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GovCon Legal Round Up™ - March 31, 2021

The GovCon Legal Round Up™                                                                                                                                                      March 31, 2021
 

U.S. COURT OF FEDERAL CLAIMS (COFC) DECISIONS

SEKRI, Inc. v. U.S. (March 22, 2021)
The COFC dismissed a pre-award bid solicitation protest that was filed directly with the court after an agency (DLA) failed to designate the protestor (SEKRI) as a mandatory source of supply for certain military equipment under the AbilityOne Program.  The COFC deviated from the arguments of both protestor and DLA and ruled, on its own, that the protestor lacked standing under the Tucker Act because, having failed to file a protest before the proposal deadline, it was neither a bidder nor a prospective bidder.  The COFC ruled alternatively that even if the protestor had standing, because it did not object before the close of bidding, it waived its challenge under the Blue & Gold Fleet waiver rule.  (Read decision here.)

Mortgage Contracting Services, LLC v. U.S. (March 18, 2021)
In the second ruling in as many days in favor of a bid protestor, the COFC overruled both the agency (USDA) and GAO and ruled in favor of a protestor (Mortgage Contracting Services).  COFC found that the agency’s evaluation of the winning bidder’s proposal was arbitrary and capricious, that protestor was prejudiced by the agency’s actions, and that protestor was entitled to an injunction against further contract performance by the winning bidder.  In a lengthy analysis, the COFC first determined that the agency’s past performance rating for the winning bidder (which was the same rating given to protestor) was arbitrary and capricious because the agency’s evaluations of two of the three past performance references were unreasonable and not performed in accordance with the solicitation. The COFC also determined that the agency’s technical factor evaluation, which was based in part on relevant experience, and its price realism analysis were both inadequate.  In overturning GAO, the COFC concluded that GAO’s analysis of the past performance issue was lacking and its conclusions summary, and that the GAO did not critically examine the price realism issues.  (Read decision here.)

AGMA Security Service, Inc. v. U.S. (March 16, 2021)
In an earlier decision in favor of a bid protestor, the COFC overruled the agency (FEMA) and determined that its award of a sole-source contract was arbitrary and capricious.  At the beginning of the procurement process, the agency issued an RFP for armed security services, and, at first, made an award decision in favor of the protestor (AGMA Security Service).  After the then-incumbent filed a protest with GAO, the agency took corrective action and subsequently reversed itself and awarded the contract to the incumbent.  The protestor then filed a bid protest with the COFC, which ultimately found no explanation for the agency’s reversal and enjoined the agency from continuing the contract with the incumbent.  Undeterred, the agency nevertheless decided to issue a sole source bridge contract to the incumbent on the grounds that there was insufficient time for a full and open competition.  The protestor then filed a bid protest challenging the sole-source award.  The COFC concluded that the sole-source award was improper and that there was no rational basis for the agency’s sole source decision, and permanently enjoined the agency from continuing its sole source contract with the incumbent.  (Read decision here.)

SBA OFFICE OF HEARING AND APPEALS

In re Size Appeal of Leumas Residential, LLC (Released March 16, 2021)
The SBA’s Office of Hearing and Appeals (OHA) granted a contractor’s (Leumas Residential, LLC’s) appeal of the SBA Area Office’s determination that it was not a small business.  The agency (Navy) had issued an RFP for grounds maintenance services under a contract set aside for 8(a) businesses with a size standard of $8M.  The contractor was awarded the contract but another offeror filed a protest alleging that the contractor was unduly reliant on its subcontractor and in violation of the ostensible contractor rule.  The SBA area office, however, ultimately determined that the contractor and its subcontractor were joint venturers and generally affiliated, that the contractor was not small, and that the ostensible contractor issue was moot.  On appeal, OHA determined that since the proposal was submitted by the contractor, and not a joint venture, the Area office should have addressed the question before it - namely, whether the contractor was in violation of the ostensible contractor rule.  OHA, thus, sent the case back to the Area office for a size determination under an ostensible contractor analysis.  (Read decision here.)

GAO BID PROTEST DECISIONS

In re ISS Action, Inc. (Released March 24, 2021)
GAO denied the bid protest of an offeror (ISS Action) that alleged the agency (DOE) improperly evaluated the winning bidder’s lowest-priced, technically acceptable (LPTA) under personnel qualifications and staffing criteria.  Among its arguments, the offeror objected that the bidder identified as the project manager an employee of the current incumbent, which was proposed to serve as a subcontractor to the bidder.  GAO rejected offeror's arguments, including by concluding that the RFP did not require the project manager to be a direct employee of an offeror.  (Read decision here.)

