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GAO Sustains Protest Due to Flawed Source Selection Methodology

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Winning a bid protest at the General Accounting Office (GAO) is difficult. In 2019, claimants filed 2,198 protests and the GAO only sustained 77 of them. In the Matter of Noble Supply & Logistics, Inc. (Noble), decided on January 16, 2020, the GAO agreed with Noble and sustained their protest.

BACKGROUND

Prior to the time set for receipt of quotations, Noble protested the terms of a request for quotations (RFQ) issued by the General Services Administration (GSA) for the establishment of blanket purchase agreements (BPAs) under federal supply schedule (FSS) No. 51V, “Hardware Superstore,” for hardware store supplies and ancillary services. The solicitation sought to establish four separate single-award BPAs, one each for the Departments of the Navy, Army, and Air Force, and the Marine Corps, with each BPA having a 1-year base period and four 1-year option periods. The RFQ required the bidders to submit separate quotations for each military branch for which the vendors wished to compete.

Regarding pricing, the solicitation required vendors to include their current FSS pricing for their entire catalog of Special Item Numbers (SINs) 105-001 and 105-002 products, any flat discounted rates from the catalogs, and four tiers of volume discounts. The RFQ did not include instructions for pricing the required ancillary services to be provided under SIN 105-003, and it instructed bidders to include the price of services under SIN 105-003 in the prices of products provided under SINs 105-001 and 105-002.

The solicitation recited five technical evaluation factors and stated that the agency would evaluate price quotations “to ensure that offered pricing, to include offered flat-rate and tiered-volume discounts, is fair and reasonable.” The solicitation said that award would be made on a best-value basis but would not involve either a lowest-priced, technically-acceptable or a best-value tradeoff source selection methodology.

ANALYSIS

Noble argued that the solicitation established an evaluation and source-selection methodology that failed to consider price as required by law and regulation, and that the pricing requirements of the solicitation were inconsistent with the terms of the underlying FSS contract. It also argued that the solicitation was defective because it required vendors to include the price of ancillary services under SIN 105-003 in their prices for products provided under SINs 105-001 and 105-002, rather than pricing the ancillary services separately. The GSA responded that its evaluation of vendors’ pricing solely for reasonableness is appropriate and consistent with the GAO’s decisions regarding the use of a highest-technically-rated, reasonably priced (HTRRP) source-selection methodology.

The GAO disagreed with the GSA’s argument. The GAO said “When, as here, an agency seeks to establish BPAs under the FSS, the HTRRP source-selection methodology fails to fulfill the agency’s obligation to consider the ‘lowest overall cost alternative’ to the government as required by 41 U.S.C. § 152(3)(B) and FAR §§ 8.404(d) and 8.405-3(a)(1)-(2).” The GAO also sustained Noble’s argument that the solicitation was inconsistent with the underlying FSS contract.

FAR part 8 implements the use of the FSS program. FAR § 8.404(d) requires agencies to review vendors‘ FSS schedules and then place orders and establish BPAs, with schedule contractors that can provide required supplies or services representing best value and “result[ing] in the lowest overall costs alternative (considering price, special features, administrative costs, etc.) to meet the Government’s needs.” Accordingly, the GAO said “Thus, it is evident from the statutory and regulatory framework that consideration of lowest cost to the government is an imperative when using the FSS. Consistent with this mandate, our Office has recognized that use of the FSS in lieu of conducting a full and open competition is premised on following procedures of FAR subpart 8.4 to reach a determination regarding which FSS vendor meets the agency’s needs at the lowest overall cost.” (citing Savantage Financial Services, Inc., GAO cases B-292046.1 and B-292046.2, June 11, 2003, 2003 CPD ¶ 113 at 6)

The GAO also said “we have recognized that ‘price is the one factor that, at a minimum, must always be considered when determining best value for purposes of establishing a BPA under the FSS.” (citing Cyberdata Technologies, Inc., GAO case B-406692, August 8, 2012, 2012 CPD ¶ 230 at 4, which in turn cites FAR §§ 8.405-3(a)(1) (‘[o]rdering activities shall establish the BPA with the schedule contractor(s) that can provide the supply or service that represents the best value). . . .”
The GAO explained the practical application of these GAO decisions and FAR clauses:

That is not to say that, when conducting an FSS procurement, agencies must use a  lowest-price, technically acceptable procurement model, and are precluded in all  cases from selecting a more advantageous quotation at a higher price. To the contrary, the FAR contemplates the consideration of ‘the lowest overall cost alternative,’ and specifies that the government may consider features in addition to price when making its  source-selection decision. See FAR § 8.404(d). This assessment, however, requires at a minimum, a comparative consideration of price in conjunction with any additional features and benefits to the government.

The GAO goes on to say that “. . . any best-value determination under the FSS program requires a weighing of the value and benefits associated with a vendor’s approach against its associated cost to the government. An agency must use an evaluation method that provides a basis for a reasonable assessment of the price of performance under the competing quotations, so as to establish whether one vendor’s quotation would be more or less costly than another’s.” The GAO also noted that it was not necessary or appropriate for the GSA to evaluate reasonableness of schedule prices when the GSA already determined the bidders’ schedule prices to be fair and reasonable when it awarded the contractors schedule contracts.

Finally, the GAO ruled that “the only reasonable interpretation of the underlying FSS contract is that ancillary services provided under SIN 105-003 are distinct from, and should be priced separately from, the products provided under SINs 105-001 and 105-002.”

CONCLUSION

The GAO sustained this protest because the source-selection approach and pricing structure were flawed. If you believe that a solicitation is flawed in any way that would affect the government’s award of contracts pursuant to the solicitation, we highly recommend that you speak with an attorney at Whitcomb, Selinsky, PC as soon as possible. In order to protest a solicitation (pre-award protest) before the GAO, you must file your protest prior to the deadline for submission of proposals. So time is of the essence.

Also note that the GAO awarded attorneys’ fees and costs to this protester. The GAO will award attorneys’ fees and costs if you file a protest that is “clearly meritorious.” “Clearly meritorious” means that the outcome is obvious and “not a close question.” While we can’t guarantee that the GAO will award attorney’s fees and costs, we can at least advise you of the strength of your case and whether an award of fees and costs is likely or not.

About the AuthorWayne White

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