Legislative frameworkRelevant legislation
What is the relevant legislation regulating the award of public contracts?
There is a broad array of federal statutes that pertain in whole or in part to public procurement. These include, in relevant part:
- the Armed Services Procurement Act of 1947 (10 USC Sections 2301-2314, see discussion below);
- the Berry Amendment (10 USC Section 2533(a); Department of Defense requirement relating to procurement of American products);
- the Buy American Act (41 USC Sections 8301-8305; subject to exceptions, restricts the purchase of supplies that are not domestic end products for use within the United States and generally creates preference for public procurement of US-made products);
- the Clinger-Cohen Act (Federal Acquisition Reform Act of 1996) (40 USC 1401; designed to improve the way the federal government acquires, uses and disposes information technology);
- the Competition in Contracting Act (codified in various provisions of 10, 31, 40, and 41 USC; see discussion below);
- the Contract Disputes Act of 1978 (41 USC Sections 1701-1709; establishes the procedures for handling claims related to federal contracts);
- the Federal Acquisition Streamlining Act of 1994 (codified in various provisions of 10 and 41 USC; implemented the ‘best value’ standard, replacing the ‘lowest bid’ standard);
- the Federal Property and Administrative Service Act of 1949 (40 USC Sections 471-514 and 41 USC Sections 251-260; see discussion below);
- the False Claims Act (31 USC Sections 3729 - 3733; establishes liability and imposes treble damages on persons who knowingly submit false claims to the federal government);
- the Small Business Act (as amended, 15 USC ch 14A; requiring that a fair percentage of work performed under government contracts be set aside for small businesses);
- the Truth in Negotiations Act (10 USC Section 2306a; providing full and fair disclosure by contractors in the conduct of negotiations with the government, including the requirement that contractors submit certified cost and pricing data for larger contracts); and
- the Tucker Act (28 USC Sections 1346(a) and 1491; waiving sovereign immunity so as to allow claims by private parties with respect to government contracts to be brought against the federal government).
In general, the Armed Services Procurement Act of 1947 (ASPA), the Federal Property and Administrative Services Act of 1949 (FPASA), and the Competition in Contracting Act (CICA), together form the three statutory foundations of government contract law and the federal acquisition process:
- the ASPA governs the acquisition of all property (except land), construction, and services by defence agencies;
- the FPASA governs similar civilian agency acquisitions; and
- the CICA, applicable to both defence and civilian acquisitions, requires federal agencies to seek and obtain ‘full and open competition’ wherever possible in the contract award process; only in seven circumstances may a federal agency award a contract using a sole source contractor or ‘other than full and open competition’.
Various other federal statutes, including those noted above, address specific issues related to public procurement but are not comprehensive in nature.
Moreover, every year new procurement-related provisions typically are added in annual authorisation and appropriations legislation and enacted into law (eg, the defence authorisation and appropriations statutes). These provisions often deal with topical issues that arise from time to time. In some years the provisions relate to stronger oversight of public federal procurement or higher penalties for violations; in other years, provisions might relate to restrictions on foreign-produced products. The Berry Amendment, noted above, as well as the Clinger-Cohen Act, were promulgated or amended through annual authorisation legislation.
Fortunately, private parties seeking to do business with the federal government do not have to examine each applicable law because federal laws related to public procurement have been implemented in the Federal Acquisition Regulation (FAR), codified in Title 48 of the Code of Federal Regulations. The FAR sets forth, in comprehensive fashion, the uniform policies and procedures for acquisitions by all federal departments and agencies, and implements or addresses nearly every procurement-related statute or executive policy. In doing so, the FAR reaches every stage of the acquisition process.Sector-specific legislation
Is there any sector-specific procurement legislation supplementing the general regime?
There has, from time to time, been specific legislation enacted to address procurement issues in particular sectors or with respect to particular types of contracts. For example, the Weapons Systems Acquisition Reform Act of 2009 governs how the Department of Defense procures major weapons systems. Additionally, numerous federal departments and agencies have adopted agency-specific supplements to the FAR, which may not conflict with or supersede relevant FAR provisions. One exception is the US Post Office, which has its own implementing rules, known as the Postal Service’s Supplying Principles and Practices.International legislation
In which respect does the relevant legislation supplement the EU procurement directives or the GPA?
Not applicable.Proposed amendments
Are there proposals to change the legislation?
Although there are no major proposals to change the overall legal framework for government procurement, as noted, virtually every year changes are made in federal laws or the FAR. For example, the Department of Defense, General Services Administration, and National Aeronautics and Space Administration have proposed an amendment to the FAR regarding commercial contract clause requirements and flowdown (see FAR Case 2018-019). In addition, in 2018, the FAR Council, which manages, coordinates, controls, and monitors the maintenance and issuance of changes in the FAR, issued proposed rules to amend the FAR to implement regulatory changes made by the Small Business Administration which revised and standardised the limitations on subcontracting, as well as proposed rules to enhance whistle-blower protection for contractor employees.
The FAR council also recently finalised a rule to clarify the prohibition on the charging of employees recruitment fees, to further implement the FAR policy on combating trafficking in persons. See Federal Register Volume 83, Number 244, pages 65,466-65,478. Under the rule, contractors and subcontractors (and employees and agents of the foregoing) are prohibited from charging employees recruitment fees.
Applicability of procurement lawContracting authorities
Which, or what kinds of, entities have been ruled not to constitute contracting authorities?
