Gordon Rees Scully Mansukhani announces the latest update from the firm's Government Contracts practice group, bringing you an overview of recent notable decisions, rule updates, and other critical information related to contracting with federal and state governments. Our team compiled the most pertinent legal developments in the ever-evolving landscape of government contracts to keep you informed. Please contact Patrick Burns or Elizabeth Husebo for further information regarding the cases and administrative actions highlighted below.
Agency Regulations:
GSA Announces Final Rule on Single-Use Plastic Free Packaging
Overview: The General Services Administration ("GSA") is amending the General Services Administration Acquisition Regulation ("GSAR") to add a new provision identifying single-use plastic-free packaging ("SUP-free") availability for products under the Federal Supply Schedule ("FSS"). The goal of the rule is to reduce single-use plastic waste. Contractors can now label their products as SUP-free, helping the agency identify offerors providing environmentally friendly options.
Affected Groups: Prospective offerors bidding on future FSS solicitations. However, this rule signifies a trend that may extend to other agencies, based on guidance from recent Executive Orders.
Significance: Under this rule, SUP-free packaging is voluntary. However, contractors using such packaging can potentially gain a competitive advantage. Federal agencies are increasingly looking for sustainable options. Contractors can voluntarily identify and offer SUP-free packaging, enhancing their marketability by aligning with federal government sustainability goals.
Cost Implications: While the rule is voluntary, contractors who choose to comply will incur an estimated cost of $2,087, covering regulatory familiarization and the process of identifying and labeling SUP-free products.
Effective Date: The rule went into effect July 8, 2024. Contact the GRSM Government Contracts practice group for additional details about the final rule.
SBA Announces Elimination of Self-Certification for Service-Disabled Veteran-Owned Small Businesses
Overview: This rule amends regulations governing the Small Business Administration’s ("SBA") Veteran Small Business Certification ("VetCert") Program by eliminating self-certification for Service-Disabled Veteran-Owned Small Businesses ("SDVOSBs"). Starting October 1, 2024, only SDVOSBs certified by the SBA's VetCert Program can count towards federal agency or prime contractor goals for SDVOSB participation.
Affected Groups: SDVOSBs that are currently self-certified. The rule provides a grace period, allowing SDVOSBs to self-certify until December 22, 2024. SDVOSBs currently certified through VetCert are not affected
Significance: The proposed change does not alter the current requirement for SDVOSBs seeking SDVOSB set-aside or sole-source contracts, which must currently certify through VetCert. However, self-certifying SDVOSBs can still receive preferential treatment from agencies and prime contractors seeking to satisfy their annual SDVOSB contracting goals.
Cost Implications: The SBA estimates that an applicant's cost burden to apply for eligibility for this program would require a total of two hours at a cost burden of $250.96 per applicant.
Effective Date: The rule is effective August 5, 2024, unless adverse comments are received prior to July 8, 2024. If significant adverse comments are received, SBA will publish a timely withdrawal of the rule in the Federal Register. Contact the GRSM Government Contracts practice group for additional details of the direct final rule and comment submission.
Recent Cases/Decisions
Federal Circuit Expands Scope for Task Order Protests
Overview: The U.S. Court of Appeals for the Federal Circuit decided a landmark case involving the Federal Acquisition Streamlining Act (“FASA”) task order bar as it relates to protests before the Court of Federal Claims (“COFC”). FASA divests COFC of jurisdiction if the protest concerns the issuance or proposed issuance of a task order unless the order is valued in excess of $25 million for the Department of Defense (“DoD”), including its subagencies, or $10 million for civilian agencies. In such cases, the Government Accountability Office (“GAO”) has exclusive jurisdiction if the amounts exceed those thresholds.
The protestor, Percipient.ai, a supplier of commercially available software, claimed that the National Geospatial-Intelligence Agency (“NGA”) violated its statutory obligation to perform market research for commercially available software. The protestor did not bid on the task order nor challenged the agency’s award. Rather, it offered its software to the agency and the awardee post-award, both of which allegedly failed to adequately evaluate the software.
Ruling: The Federal Circuit held that FASA did not bar the protest since the protestor challenged a separate statutory violation independent of the task order award. The court also ruled that the protestor met the standing requirement (i.e., the ability to challenge an agency decision) based on the offering of its software to the government and the awardee.
Significance: This decision signifies a broadening of the scope for contractors to challenge agency decisions based on two limited issues. First, even though the protest concerned a task order, FASA did not apply since the protestor did not challenge the award. Second, the protestor satisfied the standing requirement without bidding on the task order, as it offered its services or products to the government.
Citation: Percipient.ai, Inc. v. United States, 104 F.4th 839, 859 (Fed. Cir. 2024).
GAO: Air Force’s Evaluation Falls Short in ICBM Support Contract
Overview: The protestor, BAE Systems, in this action before the GAO protested the award of a U.S. Air Force integration support services contract. The contract, known as ISC 2.0, supports systems engineering and integration services for the Intercontinental Ballistic Missile organization at Hill Air Force Base, Utah. The protestor challenged the Air Force’s award decision based on its unreasonable evaluation of the offerors’ professional employee compensation plans, cost realism, and the awardee’s violation of the agency’s corrective action ground rules.
