Federal Court Again Says Agency Erred By Not Clarifying Proposal Errors

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

In Level 3 Communications, LLC v. United States, No. 16-829 (2016), the Court held that although a Contracting Officer has discretion over whether to seek clarification of a proposal, this discretion is not unlimited. By failing to clarify obvious errors, the Contracting Officer’s decision was arbitrary, capricious, and an abuse of discretion.

The decision builds on a 2013 case, BCPeabody Construction Services, Inc., No. 13-378C (2013), in which the Court reached a similar conclusion. But so far, the GAO has drawn a hard line, essentially holding that an agency’s discretion in this area is unlimited.

Under the terms of the solicitation, DISA sought construction and maintenance of a Structured, High Availability Telecommunications Circuit between Wiesbaden, Germany and Arifjan, Kuwait. The solicitation requested offers for a fixed-price, indefinite-term delivery order for telecommunications, installation, service, and maintenance for an estimated 60-month period.

The solicitation provided that offerors were to submit offers to install and maintain two circuit paths: (1) a “protect path” to traverse the waters between Germany and Kuwait, and (2) a “working path” to traverse dry land. Neither path could traverse or touch a list of nations, including Iran. The solicitation stated that DISA would award the contract to the offeror that submitted the lowest-priced, technically acceptable quote with consideration of technical sufficiency, ability to meet required service date, past performance, and total price.

Level 3 Communications, LLC, the incumbent contractor, and Verizon Deutschland GmbH, along with six other offers, submitted offers by the October 28, 2015, deadline. DISA’s Technical Evaluation Team originally evaluated L3’s proposal and determined it was “technically acceptable.”

The Contract Specialist, however, responded to the TET’s finding and reminded the TET of three issues with L3’s proposal: 1) L3 failed to submit its quote in a .kmx/kml file; 2) L3 failed to state that its subcontractor for the nation of Turkey was an accredited National Long Line Agencies (“NALLA”) subcontractor; and 3) L3’s circuit route between Istanbul, Turkey, and Budapest, Hungary, was “completely UNCLEAR” due to gaps in L3’s diagram. Despite the TET’s request for clarification of these issues, the Contracting Officer decided not to request clarification from L3.

Without this information, the TET changed its prior decision finding L3’s offer “technically acceptable” to finding the offer “technically unacceptable.” After the TET found Verizon’s proposal was “technically acceptable,” DISA awarded the contract to Verizon at a price of $38.6 million more than L3 had bid.

After receiving notice of the award to Verizon, L3 filed a bid protest with the GAO. The GAO denied the protest, finding that DISA’s evaluation was reasonable. Although the GAO’s decision did not directly address the question of clarifications, the GAO wrote more generally that “the agency had no obligation to seek out and favorably consider information that the protester was in fact required to have included in its quotation.”

Subsequently, L3 filed a compliant in the U.S. Court of Federal Claims. Among its arguments, L3 alleged that the Contracting Officer had violated the FAR by failing to seek a clarification from L3 regarding the lack of .kmz routing map and in determining that L3’s working path traversed Iran, although L3’s written statement was to the contrary.

The Court agreed with L3. First, the Court found that inquiry about the absence of .kmz files in L3’s offer would be a “clarification” and not a “discussion.” Relying on its previous holding in BCPeabody, the Court noted that although FAR Part 15 is worded permissively, “the United States Court of Federal Claims has determined that a CO’s decision not to seek ‘clarifications’ can constitute an abuse of discretion under certain circumstances.” As noted in a previous blog, the Court in BCPeabody held that the Army Corps of Engineers abused its discretion by failing to clarify an obvious mistake, in that case the submission of identical project information sheets.

In Level 3 Communications, the Court too found that the CO’s decision not to seek “clarification” was arbitrary and capricious and an abuse of discretion. In making this finding, the Court relied on the facts that the omission of the .kmz file was an oversight easily corrected, L3 had provided written representation that the path did not touch Iran, and L3 proposed that its working path would follow the same path as the circuit it provided as the incumbent.

This decision highlights an emerging split between GAO and the Court of Federal Claims concerning the “broad discretion” of a CO to seek clarification of clerical errors and whether a failure to do so can be arbitrary, capricious, and an abuse of discretion. For instance, in Cubic Simulation Systems, Inc., GAO denied a protest arguing that Department of Army should have allowed an offeror to clarify a clerical error in its proposal. In Cubic Simulation Systems, GAO specifically stated that it was not required to follow the holding in BCPeabody.

While GAO may differ on its position, the Court of Federal Claims has provided its marker: despite CO’s broad discretion regarding whether to seek clarifications, that discretion can be abused. As Level 3 Communications illustrates, it may be an abuse of discretion for the CO to fail to allow an offeror to clarify an obvious error.

In our opinion, the Court of Federal Claims has the better policy. Unfettered discretion is rarely a good thing, and sometimes an agency’s failure to seek clarification is nonsensical. In Level 3 Communications, for example, the agency’s decision not to seek clarification–if allowed to stand–would have left taxpayers on the hook for $40 million, the difference in price between the proposals of L3 and Verizon.

We hope that the GAO will reconsider its position and align itself with the Court’s decisions in BCPeabody and Level 3 Communications–both because the Court’s view is better from a public policy perspective and because doing so would discourage forum shopping. For now, would-be protesters concerned about an apparent abuse of discretion in this area may be best served by skipping the GAO and filing directly with the Court of Federal Claims.