By its terms, the FAR only applies to procurement transactions entered into by ‘Executive Agencies’ of the federal government (FAR Subpart 2.101), a term that, as defined therein, does not apply to ‘mixed ownership Government Corporations’. Such mixed ownership Government Corporations are defined in the Government Corporation Control Act, 31 USC Section 9101, to mean:
- the Central Bank for Cooperatives;
- the Federal Deposit Insurance Corporation;
- the Federal Home Loan Banks;
- the Federal Intermediate Credit Banks;
- the Federal Land Banks;
- the National Credit Union Administration Central Liquidity Facility;
- the Regional Banks for Cooperatives;
- the Rural Telephone Bank;
- the Financing Corporation;
- the Resolution Trust Corporation; and
- the Resolution Funding Corporation.
Moreover, the FAR also expressly exempts certain types of transactions. Specifically, by its terms, the FAR applies to ‘all acquisitions as defined in part 2 of the FAR, except where expressly excluded’ (FAR Subpart 1.104 (Applicability)). The express exemptions from the FAR for types of transactions are for ‘grants and cooperative agreements covered by 31 USC Section 6301, et seq’ (FAR Subpart 2.101 (Definition of ‘Contract’)).Contract value
Are contracts under a certain value excluded from the scope of procurement law? What are these threshold values?
While the FAR does not entirely exempt contracts on the basis of value, it does create certain streamlined types of contracting rules, with less burdensome procurement obligations for contractors, on contracts below certain threshold values. This is known as Simplified Acquisition Procedures (FAR Subpart 13). Generally, the threshold limit for Simplified Acquisition Procedures is US$150,000 (FAR Subpart 2.1). Threshold exceptions exist, for example, for contracts relating to defence against nuclear, chemical, or biological attack (US$750,000 in the US; US$1.5 million outside the US) and peacekeeping operations (US$300,000) (FAR Subpart 2.1).
Specific limits are also set for ‘micro-purchases’, which are defined as ‘an acquisition of supplies or services using simplified acquisition procedures, the aggregate of which does not exceed the micro-purchase threshold of US$3,500’, with limited exceptions (FAR Subpart 2.1).
The treatment of commercial item contracts under commercial law
Under the FAR, the federal government may procure commercial items from contractors on terms that are similar to non-government commercial contracts. Commercial items are defined broadly to include items of a type customarily used by the general public or by non-governmental entities for purposes other than governmental purposes, and services of a type offered and sold competitively in the commercial marketplace, as well as the combination of items and services that are customarily combined and sold in combination to the general public (see FAR Subpart 2.101 (Definition of ‘commercial item’)). As a result of the Federal Acquisition Streamlining Act of 1994 (FASA), the FAR has been revised to contain policies and procedures applicable only to commercial items, and to identify certain exemptions from government contracting laws and regulations for commercial item contracts. For example, see FAR Parts 13-15 for policies and procedures on solicitation, evaluation and award for acquisition of commercial items that more closely resemble the commercial items.
There are certain requirements that commercial item contracts must meet in order to receive preferential treatment under the FAR. For example, the contract must exceed the micro-purchase threshold and the acquisition of commercial items must not be directly from another agency of the federal government (see FAR Subpart 12.102). In addition, the commercial item contract must either be a firm-fixed-price contract or fixed-price contracts with economic price adjustment. A time-and-materials contract or labour-hour contract may be used in certain limited circumstances (see FAR Subpart 12.207).
Despite the preferential treatment afforded to them, commercial item contracts (and subcontracts) are required to incorporate a small set of FAR provisions in their contracts. Many federal agencies also have their own FAR supplement provisions. For example, the Department of Defense FAR Supplement (DFARS) applies to the acquisition of commercial items by the Department of Defense. In addition, there are a limited number of unique requirements that apply to all government contracts, regardless of whether the contract is for commercial items, including, among others, Equal Employment Opportunity contract clauses, the Anti-Kickback Act of 1986, and prohibitions on human trafficking.Amendment of concluded contracts
Does the legislation permit the amendment of a concluded contract without a new procurement procedure?
Amendments are permitted in certain circumstances enumerated below, but generally (and subject to limited exceptions) contracts cannot be extended past their specified terms or scope of work without new competitive bidding procedures (see FAR Subpart 6.1).
- Contract modifications (changes). Contract modifications (frequently referred to as ‘mods’) are common actions under the FAR and can relate to contract cost, delivery schedule, fees, terms and conditions, and personnel. Changing technologies, funding and mission requirements may create the need for changes to a contract. Whenever an executive agency wants something different than what was envisioned for the original contract or something unforeseen occurs, a modification may become necessary (see generally FAR Subpart 43).
- Commercial item contracts. When using FAR Part 12 procedures for the acquisition of commercial items, the government does not have authority to unilaterally require changes. The commercial item clause at FAR Subpart 52.212-4, contract terms and conditions - commercial items, requires that both parties agree to changes in the terms and conditions of a contract. When this occurs, a supplemental agreement has been created.
- Non-commercial item contracts. The changes clause (see FAR Subpart 52.243) is the cornerstone of the government’s ability to modify a contract for non-commercial items. It provides the government with authority that is unmatched in private-sector contracting. This clause allows the government to unilaterally make changes in the contract without requiring the contractor’s concurrence.
- Contracts for non-commercial items may be modified by use of a change order, which is a unilateral order signed by the contracting officer directing the contractor to make changes using the authority of the various changes clauses. If the change order causes an increase or decrease in the cost of, or time required for, performance of any part of the work under the contract, the contracting officer must make an equitable adjustment in the contract price, the delivery schedule, or both.
- Where a contracting officer requires an increase or decrease in the scope of work beyond what is contained in the statement of work, which will result in a change to the cost of the contract, the modification is considered ‘bilateral’ and must be agreed to and signed by both the government and the contractor.
- Contract extensions. Generally, subject to limited exceptions contracts issued pursuant to the FAR by Executive Agencies, at the time of solicitation, can be awarded with periods for extension (see FAR Subpart 17.2). It is very common to see FAR-based contracts issued with such built-in extensions (eg, with a base period and multiple additional option periods that the Executive Agency, at its option, can execute). In addition, contracts often include provisions (eg, FAR Subpart 52.217-8) that allow the Executive Agency to unilaterally extend the contract for short periods, up to six months, at prevailing rates under the contract even if option periods in the contracts have not been executed.
