Even in the face of the COVID pandemic, the past few months have seen several developments that impact government contractors, including notable regulatory updates and the development of new case law. This article provides an overview of these events from July 2020.
Key Regulatory Updates
- On July 5, 2020, the Department of Defense (DoD) amended the DoD Federal Acquisition Regulation Supplement (DFARS) to implement Section 823 of the National Defense Authorization Act (NDAA) for Fiscal Year 2020 (Pub. L. 116-92). Section 823 increased the threshold for requiring a justification and approval to award a sole-source contract to a participant in the 8(a) program to procurements exceeding $100 million, a substantial increase from the previous threshold of $22 million. Section 823 also designates the head of the procuring activity as the approval authority. This was implemented in a new DFARS provision – DFARS 206.303-1, Requirements. Pursuant to DFARS 206.304, Approval of the Justification, the head of DoD procuring activity is the approval authority for proposed sole-source contracts exceeding $100 million, but may also delegate this authority in accordance with the provision.
- On July 14, 2020, the Federal Acquisition Regulation (FAR) Counsel pre-published an interim rule prohibiting agencies from procuring or obtaining equipment or services from contractors that use telecommunications equipment and services provided by Huawei Technologies Company or ZTE Corporation (or any subsidiary or affiliate of those entities), or other covered telecommunications equipment and services. The interim rule revises FAR 52.204-24, Representation Regarding Certain Telecommunications and Video Surveillance Services or Equipment, and FAR 52.204-25, Prohibition on Contracting for Certain Telecommunications and Video Surveillance Services or Equipment, to implement Section 889(a)(1)(B) of the 2019 NDAA. The rule is scheduled to take effect August 13, 2020.
Key Legislative Updates
- Recently, the U.S. Government Accountability Office (GAO) sustained a protest alleging that the awardee had failed to properly notify the issuing agency about the unavailability of one of its key personnel. In the matter M.C. Dean, Inc., B-418553, B-418553.2, the GAO found that where the awardee's proposed program manager, one of its key personnel, was denied a required security clearance, the awardee had actual knowledge of the individual's inability to perform after proposal submission and prior to award. Therefore, it had an obligation to inform the agency of the program manager's unavailability. The GAO rejected the agency's argument that the awardee lacked actual knowledge of the unavailability because the program manager had two months to appeal the clearance denial. The GAO held that, regardless of whether key personnel résumés are a material requirement, an offeror is required to disclose the unavailability of key personnel once it has actual knowledge of the unavailability.
- On June 29, 2020, the GAO sustained a challenge to the U.S. Coast Guard's corrective action in Computer World Services Corporation, GAO B-418287.3. The Coast Guard took corrective action after the GAO had sustained a protest finding that the agency's price evaluation and IGE had been flawed. Moreover, the GAO found that the agency's non-price evaluation failed to account for differences between offerors' proposed levels of effort and labor mixes as compared to the level of effort and labor mix used to calculate the IGE. The GAO recommended that the agency craft a new method for evaluating the realism of proposed unburdened labor rates or revise its underlying acquisition strategy to change how it intended to evaluate quotations. The agency took corrective action, indicating that it would remove the price realism analysis from its evaluation, but would not be issuing an amendment to reflect this change. The GAO rejected this corrective action, finding that the removal of the price realism analysis constituted a material change that would affect vendors' pricing and strategies, concluding that an amendment to the RFQ was necessary to afford offerors an opportunity to compete intelligently and on an equal basis.
