GAO’s recent decision in HP Enterprise Services, LLC illustrates the challenges resulting from the recent changes to GAO’s task order protest jurisdiction. It also provides a useful overview of the current scope of GAO’s jurisdiction over such protests.  HP Enterprise Services, LLC—Reconsideration, B-413382.3 (January 26, 2017).

Here is a bit of background on the recent jurisdictional changes that led to the decision. GAO lost its jurisdiction over protests of civilian task and delivery orders valued at over $10 million on September 30, 2016. This was the “sunset date” established in the 2008 National Defense Authorization Act. GAO’s jurisdiction over such protests for military agencies or departments, or for protests alleging increased scope, period, or maximum value of the underlying contract, remained undisturbed in 2016.

For approximately three months, contractors had no forum (and therefore, no remedy) for protests of civilian task orders valued over $10 million. That changed on December 14, 2016, when the Government Accountability Office Civilian Task and Delivery Order Protest Authority Act of 2016 became law. See Public Law No. 114-779 (Dec. 14, 2016). This law restored GAO’s civilian task order protest jurisdiction to its pre-October 1, 2016 scope.

Less than two weeks later, the scope of GAO’s jurisdiction over task order protests changed yet again. On December 23, 2016, the 2017 National Defense Authorization Act became law. See Public Law No. 114-328 (Dec. 23, 2016). Although major changes aimed at limiting federal bid protests had been under discussion, most of the limiting provisions were not adopted. The 2017 NDAA did not change the $10 million threshold for protests of civilian agency task order awards. But it increased GAO’s jurisdictional threshold for military agency task order protests from $10 million to $25 million. Protests asserting that a task order award was improper because it exceeded the scope, the performance period, or the maximum value of the underlying contract can be filed without regard to the threshold.

HP gets caught in a jurisdictional trap

Like many government contractors, HP Enterprise Services was ensnared in these changes. On July 11, 2016, HP protested the award of a task order to CACI, Inc. The task order was issued by GSA, but it required the delivery of IT support services to DoD. GSA took corrective action soon thereafter, and the protest was dismissed as academic. Continue Reading When can a contractor protest a task order at GAO?

The Supreme Court’s June 2016 decision in Kingdomware Techs., Inc. v. United States, No. 14-916 (June 16, 2016), may significantly impact the meaning of the term “government contract” for years to come.

The case centered on a project for the Department of Veteran Affairs. When VA continually fell behind in achieving its three percent goal for contracting with service-disabled veteran-owned small businesses, Congress enacted the Veterans Benefits, Health Care, and Information Technology Act of 2006. See 38 U.S.C. §§ 8127 & 8128. The Act includes a mandatory set-aside provision that requires competition to be restricted to veteran-owned small businesses if the government contracting officer reasonably expects that at least two such businesses will submit offers and that the “award can be made at a fair and reasonable price that offers best value to the United States.” This is an iteration of the well-known “Rule of Two.”

When it published regulations implementing this statutory requirement, VA took the position that the set-aside requirements in § 8127 “do not apply to [Federal Supply Schedule] task or delivery orders.”  74 Fed. Reg. 64619, 64624 (2009). The Kingdomware case posed a direct challenge to this interpretation.

Continue Reading Kingdomware decision gives new meaning to the words “government contract”

Contractors supplying goods or services to the government through Federal Supply Schedules should expect increased scrutiny of their pricing in the coming months. In a July 2015 report [pdf], GAO released the results of a year-long performance audit analyzing government competition and pricing practices for FSS orders. The report highlights inconsistencies across FSS procurements, including purchasers’ frequent failure to ask FSS contractors for discounts to list prices (required by FAR 8.405-4 for orders exceeding the simplified acquisition threshold).

The main issues identified in the GAO report are nothing new. GSA is already taking steps to address the inconsistent usage of the FSS system among buyers. Calculator stock photo In March 2015, GSA proposed a rule that would impose a new transactional data reporting requirement upon FSS vendors. (For an explanation of current Price Reduction Clause requirements, take a look at our discussion here.) The proposed rule is aimed at increasing transparency in pricing across government procurements, with the end goal of an overall reduction in prices paid for FSS supplies and services. While the rule is still pending, a number of the nearly three dozen comments submitted during the comment period reveal considerable opposition to the proposed changes. Regardless of whether the proposed rule is enacted, contractors can prepare to effectively contract through supply schedules in a few simple ways. Continue Reading Increased government attention to Federal Supply Schedule pricing may soon have contractors sharpening their pencils

You read the agency’s solicitation and realize the specifications are written around a competitor’s product and your product does not qualify. You alert the government to the issue to no avail. Where do you turn?  This can be the ideal situation to lodge a pre-award protest of the specifications.