- Extensions of contracts beyond their terms (ie, beyond options set forth therein) or beyond the periods allowed under contract clauses for temporary extensions would generally be viewed as sole source contracts (ie, an exception to the competition requirement) and as such would need to be justified (ie, as if it were a new contract).
Has there been any case law clarifying the application of the legislation in relation to amendments to concluded contracts?
Yes. A leading case on this question is AT&T Communications, Inc v Wiltel, Inc, 1 F3d 1201 (Fed Cir 1992), where the court looked at whether the modification of a contract was so substantial as to change the nature of the contract, thus requiring a new competition. There, the Federal Circuit held that the scope of the parties’ intent should be determined by looking at the original solicitation and original contract, as other evidence provided by the offeror could be self-serving.Privatisation
In which circumstances do privatisations require a procurement procedure?
In general, under article IV, section 3, clause 2 of the US Constitution, the federal government can only dispose of government-owned property of any type if authorised by Congress. The primary statute authorising such sales is the FPASA, 40 USC 10, which authorises the sales of ‘excess’ and ‘surplus property’ (ie, property not required to meet the needs or responsibilities of the government). The FPASA then specifies that such property, if not needed by some other US government department or agency, can be disposed of by sales, exchange, lease, permit etc. Generally, subject to certain exceptions, the law provides that such disposals may be made only after public advertisement of the solicitation.
Sales of assets not surplus or excess are governed under other statutes enacted for the privatisation of specific asset classes and typically require competitive bidding. See, for example, the Energy Policy Act of 1992, Pub. L. 102-486 (authorising the sales of US nuclear enrichment capabilities for private use through an initial public offering).
Moreover, inherently governmental functions may not be privatised (see FAR Subpart 7.5). Individual agencies make determinations as to whether functions are inherently governmental, and the Office of Management and Budget may review those determinations.Public-private partnership
In which circumstances does the setting up of a public-private partnership (PPP) require a procurement procedure?
PPPs are uncommon for federal contracts and there are no express rules regarding procurement procedures for them.
Advertisement and selectionPublications
In which publications must regulated procurement contracts be advertised?
The contracting officer is required to advertise contracts with a value in excess of US$25,000 through the government-wide point of entry (GPE). This can be found on the federal government’s website FedBizOpps (FBO at fedbizopps.gov) (FAR Subpart 5.102). As an alternative, the Secretary of Commerce will publish the notice for solicitation in the Commerce Business Daily 41 USC Section 416. For sealed bidding, the agency publicises the Invitation for Bid (IFB) through display in a public place, announcement in newspapers or trade journals, publication in the federal government’s Commerce Business Daily, and by mailing the IFB to those contractors on the agency’s solicitation mailing list.Participation criteria
Are there limitations on the ability of contracting authorities to set criteria or other conditions to assess whether an interested party is qualified to participate in a tender procedure?
When evaluating whether an interested party is qualified, the contracting officer will evaluate a number of factors, including the party’s financial resources, past performance on contracts, ability to comply with the terms of the contract (including the skills, systems of production, and safety programmes necessary), record of ethical behaviour and experience (FAR Subpart 9.104). The FAR affords the contracting officer considerable discretion in shaping the procurement - with respect to the choice of procurement method, deadlines (which are not set by law or regulation but set in the actual solicitation) and the criteria for the acquisition.
Is it possible to limit the number of bidders that can participate in a tender procedure?
Yes. In general, the FAR requires competitive bidding subject to certain limited exceptions that allow sole source procurements, restrictions on types of bidders or less than full and open competition in limited circumstances (FAR Subparts 6.301, 6.302). Moreover, when bids are solicited on a competitive basis through the sealed bidding process, the use of unnecessarily restrictive specifications that might unduly limit the number of bidders is prohibited (FAR Subpart 14.101(a)). Under the competitive negotiation process (see question 21), once proposals are received, the contracting officer may limit the number of bidders based on the contractors the officer deems competitive (see FAR Subpart 15).Regaining status following exclusion
How can a bidder that would have to be excluded from a tender procedure because of past irregularities regain the status of a suitable and reliable bidder? Is the concept of ‘self-cleaning’ an established and recognised way of regaining suitability and reliability?
Contractors barred or suspended on the basis of criminal convictions or other misconduct will typically need to wait until the end of the term of the debarment (typically three years, and up to five years for violation of the Drug Free Workplace Act) or suspension (typically between 12 and 18 months, unless legal proceedings have been initiated within that time period). The suspending or debarring official has authority to terminate the debarment or suspension. For example, a contractor may have the debarment or suspension shortened or revoked if it changes its ownership or management, eliminates the causes for which the penalty was imposed, or has the civil or criminal judgment that led to the penalty reversed (FAR Subpart 9.4-4). Additionally, while there is no ‘self-cleaning’ concept per se in the FAR, it is possible for an official of an agency, in its discretion, to enter into an administrative agreement in lieu of debarment with a contractor, which imposes special compliance obligations on the contractor but allows it to nevertheless bid and perform going forward.
The procurement proceduresFundamental principles
Does the relevant legislation specifically state or restate the fundamental principles for tender procedures: equal treatment, transparency and competition?
Yes. Both the relevant federal statutes and the FAR embody these principles.Independence and impartiality
Does the relevant legislation or the case law require the contracting authority to be independent and impartial?
Yes. The FAR requires that all ‘contractors and prospective contractors shall be treated fairly and impartially but need not be treated the same’ (FAR Subpart 1.102-2).Conflicts of interest
How are conflicts of interest dealt with?
