Under FAR 15.206, the government can cancel a solicitation if there has been a substantial change in requirements, and the government determines, based on market research or otherwise, that additional offerors would have submitted bids if they knew about the change. In this case, the government invoked this FAR provision as the basis of its decision to cancel a solicitation. The court, in sustaining a protest challenging the cancellation, basically found that the government had not satisfied a single element of the FAR provision. The decision was not based on market research or other information, the agency’s requirements had drastically changed, and it was not clear additional offerors would submit bids if they knew of the change. This case is a reminder that the government’s discretion in canceling a solicitation is not unfettered.
Seventh Dimension, LLC. v. United States, COFC No. 21-2275C
Background
The Army issued a solicitation seeking support for special operations training exercises. The soliciaton was set aside for SDVOSBs. After receiving proposals, the Army amended the solicitation to require the contractor to provide land and training facilities. An offeror, Seventh Dimension, LLC, filed a GAO protest, alleging among other things, that the amendment did not reflect the Army’s actual needs. GAO denied the protest.
Following the GAO decision, the Army made an award to Aquila Alliance, LLC. Seventh Dimension filed a size protest, alleging Aquila was not an SDVOSB. The SBA’s Office of Hearing and Appeals sustained the protest.
The Army retracted the award to Aquila and made a second award to Reservoir International, Inc. Seventh Dimension protested the second award with GAO. In response to the protest, the Army took corrective action to assess whether the requirements for the solicitation were still valid.
Several months later, the Army announced that it was canceling the solicitation due to budget reductions, which resulted in extensive changes to the requirement. Seventh Dimension filed a protest with the Court of Federal Claims, contending that the cancellation decision lacked a rational basis.
The Army took corrective action to reconsider the cancellation decision. The Army ultimately decided to proceed with the cancellation. The Army’s cancellation memorandum stated that there had been reductions in the requirement and the agency no longer needed an IDIQ contract; rather, it wanted to proceed with a firm-fixed price contract vehicle. Seventh Dimension filed another protest with the COFC.
Legal Analysis
FAR 15.206(e)
The Army claimed it canceled the solicitation pursuant to FAR 15.206(e), which allows the government to cancel a solicitation if it issues an amendment that so changes the requirements that additional offerors would have likely submitted bids if they knew of the change. Again, the Army claimed its requirements had changed to due to budget reductions. The court, however, found that the Army had failed to satisfy several elements of FAR 15.206(e).
The Cancellation Decision Was Not Based on Market Research or Similar Evidence
FAR 15.206(e) requires that the cancellation decision must be “based on market research or otherwise.” The government acknowledged that it did not conduct market research before canceling. Rather, the government relied on the “or otherwise” clause, arguing that it had a rational basis for the cancellation. Basically, the government argued that the “or otherwise” clause effectively imposed no constraints on the cancellation decision beyond what reasoned judgment requires.
The court rejected this interpretation, findng that it essentially read the “or otherwise” language out of the regulation. The language had to mean something. The court determined that the phrase “based on market research or otherwise” meand “based on market research or evidence similar to market research.” This may include evidence already in the agency’s possession or the agency’s experience, but it had to be something.
Here, there was nothing in the administrative record beyond the changes to the solicitation itself that supported the cancellation decision.
No Evidence Additional Sources Would Submit Offers
FAR 15.206(e) states that cancellation is only warranted if there is change in requirement so substantial that if offerors had known about it, “additional offerors likely would have submitted offers.” The Army’s cancellation memorandum stated that offerors would likely view a fixed-price contract more favorably than the the initial IDIQ contract.
The court found that this conclusory statement did not satisfy FAR 15.206. The standard is not whether an offeror may view the revised requirements as more favorable, but rather whether they would have submitted an offer. Nothing in the record indicated that offerors would view fixed-price contracts more favorably, much less that additional offerors would likely submit proposals. Indeed, the government had not even attempted to explain the connection between the proposed changes and why certain offerors had been eliminated from the competitive range.
Unclear Whether Government Was Making A Substantial Change to Requirements
Under FAR 15.206(e) cancellation is only appropriate if the government is making a substantial change to its requirements. The government argued that it was making a change by removing the contractor-provided land requirement. But the court noted that Seventh Dimension had filed a GAO protest when the government first amended to add the land requirement. In that protest, the government had argued that the new requirement was minimal. Now, however, it claimed the land requirement was substantial. The court found that the government’s flip-flop on this had critically undermined its justification for cancellation and was likely barred by the doctrine of judicial estoppel. What’s more, it was not clear why the IDIQ vehicle itself could not simply accommodate this change.
Seventh Dimension is represented by Craig A. Holman, Stuart W. Turner, and Trevor G. Schmitt of Arnold & Porter Kaye Scholer LLP. The government is represented by Rebecca S. Kruser, Brian M. Boynton, Patricia M. McCartny and Deborah A. Bynum of the Department of Justice as well as by Michael J. Farr and David V. Peterson of the Army.
