Government Contracts CFC Applied Wrong Standard in Evaluating Corrective Action
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Monday, November 5, 2018

CFC Applied Wrong Standard in Evaluating Corrective Action

By Government Contracts Editorial Staff

The Court of Appeals for the Federal Circuit reversed a Court of Federal Claims decision enjoining corrective action because the CFC improperly applied a heightened “narrowly targeted” standard to determine whether the corrective action was reasonable. The solicitation for commercial off-the-shelf computer hardware contemplated award to eight or more offerors that submitted the lowest-priced technically acceptable proposals. It required offerors to provide technical approach subfactor spreadsheets and stated “an incomplete or blank entry will indicate that the proposed item does NOT meet the minimum requirements.” Errors in many offerors’ spreadsheets caused them to submit technically unacceptable proposals, but the government elected to make nine awards without discussions. After 21 offerors filed protests at the Government Accountability Office alleging solicitation ambiguities, the government announced it would take corrective action by opening discussions with all remaining offerors, requesting final revised proposals, and making new awards.

Deferential Standard. Six awardees challenged the corrective action before the CFC, which held opening discussions and seeking revised proposals was overbroad and not rationally related to any procurement defects, and clarification and reevaluation of proposals was more appropriate for what the court deemed were “minor clerical errors” in proposals (61 CCF ¶81,182). However, the CFC based its decision on an error of law. The Federal Circuit has consistently reviewed corrective actions under the Administrative Procedure Act’s highly deferential rational basis standard. In applying a heightened standard requiring reasonable corrective action to “narrowly target the defects it is intended to remedy,” the CFC failed to follow binding precedent. Instead, the CFC improperly relied on its decision in Amazon Web Services, Inc. v. U.S., et al. (57 CCF ¶80,199), which applied the defective narrowly targeted standard and was factually distinguishable because it concerned evaluation defects, not defects with the original solicitation and proposals.

Rational Basis.The Federal Circuit also found the proposed corrective action was rationally related to the procurement’s defects, which were spreadsheet ambiguities and failure to conduct discussions. Although spreadsheet ambiguities may not always require reopening a procurement, the CFC’s characterization of the spreadsheet defects as “relatively minor” was incorrect. The defects were highly material because they led to the majority of the offerors submitting technically unacceptable offers and related to offerors’ identification of their computer equipment models, which were the primary technical elements on which the government evaluated offerors. In addition, the total procurement was estimated to be $5 billion, and DFARS 215.306(c)(1) provides that contracting officers should conduct discussions for acquisitions with an estimated value of $100 million or more. The government coherently explained that opening discussions with all offerors would allow offerors to propose compliant equipment and modify prices accordingly. Also, the corrective action of conducting discussions was rationally related to the procurement defect of failing to conduct pre-award discussions, according to the government’s reasonable interpretation of applicable regulations. (Dell Federal Systems, L.P., et al. v. U.S., et al., CA-FC, 62 CCF ¶81,494).

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