Proving that an agency acted improperly in its source selection process can be a difficult task for any protester. In theory, for a best value tradeoff decision, the agency’s decision and the process to come to that decision seems easy: the agency does a tradeoff between cost and non-cost factors, and that which is most advantageous to the government is awarded. How hard could it be? And the decisions handed down by the Government Accountability Office (GAO) and the Court of Federal Claims (COFC) seem to confirm that it isn’t that hard, seeing as many cases challenging a best value decision are denied. This is, in large part, due to the discretion agencies are afforded in their source selection decisions. Whether an agency conducts discussions during the source selection process is one of many procurement factors that is left up to the agency’s discretion. But, every so often, a decision comes along to prove that there are limits to an agency’s discretion, and in this case, the agency’s discretion overstepped its bounds with its price reasonableness decision and the unjustified decision to not perform discussions.
In SLS Federal Services, LLC v. United States, No. 22-1215 (Fed. Cl. Jan. 10, 2023), the Naval Facilities Engineering Systems Command, or the Agency, issued a solicitation looking for indefinite delivery, indefinite quantity (IDIQ) contracts for global contingency construction. And what is global contingency construction? In this context, it means a construction contract that “can arise anytime and anywhere,” and, as you will soon see, knowing what it is becomes important a little bit down the road.
Under this solicitation, awards would be made to contractors whose offers represented the best value to the government, as determined through performing a best value tradeoff analysis, with cost being the most important factor. The terms of the solicitation required offerors to submit cost data, including hourly labor rates and indirect ceiling rates, but did not anticipate profit or an overall price. The Agency planned to analyze cost proposals for both cost and price reasonableness. Once the initial group of awardees was determined, they would later compete for “cost-plus-award-fee or firm fixed price task orders,” with the Agency intending to use firm fixed price task orders as much as possible. The solicitation conveyed, and the Agency reaffirmed, that it intended to make awards without discussions, but it reserved the right to conduct discussions if needed.
Offerors would be evaluated in three different phases. First, the Agency’s evaluation board would evaluate each factor independently. This included the cost factor as well as four non-cost factors: corporate experience, safety, small business utilization and participation, and past performance. The evaluation board would then make two reports; one report for cost factors, and, you guessed it, one for non-cost factors. The Agency’s advisory council then reviewed the board’s reports, consolidated that information into its own report, and then made recommendations to the source selection authority for offerors it believed should receive awards. The source selection authority then reviewed the recommendation. If the source selection authority agreed with the advisory council’s recommendations, and did not feel a need to conduct discussions, it would select the contractor or contractorss whose proposal was the best value to the government.
Award and GAO Protests
The Agency ended up making awards to six out of nine contractors who had submitted proposals. Following award, the protester, SLS, filed its protest to GAO based on the Agency’s decision to not conduct discussions and that the Agency had erroneously analyzed price reasonableness. As these things often go, the Agency opted to take corrective action “to address the evaluation of the proposals, including, but not limited to, price reasonableness.”
Don’t we all love a happy ending? Yes? Well, I’m sorry to inform you that we don’t have one here…yet.
Nearly a year after the Agency had filed its notice of corrective action, it once again made awards to the same six offerors. When reviewing the corrective action taken, for almost an entire year, the Agency removed an “inappropriate CPARS evaluation” and stated that “no additional amendments or requests for proposal revisions [were] made in the pursuance of th[e] corrective action.” SLS once again filed a protest with GAO. Due to disputes over document production in the second GAO protest, SLS then filed its protest with the Court of Federal Claims.
In protests that are submitted to COFC, the judge is looking at the agency’s actions to determine whether they were “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.” And here, COFC ultimately determined that the agency’s actions were arbitrary and capricious. It’s also important to note that, had the Agency been firing on all cylinders, it would have pointed out that the protester was too late to challenge what was technically the terms of the solicitation, thus waiving its price reasonableness argument (remember the profits missing from the price proposals?). This was eventually pointed out by an intervenor, but because the Agency did not point out the protester’s waiver of a challenge to the terms of the solicitation by not filing a protest prior to the date offers were due, in neither GAO protest nor in the COFC protest, the Agency thereby waived any defense it had to the price reasonableness issue, at least as far as it was considered a term of the solicitation. Protester: 1; Agency: 0.
