Subcontracting Ambiguity Results in Proposal Downgrade

In a recent case, a federal court held that a procuring agency properly downgraded an offeror’s proposal because the proposal was ambiguous as to how much of the contract work the offeror intended to subcontract.

According to the Court, even though the amount to be subcontracted was small in any event, the ambiguity meant that the procuring agency reasonably questioned whether the offeror understood the requirements of the solicitation.

The decision of the U.S. Court of Federal Claims in Davis Boat Works, Inc., v. The United States, No. 13-58C (2013) involved a Coast Guard solicitation for inspection, maintenance and other related services to support Coast Guard cutters.  After evaluating competitive proposals, the Coast Guard awarded the contract to BMT Designers & Planners, Inc. (not to be confused with the Italian B.M.T.)

Davis Boat Works, Inc., an unsuccessful competitor, filed a bid protest with the U.S. Court of Federal Claims.  Davis alleged, in part, that the Coast Guard had improperly downgraded it for proposing to subcontract one percent of its electronics work, even though the solicitation did not prohibit such subcontracting.

The Coast Guard countered that it had not downgraded Davis for proposing to subcontract the work, but because Davis’s proposal appeared to misunderstand the work required by the solicitation.  The Coast Guard noted that Davis’s proposal stated that it would subcontract “100% of the necessary electronics work,” but “less than 1% of [the] total contract.”  Because electronics work accounted for more than 1% of the total contract value, the Coast Guard believed Davis’s proposal demonstrated a “less than perfect understanding of the contract’s requirements,” and downgraded Davis for that reason.

At the Court, Davis argued that it “always intended to perform the remaining electronics work itself, and that it has the necessary capacity to do so.”  The Court, however, found that this was not clear from Davis’s proposal.  It wrote, “the Court agrees with the Government . . . that because the solicitation required Davis to state its capabilities in its proposal, the adverse consequences of an omission are properly Davis’s responsibility.”  The Court denied Davis’s protest.

Although small business status was not at issue in Davis Boat Works, the case is an important one for small government contractors to note.  In the world of set-aside solicitations, small prime contractors are often asked to explain exactly how much work will be subcontracted and to whom, if for no other reason than to demonstrate compliance with the limitations on subcontracting.  Davis Boat Works demonstrates that when a contractor makes representations about the percentages of work that will be subcontracted, it must avoid ambiguities and make sure the math works.  If not, the agency may determine that the contractor lacks a full understanding of the solicitation’s requirements, as happened to Davis.

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