Semiconductor Supply Chain Update
FAR Council Released Advance Notice of Proposed Rulemaking
Suppliers of semiconductors to the government beware. The FAR Council released an Advance Notice of Proposed Rulemaking that would prohibit the government from acquiring and contractors from providing certain semiconductor parts, services, or products from certain Chinese companies, among other potential sources controlled by or connected with the government of a “foreign country of concern.” The ANPRM would require a “reasonable inquiry” which is familiar for contractors who conducted similar inquiries when implementing Section 889-related prohibitions, disclosures, and corrective actions.
Cybersecurity News
NIST SP 800-171 Rev. 3 and DFARS Class Deviation to Continue to Comply with Rev. 2 until Further Notice
The Department of Defense issued a DFARS class deviation instructing DOD contractors to continue to comply with NIST SP 800-171 Rev. 2 until further notice. The class deviation was released just in time. On May 14, 2024, NIST released the final Rev. 3 of this critical publication, including a change analysis between Rev. 2 and Rev. 3.
Article of Interest
Defending a Small Business Suspension Action
Jenner & Block Government Contracts Practice Co-Chair David Robbins recently published Defending a Small Business Suspension Action in The Government Contractor.
Claims Updates
- GSA issued Honeywell a task order to provide operations and maintenance services (including after-hours services) as well as facility maintenance and tour coverage outside of normal business hours. An audit of GSA found that: (1) GSA had overpaid for after-hours services; (2) Honeywell had failed to provide the required number of staff for after-hours services; and (3) after-hours services staff worked 12-hour shifts, rather than the 14-hour shifts required by the contract. Following the audit, GSA informed Honeywell that it intended to withhold overpayments for after-hours services.
- Honeywell and GSA later executed a bilateral contract modification which purported to incorporate the parties’ negotiated agreement and constitutes a “full and final settlement of all issues” related to the after-hours services. Shortly thereafter, the contracting officer sent Honeywell a letter regarding the second and third audit findings, i.e., that Honeywell had not provided the number of staff required and that the staff had not worked the number of hours required. Eventually, on April 29, 2022, the contracting officer demanded the recoupment of over $20 million “for services that could not be substantiated” under the audit.
- Although the letter was not styled as a contracting officer’s final determination, neither party contested CBCA’s jurisdiction and the CBCA accepted that this demand letter constituted a final decision that established its jurisdiction.
- On appeal to the CBCA, Honeywell asserted that because the bilateral contract modification constituted a “full and final” settlement of the dispute regarding after-hours services, GSA’s demand was barred.
- The board disagreed and denied summary judgment, holding that there were material facts in dispute as to the scope of the modification and release. Specifically, the “negotiated agreement” incorporated into the modification was a series of email communications that failed to indicate an agreement between the parties, but instead look “as if the parties were summarizing two different negotiations, perhaps in an effort to memorialize their own interpretations as representative of the parties’ joint agreement.” Given the “confusing” result, the CBCA could not conclude that there was no dispute as to the scope of the bilateral modification.
When negotiating contract modifications and releases, contractors should take care to ensure that the modification both accurately reflects the contractor’s understanding of what is encompassed within it and also that it reflects an actual agreement between the parties.
Bid Protest Updates
ITility, LLC, B-421871.3, B-421871.4 (May 3, 2024)
- GAO sustained a protest challenging DHS’s issuance of a task order where the protester alleged that the agency’s technical evaluation was unreasonable.
- ITility argued that DHS unreasonably assigned the higher-priced awardee a “positive” for a risk management tool when the solicitation did not seek risk management services. After reviewing the agency report, ITility raised two supplemental arguments challenging the agency’s evaluation of the same tool.
- ITility also argued that the agency failed to credit its management approach, which proposed more senior accounting personnel than the awardee, and its staffing approach, which proposed a faster transition period than the awardee.
- GAO sustained the protest on both grounds. First, GAO found that DHS conceded the arguments regarding the evaluation of the awardee’s risk management tool by failing to substantively address ITility’s supplemental protest grounds.
- Second, GAO found that the agency failed to consider the qualitative advantages of the protester’s more qualified accounting personnel. Instead, the agency’s contemporaneous evaluation found, without further explanation, that both offerors “met” the RFP’s requirements.
