This month’s bid protest roundup highlights three protest decisions released by the Government Accountability Office (GAO) and the Court of Appeals for the Federal Circuit (Federal Circuit) in March. The first discusses an offeror’s exclusion from the competitive range for failing to comply with the solicitation’s font type. The second involves an agency’s failure to conduct an adequate price analysis. The third confirms the Court of Federal Claims’ dismissal of a protest challenging a since-expired one-year, sole-source bridge contract award for lack of standing.
Horizons Youth Services
In Horizons Youth Services, the solicitation established, that proposal volumes were to use 8.5 x 11-inch paper with margins of at least 1 inch and use font type Times New Roman, Arial, Garamond, or Calibri, with a font size 12 point or larger, with the exception of graphics, charts, and tables. The solicitation warned offerors that any pages in excess of the page limit would not be read or considered and any failure to comply could result in the proposal’s elimination from the competition.
The agency’s technical evaluation panel reviewed Horizon’s proposal and found that Horizon used Arial Narrow font, which was different from the required Arial font and took up less horizontal space than Arial. As a result, it was impossible to confirm whether the proposal met the required page limit. The contracting officer reviewed the proposal and concluded that use of Arial Narrow allowed for at least three pages of additional text beyond the limit, giving the firm an unfair competitive advantage over other offerors who complied with the formatting requirements. Accordingly, Horizons was eliminated from the competition. This protest followed.
Horizons acknowledged that its proposal used Arial Narrow but argued that Arial Narrow was consistent with the solicitation requirements because Arial is not a single font type, rather it is a “family of fonts” that includes Arial Regular and Arial Narrow. In response, the agency explained that the font type “Arial” as used in the solicitation is consistent with a font choice offered in common word processing software platforms, including Microsoft Word and Adobe Acrobat. The GAO agreed explaining that Horizons’ interpretation failed to read the solicitation as a whole, which identified four specific fonts (not families of fonts), and would require the GAO to read-in language that does not exist.
Horizons further argued that even if it ran afoul of a formatting rule, the deviation was minor, and the agency’s rejection of its proposal was unreasonable. Although Horizons acknowledged the agency reformatted its proposal using 12-point Arial font (rather than 12-point Arial Narrow), the agency should have reformatted using 12-point Garamond font, the most compact of the allowable fonts, to meaningfully assess the impact. The GAO disagreed, explaining that “[e]ven if a reformatting effort by the offeror or the agency could be accomplished to allow for evaluation, the question is not what the agency could possibly do to cure a noncompliant submission, but rather, what it was required to do.” Accordingly, GAO found that given Horizons’ material departure from unambiguous solicitation requirements, the agency reasonably excluded Horizons’ proposal from consideration.
Takeaway: Horizons is a reminder that any attempt to circumvent clear, unambiguous solicitation instructions will likely fail, particularly where those actions result in an unfair advantage—i.e., several additional pages beyond the page limit—over other offerors. To the extent there is any question regarding a solicitation requirement, it is in offerors’ best interest to submit a question during the procurement.
SMS Data Products Group, Inc.
In SMS Data Products Group, Inc., the Air Force issued a fair opportunity proposal request (FOPR) for Combined Air and Space Center Operations Center communications support. The FOPR advised offerors that the agency would evaluate the proposed professional compensation plans in accordance with FAR 52.222-46, and any failure to demonstrate a realistic compensation plan could render a proposal ineligible for award. The FOPR further stipulated that any proposals envisioning compensation levels lower than incumbent prices for the same work would be evaluated on the offeror’s ability to “maintain program continuity, uninterrupted high-quality work, and availability of required competent professional service employees.”
The agency was also required to consider item, price, and supplier risk pursuant to DFARS 252.204-7024 to determine whether a proposed price is consistent with the historical prices paid for a product or a service or otherwise creates risk to the government.
Following a two-phased evaluation, the agency awarded the task order to Trace Systems, Inc. (Trace) and SMS Data Products Group, Inc. (SMS) protested. SMS made several arguments challenging the award to Trace, including that the agency failed to conduct an adequate evaluation of offerors’ proposed professional compensation plans under FAR 52.222-46.
Under FAR 52.222-46, the agency is required to engage in a two-prong evaluation of professional employee compensation plans. The analysis under the first prong equates to a price realism evaluation to confirm whether the offeror understands the contract requirements and whether the compensation plan is appropriate to meet those requirements. The second prong requires the agency to compare proposed compensation rates to the incumbent to determine whether the proposed compensation levels are lower than those of the predecessor contractors. If the offeror proposes lower professional compensation levels than that of the incumbent, the agency must further evaluate whether the compensation plan is sufficient to maintain program continuity.
Under the first prong, the price team compared the proposed rates to an eight percent discount from incumbent direct labor rates for the same or similar categories. The agency explained that realism concerns may exist when proposed rates were more than eight percent below the incumbent rate or market data. In its initial realism evaluation, the agency determined that certain direct labor rates for the awardee’s professional employees were below the threshold. The agency requested the awardee address the low rates. In response, the awardee adjusted all rates except for one, which remained more than eight percent below the incumbent rate. The agency took no issue with the one rate that remained more than eight percent below the incumbent rate.
