In recent years, the Government has been focused on initiatives that promote efficiency and innovation in contracting. I love this initiative, but like all good things, innovation must be accompanied by critical thinking. Critical thinking should cause Contracting Professionals to distinguish between an “innovation” and an “incorrect” application of the rules. Innovation is incorrect when it claims authority to implement processes that are opposed by either statute, regulation, case law, or executive orders. That is, innovative acquisition strategies cannot violate established bright-line dos and don’ts.[1]
There are three areas I’d like to address where I routinely observe bright-line violations during source selections performed under the authority of FAR 8.4. These include: (1) negotiations only with the best suited offeror (i.e., the apparent successful offeror); (2) use of the highest rated offeror best value methodology; and (3) the determination of a fair and reasonable price.
Negotiating with the Apparent Successful Offeror
The first bright-line violation concerns the way agencies interact with the best suited offeror. The best suited offeror is frequently used as a synonym for the apparent successful offeror (ASO); therefore, any interaction must follow the rules that govern interactions with the ASO.
Negotiation with the ASO is a long-standing exception to negotiating with all vendors in the competitive range, because updates to the vendor’s proposals are received after the vendor has been chosen for award; therefore, receiving an update to an otherwise successful offer, does not occasion prejudice against other competitors. [2]
Notwithstanding this construct, I’ve seen solicitation language that is derived from this long-standing principle, but with an added twist. It is usually very similar to the following language:
Once the Government determines the contractor that is the best-suited (i.e., the apparent successful contractor), the Government reserves the right to communicate with only that contractor to address any remaining issues, if necessary, and finalize a task order with that contractor. These issues may include technical and price. If the parties cannot successfully address any remaining issues, as determined pertinent at the sole discretion of the Government, the Government reserves the right to communicate with the next best-suited contractor based on the original analysis and address any remaining issues. Once the Government has begun communications with the next best-suited contractor, no further communications with the original best contractor will be entertained until after the task order has been awarded. This process shall continue until an agreement is successfully reached and a task order is awarded.
While working with agencies, I have detected two bright-line violations of this established acquisition principle. One violation occurs when identifying the apparent successful offeror, and the other violation occurs during exchanges.
Identifying the Apparent Successful Offeror
When the agency has identified the apparent successful offeror, the agency is allowed to receive a more favorable update. To be identified, the ASO must be determined to be the best value to the Government (price and all factors considered) and selected for an award. One caveat is the selected quotation must be technically acceptable.[3] If the quotation has a deficiency, according to the normal rules, it cannot be selected as the ASO. Agencies frequently ignore deficiencies and negotiate only with their preferred, but technically unacceptable offeror. This is a bright-line violation because the process of allowing updates from only the ASO cannot be used to cure deficiencies.[4] If a deficiency exists in the quotation that the agency thinks is best suited to support the requirement, it needs to implement an exchange process that includes other competitors[5] or write a memo excluding all other competitors from the negotiation range.[6]
The second bright-line violation concerns the language itself. The language reserves the right to negotiate only with the “ASO”, but the proposed process does not indicate that an ASO has been selected. When the ASO has been selected, the rule contemplates that the ASO will receive the award regardless of the result of post selection negotiations or updates to its quotation. However, the aforementioned language contemplates negotiating with the ASO, but if negotiations fail, the agency can move on to the next best suited ASO. This process is totally at odds with ASO exception where the awardee is previously selected before updates or revisions are accepted.
In addition to the bright-line violation of the ASO exception, this language is modeled on the Architect-Engineering (A&E) Service acquisition process.[7] In the A&E process, all best suited submissions are “selected” and ranked. From there, the agency may negotiate with one or more of the top ranked offerors.[8] The issue with utilizing the A&E-like process in the FAR 8.4 environment is that acquisitions conducted under the authority of FAR 36.6 are exempt from equal discussions, but FAR 8.4 acquisitions are not exempt .[9]
There have been a few post award challenges to the interpretation of the language and the agency’s implementation of it in the past, but to my knowledge, there has not been a preaward protest to challenge the language itself. In some of these cases, GAO has rightly pointed out, that the vendor did not protest the language even though they were put on notice of the agency’s intentions.[10] In my view, this language should be challenged in a preaward protest because it violates the requirement to have equal discussions without statutory or regulatory support for that process in FAR 8.4. If a vendor seeks to preserve its rights, it must act before the solicitation closes.
