In 2014, the AAFES (Army and Air Force Exchange Service) awarded a contract to Team Hall Venture to operate a frozen yogurt concession at a food court on a military base. The contract period of performance was for up to ten years. The concession opened that November but had to close from time to time due to rodent infestation and flooding. About a year and a half after opening, the concession ceased operations and the contract was terminated.
As part of the termination agreement, Team Hall released AAFES from any and all obligations related to the contract and waived any claim against AAFES for monetary or other relief to the contract including any that may arise in the future.
In September 2015, about two months following termination, Team Hall presented a certified claim for $673 thousand representing lost profits for the eight years remaining on the contract. The contracting officer denied all but $30 thousand of the $673 thousand. Team Hall appealed the contracting officer's final decision to the ASBCA (Armed Services Board of Contract Appeals).
The ASBCA denied the appeal, noting the plain language of the waiver signed by Team Hall. The ASBCA gave no credence to Team Hall's assertion that the Government slipped the language into the contract modification at a later date.
The ASBCA did not rule on the validity of the claimed amount - i.e. whether lost profits are recoverable under a contract termination. The Board didn't have to as the contractor had waived any rights to additional monies.
The full decision can be read or downloaded here.
Showing posts with label contract appeals. Show all posts
Showing posts with label contract appeals. Show all posts
Wednesday, July 25, 2018
Wednesday, May 11, 2016
Contractor Cannot Allocate Risks to the Government on FFP Contracts
In 2005, the Navy issued a solicitation for base operating support services at its Diego Garcia support facility. The scope of work included information technology, refuse collection, and recycling, to name a few of the varied services contemplated in the solicitation. The solicitation identified two categories of fuel under the contract. The first category was to be provided by the Navy at no cost and could be used for most of the services required by contract. The second category applied to all contractor base support vehicles and equipment. This fuel was also provided by the Navy but the contractors had to pay for that fuel at the prevailing DOD rate at the time of purchase. This arrangement was to encourage reductions in fuel usage - reductions which, if achieved, would increase the contractor's award fee pool each year.
A company named DG21 submitted a bid. Within its bid, was an estimate of contractor furnished fuel it expected to consume, The estimate was significantly lower than the amount reflected in the solicitation. DG21's proposal included a provision that if fuel rates varied from historical rates by more than 10 percent, it would seek an equitable adjustment.
The Navy responded that historical fuel usage information and rates were provided for informational purposes only and clarified that the contractor assumes the full risk of consumption and/or rate changes. The Navy told DG21 to price its proposal accordingly.
DG21 did not adjust its fuel cost estimates, reasoning that while fuel prices fluctuate dramatically from year-to-year, fuel costs, in total should decrease as a result of its energy efficiency programs. DG21 also removed the provision from its proposal indicating that it would seek an equitable adjustment if fuel prices changes by more than 10 percent. DG21 was ultimately awarded the contract.
During contract performance, fuel prices rose dramatically, reaching a maximum of more than double the historical rated indicated in the solicitation. In 2011, DG21 requested an equitable adjustment to account for the unexpected increase in fuel costs.asserting that the change in fuel price was a "change" to the contract under the FAR 52.243-4 Changes clause. The contracting officer denied the request, noting again that historical fuel rates had been provided for information purposes only. DG21 appealed the contracting officer's determination to the ASBCA (Armed Services Board of Contract Appeals). The ASBCA denied the appeal for several reasons, the first being that the Changes clause did not apply to this situation since the contract language anticipated fluctuations in the market. DG21 was not happy with the ASBCA decision so it appealed to the U.S Court of Appeals.
The Appeals Court affirmed the ASBCA decision. The Court agreed with the Navy that the contract did not allocate the risk of market fluctuations in fuel prices to the Navy. The contract specifically states that DG21 would purchase fuel at the prevailing DoD rate at the time of purchase. By referencing the prevailing DoD rate at the time of purchase rather than a specific price, the contract conveyed that the price for fuel could vary as the prevailing DoD rate varies. Accordingly, a variable fuel price was a specific part of the contract. The Appeals Court concluded:
A company named DG21 submitted a bid. Within its bid, was an estimate of contractor furnished fuel it expected to consume, The estimate was significantly lower than the amount reflected in the solicitation. DG21's proposal included a provision that if fuel rates varied from historical rates by more than 10 percent, it would seek an equitable adjustment.
