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A New Way to Claim Damages Resulting from an Unfavorable CPARS Rating

Government contractors know that an unfavorable performance review posted to the Contractor Performance Assessment Reporting System (“CPARS”) can be extremely costly. Many negotiated solicitations include past performance as an important or even primary evaluation factor for contract award. An unfavorable review on a past contract can impose significant costs on the contractor to address the unfavorable review with contracting officers on future solicitations. However, the contractor saddled with an unfair and inaccurate CPARS review may now have a means to challenge the review and recover some of these costs.

Both the Federal Court of Claims and the Armed Services Board of Contract Appeals have held that they have jurisdiction to hear Contract Disputes Act claims regarding unfair and inaccurate CPARS reviews. However, the relief available up until this year was a declaration from the Court or Board that the unfair and inaccurate CPARS review was arbitrary and capricious. Neither the Court nor the Board have the power to order the contracting officer to change the unfavorable review. A contractor who receives a declaration from the Court or Board regarding an unfavorable CPARS review may use it in the future to explain the unfavorable review when bidding new government work, but the unfavorable review remains in CPARS.

However, the Board has recently validated a new type of claim related to an unfavorable CPARS review. In Appeal of Government Services Corporation, ASBCA No. 60367, 16-1 B.C.A. (CCH) ¶ 36411 (June 20, 2016), the contractor received a CPARS review that it believed was unfair and inaccurate. The contractor filed a claim for $100,000 in estimated damages. The estimate was not based on future profits from lost work, which cannot be recovered, but on the estimated costs to address the unfavorable review on future proposals. The contractor calculated how many proposals it would submit on solicitations that require consideration of past performance during the time period that the unfavorable review would remain in CPARS, and then estimated the cost “both administrative and legal, of addressing the issue with future Contracting Officers in the form of negotiations as well as protests.”

The Government moved to dismiss this claim on the basis that it failed to state a sum certain. The Board rejected this argument and validated the estimated claim, allowing the litigation to proceed. While the Board has not yet issued a decision granting such a claim, the ability to pursue monetary relief for an unfavorable CPARS review could be a game-changer for government contractors suffering from the consequences of unfair and inaccurate reviews.

This type of claim could be increasingly important if recent statutory changes to CPARS reviews are implemented. In May 2016, we summarized President Obama’s Executive Order 13673, known as the “Fair Play and Safe Workplaces” order, which imposes reporting requirements on government contractors for alleged labor law violations. One of Executive Order 13673’s lesser known effects was to add a subsection to FAR § 42.1502, which governs CPARS reviews, requiring past performance reviews to consider both the contractor’s labor law violations and steps the contractor took to address its subcontractors’ labor law violations.

Earlier this month, we reported that a federal court had enjoined the enforcement of Executive Order 13673. On October 25, 2016 the Office of Management and Budget issued a Memorandum directing Government agencies not to implement Executive Order 13673, including the new subsection of FAR § 42.1502. However, it is important to note that the district court did not address the new subsection of FAR § 42.1502 in its injunction. It is not yet clear what will happen to the new requirement to consider labor violations in CPARS reviews even if the rest of Executive Order 13673 is struck down.

We will continue to post on this issue to keep the government contractors we serve apprised of the situation as it develops.

Low Price Alone Not Dispositive of Awardee’s Intent to Violate Berry Amendment; GAO B-413798, Inspire International

Protest that an awardee’s price is so low that it evidences an intent to violate the Berry Amendment is denied where the awardee’s quotation included the required certification of compliance; the agency received additional information confirming the awardee’s intent; and nothing in the awardee’s quotation called into question the protester’s ability or willingness to comply.

Inspire International LLC protested the Army’s award of a contract for embroidered baseball caps to Lag Sports and Leather Wear LLC, arguing that the awardee’s low price indicates it will not comply with the Berry Amendment.

Inspire argued the awardee’s contract price was so low, it could only be based on an intent to furnish non-domestic products, in violation of the Berry Amendment, which generally restricts the Department of Defense’s expenditures for certain items, including articles of clothing, to domestically-produced products. In support of this allegation, the protester asserted that the Marner Group, named in the RFQ as a brand name manufacturer of the style of cap sought, agreed that the required quantity of that company’s products could not be manufactured and resold for the price of the awarded contract.

GAO disagreed, finding that the agency reasonably relied on the awardee’s representation that it would comply with the Berry Amendment, and that the agency also sought additional reassurances regarding the domestic manufacture of the caps.  Lag Sports’s quotation provided the representations and certifications required by the request for quotations with regard to its intent to comply with the domestic production requirements of the Berry Amendment and Buy America Act.

The protester, insisted that the low price offered by Lag Sports’s quotation was sufficient to alert the agency that the awardee did not intend to comply with the Berry Amendment, and to require additional scrutiny. GAO disagreed that the awardee’s price alone, by itself or in comparison to an incumbent’s price, indicates the vendor’s intent. For example, a firm properly may decide to submit a price that is extremely low, or even below the cost of performance. Moreover, notwithstanding the awardee’s self-certification, the Army sought additional information from Lag Sports and received assurances regarding the awardee’s intent to comply with the requirements of the Berry Amendment.  In its response, Lag Sports identified the domestic mills that would be supplying the fabric it would use to make the caps, and confirmed that Lag Sports itself would be manufacturing the caps in the United States.

