Helping individuals, companies, and organizations understand key legal and practical considerations for promoting compliance and making better business decisions in these types of federal, state, and local government contracting matters MORE

The Government was recently reminded of its responsibility to clearly articulate its requirements for contract performance in Command Language, Inc. d/b/a CLI Solutions, ASBCA No. 61216. There, the Government had sought the creation of 30 and 40 level maintenance manuals to support Afghan forces utilizing Mobile Strike Force Vehicles (MSFV) in Afghanistan. The Afghan forces were already using 10 and 20 level manuals prepared by the original equipment manufacturer (OEM), but needed the higher level manuals for more advanced tasks such as refurbishing, overhauls, etc.. The manuals had to be prepared in English and then translated into Dari and Pashtu.

The OEM’s manuals were written at the standard seventh grade reading level, but the Army wanted the new 30 and 40 level manuals prepared at a third-grade reading level, with a step-by-step pictorial display. The Government prepared a list of the tasks it wanted included in the 30 and 40 level MSFV manuals; however, the Government created this task list based upon manuals for a related vehicle program (the ASV) rather than cross-referencing the tasks already included in the existing 10 and 20 level OEM MSFV manuals. As a result, there was some overlap between tasks previously included in the OEM 10 and 20 level MSFV manuals and the tasks the Government was requesting to be included in the 30 and 40 level MSFV manuals.

The Solicitation, and later the Contract, indicated the Government was providing the OEM 10 and 20 MSFV manuals, as well as the 10-40 level manuals from the ASV vehicle program, as “Government Furnished Information [GFI] for reference,” and instructed bidders that they should use the GFI to the “maximum extent practicable.” Prior to bid submission, offerors submitted numerous questions to the Government seeking guidance in formulating their bids. Two important questions were raised in regards to the overlap between tasks in the 10 and 20 level manuals and the 30 and 40 level manuals being created. The first was “whether it would be acceptable to reference the [10 and 20 level] manual for equipment conditions and other references in the 30 and 40 level manuals [being created]” and the second was whether the tasks in the 10 and 20 level manuals would have to be replicated. The Government responded that offerors could “reference existing manuals” and that there was “no need to replicate.”

The Government evaluated bids utilizing the Lowest Price Technically Acceptable (LPTA) methodology. Essentially, the Government reviewed the sample translation each offeror was required to submit and then looked to price. Because the Government chose the LPTA evaluation methodology, it took the position that it was not required to give consideration to any other factors—including the technical approach offerors planned to take in preparing the subject manuals. Appellant, CLI Solutions (CLI), was ultimately selected because its sample translation was deemed “most favorable” and its price was quite low.

CLI’s price was so low because it intended to do as the solicitation directed and leverage its ability to “reference” the existing material in the 10 and 20 level manuals to the “maximum extent practicable.” Essentially, where possible, it was not going to take apart the vehicles or write out the steps of a task if that task had already been covered in the 10 and 20 level manuals. It would simply refer the reader back to the 10 and 20 level manuals. These tasks were referred to as “reference only tasks.”

CLI specifically mentioned in its bid proposal that it intended to take this approach. The Government expressed its concern in the kick-off meeting at CLI’s low price, but didn’t ask any specific questions about how it arrived at that cost. Nevertheless, CLI specifically mentioned, again, in its kick-off presentation slides that it intended to use reference-only tasks and provided samples detailing the same. CLI went on to submit two additional rounds of sample tasks and then submitted its first deliverable (a first draft 30 level manual), all containing reference-only tasks. At no point in response to these submissions did the Government indicate this approach was unacceptable. It wasn’t until months into contract performance, when the same 30-level draft manual was submitted for its second review, that the Government for the first time indicated the reference-only tasks would have to be redone and fully developed.

Shortly thereafter, the Government issued a cure notice forcing CLI to change its approach, which in turn greatly increased its costs. As a result, CLI filed a claim seeking additional compensation for the full development of the tasks that were previously included as reference-only tasks.

