By: Eric Whytsell
You might think that there’s a fairly bright line between “clarifications” and “discussions” because the terms are both defined in FAR 15.306. But you would be wrong. The recent decision in International Waste Industries, B-411338 (July 7, 2015) highlights how difficult it can be to apply the distinction outside the pages of the FAR – and the potentially huge impact of missteps in this area.
The case involved an Air Force procurement under FAR Part 12 (Acquisition of Commercial Items) and Part 13 (Simplified Acquisition Procedures) of a solid waste incinerator. The RFQ contemplated award of a firm fixed-price (FFP) contract to be made on a lowest-cost technically acceptable basis. The agency received 11 timely quotations, including those of International Waste Industries (IWI) and the awardee, Mahto Construction, Inc. (Mahto). In protesting the contract award to Mahto, IWI argued that the Air Force (i) unreasonably found its quote technically unacceptable; and (ii) engaged in unequal discussions.
The Government Accountability Office (GAO) never considered IWI’s first protest ground because it agreed that the agency had conducted unequal discussions and sustained the protest on that ground. What led to that conclusion was a combination of mistakes by the awardee and the Air Force.
Despite the RFQ’s making clear that FFP quotes were required, Mahto initially proposed to bill costs of mobilization to and from the jobsite separately “at $ per diem.” Similarly, Mahto’s original quote proposed a schedule of payments based on milestones, ignoring the relevant FAR clause contained in the RFQ, which states “Payment shall be made for items accepted by the Government that have been delivered to the delivery destinations set forth in this contract.” Recognizing the disconnect between the RFQ and these aspects of Mahto’s quote, the Air Force e-mailed two “clarification” questions to Mahto.
The first question pointed out that a FFP quote was required and asked whether Mahto’s quoted price covered “all travel, per diem, lodging costs, and all other associated costs.” The second question explained that contracts awarded under FAR Parts 12 and 13 are usually paid using Net 30 terms and asked whether Mahto accepted those terms despite its proposed “Schedule of Payments.” Not surprisingly, Mahto got the message and confirmed that its quote included all costs and that Net 30 payment terms “are completely agreeable.”
Based on this exchange, the Air Force determined that Mahto’s quotation was technically acceptable. Because IWI had failed to specifically state that its proposed incinerator met one of the technical requirements, the agency found its quote unacceptable — like those received from the other ten offerors. As a result, the contract was awarded to Mahto, the highest-priced vendor.
IWI argued that this exchange constituted discussions with Mahto and pointed out that, had the agency held similar discussions with IWI, it could have clarified the issues that led the agency to declare its proposal technically unacceptable. In response, the Air Force characterized the exchange as mere clarifications.
GAO disagreed, noting that clarifications are “limited exchanges” “for the purpose of eliminating minor uncertainties or irregularities in a proposal.” They do not afford an offeror the opportunity to revise or modify its proposal and cannot “be used to cure proposal deficiencies or material omissions, or materially alter the technical or cost elements of the proposal, or otherwise revise the proposal.” Indeed, that is what discussions are for. According to GAO, discussions are communications with offerors “for the purpose of obtaining information essential to determine the acceptability of a proposal” or providing the offeror “an opportunity to revise or modify its proposal in some material respect.”
Here, GAO found the communications to be discussions because, as described above, Mahto was allowed to revise portions of its quote that did not comply with the RFQ’s terms. Despite the Air Force’s characterization of the exchange as seeking clarifications, the agency’s communication “invited a response from Mahto that was necessary to determine the acceptability of Mahto’s quotation and, in fact, resulted in Mahto being permitted to supplement or alter its quotation.” As GAO notes, “This is quintessentially the nature of discussions, not clarifications.” And an agency conducting discussions with one offeror must generally give all offerors remaining in the competition an opportunity to also engage in meaningful discussions. Here, the agency failed to do so and IWI’s protest was sustained.
Unfortunately, this was a pyrrhic victory for IWI: it was right about the law but overcome by events. Because it had originally filed an agency-level protest and did not get a stay, the contract was almost completely performed before GAO issued its decision.
Agencies and offerors alike should be on the lookout for communications that veer from merely eliciting clarification of a minor uncertainty or irregularity into invitations to cure deficiencies or omissions or otherwise make changes to a proposal. If the latter kinds of communications are made to one offeror in the competitive range, they have to be made to all.
Eric Whytsell is responsible for the contents of this article.
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