Highest Technically Rated Offeror w/ Reasonable Price
The next bright-line violation I’d like to address is using the highest technically rated best value methodology in the FAR 8.4 environment. The highest technically rated best value methodology has been recognized as a valid best value procedure that may be used FAR 15 negotiated procurements[11] and task order procurements conducted under the authority of FAR 16.5[12]. However, this best value procedure is not valid under the Federal Supply Schedules because all GSA orders and BPAs must be awarded in accordance with the agency’s obligation to consider the “lowest overall cost alternative” to the Government.[13] This was discussed in the GAO case Noble Supply & Logistics, Inc., B-418141 (Jan 2020) (hereafter referred to as the Noble case).
To reiterate, the Noble case explains, via its discourse on pages 6-7, that the obligation to award to the lowest overall cost alternative applies to orders[14] and the establishment of BPAs.[15] However, since the context of the protest involved an action where the agency contemplated a single award BPA, some agencies opine that the prohibition does not apply to multiple award BPAs. That interpretation seems to be at odds with the language in the Noble case and in FAR 8.4 itself, as neither the case law nor regulation distinguishes between single and multiple award BPAs.
Clearly, at a minimum, the FAR requires price to be considered when establishing BPAs, but one or more technical factors may also be evaluated. In context, “considered” means that price may not be treated as a nominal factor. If technical factors are used, price must be included in an integrated assessment to select the lowest overall cost alternative.
Lastly, on page 10 of the Noble case, GAO cited three reasons for finding against the agency. They sustained the protest because of the different statutory, regulatory, and factual posture of the case as compared to its earlier Sevatec[16] decision. That is, in the open market, there is no statutory or regulatory prohibition on the use of the highest- technically-rated, best-value procedure, but there is a statutory and regulatory prohibition on its use on the GSA schedule. The third reason, “the different factual posture” refers to the Sevatec procurement contemplating multiple awards vs the single award contemplated in the Noble case.
The third issue seems more like an add-on to the fact that statute and regulation are violated. It points out that the agency’s strategy “adds insult to injury” because direct competition will not take place—even at the order level. In my view, since the GAO explained that statute and regulation are violated when using the highest-technically-rated best-value methodology, even for the establishment of BPAs, I conclude this best value methodology should not be used for any FAR 8.4 acquisitions including the establishment of multiple award BPAs.
Determining Price to be Fair and Reasonable
Finally, I’ll address the process of determining prices to be fair and reasonable in FAR 8.4 acquisitions. In FAR 8.4 acquisitions, the overall price is determined fair and reasonable by evaluating the unit or hourly prices, the level of effort, and the labor mix. GSA has already determined the unit or hourly prices to be fair and reasonable, so the Contracting Officer only must determine the level of effort and labor mix reasonable. All three facets of the price must be reasonable, for the Contracting Officer to determine the overall price reasonable.
DoD deviates from this process and requires their Contracting Officers to determine the component parts of the price and the overall price to be fair and reasonable in accordance with FAR 15.404-1 processes.[17] Other agencies, although not required, routinely utilize FAR 15 processes in the FAR 8.4 environment. An examination of civilian agency solicitations reveals that agencies routinely state they expect adequate price competition, or the prices will also be compared to the Independent Government Cost Estimate (IGCE).
