In NetCentrics Corp. v. U.S., the U.S. Court of Federal Claims recently upheld an agency’s decision to disqualify an offeror from a procurement based on a perceived material misrepresentation in the offeror’s proposal.1 In so holding, the COFC made clear that a material proposal misrepresentation may exist, even if there is no intent on the part of the offeror to deceive the agency.

Key Facts

In response to allegations made in a post-award bid protest that was filed with the Government Accountability Office, the U.S. Department of Defense's Washington Headquarters Services investigated whether the awardee of the subject contract had made a material misrepresentation about the availability of one of its proposed key personnel.

The agency’s investigation concluded that the awardee’s proposal had, in fact, made a misrepresentation about the availability of the awardee’s proposed key personnel and that this misrepresentation was, in fact, material because it was relied on by the agency during its evaluation. The agency, accordingly, rescinded the award and disqualified the contractor from the competition.

Thereafter, the disqualified contractor filed its own bid protest with the GAO, arguing, among other things, that the agency’s determination that the disqualified contractor’s proposal contained a material misrepresentation was “factually and legally erroneous.” The GAO then denied the disqualified contractor’s bid protest, concluding that the agency reasonably considered the contractor’s proposal to contain a material misrepresentation and that the agency acted reasonably in rescinding the award and disqualifying the contractor.

The day after the GAO denied its protest, the disqualified contractor filed a bid protest with the COFC, arguing, among other things, that, “in order to disqualify its proposal on material misrepresentation grounds, the agency was required to find not only that [the contractor] made false statements upon which the agency relied, but also that [the contractor] did so with the intent to deceive the agency.”

The disqualified contractor also noted that “several judges on [the COFC] have stated that intent to make a false statement is a necessary element of a material misrepresentation.”

After reviewing the protest, the COFC held that “a material misstatement made with the intent to deceive reflects particularly egregious behavior that directly threatens the integrity of the procurement process.” But, the COFC continued, “that does not mean that an agency lacks the discretion to disqualify a proposal that contains a material misrepresentation that an offeror included inadvertently (as opposed to intentionally) in its proposal.”

Thus, the COFC went on to hold:

[A]n offeror has an obligation to submit a proposal that is, to the greatest extent possible, an accurate one. An offeror that inadvertently includes a material misrepresentation in its proposal concerning the availability of its proposed key personnel shirks this obligation and also undermines the agency’s ability to make well-reasoned procurement decisions that serve the public interest. Therefore, an agency may reasonably reject such a proposal. ... Further, requiring a heightened showing of intent to deceive as a condition of rejecting proposals that contain material misrepresentations may reduce offerors’ incentives to exercise due diligence when preparing their proposals, including their identification of key personnel.

For these reasons, the COFC concluded that an agency “may reasonably disqualify a proposal on material misrepresentation grounds where — despite the fact that the misrepresentation was inadvertently included in the proposal — the agency relied upon it when making its award decision.”

The COFC then went on to hold that the agency in this case reasonably concluded that the disqualified contractor’s proposal contained such a misrepresentation and, further, that the misrepresentation was a material one.

Key Takeaways

As the COFC noted in its decision in this case, multiple prior COFC decisions have stated that intent to make a false statement is a necessary element of a material proposal misrepresentation. The COFC’s decision in this particular case, however, is a departure from those prior decisions, in that it makes clear that a material proposal misrepresentation need not be intentional for an agency to disqualify an offeror based on the misrepresentation.

Notably, the COFC’s recent holding in this regard is generally consistent with the GAO’s case law in this area, which holds that such a material proposal misrepresentation — or “bait and switch” — may exist where the offeror either “knowingly or negligently” made a material misrepresentation in its proposal.2

However, because COFC decisions are not necessarily binding on other COFC judges,3 it is still possible that another judge on the COFC could, in the future, hold that intent to make a misrepresentation in a proposal is a necessary element of a material proposal misrepresentation.

Further, because of these diverging COFC decisions in this area, it is possible that the disqualified contractor will appeal the COFC’s decision in this case to the U.S. Court of Appeals for the Federal Circuit. If that were to happen, then any decision by the Federal Circuit on this particular issue would, in fact, be binding on all COFC judges and, thus, would effectively be the last word on the issue.

The original article, "Claims Court Lowers Bar For Proposal Misrepresentation," first appeared in Law360 on Sept. 27, 2019 (login required)