Recent Developments

US-UK Defense Trade Cooperation Treaty: On June 21, 2007, President Bush and Prime Minister Blair signed the US-UK Defense Trade Cooperation Treaty. If ratified by the US Senate and the British Parliament, the treaty will allow most defense goods, services, and information intended for use by the authorities of the two countries to be exchanged without the requirement for an export license. Specific details of the treaty have not yet been made public. A joint statement regarding the treaty may be found at .

Government Property: A long-awaited final rule was issued amending the Federal Acquisition Regulation (“FAR”) to simplify procedures, clarify language, and eliminate obsolete requirements related to the management and disposition of Government property in the possession of contractors. 72 Federal Register (Fed. Reg.) 27364 (May 15, 2007). The rule is intended to improve the management of Government property by adopting practices typically used in the commercial arena while continuing to protect the Government’s interest. The rule also reduces the number of property-related FAR clauses from nineteen (FAR Clauses 52.245-1 through 52.245- 19) to three overarching clauses. The three overarching clauses are designated as (1) FAR Clause 52.245-1, “Government Property,” (2) FAR Clause 52.245-2, “Government Property Installation Operation Services,” and (3) FAR Clause 52.245-9, “Use and Charges.” The rule went into effect on June 14, 2007.

Cost Accounting Standards: The Cost Accounting Standards (CAS) Board issued a final rule revising the threshold for the application of CAS to negotiated Government contracts. 72 Fed. Reg. 32809 (Jun. 14, 2007). The CAS Board increased the threshold from $500,000 to $650,000, the same threshold for compliance with the Truth in Negotiations Act. The new CAS applicability threshold went into effect on June 14, 2007. (CAS program requirements are discussed in the FAR Appendix, Subpart 9903.2.) Separately, the CAS Board also issued a proposed rule to provide a standard clause for use by Government and contractor personnel in applying CAS requirements to contracts and subcontracts awarded to foreign concerns. 72 Fed. Reg. 32829 (Jun. 14, 2007).

The proposed clause, “Disclosure and Consistency of Cost Accounting Practices – Foreign Concerns,” is identical to the clause currently applicable to contracts subject to modified CAS coverage, except that the proposed clause only requires foreign concerns to comply with CAS 401 and 402, disclose actual cost accounting practices, and consistently follow disclosed and established cost accounting practices. Comments to the proposed clause must be submitted by August 13, 2007.

Prompt Payment Interest Rate: The Department of the Treasury announced that, for the six month period of July 1, 2007 to December 31, 2007, the interest rate applicable to the Prompt Payment Act and claims under the Contract Disputes Act is 5 3/4 percent per year. 72 Fed. Reg. 35742 (Jun. 29, 2007). The interest rate for the six month period ending on June 30, 2007 was 5 1/4 percent per year.

Postal Service Board of Contract Appeals: The U.S. Postal Service amended its rules regarding small claims (expedited) and accelerated proceedings before the Postal Service Board of Contract Appeals. 72 Fed. Reg. 35662 (Jun. 29, 2007). Pursuant to a recent amendment to the Contract Disputes Act, the Board’s rules now permit appellants that are small business concerns to elect the small claims (expedited) procedure when the monetary amount in dispute is $150,000 or less. For appellants that are not small business concerns, this expedited procedure may be elected only when the amount in dispute is $50,000 or less. The Postal Service also made other technical changes to these rules, which appear in Section 955.13 of Title 39 of the Code of Federal Regulations. The changes went into effect on June 29, 2007.

Ethics Training: On June 14, 2007, the U.S. Office of Government Ethics announced the availability of an online course called “Interacting with Government Employees for Contractors.” The course is an interactive web-based training module that is designed as an introduction to some common ethics issues that contractors may encounter when working with Government employees. The course addresses topics such as: conflicts of interest; gifts that Government employees may accept from contractors; Government employees seeking work as an employee of a contractor; post-Government employment restrictions; and contractor employees leaving the private sector to enter Government service. The course may be found at .

Emergency Acquisitions Guide: On May 31, 2007, the Office of Management and Budget (OMB) issued a guide to help federal agencies prepare the acquisition workforce for emergencies. The guide describes strategies for effective response planning, provides a list of acquisition reminders when contracting during emergencies, and discusses flexibilities that acquisition personnel deployed to an emergency situation may use to facilitate timely procurements. The guide also includes management and operational best practices that agencies developed in response to Hurricane Katrina and other emergency situations, which OMB recommends should be considered in planning related to contingency operations, anti-terrorism activities, and national emergencies. The guide will be maintained electronically on the Office of Federal Procurement Policy website at .

Public-Private Competitions: On May 2, 2007, the OMB issued a report addressing executive agencies’ use of public-private competitions, or “competitive sourcing,” for commercial activities in FY 2006. The report states that agencies completed 183 competitions involving nearly 7,000 jobs, which are expected to generate over $1.3 billion of savings. Significantly, federal employees won 87% of these competitions. The report also analyzes trends from FY 2003 to FY 2006. During this four-year period, agencies conducted 1,243 competitions involving nearly 47,000 jobs, which are expected to save $6.9 billion. The report may be found at .