On Appeal, the ASBCA found in favor of CLI. The ASBCA noted that, while the Government may have wanted these manuals fully developed and without reference to the level 10 and 20 level manuals written at a higher grade level, it “did not bind CLI to perform [that type of work].” Citing Blount Bros. Constr. Co. v. United States, 346 F.2d 962, 971 (Ct. Cl. 1965) (the intention in the minds of government designers is of no consequence unless communicated to bidders). The ASBCA gave no weight to the Government’s linguistic-based arguments centered on the grammatical usage and definition of the term “reference” and found that the Government had entirely failed to verify the basis of CLI’s pricing and “ignored every indicator that CLI did not possess the same understanding of the GFI as reference material.”

The ASBCA concluded that the dispute arose from the Government’s “careless disregard of CLI’s technical approach” and the “Army’s mid-stream reformation of the statement of work to satisfy previously undisclosed requirements for simplified 10 and 20 level manuals.” CLI’s approach was consistent throughout the bidding and performance period, and it communicated its intended approach to the Government at every turn. The ASBCA’s decision confirms that the Government must effectively communicate what it wants in a contract and cannot simply turn a blind eye towards a Contractor’s approach and then threaten termination when it decides that approach does not align with its intended purpose. Even in an LPTA evaluation, contractors should make sure they are communicating with the Government about how they intend to arrive at a finished product. That way, in the event of a later disagreement, the Contractor will have a very consistent and persuasive story to tell about why its interpretation is the correct one.

Generally speaking, entities that enter into contracts are bound to perform them. However, as matters evolve, the impacts of natural and man-made problems arising from the coronavirus (COVID-19) are being felt by customers, their contractors, and suppliers. Who bears the costs of such impacts and are there possible defenses or routes to recovery of costs? Force majeure provisions may prove to be a sword and a shield for addressing such impacts.

I. “Force Majeure” Concept and Provisions

The concept of “force majeure” is that a party’s performance of its contractual obligations may be excused where performance is prevented or frustrated due to an unusual event that is beyond the contracting parties’ control. However, force majeure clauses come in different shapes and sizes. Depending on how they are drafted, they may excuse for nonperformance where a set threshold has been exceeded or in only a limited set of circumstances.

A. Commercial contracts

Commercial contracts may contain general or customized force majeure clauses that broaden or restrict the types of triggering events and mitigation that may excuse performance. For example, the majority of force majeure clauses include triggering events caused by an “act of God.” An “act of God” is commonly defined as “[a]n overwhelming, unpreventable event caused exclusively by forces of nature, such as an earthquake, flood, or tornado. The definition has been statutorily broadened to include all natural phenomena that are exceptional, inevitable, and irresistible, the effects of which could not be prevented or avoided by the exercise of due care or foresight.” ACT OF GOD, Black’s Law Dictionary (11th ed. 2019) citing 42 U.S.C. § 9601(1). However, an individual force majeure clause may specify additional factors that, if present, will excuse contractual obligations, such as government regulations, war, disasters, strikes, civil disorders, and acts of terrorism or other similar emergencies. The bottom line is that force majeure clauses often vary and the language must be evaluated to determine if a party can rely on it to excuse nonperformance.

B. Government Contracts

Federal government contracts also may contain force majeure provisions that excuse a contractor’s nonperformance where it is caused by an occurrence beyond the contractor’s “reasonable control” and without its “fault or negligence.” For example, FAR 52.212-4 Contract Terms and Conditions – Commercial Items provides:

  1. Excusable delays. The Contractor shall be liable for default unless nonperformance is caused by an occurrence beyond the reasonable control of the Contractor and without its fault or negligence such as, acts of God or the public enemy, acts of the Government in either its sovereign or contractual capacity, fires, floods, epidemics, quarantine restrictions, strikes, unusually severe weather, and delays of common carriers. The Contractor shall notify the Contracting Officer in writing as soon as it is reasonably possible after the commencement of any excusable delay, setting forth the full particulars in connection therewith, shall remedy such occurrence with all reasonable dispatch, and shall promptly give written notice to the Contracting Officer of the cessation of such occurrence. [Emphasis added.]

