Case Study: Disputing and Litigating a Government Contract
This case study tracks the entire process of disputing and litigating a disagreement over a government contract.
For a deeper understanding of the complete disputes process, we provide a description of a protest undertaken by a company under a solicitation issued by a contracting agency, in this case the United States Army's Tank-automotive and Armaments Command (TACOM), a contracting agency for the United States Army. This study will not only present the facts of what occurred in this particular protest, but will also include the reasoning why the company chose the venue it did.
A protesting company may choose one of three venues in which to pursue its dispute with the contracting agency. In this case, the company chose an "agency" protest, for reasons discussed below. An agency protest is a protest filed with the same agency that issued the solicitation or contract. In choosing to file an agency protest, the company had to follow the procedural guidelines set forth by the agency unit that handled the protest on behalf of the Army, which in this case was Headquarters, Army Material Command (AMC) in Washington, D.C. The company also had to follow the Federal Acquisition Regulations (FAR).
The protesting company is a mid-sized machine and tool shop that has been working for the Department of Defense and other private-industry customers for many years. The subject device of this protest was a part for a military vehicle, and the company was the exclusive supplier to TACOM for a number of years because of price and quality. Therefore, for years, the company became very familiar with the solicitation, bidding, and performance routines under government procurement agency contracts.
The supply network for the particular part is as follows: The castings were procured from overseas providers. Once received in the United States, the castings were then sent to subcontractors to be machined and painted. One of the sub-component parts of this device was procured from a vendor in the Ohio. The final assembly work and shipment to the Army's depots was accomplished from the company's facility in Illinois.
Although the part was not necessarily a sophisticated part piece of hardware, the solicitation, bidding, and performance time frames would span over a year's time. This particular part was located on the exterior of a military vehicle and was subject to wear. Therefore, the Army had to have a constant supply of these parts in their depots and in the field. The part performed a critical function on this vehicle and therefore the contract was "DX" rated. "DX"-rated contracts are for supplies and materials the Army needs in time of national crisis. Although the DX rating was canceled several years ago, it is still being used by buying agencies.
The contracting cycle worked as follows: At the same time the company was supplying the same part under a pre-existing contract, the contracting office (TACOM) in Warren, Michigan would release a solicitation to prospective bidders for the next series of parts it needed. The company would respond to that solicitation and, upon contract award, would begin the engineering, pre-production planning, and procurement process. Therefore, at the approximate time that the pre-existing contract terminated and all parts from that contract had been delivered, the new contract was in place and the company would continue to supply the part under a new contract. The contract term for this part was for three years.
The subject solicitation that caused all the trouble was released by TACOM in the normal fashion. The company responded to the solicitation, but was denied the contract. After consulting with the local PTAC (Procurement Technical Assistance Center) representative, the law firm was immediately contacted, and a review of the solicitation and award proceeded.
Because this was a negotiated solicitation, the Contracting Office made its decision based upon price and past performance, with price being slightly more important that past performance, as set forth in the solicitation. The Contracting Office had a rating system to help it categorize the performance capabilities of bidders. When the company received notice that it had not won the award, after a quick analysis of the situation, it found it disagreed with the Contracting Office's rating relative to the company's past performance and price. It also disagreed with the rating the awardee company received. Rather than just fire off a letter to the Army complaining about what happened, the company decided to take another route.
Post-Award Debriefing of Offerors
The company determined that it was important to find out more about the decision-making process of the Contracting Office. The FAR provides for this option under section 15.506, Postaward Debriefing of Offerors.
- An Offeror, upon its written request received by the agency within three days after the date on which that Offeror has received notification of contract award in accordance with 15.503(b), shall be debriefed and furnished the basis for the selection decision and contract award.
