Federal Acquisition Circular 97-02 implementing the FAR Part 15 Rewrite was issued September 30th, and it is effective for all solicitations issued on or after October 10th, save that agencies may delay implementation until January 1st, 1998. Much has been written about the impact of the FAR Part 15 Rewrite on competitive range determinations. In this writer’s view, competitive range determinations are not the big news in the FAR Part 15 Rewrite, simply because most of these materials are little more than a restatement of existing case law. [We discussed this case law in A New Twist for Competitive Range Determinations, an article that appeared in the Summer 1995 issue of Government Contractor Insights.] Rather, the big news in the FAR Part 15 Rewrite is the increased scope of agency obligations to conduct discussions.
Let’s begin by looking at the new requirements set out in FAR 15.306(d)(3) and (e):
(d)(3) The contracting officer shall . . . indicate to, or discuss with, each offeror still being considered for award, significant weaknesses, deficiencies, and other aspects of its proposal (such as cost, price, technical approach, past performance, and terms and conditions) that could, in the opinion of the contracting officer, be altered or explained to enhance materially the proposal’s potential for award. The scope and extent of discussions are a matter of contracting officer judgment. In discussing other aspects of the proposal, the Government may, in situations where the solicitation stated that evaluation credit would be given for technical solutions exceeding any mandatory minimums, negotiate with offerors for increased performance beyond any mandatory minimums, and the Government may suggest to offerors that have exceeded any mandatory minimums (in ways that are not integral to the design), that their proposals would be more competitive if the excesses were removed and the offered price decreased.
. . . .
(e) Limits on exchanges. Government personnel involved in the acquisition shall not engage in conduct that-
Favors one offeror over another;
Reveals an offeror’s technical solution, including unique technology, innovative and unique uses of commercial items, or any information that would compromise an offeror’s intellectual property to another offeror;
Reveals an offeror’s price without that offeror’s permission. However, the contracting officer may inform an offeror that its price is considered by the Government to be too high, or too low, and reveal the results of the analysis supporting the conclusion. It is also permissible, at the Government’s discretion, to indicate to all offerors the cost or price that the Government’s price analysis, market research, and other reviews have identified as reasonable . . . .
62 Fed. Reg. 51238 (1997) (emphasis added).
As it turns out, the Final Regulatory Flexibility Analysis prepared for the FAR Part 15 Rewrite gives us an explanation of this increased scope of agency obligations:
The language requires the Government to identify, in addition to significant weaknesses and deficiencies, other aspects of an offeror’s proposal that could be enhanced materially to improve the potential for award. This change should benefit all offerors, including small businesses, because it permits offerors to develop a better understanding of their proposal, and permits them to optimize their potential for award.
62 Fed. Reg. 51229 (1997).
Although we haven’t conducted a formal survey, experience teaches this writer that failure to conduct meaningful discussions is the most frequent ground for overturning contested awards made as a result of competitive negotiations. While it’s too early to undertake a comprehensive analysis of just where this new requirement will lead us, we can begin to understand some issues by contrasting existing case law with the new rules.
Generally, the obligation to conduct meaningful discussions extends to proposal deficiencies, uncertainties, or suspected mistakes; to proposed costs or prices that exceed what the agency believes is reasonable; to proposal errors that reasonably should have been detected by the agency; and to specific areas of concern that have been identified by the agency in its evaluation of competitive proposals. Matrix International Logistics, Inc., B-272388.2, Dec. 9, 1996, at 11-12. In short, agencies are obligated to tell offerors just what they think is wrong, or should have thought is wrong, with particular competitive proposals. This obligation hasn’t gone away. Rather, a new obligation has been added, the obligation to tell offerors how they can make their competitive proposals materially better.
Like the marketing strategy of identifying goods offered at several different levels of quality and features, the “good, better, best” litany, it will be hard to identify just how an offeror can materially enhance its proposal’s potential for award without referring to the other proposals on hand. Whoa! Doesn’t this run afoul of the technical leveling/technical transfusion prohibitions? And where are these things in the FAR Part 15 Rewrite?
Surprise! The FAR Part 15 Rewrite discards the concepts of technical leveling/technical transfusion. In their stead, now we have FAR 15.306(e), the “limits on exchanges” provision. In place of technical transfusion, we have a carefully-worded provision that limits proposal content that may not be disclosed to “unique technology,” to “innovative and unique uses of commercial items,” and to “any information that would compromise an offeror’s intellectual property.” There’s nothing about technical leveling. Technical leveling is dead; perhaps the authors of the FAR Part 15 Rewrite thought that technical leveling was too often an excuse, after a review of all of the proposals, not to bargain for better from offerors whose proposals lacked desirable features offered in other proposals.
By looking at a recent GAO decision, International Data Systems, Inc., B-277385, Oct. 8, 1997, we can speculate about just how FAR 15.306(e) may work with its new requirement to discuss areas of competitive proposals that could be altered or explained to enhance materially the proposal’s potential for award. At issue here was a solicitation for personal computers that specified a requirement for Intel Pentium® Pro microprocessors. One of the offerors proposed an Intel Pentium® II microprocessor as an alternate, and was able to convince the agency (and GAO) that the Intel Pentium® II, rather than the Intel Pentium® Pro, is the state of the art. Id., at 2 n.1. [Persons with extensive benchmarking results will argue that this is not the case, that the Intel Pentium® Pro is not outdated and is better suited for some machines, i.e., multiple processor servers.]