Price Reasonableness Analysis
It is here where the protester’s arguments really get some traction. SLS’s protests challenged the Agency’s purported inability to conduct a price reasonableness analysis on offeror’s proposals because the Agency never asked for pricing information. Now, you may be thinking, “Sure they did! You just said cost was the most important factor in the evaluation.” And you would be right, I did. But cost and price are two different things, with cost representing the cost to the contractor, and price being what the contractor will charge the government for its products and/or services. In many cases, price reasonableness is then determined when looking at the difference between costs and price in relation to other offerors’ price proposals.
However, when the agency doesn’t require certified cost or pricing data, as here, “[the] agency ‘shall’ use price analysis” per FAR 15.404-1(a)(2). One way of doing this is comparing prices when adequate competition exists, which is permitted per FAR 15.404-1(b)(1). Because the Agency failed to address the missing price information as part of its corrective action, there was no way for it to evaluate price reasonableness. In response, the Agency claimed that it was impossible to evaluate firm fixed price proposals because of the nature of global contingency construction contracts (See? Here it is again!), and therefore conducted a price reasonable analysis in line with FAR 15.404-1(b), but that argument ultimately failed, with COFC finding that a price reasonableness evaluation cannot happen with no price information at all. Protester: 2; Agency: 0.
SLS’s protest of the Agency’s price reasonableness evaluation was not the only issue protested. SLS also protested the Agency’s decision to not conduct discussions even though DFARS 215.306, which is applicable here, “’create[s] a presumption in favor of’ discussions.” While not applicable in all federal government acquisitions, the DFARS state that “’contracting officers should conduct discussions’ ‘[f]or [defense contract] acquisitions with an estimated value of $100 million or more.’” The decision on this issue came down to the meaning of “should” within the applicable DFARS.
Both GAO and COFC decisions showed a history of a presumption in favor of discussions, with the requirement that the contracting officer document its reasoning for not conducting discussions. Although the Agency tried to defend its decision to not conduct discussions by its notice that it planned to make awards without discussions, that reason was not enough to satisfy the COFC because “agencies are ‘bound by the applicable procurement statutes and regulations,’” and DFARS 215.306 clearly required the Agency to either conduct discussions or justify its decision not to. Further, stating that the awardees were “clearly awardable” was not sufficient justification either because “an agency must ‘articulate a rational connection between the facts found and the choice made.’” Otherwise, the agency’s decision is arbitrary and capricious, which was exactly what COFC determined here. Protester: 3; Agency: 0.
Conclusion and Relief
In the end, the COFC determined that SLS was prejudiced by the Agency’s lack of pricing information that was required to conduct a price reasonableness decision and for the Agency’s decision to refrain from conducting discussions without proper justification. Correcting either one of those issues could have potentially left SLS in the competition, which is the very core of prejudice in federal contracting.
Since SLS was determined to have been prejudiced by the Agency’s actions, COFC looked to determine whether the protester’s request of a permanent injunction was appropriate. In doing so, COFC must weigh the “competing claims of injury” and the “effect on each party of the granting or withholding of the requested relief.” To do so, the courts must consider the following four factors:
(1) Whether the plaintiff succeeds on the merits;
(2) Whether the plaintiff will suffer irreparable harm without injunctive relief;
(3) Whether the “balance of hardships” favors the plaintiff; and
(4) Whether the injunction is in the public’s interest.
COFC’s final analysis determined each of these factors were in favor of SLS, and therefore enjoined the Agency from proceeding with performance of the contract.
Game, set, match.
You can read the entire decision here: SLS Federal Services, LLC v. United States, No. 22-1215 (Fed. Cl. Jan. 10, 2023).
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