Washington Business Journal by Lee Dougherty, Attorney, General Counsel PC

Date: Friday, November 4, 2011, 1:34pm EDT

 A sole-source provider that previously won awards without competition can’t expect to charge a premium when there are other capable firms able to perform for less.

Protesting Contractor: United Terex Inc., Fairview Village, Pa.

Contracting Agency: Department of the Navy

Protest Issue: Whether an agency can view past performance as favorable when a manufacturer has not made the exact item being purchased, and whether it is reasonable to pay a premium price to the manufacturer with experience making the exact item being purchased.

GAO Decision, Sept. 27, 2011: Denied

Post-mortem: The protester had been awarded two prior sole-source awards to manufacture a product for the Navy, at least in part because it claimed it was the only manufacturer that could provide the item. The Navy made the determination that an experienced vendor could produce the product and issued a request for quotations. The contract went to an offerer with favorable past performance in similar manufacturing and with a 50 percent lower price than the protestor.

The GAO has held that past performance is a matter within the discretion of the contracting agency; in other words, the GAO is not going to substitute its judgment for the judgment of the contracting officer unless that judgment is deemed unreasonable or inconsistent with the solicitation and applicable regulations. The mere fact that a manufacturer has not produced a particular item yet does not mean it can’t produce it. If that were the case, it would be impossible for a business to break into government contracting.

Furthermore, the government is required to promote competition to the maximum extent possible to obtain the least expensive acceptable product. A contractor cannot rest on its laurels and assume that, because it has been awarded multiple sole-source awards in the past, it is impervious to competition. No matter how long or how well it has produced a product, there will always be a hungry company, nipping at its heals, offering to make the same product for less than the premium the government is currently paying. As long as the government follows the guidelines in evaluating past performance, the less expensive product will win out every time.