Because Inspire did not show the Army failed to follow the required procedures for ascertaining the awardee’s intent with regard to the Berry Amendment, any reasonable basis to conclude that the awardee will furnish noncompliant products, GAO denied the protest.

Inspire International is represented by Kristin Rae Nowers. The government is represented by Capt. Jessica E. Hom, Department of the Army. GAO attorneys Gabriel D. Soll, and Christina Sklarew participated in the preparation of the decision.

FPR Should Have Incorporated Information Provided in Response to Discussions; GAO B-412998, Ultra Electronics – 3 Phoenix, Inc.

Protest challenging the agency’s evaluation of the protester’s past performance is denied, where the agency reasonably considered information submitted by the protester acknowledging technical issues and cost overruns on its reference projects, and found its past performance provided low confidence despite one excellent rating on a relevant contract; and protest challenging the agency’s technical evaluation is denied, where the protester’s final proposal revision failed to incorporate information provided in response to discussions, despite the agency’s reminder of this requirement, and this missing information resulted in the assignment of a minor weakness.

Ultra Electronics – 3 Phoenix, Inc. protested the Navy’s award of a contract for the production of tow cables to L-3 Chesapeake Sciences Corporation, challenging the agency’s past performance evaluation.

The protester challenged the agency’s assessment of its quality of performance under three contracts. For example, the protester asserted the agency improperly rated its performance as unsatisfactory for one contract, despite the firm receiving a mix of very good and exceptional ratings on a contractor performance assessment report for this contract. GAO found the agency acknowledged the very good and exceptional ratings for this contract, but also noted the CPAR did not cover the relevant work the protester cited in its proposal. Instead, the evaluators took into account a May 2015 letter submitted by the protester to the Navy, which advised that the program was experiencing supplier delivery delays, production delays, increased labor to complete test design and drawing updates, and unexpected design updates to schematic and drawing revisions, among other issues. Taking this into account, the agency reasonably considered the protester’s performance on this contract to be unsatisfactory.

For a second reference, the protester complained the agency failed to take into account gaps in the contract’s period of performance and intermittent technical instructions it received from the agency. As above, the agency relied on an internal cost projection provided by the protester which revealed cost overruns and technical issues, and assigned an unsatisfactory rating to this reference as well.

Lastly, the protester argued that the agency failed to give more weight to its very relevant/very good performance contract, but weighed each contract equally. The source selection authority acknowledged the protester performed well on one contract that was found to be very relevant, but noted that on the other three contracts, the protester had experienced cost overruns and technical issues. In considering the protester’s past performance as a whole, the SSA concluded there was low expectation the protester would successfully perform the contract. In total, GAO found the agency’s past performance evaluation reasonable and denied the protest on these grounds.

The protester also objected to the minor weaknesses assigned to its proposal, and the SSA’s consideration thereof, under the production test capabilities subfactor.  The agency assessed UE3P’s final proposal revision a minor weakness because the offeror failed to fully describe the voltage sensor calibration and hydrophone spacing testing. In response, UE3P explained that it provided the information in its response to discussion questions. However, GAO had no basis to question the assignment of a minor weakness, noting the agency advised the protester of a significant weakness in this regard during discussions. Further, the agency noted that written answers to discussion questions would become part of the proposal only if specifically referenced in the FPR. In response to discussions, UE3P submitted by letter the requested information relating to the two test capabilities, but firm neglected to include the same information in its FPR. As a result, the lack of description for the two critical capabilities garnered a minor weakness in the agency’s final evaluation. GAO considered this reasonable and denied the protest on these grounds.

Ultra Electronics – 3 Phoenix Inc. is represented by Keith L. Baker of Baker, Cronogue, Tolle & Werfel, LLP. L-3 Chesapeake Sciences Corporation is represented by Craig A. Holman, and Lauren J. Schlanger of Arnold & Porter LLP. The government is represented by Liza V. Craig, and Lea E. Delossantos, Department of the Navy. GAO attorneys Peter D. Verchinski, and Noah B. Bleicher participated in the preparation of the decision.

Agency Unreasonably Overlooked Serious Design Flaw in Awardee’s Proposal; GAO B-413389, Jacobs Technology Inc.

Protest challenging the agency’s past performance evaluation of the awardee is denied, where the agency was not required to consider work elements in past performance references separately to determine whether the discrete effort could be considered recent; and protest challenging the agency’s technical evaluation of the awardee’s proposal is sustained, where the protester’s response to a design and installation scenario proposed a significantly lower level of service than contemplated by the solicitation and indicated a lack of technical understanding, which the agency failed to consider.

Jacobs Technology Inc. protested the Air Force’s award of a contract for aerospace systems technical research and operations services to AS and D, LLC, challenging the agency’s past performance evaluation and technical evaluation.

