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Negotiated acquisitions.

If the Proposal Is Sent Electronically, Either, Get It There by 5:00 p.m. the Day Before or Contractor Bears the Risk of Late Proposals

In today's age where e-mail is so prevalent and an almost instantaneous method of communication, the Government Accountability Office (GAO) reaffirmed the rule that if proposals are not sent by 5:00 p.m. the day prior to the time due to the agency, the contractor bears the risk. In Symetrics Industries, LLC, (1) the GAO denied a protest alleging the agency improperly rejected Symetrics' final proposal revision (FPR). (2)

The Air Force refused to consider the protester's FPR when the electronic version arrived in the contracting officer's email inbox one minute after the designated time for submissions. (3) The Air Force requested FPRs from those offerors in the competitive range for AN/ALE-47 Countermeasures Dispensing System, pointing out certain items to be reviewed prior to each offeror's submission of its FPR. (4) The solicitation stated that FPRs could be electronically submitted to the contracting officer's e-mail address, but the agency warned that the FPRs must be received no later than 3:00 p.m. Eastern Standard Time (EST) on the day in question. (5) Any FPRs received after 3:00 p.m. would be considered late in accordance with the RFP provision and FAR 52.215-1 and would therefore not be considered. (6)

Although Symetrics sent its FPR from its offices before the 3:00 p.m. deadline, the contracting officer did not receive the e-mail in her e-mail system until 3:01 p.m. (7) At 2:58 p.m. on the final date designated for the receipt of FPRs, the president of Symetrics phoned the contracting officer to state that Symetrics had submitted its FPR via e-mail. The e-mail arrived at the contracting officer's inbox at 3:01 p.m., during the conversation. (8) There was a variety of evidence that Symmetrics' e-mail worked its way through the company's e-mail system starting at 2:54 p.m. and the base server received the email at 2:57:41 p.m., but it did not ultimately reach the contracting officer until 3:01 p.m. (9) Symetrics argued that its submission was under government control by the deadline, and that it was unreasonable to reject its FPR. The GAO rejected that reasoning stating that the FAR is clear. (10) By not submitting the proposal to the government by 5:00 p.m. the day before it was due, the contractor bore the risk (and ramifications) of a late submission. (11) Here, the contracting officer received the FPR one minute after proposals were due which clearly made it late and the GAO denied the protest. (12)

Section L Counts--Agency Not Required to Allow Offerors the Opportunity to Correct Proposals That Do Not Comply with the Clear Requirements of the Solicitation

In case you thought otherwise, the directions in Section L concerning submissions count. In Mathews Associates, Inc., (13) the GAO denied a protest alleging that it was unfair or unduly burdensome to require offerors to assume the risks associated with failing to comply with clearly stated solicitation formatting requirements. (14) In preparing its proposal in Mathews, the protester failed to follow the solicitation's requirements regarding page formatting and as a result, the agency refused to consider the proposal. (15)

The Army Communications-Electronics Life Cycle Management Command issued a request for proposals for loudspeakers and battery boxes to use in the single channel ground airborne radio system. (16) The solicitation anticipated the award of up to two fixed-price indefinite-delivery indefinite-quantity (ID/IQ) contracts for up to five years that offered the best value to the government. (17) Section L notified prospective offerors that proposals were limited to twenty-five pages and specified one-inch margins. (18) In formatting its proposal, Mathews modified the page margins to less than the one-inch prescribed in the solicitation. (19) The Agency realized this and then notified Mathews that the agency would not evaluate its offer because it violated the solicitation's formatting requirements. (20)

After the agency refused to reconsider, Mathews filed a protest alleging unreasonableness because either Mathews or the Army could have easily reformatted the proposal. (21) The protester also alleged that the formatting requirements were created as a public policy to create a level playing field and that there is no public policy reason to uphold the agency's decision not to reformat its proposal. (22) Neither of these allegations convinced the GAO. For the GAO, the question was not what the agency could do, but what the agency is required to do with an offer that is not within the agency's clear guidelines. (23) Since the agency is not required to allow the offeror to reformat a proposal if it is drafted within the agency's clear guidelines, the agency should not be required to allow the offeror to reformat its proposal when it is not drafted within the agency's clear guidelines. Consequently, the GAO denied the protest. (24)

