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Formalization of Enhanced Debriefings Coming Soon to DOD Procurements

admin on June 18, 2021

By Andrew Victor, Sam Van Kopp, and Haaleh Katouzian

June 18, 2021

Recently, the Department of Defense (DOD) published a proposed rule in the Federal Register that would formalize DOD’s Class Deviation Letter issued in March of 2018 regarding enhanced debriefing rights for unsuccessful offerors.. As many contractors are aware, larger DOD source selections have been conducted with more disclosure in debriefings. The proposed rule formalizes the Class Deviation as it implements Section 818 of the 2018 National Defense Authorization Act (NDAA) by amending Defense Federal Acquisition Regulation Supplement (DFARS) 215.506.

Specifically, the proposed rule provides for the following process that is similar to the Class Deviation:

Upon request by the contractor, agencies are required to provide a debriefing—written or oral—for contracts, task orders, and delivery orders of at least $10 million.
For awards that exceed $100 million, as part of the requested debriefing, agencies are required to provide a redacted source selection decision document.
For awards between $10 million and $100 million, small business or a nontraditional defense contractors may request disclosure of the redacted source selection decision document.

Additionally, the proposed rule reiterates the time frame for these debriefings. After a debriefing, contractors have two business days to submit written questions. The agency then has five business days to respond in writing to the follow-up questions. Because the debriefing does not close until an agency has responded to the written questions, unsuccessful offerors should always submit written questions within two business days. Responses to the written questions may provide insight to the source selection; further, the time to protest at the Government Accountability Office (“GAO”) is delayed until the agency responds. This includes the 5-day timeline to obtain the stay of performance under the Competition in Contracting Act (“CICA”).

Interested parties will have until July 19, 2021, to comment on the formalization of enhanced debriefings. Because agencies are aware of and have been following the Class Deviation for some time, we expect DOD to implement the proposed rule.

More in-depth debriefings help agencies uncover problems in the source selection and provide unsuccessful offerors more time to evaluate their options. Nichols Liu LLP has extensive experience assisting unsuccessful offerors develop debriefing questions and advising on whether a protest should be filed.

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The information provided in this blog does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available on this site are for general informational purposes only. Information on this website may not constitute the most up-to-date legal or other information. Readers of this website should contact their attorney to obtain advice with respect to any particular legal matter.

GAO Releases Report on Small Business Innovation Research

admin on February 4, 2021

By Shiva Hamidinia

February 4, 2021

GAO recently published a report on Small Business Innovation Research (SBIR) program awards to businesses majority-owned by investment companies and funds.

The SBIR and related Small Business Technology Transfer (STTR) programs act as a seed fund to invigorate technological breakthroughs by directing federal research and development funds to eligible small businesses. The programs’ goals are to use small businesses to meet federal research and development needs, while fostering participation by socially and economically disadvantaged small business concerns and women-owned small business concerns in technological innovation. See SBA’s New SBIR/STTR Policy Directive, effective October 2020.

Agencies allow participation in their SBIR programs by small businesses that are more than 50% owned by multiple venture capital operating companies, hedge funds, or private equity firms, so long as no one such firm owns a majority of the stock.

GAO reports that only three out of 11 participating agencies (the National Institutes of Health, the Department of the Navy, and the Department of Education) made awards to qualified small businesses majority-owned by multiple venture capital operating companies during fiscal years 2019 and 2020. GAO reports a total combined 45 awards worth $31.6 million to qualified small businesses during fiscal years 2019 and 2020, with the NIH making the most awards, as in years past. Although the Department of Energy’s Advanced Research Projects Agency-Energy opened its SBIR awards to qualified small businesses, it did not issue any awards in fiscal years 2019 and 2020. The GAO reported the reasons for lower participation include the limited funds available for SBIR program awards.

Last month, the Department of Energy SBIR and STTR Programs Office issued its 2021 FY Phase I funding opportunity announcement identifying 9 participating DOE program offices. The U.S. Department of Transportation officials also recently announced that their 2021 FY SBIR solicitation is slated to total $1.9 million.

