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Even on the best of days, determining the proper application of sourcing restrictions in the Federal Acquisition Regulation (FAR) and Defense Federal Acquisition Regulation Supplement (DFARS) can be a chore. The process is further complicated when the procurement is conducted by the Department of Defense (DoD) and the Berry Amendment must be taken into account. It becomes downright unmanageable, however, if the procuring agency improperly substitutes its judgment for the provisions of the FAR and DFARS. Fortunately, as shown in the recent decision in Mechanix Wear, Inc., B-416704; B-416704.2 (November 19, 2018), the Government Accounting Office (GAO) will step in to provide relief when circumstances warrant.

In Mechanix Wear, the underlying procurement by the Defense Logistics Agency (DLA) aimed to acquire Army combat gloves with capacitive capability, i.e., the capability to be used with touchscreens. The specifications in the request for proposals (RFP) required the leather used in the gloves to be goat/kidskin, a type of leather typically made from the skin of young goats. The original solicitation provided that “pickled-state” goat/kidskin from foreign sources could be used, but required all tanning and processing of the goat/kidskin to be done domestically. The solicitation also included DFARS § 252.225-7012, “Preference for Certain Domestic Commodities.” This clause implements the Berry Amendment, which generally restricts the DoD’s expenditure of funds for certain articles and items, including clothing and handwear, to domestically produced products.

Prior to releasing the RFP, DLA had issued a sources sought survey to determine its acquisition strategy. It received responses from five potential suppliers, three of which indicated that they could provide the gloves being sought using domestic materials. After the solicitation was issued, the agency conducted additional market research to determine whether goat/kidskins were available domestically to meet DLA’s requirements in this and other acquisitions. Again, it received responses from suppliers indicating that domestic goat/kidskins were available in sufficient quantities to meet the needs for the pending acquisition. DLA subsequently amended the RFP to prohibit the use of foreign goat/kidskin, stating: “All Goat/Kidskin ‘MUST’ be 100% Domestic to include all tanning process.” When Mechanix informed DLA that it could identify only one confirmed domestic source for the leather required by the RFP, DLA contacted that source, which confirmed that it had the capability of meeting DLA’s needs. Given its belief that sufficient domestic sources existed, DLA decided not to remove the domestic restriction from the RFP.

Mechanix’s protest argued among other things, that the solicitation’s prohibition on foreign goat/kidskin is unduly restrictive of competition and contrary to governing regulations. Mechanix supported its protest by pointing out that the regulations implementing the Berry Amendment expressly provide for an exception from the Amendment’s domestic source restrictions for goat/kidskins. More particularly, DFARS § 252.225-7012(c)(1) provides that it does not apply to items listed in FAR § 25.104(a), one of which is goat/kidskins. FAR § 25.104(a) lists various “[n]onavailable articles,” which are defined as those articles for which there has been a “[c]lass determination” that domestic sources can meet only 50 percent or less of total U.S. government and nongovernment demand. FAR § 25.103(b)(1). According to Mechanix, since goat/kidskins fall within an express exception to the DFARS provisions implementing the Berry Amendment, it was both unreasonable and contrary to regulation for DLA to impose a domestic source restriction on the goat/kidskin leather used to make the gloves being sought here.

In response, the agency argued that the meaning of the exception found at DFARS § 252.225-7012(c)(1) must be understood in light of other considerations,  including the provisions of FAR § 25.103(b)(1). According to DLA, FAR § 25.103(b)(1) clarifies the application of the FAR § 25.104(a) nonavailability exception and makes clear that the agency is required to conduct market research before determining an article qualifies for the nonavailability exception applicable to the Berry Amendment’s domestic sourcing restrictions.