The Navy responded that historical fuel usage information and rates were provided for informational purposes only and clarified that the contractor assumes the full risk of consumption and/or rate changes. The Navy told DG21 to price its proposal accordingly.
DG21 did not adjust its fuel cost estimates, reasoning that while fuel prices fluctuate dramatically from year-to-year, fuel costs, in total should decrease as a result of its energy efficiency programs. DG21 also removed the provision from its proposal indicating that it would seek an equitable adjustment if fuel prices changes by more than 10 percent. DG21 was ultimately awarded the contract.
During contract performance, fuel prices rose dramatically, reaching a maximum of more than double the historical rated indicated in the solicitation. In 2011, DG21 requested an equitable adjustment to account for the unexpected increase in fuel costs.asserting that the change in fuel price was a "change" to the contract under the FAR 52.243-4 Changes clause. The contracting officer denied the request, noting again that historical fuel rates had been provided for information purposes only. DG21 appealed the contracting officer's determination to the ASBCA (Armed Services Board of Contract Appeals). The ASBCA denied the appeal for several reasons, the first being that the Changes clause did not apply to this situation since the contract language anticipated fluctuations in the market. DG21 was not happy with the ASBCA decision so it appealed to the U.S Court of Appeals.
The Appeals Court affirmed the ASBCA decision. The Court agreed with the Navy that the contract did not allocate the risk of market fluctuations in fuel prices to the Navy. The contract specifically states that DG21 would purchase fuel at the prevailing DoD rate at the time of purchase. By referencing the prevailing DoD rate at the time of purchase rather than a specific price, the contract conveyed that the price for fuel could vary as the prevailing DoD rate varies. Accordingly, a variable fuel price was a specific part of the contract. The Appeals Court concluded:
Consistent with the general rule that the essence of a firm fixed-price contract is that the contractor, not the government, assumes the risk of unexpected costs, the prevailing DoD rate provision also allocates the risk of fluctuating fuel prices to DG21
Monday, April 27, 2015
Doctrine of Exhaustion of Administrative Remedies - Part 2
Last week we discussed the "Doctrine of Exhaustion of Administrative Remedies" which holds that Government contractors must exhaust all reasonable administrative remedies for settling a dispute before filing a lawsuit. Today we will discuss a recent case where this doctrine was applied.
The case involves a pre-award bid protest. In February 2014, the NIH (National Institute of Health) issued an RFP (Request for Proposal) as a small-business set-aside under NAICS (North American Industry Classification System) Code 541712 which limited offerors to small businesses of 500 employees or fewer. A prospective offeror appealed the NAICS designation to the SBA (Small Business Administration) who ordered the contracting officer to amend the solicitation to change the NAICS Code from 541712 to 541611, presumably allowing more companies the opportunity to bid.
Palladian Partners filed suit in the Court of Federal Claims seeking declaratory and injuctive relief to prevent NIH from accepting and evaluating proposals under the new code, which rendered Palladian ineligible to compete. The Court of Federal Claims granted Palladian's motion for judgment finding that the contracting officer's NAICS code amendment was arbitrary and capricious. Specifically, the court found that NAICS code 541611 did not best describe the statement of work for the solicitation. Based on this conclusion, the court remanded for NIH to make a proper NAICS code selection, given the current statement of work, or to determine who other wise to proceed.
NIH appealed the Court of Federal Claims judgment to the Court of Appeals for the Federal Circuit. Among other things, the Government argued that the Court of Federal Claims should have dismissed Palladian's suit for failure to exhaust administrative remedies with OMB (specifically OMB's Office of Hearings and Appeals or OHA). The Court of Appeals agreed that Palladian failed to exhaust its administrative remedies and because that failure warrants dismissal of Palladian's protest, the Court of Appeals reversed the Claims Court's decision.
When the first potential offeror appealed the NAICS Code assignment, Palladian had the opportunity to intervene and participate in that proceeding. Palladian did not do so. By regulation, when SBA issued its NAICS code determination for the solicitation, it became a final decision. Therefore, by not participating in the code determination process, Palladian lost the opportunity to file suit.