One of the major initiatives from President Biden’s platform include $300 billion in R&D spending. President Biden announced allocating more funding toward a “scaled-up version” of the SBIR program, including “[c]ompetitive capital financing to encourage small businesses to commercialize cutting-edge technology.”

The SBIR program follows a uniform competitive three-phase process. Generally, Phase I awards may not exceed $150,000 and Phase II awards (including modifications) may not exceed $1,000,000. There are no dollar thresholds for Phase III awards. To be eligible for a SBIR award, a small business must:

Be in the United States,
Operate primarily within the United States,
Be more than 50% directly owned and controlled by individuals who are citizens or permanent resident aliens of the United States, and
Employ fewer than 500 employees.

The program also sets minimum self-performance thresholds. For SBIR Phase I awards, a minimum of two-thirds of the research or analytical effort must be self-performed. For SBIR Phase II awards, a minimum of one-half of the research or analytical effort must be self-performed by the small business awardee.

GAO’s January 29, 2021 Report, Small Business Innovation Research: Three Agencies Made Awards to Businesses Majority-Owned by Investment Companies and Funds, GAO-21-223R (Washington, D.C.: Jan. 29, 2021) is available here: https://www.gao.gov/assets/720/712105.pdf.

GAO’s December 21, 2018 Report, Small Business Innovation Research: Few Agencies Made Awards to Small Businesses Majority-Owned by Multiple Venture Capital Operating Companies, Hedge Funds, or Private Equity Firms, GAO-19-205R (Washington, D.C.: Dec. 21, 2018) is available here: https://www.gao.gov/assets/700/696269.pdf.

SBA’s October 2020 SBIR/STTR Policy Directive is available here: https://www.sbir.gov/sites/default/files/SBA_SBIR_STTR_POLICY_DIRECTIVE_OCT_2020_0.pdf

If you have any questions regarding the SBA’s SBIR or STTR programs, please contact Shiva Hamidinia at shamidinia@nicholsliu.com or 202-846-9829.

About the author:

Shiva helps high-growth startup government contractors navigate the full life-cycle of complex state, local and federal government procurements and projects. This includes assisting emerging small and mid-sized government contractors with structuring, negotiating, and closing non-disclosure agreements, subcontracts, teaming, channel partner, and joint venture agreements, and assisting small businesses navigate the SBA’s set-aside, SBIR, and STTR programs.

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Biden’s Buy American

admin on February 2, 2021

By Rober Nichols, Madison Plummer, Andrew Victor

February 2, 2021

In his inaugural address, President Joe Biden stated that he sought “[t]o rebuild the backbone of the nation.” Days later, on January 25, 2021, he issued Executive Order (“EO”) 14005 titled “Ensuring the Future is Made in All of America by All of America’s Workers.” This EO enhances compliance with “Made In America Laws,” such as the Buy American Act (“BAA”), by strengthening federal procurement requirements and closing existing loopholes in the current regulatory scheme.

So what? Since 1933, federal procurement laws have required the government to give preference to American companies when awarding contracts. Over time, however, the strength of “Made in America Laws” has diminished due to ineffective implementation and numerous loopholes. For example, under the previous administration, the share of federal contracts awarded directly to foreign companies increased by 30%.

New Changes: President Biden’s EO seeks “to maximize the use of goods, products, and materials produced in, and services offered in, the United States.” Of particular note, the EO breaks with precedent by adding “services” to the list of products that must be procured according to federal “Made In America Laws,” and changes the definition of an “American-made” good.

To effectuate these goals, the EO orders three things: direct action by federal agencies; amended guidance by the Federal Acquisition Regulatory (FAR) Council; and increased oversight within the Executive Branch.

First, the EO directs federal agencies to maximize their use of domestic products and services. Agencies are also mandated to use the Manufacturing Extension Partnership to scout new small and midsized American suppliers “that are able to produce goods, products, and materials in the United States that meet federal procurement needs.” Within the next 180 days, federal agencies are required to file a report outlining (1) implementation of Made In America Laws, (2) intended use of waivers, and (3) recommendations for how to further the overarching policy of the EO. These reports will continue on a bi-annual basis.