Conditional Pricing

In a challenge to the Air Force's evaluation of its offer, the GAO sustained SunEdison, LLC's (25) protest of an RFP for construction and operation of a photovoltaic array to supply solar power to Nellis Air Force Base in Nevada. (26) The agency's goal was to reduce the unit cost of electrical service it presently paid to the local utility company; however, if the cost of the contract was more than its present cost of service, the Air Force might elect not to award. (27) The awardee was responsible for all equipment necessary to connect to the base's current electrical distribution system and for an interconnect agreement with the power company to be secured prior to award. (28) The Air Force would award to the lowest cost, technically acceptable proposal. (29)

The agency evaluated four factors on a pass/fail basis and intended to award to the offeror with the lowest cost of the technically acceptable proposals. (30) Three proposals were received and they all passed all four factors. Therefore, the determining factor was price. (31) The awardee's price was contingent upon the successful completion of a Renewable Energy Credit (REC) purchase agreement with Nevada Power. (32) While the agency argued its decision was permissible because the other offerors also contained similar contingencies on price, the GAO disagreed. (33) SunEdison's price proposal was unconditional. (34) SunEdison assumed the risk and stated so in its proposal. (35) Since the Air Force awarded to an offeror whose proposal was conditional, the GAO sustained the protest. (36)

Not Meaningful Discussions

In Multimax Inc., (37) several unsuccessful offerors to the Army's proposed award of multiple ID/IQ contracts actions for worldwide Information Technology (IT) services protested at the GAO. (38) The protesters asserted that the agency failed to conduct meaningful discussions, and that the agency's evaluation of proposals and source selection were unreasonable. (39) The GAO agreed. (40) The protesters asserted that the agency applied an unreasonable "mechanistic formula" in evaluating proposed labor rates, which resulted in the Army failuring to conduct meaningful discussions. (41) The GAO sustained the protests finding that the Army failed to hold meaningful discussions because "the agency's reliance on a two- standarddeviation formula to identify 'outlier' rates--and the broad range of acceptable prices resulting from the formula" caused the agency to failed to bring to numerous other rates to the protesters' attention that reasonably should have been considered significantly overstated. (42)

The Army drafted an expansive statement of objectives for the IT services solicitation, looking for contractors to provide "a full range of IT equipment, operation, maintenance, sustainment requirements, and to analyze requirements, develop solutions and implement them." (43) The Army contemplated eight contract awards and intended generally to compete requirements among the awardees and issue task orders primarily based on fixed-price or a time-and-materials basis. (44) Offerors were required to propose fully-loaded hourly labor rates for 104 labor categories at both government and contractor sites. (45) Their rates were subject to annual escalation rates proposed by the offeror and applied to the annual estimated hourly requirements for each labor category. (46) The resulting totals were combined with annual other direct costs (ODC) as specified in the solicitation and increased by a fixed markup proposed by each offeror for each ODC category, to yield an overall Total Proposed Contract Price (TPCP). (47)

The Army intended to make offers to those offerors whose proposals were determined to be the best value based upon: (1) mission support (with subfactors for performance-based approach, performance-based task approach, and small business participation); (2) performance risk (past performance, corporate experience, and financial; and (3) price with non-price factors significantly more important than price. (48) The agency determined sixteen of the submitted proposals had no deficiencies or weaknesses, and none were unreasonably high. (49) After a protest and subsequent corrective action, the Army awarded eleven contracts and the disappointed offerors again protested. (50) The protesters complained of problems revolving around the price evaluation methodology the Army used. (51)