You may read the decision in its entirety by clicking here.
The case involves a pre-award bid protest. In February 2014, the NIH (National Institute of Health) issued an RFP (Request for Proposal) as a small-business set-aside under NAICS (North American Industry Classification System) Code 541712 which limited offerors to small businesses of 500 employees or fewer. A prospective offeror appealed the NAICS designation to the SBA (Small Business Administration) who ordered the contracting officer to amend the solicitation to change the NAICS Code from 541712 to 541611, presumably allowing more companies the opportunity to bid.
Palladian Partners filed suit in the Court of Federal Claims seeking declaratory and injuctive relief to prevent NIH from accepting and evaluating proposals under the new code, which rendered Palladian ineligible to compete. The Court of Federal Claims granted Palladian's motion for judgment finding that the contracting officer's NAICS code amendment was arbitrary and capricious. Specifically, the court found that NAICS code 541611 did not best describe the statement of work for the solicitation. Based on this conclusion, the court remanded for NIH to make a proper NAICS code selection, given the current statement of work, or to determine who other wise to proceed.
NIH appealed the Court of Federal Claims judgment to the Court of Appeals for the Federal Circuit. Among other things, the Government argued that the Court of Federal Claims should have dismissed Palladian's suit for failure to exhaust administrative remedies with OMB (specifically OMB's Office of Hearings and Appeals or OHA). The Court of Appeals agreed that Palladian failed to exhaust its administrative remedies and because that failure warrants dismissal of Palladian's protest, the Court of Appeals reversed the Claims Court's decision.
When the first potential offeror appealed the NAICS Code assignment, Palladian had the opportunity to intervene and participate in that proceeding. Palladian did not do so. By regulation, when SBA issued its NAICS code determination for the solicitation, it became a final decision. Therefore, by not participating in the code determination process, Palladian lost the opportunity to file suit.
You may read the decision in its entirety by clicking here.
Friday, April 24, 2015
What is the Doctrine of Exhaustion of Administrative Remedies?
Simply stated, the "doctrine of exhaustion of administrative remedies" prevents contractors or prospective contractors from seeking a remedy in court until all claims or remedies have been exhausted in the original one. The doctrine of exhaustion of administrative remedies provides that no one is entitled to judicial relief for a supposed or threatened injury until the prescribed administrative remedies have been exhausted. Exhaustion stems for the notion that simple fairness to those who are engaged in the tasks of administration, and to litigants, requires as a general rule that courts should not topple over administrative decisions unless the administrative body not only has erred but has erred against objection made at the time appropriate under its practice.
Exhaustion of administrative remedies serves two main purposes. First, it protects administrative agency authority. On this point, the Supreme Court has explained that the exhaustion doctrine recognizes the notion, grounded in deference to Congress' delegation of authority to coordinate branches of Government, that agencies, not the courts, ought to have primary responsibility for the programs that Congress has charged them to administer. Exhaustion gives an agency an opportunity to correct its own mistakes before it is haled into federal court.
Secondly, exhaustion promotes judicial efficiency. Claims generally can be resolved much more quickly and economically in proceedings before an agency than in litigation in federal court. In come cases, claims are settled at the administrative level, and in others, the proceedings before the agency convince the losing party not to pursue the matter in federal court. Even if litigation ensues, however, exhaustion of the administrative procedure may narrow the issues and produce a useful record for subsequent judicial consideration.
Exhaustion may be required by statute, regulation, or judicially-created common law. It is common for an agency's regulations to require issue exhaustion in administrative appeals. The fact that the administrative remedy was provided by a regulation rather than by a statute does not make the exhaustion doctrine inapplicable or inappropriate. Where a regulation requires exhaustion, a party's failure to exhaust administrative remedies precludes judicial review of its claim. When a regulation provides for exhaustion, courts reviewing agency action regularly ensure against the bypassing of that requirement by refusing to consider issues that have not been exhausted.
Under this doctrine, contractors (or prospective contractors) cannot appeal an Agency's actions or inaction until all administrative actions have been exhausted.