Second, the EO contains several recommendations that directly relate to the FAR Council:

“Value Added” Test: The EO directs the FAR Council to replace the current “component test” under FAR Part 25 with a standard that addresses the value added to the product through U.S.-based production or U.S. job-supporting economic activity. This change supports the overarching procurement goal of obtaining the best bargain for the public’s money. The exact requirements for the new “value added” test have yet to be defined, but industry should expect promulgation from the FAR Council in the next 180 days.
Information Technology Exception: Presently, FAR 25.103(e) creates an exception under the BAA regarding “information technology” (“IT”) that is a “commercial item.” The exception allows federal agencies to buy commercial IT products without regard to their country of origin, even when the BAA applies to the procurement. The EO directs the FAR Council to review this exception and to develop guidance that will reduce the frequency with which this waiver is invoked.
Domestic Content Requirement: The EO increases the domestic content requirement from 50% to 55% for non-commercial off-the-shelf (COTS) manufactured goods and 95% for steel and iron.

Notably, in January 2021, the FAR Council implemented President Trump’s EO 13881, Maximizing Use of American-Made Goods, Products and Materials in a final rule. 86 Fed. Reg. 6,180 (Jan. 19, 2021) (to be codified at 48 CFR pts. 12, 25, and 52). Although President Biden’s EO cannot repeal this final rule, the EO does states that the final rule is “superseded to the extent that [it is] inconsistent with this order.” As such, contractors should follow the final rule but remain vigilant for amended guidance by the FAR Council.

Third, the EO establishes a new office within the Office of Management and Budget (“OMB”). This office will be led by a Made in America Director, who will review all waivers under the Buy American preference. These waiver requests will be published on a public website in partnership with the General Services Administration to enhance transparency and integrity. The new office will also conduct a review and update the list of items deemed “unavailable” from domestic sources in FAR 25.104; the first update in over ten years.

Looking Forward: Contractors and industry should look out for further guidance promulgated by federal agencies and the new Office under OMB in alignment with this new EO. Any proposed changes by the FAR Council will follow notice and comment, so contractors will have an opportunity to be heard on these matters.

Please contact Nichols Liu LLP for more insights and guidance on compliance with Made in America Laws and further developments under the Biden administration as they relate to procurement.

The FAR Council Issues Rule Implementing Section 880 of the 2019 NDAA That Further Limits Lowest Price Technically Acceptable (LPTA) Procurements

admin on January 15, 2021

By Andrew Victor and Sam Van Kopp

January 15, 2021

On January 14, 2021, the FAR Council issued a final rule that changed the source selection process by which federal civilian agencies can use lowest price technically acceptable (“LPTA”) procurements. Contractors should take note because the rule implements additional criteria for the use of the LPTA source selection process, which some members of the contracting community have characterized as a de facto prohibition on LPTA.

Because LPTA resides on the best value continuum, this source selection tool has been subject criticism from perceptions that agencies have misused it for complex acquisitions or by not setting the minimum technically acceptable requirements high enough. For example, if an agency fails to define sufficiently what is “technically acceptable,” the agency may end up procuring an item that is not completely acceptable. The new rule implements restrictions imposed by Congress to address the perceived problems with LPTA procurement.

Specifically, the FAR Council acted in response to section 880 of the John S. McCain National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2019 (Pub. L. 115–232, 41 U.S.C. 3701 Note). Section 880 directs agencies to consider six preliminary criteria before selecting LPTA for procurement, including verifications that the agency (1) can “clearly describe the minimum requirements” of the procurement; (2) “would realize no, or minimal, value from a contract proposal exceeding the minimum technical or performance requirements;” and (3) “believes the technical proposals will require no, or minimal subjective judgement” for award. The rule codifies these criteria and highlights that services for information technology, cybersecurity, health care, and telecommunications and “other knowledge-based professional services” should not be procured through LPTA “to the maximum extent possible.”

The rule follows a DFARS rule promulgated in 2019 that implemented near identical pre-procurement considerations and disincentives. See 84 Fed. Reg. 50,785 (Sep. 26, 2019). Unlike the 2019 DFARS rule, however, the 2021 FAR rule does not address LPTA within Federal Supply Schedule (“FSS”) procurements. GSA specified that it “will separately address, outside of this rule, the applicability of section 880 to the GSA FSS program.”