What is a pre-award protest?

Image 2012 by Thangaraj KumaravelA pre-award specification protest challenges the agency’s description of the requirements contained in a solicitation or the ground rules under which the agency intends to conduct the procurement. Under the Competition in Contracting Act, a contracting agency is generally required to specify its needs and solicit offers in a manner that will achieve full and open competition, so that all responsible sources are permitted to compete. An agency generally may include restrictive provisions or conditions in its solicitations only to the extent necessary to satisfy the agency’s needs. 10 U.S.C. § 2305(a)(1)(A); 41 U.S.C. § 3306(a)(2)(B). When an agency’s solicitation contains restrictions that prevent a potential bidder from competing, potential bidders can protest that the solicitation improperly restricts competition.

Prevailing on this type of protest can be difficult because it requires the protestor to demonstrate that an agency acted unreasonably in describing its requirements, which is an area over which agencies are granted broad discretion. But the equities of such a challenge can be in the favor of the protestor because the protest seeks to expand competition, which ultimately should benefit the agency. The GAO recently sustained a pre-award protest of a Department of Veterans Affairs procurement for sterile foam dressings because the agency was unable to provide a reasonable explanation for a restrictive absorbency specification in its solicitation. Continue Reading A primer on pre-award protests of federal procurements

Contractors receive about $50 billion a year through GSA multiple award schedule contracts. With that level of spending, it is easy to see why GSA has adopted policies and procedures that allow it to secure the best possible pricing for each one of its schedule contracts.

General Services Administration Building, March 2009Initially, GSA uses discounts, terms, and conditions that contractors offer to other customers to negotiate “most favored customer” pricing.

But negotiated prices stated in a schedule contract are not necessarily fixed for the entire term of the contract. The contractor remains subject to the Price Reductions Clause (GSAR 552.238-75), which imposes a duty to report certain changes in its commercial pricing terms. Under some circumstances, the PRC allows a downward adjustment in the contractor’s fixed prices.

Two triggers for adjustments under the PRC

Two types of events will trigger the Price Reduction Clause. The first is relatively straightforward: GSA and the contractor base the federal supply schedule pricing on a commercial price list, catalog, schedule, or similar document. The contractor later reduces the list price or otherwise revises the price list or offers more favorable pricing, discounts, or terms to another customer.  When that occurs, the contractor must offer the same reduced price, discount, or better terms to the government.

The second situation is a bit trickier. The PRC is triggered when the contractor makes a pricing change that disturbs the relationship between the government’s pricing and the pricing offered to the customer or customers whose pricing terms are established as the “basis of award.”

Continue Reading Applying the Price Reduction Clause in GSA Schedule Contracts

The Senate passed the Carl Levin and Howard P. “Buck” McKeon National Defense Authorization Act for Fiscal Year 2015 [pdf] on Friday, December 12, 2014. President Obama is expected to sign the bill into law. The $585 billion bill authorizes the Pentagon’s activities in FY 2015. It includes $521.3 billion in base defense spending and another $64 billion in war funding. Here is a summary of the procurement reform initiatives that will be relevant to contractors in the upcoming year:

  1. Cyber incident reporting for operationally critical contractors. Section 1632 of the 2015 NDAA directs the Secretary of Defense to designate and notify “operationally critical contractors,” a term narrowly defined in the bill. After notification, designated contractors will be required to report to the Department of Defense each cyber incident with respect to any network or information system of such contractor. Reports must include: an assessment of the effect on the contractor’s ability to meet the Department’s contractual requirements; the technique used in the cyber incident; any sample of malicious software obtained; and a summary of information compromised by the incident. Despite the disclosure requirement, section 1632 provides for protection of contractor trade secrets and confidential commercial or financial information. It also limits the dissemination of information obtained to relevant entities and agencies.
  2. Enhanced authority for non-DOD Chief Information Officers. Section 831 of the NDAA increases the role of Chief Information Officers of agencies other than the Department of Defense. It provides that an agency may not enter into a contract for information technology unless the contract has first been reviewed and approved by the agency’s Chief Information Officer. The head of each covered agency must ensure that its Chief Information Officer has a significant role in all annual and multi-year planning, budgeting, and reporting related to information technology. The bill requires the Director of OMB and the Chief Information Officers of appropriate agencies to increase the efficiency and effectiveness of information technology investments and to develop opportunities to consolidate the acquisition and management of information technology services. The Chief Information Officer of each covered agency is directed to inventory agency data centers and develop a multi-year strategy for consolidation and optimization of those data centers inventoried.
  3. DOD CIO positions consolidated. Section 901 of the 2015 NDAA incorporates a DOD proposal to combine the positions of Chief Information Officer and Deputy Chief Management Officer into the position of Under Secretary of Defense for Business Management and Information. The new Under Secretary will oversee business operations, personnel, and IT projects and will be appointed by the President with the advice and consent of the Senate. This change will not take place until the next administration. Continue Reading Six contracting policy changes in the FY 2015 National Defense Authorization Act