The most developed area of conflict of interest law is under the FAR, which has rules governing ‘organizational conflicts of interest’ (OCI). Thus, to the extent that the agreement or arrangement being crafted falls under the FAR (ie, because it is an ‘acquisition’ covered by the FAR), the OCI rules would be applicable. The OCI rules generally pertain to situations where, because of other activities or relationships, an organisation is unable to render impartial assistance or advice to the government; an organisation’s objectivity in performing government contract work is or might otherwise be impaired; or an organisation has an unfair informational advantage (FAR Subpart 2.101). Significantly, under the FAR, there are few bright lines and it is left to each contracting officer to determine whether a ‘significant’ OCI exists
In general, the following situations may arise:
- impaired objectivity - a firm’s advisory work for a government agency under a government contract could entail evaluating its own work or that of an affiliate or competitor, either through an evaluation of proposals or an assessment of performance (FAR Subpart 9.505-3);
- unequal access to information - a firm has access to non-public information as part of its performance of advisory services for the government, and that information might provide the firm a competitive advantage in a future competition; these are also known as ‘unfair competitive advantage’ OCIs (FAR Subpart 9.505-4); and
- biased ground rules - a firm, as part of its performance of advisory services for a government agency, has helped to set the ground rules for a government contract by, for example, writing the statement of work or defining the specifications. The firm that drafted the ground rules might have a competitive advantage in a future competition governed by those rules (FAR Subparts 9.505-1 and 9.505-2).
If a significant OCI exists, it is the responsibility of the contracting officer to ‘avoid, neutralize, or mitigate significant potential conflicts before contract award’ (FAR Subpart 9.504(a)). A contracting officer’s failure to adequately address OCIs risks unravelling an award in a bid protest. For example, the GAO sustained a recent bid protest where the US Department of Health and Human Services failed to meaningfully assess an OCI that was identified by an awardee at the beginning of the procurement process (AdvanceMed Corp., B-415062 (17 November 2017). In the opinion, the GAO noted that it will not substitute its judgment for that of the agency, provided the agency meaningfully considers whether a significant conflict of interest exists. As a practical matter, all contractors should actively search for potential OCIs, disclose them to the contracting officer, and ensure that the contracting officer considers the OCI and adequately documents any decision regarding resolution of the OCI.
In general, case law will allow the use of organisational ‘firewalls’ and similar measures to mitigate OCIs involving ‘unequal access to information’, but not OCIs based on bias or impaired objectivity. In practice, however, since contracting officers have broad discretion, some do permit ‘mitigations’ to be used to address such situations on a case-by-case basis. Thus, whether an OCI exists is very much a case-by-case, fact-specific matter.
If the contracting officer finds that it is in the best interest of the US to award the contract notwithstanding a conflict of interest, a request for waiver shall be submitted. The waiver request and decision shall be included in the contract file (FAR Subpart 9.504). The grant of a waiver in one contract, however, is not a guarantee that OCIs identified in a subsequent contract will be deemed by the contracting officer, or a losing bidder, to be sufficiently ‘neutralized or mitigated’ (AdvanceMed Corp.) (‘[T]o the extent that the agency may have considered a similar type of conflict in the award of a task order in a different jurisdiction does not discharge its obligation to meaningfully consider whether a significant conflict of interest exists for this specific procurement.’).Bidder involvement in preparation
How is the involvement of a bidder in the preparation of a tender procedure dealt with?
Contracting officers are not permitted to knowingly award a contract to a government employee or a company owned or substantially owned or controlled by a government employee, except in cases where there is a ‘most compelling reason to do so, such as when the government’s needs cannot reasonably be otherwise met’ (FAR Subpart 3.603).
In the event that a bidder is involved in drafting government tender documents or shaping government specifications, such circumstances would, depending on the facts and circumstances, give rise to an organisational conflict of interest in the nature of bias (where the potential bidder helped shape the ground rules in its favour) or unequal access to information (ie, that it would have an informational competitive advantage in bidding). Whether an OCI arises is a fact-specific inquiry (see question 17.)Procedure
What is the prevailing type of procurement procedure used by contracting authorities?
The FAR establishes several basic methods of contracting. The three most common are sealed bidding, competitive negotiation and simplified procedures.Separate bids in one procedure
Can related bidders submit separate bids in one procurement procedure?
There is no general bar on such bids, but certain restrictions do apply. Generally, under the FAR, related bidders can submit bids, and contracting officers can accept them, unless they determine that it is contrary to the government’s interests or would somehow unfairly advantage the affiliated offerors. Moreover, in fixed-price contracts, each individual bidder must submit a certificate of independent price determination, stating that the prices in the offer were set independently, without, for purposes of restricting competition, consultation, communication or agreement with any other bidder or competitor (FAR Subpart 52.203-2). The certificate must also state that each offeror did not consult, communicate or agree with another offeror for purposes of restricting competition, regarding the intention to submit the offer or the methods or factors used to calculate the price in the offer. Additionally, potential bidders need to evaluate such bids on a case-by-case basis, taking into account all relevant facts and circumstances, pursuant to FAR rules on organisational conflict of interest and antitrust rules concerning bid rigging.Negotiations with bidders
Is the use of procedures involving negotiations with bidders subject to any special conditions?
In the competitive negotiation process, the contracting officer may engage in discussions with offerors and, in evaluating proposals, may also consider non-cost factors (such as managerial experience, technical approach or past performance). The negotiating process begins when the officer issues a request for proposals (RFP). An RFP must, at a minimum, state the agency’s need, anticipated terms and conditions of the contract, information the contractor must include in the proposal, and factors and significant subfactors that the agency will consider in evaluating the proposals and awarding the contract - which vary from one contract to another. All interested parties may then submit proposals. Evaluation of the proposals includes an assessment of the proposals’ relative qualifications, based upon factors and subfactors specified in the solicitation.