For contractors, there are a few immediate impacts of this rule. Contractors can expect fewer LPTA procurements going forward, as the rule’s criteria disincentives the use of LPTA procurement. And when an agency decides to use an LPTA procurement, contractors should not be surprised if that decision is challenged in a pre-award protest. Finally, the carve-out for FSS procurements may provide a window of opportunity for FSS contractors, who may see increased orders as COs seek swift procurement of items in a shift away from LPTAs. Contractors should track GSA’s rulemaking and to see how GSA’s treatment of section 880 materializes

The new rule takes effect on February 16, 2021.

GAO Sustains Small Disadvantaged Businesses’ Protest – Agency Shouldn’t Reject Bid Due to Inactive SAM Registration

admin on December 23, 2020

By Shiva Hamidinia

December 23, 2020

GAO recently sustained a Puerto-Rico Disadvantaged Small Business’ protest challenging the rejection of its bid because it’s SAM registration was expired at the time of bid submission.

GAO held that compliance with SAM registration requirements are matters of bidder responsibility, not responsiveness. As such, the agency should not have rejected the bid. FAR 14.405 requires agencies to provide bidders an opportunity to cure immaterial defects in a bid that can be corrected or waived without prejudicing other bidders. A defect is immaterial when it has a negligible effect on price, quantity, quality, or delivery. GAO found that contractors’ annual SAM representations and certifications fell within the category of minor or immaterial defects that the bidder should have been allowed to correct.

If you have questions regarding this decision, please contact Shiva Hamidinia at shamidinia@nicholsliu.com or 202-846-9829.

About the author:

Shiva helps high growth government contractors win, keep, and successfully perform projects. When litigation is necessary to achieve clients’ objectives, Shiva efficiently navigates matters through state and federal courts in the District of Columbia, Maryland, and Virginia, the Boards of Contract Appeals, the U.S. Court of Federal Claims, and the Federal Circuit.

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NIST Publishes Guidance on IoT Device Cybersecurity

admin on December 22, 2020

By Shiva Hamidinia

December 22, 2020

On December 4, 2020, The Internet of Things (“IoT”) Cybersecurity Improvement Act of 2020 was signed into law. The National Institute of Standards and Technology (NIST) released four new publications last week providing recommendations for effective cybersecurity for IoT devices, including processes manufacturers should implement to support cybersecurity.

The new documents are:

NIST is accepting comments from the public on the four draft documents until Feb. 12, 2021. Comments can be submitted to IoTSecurity@nist.gov.

If you have questions regarding this legislation, please contact Shiva Hamidinia at shamidinia@nicholsliu.com or 202-846-9829.

About the author:

Shiva helps high growth government contractors win, keep, and successfully perform projects. Intimately familiar with the pitfalls of federal contract documents and jobsite realities, Shiva provides concise business-minded legal advice to help contractors mitigate risks and increase opportunities.

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What Ghislaine Maxwell’s Unsealed Deposition Teaches About Preparing Witnesses for Depositions

admin on December 18, 2020

By Shiva Hamidinia

December 18, 2020

Although depositions are routine for attorneys, they can be nerve-racking for witnesses, especially for witnesses who haven’t previously been deposed. A deposition is the opportunity for a party in litigation to obtain oral evidence from a witness that is taken under oath and transcribed by a court reporter. Preparing a witness can help him or her know what to expect. The recently unsealed deposition transcript of Ghislaine Maxwell, the late Jeffrey Epstein’s alleged associate, provides a few helpful illustrations of do’s and don’ts for witness preparation.