In order to determine price reasonableness, the Army employed a two-step approach to evaluate labor rates, detect unbalanced pricing, and identify labor rates to question during discussions. (52) The price evaluation team compared an offeror's rate for a labor category to the independent government cost estimate rate, and "then it compared the rate to the mean of all offerors' evaluated rates for each labor category using a two-standard-deviation measure." (53) The results showed that the offerors all fell between one and three standard deviations. (54) The agency therefore determined that a price within two standard deviations was the most appropriate measure of comparison to use for reasonableness assessment. (55)

The problem is that the agency referred to the offerors labor costs and "mechanistically applied" their formula and accepted the results without further analysis. (56) The GAO determined that instead, the agency should have reviewed the results of applying their formula and sought to ensure the prices at the extreme ranges reflected reasonable pricing. (57) The two standard deviation formula the agency created resulted in a wide range of acceptable rates for labor categories. (58) Therefore, the GAO determined the agency's decision was unreasonable because this did not provide a valid means for identifying questionable rates. (59)

The GAO then determined that the Army's price discussions with three offerors were inadequate. According to the GAO the agency's reliance on the two-standard-deviation formula to identify "outlier" rates (and the broad range of acceptable prices resulting from the formula) failed to bring to the protesters' attention numerous rates that reasonably should have been considered significantly overstated. (60) During discussions, the agency failed to identify rates that significantly exceeded the IGCE, which misled offerors into believing these significantly higher rates did not require further adjusting. (61) While the agency notified several offerors that some of their proposed labor rates were significantly higher than the IGCE rates for certain labor categories, they did not reveal the agency's reliance on the standard deviation formula. (62) The offerors incorrectly, but reasonably, reached the conclusion that their rates were not significantly higher than the IGCE. (63) The GAO concluded "that not only were offerors not adequately advised of all of their significantly overstated rates, but the agency's failure to identify the additional rates actually misled the offerors into believing that those rates did not require further adjustment." (64) Since the offerors were unaware of the issues with their rates they did not change their final rates and therefore the discussions were misleading. (65) Since the agency did not reveal all potential issues with the protesters, the GAO found that the agency failed to conduct meaningful discussions with them. (66)

Lieutenant Colonel Ralph J. Tremaglio, III

(1) Comp Gen. B-298759, Oct. 16, 2006, 2006 CPD [paragraph] 154.

(2) Id.

(3) Id.

(4) Id.

(5) Id.

(6) Id;. GENERAL SERVS. ADMIN. ET AL., FED. ACQUISITION REG. pt. 52.215-1(c)(3)1(c)(1)(ii). This provision provides "if no time is specified in the solicitation, the time for receipt is 4:30 p.m., local time, for designated Government office on the date that proposal or revision is due." Id. In this case, the Government did designate the time, 3:00 p.m. Symetrics, 2006 CPD [paragraph] 154, at 1.

(7) Symetrics Indus., LLC, 2006 CPD [paragraph] 154, at 3.

(8) Id.

(9) Id. Symetrics sent the email at 2:54 p.m., which then started transmitting from its mail server at 2:55:44 p.m. The intended recipient was identified and located at 2:58:30 p.m. and completed at 2:58:30 p.m. and completed at 2:58:31 p.m. returning the message "SMTP session successful." Id.

(10) Id.

(11) Id.

(12) Id.

(13) Comp. Gen. B-299305, Mar. 5, 2007, 2007 CPD [paragraph] 47.

(14) Id. at 1.

(15) Id.

(16) Id.

(17) Id.

(18) Id.

(19) Id. at 2. In Mathews' proposal, the top margin was .87 inches (versus 1 inch as was required), the bottom margin was .5 inches (versus 1 inch as was required), the header was .28 inches (versus .5 inches as was required), and the footer was .18 inches (versus .5 inches as was required). Id.

(20) Id.

(21) Id. According to the protester, any portion being more than the twenty-five pages the Army could reasonably refuse to consider. Id.

(22) Id.

(23) Id. at 3.

(24) Id.

