Agency Erred By Not Clarifying Clerical Error, Says Federal Court

A procuring agency erred by failing to seek clarification of an obvious clerical error in a small business’s proposal, according to a recent ruling by the U.S. Court of Federal Claims.

In BCPeabody Construction Services, Inc., No. 13-378C (2013), the Court held that although procuring agencies have discretion as to whether to clarify clerical mistakes, that discretion is not unlimited–and that failing to clarify an obvious mistake may be an abuse of discretion.  It’s a ruling that should be cheered by small government contractors.

The BCPeabody case involved an Army Corps of Engineers procurement for construction work in Florida.  The solicitation was issued as a small business set-aside under FAR Part 15, which governs negotiated procurements.

BCPeabody Construction Services, Inc., a small business, submitted a proposal.  BCPeabody’s proposal identified Bauer Foundation Corporation as its major subcontractor for one of the sub-elements of the contract.

In its proposal, BCPeabody submitted two project information sheets in an effort to show that Bauer had relevant experience.  However, due to a clerical error, the two sheets were identical.  As a result, the proposal did not fully demonstrate Bauer’s relevant experience.

Another small business, Edens Construction Co., Inc., also submitted a proposal.  Like BCPeabody, Edens proposed Bauer as a major subcontractor for one of the sub-elements of the project.  However, Edens correctly submitted information about two relevant projects completed by Bauer.

As the result of BCPeabody’s clerical mistake, the Corps assigned BCPeabody an “unacceptable” score for the project sub-element to be completed by Bauer.  The Corps made this determination without alerting BCPeabody of the mistake of affording BCPeabody the opportunity to clarify its proposal.  The Corps awarded the contract to Edens, at a significantly higher price.

BCPeabody filed an agency-level protest, arguing that the government abused its discretion by failing to clarify the obvious mistake regarding Bauer’s experience.  The agency denied the protest.  Bauer then took its challenge to the GAO.  The GAO found that the agency had abused its discretion, but nonetheless denied the protest for technical reasons.

BCPeabody filed a bid protest with the Court.  As it had at the agency level and at the GAO, BCPeabody argued that the Corps had abused its discretion by failing to afford BCPeabody the opportunity to clarify its clerical mistake.  The Court agreed with BCPeabody.

The Court noted that unlike sealed bids under FAR Part 14, the rules for negotiated procurements under FAR Part 15 do not include a requirement that certain mistakes be clarified.  Instead, FAR Part 15 states that clarifications are a matter of discretion.  The Court agreed that the FAR describes clarifications as discretionary, but stated that it “cannot accept the implication that there are never situations in which a contracting officer’s discretion would be abused by a failure to seek clarification.”

In this case, the court noted that the Contracting Officer had actual knowledge that Bauer possessed relevant experience.  The Court wrote:

Once the contracting officer became aware of the suitability of Bauer’s past experience with cutoff wall construction, she could not reasonably rate Bauer differently for BCPeabody as contrasted to Edens.  Given BCPeabody’s significantly lower bid, the contracting officer had virtually overwhelming cause to contact BCPeabody about the clerical error or assign an equal rating for Bauer as a subcontractor for both Edens and BCPeabody.

The Court concluded that the Corps had abused its discretion by failing to allow BCPeabody to clarify its clerical error.  The Court sustained BCPeabody’s protest and ordered the Corps to set aside the award to Edens, restore BCPeabody’s proposal to the competitive range, and conduct a new evaluation of proposals.

In ruling in BCPeabody’s favor, the Court quoted from a recent treatise by one of the deans of government contracting law, Ralph C. Nash.  Professor Nash argues that there is no good reason to allow contracting officers absolute discretion to forego clarifications in negotiated procurements:

We can’t see how the government would be harmed by adopting a mandatory verification and mistake correction rule when competitive negotiation is the procurement technique.  When the government uses long and complex solicitations, mistakes can be expected.  It would seem that both parties would benefit from a rule that compensates for such mistakes. Companies that spend the money required to compete in these circumstances would be given fair treatment and the agencies would have a better chance of awarding to the offeror(s) that really can deliver the best value.

Count me as a supporter of Professor Nash’s sentiment.  After all, agencies routinely amend their solicitations, sometimes a dozen times or more, in order to correct their own mistakes.  It seems unfair–particularly for small business set-asides–for a minor clerical error on the part of an offeror to determine the outcome of the competition.

Perhaps the FAR Council will one day amend FAR Part 15 to adopt a mandatory clarification rule.  But until that happens, the Court of Federal Claims has laid down a marker: even the broad discretion afforded contracting officers only goes so far.  In some cases, as in BCPeabody, it may be an abuse of discretion to fail to allow an offeror to clarify an obvious mistake.  It’s a result small government contractors should cheer.

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