In re CACI, Inc. - Federal  (Released March 23, 2021)
An agency (Army) relaxed the deadline for offerors to submit notices of intent to propose when it accepted late notices.  After making an award to an offeror that submitted an untimely notice but filed a timely proposal, the protestor (CACI) filed a bid protest arguing that the winning bidder was ineligible for the award because of its untimely notice.  GAO dismissed the protest, concluding that even if the notice deadline waiver was material, the protestor was not next in line for the award in any event and, thus, was not an interested party.  (Read decision here.)

In re Pathfinder Consultants, LLC (Released March 23, 2021)
GAO denied the pre-bid solicitation protest of an offeror (Pathfinder Consultants) that argued the agency (VA) unreasonably omitted past performance from its RFP evaluation factors.  GAO concluded that the agency adequately explained the basis for omitting past performance - namely, that the services sought were not complex or difficult, thus requiring only an assessment of technical approach.  GAO, likewise, rejected the other grounds for offeror's protest based on the agency's failure to respond to its pre-bid questions.  GAO ruled that the offeror failed to demonstrate how the solicitation was inadequate, unclear or ambiguous.  Thus, GAO could not conclude that the agency's failure to respond resulted in unfair or unequal treatment.  (Read decision here.)

In re Jade Excavation, Inc. (Released March 19, 2021)
An offeror (Jade) protested an award by an agency (DOT) to the lowest bidder because it did not have an active SAM registration at the time of its bid submission as required by the invitation for bid.  GAO, however, rejected the protest, relying on its prior decisions that minor informalities related to SAM registration generally do not undermine the validity of an award and are waivable.  (Read decision here.)

GovCon Legal Round Up™ - March 18, 2021

March 18, 2021
Introducing the GovCon Legal Round Up™! 
In this issue of The GovCon Bulletin,™ we introduce our GovCon Legal Round Up,™ providing short summaries of recently released federal government contracting bid protest and dispute decisions.  We hope the handful or so of cases that we select and summarize in each round up - taken from decisions made by the SBA's Office of Hearing Appeals, GAO, the U.S. Court of Federal Claims, the U.S. Court of Appeals for the Federal Circuit, and the Civilian and Armed Services Boards of Contract Appeals - will offer "lessons learned" to federal government contractors as they bid on and pursue federal procurement opportunities.  From time to time, our GovCon Legal Round Up™ may also include more in-depth analysis of one of the selected cases if the decision is particularly instructive or reflects a new understanding of federal government contracting legal issues.
Mark A. Amadeo
 

GAO BID PROTEST DECISIONS

In re MidAmerica Fab and Machine, LLC -- Costs (Released March 16, 2021)
GAO denied a request for recovery of bid protest costs even though the agency (Defense Logistics Agency) decided to take corrective action in response to the GAO protest by cancelling a purchase order and making a new award decision.  GAO denied the request because the agency did not unduly delay taking corrective action but, rather, took action and requested dismissal of the protest before the date the agency report was due.  (Read decision here.)  

In re Omni2Max (Released March 16, 2021)
GAO denied a bid protest in a procurement involving an agency's (Navy's) effort to charter a vessel.  The solicitation required offerors that did not own or charter vessels to provide “supporting evidence” of their “legally enforceable right” to purchase, lease or charter a vessel.  GAO upheld the agency’s decision to exclude from competition an offeror that submitted letters of commitment signed by the vessel owners and charterers because the commitment letters did not contain features of a legally enforceable contract or option.  (Read decision here.)

In re Mission1st Group, Inc. (Released March 16, 2021)
GAO denied a bid protest by an offeror whose proposal was eliminated from consideration by the agency (Army) because it included current, but not expired, ISO 9001:2015 certificates when the solicitation required evidence of certification for the two years prior to the submission of proposals.  GAO rejected offeror’s arguments that its expired certificate was not actually required by the solicitation and, alternatively, that the agency should have followed up with a request for its expired certificate.  (Read decision here.)

In re Rotair Aerospace Corporation (Released March 12, 2021)
When an agency (DLA) issued an RFQ that did not include the offeror, the offeror filed a bid protest with the agency arguing that it should have been identified as an approved source of supply.  The agency dismissed the protest as untimely because it was not filed with the agency prior to the closing of the solicitation.  The offeror’s subsequent protest to GAO was also found untimely since a GAO protest is untimely if an original protest filed with an agency is untimely.  The GAO also noted that even if the protestor’s filing with the agency had been timely, the filing with GAO would still be untimely because it was filed more than 10 days after the agency’s decision to dismiss.  (Read decision here.)