The agency accepted the offer of an Intel Pentium® II microprocessor as an alternate, believing the offeror’s representations that the Intel Pentium® Pro would be phased out at the end of 1997. Many of the agency’s users that were scheduled to receive the Intel Pentium® Pro systems described in the solicitation expressed a preference for the Intel Pentium® II microprocessor. The contract award document contained a new contract line item, this one for Intel Pentium® II microprocessor-based systems. Id., at 2, 4.
This, and other grounds, formed the basis for a protest filed at GAO. GAO granted the protest, deciding that the addition of a new contract line item for Intel Pentium® II microprocessor-based systems represented a change in agency needs that should have prompted a solicitation amendment allowing all of the offerors to submit revised proposals on a common basis. Id., at 5. This is the rule announced in former FAR 15.606(a), and it is carried forward in the FAR Part 15 Rewrite at FAR 15.206(a), (d). 62 Fed. Reg. 51235 (1997).
Could GAO have sustained this protest under the former FAR Part 15 based on a failure to conduct meaningful discussions, i.e., on the basis that the agency should have raised the desirability of the Intel Pentium® II microprocessor in the discussions with other offerors? Likely not. As we’ve said, under the former FAR part 15 rules, agencies were abjured from “technical leveling (i.e., helping an offeror to bring its proposal up to the level of other proposals . . . .),” and from “technical transfusion (i.e., Government disclosure of technical information pertaining to a proposal that results in improvement of a competing proposal).” FAR 15.610(d), (e), 48 C.F.R., ch. 1 (1996). Disclosure during discussions of user enthusiasm for the Intel Pentium® II microprocessor-based systems offered by only one offeror would have violated both prohibitions. To grant the protest, GAO hung its hat on the only available regulatory hook, the requirement for a solicitation amendment so as to conduct the competition on a common basis.
Now let’s look at a possible result under the FAR Part 15 Rewrite. Would a potentially successful protest ground be the agency’s failure, during discussions, to ask for revised proposals based on Intel Pentium® II microprocessor-based systems? Recalling that the standard is for the contracting officer to call offerors’ attention to material enhancements, the first hurdle is to demonstrate that a revised proposal offering Intel Pentium® II microprocessor-based systems would have materially improved the potential for award. Given the agency’s position that the Intel Pentium® II, rather than the Intel Pentium® Pro, is the state of the art, and that many agency users expressed a preference for Intel Pentium® II microprocessor-based systems, it must be a given that such a revision would have materially improved the potential for award.
Would asking for revised proposals based on Intel Pentium® II microprocessor-based systems have violated the limits on exchanges provisions of FAR 15.306(e)? Here we need to look at FAR 15.306(e)(1) and (2). It is unlikely that any tribunal would hold that asking all of the other offerors for revised proposals based on Intel Pentium® II microprocessor-based systems would violate FAR 15.306(e)(1), which provides that agencies may not favor one offeror over another. One consideration that comes into play is the addition to FAR 1.102-2 that is made with the FAR Part 15 Rewrite, specifically, the new provision, in FAR 1.102-2(c)(3), that “[a]ll contractors and prospective contractors shall be treated fairly and impartially but need not be treated the same.” 62 Fed. Reg. 51229 (1997). Another line of reasoning is that asking for proposal revisions so that offerors are competing on a common basis is a point that underlies the new FAR 15.306(d)(3) requirement to ask for material enhancements. This view is further bolstered by pointing out that the prohibition on technical leveling is eliminated in the FAR Part 15 Rewrite.
Whether or not there is a violation of FAR 15.306(e)(2) depends on the information that would have to be revealed. Recall that FAR 15.306(e)(2) prohibits the revelation of an offeror’s technical solution, i.e., an offer of unique technology, or an innovative and unique use of commercial items, or the compromise of an offeror’s intellectual property. On the facts as presented in International Data, an alternate offer of Intel Pentium® II microprocessor-based systems against a requirement for Intel Pentium® Pro microprocessor-based systems is hardly unique technology or an innovative and unique use of commercial items, and neither is it a compromise of an offeror’s intellectual property where, as here, there is no need to reveal a protected expression, and that which is disclosed is simply the idea, an alternate offer based on a different microprocessor.
So it appears that on the facts presented in International Data, there is a new ground of protest that becomes available under the FAR Part 15 Rewrite, viz., the agency’s failure to identify just how offerors could have materially enhanced their proposals’ potential for award, here by offering Intel Pentium® II microprocessor-based systems. It is one thing to require that agency evaluators and contracting officers tell offerors just what they think is wrong, or should have thought was wrong, with particular competitive proposals, and quite another when agency evaluators and contracting officers are tasked with the requirement of identifying particular aspects of competitive proposals that would materially enhance the potential for an award. This is a paradigm shift in agency obligations, one that presents substantial new obligations that few agencies have considered. It will be interesting to see how this increased scope of agency obligations works out in the case law. Look for a number of cases on this issue after the FAR Part 15 Rewrite provisions go into full effect on January 1st.
— Cy Phillips
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