Exhaustion of administrative remedies serves two main purposes. First, it protects administrative agency authority. On this point, the Supreme Court has explained that the exhaustion doctrine recognizes the notion, grounded in deference to Congress' delegation of authority to coordinate branches of Government, that agencies, not the courts, ought to have primary responsibility for the programs that Congress has charged them to administer. Exhaustion gives an agency an opportunity to correct its own mistakes before it is haled into federal court.
Secondly, exhaustion promotes judicial efficiency. Claims generally can be resolved much more quickly and economically in proceedings before an agency than in litigation in federal court. In come cases, claims are settled at the administrative level, and in others, the proceedings before the agency convince the losing party not to pursue the matter in federal court. Even if litigation ensues, however, exhaustion of the administrative procedure may narrow the issues and produce a useful record for subsequent judicial consideration.
Exhaustion may be required by statute, regulation, or judicially-created common law. It is common for an agency's regulations to require issue exhaustion in administrative appeals. The fact that the administrative remedy was provided by a regulation rather than by a statute does not make the exhaustion doctrine inapplicable or inappropriate. Where a regulation requires exhaustion, a party's failure to exhaust administrative remedies precludes judicial review of its claim. When a regulation provides for exhaustion, courts reviewing agency action regularly ensure against the bypassing of that requirement by refusing to consider issues that have not been exhausted.
Under this doctrine, contractors (or prospective contractors) cannot appeal an Agency's actions or inaction until all administrative actions have been exhausted.
Tuesday, July 9, 2013
Once Section 8(a), Always Section 8(a)
Section 8(a) of the Small Business Act (15 USC Sec 637(a)), authorizes the SBA to enter into contracts with Government agencies and to arrange for performance through subcontracts with socially and economically disadvantaged small business concerns. The Act affords the SBA and contracting agencies broad discretion in selecting procurements for the 8(a) program.
In a recent appeal, a contractor argues that a particular solicitation was improperly set aside as an 8(a) competition because the SBA failed to perform an adverse impact analysis as required by 13 CFR Section 124.504(c). The contractor claimed that it was adversely impacted by the decision to set aside the solicitation as an 8(a) award, given that it is a small business, but no longer a certified 8(a) contractor.
The SBA contended that no adverse analysis was required because the work solicited was a follow-on shuttle bus service contract performed by the appellant when it was still an 8(a) contractor. The SBA further contended that the requirement is, therefore subject to the "once 8(a), always 8(a)" rule set forth at 13 CFR 124.504(d), which precludes removing follow-on requirements from the 8(a) program unless they are specifically released by the SBA from the program for non-8(a) competition.
The Comptroller General sided with SBA. It concluded:
You can read the entire decision here.
In a recent appeal, a contractor argues that a particular solicitation was improperly set aside as an 8(a) competition because the SBA failed to perform an adverse impact analysis as required by 13 CFR Section 124.504(c). The contractor claimed that it was adversely impacted by the decision to set aside the solicitation as an 8(a) award, given that it is a small business, but no longer a certified 8(a) contractor.
The SBA contended that no adverse analysis was required because the work solicited was a follow-on shuttle bus service contract performed by the appellant when it was still an 8(a) contractor. The SBA further contended that the requirement is, therefore subject to the "once 8(a), always 8(a)" rule set forth at 13 CFR 124.504(d), which precludes removing follow-on requirements from the 8(a) program unless they are specifically released by the SBA from the program for non-8(a) competition.
The Comptroller General sided with SBA. It concluded:
Under the circumstances, and, given the deference we accord the SBA’s interpretation of its regulations, we find the SBA’s determination--i.e., that the current solicitation is a follow-on to the previous contracts to obtain these services under the 8(a) program, and, is thus subject to the “once 8(a), always 8(a)” rule--is not inconsistent with applicable SBA regulations. In this regard, the pertinent regulation provides, “where a procurement is awarded as an 8(a) contract, its follow-on or renewable acquisition must remain in the 8(a) . . . program unless the SBA agrees to release it for non-8(a) competition.” 13 C.F.R. § 124.504(d)(1). For procurements covered by this regulation, no adverse impact analysis is required. We cannot find the SBA’s position in this regard to be inconsistent with applicable regulations.
You can read the entire decision here.