In re People, Technology and Processes, LLC (Released March 8, 2021)
GAO denied the bid protest of a company whose proposal was determined by GSA to be untimely, even though the offeror uploaded its proposal and all attachments to GSA ASSIST as of 4:00:52 pm - exactly at the 4:00 pm deadline for submissions. The offeror purportedly was logged off the system while uploading the attachments and when it realized its submission might be late it e-mailed its proposal and attachments to the contracting officer, who received them at 4:01 pm.  GAO agreed with the agency that e-mail submissions were not authorized and that, despite the fact that the offeror uploaded its files in ASSIST, the offeror nevertheless did not complete its proposal submission.  Consequently, the offeror could still have made changes to its uploaded proposal and, thus, never fully relinquished control of its proposal.  (Read decision here.)

In re Vectrus Mission Solutions Corporation; Vanquish Worldwide, LLC (Released March 8, 2021)
In a rare decision sustaining a bid protest, GAO sided with an offeror whose bid was subjected to an upward adjustment by an agency (Army).  In responding to an RFP for a cost-plus-fixed-fee requirement, the offeror proposed to absorb some costs.  During evaluation of the bid, however, the agency made an upward adjustment to the offeror’s bid to reflect the cost that the offeror agreed to absorb.  GAO concluded that since the offeror made a legally binding promise to assume liability for the cost reduction it proposed, the agency should not have made the upward adjustment.  GAO consequently recommended that the agency make the award to the protestor and reimburse its protest costs, including reasonable attorneys fees.  (Read decision here.)

U.S. COURT OF FEDERAL CLAIMS DECISIONS

Colonna's Shipyard, Inc. v. U.S. (March 11, 2021)
After GAO dismissed an offeror’s bid protest against the agency (Navy), the offeror filed its protest with the U.S. Court of Federal Claims (COFC) alleging that the agency was arbitrary and capricious in making the award to another bidder and that the agency breached an implied contract of fair dealing.  Besides challenging the agency’s evaluation of its proposal, the offeror also challenged the agency’s use of Simplified Acquisition Procedures (SAP) under FAR Part 13 and argued that it received no notice that SAP applied to the procurement.  The COFC rejected the offeror’s bad faith claims and its evaluation and scoring challenges.  With regard to SAP, the COFC determined that the agency never represented that FAR Part 15 would control, that the agency complied with FAR Part 13 requirements, and that FAR contains no requirement that an agency notify offerors that it intends to make an award pursuant to SAP.  (Read decision here.)  

Independent Contractor Regulation Update: DOL Withdraws Opinion Letters, Delays Regulation Effective Date

March 1, 2021
INDEPENDENT CONTRACTOR REGULATION UPDATE: DOL WITHDRAWS OPINION LETTERS, DELAYS REGULATION EFFECTIVE DATE

Recently, on February 19, 2021, the U.S. Department of Labor (DOL) withdrew for the third time in three weeks an opinion letter - FLSA2019-6 - addressing the issue of whether workers are independent contractors. 

Earlier, on January 26, 2021, DOL withdrew two opinion letters - FLSA2021-9 and FLSA2021-8 - in which DOL concluded the workers in question were independent contractors.  DOL had issued FLSA2021-8 and FLSA2021-9 on January 19, the last full day of the Trump administration, and relied on its new independent contractor regulation to draw its conclusions.  At the time the two letters were issued, however, that new independent contractor regulation, which was announced in November 2020, was not yet effective since the effective date was set for March 8, 2021.  Indeed, DOL withdrew FLSA2021-8 and FLSA2021-9 soon after inauguration day on the grounds that “[t]hese letters were issued prematurely because they are based on rules that have not gone into effect.”

We covered the new independent contractor regulation in our February 5 GovCon Video Blog.™  As we mentioned, and as DOL itself has acknowledged, that new regulation is the first generally applicable regulation that DOL has ever issued setting forth criteria for determining whether workers are employees or independent contractors under the Fair Labor Standards Act (FLSA).  The new regulation adopts a five-factor “economic reality” test for making the determination, and a number of commenters have suggested that the new regulation will make it easier for employers to classify workers as independent contractors.  (For more on the new regulation, see our vlog here.)  This notion is seemingly borne out by DOL’s reliance on the new regulation in FLSA2021-8 and FLSA2021-9 to conclude workers were independent contractors. 

