Link: GAO Opinion
Agency: Department of Transportation
Disposition: Protest denied.
Keywords: Incorporation by reference
General Counsel P.C. Highlight: Solicitation clauses incorporated by reference need not be included in full text to be enforceable or binding.
The Federal Highway Administration issued an invitation for bids for the provision of road repair and improvement in the Humboldt-Toiyabe National Forest. Bidders were required to price three contract line items (CLINs) for three separate portions of the road (Schedules A, B, and C), as well as several option CLINs. The evaluation and award was then based on the lowest priced bid for the work under Schedule C, unless sufficient funding was not available, in which case Schedule B would be used, and insufficient funding was available, at which point Schedule A would be evaluated. The solicitation also included a provision that incorporated Federal Acquisition Regulation (FAR) clause 52.217-3 by reference, which states that a provision “substantially the same” as the following should be included in solicitations with an option clause:
The Government will evaluate offers for award purposes by including only the price for the basic requirement; i.e., options will not be included in the evaluation for award purposes.
Seven bids were received by the agency and award was made to Eagle Peak, the lowest bidder for Schedule C. Staker & Parsons (S&P), one of the unsuccessful bidders, then protested. In its protest, S&P argued that the FAR language required the agency to “insert a provision in the solicitation” containing language “substantially the same” as the operative language of the clause, but that by incorporating by reference, the agency did not insert a provision containing substantially similar language. Because the actual operative words of the clause were not included in the solicitation, S&P claims that the solicitation failed to inform bidders that award would be based on the base year schedule prices alone, rather than taking into account the option prices. When the option prices were included with the schedule prices, S&P had an overall lower bid than Eagle Peak.
GAO found this argument to be meritless. Contract law is well-settled on the premise that if an item is incorporated into a contract by reference, it is not necessary to insert the text of the item itself into the contract. To further emphasize this sentiment, GAO pointed to FAR 52.102(a), which states that clauses “should be incorporated by reference to the maximum practical extent, rather than being incorporated in full text….” For this reason, the bidders were properly aware that the option prices would not be evaluated, and as such, S&P’s protest was denied.