Thursday, June 13, 2013
Be Careful to Comply with Solicitation Requirements
Last December, the Department of Homeland Security (DHS) issued a solicitation for repair and maintenance work along the U.S. southwest boarder. The work included (i) fencing and gates, (ii) roads and bridges, (iii) drainage and grate systems, (iv)lighting and electrical systems and (v) vegetation control and debris removal.
The RFP instructed offerors to submit their proposals electronically, and on paper and to provide all required information in the format specified. With regard to the electronic version, the RFP required that it be submitted in "XLS" file format with all formulas and calculations. This requirement was necessary to "ensure submission of information essential to the understanding and comprehensive evaluation of the offeror's proposal. Offerors were specifically warned that a failure to comply with the RFP's proposal submission requirements would result in rejection of the firm's proposal.
Nineteen proposals were submitted in response to the solicitation. Based on an initial review, DHS rejected six of them for failing to comply with the RFP's requirement for submission of the price proposal in Excel file format. One of those six firms, Herman Construction appealed the Agency's rejection of its proposal to the Comptroller General. Herman, you see, had submitted its electronic proposal in PDF format rather than XLS format.
Herman argued that it had complied with the solicitation's submission requirements and that DHS had improperly rejected its proposal. Herman contended that its PDF files should have been acceptable to the Agency because they were based on the cost template guide provided in the RFP. DHS argued that the solicitation specifically required offerors to submit their price proposal spreadsheets as Microsoft Excel files.
The Comptroller General sided with the Government. The CG ruled that DHS properly rejected Herman's proposal for failing to comply with the RFP's mandatory proposal submission format requirement. An agency is not require to adapt its evaluation to comply with an offeror's submission. The question is not what the agency could possibly do to cure a noncompliant submission but rather, what it was required to do. Where proposal submission requirements are clear, an agency is not required to assume the risks of potential disruption to its procurement in order to permit an offeror to cure a defective proposal submission initiated by its failure to comply with mandatory solicitation requirements.
Here is yet another illustration of the importance of complying with specific solicitation requirements. All that work to prepare a proposal was for naught because of a simple formatting mistake.
The RFP instructed offerors to submit their proposals electronically, and on paper and to provide all required information in the format specified. With regard to the electronic version, the RFP required that it be submitted in "XLS" file format with all formulas and calculations. This requirement was necessary to "ensure submission of information essential to the understanding and comprehensive evaluation of the offeror's proposal. Offerors were specifically warned that a failure to comply with the RFP's proposal submission requirements would result in rejection of the firm's proposal.
Nineteen proposals were submitted in response to the solicitation. Based on an initial review, DHS rejected six of them for failing to comply with the RFP's requirement for submission of the price proposal in Excel file format. One of those six firms, Herman Construction appealed the Agency's rejection of its proposal to the Comptroller General. Herman, you see, had submitted its electronic proposal in PDF format rather than XLS format.
Herman argued that it had complied with the solicitation's submission requirements and that DHS had improperly rejected its proposal. Herman contended that its PDF files should have been acceptable to the Agency because they were based on the cost template guide provided in the RFP. DHS argued that the solicitation specifically required offerors to submit their price proposal spreadsheets as Microsoft Excel files.
The Comptroller General sided with the Government. The CG ruled that DHS properly rejected Herman's proposal for failing to comply with the RFP's mandatory proposal submission format requirement. An agency is not require to adapt its evaluation to comply with an offeror's submission. The question is not what the agency could possibly do to cure a noncompliant submission but rather, what it was required to do. Where proposal submission requirements are clear, an agency is not required to assume the risks of potential disruption to its procurement in order to permit an offeror to cure a defective proposal submission initiated by its failure to comply with mandatory solicitation requirements.
Here is yet another illustration of the importance of complying with specific solicitation requirements. All that work to prepare a proposal was for naught because of a simple formatting mistake.
Thursday, April 11, 2013
Watch Your Dates - 90 Days is Not the Same as Three Months
EPSI (Executive Personnel Services, Inc.) had a contract with the Small Business Administration (SBA) to provide temporary clerical and administrative support services. The contract ended in April 2009 but in July 2011, the Department of Labor notified EPSI that it owed $94 thousand in back wages to its employees.
In April 2012, EPSI submitted a certified claim to the SBA contracting officer seeking to recover the back wages which represented increases in the minimum wage during the period of performance. On July 5, 2012, the contracting officer issued a final decision denying the claim.
