of modification.

GAO thought otherwise. It found that the contract did not allow for modifications to the illumination mechanism–a change in design necessitated by dropping the wire reticle and utilizing the glass-etched reticle. In other words, in GAO’s reading, the solicitation allowed for future reticle designs but, when changing the reticles, there could be no other changes to the scope’s design. Despite their noble efforts, the Navy and intervenor could not convince GAO otherwise.

Ultimately, GAO held: “On this record, in light of the restrictive solicitation language and the significant cost increase of the modification, we find that modification for the [glass-etched] reticle to be a material change and therefore outside the scope of the [awardee’s] contract.” And finally, GAO rejected the Navy’s last-ditch argument regarding prejudice–an essential element in every protest–holding that “the protester was prejudiced because the agency’s approach changed the field of competition.”

So, bear in mind that even after a contract is awarded, it can later be challenged if a modification is not confined to the scope established by the solicitation. In those cases, a new procurement is necessary.

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