Similarly, FAR 52.249-8 Default (Fixed-Price Supply and Service) may excuse a contractor’s nonperformance due to, inter alia, epidemics, quarantine restrictions, or freight embargoes and the contractor could not obtain the needed supplies or services from others in sufficient time to meet the contract schedule:

  1. Except for defaults of subcontractors at any tier, the Contractor shall not be liable for any excess costs if the failure to perform the contract arises from causes beyond the control and without the fault or negligence of the Contractor. Examples of such causes include (1) acts of God or of the public enemy, (2) acts of the Government in either its sovereign or contractual capacity, (3) fires, (4) floods, (5) epidemics, (6) quarantine restrictions (7) strikes, (8) freight embargoes, and (9) unusually severe weather. In each instance, the failure to perform must be beyond the control and without the fault or negligence of the Contractor.
  2. If the failure to perform is caused by the default of a subcontractor at any tier, and if the cause of the default is beyond the control of both the Contractor and subcontractor, and without the fault or negligence of either, the Contractor shall not be liable for any excess costs for failure to perform, unless the subcontracted supplies or services were obtainable from other sources in sufficient time for the Contractor to meet the required delivery schedule. [Emphasis added.]

In addition to these established provisions, individual government contracts may include customized provisions that excuse specific types of force majeure events or delays.

Government contracts also may provide affirmative relief mechanisms where nonperformance, injury or damage arises in certain situations. For example, a government contract may be negotiated to include specific indemnification provisions that provide a vehicle for recovery where the contractor performs high-risk contracts and the potential for injury or damages is significant. See, e.g., FAR 52.249-14 Excusable Delays (Apr 1984); FAR 52.250-1 Indemnification Under Pub. L. No. 85-804 (Apr 1984).

C. The Uniform Commercial Code (UCC)

Subject to definite terms and provisions in the contract, the UCC acts as a gap-filler and may provide guidance where situations arise under government contracts. Typically, force majeure clauses may limit a party’s requirement to achieve substitute performance. Without a force majeure clause, UCC §§ 2-613 through 2-615 provide assistance in sales contracts that become impracticable due to no fault of either party. Section 2-613, for example, provides for the avoidance of a contract if goods suffer a total casualty through no fault of either party before the risk of loss passes to the buyer. Sections 2-614 and 2-615 contemplate avoidance of a contract due to commercial impracticability, which excuses nonperformance arising from circumstances beyond the nonperforming party’s control.

Thus, depending on whether and to what extent your contract (or subcontract) contains force majeure or excusable delay provisions such as the above, you may be able to assert a defense to the assessment of damages or termination under your contract where your alleged nonperformance is beyond your control and without your fault or negligence.

Note that under the UCC (and under many commercial contracts), any shortfall due to the unexpected event must be allocated fairly amongst customers. And if a company fails to allocate the shortfall fairly, the company risks losing the entire defense of force majeure or impracticability. In a government contracts context, such a failure may also give rise to potential liability as an overpayment or False Claim. Thus, failing to allocate fairly can result in huge liability.

II. Look Out for Potential Impacts and Workarounds

At present, the virus has been detected in 6 continents and over 100 countries, including the United States. COVID-19 has been classified by the World Health Organization as a “pandemic.” There are over 100,000 confirmed cases and more than 4,000 deaths resulting from COVID-19. You should be planning for and alert to any actual or potential impacts arising from this emergency. Below are a few potential impacts to be thinking about:

A. Impacts due to illness in your workforce

The virus may be transmitted person to person through respiratory droplets even though infected persons do not appear to be ill. Given the apparent ease of transmission and the fact that the CDC does not identify a specific period of time when the infected person will remain contagious, companies should consider prompt and appropriate action to address the situation and avoid further contagion. Companies would be wise to track these events to determine whether and to what extent they will have sufficient workforce to carry on, as well as whether and to what extent they need to take additional steps to address or mitigate the situation. The severity of these types of events and the limits on your ability to overcome or mitigate them may trigger force majeure consideration.