On October 5, 2012, EPSI filed an appeal with the Civilian Board of Contract Appeals. The problem was, this appeal was filed 92 days after the contracting officer's final decision and not within the 90 days specified in the Contract Disputes Act.
Because of two days, the Civilian Board of Contract Appeals (CBCA) dismissed the appeal for lack of jurisdiction.
EPSI still has avenues available to it for appeal. It can appeal to United States Court of Federal Claims within 12 months of the contracting officer's final decision. That appeal process is significantly more costly and time consuming than a Board of Contract Appeals (BCA) appeal however and EPSI is going to have to weigh the cost/benefit of doing so.
By the way, there was no ruling on the merits of EPSI's appeal. Since the CBCA found a way to throw it out on a technicality, it didn't have to get in to the details of the appeal. That's one way to clear out your backlog.
Tuesday, June 5, 2012
Failure to Comply with Solicitation Requirements - You're Outta Here!
Back in May 2011, the EPA (Environmental Protection Agency) issued an RFP (Request for Proposal) for technical support services to support aquatic resource surveys including research and planning, field sampling-related activities, sampling logistics, laboratory analyses, analytically techniques and modeling, and reporting.
The solicitation included a standard FAR clause (FAR 52.219-14(c)) requiring at least 50 percent of the cost of the contract performance incurred for personnel shall be expended for employees of the concern. One of the bidders, EcoAnalysts submitted a proposal that included only 46.5 percent of the firm's personnel cost in its direct labor base. Because the proposal failed to conform to a material term or condition of the solicitation, the EPA ruled that it was unacceptable and threw it out of the competition. EcoAnalysts appealed the award to the Comptroller General (GAO).
The percentage of proposed contractor labor (46.5%) was not in dispute. However, EcoAnalysts argued that it was unreasonable for the EPA to conclude that EcoAnalysts could not and would not comply with the subcontracting limitation and reject its proposal, given that EcoAnalysts later assured the EPA that it would comply with the subcontracting requirements.
The GAO denied the protest. The GAO ruled that although EcoAnalysts offered to , and states that it could, comply with the requirement, the proposal was reasonably found to be technically unacceptable as submitted. EcoAnalysts' offers to comply with the subcontracting limitation do not render acceptable a proposal that is noncompliant on its face. To make EcoAnalysts proposal acceptable would have required the EPA to conduct discussions and allow EcoAnalysts to revise its cost proposal. However, the EPA was not obligated to conduct discussions with EcoAnalysts for this propose, where, as here, the agency made award without discussions to other offerors with technically acceptable proposals.
By failing to read and understand the solicitation requirements, EcoAnalysts lost out on the opportunity to compete for this work.
The solicitation included a standard FAR clause (FAR 52.219-14(c)) requiring at least 50 percent of the cost of the contract performance incurred for personnel shall be expended for employees of the concern. One of the bidders, EcoAnalysts submitted a proposal that included only 46.5 percent of the firm's personnel cost in its direct labor base. Because the proposal failed to conform to a material term or condition of the solicitation, the EPA ruled that it was unacceptable and threw it out of the competition. EcoAnalysts appealed the award to the Comptroller General (GAO).
The percentage of proposed contractor labor (46.5%) was not in dispute. However, EcoAnalysts argued that it was unreasonable for the EPA to conclude that EcoAnalysts could not and would not comply with the subcontracting limitation and reject its proposal, given that EcoAnalysts later assured the EPA that it would comply with the subcontracting requirements.
The GAO denied the protest. The GAO ruled that although EcoAnalysts offered to , and states that it could, comply with the requirement, the proposal was reasonably found to be technically unacceptable as submitted. EcoAnalysts' offers to comply with the subcontracting limitation do not render acceptable a proposal that is noncompliant on its face. To make EcoAnalysts proposal acceptable would have required the EPA to conduct discussions and allow EcoAnalysts to revise its cost proposal. However, the EPA was not obligated to conduct discussions with EcoAnalysts for this propose, where, as here, the agency made award without discussions to other offerors with technically acceptable proposals.
By failing to read and understand the solicitation requirements, EcoAnalysts lost out on the opportunity to compete for this work.
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