Ruling: The GAO sustained the protest on all three grounds set forth below.
1. Evaluation of Professional Employee Compensation Plans
The solicitation required offerors to submit Professional Employee Compensation Plans ("PECPs") that adhered to FAR provision 52.222-46. This provision mandates that agencies evaluate an offeror's total compensation plan, including salaries and fringe benefits, to ensure the proposed compensation is realistic and sufficient to attract and retain high-quality employees. The GAO found that the Air Force did not adequately evaluate the awardee’s PECP in relation to its cost proposal. Specifically, the agency failed to identify discrepancies between the awardee’s narrative on compensation in the mission capability volume and the direct labor rates proposed in the cost volume. The awardee’s cost proposal included lower labor rates than what it described in its mission capability narrative, which set forth a strategy of paying above-average compensation to attract and retain these employees.
2. Cost Realism Analysis
The solicitation required the agency to perform a cost realism analysis to determine the extent to which an offeror's proposed costs were realistic for the work to be performed. This analysis should have involved a comparison of the labor rates in relation to the offeror's unique technical approach. The agency limited its evaluation to a comparison of proposed labor rates against market rates without adequately considering the consistency between the technical and cost proposals. The awardee’s technical proposal emphasized the recruitment and retention of certain personnel through higher compensation, but its cost proposal included lower labor rates that were not reflective of this strategy.
3. Corrective Action Compliance:
Following a previous protest, the Air Force took corrective action by allowing offerors to submit revised cost proposals. The agency specified that only cost proposals should be updated—no other aspects of the proposals could be changed. The awardee submitted a revised cost proposal that included changes to its direct labor rates and subcontractor allocations, which effectively altered its technical and mission capability approaches. The awardee’s actions were in violation of the ground rules established for the corrective action, resulting in an unfair competitive advantage.
Citation: Bae Sys. Tech. Sols. & Servs., Inc., B-420860.4 (June 18, 2024).
GAO: Protest Sustained Concerning Conflict of Interest in CMS Contract Award
Overview: The Center for Medicare and Medicaid Services (“CMS”) sought operational analytics services under the Affordable Care Act, issuing an RFQ as a small business set-aside. A Square Group, the protestor, challenged the award, citing flaws in the evaluation process, specifically regarding the management of the awardee’s Organizational Conflicts of Interest (“OCI”). The GAO sustained the protest on two grounds:
1. The agency failed to reasonably consider the strategy proposed by the awardee to mitigate an impaired objectivity organizational conflict of interest.
2. The record showed that to mitigate an organizational conflict of interest, the awardee materially altered its technical approach, and the evaluation did not contain any evidence that the agency considered the impact of the changed approach on contract performance.
Definition – Organizational Conflict of Interest: An impaired objectivity OCI exists where a firm's work under one government contract could entail evaluating itself, either through an assessment of performance under another contract or an evaluation of proposals. The OCI, in this case, arose because the solicitation’s statement of work (“SOW”) required the awardee to evaluate data generated under a separate contract performed by the awardee’s subcontractor.
Ruling: The awardee proposed to firewall personnel from reviewing the data at issue but did not address other data analysis tasks set forth in the SOW, leaving some OCI issues unaddressed. As a result, the GAO determined that the firewall proposed by the awardee was inadequate and that the agency failed to consider and document the impact of the proposed mitigation measures set forth in the awardee’s technical approach.
Citation: A Square Grp., LLC, B-421792.2 (June 13, 2024).
GAO: Disparate Treatment in HHS Contract Award Leads to Sustained Protest
Overview: The protester in this action, Sparksoft Corporation, filed a protest against the Department of Health and Human Services (“HHS”) regarding the award of a task order for security testing services. The protest arguments focused on disparate treatment in the evaluation process.
Definition – Disparate Treatment: When a protester alleges disparate treatment in a technical evaluation, to prevail, it must show that the agency unreasonably evaluated its proposal differently than another proposal that was substantively indistinguishable or nearly identical. In other words, a protester must show that the differences in the evaluation did not stem from differences between the proposals.
Ruling: The GAO found that the agency unequally assessed the protester’s and awardee’s corporate experience. The awardee received a positive evaluation for a certain certification, while the protester, despite possessing the same certification, did not receive an equivalent rating. The disparity was not justified by any substantive differences in the proposals.
Citation: Sparksoft Corp., B-422440 (June 25, 2024).
GRSM Government Contracts Practice Group
GRSM’s government contracts team has considerable experience defending and enforcing the rights of our contractor clients in disputes against government entities and private businesses. In addition to litigating claims in state and federal courts, we routinely handle matters before administrative tribunals, such as the Government Accountability Office, the Small Business Administration, and the Armed Services Board of Contract Appeals.
Our team of attorneys is located throughout the United States, which allows the firm to represent contractors, regardless of size, and in a wide variety of industries, including defense, information technology, construction, and aerospace, among others. Please contact the authors with any questions.
Contacts:
Patrick Burns – pburns@grsm.com
Elizabeth Husebo – ehusebo@grsm.com