- To the maximum extent practicable, the briefing should occur within five days after receipt of the written request.
b. Debriefings of successful and unsuccessful Offerors may be done orally, in writing, or by any other method acceptable to the contracting officer.
c. The contracting officer should normally chair any debriefing session held. Individuals who conducted the evaluations shall provide support.
d. At a minimum, the debriefing information shall include:
- The Governments evaluation of the significant weaknesses or deficiencies in the Offeror's proposal, if applicable;
- The overall evaluated cost or price (including unit prices) and technical rating, if applicable, of the successful Offeror and the Debriefed Offeror, and past performance information on the Debriefed Offeror;
- The overall ranking of all Offerors, when any ranking was developed by the agency during the source selection;
- A summary of the rational for award;
- Reasonable responses to relevant questions about whether source selection procedures contained in the solicitation, applicable regulations, and other applicable authorities were followed.
e. The Debriefing shall not include point-by-point comparisons of the Debriefed Offeror's proposal with those of other Offerors. The outcome of the debriefing shall not reveal any information prohibited from disclosure or exempt from release under the Freedom of Information Act.
Within the three-day period, the company e-mailed the Contracting Office requesting a post-award debriefing. The Contracting Office responded and a date for a telephonic debriefing was set for the fifth (business) day after the request had been made.
Because the FAR did not detail any procedures beyond those set forth above, the company checked with the Contracting Office to see if it had its own procedural guidelines explaining how it would conduct the postaward debriefing. (Although postaward debriefings are informal, the company didn't want to drop the ball on any procedural rules.) TACOM complied and e-mailed an outline of how they were going to proceed through the debriefing.
- Ground rules
- What cannot be discussed
- Source selection authority
- Evaluation procedures — In this part of its outline, TACOM explained how it evaluated the company's past performance and price under prior contracts for the same article; it also said it would assess the risk of each offeror and proposal and assign a rating to each offeror
- Other pertinent information and an opportunity for feedback
The outline further said that the participants for the Government in the debriefing would be the Contracting Officer, Contracting Specialist, and an attorney for TACOM. The outline included ground rules:
- To instill confidence in the offeror that it was fairly treated
- To assure the offeror that its proposal was evaluated in accordance with the solicitation and applicable laws and regulations
- To give the offeror an opportunity to provide feedback regarding the evaluation of the solicitation
The ground rules went on to state that the debriefing is not a debate or defense of the Government's award decision or evaluation results. The document further warned that if the company intended to debate TACOM's decision, the debriefing would be terminated. Finally, any discussion of proposals submitted by the competition would be disallowed.
The company and TACOM conducted their post-award telephonic debriefing. The company's concern centered on whether the awardee had recent, relevant contracts, and thus had sufficient demonstrative past performance upon which the Agency could determine that the awardee would be a better supplier than the incumbent company. Because the company could not ask questions about how TACOM rated the competition, it was only able to inquire about the rating it received.
After the debriefing, the company's management huddled with its attorney. With information from the session with the Contracting Office, and with knowledge of other facts, the company decided to file a protest. But it had only ten days in which to determine in which venue to file its protest and to prepare the protest document.
Venue for Filing Protest
The company had three choices of venues in which to file its protest. One option was to file in Federal District Court, but that option was discarded because of the lengthy time frames and expenses involved.
The second option was to file with the General Accounting Office (GAO). For many years the GAO has provided a forum for dispute resolution concerning federal contract awards. A body of law has developed from decisions of the Comptroller General of the United States, upon which protestors may rely to shape arguments for their own protests.
The Office of General Counsel, in publication GAO\OGC-96-24, published a descriptive guide for bid protest at GAO. This is an informative set of materials on which a protestor may partially rely if it chooses the GAO venue. However, being merely a guide, the protestor would have to refer to the GAO bid protest regulations that, of course, are far more detailed and are the law concerning where and how to file a protest. Since the GAO does change its regulations from time to time, protestors should check the Federal Register and the Code of Federal Regulations (Title 4 of the Code of Federal Regulations) (C.F.R., Part 21). Even though the GAO bid protest descriptive guide states that an attorney is not necessary when filing a protest within the GAO venue, there are many procedural requirements that, if not followed precisely, could foreclose a protestor from proceeding with its protest.