FAR 15.4 comparative approaches can be used to obtain better pricing or decide that GSA’s unit or hourly prices are not fair and reasonable, because, even in civilian agencies, the Contracting Officer is not required to accept the fair and reasonable determination previously made by GSA.[18] However, the rules governing FSS purchases must still be observed when determining prices to be fair and reasonable via FAR 15.4 procedures, even though the solicitation is silent on the issue. The RFQ must be read in a manner consistent with the FAR rules and regulations pertaining to FAR 8.4 purchases.[19]
For example, one may obtain discounts from the prices that GSA has determined fair and reasonable, but a price may not be fair and reasonable if it exceeds the unit or hourly prices determined reasonable by GSA, even if the overall price is below the IGCE or below the overall price of competitors or even if the quote prices are not “materially” higher than those approved by GSA.[20] Any prices higher than those in the GSA schedule renders the quotation unacceptable.[21] Pricing that exceeds those approved on a vendor’s FSS contract is not a minor issue that may be corrected via clarification, because the awardee would need to revise its pricing with respect to higher-priced labor categories in order to make it eligible for award.[22] An order based on non-FSS prices under an FSS acquisition is improper.[23]
Conclusion
The Government should continually seek to implement innovative strategies to deliver value to its customers and ultimately to the tax payers. The GSA Schedules continue to play a major role in providing these solutions. However, when utilizing the GSA Schedule remember to observe the peculiar rules of this dynamic FAR part because one size does not fit all.
Author:
Christopher E. Harris PMP, CPCM, CFCM, CCCM
Former DoD Contracting Officer, Unlimited Warrant
Owner of Productivity Partners, LLC which provides training and source selection support to Contracting Professionals and consults with industry in various capacities.
[1] FAR 1.102(d).
[2] See 52.212-1(f)(2)(ii) & 52.215-1(c)(3)(ii)(B); Omega, B-298767 (Nov 2006); The SANDI Group, Inc., B-401218 (Jun 2009).
[3] “Technically Acceptable” refers to more than issues with the technical submission. In the context of a negotiated procurement, it means “a proposal that fails to conform to a material solicitation requirement” See CR/ZWS LLC B-414766 (Sep 2017).
[4] See Innovative Management & Technology Approaches, Inc., B-418823.3 (Jan 2021).
[5] It seems that at least one agency has become aware of this contradiction and taken the deviation from the acquisition principle of fairness and equity to new heights. In Sky Sols., LLC., B-421139.2 (June 2023), the agency advised that vendors would “not automatically be considered ineligible for award” even if they had been “assessed as unacceptable.” This sentence allowed the agency to negotiate with the best suited offeror even if its quotation is technically unacceptable. I don’t understand why this was not challenged before the solicitation closed.
[6] GBTI Solutions, Inc., B-409114.3 (Jan 2014).
[7] See FAR 36.602-4(b).
[8] See Design Engineering, Inc., B-408336.3 (May 2014).
[9] Venturi Technology Partners, B-292060 (June 2003). Vendors whose quotations are technically unacceptable are not entitled to discussions; however, those who are technically acceptable are entitled to discussions (when conducted) unless a negotiation range is developed to exclude them from the competition.
[10] VariQ-CV JV, LLC., B-418551/.3 (June 2020) & SKY Sols., LLC., (Jun 2023).
[11] Sevatec, Inc., et al, B-413559.3-.7 (Jan 2017).
[12] Sumaria Systems, Inc., B-418796 (Sep 9, 2020).
[13] 41 U.S.C. § 152(3)(B) and FAR §§ 8.404(d) and 8.405-3(a)(1)-(2).
[14] See FAR 8.404(d).
[15] See 8.405-3(a)(1)-(2).
[16] See FN 10.
[17] DFARS 208.404 & DoD Class Deviation 2014-O0011.
[18] Land Shark Shredding, LLC., v. US, No. 20-1230 (Fed. Cir. 2021).
[19] Perot Systems Government Services, Inc., B-402138 (Jan 2010).
[20] Id.
[21] Id, Page 3. This is an important distinction because some Contracting Officers try to treat higher prices as if it is a minor thing that can be cured via clarifications.
[22] Kauffman and Associates, Inc., B-421917.2/.3 (Jan 2024). Contracting Officers sometime think this is a minor issue that can be corrected without discussions.
[23] See generally Science Application Int’l, B-401773 (Nov 2009) (Holding under FSS acquisitions, all items ordered must be included on the vendor’s schedule contract).
