Regulatory Updates
- Restrictions on LPTA Procurements Take Effect for Civilian Agencies. On February 16, 2021, new criteria and limitations on the use of lowest price technically acceptable (LPTA) source selection processes in solicitations took effect for civilian agencies. While the Department of Defense (DOD) had previously imposed restrictions on the use of LPTA procurements in September 2019 for DOD agencies, now all agencies are subject to similar limitations.
In particular, the FAR final rule amended FAR 15.101-2 to establish six criteria to be met in order for an agency to use LPTA procedures:
- The agency can comprehensively and clearly describe the minimum requirements in terms of performance objectives, measures, and standards that will be used to determine the acceptability of offers;
- The agency would realize no, or minimal, value from a proposal that exceeds the minimum technical or performance requirements;
- The agency believes the technical proposals will require no, or minimal, subjective judgment by the source selection authority as to the desirability of one offeror's proposal versus a competing proposal;
- The agency has a high degree of confidence that reviewing the technical proposals of all offerors would not result in the identification of characteristics that could provide value or benefit to the agency;
- The agency determined that the lowest price reflects the total cost, including operation and support, of the product(s) or service(s) being acquired; and
- The contracting officer documents the contract file describing the circumstances that justify the use of the lowest price technically acceptable source selection process.
Additionally, the new rule mandates that "contracting officers shall avoid, to the maximum extent practicable, using the [LPTA] source selection processes" in three types of acquisitions: (1) "Information technology services, cybersecurity services, systems engineering and technical assistance services, advanced electronic testing, audit or audit readiness services, health care services and records, telecommunications devices and services, or other knowledge-based professional services"; (2) Personal protective equipment; and (3) "Knowledge-based training or logistics services in contingency operations or other operations outside the United States, including in Afghanistan or Iraq."
Case Developments
- Supreme Court Denies Certiorari in FCA Circuit Split. The United States Supreme Court denied certiorari to United States v. Care Alternatives (952 F.3d 89) out of the Third Circuit. At issue was a circuit split regarding whether the False Claims Act (FCA) requires "objective falsity" to establish liability. In Care Alternatives, physicians subjectively evaluated patients to determine if they were terminally ill and eligible for hospice care. The relators sought to use expert opinion to show that, in many cases, the record did not support such a determination. A battle of expert opinions ensued, and the Third Circuit eventually held that the certification could be legally false for purposes of establishing FCA liability if a jury decided that one expert's opinion was more persuasive. However, in the Fourth, Seventh, Tenth, and Eleventh Circuits, a relator or the government must prove "objective falsity," which means that, effectively, a difference in opinion is insufficient to establish falsity. The practical effect of this, at least for now, is that the division among the circuit courts will continue and relators and the government may have an easier time establishing FCA liability in the Third Circuit.
- Federal Circuit Clarifies Protest Timing Under DOD Enhanced Debriefing Rights. In NIKA Technologies, Inc. v. United States, No. 2020-1924 (Fed. Cir. Feb. 4, 2021), the Court of Appeals for the Federal Circuit reversed the Court of Federal Claims on the latter's interpretation of when the clock starts to run on a protester to obtain a stay after a debriefing under DOD's enhanced debriefing rights. For post-award protests at GAO, in order to obtain a stay of contract performance, the protester must file within ten days of the contract award or five days after a requested and required debriefing. Under the DOD Enhanced Post Award Debriefing Rights Class Deviation, as part of a debriefing a contractor may submit questions to the DOD agency within two business days after receiving a debriefing, which is codified at 10 U.S.C. § 2305(b)(5)(B)(vii). NIKA filed six days after the debriefing, arguing that the statute added an additional two days because it allows the disappointed offeror to submit questions. However, NIKA did not submit any additional questions. The Court of Federal Claims agreed with NIKA's interpretation—that the five days in the statute really meant seven—but the Federal Circuit reversed, holding "that the plain meaning of the statutory scheme is that when no additional questions are submitted, the 'debriefing date' is simply the date upon which the party receives its debriefing." The takeaway is that a disappointed offeror on a DOD procurement is always well advised to submit additional questions, as it buys another two days of time in which to submit a protest under DOD's enhanced debriefing rights.
- GAO Reminds Unsuccessful Offerors That They Must Diligently Pursue Their Protests in Order to Be Timely. In another timing-related protest, Integration Technologies Group, Inc., B-419116.3, the GAO dismissed a protest as untimely for failing to diligently pursue information giving rise to its protest grounds. ITG submitted its protest approximately a month after it learned that it had not received the award. Instead, about 20 days after the notice of non-award, ITG learned of its protest grounds from another offeror that had submitted a timely protest. ITG argued that its protest was timely because it submitted its protest within 10 days of learning the grounds of its protest from the other offeror. GAO dismissed, stating that "ITG made no effort to obtain the information that formed the basis of its protest….Accordingly, we conclude that ITG failed to satisfy the requirement for diligent pursuit because it passively awaited information from another unsuccessful vendor and opted to piggyback on" the other offeror's protests. Both NIKA and Integration Technologies are good reminders to contractors that the timing rules regarding bid protests at GAO must be taken seriously.