B. Impacts due to government direction

News reports reveal that governments at the federal, state and local levels are taking actions, inter alia, to try to limit the spread of the virus.

For example, a federal quarantine has gone into effect blocking the transit of persons into the United States – foreign nationals who have visited China or Iran within the past 14 days may not enter the United States; citizens and lawful permanent residents of the United States who have been to China or Iran in the past 14 days are being allowed back in to the United States but are being redirected to one of 11 airports to undergo health screening. Depending on the results of the screening, there will be some restrictions on their movements for a period of time.

States are also being impacted and declaring states of emergency, including California, Colorado, Florida, Illinois, Kentucky, Maryland, New York, Utah, and Washington.

At the state and local levels, at least one state government now has taken action to create a containment area to prevent further spread of the virus. Other state and local government actions being considered and/or implemented include school closures for a period of time in a number of areas, as well as restrictions on public events and movement. This type of “social distancing” is consistent with White House guidance, and efforts proposed by the Centers for Disease Control.

Where the government prevents action or directs certain action, this may give rise to an impact to your business that you cannot avoid and which is beyond your fault or control.

C. Impacts as a result of customer, higher-tier contractor, and supply chain actions

Disruptions in the supply chain may affect the ability of a company to obtain needed raw materials, supplies or services to meet its requirements.

For example, quarantines in China to stem the tide of the virus’ progression are impairing the delivery of supplies and services and are resulting in shortages of raw and finished materials and components used throughout the supply chain.

Closures or reduced workforces in lower-tier suppliers or services providers also may affect the availability of needed supplies or services for higher-tier contractors and end-customers. Particularly hard hit at this time is the electronics supply chain, where impacts of the virus are resulting in delays in production and delivery of computer and telecommunications equipment and components.

Within the United States, production and services delays are also being experienced. Microsoft has asked employees who can to work from home and agreed to pay vendor hourly service providers their regular pay during their period of reduced service needs. Manufacturers are considering options to work around these delays and unavailable parts. Companies are considering alternative places and methods to conduct their manufacturing, such as trying to use 3D printed parts from local suppliers instead of tooled parts that normally would come from China.

Whether and to what extent these impacts constitute force majeure events or sufficient efforts to mitigate so as to excuse any performance deficiencies will need to be assessed on a case by case basis. However, early identification of potential issues and impacts and timely efforts to consider and seek to address them will be important.

III.      Insurance Considerations

Businesses should carefully review their insurance policies to assess any applicable coverage for losses resulting from the coronavirus, including supply chain disruption, business interruption, property damage, and liability claims. Whether there is coverage for coronavirus-related losses will depend on the particular circumstances and the terms of the insurance policies.

While businesses often maintain business interruption insurance, coverage is generally triggered only where there is “direct physical loss of or damage to” to insured property by a covered cause of loss. Some courts have concluded that contamination events that render property unfit for intended use may constitute a “physical loss” sufficient to trigger business interruption coverage, but this will be a fact-intensive exercise in each case. Some businesses (e.g., in the healthcare industry) may have business interruption coverage for communicable or infectious diseases without a physical damage trigger. However, for the standard policyholder, a cessation of business operations without any “physical loss” to insured property will not trigger coverage.

Contingent business interruption insurance provides coverage for losses arising from supply chain disruption, but generally requires physical damage to the property of a supplier or customer on whom the policyholder relies for business. Policies do vary, however, in their requirements to trigger contingent business interruption insurance, and should be carefully assessed to determine if the circumstances and policy language support coverage. Businesses may also maintain “supply chain risk insurance” that does not require physical damage to property.

Property policies may also contain “civil authority” coverage that insures for business interruption-related losses when the government prohibits or impairs access to the policyholder’s premises. As with the other types of business interruption coverage, this often applies only where there is physical damage – here, where there is physical damage to adjacent or nearby property. However, if civil authorities block access to the business premises, the policy should be reviewed carefully to determine whether there is a “physical loss” trigger and, if so, whether it is met.