Recent Decisions

Solicitation Defects: The U.S. Court of Federal Claims (COFC) held that the Army’s rejection of a proposal in a procurement for educational support services was improper because the factors and significant subfactors used in evaluating the proposal were not stated clearly in the solicitation, in violation of FAR 15.304(d). Heritage of America, LLC v. United States, No. 07-150C (Fed. Cl. May 31, 2007). The Army asserted that, contrary to the solicitation, the plaintiff’s proposal failed to provide a loaded unit price for each labor category and, in addition, failed to bid on at least 75 percent of the Army installations in each region on which it bid. The COFC concluded, however, that neither of these requirements was clearly stated in the solicitation. Moreover, the COFC determined that the plaintiff reasonably interpreted the solicitation to require offerors to provide a loaded unit price only for those services for which the Army had provided an estimated number of hours, and not for all labor categories as asserted by the agency. Similarly, the COFC determined that the plaintiff reasonably interpreted the solicitation to require offerors to bid on at least 75 percent of the estimated labor hours – not 75 percent of the installations – in each region on which they bid.

Site Visits: The U.S. Government Accountability Office (GAO) sustained a bid protest because the National Oceanic and Atmospheric Administration (NOAA) failed to reasonably accommodate the protester’s request for a site visit in a procurement for operation and maintenance services at a NOAA research center. Dellew Corp., Comp. Gen. Dec. B-299408, May 1, 2007. Although procuring agencies generally have broad discretion in scheduling site visits, the GAO concluded that NOAA acted unreasonably when it only gave the protester one day’s notice of the scheduled site visit and refused to grant the protester’s request for a later site visit to allow it a meaningful opportunity to compete. Significantly, although the solicitation stated that offerors were urged and expected to inspect the site where services were to be performed, the solicitation did not establish or provide any dates for the conduct of site visits, nor did it establish a deadline for an offeror to request a site visit.

Late Quotations: The GAO sustained a bid protest regarding the award of an Environmental Protection Agency (EPA) purchase order for a hazardous substance identification container because the EPA should not have considered the awardee’s quotation, which was submitted 15 minutes after the time set for receipt of quotations. M.Braun, Inc., Comp. Gen. Dec. B-298935.2, May 21, 2007. Although late quotations generally may be considered up to the time of issuance of the order (unlike offers submitted in response to a Request for Proposals), the Request for Quotations here incorporated a FAR clause that expressly limited the EPA’s consideration of late submissions. In addition, although the EPA argued that its consideration of the late quotation was proper because the awardee’s quotation was the only acceptable submission received, the GAO stated that the EPA’s claim was not supported by the record, which established that the awardee’s submission also was unacceptable because the awardee did not submit a fixed-price quotation as required by the Request for Quotations.

Lack of Meaningful Discussions: The GAO sustained four bid protests regarding a Defense Information Systems Agency (DISA) procurement for information technology services because, although DISA conducted discussions with several offerors regarding their small business subcontracting plans, the agency failed to conduct discussions with the protesters regarding certain other significant weaknesses identified in their proposals. Computer Sciences Corp.; Unisys Corp.; Northrop Grumman Information Technology, Inc.; IBM Business Consulting Services – Federal, Comp. Gen. Dec. B-298494.2 et al., May 10, 2007. DISA contended that its exchanges with offerors regarding their subcontracting plans were merely clarifications, and that the exchanges therefore did not trigger the requirement to conduct discussions with all offerors in the competitive range. The GAO disagreed, finding that offerors, through the exchanges, revised their subcontracting plans and, as a result, DISA changed its evaluation of the plans from unacceptable to acceptable. The GAO also rejected DISA’s argument that exchanges relating to the acceptability of small business subcontracting plans relate to an offeror’s responsibility and, therefore, do not constitute discussions. Although the GAO in some cases has found that exchanges concerning an offeror’s small business subcontracting plan were not discussions because the plan was only evaluated as part of the agency’s responsibility determination, the solicitation in this case provided for a comparative assessment of the offerors’ subcontracting plans as part of DISA’s technical evaluation.

Past Performance Evaluations: The GAO sustained a bid protest because the General Services Administration (GSA), in a procurement for commercial hand tools, mischaracterized the relative quality of the offerors’ past performance records. Midland Supply, Inc., Comp. Gen. Dec. B-298720.3, May 14, 2007. Although the GSA stated that the protester’s past performance had “substantial weaknesses” relating to its ontime delivery rate, the record demonstrated that the protester’s delivery rate merited a rating of “average,” which could not reasonably be characterized as a substantial weakness. Similarly, the GSA unreasonably concluded that, based upon the offerors’ respective on-time delivery rates, the awardee’s past performance was “significantly better” than the protester’s past performance. Although the awardee’s on-time delivery rate was better than the protester’s rate, the awardee, like the protester, received a rating of only “average” for its ontime delivery record. Moreover, the GSA’s best value determination mischaracterized the awardee’s average performance as “excellent.”