Deposition Don’ts:

Don’t lie. Don’t cover for anyone. Following the deposition, several federal perjury counts were brought against Maxwell for alleged untruthful statements she made while under oath. Tell the truth. Never attempt to misrepresent facts to protect yourself or help your employer. Stick to the facts. A witness should only testify to things he or she personally knows and always tell the truth.
Don’t lose your temper or composure. Maxwell smacked the table after repeated questioning regarding the plaintiff, Virginia Giuffre’s, age when the two first met. Ms. Giuffre’s lawyer did not hesitate to describe this gesture on the record, stating that: “Ms. Maxwell very inappropriately and very harshly pounded our law firm table in an inappropriate manner. … I know this is a difficult position but physical assault or threats is not appropriate, so no pounding, no stomping, no, that’s not appropriate.” Don’t argue or get angry, even if opposing counsel is rude or overbearing. Never swear on the record. Be polite. Treat all persons in the deposition room with respect.
Don’t offer your own objections to a question. As Maxwell’s attorney reminded her when she offered her own objection to a question, “You don’t get to object.” Let your attorney handle objections. Pause after every question to afford your counsel the opportunity to record their objection. Unless directed not to answer, answer each question asked.
Don’t assume where a question may be going. If asked questions that assume facts that are not true – make it clear that it is the attorney’s assumption not yours.
Don’t ramble. Once finished with your answer, stop talking. A witness should not offer opinions or estimates (distance, dates, times, etc.) unless he or she has a good basis for knowing the estimate is accurate. If pressed, but unsure, you can start an answer with “I’m not certain, but I can guess …”
Don’t hide negative information from your lawyer. Make sure your attorney knows everything. Trust them and let them deal with any negative aspects of your testimony or actions before the deposition to avoid any surprises.
Don’t answer by gestures or with answers such as “uh-huh. ” Answer out loud with words such as “yes” or “no.”

Deposition Do’s.

Tell the truth. Never attempt to misrepresent facts to protect yourself or help your employer.
Listen and wait. Listen carefully to the question being asked. Pause, think, and answer based on what you know, personally (not what others have told you). A good way to do this is to rephase a question and ask yourself how you know the answer to a question before answering. Pausing after the question also affords your counsel the opportunity to record any objections. Avoid talking over others. The court reporter can only record one person talking at a time.
Understand. Make sure you understand the question. Take care answering and seek clarification on questions that are: compound, assume facts, include prefatory statements, call for speculation, or paraphrase prior answers.
Read carefully. Any document handed to you as an exhibit should be reviewed carefully before you start answering questions. Even if told to turn to a particular page, you may read the entire document. If a document is an email, check to see that your email is included on the address line.
Take a break. Ask for breaks when you need them, and when you don’t. About every hour is a good stopping point to take a breather. Depositions can be mentally exhausting. Have a glass of water and snacks stashed nearby to keep hydrated.

In a deposition, witnesses will often commit themselves to a story under oath that cannot later be changed. All counsel will be evaluating how a particular witness performs during their deposition to determine how effective they will be at trial. A successful deposition can sometimes prompt settlement discussions, or serve as grounds for a party to move for summary judgment. For all these reasons, it is important to prepare a witness thoroughly in advance of their deposition.

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GAO Stops Agency from Avoiding Competition Among 8(a) Firms

admin on December 10, 2020

By Shiva Hamidinia

December 10, 2020

Once a federal requirement is competed among 8(a) firms, an agency cannot reverse course and attempt to procure on a sole-source basis. This is illustrated in a recent GAO decision, UpSlope Advisors, Inc., B-419036,B-419036.2: Nov 25, 2020.

The GAO sustained a protest of the U.S. Transportation Command’s attempt to sidestep competition by bundling requirements that were previously competed separately among capable 8(a) businesses.

Agencies must compete contract awards among 8(a) program participants when:

At least two eligible 8(a) businesses are expected to submit offers at a fair market price; and
The anticipated award price of the contract, including options, will exceed $4 million (for non-manufacturing contracts). See 13 C.F.R. § 124.506(a)(2)(ii).

There is an exception to this rule for sole-source awards to Tribally-owned or ANC-owned businesses. A requirement previously competed among 8(a)s, however, may not be removed from competition, even if proposed for sole-source award to a Tribally-owned or ANC-owned business. See 13 C.F.R. § 124.506(b).

Agencies sometimes try to sole-source awards of requirements previously offered for competition among 8(a) businesses. They attempt this by either slicing a program into smaller bits to avoid exceeding the $4 million dollar threshold, or by bundling requirements previously competed among 8(a)s and arguing they are “new.”

