Link: GAO Opinion
Agency: Department of the Treasury
Disposition: Protest sustained.
Keywords: Post-Award Changes to the Contract
General Counsel P.C. Highlight: A contracting officer exercising the authority to change the terms and conditions must do so in a manner that gives all offerors an equal opportunity to compete by either publishing the tailored clauses in the initial solicitation’s addenda or by providing an amendment to the solicitation to include the revised terms and conditions.
Diebold, Inc. protests the award of a contract, by the Department of the Treasury, Office of the Comptroller of the Currency (OCC) under a request for proposals (RFP) for interim security and compliance services in support of OCC’s physical security program.
OCC issued the RFP under Federal Acquisition Regulation (FAR) part 12 commercial item procedures. The RFP contemplated the award of a one?year fixed-price contract. The solicitation was provided via email and advised that award would be made on a best value basis based upon two equally weighted evaluation factors: past performance and price. OCC received two proposals by the January 28 deadline, including Diebold Inc.’s. While Diebold offered a lower price, the other offeror was chosen where its past performance was considered to be better than Diebold’s.
Diebold’s alleges that OCC unreasonably evaluated its past performance and failed to conduct a proper trade-off analysis between price and past performance in determining the best value. In a supplemental protest, Diebold argued that OCC made changes to the RFP after selecting the awardee without permitting Diebold an opportunity to compete on the altered solicitation. GAO states that it is a fundamental principle of government procurement that competition must be conducted on an equal basis, that is, offerors must be treated equally and be provided with a common basis for the preparation of their proposals. When, either before or after receipt of quotations, the government changes or relaxes its requirements, it must issue an amendment to notify all offerors of the changed requirements and give them an opportunity to respond. GAO will sustain a protest where an agency, without issuing a written amendment, materially alters the solicitation’s requirements to the protester’s prejudice.
Here, the RFP incorporated by reference the standard commercial clauses in accordance with FAR subpart 12.3. FAR subpart 12.3 requires that solicitations for commercial items include the provisions at FAR sect. 52.212-1 (Instructions to Offerors-Commercial Items), 52.212-3 (Offeror Representations and Certifications-Commercial Items), 52.212-4 (Contract Terms and Conditions-Commercial Items), and 52.212-5 (Contract Terms and Conditions Required to Implement Statutes or Executive Orders-Commercial Items). After OCC selected ADT for award, it sent a draft contract for ADT’s review. The draft contract included numerous provisions, specifically those included in section H, which had not previously been included in the solicitation. As relevant here, section H of the draft contract included section H.7-Reimbursement of Travel Costs, section H.18-Standard Commercial Warranty, and section H.21-Harmless from Liability. In response, the awardee submitted an email requesting various changes to section H of the draft contract. After a review, OCC decided to permit certain of ADT’s requested modifications to the draft contract. Section H.21-Harmless from Liability was included in the draft contract and generally provides for the contractor to hold and save the government harmless from liability for suits or damages based on the contractor’s negligent or wrongful actions. The agency also agreed to insert into Section H two new liability clauses. Section H.22-Safety Act Waiver waived claims against ADT arising from Qualified Anti-Terrorism Technologies (QATT) systems or services and Section H.23-Mutual Limitation of Liability, which provided that neither party would be liable to the other for any special, indirect, consequential or incidental damages arising out of any performance of the contract. As to the section H.18-Standard Commercial Warranty, the agency agreed to add a new section H.18.1-Equipment Warranty to permit the awardee to include its standard commercial warranty.
GAO agrees with OCC that contracting officers are permitted under FAR part 12 to tailor the provisions of FAR sect. 52.212-4 to the market practices and conditions for each acquisition. However, this section makes clear that any tailoring to the provisions and clauses can only be done “after conducting appropriate market research,” id., and “shall be by addenda to the solicitation and contract.” Consequently, under commercial item acquisitions, a contracting officer exercising the authority to change the terms and conditions must do so in a manner that gives all offerors an equal opportunity to compete by either publishing the tailored clauses in the initial solicitation’s addenda or by providing an amendment to the solicitation to include the revised terms and conditions. GAO finds that the agency altered materially the terms and conditions of the solicitation when it modified the draft contract at the awardee’s request. For example, the modified section H.21 eliminated the awardee’s obligation to indemnify the government for suits or damages based upon “detection events.” The awardee’s email to the agency during the negotiations of the contract terms and conditions demonstrates how the modified section H.21 limited the awardee’s liability/risk beyond that provided for in the RFP. Thus, the record shows that the changed language of section H.21 was a material change to the RFP because it greatly reduced the liability of ADT by absolving it from the results of “detection events.”
Additionally, section H.23 materially reduced the awardee’s liability compared to that set forth in solicitation provision FAR sect. 52.212-4(p) by allowing the awardee to limit its liability with respect to consequential damages. The solicitation’s limitation of liability provision stated, “Except as otherwise provided by an express warranty, the Contractor will not be liable to the Government for consequential damages resulting from any defect or deficiencies in accepted items.” Again, the awardee’s email to the agency during negotiations of the contract terms and conditions illustrates why this change is material. GAO finds that the agency was required to issue an amendment to the solicitation upon the addition and acceptance of these material changes and because the agency did not issue the required amendment permitting all offerors to respond on the altered requirements, GAO finds the agency’s actions resulted in unequal treatment of Diebold.
GAO further finds that Diebold was prejudiced by the agency’s actions. GAO states that it will not sustain a protest unless the protester demonstrates a reasonable possibility that it was prejudiced by the agency’s actions; that is, unless the protester demonstrates that, but for the agency’s actions, it would have had a substantial chance of receiving the award. Here, Diebold asserts that the changes in liability could significantly impact an offeror’s price. Given that were only two evaluation factors that were of equal importance (price and past performance), and that Diebold was the low offeror, GAO does not know, and will not speculate, how this matter would have affected the source selection decision. In such circumstances, GAO will resolve any doubts regarding prejudice in favor of a protester since
a reasonable possibility of prejudice is a sufficient basis for sustaining a protest. Accordingly GAO concludes that Diebold has established the requisite competitive prejudice to prevail in a bid protest.
GAO recommends that OCC amend the solicitation to reflect the changes made to the terms and conditions of the RFP, request and evaluate proposal revisions, and make a new award determination. The protest is sustained.