By Hal Perloff

Energy is a national security issue. The U.S. defense industry represents one of the world’s largest markets for energy, and the cost and availability of energy directly affects military capabilities and readiness. Department of Defense leaders are revamping how DOD uses energy and determining which fuels offer the best overall investment, prices, and logistical advantages with the fewest environmental problems. Moreover, the military provides an attractive test-bed for commercialization of emerging technologies on a ‘demand-pull’ basis as well as an important market for fossil fuels, renewable energy and biofuels, energy services, energy efficiency, and demand response. A secure and sustainable energy system must be viewed from a national defense standpoint. What are the risks and rewards for moving the military toward an environmentally as well as economically sustainable energy system?

This year’s J.B. and Maurice C. Shapiro Conference is entitled “Laying the Foundation for Sustainable Energy Future: Legal and Policy Challenges” and will present a panel on Sustainable Energy and the National Defense. The panel will be chaired by former Chief of the U.S. Army Corps of Engineers, retired Lieutenant General Robert Flowers, and includes as panelists:

  • Honorable Katherine Hammack, Assistant Secretary of the Army (Installations, Energy & Environment)
  • General Paul Kern, Chairman, CAN Military Advisory Board, U.S. Army (Ret.)
  • Christopher Yukins, Co-Director of George Washington University Law School’s Government Procurement Law Program
  • Matthew Carr, Managing Director, Industrial & Environmental Section, Biotechnology Industry Organization
  • Hal Perloff, Partner, Husch Blackwell, LLP

This timely and insightful conference is co-sponsored by the George Washington University Law School, Husch Blackwell LLP, the Environmental Law Institute, and the Constellation Energy Foundation and will be held on April 10 & 11, 2013 at the Jacob Burns Moot Court Room on GW’s campus.

The Veterans Administration can freely acquire goods and services from GSA’s Federal Supply Schedule, and it is not required to set-aside such procurements for veteran-owned small businesses (VOSBs) or service-disabled veteran-owned small businesses (SDVOSBs). Under the Veterans Benefits, Health Care, and Information Technology Act of 2006, the VA is required to set aside procurements for VOSBs or SDVOSBs (if it is possible to do so) before opting to use another procurement method. VA applies the so-called “Rule of Two” by conducting market research to determine whether there are at least two VOSBs or SDVOSBs capable of meeting its requirement at a fair price before selecting a different procurement method.

In Kingdomware Technologies, Inc. v. United States, No. 12-173C (Fed. Cl. Nov. 27, 2012), the Court of Federal Claims found that the 2006 Act does not apply to FSS purchases. Despite multiple GAO decisions holding the opposite, Judge Firestone found that the 2006 Act does not specifically address the relationship between the set-aside requirements and the VA’s use of FSS. Because of this ambiguity, the court looked to the agency’s interpretation and found that the VA has consistently interpreted the 2006 Act as “having no effect on its ability to use the FSS without limitation.” Ultimately, the Court found the VA’s interpretation reasonable, and it granted judgment in favor of the agency.

It is clear that the VA will continue to look to the FSS where practicable, especially for smaller purchases where it will save administrative costs by doing so. While the Kingdomware decision may be seen as further reducing opportunities available to small businesses, especially VOSBs and SDVOSBs, it highlights the advantages of participating in the FSS. Small businesses seeking to remain competitive as a VA contractor especially should consider getting on the FSS as an additional marketing and sales tool.

Many of the new contracting policies imposed by the National Defense Authorization Act for Fiscal Year 2012 [pdf] are geared towards increasing oversight of defense contractors and reducing the federal government’s outlay of cash. Here are a few of the highlights.

Continue Reading More contractor oversight in the 2012 National Defense Authorization Act

From 30,000 feet, we all know about the dramatic increase in federal contract expenditures over the last 10 years. An interesting report [pdf] published by the Center for Strategic and International Studies takes a much closer look at DOD contract spending since 1990. It does a good job of quantifying the increase in service contracts, the increase in Army contracts as a percentage of overall DOD spending, and the increase in the use of multiple-award contracts such as the Federal Supply Schedule. It concludes with a comparison of the list of the Top 20 DOD contractors from 1999 and the same list from 2009. Definitely worth a read.