Typically, in practice, the contracting officer will evaluate the offeror’s cost or price proposal; the offeror’s past performance on government and commercial contracts; the offeror’s technical approach; and any other identified factors for award (FAR Subpart 15.305). During the evaluation period, the contracting officer and source selection team may communicate with the offerors to clarify ambiguities in the proposal, other concerns, or the offeror’s past performance (FAR Subpart 15.306). The contracting officer may award a negotiated contract without any further negotiations (ie, ‘discussions’). However, if the contracting officer intends to conduct discussions, he or she will preliminarily identify the offerors that fall within the ‘competitive range’. The competitive range is comprised of all the most highly rated proposals (FAR Subpart 15.306(c)). To assist in determining the competitive range, the contracting officer may engage in limited communications with all offerors. After establishing the competitive range, the contracting officer will notify each excluded offeror and proceed to conduct ‘discussions’ with the remaining offerors.
Under the FAR, the ‘primary objective’ of discussions is to maximise the agency’s ability ‘to obtain best value, based on the requirement and the evaluation factors set forth in the evaluation’ (FAR Subpart 15.306(d)(2)). During the discussions, the contracting officer must indicate to each offeror the significant weaknesses, deficiencies or other aspects of the proposal that could be altered to enhance the proposal’s potential for award (FAR Subpart 15.306(d)(3)). The scope and extent of these discussions are generally left to the judgment of the contracting officer. However, the contracting officer must not engage in conduct that favors one offeror over another; reveal an offeror’s technical solution; reveal an offeror’s price without permission; disclose the names of persons providing information about the offeror’s past performance; or furnish sensitive source selection information (FAR Subpart 15.306(e)). After discussions begin, the contracting officer may eliminate from consideration any offeror originally in the competitive range but no longer considered among the most highly rated offerors (FAR Subpart 15.306(d)(5)). Further, the contracting officer may request that offerors revise their proposals to clarify any compromises reached during negotiation (FAR Subpart 15.306(d)(3)). At the conclusion of the discussions, the contracting officer will request a final proposal revision from each offeror still in the competitive range. Finally, the contracting officer will undertake a comparative analysis of the final offers in accordance with the evaluation procedures set forth in the RFP, and select the offeror whose proposal is most advantageous to the government. The documented award decision should contain an analysis of the trade-offs accomplished by negotiations and the reasons why the awardee’s proposal represents the best value to the agency (FAR Subpart 15.308).
If the legislation provides for more than one procedure that permits negotiations with bidders, which one is used more regularly in practice and why?
The competitive negotiation process is the most frequently used procurement procedure. The other procedures, such as sealed bidding, do not permit negotiations with bidders.Framework agreements
What are the requirements for the conclusion of a framework agreement?
Under the FAR, federal departments and agencies often issue broad omnibus contracts that allow purchases to be made under them from time to time through the term of the agreement. While such ‘indefinite delivery contracts’ come in varying forms, the FAR contains a preference for making awards to multiple contractors for such contracts (ie, to maintain competition). The available forms include ‘definite-quantity’ contracts (for delivery of a definite quantity of supplies or services for a fixed period); requirements contracts (for filling all purchase requirements during a specified period); and ‘indefinite quantity’ contracts that establish stated maximum and minimum quantities for a fixed period (see FAR Subpart 16.5 generally). The indefinite delivery contract (IDIQs) is regularly used by US departments and agencies. The FAR also establishes other mechanisms such as basic agreements and ordering agreements that establish a range of contractual clauses that would apply in subsequent contracts between the parties, but do not necessarily establish minimum or maximum quantities to be purchased (see FAR Subpart 16.701). These include blanket purchase agreements (BPAs) (see also FAR Subpart 13.303).
May a framework agreement with several suppliers be concluded?
Yes. In general, the FAR (Subpart 16.5) affords executive agencies the authority to, and states a preference for, the execution of a number of indefinite delivery contracts. In such cases, there typically can be further competition among contract holders through task orders under terms specified in the overall contract. Pursuant to this authority, executive agencies have created a range of varied, flexible contract vehicles for such situations where the precise amounts to be ordered are not known in advance, and task orders are issued over a number of years to specifically procure precise amounts. In some cases, agencies (such as the General Services Administration) establish a ‘supply schedule’ of goods, from which all executive agencies can order.Changing members of a bidding consortium
Under which conditions may the members of a bidding consortium be changed in the course of a procurement procedure?
This depends on the nature of the bidding consortium and the relative role of the member of the consortium to some extent. Contractor teaming arrangements can take various forms, with an actual joint venture being formed (that would serve as the bidder), or as one participant taking a lead role, with the other participant or participants acting as subcontractors.
In general, one bidder cannot be substituted for the party that submitted the bid once a bid is submitted. If the bidder is a joint venture, in general, all members must remain on the team or the bidder can potentially be disqualified. The situation is different with respect to subcontractors. Contractors typically enter into teaming arrangements with prospective partners or subcontractors prior to submitting an offer, but also may enter into such arrangements during the bidding process or after submission of an offer, as long as the companies fully disclose their relationship and arrangement (FAR Subpart 9.6). If a subcontractor is not expressly included in the bid, their substitution should not be problematic. If a subcontract was included in the bid, the situation is more complex. This can affect the evaluation of the bid (ie, as one subcontractor’s past performance will be different from another’s) and also raises questions of contractual liability between the parties under whatever teaming arrangements were agreed upon. Regardless of whether the arrangement is made prior to the submission of the offer or after the submission (but prior to the award), the arrangement must be identified and the relationship between the contractors fully disclosed (FAR Subpart 9.603).Participation of small and medium-sized enterprises
Are there specific mechanisms to further the participation of small and medium-sized enterprises in the procurement procedure? Are there any rules on the division of a contract into lots? Are there rules or is there case law limiting the number of lots single bidders can be awarded?