(25) Comp. Gen. B-298583, B-298583.2, Oct. 30, 2006, 2006 CPD [paragraph] 168.

(26) Id. Photovoltaic array produces both renewable energy (solar power) and renewable energy credits. The Government understood that while the awardee would have to sell both in order to have a viable project, the government was only interested in the solar power or kilowatt-hours. Id. at 1-2.

(27) Id. at 1.

(28) Id. at 2. The new system was to intended to operation "in parallel" with the present electrical supply system from the local power company, Nevada Power Company. Id.

(29) Id.

(30) Id.

(31) Id.

(32) Id. at 4. It was clear to all that in order to be viable, an awardee would have to sell both kilowatt hours and RECs to have a viable project. Id. at 2. The awardee made clear that it did not believe it could predict the amount at which Nevada Power would purchase the RECs. Id. at 5.

(33) Id.

(34) Id.

(35) Id. The proposal stated, "SunEdison assumes the risk of final PCPA [Portfolio Energy Credit Purchase Agreement] pricing and the final PCPA price will not [a]ffect [the price]." Id.

(36) Id.

(37) Multimax, Inc.; NCI Info. Sys., Inc.; BAE Sys. Info. Tech. LLC; Northrop Grumman Info. Tech., Inc.; Pragmatics, Inc., Comp Gen. B-298249.6, B298249.7, B-298249.8, B-298249.9, B-298249.10, B-298249.11, B-298249.12, B-298249.13, B-298249.14, B-298249.15, B-298249.16, B-298249.17, B298249.18, B-298249.19, B-298249.20, Oct. 24, 2006, 2006 CPD [paragraph] 165.

(38) Id. at 2.

(39) Id. Multimax, NCI Info. Sys., Inc.; BAE Sys. Info. Tech. LLC, and Northrop Grumman Info. Tech., Inc. also alleged the agency changed its requirements, however, this claim was denied.

(40) Id. at 5-6.

(41) Id. at 8.

(42) Id. at 12.

(43) Id. The solicitation's statement of objectives stated:
 ITES-2S contemplates services-based solutions under which
 contractors may be required to provide a full range of IT
 equipment. Therefore, end-to-end solutions to satisfy worldwide
 development, deployment, operation, maintenance, and sustainment
 requirements are included. Additionally included is support to
 analyze requirements, develop and implement recommended solutions,
 and operate and maintain legacy systems, and equipment. It is the
 intention of the Government to establish a scope that is broad,
 sufficiently flexible to satisfy requirements that may change over
 the period of performance, and fully comprehensive so as to embrace
 the full complement of services that relate to IT.


(44) Id. at 2-3. Even though the Army contemplated award to eight contractors, it reserved the right to make more, less, or none. Id.

(45) Id.

(46) Id.

(47) Id.

(48) Id. at 3.

(49) Id. at 3, 5. The Army received seventeen proposals and entered into discussions with all seventeen offerors; one offeror withdrew its offer. Id. at 3.

(50) Id. The Army originally awarded eleven contracts, but several of the disappointed offerors protested. The agency advised that it failed to account for all information received during discussions in its evaluation ratings for the financial subfactor under performance risk evaluation. It therefore took corrective action and the GAO dismissed the protests. Id.

(51) Id. at 8.

(52) Id.

(53) Id. Standard deviation is a statistical tool.

(54) Id.

(55) Id.

(56) Id. at 11.

(57) Id.

(58) Id. at 10.

(59) Id. at 11.

(60) Id. at 12.

(61) Id. at 13.

(62) Id. at 12. The agency also recommend that the offerors consider revising the price proposal or provide an explanation for the basis of the rate. Id.

(63) Id. at 13.

(64) Id.

(65) Id.

(66) Id.
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Title Annotation:Contract and Fiscal Developments of 2007 - the Year in Review
Author:Tremaglio, Ralph J., III
Publication:Army Lawyer
Date:Jan 1, 2008
Previous Article:Sealed bidding.
Next Article:Socio-economic policies.

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