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Government Contracts Monitor

Agencies’ Shield of Discretion Is Not Impenetrable

March 13, 2017

By: Lindsay Simmons

As we have previously noted, here and here for example, the discretion granted to procuring agencies in connection with award decisions often poses an insurmountable barrier to protesters. Absent clear evidence the agency acted unreasonably, it can be virtually impossible to prevail. As the recent decision in Pitney Bowes, Inc., B-413876.2 (February 13, 2017) reminds us, however, agencies are not infallible: sometimes the facts in the record demonstrate the agency acted unreasonably. The decision provides helpful examples on the types of factual situations contractors should be looking for to support their protests.

The case involved a request for quotations (RFQ) issued by the Department of the Treasury, Internal Revenue Service (IRS), for the procurement of mail inserter/folder machines. In this pre-award protest, Pitney Bowes, Inc. argued that the technical specifications set out in the solicitation are unduly restrictive of competition.

The RFQ contemplated the award of a fixed-price contract on a lowest-priced, technically acceptable basis. It sought quotations for four PS200 folder/inserters with four 500 sheet capacity sheet feeders, and four PS200 high capacity feeders, or equivalent machines, to replace existing equipment used for document processing and mailing at the IRS’s National Distribution Center (NDC) in Bloomington, Illinois. According to the solicitation, the NDC is one of the IRS facilities that processes and mails high volume turnaround letters. Consistent with the “brand name or equal” approach to procurement, the statement of work (SOW) identifies a number of specific requirements for the folder/inserters. These include, as relevant here: (1) “[a] high capacity sheet feeder with a capacity of up to 1,000 per feeder with the capability of loading on the fly”; (2) “[a] feeder swap capability for up to 10 sheet feeders per machine”; and (3) “[o]ne envelope feeder to handle all types of envelopes from letters to flats.”

Pitney Bowes argued that these requirements are unduly restrictive of competition and amount to a de facto sole source requirement. After noting that the procuring agency is primarily responsible for determining its needs and the best method of accommodating them, GAO explained that, when specifications are challenged as unduly restrictive, the agency also has the responsibility of demonstrating that the specification is reasonably necessary to meet its needs. Here, based on the record, GAO could not conclude that the specifications included in the RFQ are necessary to meet the agency’s needs.

Pitney Bowes essentially prevailed on all of its protest grounds.

The agency attempted to justify the first requirement, for a high capacity sheet feeder with a 1,000 sheet capacity, capable of being loaded on the fly, by claiming that such loading capability is necessary to “minimize production time by allowing the equipment to be loaded while in operation” because it would allow the insertion of additional sheets while the system is in operation. According to Pitney Bowes, however, while its high capacity sheet feeders do not have load-on-the-fly capability, the same continuous operation can be achieved by using two high capacity sheet feeders, each holding 1,000 sheets. This approach would allow one sheet feeder to be loaded while sheets are being pulled from the other for processing. In response, the agency argued that maintaining continuous operation would require additional employee time because two sheet feeders would have to be filled instead of only one.

GAO rejected this argument, noting “we fail to see, and the agency has not adequately shown, why the protester’s solution would be more time consuming for employees [because under] . . . either approach, employees would be monitoring a tray and inserting more sheets into a feeder as needed.” According to GAO, the agency did not provide anything to substantiate its claims in this regard. In addition, as Pitney Bowes explained, its two-feeder system would actually better promote the agency’s interest in continuous operation because the use of two feeders would ensure a back-up in case one feeder jammed. If only a single feeder were used, a jam would require the entire operation to be shut down until the jam was removed. GAO considered this argument “compelling” and held that the agency had failed to provide a reasonable justification for requiring “on the fly” loading capabilities.

Pitney Bowes also protested the requirement for the equipment to have a feeder swap capability for up to ten sheet feeders per machine, arguing that it could only be met by one source. In its report in response to the protest, however, the agency clarified the requirement terminology to make clear that Pitney Bowes’ equipment could meet the specification.

With respect to the third protest ground, challenging the requirement that the folder/inserter have one envelope feeder to handle all types of envelopes from letters to flats, Pitney Bowes explained that the standard envelope feeder for its proposed solution feeds a wide range of the most common types of envelope sizes and flats and argued that the process of swapping that feeder out and inserting a new one for other sizes would take less than 30 seconds. While the agency contended that it needed a single feeder that will handle all types of envelopes, it provided no explanation as to why it needs a feeder that would handle envelope sizes and types that deviate from standard sized envelopes. In addition, despite complaining about the additional time and effort it would take to swap out the feeders, the agency provided no information regarding whether and how often the insertion of a different feeder might actually be necessary. Given the lack of any discussion of the need for types of envelopes that would fall outside of the range of standard types, GAO found that the agency has not provided a reasonable justification for this requirement.

GAO recommended that the agency make a documented determination of its needs and then revise its RFQ to include specifications that are reasonably necessary to meet those needs. While this outcome does not guarantee that Pitney Bowes will ultimately prevail, it does suggest that it will be able to compete on a more equal basis. The decision also reiterates the importance of a protester identifying facts (or the lack of facts) that supports its protest grounds. While procuring agencies are granted great discretion, they cannot defend their actions by simply making bald, unsupported assertions. Contractors pursuing protests should always be on the lookout for government claims not backed up by facts or reason.

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