The U.S. Transportation Command attempted the latter, which became the subject of UpSlope’s protest. UpSlope, an 8(a) small business, protested the agency’s notice of intent to sole-source requirements previously procured through competition among 8(a) businesses, where UpSlope could compete for award. The GAO found there was no basis to conclude that the agency’s needs were significantly changed simply because the 8(a) STARS II GWAC vehicle formerly used could no longer meet the agency’s procurement needs. The GAO held that a requirement is “new” only if the magnitude of changes is “significant.” Changes to a requirement are “significant” if there is either: (1) a price adjustment of at least 25 % (adjusted for inflation), or (2) there are significant additional or different types of capabilities or work required by the agency. 13 C.F.R. §124.504(c)(1)(ii)(C).

The GAO found that the magnitude of change between the procurement the agency proposed for a sole-source award to a Tribally-owned business was not significant enough to cause a price adjustment of at least 25%. The GAO also found that the proposed sole-source contract did not require significant additional or different types of capabilities or work. The GAO evaluated the agency’s own language demonstrating that its sole-source requirement was simply a “consolidation” of three formerly separate requirements previously solicited under competitive 8(a) program procurements. Based on this record, the GAO sustained UpSlope’s protest.

For questions regarding this decision, please contact Shiva Hamidinia at shamidinia@nicholsliu.com or 202-846-9829.

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Four Things to Know about the “Internet of Things” Cybersecurity Improvement Act of 2020

admin on December 3, 2020

By Shiva Hamidinia

December 3, 2020

The Internet of Things (“IoT”) Cybersecurity Improvement Act of 2020 (S. 734, H.R. 1668) is about to be signed into law. Billions of devices are operating on federal government networks, many of them remotely connecting via the internet. The COVID-19 pandemic has accelerated this trend as many federal workers and contractors are performing in remote work environments.

Remote devices connecting to federal networks and systems pose serious security threats. According to a 2020 threat intelligence report, these devices are responsible for almost a third of all mobile and wireless network infections. Another report warns that the rapid introduction of edge remote connection devices will create opportunities for invasive activities.

The purpose of the IoT Act is to mitigate the potential for malicious cyber-attacks and establish baseline standards to ensure the security of any devices used by, or connected to, federal government systems.

What does the IoT Act require?

The IoT Act will require anyone selling internet connected devices to the federal government to ensure that they meet minimum cybersecurity standards and guidelines developed by the National Institute of Standards and Technology or NIST. NIST is required to develop and publish these standards within 90-days. NIST’s guidance will include appropriate use and management by agencies of IoT devices, including minimum information security requirements for managing cybersecurity risks associated with these devices. The controls for IoT devices will have to account for:

secure development,
identity management,
patching, and
configuration management.

All contractors and subcontractors involved in developing and selling IoT products to the federal government will need to establish programs and processes to disclose security vulnerabilities in their products and supply chain. The Comptroller General is required to report to Congress every 2 years on the effectiveness of processes, vulnerabilities, and recommended best practices. The Director of OMB, in consultation with the Director of NIST, is also required to update policies to resolve security vulnerabilities. Agency Chief Information Officers (CIOs) will have the power to prohibit their agencies from procuring or obtaining any contract using IoT devices that do not comply with NIST’s guidance.

What are covered devices?

The IoT Act will apply to any physical object that connects to the internet. This can be computer desktops, laptops, mobile devices, tablets, but extends to other equipment and appliances, such as heating and cooling systems that are connected to each other and other systems via the internet.

When is the effective date of the prohibition?

The effective date of the prohibition is two years after the date of enactment.

Are there exceptions?

As with any rule, there are exceptions. A waiver may be provided by the head of an agency if:

in the interest of national security;
procuring, obtaining, or using such device is necessary for research purposes; or
the device is secured using alternative and effective methods appropriate to the function.

Conclusion

After enactment of the IoT bill, government agencies are expected to collaborate with industry experts and academia to develop within three months security standards for IoT devices that will close security loopholes and have practical applications. NIST’s IoT device standards and guidelines will be compatible with NIST’s existing efforts. The IoT Act will ultimately increase end-user transparency on IoT devices and will better inform the government of their cyber security risks.