Cost Evaluations: In a January 2007 decision that was issued under a protective order and recently released to the public, the GAO sustained a bid protest regarding the award of a cost-reimbursable Department of Health and Human Services (HHS) contract for employee assistance program services because HHS failed to perform a reasonable cost realism analysis of the awardee’s proposal. Magellan Health Servs., Comp. Gen. Dec. B- 298912, Jan. 5, 2007. The GAO concluded that HHS’s cost evaluation was unreasonable in at least four respects. First, the HHS cost analyst improperly removed the awardee’s proposed fixed fee from the cost realism analysis because the analyst believed that the determination of an acceptable fee was left to the Contracting Officer’s discretion. Second, HHS also improperly removed the awardee’s proposed costs for employee signing bonuses and educational materials because the awardee was unable to provide supporting documentation for the proposed amounts. The GAO stated that proposed costs should be adjusted downward only if a procuring agency concludes that the actual costs likely will be lower than proposed, not because the proposed costs are insufficiently supported. Third, although the HHS cost analyst determined that the awardee had not proposed sufficient levels of effort for certain labor categories, the Contracting Officer failed to consider the analyst’s corresponding cost adjustments and, instead, considered only the awardee’s proposed costs in the source selection decision. Fourth, HHS failed to adjust the awardee’s proposed direct labor rates for certain labor categories when, while the awardee expressly agreed in its proposal to match existing salaries as part of its effort to attract and retain incumbent employees, the awardee’s proposed labor rates for these labor categories were lower than the labor rates for the incumbent employees in those categories. HHS argued that the awardee did not know the incumbent employees’ salaries and that its proposed labor rates were based on the best information available to it. The GAO stated that these HHS contentions were irrelevant, and reflected a fundamental misunderstanding of what is required as part of a cost realism analysis, because HHS was aware of both the incumbent labor rates and the discrepancies between those rates and the awardee’s proposed rates. Moreover, the awardee’s proposed labor rates also were substantially lower than the rates in HHS’s own independent Government cost estimate.

Bid Protest Timeliness: The U.S. Court of Appeals for the Federal Circuit (Federal Circuit) held that, when a party has the opportunity to object to the terms of a solicitation containing a patent error and fails to do so prior to the close of the bidding process, the party waives its ability to raise the same objection in a subsequent bid protest action in the COFC. Blue & Gold Fleet, L.P. v. United States, No. 2006-5064 (Fed. Cir. Jun. 26, 2007). Although the COFC’s jurisdictional statute does not contain an express protest timeliness requirement regarding alleged solicitation defects, the Federal Circuit noted that the statute requires the COFC to give due regard to “the need for expeditious resolution” of protests. The Federal Circuit also observed that several COFC decisions have recognized the utility of such a timeliness rule, and that the GAO has adopted a similar rule in its bid protest regulations.

Warranties: Reversing a 2006 COFC decision, the Federal Circuit held that the Air Force’s termination for convenience of a contract to provide computers did not extinguish the contractor’s obligations to provide warranty and upgrade services. International Data Products Corp. v. United States, No. 2006-5083 et al. (Fed. Cir. Jun. 27, 2007). The contract, which was awarded under section 8(a) of the Small Business Act, contained a clause that warranted parts and labor for a minimum of 3-5 years and, in addition, provided a two-year warranty on software upgrades. In accordance with Small Business Act requirements, the Air Force terminated the contract after approximately four years because the contractor was purchased by a non-section 8(a) company and, as a result, no longer qualified under the section 8(a) program. The Federal Circuit also held that the original purchase price of the computer equipment included the cost of the warranty and upgrade services and, therefore, the Air Force was not required to pay any additional costs for these services.

Contractor Performance Evaluations: The U.S. District Court for the District of Columbia held that it lacked jurisdiction to consider a lawsuit brought by a contractor seeking relief from the alleged refusal by the Defense Supply Center Philadelphia (DSCP) to provide other Government procurement agencies with performance evaluations and information regarding the contractor’s DSCP contracts. Public Warehousing Co., K.S.C. v. Defense Supply Center Philadelphia, et al., Civ. Action No. 07-0502 (D.D.C. May 22, 2007). The district court held that, under the Administrative Dispute Resolution Act (ADRA), Congress established exclusive jurisdiction over such actions in the COFC as of January 1, 2001. Among other things, ADRA provides the COFC with exclusive jurisdiction over objections regarding any alleged violation of statute or regulation “in connection with a procurement or a proposed procurement.” The district court concluded that the FAR requirement to provide contractors with performance evaluations and information “fits comfortably within the body of regulations that are ‘in connection with a procurement or a proposed procurement.’”

Monetary Sanctions: The Civilian Board of Contract Appeals (CBCA) held that it lacks the authority to issue monetary sanctions against the Government for discovery abuses. Mountain Valley Lumber, Inc. v. Dept. of Agriculture, CBCA No. 95, Jun. 21, 2007. The CBCA noted that, for almost 25 years, various boards of contract appeals have consistently held that they lack authority to issue monetary sanctions. The CBCA observed, however, that it has authority under the Equal Access to Justice Act (EAJA) to award attorneys fees to prevailing parties. The CBCA stated that the appellant therefore might be able to recover its attorneys fees, including those related to discovery, if it were to prevail in its appeal and if it met the criteria for reimbursement under EAJA.