Under the Small Business Act and regulations promulgated thereunder by the Small Business Administration (SBA) and the FAR (Subpart 19), executive agencies are required to foster the participation of small business concerns as prime contractors and subcontractors in contracting opportunities. To this end, executive agencies are required to ‘set aside’ certain contracts for small and disadvantaged businesses, and contractors awarded other contracts are required in most cases to establish a small business plan designed to facilitate subcontract awards to small businesses. Contracting officers can partially set aside contracts where the requirements for full set asides are not met. In addition, there are rules within FAR Subpart 19 allowing for the division of contracts into lots.Variant bids
What are the requirements for the admissibility of variant bids?
Solicitations may allow for alternative or variant bids (FAR Subpart 15.203(a)(2)). In the case of an alternative bid submission, the evaluation approach must consider the potential impact of the variant bids.
Must a contracting authority take variant bids into account?
No, but they are permitted to do so. See question 27.Changes to tender specifications
What are the consequences if bidders change the tender specifications or submit their own standard terms of business?
Under the sealed bid process, modifications shall result in a rejection of a bid unless the invitation for bids expressly allowed alternative bids.Award criteria
What are the award criteria provided for in the relevant legislation?
The FAR affords the contracting officer considerable discretion in shaping the procurement with respect to the choice of the procurement method, deadlines, and specific criteria. Under FAR Subpart 15.304, however, the contracting officer is required, subject to limited exceptions, to consider price or cost; the ‘quality’ of the product or service being offered (including, among other things, technical performance and compliance with solicitation requirements); the past performance of the party; and compliance with socioeconomic goals such as small business participation (including past performance and the specific plan for the bid being submitted).Abnormally low bids
What constitutes an ‘abnormally low’ bid?
Under the FAR, as interpreted by the courts, contracting officers apply the concepts of ‘cost realism’ and ‘price realism’ in evaluating contract proposals, and protestors often challenge awards on these bases. Specifically, under cost realism, contracting officers independently review and evaluate each offeror’s proposal ‘to determine whether the estimated proposed cost elements are realistic for the work to be performed; reflect a clear understanding of the requirements; and are consistent with the unique methods of performance and materials described in the offeror’s technical proposal’ (FAR Subpart 15.404-1(d)). Similarly, under price realism, a concept not expressly included in the FAR, courts have upheld the right of agencies to determine whether proposed prices are too low or otherwise indicate a misunderstanding of the agency’s requirements. Agencies are not required to conduct a price realism analysis unless specified in the solicitation. And, unlike in a cost realism analysis, an agency cannot adjust an offeror’s proposed prices for evaluation purposes in a price realism analysis. The nature and extent of a price realism analysis are within an agency’s discretion.
What is the required process for dealing with abnormally low bids?
See question 31.
Review proceedingsRelevant authorities
Which authorities may rule on review applications? Is it possible to appeal against review decisions and, if so, how?
A disappointed bidder may choose between three fora in which to seek the review of an award: the federal agency that made the award; the US General Accounting Office (GAO); or the federal courts (generally, the US Court of Federal Claims). The protestor can challenge a procurement award made by a federal agency on grounds that the award is arbitrary and capricious, constitutes an abuse of discretion, is otherwise not in accordance with the law or is ‘without observance of procedure required by law’ (5 USC Section 706(2)(A)(D)). In practice, many protests are based on alleged violations of the FAR or the terms and conditions of the solicitation itself, which the FAR requires the contracting officer to follow in making an award. A successful protest can result in reconsideration of the decision to award the contract or in the actual award of the contract to the protester in lieu of the original awardee. Even though a successful protester may not ultimately be awarded the contract, the government agency may have to pay the protester’s bid and proposal costs.
In 2018, the GAO received 2,474 bid protests but sustained only 15 per cent of them. Although the success rate of GAO protests is relatively low, US government procuring agencies do with some frequency adopt some type of voluntary corrective action in response to protests, which typically results in the dismissal of the protest and further action by the procuring agency of various types depending on the circumstances. In 2018, for example, the GAO sustained protests or agencies took corrective action in 44 per cent of the total protests received (GAO Bid Protest Annual Report to Congress for Fiscal Year 2018, B-158766 (27 November 2018)).
Unfavourable decisions reached by the federal agency or the GAO may be appealed to the US Court of Federal Claims, the results of which may, in turn, be appealed to the US Court of Appeals for the Federal Circuit.
If more than one authority may rule on a review application, do these authorities have the power to grant different remedies?
Generally, because the US government has not waived its sovereign immunity, it cannot be sued for money damages with respect to the contract actions of federal agencies. Therefore, remedies are limited to reconsideration of the award or the payment of bid and proposal costs to the protestor if it wins, regardless of the review authority hearing the protest.Timeframe and admissibility requirements
How long do administrative or judicial proceedings for the review of procurement decisions generally take?
According to the terms of the FAR, agencies are required to provide ‘inexpensive, informal, procedurally simple, and expeditious resolution of protests’, and should use ‘best efforts’ to resolve agency protests within 35 days of filing (FAR Subparts 33.103(c) and (g)). Final decisions on protests made to the GAO are required by statute and GAO regulation to be made within 100 days of filing at the GAO (see 31 USC Section 3554(a)(1); 4 CFR Section 21.9(a)). The filing of a supplemental or amended protest may often have the effect of extending a decision by the GAO beyond the 100 day deadline (see 4 CFR Section 21.9(c)). Proceedings before the US Court of Federal Claims are not subject to such deadlines or time frames, but in general the Court is, in practice, often willing to expedite such bid protests given the circumstances.