The GAO made short work of this argument, finding “no support in the applicable FAR and DFARS provisions for DLA’s contentions that the market research provisions of FAR § 25.103(b)(1)(ii) and (iii) are applicable to the Berry Amendment’s domestic sourcing restrictions implemented in the DFARS.” After noting the clear exception for items listed in FAR § 25.104(a) established in DFARS § 252.225-7012(c)(1), the GAO explained that the relevant DFARS sections do not contain any limiting language or carve out, e.g., a statement to the effect that the FAR § 25.104(a) exception does not apply where the agency finds that such items are, in fact, available in sufficient quantity and quality. Nor do they reference the market research contemplated in certain subsections within FAR § 25.103, which is a Buy American Act (not Berry Amendment) provision. Similarly, the language of FAR § 25.103 does not reflect an intention for that provision to apply to Berry Amendment restrictions. Given this, the GAO resoundingly rejected the agency’s position, concluding that the plain language of these DFARS sections does not support the notion that the applicable Berry Amendment exception is itself subject to an exception when the agency determines, via market research, that the applicable item is sufficiently available for purposes of the specific acquisition at issue.

As a result, the GAO held that DLA failed to establish that it has the authority to use the FAR Buy American Act’s market research provisions to evade the applicability of the “nonavailable articles” exception to the Berry Amendment. This was true despite actions by DLA’s senior procurement executive, as well as regulatory changes to the FAR that the agency claimed supported its position. As the GAO explained, there is no reason to move beyond the plain meaning of the text where the language of a regulation is plain on its face, and its meaning is clear. Here, the plain meaning of the text resulted in a sustained protest.

Mechanix Wear makes clear that the DFARS sections implementing the Berry Amendment do not require the agency to impose a domestic restriction on items listed in FAR § 25.104(a) if its market research “reveals” that the items are sufficiently available. Instead, if an agency imposes such a restriction and has not otherwise asserted that the restriction is reasonable or is needed to meet its minimum needs, the agency has not met its responsibility of establishing that the restriction is reasonably necessary to meet its needs. In other words, an item’s listing in FAR § 25.104(a) is dispositive with respect to the exception from the Berry Amendment and agencies and offerors can and should inquire no further regarding the item’s availability—and cannot persist in imposing domestic restrictions on it.

Contractors who encounter this type of agency action should consider a pre-award protest.

We often hear that contractors are not entitled to a “second bite from the apple.” As the recent General Accountability Office (“GAO”) decision in Navarre Corporation, B-414962.6; B-414962.7 (October 22, 2018), makes, clear, however, the same cannot be said about procuring agencies. In that bid protest, the GAO once again reinforced the flexibility of agencies to fashion corrective action and define award criteria, this time by amending a solicitation and resoliciting proposals after an award when it was discovered the initial solicitation didn’t reflect the agency’s needs or intent.

The VA issued a Request for Proposals for a fixed-price IDIQ contract for non-emergency wheelchair transportation services, on a lowest-priced technically acceptable basis, and in April 2018 made award to Navarre.  Disappointed bidder Owl subsequently challenged the award, contending among other things that the agency failed to conduct a price realism evaluation.  GAO dismissed the protest on the basis that Owl was not an interested party to challenge the award, however its dismissal noted that the solicitation did in fact call for a price realism analysis by advising offerors that it would assess whether the proposed prices reflected a clear understanding of the requirements.

Owl persevered by filing a second protest at the Court of Federal Claims, at which point the VA decided to take corrective action.  Until it read the GAO’s decision dismissing the protest, VA had not been aware that the solicitation had included a provision for a price realism evaluation. Nor had it performed such an evaluation.  VA decided that it would terminate the contract with Navarre for the convenience of the government, amend the solicitation to remove the price realism evaluation, and solicit new proposals.

Navarre protested the corrective action, arguing that resoliciting the requirements was unreasonable now that its price had been disclosed, and that the better course was for the agency to remedy any fault by conducting a price realism evaluation on the proposals that it had already received.

GAO disagreed and denied the protest, siding with the VA, which had “never intended to include a price realism provision in the solicitation” and apparently did not realize that the RFP included such language.  Because the solicitation as written did not reflect the agency’s true needs (agencies may impose a price realism evaluation for fixed-price contracts, but are not required to do so) and the proposed corrective action would reasonably address the issue, the GAO upheld the VA’s decision to resolicit.

The decision is a reminder of the high bar contractors face in challenging agency corrective action, even where they believe there is an easier or fairer outcome.  It also serves to show that even as the author of the solicitation, agencies can and do get it wrong.  And where it can establish that a mistake resulted in an evaluation that didn’t reflect its needs, the agency will be allowed to correct it and given significant discretion in doing so.