Policies may also expressly exclude coverage for infectious diseases or pathogen contamination events. Businesses in service and healthcare industries, on the other hand, may have policy endorsements specifically providing limited coverage for such perils.

IV. Next Steps

  1. Proactively evaluate your contracts to determine your requirements, contract provisions and insurance policies that may be applicable to the current COVID-19 situation.
  2. Take steps to promptly identify any actual or potential impacts arising from the situation both within your company and your supply chain.
  3. If you do identify any impacts, promptly assess and determine what it will take to respond and whether and to what extent there are actions that you can take to address or mitigate the situation.
  4. Where impact events arise, be sure to track these events and your efforts to address them.
  5. Determine if you have any notice or reporting requirements as these may be thresholds to your ability to assert defenses or seek relief.
  6. If you are encountering impacts that you think may constitute a force majeure event, contact your counsel to make sure you do so in a way that minimizes your potential liability.

This is a rapidly evolving situation. Taking steps to identify and address your potential risk areas is important. We are watching developments in this area closely and will issue further alerts as matters unfold. The Stinson Task Force is planning a webinar to cover this topic on March 24 from 12 – 1 p.m. CDT. If you are interested in this event, please let us know.

At the end of December, China acknowledged the existence of the coronavirus, and this burgeoning heath crisis is becoming a supply chain problem. China, a major manufacturing hub for materials, products and components being used around the world, has been significantly impacted. 

Facing the fast spread of the virus, China took a number of steps–delaying the return to work of millions following the Lunar New Year celebration, blockading entire cities where the virus is found to be most prevalent, and transporting those with the virus to isolation camps. 

In addition, travel, transportation and shipping services to and from China have been cancelled or restricted. Certain airlines have stopped flying to locations in China. Countries are instituting screening and isolation protocols to prevent those persons with symptoms from entering their countries and further spreading the virus.

Workers have been unable to get to factories to produce materials, products and components. Supplies have been delayed or prevented from transport to their destinations. This has impacted sales, the manufacturing of additional products, and the delivery of services elsewhere. Given the expanding reach of the virus, further impacts to the global supply chain are likely.

What Should Businesses Be Doing Now?

Because of the global nature of the supply chain, these problems are likely to impact businesses in the United States, delaying delivery of both raw and finished materials sourced from China and potentially other origins. This is likely to disrupt manufacturing, construction and other businesses that depend on such materials. For some, the disruption could interfere with the ability to comply with contractual commitments. For others, inventory shortages could lead to a reduction in sales revenues, which in turn, could have a material impact on performance and trigger reporting obligations. Apple reported that the virus would negatively affect iPhone production—and revised its forecasts.
These supply chain problems are not just the province of large multinational businesses. On February 9, Bridgewater, NJ-based Valeritas Holdings, a medical technology company specializing in the manufacture of insulin patches sought bankruptcy protection. The company blamed supply chain problems exacerbated by the coronavirus epidemic as the triggering cause of its bankruptcy filing. 
In these situations, there are several proactive steps that businesses should be taking now to avoid or mitigate problems in the long run.
Identify Alternative Sources: Businesses should identify vulnerabilities in their supply chain and alternative sources to which they can turn. In identifying vulnerabilities, look beyond Chinese-sourced goods. As the virus spreads to other countries, so too could the supply chain disruption.
Review Contracts: Businesses that have contractual commitments that depend on foreign-sourced goods (or goods that include foreign-sourced components) should review those contracts to identify any rights and requirements under those contracts.

  • Are there schedule and performance requirements?
  • Does the contract address under what circumstances delay or non-performance may be excusable?
  • Are there notice requirements if items are delayed or unavailable?
  • Is there a force majeure provision and does it apply to your situation?
  • Are you required to deliver in accordance with an established bill of materials or to use only qualified products, or can you substitute products or components if items are delayed or unavailable?
  • Do you have any rated orders under the Defense Production Act? If so, you have an obligation to deliver what is required under the set schedule. You also may have a duty to notify the government or your higher tier contractor if there are performance and schedule risks.
  • Are the increased costs of performance recoverable?
  • Is your schedule impacted and can you obtain relief?