One way in which the GAO’s decision may be expedited is through the use of alternative dispute resolution (ADR) mechanisms (4 C.F.R. § 21.10(e)). Examples of ADR include negotiation assistance (prior to the filing of an award) or outcome prediction (after the filing of a protest). In outcome prediction ADR, the GAO will advise the parties of the likely outcome of the protest and make recommendations for corrective action, if any, but will not then prepare a full written determination. Generally, the GAO will not conduct outcome prediction ADR unless the parties indicate a willingness to take the appropriate action to resolve the protest (either through withdrawal of the protest by the protestor or corrective action by the agency).
What are the admissibility requirements?
The standard for determining standing to protest a procurement action is prescribed by statute. Specifically, standing is limited to an ‘interested party’, defined as an ‘actual or prospective bidder or offeror whose direct economic interest would be affected by the award of the contract or by failure to award the contract’ (31 USC Section 3551; see also 4 CFR Section 21.0). In the event that the protestor lacked the potential to receive the award even if it prevailed on its protest, it is not an interested party.
What are the time limits in which applications for review of a procurement decision must be made?
The time limits vary depending on the forum in which the protest is brought:
- Court of Claims: challenges filed in the US Court of Federal Claims are not subject to specific time limits for filing;
- agency protests: protests based on alleged apparent improprieties in a solicitation shall be filed with the agency making the award before bid opening or the closing date for receipt of proposals. In all other cases, protests shall be filed no later than 10 days after the basis of protest is known or should have been known, whichever is earlier. The agency, for good cause shown, or where it determines that a protest raises issues significant to the agency’s acquisition system, may consider the merits of any protest that is not timely filed (FAR Subpart 33.103(e)); and
- GAO protests: the rules for filing of pre-award and certain post-award protests are very similar to those of agency awards. For post-award protests in competitive procurements where a debriefing is requested and required, the parties have until 10 days after the debriefing is held (4 CFR Section 21.2(a)(2)). The GAO may also consider protests that are not timely filed where good cause is shown or where the protest ‘raises issues significant to the agency’s acquisition system’ (4 CFR 21.2).
Does an application for review have an automatic suspensive effect blocking the continuation of the procurement procedure or the conclusion of the contract?
The answer varies by forum. There is no automatic right to a suspension for bid protests filed with the US Court of Federal Claims (although the Court does have the authority to issue preliminary injunctive relief to stay the underlying award being challenged pending its consideration of the matter or to use its suasion to convince the US Government to agree to a suspension voluntarily, which does happen at times in practice).
On the other hand, automatic stays do apply to protests before the agency and the GAO in certain circumstances. Specifically, pre-award protests filed on a timely basis with either the agency or the GAO do serve to stay the award of a contract by a federal agency once that agency has received notice that a protest has been filed (31 USC Section 3553(c)(1); 4 CFR Section 21.6; FAR Subpart 33.104(b)). In situations involving a post-award protest, an agency must ‘immediately suspend performance or terminate the awarded contract’ upon receiving notice of a timely filed protest (ie, within 10 days of the contract award date, or within five days of the agency offering a post-award briefing, whichever is later) (31 USC Section 3553(c); 4 CFR Section 21.6; FAR Subpart 33.104(c)). Significantly, a new law modifies this standard for protests involving only contract awards made by the United States Department of Defense (DoD). Specifically, the recently enacted sections 818(b) and (c) of the Defense Authorization Act of 2018 established ‘enhanced debriefing rights’ for disappointed offerors on contracts awarded by the DoD, which affords them the right to ask questions within two days after a post-award debriefing and establishes that the agency must deliver its written responses to those questions within five days. The agency shall not consider the debriefing to be concluded until it delivers its written responses to the disappointed bidder. Where such an enhanced debriefing is held on a DoD contract, the five-day period for the purpose of the automatic stay only begins to run until after the enhanced briefing is complete (ie, when the agency has delivered its written responses to questions to the disappointed bidder). The DoD recently issued a Memorandum on ‘Class Deviation - Enhanced Postaward Debriefing Rights’ (2 March 2018), which implements the new law. Thus, as a practical matter, for DoD awards, the enhanced debriefing rights may extend the timelines for automatic stays in cases where the agency takes time in answering the debriefing questions.
Approximately what percentage of applications for the lifting of an automatic suspension are successful in a typical year?
A contracting agency may ‘override’ the automatic stays described above by making a determination in writing that ‘[c]ontract performance will be in the best interests of the United States’, or that ‘urgent and compelling circumstances that significantly affect the interests of the United States’ are impacted and do not permit waiting for a resolution of the merits of the protest (see FAR Subparts 33.104(b)(1)(i), 33.104(c)(2)(i) and (ii)). Such attempts by agencies to override an automatic stay are relatively rare, accounting for less than 5 per cent of all protests in a typical fiscal year (according to recent GAO statistics).Notification of unsuccessful bidders
Must unsuccessful bidders be notified before the contract with the successful bidder is concluded and, if so, when?
Unsuccessful bidders must be notified pre-award to the extent that their bid is determined to be outside of the competitive range, or within three days after the contract award if the bid was deemed to be competitive but ultimately not accepted. See, for example, FAR Subparts 14.409-1(a)(1), 15.503(b)(2).Access to procurement file
Is access to the procurement file granted to an applicant?
Counsel to applicants, but not the applicants themselves, are typically granted access to the administrative record of the award pursuant to the terms of protective orders (see 4 CFR Section 21.4). Applicants may also have the opportunity to supplement the administrative record in certain circumstances upon appeal to the US Court of Federal Claims.Disadvantaged bidders
Is it customary for disadvantaged bidders to file review applications?
The number of bid protests fluctuates, and disappointed bidders do not always file protests to challenge an award for any number of reasons (eg, lack of a cogent basis for a protest, the cost involved, fear of alienating a key government customer, and other considerations). In general, the number of protests tends to rise in periods of budgetary restraints as contractors are more likely to challenge awards in periods where fewer awards are issued.