At the time of our vlog, the new administration had implemented a freeze on pending new regulations that had not yet taken effect.  Since then, on February 9, DOL proposed to move the effective date of the new independent contractor regulation from March 8 to May 7.  According to DOL, the new regulation “would adopt a new legal standard for determining employee and independent contractor status under the FLSA.”  Moreover, delaying the effective date would allow DOL

"more time to further review and consider, among other important issues, the legal, policy, and/or enforcement implications of adopting that standard, such as: Whether the rule effectuates the FLSA’s purpose, recognized repeatedly by the Supreme Court, to broadly cover workers as employees; the costs and benefits attributed to the rule, including the assertion that workers as whole will benefit from the rule; and/or whether the rule’s explanation of the standard provides clarity for stakeholders and for the purposes of WHD enforcement, as was intended.”

In its announcement of the delay, DOL also instructs employers, in the meantime, to look to existing guidance in DOL's Fact Sheet #13 and to the legal analysis in current federal court decisions for the standards that DOL and courts will apply.

Thus, DOL’s proposed delay makes it clear that the new independent contractor regulation will undergo renewed and intense scrutiny that may ultimately lead to its withdrawal, and that any regulatory standard for determining whether workers are contractors or employees, if it is ever issued, will likely be re-formulated from the new regulation.

DOL’s nearly immediate withdrawal of the two “last minute,” and yet premature, opinion letters under the prior administration that concluded workers were independent contractors is not surprising in light of the status of the new regulation that the letters relied on when they were issued, and given DOL’s subsequent decision to subject the new regulation to a fresh new look.

More perplexing, however, is DOL’s recent decision to reach back to April 2019 to withdraw its FLSA2019-6 opinion letter in which it had also concluded that workers were independent contractors.  DOL withdrew that letter after it announced its decision to delay implementation of its new regulation on the grounds that it “addressed the same issue under consideration by the Department—independent contractor status under the FLSA.”  But that April 2019 opinion letter purportedly relied on the formulation of the economic reality test for determining independent contractor status that is currently applied by the Supreme Court and federal courts and that DOL now points employers to for guidance.

In any event, as we mentioned in our vlog, given how much subcontracting takes place in federal contracting and given that the line between independent contractor and employee status may be further blurred by the prevalence of remote working during the Covid-19 pandemic, government contractors should remain alert to any further developments. 

To read or obtain a copy of DOL's announcement of its proposed delay of the new independent contractor regulation go here.

To read other articles from The GovCon Bulletin™ go here.

FAR Update: Final Rule Limits Use of LPTA Criteria By Civilian Agencies

February 10, 2021
FAR UPDATE: FINAL RULE LIMITS USE OF LPTA CRITERIA BY CIVILIAN AGENCIES

Last month, on January 14, 2021, DoD, GSA and NASA issued a final rule that sets out new criteria, as well as limitations, on the inclusion of lowest price technically acceptable (LPTA) source selection criteria in solicitations by civilian agencies.  Initially proposed in October 2019, the final rule makes no changes and only a few minor edits to the October 2019 proposed rule, and is set to become effective on February 16, 2021.

The new FAR rule is similar to a final rule that DoD issued in October 2019 implementing in DFARS 215.101–2–70 restrictions on the use of LPTA criteria by defense agencies.  (That DoD final rule can be found here.)

In particular, the final FAR rule amends FAR 15.101-2 to require the use of the LPTA selection process only when six (6) conditions are satisfied:

(1) An agency can comprehensively and clearly describe the minimum requirements expressed in terms of performance objectives, measures, and standards that will be used to determine acceptability of offers;
(2) An agency would realize no, or minimal, value from a contract proposal exceeding the minimum technical or performance requirements set forth in the request for proposal;
(3) The agency believes technical proposals will require no, or minimal, subjective judgment by the source selection authority as to the desirability of one offeror's proposal versus a competing proposal;
(4) The agency has a high degree of confidence that reviewing technical proposals of offerors other than the lowest bidder would not result in the identification of factors that could provide value or benefit to the agency;
(5) The contracting officer has included a justification for the use of an LPTA evaluation methodology in the contract file; and
(6) The agency has determined that the lowest price reflects total cost, including for operations and support, of the product or service being acquired.

The new FAR rule also amends FAR 15.101-2 to instruct contracting officers to avoid using the LPTA selection process, to the maximum extent practicable, in procurements that are predominantly for the acquisition of:

(1) Information technology services, cybersecurity services, systems engineering and technical assistance services, advanced electronic testing, audit or audit readiness services, health care services and records, telecommunications devices and services, or other knowledge-based professional services;
(2) Personal protective equipment; or
(3) Knowledge-based training or logistics services in contingency operations or other operations outside the United States, including in Afghanistan or Iraq.

The additional criteria and restrictions, predictably, may lead to an increase in the number of protests challenging a civilian agency’s use of LPTA procedures in its procurements. 

To read or obtain a copy of the final rule go here.

To read other articles from The GovCon Bulletin™ go here.