Communicate: Early and open communication with counterparties can help parties avoid or reduce problems as well as reduce the risk of litigation. This communication extends to businesses with lines of credit determined by a borrowing base formula. Generally, that formula considers a company’s current accounts receivables or finished inventory as the collateral for ongoing loan advances. Advising your lender of the supply chain disruption in advance may avoid an unfortunate conversation later in the quarter. Similarly, lenders should check on borrowers and anticipate potential defaults resulting from these supply chain issues.

Document, Document, Document: If you do have to declare force majeure or otherwise excuse performance, you may need to be able to show not just disruption to the supply chain, but that the disruption prevented or delayed performance under the contract. This may require a showing of the efforts that you took to obtain product from other sources. It is critical not just to engage in such efforts, but to document those efforts contemporaneously.

Reporting Obligations: Prior forecasts and projections may be looking a little overly optimistic at this point. You may consider whether restating forecasts is warranted. Similarly, you should consider additional disclosures in annual reports or in reports to lenders. Disclosure and disclaimers may also be added in connection with representations in new financing or transaction documents entered into during this period.

These issues may also be applicable to your own supply chain members and further impact your performance. Businesses should be urging all of their vendors and subcontractors to take the actions recommended above. Consider developing a plan to identify and address these concerns. Being proactive and strategic now may help you to avoid problems down the road.

The title of this article is based on a line in an old song, “Everybody’s Crying Mercy,” by Mose Allison. As modified, the couplet captures the cognitive dissonance that many are feeling as a result of the federal government’s conflicting approach to trade with Huawei Technologies Co. Ltd. (Huawei) and its non-United States affiliates. In the most recent step in this halting “evolution,” the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) announced it is seeking public comments by March 25, 2020 on the continuing need for, and scope of, possible future extensions of the Temporary General License (TGL) authorizing certain exports to Huawei and 114 of its non-United States affiliates on BIS’s Entity List. In connection with this request for input, BIS extended—for the fourth time—the TGL for Huawei and those affiliates through May 15, 2020.

The TGL was initially published on May 22, 2019, several days after BIS added Huawei and 68 of its non-United States affiliates to the Entity List after determining “that there is reasonable cause to believe that Huawei has been involved in activities contrary to the national security or foreign policy interests of the United States” and “those affiliates pose a significant risk of involvement in activities contrary to the national security or foreign policy interests of the United States.” (BIS subsequently added another 46 affiliates to the list.) As a result, BIS imposed a license requirement for all items subject to the Export Administration Regulations and a license review policy of presumption of denial. Similarly, the action provided that, with limited exceptions for certain shipments already en route, no license exceptions are available for exports, reexports, or transfers (in-country) to the persons added to the Entity List.

Despite the findings that motivated Huawei’s addition to the Entity List, the initial TGL and the three previous extensions of it have allowed: (i) continued operation of existing networks and equipment; (ii) support to existing handsets; (iii) cybersecurity research and vulnerability disclosure; and (iv) engagement as necessary for development of 5G standards by a duly recognized standards body. BIS has explained that the TGL and extensions were intended to allow time for companies and persons to shift to alternative sources of equipment, software, and technology (e.g. those not produced by Huawei or one of its listed affiliates). In addition, under applicable Entity List rules, non-U.S. manufacturers are still allowed to export items to Huawei so long as the items do not have more than de minimis—here, 25%—U.S. origin content.

When BIS floated closing that loophole in late 2019, proposing that the de minimis figure be reduced to 10%, the Department of Defense (DoD) initially pushed back. The Pentagon argued that the additional limits would cost U.S. chip manufacturers so much revenue that their research spending would suffer and they would not be able to keep up with global rivals, which could threaten the American military’s technological edge. Last month, however, after challenges from influential Republican Senators and lobbying from the Department of Commerce, DoD dropped its opposition to the further crack down on Huawei proposed by the Department of Commerce. A cabinet-level meeting to discuss the potential new U.S. restrictions was supposed to follow, but that meeting has since been postponed twice.