The company also looked at filing a protest within the agency itself. The Army Material Command does have a protest program and publishes its program procedures at www.army.mil/info/organization/unitsandcommands/commandstructure/amc/. The company reviewed the AMC program and it did other research relative to whether this venue would meet its needs. In comparing the agency-level versus the GAO protest, the company determined to proceed with the agency-level protest. Its reasoning was that the agency-level protest was significantly less complex in its procedures and requirements. In reviewing the AMC protest program procedures, the company determined that it would likely receive fair and expedited treatment in this venue. Going with an agency-level protest would also be less expensive. Not only does the FAR itself suggest agency-level protests, Executive Order 12979 encourages agency-level protests and other alternative dispute resolution options instead of using the GAO as the protest forum. But GAO or federal district court may make more sense under different circumstances.
Part 33 of FAR is where the protest process is explained. In Section 33.103, it instructs agencies to set up "inexpensive, informal, procedurally simple, and expeditious resolution of protests."
AMC established protest procedures that required the following to be included in the protest documents:
- protestor's identity and contact information
- solicitation contract number and identity of the contracting activity and contracting officers names
- a detailed statement of all legal and factual grounds for protest, with the warning that a protestor's mere disagreement with the decisions of the contracting officer does not constitute grounds for protest
- copies of all relevant documents
- request for ruling and request for relief
Since the company had only ten days after the debriefing to file its protest, it began immediately to prepare its protest under the rules of the AMC agency-level protest guidelines.
Preparation of Protest
Before the company sent its protest to AMC, it filed a Freedom Of Information Act (FOIA) request with TACOM for documents, because it felt there was more information available to it with which it could further develop its arguments. Because FOIA responses did not have to be replied to before twenty days after the agency received the request, the company knew it would not have the documents in time to meet the ten-day filing deadline of the protest. So when the company filed the protest, which it did within the ten-day deadline, it also notified AMC that it may file supplemental protest documents. Being an informal protest process, AMC granted an extension, and waited for the further information.
While it was waiting, AMC sent the company's protest to TACOM, which, by AMC procedures, had to provide an Administrative Report back to AMC. But the company did not have the chance to see TACOM's report to AMC. (This is one thing the company gave up when it decided to go with an agency-level protest. The GAO protest format allows this, but it takes longer to get a decision back. Plus, the company believed it could meet its burden of proof without the need to contradict TACOM's report.) Also interesting is that the awardee in such situations can get a copy of the protest documents, albeit in redacted form. Although the awardee may file papers of its own in support of the decision of the Contracting Office, the awardee in this case chose not to do so in this case, ostensibly preferring to stay on the sidelines.
The company's protest filing was based on a dispute it had with the Contracting Office's determination that the awardee's past performance and relevant experience justified a better rating than the incumbent; further, the company disagreed with the Contracting Office's assessment that the incumbent company had a less than favorable rating. The solicitation said the contract would be given to the company that had the best past performance.
To support its argument that the awardee did not deserve the favorable rating it received, the company performed research on government web sites. The company was able to show that although the awardee had, years before, produced the same part, the quantities were small and its contract was never renewed. (The protesting company had received all subsequent awards for this part following awardee's end of performance on that old contract). Awardee had little else in recent or relevant contracts with the government or private sector, and the company highlighted that fact in its protest.
Basing its argument on facts and the solicitation's guidelines, the company argued that the Contracting Office erred in assigning a favorable rating to the awardee, where there was scant past performance history to evaluate.
The second component of the company's protest consisted of a detailed analysis of its past performance on prior contracts for the same part. Some initial deliveries of the part to the Army depots had been late, and the company knew those late deliveries were counted against it when TACOM evaluated its past performance. Not only were the delays explained, but they argued they were aggressive in meeting and exceeding delivery schedules.
As an example, although this company had been making these parts for many years, the contract solicitation required a first article test (FAT). The company requested that the Government waive that FAT requirement or perform a FAT on parts that were already in production or on pieces produced in earlier runs. The company argued that had this FAT been waived, there would have been no delay on that particular contract.