According to statistics maintained by the GAO, during fiscal year 2016, 2,789 total cases were filed at GAO, including 2,621 protests, 80 cost claims and 88 requests for reconsideration. This reflects a 6 per cent increase year to year. The GAO reported further that while more than 22 per cent of those cases filed were sustained, 46 per cent of the cases filed resulted in some form of relief being obtained by the protestor (referred to as an overall ‘effectiveness rate’).Violations of procurement law
If a violation of procurement law is established in review proceedings, can disadvantaged bidders claim damages?
The federal government cannot be sued for monetary damages associated with contract actions of federal agencies. Rather, remedies are limited to reconsideration of the award or the payment of bid and proposal costs to the protestor if it prevails.
May a concluded contract be cancelled or terminated following a review application of an unsuccessful bidder if the procurement procedure that led to its conclusion violated procurement law?
Yes, a contracting officer may cancel or terminate a contract or solicitation where it ‘determines that a solicitation, proposed award, or award does not comply with the requirements of law or regulation’ (FAR Subpart 33.102(b); see also 4 CFR Section 21.8(a)). Those remedies may also be recommended to the contracting officer by the GAO in the event that the underlying protest is filed at the GAO (4 CFR Section 21.8(a)).Legal protection
Is legal protection available to parties interested in the contract in case of an award without any procurement procedure?
Yes, in ‘sole source’ contract situations, a contracting agency’s decision may be challenged by interested parties upon the basis that the decision to award the contract on a sole source basis was arbitrary, capricious or an abuse of discretion or violated applicable law or procedure. The agency is afforded a significant amount of deference, however, and in order to prevail, a protestor must establish that the decision had no rational basis and there is no coherent or reasonable explanation for the award.Typical costs
What are the typical costs of making an application for the review of a procurement decision?
There are a wide range of costs associated with filing a protest, depending on the nature and complexity of the contract, the number of issues involved in the protest and other factors. Hence, it is difficult to discern ‘typical costs’ of such protests. As a general matter, however, protests pursued at the contracting agency typically involve less time and expense, whereas challenges pursued at the GAO afford more process (including the ability for counsel to review and comment on the administrative record of the award) and, as a consequence, are more expensive to prosecute. Actions in the US Court of Federal Claims generally are the most time and cost-intensive given the lack of explicit timelines and the prospect that additional discovery or fact finding proceedings can take place. Although an interested party is not required to exhaust its available remedies at the agency level prior to seeking review at the GAO or the US Court of Federal Claims, it is not uncommon for protestors to pursue more than one level of review (where feasible given timeliness restrictions discussed above), which ultimately results in the accumulation of time and expense.
Update and trendsRecent developments
Are there any emerging trends or hot topics in public procurement regulation in your country? In particular, has the scope of applicability of public procurement law been broadened into areas not covered before (eg, sale of land) or on the contrary been restricted?
The FAR and cybersecurity
In 2016, the DoD, General Services Administration and National Aeronautics and Space Administration issued a final rule to add a new FAR subpart (4.19) and contract clause (52.204-21). The rule imposes a set of 15 basic security controls for ‘covered contractor information systems’ (ie, information systems that are owned or operated by a contractor) that process, store or transmit Federal contract information. This is defined broadly to include ‘information, not intended for public release, that is provided by or generated for the Government under a contract to develop or deliver a product or service to the Government’. Acquisition of commercially available off-the-shelf items is exempt from these baseline requirements.
For DoD contractors, a more robust set of requirements under DFARS 252.204-7012 have gone into effect as of 31 December 2017 to safeguard ‘covered defense information’. This provision requires rapid reporting of breach incidents and obligations regarding post-incident investigation, as well as requirements for compliance with the National Institutes for Standards and Technology (NIST) Special Publication 800-171 (Protecting Controlled Unclassified Information in Nonfederal Systems and Organizations).
In addition, the federal government has issued a final rule in 2016 to govern the treatment of ‘controlled unclassified information’ (CUI), which is information held by the government that is sensitive but unclassified. This rule currently only applies to federal government agencies and puts the burden on the agencies to ensure that its agreements with contractors that involve CUI include a provision requiring the contractor to handle CUI in accordance with this rule. Pursuant to FAR case 2017-016, a new FAR clause is currently being drafted to extend the CUI rule to government contractors. It is expected that the FAR CUI clause will be consistent with the DFARS in that it will rely on the NIST framework for the security requirements.
Alternative procedures for government contracting
The DoD can utilise Other Transactional Authority (OTA) as an alternative to strict FAR regulations. OTAs were designed to allow the DoD to attract, and gain access to, non-traditional suppliers. This flexible authority allows the DoD to tailor the transaction to the specific circumstances involved rather than using the standard contract terms and conditions typically used in government contracts, and also allows the DoD to exempt the agreement from the requirements in the FAR as well as cost accounting standards and to negotiate terms on issues like intellectual property and data rights on a project-specific basis. Thus, thorny issues like intellectual property rights can be separately addressed. Recently, OTAs have given the DoD flexibility to adapt to changing commercial industry standards and emerging technology. Generally, OTAs are used in contracts for prototypes and research or IT, where the rate of change in the industry outpaces the amount of time it takes to go through the traditional acquisition process.
The use of OTAs has grown significantly in recent years after Congress expanded the scope of OTA authority. Now, DoD agencies can use OTAs for contracts worth up to U$500 million. OTAs can also be used for contracts exceeding U$500 million in value provided the agency receives approval from the Under Secretary of Defense for Research and Engineering or the Undersecretary of Defense for Acquisition and Sustainment. Contractors seeking to take advantage of the expedited procurement process generally need, for all practical purposes, to be a member of a consortium that the government seeks out for procurement of emerging technologies.