The GAO, however, found that the agency failed to evaluate whether the lower rates were sufficient to maintain program continuity, uninterrupted high-quality work, and availability of required competent professional service employees, as required by FAR 52.222-46, while paying them up to eight percent less.
SMS also argued the agency failed to properly analyze price risk in accordance with DFARS 252.204-7024. DFARS 252.204-7024 requires the contracting officer to utilize the Supplier Performance Risk System (SPRS) in evaluating a proposal’s price risk.
The agency explained that the contracting officer reviewed SPRS, considered the risk assessments, and determined there were no concerns. The agency, however, ran a supplier risk report, not the required price risk report. The agency argued the DFARS 252.204-7024 price risk assessment was not used as part of the separate price evaluation because it was not part of the price evaluation criteria outlined in the FOPR. Instead, the agency relied on the price evaluation criteria outlined in the FOPR, which included the FAR 52.222-46 realism evaluation. GAO determined that because the agency’s evaluation under FAR 52.222-46 was noncompliant, the agency could not rely on that evaluation to satisfy the DFARS requirement.
Takeaway: This protest serves as a reminder to agencies and disappointed offerors that where the regulations require a comprehensive evaluation that includes consideration of multiple factors, the agency may not engage in a mechanical review. The record must confirm the agency engaged in the requisite review and consideration of all factors.
Associated Energy Group, LLC, DBA AEG Fuels v. United States
In Associated Energy Group, LLC, d/b/a AEG Fuels v. United States, the appellant, Associated Energy Group, LLC (AEG), initiated multiple protests concerning several contracts with the Defense Logistics Agency (DLA) to deliver fuel. The issue before the Federal Circuit was whether AEG had standing to challenge the award of a one-year, sole-source bridge contract to the incumbent contractor.
In 2022, DLA issued a solicitation for a five-year contract to supply fuel to military bases throughout Africa, including Djibouti. To supply fuel in Djibouti, a fuel supplier must possess a petroleum activity license (PAL) issued by the local government. DLA awarded AEG an order to begin in February 2023. That same month, AEG alerted DLA that officials within the Djiboutian Ministry of Energy and Natural Resources (MOE) were taking certain actions that would threaten contract performance. Several months later, DLA discovered that the incumbent contractor was the only supplier with a valid PAL. AEG alleged that the MOE declined to issue permits and licenses to foreign companies who refused bribe demands.
On September 1, 2023, DLA awarded a six-month, sole-source bridge contract to the incumbent contractor, with a six-month option. The solicitation provided that all offerors must possess a PAL from the MOE. AEG challenged the award of the sole-source bridge contract. The Court of Federal Claims (Claims Court) ruled that AEG lacked standing under Article III and the Tucker Act and dismissed the protest. AEG appealed.
After establishing that AEG’s protest was not moot, even though the bridge contract was set to expire before oral argument, the court turned to the issue of standing. Article III standing has three requirements: (1) the plaintiff must have suffered an injury in fact; (2) that injury must be fairly traceable to the challenged conduct of the defendant; and (3) that injury must be likely to be redressed by a favorable judicial decision.
In its complaint before the Claims Court, AEG argued the injury could be redressed by invalidating the PAL requirement, allowing AEG to bid. But in its complaint before the Federal Circuit, AEG did not challenge or seek relief related to the bridge contract’s PAL requirements. Accordingly, the court explained that even if the Claims Court was to grant AEG the relief sought, thereby requiring DLA to terminate the bridge contract and conduct a full and open competition, AEG would remain unable to perform because it did not possess the requisite PAL. To establish standing in contracting cases, the plaintiff must demonstrate that it is able and ready to bid on contracts and because AEG could not do that, the court held that AEG lacked Article III standing.
The court took its analysis one step further and opined that even if AEG could establish Article III standing, it would affirm the Claims Court’s dismissal for lack of statutory standing. Under the Tucker Act, the plaintiff is required to make two separate showings. First, the party must show that it is an interested party, which requires a party to show that it is an actual or prospective bidder and has a direct economic interest in the procurement (i.e., a substantial chance of winning the contract). Second, the party must show that it was prejudiced by a significant error. The Claims Court explained that because AEG lacked the PAL and was thus ineligible for award of the bridge contract, AEG did not have a substantial chance of being awarded the bridge contract. AEG argued the Claims Court’s position conflicted with the longstanding precedent that a protester is not required to show it has a substantial chance of award despite the alleged errors. AEG suggested that it would have had a substantial chance of award had the agency conducted a competitive lawful procurement and did not impose terms that required the payment of illegal bribes. But because AEG did not challenge or seek removal of the PAL requirement in its complaint, the alleged procurement errors did not change the fact that AEG did not possess a PAL and would not have been able to secure the bridge contract. As such, the court agreed with the determination that AEG lacked statutory standing as well.
Takeaway: When deciding whether to move forward with a protest, disappointed offerors should first ensure they can satisfy the jurisdictional requirements, such as standing. This case reiterates the importance of establishing that, but for the alleged procurement errors, the disappointed offeror would have had a substantial chance at receiving—and being able to perform—the contract.
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