Coincidentally, at about the same time the company received its denial on this contract, the same contracting agency let contracts to the company for other parts for this same vehicle. The company then questioned whether or not the evaluation criteria used by the agency had changed from one contract to another, when the solicitation criteria for the different parts were essentially the same.
The agency-level protest is flexible and allows for extensions and the filing of supplemental pleadings. In this case, because the company had not received the FOIA responses in time for the deadline in which to file the initial protest, the company was allowed to file a supplemental protest.
When it received the FOIA response, the company felt it had another argument that should be developed in the supplemental protest. The gist of its argument in the supplemental protest is that the agency may not have treated offerors equally during the evaluation process. This situation presented the company with a strategic decision, that being whether to delve into the area of bias. Company management thought long and hard about this, because it didn't want its relationship with a good customer, TACOM, to be affected.
The company knew also that once it ventured into alleging bias, it would be dealing with a body of federal case law where the burden of proof is difficult to meet. The burden of proof a protestor must meet to succeed in its allegation of bias is stated as follows:
"we will not attribute bias in the evaluation of proposals on the basis of inference and supposition without strong evidence to support such a conclusion, we will not assume that Agency employees acted in bad faith. Furthermore, in addition to producing credible evidence showing bias, the protestor must demonstrate that the Agency bias translated into action which unfairly affected the protestor's competitive position." (Comptroller General decisions from GAO protests).
However, because of the importance of this contract to the company and because of its long-standing history as a quality supplier of parts to the military, the decision was made to proceed with the supplemental protest.
The solicitation in question did require a FAT. The FOIA response contained e-mails between TACOM and the awardee, which showed that the awardee convinced the agency to waive the FAT, even though the awardee hadn't made the part in over seven years. The result of receiving such a waiver allowed the awardee to significantly improve upon its delivery schedule.
As stated before, in one of the prior contracts for the same part under which the company was performing, the TACOM refused to waive the first article test. The result of that denial of the FAT to the company created a slight delay in performance.
The agency reviews past performance on similar relevant contracts and assigns a risk rating to an offeror. Of course, the agency downgraded the company's rating for past performance because of the delay. But the company argued the delay in delivery was caused by the agency's own refusal to waive the FAT. From that, the company argued that it was receiving disparate treatment by the agency, especially since the agency waived the FAT for the awardee.
Because federal case law says "the protestor must demonstrate that the Agency bias translated into action which unfairly affected the protestor's competitive position," the company had to argue the connection between the agency's conduct and the loss of the contract. In its protest, the company said it not only lost this particular contract but that the company's future opportunities to supply parts to this Agency were negatively affected.
The AMC protest procedure guidelines require a request for relief and the company complied. Relief can be asked for in the alternative, such as the following:
- Terminate the subject awarded contract to the awardee
- Award the contract to the company
- Re-compete the contract
- Issue a new solicitation
- Provide the company with additional or alternative relief that the Agency deemed appropriate
This type of request for relief pretty much leaves it up to the agency attorneys to decide what to do, if they find that the protestor deserves relief.
Although the company did win this protest, its relief was not complete because, in the company's opinion, the agency struck a compromise. This particular solicitation allowed the agency to award the single contract to two sources. Therefore, the form of relief chosen by AMC attorneys was to modify the contract it originally awarded solely to awardee. The contract was modified so the company would produce half of the items and the awardee would produce the other half. The Army came out a winner because it now has two suppliers of that same part, guaranteeing future competition.
Although the company could have pressed the issue forward and tried to recover the entirety of the contract (believing that it had strong enough arguments to do so), it took that result as a victory. It could have decided to file a protest with the GAO (expensive and time-consuming) or in federal court (even worse).
In conclusion, the company was satisfied with its result and felt that its decision to proceed with an agency-level protest was the right decision. AMC has a number of attorneys tasked to handle such protests, some with many years of experience. The company felt it received fair treatment by AMC protest attorneys. The company was able to successfully prosecute this protest without the expense of sending representatives to hearings in Washington, D.C.; this protest was handled by telephone, e-mail, and facsimile.
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