Where a solicitation indicates that the agency will evaluate the “extent” to which a proposal meets a particular requirement, offerors can reasonably expect that a proposal exceeding the agency’s minimum requirements will garner a more favorable evaluation than one that merely meets the requirements. Where the agency announces such a scheme, an evaluation that assesses whether key personnel met the minimum qualification and experience requirements, without qualitatively assessing their qualifications and experience, is contrary to the announced criteria and unreasonable.
- In a procurement for language analyst services, GAO denied a protest challenging the National Security Agency’s (NSA) determination not to conduct discussions with the protester because the weakness did not rise to the level of a significant weakness.
- When conducting discussions with offerors in the competitive range under FAR 15.306, agencies are required to identify “at a minimum . . . deficiencies, significant weaknesses, and adverse past performance information to which the offeror has not yet had an opportunity to respond.”
- Here, during discussions, the protester asked the NSA whether the agency identified “any weaknesses” in its proposal, to which the Agency responded no. The evaluation record later revealed that the agency had a series of “concerns” with the protester’s proposal, leading to a claim that it was misled.
- GAO found no basis to sustain the protest, noting that even if the “concerns” amounted to weaknesses, and the NSA had affirmatively answered that weaknesses existed, there would have been no obligation to inform the protester about the nature of the weaknesses since they were not “significant.”
- The protester, in turn, could not credibly claim prejudice since it would not have been able to address weaknesses that were not disclosed.
Although an agency may not mislead an offeror by responding to a question in a manner that does not address the agency’s concerns, GAO has also stated that to satisfy the requirement for meaningful discussions, an agency need not “spoon-feed” an offeror as to each and every item that could be revised to improve an offeror’s proposal.
- GAO denied a protest that the agency disparately evaluated technical capability quotations and otherwise unreasonably evaluated the protester’s marginal-rated technical quotation.
- As an initial matter, GAO found the protester’s argument to be an untimely challenge to the terms of the solicitation, which claimed that the agency unreasonably failed to evaluate its past performance volume. Here, the solicitation advised that any quotation receiving a marginal or unacceptable rating would not be further evaluated.
- GAO also found no basis to disturb the significant weakness assigned to the protester’s staffing approach. The protester’s proposal admitted that as part of its performance of the prior contract it was still attempting to fill a certain mandatory on-site position required by the instant solicitation, which the agency reasonably found to present risk.
- With respect to disparate treatment, GAO agreed with the agency that the protester’s quotation hedged regarding its commitment to meet staffing requirements, while the awardee’s quotation confirmed that all staffing requirements would be met by the time contract performance began. GAO did not credit the protester’s argument that the awardee lacked the requisite staff as evidenced by its post-award efforts to recruit incumbent personnel, focusing instead on the awardee’s unequivocal commitment to meet staffing requirements.
Post-award developments during a contract transition are often used as a factual predicate for protest grounds. Here, GAO relied on the awardee’s proposal representations to determine that the agency had not unequally evaluated quotations.
- This case underscores the importance of being alert to ambiguous solicitation requirements.
- Disappointed bidder Eagle Hill filed a post-award bid protest challenging the Federal Emergency Management Agency’s (FEMA) award of contract for administrative support services.
- Amendment 2 to the Solicitation included a significant revision to the price evaluation criterion. There, FEMA provided an excel pricing spreadsheet that offerors were to use when submitting pricing information.
- Amendment 2 advised offerors that FEMA would apply its estimated labor hours to their proposed labor rates in one column of the provided pricing spreadsheet. However, the Amendment also instructed offerors to submit the pricing spreadsheet from the original solicitation that had numerous columns for offerors to complete, beyond just labor rates.
- Eagle Hill argued that this created a latent ambiguity regarding what pricing information the offerors were required to submit and what pricing information would actually be evaluated.
- The court agreed that the instructions were ambiguous. However, the court found that this ambiguity was patent because it was not hidden or concealed in the revised evaluation criteria.
- The “glaring” inconsistency should have put the protester on notice that it was required to challenge the ambiguity or seek clarification before submitting its bid.
A contractor with the opportunity to object to the terms of a government solicitation containing a patent ambiguity and fails to do so prior to the close of the bidding process waives its ability to raise the same objection subsequently in a protest.
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