Protest alleging that a contract modification exceeded the contract’s scope and thus should have been a new procurement is granted, where the modification increased the price and amount of resources for the work and required different work than the original contract, which could not have been anticipated by the original offerors.
In 2014, the Department of Defense implemented the Continuous Evaluation program, which involved automatic record checks to monitor government and private employees who had access to classified material. Ian, Evan & Alexander Corporation had a contract with DoD’s Washington Headquarter Services to validate alerts generated by the CE system. Another company, Xcelerate Solutions, had a different contract with DoD’s Defense Security Services to, among other things, review, analyze, and prioritize records flagged by the CE system.
After IEA and Xcelerate had been performing their contracts for about a year, DoD realigned the CE program so it would now be managed solely by DSS. As a result of this realignment, WHS effectively ended its contract with IEA, declining to exercise future options. DSS, on the other hand, modified Xcelerate’s contract, adding new responsibilities, including the assessment and validation of CE flags. Thus, the work IEA had been performing—validating CE red flags—had essentially been transferred to Xcelerate.
IEA sued the government, alleging that the modification of Xcelerate’s contract exceeded the scope of the contract as solicited, and that by using a modification rather than a competition, DSS had violated the Competition in Contracting Act’s requirement for full and open competition. Shortly after filing suit, Xcelerate intervened, and all the parties moved for judgment on the administrative record.
In ruling on the competing motions, the court noted that modifying an existing contract so that it materially departs from the scope of the original procurement violates CICA by preventing potential offerors from participating in what should be a new procurement. To determine whether a modification is within the scope of the original procurement, the court would consider whether the modification substantially changed the type of work, the performance period, and the costs of the original contract.
The court found that the modification exceeded the scope Xcelerate’s original contract. First, the court reasoned, the initial contract involved receiving, evaluating, and disseminating flags identified by the CE system. The modification, however, required far more—i.e., providing a knowledge based analytic capability for assessing and validating the flagged records. The court determined that this type of work differed from the mere review and dissemination of flagged information that Xcelerate had been performing before the modification. Xcelerate now had to develop tools to capture and analyze data that it did not have to perform under the original contract. Moreover, the modification now required Xcelerate to develop policy, coordinate, and assess the entire CE program. Again, this was not work that had been included in Xcelerate’s original contract.
The court was further persuaded that the modification exceeded the scope of the contract by the increases in time and personnel that DSS anticipated for the project. DSS estimated that due to the modification, it would now take Xcelerate nine times longer to complete s single CE report. Moreover, this new work would require several times the number of personnel required by the original contract.
Also, while not dispositive, the court noted that the modification nearly doubled the price of the contract. Taken together with the change in services provided under the contract, this was a significant indication that the modification exceeded the scope of the contract.
The government and Xcelerate contended that offerors could have anticipated the modification and thus it was not outside the scope of the original contract. The court, however, found that it was by no means clear that offerors could have foreseen a modification of this magnitude. After all, IEA already had a contract with WHS performing validation of CE alerts; there was no reason to expect that the DSS contract would be modified to include this exact validation work. What is more, none of the four offerors that responded to the DSS contract had included end-to-end processing of CE alerts in their proposals, further indicating that this modification was not foreseeable.
Having concluded that DSS issued an out-of-scope modification that violated CICA, the court turned to whether IEA was entitled to an injunction. Applying the four factors used to determine the propriety of injunctive relief, the court found that IEA had prevailed on the merits. Additionally, because it had lost the opportunity compete for the DSS contract, IEA had also suffered irreparable harm. The court also found that the balance harms weighed in favor of IEA. While the agency may be harmed by a gap in services, the court believed this could be mitigated by giving IEA a bridge contract while it competed the DSS contract. Finally, the court found that the public interest was served by ensuring that the DSS contract was procured by free and open competition.
The court granted IEA’s motion for judgment on the administrative while denying the government’s and Xcelerate’s cross-motions.
Ian, Evan & Alexander Corporation is represented by John R. Prairie, Brian G. Walsh, Kendra P. Norwood, and Cara L. Lasley of Wiley Rein, LLP. Xcelerate is represented by Michelle E. Litteken, Jonathan T. Williams, Samuel Finnerty, and Meghan F. Leemon of PilieroMazza PLLC. The government is represented by Douglas T. Hoffman, Franklin E. White, Jr., Robert E. Kirschman, Jr, and Carl A. Readler of the U.S. Department of Justice.