Against this background, BIS explains that the recent 45-day extension and request for public comment demonstrates the Department of Commerce is trying to find a permanent solution. BIS hopes the responses will help it better evaluate the need to extend the TGL, determine whether any other changes may be warranted to the TGL, and identify any alternative authorization or other regulatory provisions that may more effectively address what is being authorized under the TGL. Only time will tell how the BIS and the rest of the federal government will resolve the vexing issues raised by Huawei, its connection with the People’s Republic of China, and its position in the technology industry. Until then, it’s arguably “business first.”

Not being included, or being purposely excluded, may remind some of adolescence, and may remind others of the Federal Acquisition Regulation (FAR) simplified acquisition procedures. The recent Government Accountability Office (GAO) decision in Phoenix Environmental Design, Inc. (Phoenix), B-418304 (March 2, 2020) deals with facing the latter form of disappointment.

The underlying purchase order in this matter was issued by the Department of the Interior, United States Fish and Wildlife Service to address the Southeast Idaho National Wildlife Refuge Complex’s (NWRC’s) urgent need for herbicide. The Southeast Idaho NWRC’s need was compounded by an unplanned wildfire, which provided soil conditions that would facilitate the elimination of “cheatgrass,” an invasive species in the area. The Southeast Idaho NWRC expressed its need for fifteen gallons of herbicide to the agency on October 10, 2019, stating that it needed the herbicide by October 25 because of concerns that a freezing event would occur and eliminate the efficacy of the herbicide.

To respond to the pressing request, the agency solicited quotations as a small business set-aside pursuant to FAR §§ 13.003 and 13.104, which provide for simplified acquisition procedures in lieu of full and open competition. The agency solicited quotations from three vendors – one was a local vendor and the other two vendors were businesses that had submitted the lowest prices in response to a prior solicitation for herbicides. Phoenix had also submitted a bid for this prior solicitation, though it had quoted the second highest price. While Phoenix had, throughout the years, repeatedly notified the agency that it was interested in all of the agency’s herbicide requirements, the agency did not solicit a quotation from Phoenix.

The formal purchase order was issued to Wilbur-Ellis Co. on October 17 and on October 18 the Southeast Idaho NWRC picked up the herbicide from the vendor’s facilities. On October 22, Phoenix requested that the contracting officer cancel the award, and after being informed that such would not occur, on October 25, Phoenix filed a protest at the agency level. Following the denial of that protest, Phoenix filed the instant protest with the GAO.

Phoenix protested on two grounds: that it was unreasonably excluded from the solicitation, particularly as it had expressed interest numerous times in competing for the agency’s herbicide requirements, and that the agency improperly awarded the purchase order to a large business.

The GAO was unconvinced on both grounds, noting that simplified acquisition procedures permit an agency to forego full and open competition and generally allow an agency’s soliciting quotations from three sources. However, an agency cannot unreasonably exclude an offeror that has expressed an interest in competing. Here, according to the GAO, the agency was not unreasonable in excluding Phoenix since, despite Phoenix’s request to compete, the agency was on a tight deadline and Phoenix had previously submitted a high-priced offer.

Further, the GAO clarified that its review of an agency’s size determination, which is typically in the purview of the Small Business Administration, is limited to situations where the awardee’s quotation, on its face, demonstrates that the awardee is not eligible for award as a small business. Such was not the case here where, at least facially, the awardee represented and certified that it was a small business.

The important takeaway: simplified acquisition procedures are, indeed, simple and allow the agency a lot of leeway, including the ability to exclude an offeror based on one prior high offer (at least in an urgent situation). Though unsuccessful here, Phoenix’s tactic of putting itself out there and reminding the agency that it wants to compete may be the best way to convince the agency to invite it to participate in future procurements.