JTI first protested the agency’s past performance evaluation of AS&D, arguing that the Air Force improperly considered non-recent past performance references for AS&D and its subcontractors. The solicitation directed offerors to submit past performance references for work that was ongoing or completed within five years of the date of the RFP, but JTI argued three of the awardee’s references were not recent with regard to the phase-in plan aspect of the work. According to JTI, because the referenced work began before July 1, 2010, the phase-in plan aspect of each was necessarily performed more than 5 years prior to the RFP’s issuance date. In relation, JTI argued that the RFP phrase “the effort” referred to each specific aspect of prior contract performance individually. According to the protester, because the agency was required to determine whether each aspect of offerors’ past performance was ongoing or had occurred within 5 years of the RFP’s issuance date, but failed to do so, the evaluation of AS&D’s past performance was unreasonable. In response, the agency explained that the term “effort” referred to the offerors’ reference as a whole, not to each discrete work element, and therefore if any part of the reference had been performed within five years of the RFP date, the agency considered the entire reference recent. GAO found the agency’s interpretation reasonable. Even assuming JTI’s interpretation was also reasonable, the protester was required to challenge this ambiguity for the deadline for proposals.

JTI also argued that the two references submitted by AS&D subcontractor AES AK did not demonstrate past performance consistent with the subcontractor’s planned role in the contract. Although the subcontractor’s stated role was to provide “engineering design and drawings, operations and maintenance,” JTI argued its references did not reflect operations and maintenance experience, and therefore it was improper for the agency to find these references relevant or very relevant with regard to the various technical subfactors. GAO disagreed, finding that the subcontractor’s references involved all areas that it would be performing on the contract at issue. While the protester also alleged that the kind of operations and maintenance work previously performed by AES AK is somehow different from the work to be performed under the contract, it provided no support for such an assertion. JTI also argued the agency’s past performance evaluation was unreasonable because none of the awardee’s references were considered “very relevant” for the most important subfactor, but GAO found this without merit, noting that there was no requirement that an offeror have very relevant past performance under the scenario subfactor in order to receive a substantial confidence rating. Given that the awardee’s references were generally considered excellent or very good quality and relevant or very relevant, GAO found it reasonable for the agency to assign its proposal a substantial confidence rating.

JTI then challenged the agency’s technical evaluation of AS&D. Under the scenario subfactor, offerors were required to respond to a hypothetical installation scenario, which included 11 specific elements upon which responses would be evaluated. AS&D’s response to the scenario described how it would design and install piping for Category D Fluid Service, which is basic, relaxed design. However, the proper service for the agency’s requirement was a Category M Fluid Service, which indicates the potential for serious harm should the fluids being transported be exposed. Although evaluators identified the awardee’s use of Category D as a weakness, they concluded the awardee’s reference to this level of service was an administrative error because other calculations and assumptions in the scenario response exceeded the requirements for the correct service. However, during GAO’s proceedings, the evaluation board chair testified the awardee’s reference to the lower level service was not an administrative error, because there were at least three separate instances in the scenario response where AS&D referenced capabilities not allowed under Category M service, but are allowed under the basic Category D service. Because the agency failed to consider areas of the awardee’s proposal that utilized an incorrect service level for the toxic fluids to be transported by its piping work, thereby overlooking a significant design shortcoming under the most important evaluation factor, GAO found the evaluation unreasonable and sustained the protest on these grounds.

The agency argued that JTI was not prejudiced by this error, given AS&D’s advantages under the technical and cost/price factors, and the relative importance of the evaluation criteria. The agency argued that none of the strengths assigned the awardee’s proposal were affected by the evaluation error, and that it already considered JTI’s response under the scenario subfactor to be superior. Accordingly, an error in the evaluation of scenario subfactor would not change the agency’s conclusion that AS&D’s proposal was technically superior and provided the best value.

However, GAO concluded that the significant deficiencies in the agency’s evaluation of AS&D’s proposal under the scenario subfactor made it impossible to determine what AS&D’s correct rating should have been. While this was one aspect of the agency’s evaluation, appropriate design standards was clearly a significant element under the most important subfactor, under the most important factor. Moreover, the agency already recognized that JTI’s past performance was superior to AS&D’s both as to relevance and quality, and that the cost difference between offerors was extremely small. Consequently, as GAO could not determine that AS&D’s proposal would remain technically superior, or the best value overall, it concluded that the agency’s actions were prejudicial to the protester.

Jacobs Technology Inc. is represented by Brian P. Waagner, Hal J. Perloff, Steven A. Neeley, Jr., Michelle L. Caton, and Charles M. Fleischmann of Husch Blackwell LLP. AS and D, LLC is represented by Amy Laderberg O’Sullivan, Olivia L. Lynch, and Sarah A. Hill of Crowell & Moring LLP. The government is represented by Maj George M. Ebert, Department of the Air Force. GAO attorneys Louis A. Chiarella, and Peter H. Tran participated in the preparation of the decision.

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