Court of Federal Claims Bid Protest Update

Netcentrics Corporation v. United States and Rockwell Collins, Inc. v. United States

Two recent Court of Federal Claims decisions reaffirm that the Court will meaningfully review an agency’s proposed corrective action. For context, GAO will almost always dismiss a protest as academic once an agency announces its intent to take corrective action, and GAO will almost always defer to an agency’s cancellation of a solicitation. The Court is less deferential in these matters.

In Netcentrics Corporation v. United States, Judge Solomson rejected an agency’s motion for voluntary remand to take limited corrective action in response to a protest because the remand request lacked sufficient detail, contained internal contradictions, and would not address several of the protester’s allegations. No. 23-1966 (February 13, 2024). In Rockwell Collins, Inc. v. United States, Judge Dietz rejected the Air Force’s proposed solicitation cancellation, finding that the agency’s rationale for cancellation did not satisfy the specific FAR provision invoked to support cancellation. No. 23-1800 (February 14, 2024). These decisions are powerful reminders that protest litigation before the court can be very different from protest proceedings before GAO. Protest parties and counsel must know their forum.

GAO Bid Protest Updates

Marathon Medical Corporation, B-422168.2 (February 14, 2024)

• GAO dismissed a protest as untimely because it was filed more than ten days after initial adverse agency action on the protester’s agency-level protest.
• Protester Marathon Medical filed a timely agency-level protest with the Department of Veterans Affairs challenging the application of the nonmanufacturer rule to a simplified acquisition for numerous commercial medical supplies and surgical items.
• The solicitation closed on December 1, 2023, and the VA ultimately denied Marathon’s agency-level protest on January 17, 2024. Thereafter, Marathon filed a protest at GAO on January 29.
• GAO dismissed the protest as untimely because it was not filed within ten days of when the solicitation closed, which constituted initial adverse agency action.

GAO’s bid protest filing timelines are notoriously strict. Where an agency-level protest is filed prior to a GAO protest, GAO regulations provide that any subsequent protest to GAO must be filed within ten days of “actual or constructive knowledge of initial adverse agency action.” Adverse agency action means any action or inaction on the part of a contracting agency that is prejudicial to the position taken in a protest filed with the agency—expressly including the “opening of bids or receipt of proposals.” In other words, when an agency-level protest challenges the terms of a solicitation, and the contracting activity subsequently proceeds to close the period for submitting proposals, a protester is on notice that the contracting activity has not taken corrective action to address the challenged terms. This inaction constitutes adverse agency action, triggering a ten-day clock to bring the protest to GAO. Contractors must pay close attention to relevant deadlines to avoid disappointment at GAO.

Jacobs Technology, Inc., B-421739.3 et al. (January 31, 2024; published Feb. 15, 2024)

• GAO denied a protest challenging the General Services Administration’s (GSA’s) rejection of a proposal due to the unavailability of a proposed key person.
• The solicitation for this multibillion-dollar task order competition (conducted by GSA on behalf of the US Special Operations Command) identified five key personnel positions, including a quality assurance manager.
• Subsequent to proposal submission but prior to award, Jacobs advised GSA that its proposed quality assurance manager left the company and that Jacobs had a qualified replacement candidate. GSA denied Jacobs’s request to substitute its key personnel candidates and ultimately found the proposal technically unacceptable due to the unavailability of the quality assurance manager.
• The protester first argued that the solicitation’s pass/fail evaluation criteria did not encompass key personnel availability but rather focused only on naming the candidate and producing a letter of commitment, which Jacobs did. GAO found this argument unavailing because other aspects of the solicitation contemplated an assessment of whether the proposed key personnel would be available to begin work on the project start date.
• GAO also rejected Jacobs’s complaint that it should have been permitted to revise its proposal to include the substitute candidate.
• GAO distinguished the Court of Federal Claims’ recent holdings in KPMG LLP v. United States, 166 Fed. Cl. 588, 597 (2023), and Golden IT, LLC v. United States, 157 Fed. Cl. 680, 705 (2022). According to GAO, those cases stand for the proposition that there is no obligation for an offeror to notify the agency of the departure of a key individual absent a requirement in the solicitation to do so. But here, Jacobs notified GSA of the departure.

The unavailability of a proposed key person during a competition is one of the more difficult scenarios facing an offeror and the government. GAO decisions make clear that the unavailability of a key person identified in a proposal renders the proposal technically unacceptable, and that a contracting agency has the discretion whether to evaluate the technically unacceptable proposal or to conduct discussions under such circumstances. Moreover, GAO views a contracting officer’s discretion in deciding not to hold discussions as “quite broad,” and so absent unusual circumstances, GAO will not sustain a protest on this basis. Companies facing such a scenario should weigh the risks and rewards of notification.

Supply Chain Regulatory Update

DoD Publishes Final Rule Amending the DFARS to Promote the Buy American Act (February 15, 2024)

• DoD recently issued a final rule amending the DFARS pursuant to President Biden’s Executive Order 14005, Ensuring the Future is Made in America by All of America’s Workers.
• Section 8 of EO 14005 instructed the FAR Council to promote enforcement of the Buy American Act by increasing the minimum domestic content requirements for end products and construction materials and increasing price preferences for domestic products and materials.
• The FAR final rule was issued on March 7, 2022; this rule adds required conforming changes for DoD-unique requirements.
• The final rule makes four notable changes to the DFARS:
  • Increases the US and qualifying country content threshold for manufactured end products. For the next five years, the threshold has been raised to 65%. In 2029, it will rise again to 75%.
  • Authorizes senior procurement executives—in situations where it is not otherwise feasible—to apply an alternate domestic content (ADC) test that would only require the contractor to comply with the domestic content threshold in effect at the time of award.
  • Contemplates a 55% fallback threshold for all awards made before January 1, 2030. Under this provision, if a product that meets the higher domestic content threshold is unavailable or its cost would be unreasonable, it may still qualify as a domestic product if it meets the 55% fallback threshold.
  • Establishes a framework for implementing increased price preferences for domestic products that are considered “critical items” or are composed of “critical components.”

Offerors should note that the final rule requires them to plan for future changes to the domestic content threshold when submitting proposals unless DoD has authorized the application of an ADC or the fallback threshold. Contractors who are uncertain about navigating the intricacies of the final rule are encouraged to seek counsel before responding to solicitations containing these requirements.

Small Business Regulatory Update

Adjustment of Alternative Size Standard for SBA’s 7(a) and CDC/504 Loan Programs for Inflation; and Surety Bond Limits: Adjustments for Inflation

On February 15, 2022, the Small Business Administration (SBA) published a final rule altering the alternative small business size standards for its 7(a) and 504 loan programs and the contract limits for its surety bond guarantee program, to adjust for inflation. The SBA uses these size standards or contract limits to determine if a business qualifies for federal small business assistance. The rule adopts the current statutory alternative size standard for its 7(a) Business and Certified Development Company (CDC/504) Loan Programs, subject to a 34.46% adjustment for inflation that has occurred since the establishment of the statutory alternative size standard in 2010. The inflation adjustment also increases the size standard’s level for tangible net worth to $20 million and for net income to $6.5 million.

The rule also adjusts the applicable statutory limits for contract size under the Surety Bond Guarantee Program. The adjustment increases the contract limit to $9 million and the contract limit for federal contracts if a federal contracting officer certifies that such a guarantee is necessary to $14 million.

This rule is effective March 18, 2024.

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