If you have questions regarding this legislation, please contact Shiva Hamidinia at shamidinia@nicholsliu.com or 202-846-9829.

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GAO Rules that HUD RFP Cannot Ignore the New Realities of Operating Under COVID-19

admin on October 27, 2020

By Shiva Hamidinia

October 27, 2020

On October 1, 2020, the GAO sustained a protest of solicitation terms, which failed to accurately reflect the agency’s needs considering the coronavirus pandemic. See Chronos Solutions, LLC; Inside Realty, LLC; BLB Resources, Inc. B-417870.2,B-417870.3,B-417870.4 (Oct 1, 2020 ).

The GAO found that the Department of Housing and Urban Development (HUD) should reconsider its plan to award 11 contracts for real estate management services because the agency failed to consider significant changes brought about by Covid-19 and the foreclosure provisions in the CARES Act enacted in March, 2020.

This decision is insightful for contractors preparing bids post-coronavirus. Agencies and contractors cannot ignore economic and regulatory changes following the coronavirus pandemic. COVID-19 was not a planned event. Moving forward, however, federal programs must factor the new realities of operating under the COVID-19 health threat for the near-term future.

In Chronos Solutions, LLC, the GAO sustained a pre-award protest to solicitation terms that failed to account for new economic and regulatory conditions caused by the coronavirus pandemic. The Department of Housing and Urban Development (HUD) issued a solicitation for asset management services in support of HUD’s real estate owned properties using outdated estimates created in 2019. The GAO found persuasive the protesters’ arguments that HUD’s solicitation estimates, upon which proposals were to be based and evaluated, failed to factor changing economic and regulatory conditions caused by the pandemic. These changes would impact the number of foreclosures during at least the base period and first option period of the solicitation.

The GAO agreed with the protesters’ arguments that HUD’s record contained no documentation to show that the agency considered the impact of the COVID-19 pandemic on the terms of the solicitation. Even though the solicitation was amended 15 times, HUD’s estimates did not account for new laws, namely, the mortgage forbearance period for up to 360 days mandated by the CARES Act and the mortgage payment relief options implemented by HUD. The agency’s record was also devoid of any analysis of the changing economic conditions affecting the housing market as a result of the COVID-19 pandemic.

Moreover, two large businesses protested HUD’s decision to restrict the program solicitation to small businesses. The large businesses argued that the agency could not expect small businesses to have the capabilities to handle the significant increased volume of work following the new post-pandemic regulatory landscape. In considering this argument, the GAO evaluated the “rule of two” requirement under FAR 19.502-2(b). Under this rule, a procurement with an anticipated dollar value of more than $150,000 must be set aside for exclusive small business participation when there is a reasonable expectation that offers will be received from at least two responsible small business concerns, and award will be made at a fair market price. A contracting agency’s investigation to determine the availability of responsible small business concerns for set-aside purposes must address not only the existence of small businesses that might submit proposals, but also their capability to perform the contract at a fair market price.

The GAO decision recommended that when HUD revisited its needs and estimates used in the solicitation, it would also be prudent for the agency to reconsider its small business set-aside decision, given that its conclusion about the availability and capability of small businesses to fulfill its requirements would be based on revised estimates.

The takeaway from this decision is that solicitation terms and requirements must address economic, regulatory, and other potential increased costs and disruptions to doing business as usual. While coronavirus continues to present a health threat, changes to operations and new regulations implemented to curb the adverse impacts of the disease, cannot be ignored. Bidders must also question potentially conflicting solicitation terms and other ambiguities before responding to an agency’s request for proposals. If solicitation terms fail to account for operating in a post-Covid-19 era, a GAO protest must be filed before the deadline for submitting bids or proposals.

If you have questions regarding this decision, please contact Shiva Hamidinia at shamidinia@nicholsliu.com or 202-846-9829.

About the author:

Shiva helps government contractors win, keep, and successfully perform projects. Intimately familiar with the pitfalls of federal contract documents and jobsite realities, Shiva provides concise business-minded legal advice to help contractors mitigate risks and increase opportunities.

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