- GAO Finds Corrective Action Protest to Be Premature. In Cooper/Ports America, LLC, B-419000.2, the GAO dismissed a protest challenging the adequacy of an agency's proposed corrective actions as premature. Cooper/Ports protested a procurement for stevedoring and terminal services, which resulted in the agency taking corrective action. The agency stated that it would conduct a new responsibility determination and any other corrective action that it deemed appropriate. Cooper/Ports filed a new protest challenging the corrective action as inadequate by not addressing a number of its other, original protest grounds. GAO noted that in instances where the proposed corrective action "alters the ground rules for a competition," it will be treated akin to a pre-award protest and the protest can proceed before the corrective action takes place. In contrast, as here, where those "ground rules" are not altered, the protester must wait until the new evaluation is completed before protesting again, or else its protest will be deemed premature.
Government Reports
- DOD OIG Recommends Improvements to DLA's Captains of Industry Contracts. A recent audit by the DOD Office of Inspector General (OIG) looked at whether the Defense Logistics Agency's (DLA's) sole source Captains of Industry (COI) strategic support contracts are achieving cost savings, value, and benefits for DOD. DLA has 13 COI contracts with a value of $55.6 billion. The DOD OIG performed a review of two of these contracts and found that, for one contract, DLA had overstated its estimated cost savings, did not have visibility of spare parts prices under performance-based CLINs, and included bundling in the contract, which reduced small business participation. The OIG recommended that DLA (1) validate the estimates in its business cost analysis and determine whether changes need to be made to improve future estimates, (2) set small business goals at levels representative of previous small business participation for future bundled work, (3) reevaluate the methodology for determining historical work done in bundled areas, and (4) develop procedures on all COI contracts to include incentives and disincentives for meeting and exceeding small business goals on future bundled work.
- DOD OIG Finds Agencies Procured IT at Reasonable Prices During COVID-19 Pandemic. A recent audit by the DOD OIG sought to determine whether DOD agencies, in accordance with the CARES Act, procured information technology (IT) products and services to support operations in response to the COVID-19 pandemic, paid fair and reasonable prices for such products and services, assessed whether known cybersecurity risks existed and developed risk mitigation strategies for the risks before procurement or use of the products, and accurately reported the COVID-19-related codes to USASpending.gov. The DOD OIG found that the DOD agencies met all of the requirements, determining that the agencies "procured $81.5 million in information technology products and services in response to the COVID-19 pandemic at reasonable prices and at a reduced risk of cybersecurity vulnerabilities."
- GAO Testimony on DOD's Management of Defense Spending. In testimony before the House Subcommittee on Defense, Committee on Appropriations, the Government Accountability Office (GAO) highlighted a number of issues surrounding DOD's management of its spending. In particular, the testimony noted four opportunities. The first was to improve the actual budgeting and execution of funds, finding that DOD was leaving hundreds of millions of dollars of unexpended funds to be cancelled and returned to the Treasury. The second issue was to seek further clarity on Overseas Contingency Operations (OCO) costs. These funds are handled separately from the department's base budget and have been a political issue for decades. Third, GAO revealed that DOD estimated some 1.7% of all payments made in fiscal year 2020 were improper. GAO attributed this to a number of factors, including DOD's "decentralized environment" and ineffective controls. Finally, GAO encouraged DOD to continue its business reform efforts, while noting that those efforts were hampered by the recent elimination of the Chief Management Officer position. Considering that DOD's budget is the single largest source of government contracts, any changes that DOD enacts will have far-reaching impacts.
- GAO Analyzes DOD's Service Acquisitions. In another analysis, GAO discussed a recent report by DOD on "current mechanisms for overseeing defense service contracts." GAO noted that "nearly half" of all contract obligations out of DOD were for service acquisitions and mentioned prior reports that raised concerns about contracts that closely support inherently governmental activities giving rise to inappropriate influence. In those reports, GAO provided a number of recommendations for DOD to improve its procurement of services. Turning to the DOD's new report, GAO noted that DOD described certain efforts taken to better manage service acquisitions but failed to implement GAO's recommendations "regarding the volume and type of services that should be acquired." It remains to be seen how DOD will adapt its acquisition of services in the coming years, but both of these reports indicate that DOD is attempting to make at least some changes. Given the sheer volume of DOD contracting, even apparently minor changes could have far-reaching impacts.
- GAO Reviews DOD's Use of Fixed-Price Incentive Contracts. In another recent report, the GAO analyzed DOD's use of fixed-price incentive (FPI) contracts on major defense acquisition programs (MDAPs). GAO found widespread adoption of FPI contracts over the last decade, which purport to encourage contractors to control costs and increase performance. However, GAO found that "DOD has not assessed the extent to which use of FPI contracts has contributed to achieving desired cost and schedule performance outcomes." In other words, DOD does not know if FPI contracts actually have their desired effect. GAO recommended, and DOD agreed, that DOD needs to start collecting information about incentive contracts to determine if they achieve the desired results. Whether this will result in greater or lesser adoption of FPI and similar incentive-type contracts remains to be seen.
*A special thank you to Anna Kaye for her contributions to this article.