- The GAO also recently emphasized the importance of proposal submission deadlines. In Prestige Lawncare, Inc., B-418608, the GAO denied a protest alleging that the Army Corps of Engineers (ACE) had unreasonably rejected protester's proposal as untimely where the protester argued that questions it submitted to the agency should have tolled the deadline for its proposal submission. ACE issued a solicitation seeking park services, setting the proposal submission deadline for March 23, 2020. On March 19, the protester emailed the contracting officer (CO) a series of questions. The CO did not respond until 11 a.m. on March 23, 2020, because she was out of town, and responded that she was unable to answer the protester's questions and would need to consult with the program manager. Without receiving further guidance, the protester submitted its proposal at 12:29 p.m. on March 23, which the CO rejected as untimely. The protester argued that ACE should have accepted its late proposal because the agency failed to respond to its questions in a timely manner. The GAO rejected this argument, citing to FAR 52.212-1, which was incorporated into the solicitation. GAO explained that FAR 52.212-1 allows the consideration of late proposals in only a few limited circumstances, not including when an offeror has questions about a solicitation.
- In General Dynamics Information Technology, Inc., GAO B-418533, the GAO denied the protester's allegation that the Navy conducted misleading discussions. Specifically, protester GDIT alleged that the Navy had misled it because, during discussions the Navy had assessed it a deficiency and three weaknesses for its approach to a technical subfactor, yet assessed three deficiencies for the same subfactor in the protester's final revised proposal. The GAO found that the additional deficiencies were assessed because the protester failed to address requirements imposed by multiple solicitation amendments that were issued during discussions, rather than because of misleading discussions. The protester asserted that the Navy should have reopened discussions to address the new deficiencies, but the GAO rejected this argument, emphasizing that agencies are not required to reopen discussions to allow offerors an additional opportunity to revise their proposal where a weakness or deficiency is first introduced in the offeror's revised proposal.
- In a July 7, 2020 decision, the GAO upheld the Department of Veterans Affairs (VA) award of a sole-source contract for eyeglasses and optician services to PDS Consultants, Inc. In Superior Optical Labs, Inc., B-418618, B-418618.2, the protester alleged that PDS did not qualify as a small business concern under the procurement, nor did the VA perform adequate market research to determine whether PDS qualified as small. The RFP included VA Acquisition Regulation (VAAR) clause 852.219-10, Notice of Total Service-Disabled Veteran-Owned Small Business Set-Aside, which imposes a subcontracting limitation on manufacturers or, for nonmanufacturers, requires compliance with the nonmanufacturer rule. Offerors were required to explain how they would comply with the subcontracting limitation if they intended to manufacture the required prescription eyeglasses, or how they would comply with the nonmanufacturer rule if they intended to purchase the required prescription eyeglasses. The protester alleged that PDS was not a manufacturer of prescription eyeglasses, but intended to obtain the required eyeglasses from its wholly owned subsidiary, qualifying as a nonmanufacturer. The GAO noted that while it typically dismisses a protest challenging a firm's size for lack of jurisdiction, an exception exists where, as in this matter, the protester asserts that the awardee's offer shows on its face that it is ineligible for award as a small business. The GAO found that the nonmanufacturer rule did not apply where the protester only proposed to use the optical labs of its subsidiary, rather than purchase from it, emphasizing that use of another firm's facilities does not by itself prevent the firm from being considered a manufacturer.
- In Covenant Construction Services Re: Concord Construction, LLC, SBA No. CVE-152-P, the Small Business Administration (SBA) Office of Hearings and Appeals (OHA) sustained a protest challenging the status of awardee Concord Construction, LLC, a service-disabled veteran-owned small business (SDVOSB), based on the managing member's full-time employment with another company. OHA emphasized that in order to qualify as an eligible SDVOSB, a concern must be owned and controlled by one or more service-disabled veterans in accordance with 13 C.F.R. §§ 125.12 and 125.13. OHA highlighted that SBA has established a rebuttable presumption that a service-disabled veteran does not control the firm when they are not able to work for the firm during the normal working hours that businesses in that industry normally work. OHA was not persuaded to find that Concord's managing member controlled the entity even though it had previously disclosed this individual's employment with another company to SBA.
As always, Venable will continue to track the legal updates impacting government contractors to keep our clients abreast of relevant updates.