CHAPTER

16

CONTRACTOR QUALIFICATIONS

No matter how good an offer is, it will not win the offeror the contract unless the contracting officer (CO) deems the offeror “qualified” to get the contract. Federal Acquisition Regulation (FAR) Part 9 describes a qualified contractor. Although this FAR material deals with a wide range of issues, typically three create the biggest problems prior to award. These are (1) what makes a prospective contractor “responsible”; (2) the impact a prospective contractor’s organizational conflict of interest (OCI) has on the contractor’s chances of getting the contract; and (3) “teaming” arrangements the government allows.

    What makes a government contractor “responsible”?

A government contractor that has the ability to do the contract work, has shown it has done so in the past, and has business ethics in place to do so in the future is a responsible contractor. According to the FAR, a responsible contractor is one that has “adequate financial resources to perform the contract,” has “a satisfactory performance record,” has “a satisfactory record of integrity and business ethics,” and has “the necessary organization, experience, accounting and operational controls, and technical skills, or the ability to obtain them (including, as appropriate, such elements as production control procedures, property control systems, quality assurance measures, and safety programs applicable to materials to be produced or services to be performed by the prospective contractor and subcontractors)” (FAR 9.104-1).

    What purpose does “responsibility” serve?

It makes sure that a company that writes the best proposal and offers the best price but whose CEO is in prison for fraud in government contracts does not get the contract. The final step in the contract award process, after looking at the offer, is looking at the offeror.

    What is the difference between “responsive” and “responsible”?

“Responsive” refers to the offer and whether the offer meets the requirements of the RFP. It is established (or not) when a final proposal is submitted. It refers to the offeror and its ability to carry out the contract and is established, if at all, later in the solicitation process—at the time of award.

Sometimes, it seems hard to tell the difference. If a solicitation requires offerors to provide specific pieces of information, such as proof that they can obtain required funding to carry out the project, that requirement would seem to involve the technical acceptability of a proposal. For example, let’s say the government requires A, B, C, and D, but the offeror provides only A, B, and C. Since the offeror did not provide D, it would seem that the offer is not responsive and is technically unacceptable. But that is not always true, especially if the required information is listed under a solicitation provision labeled “Evidence of Capability to Perform,” language typically associated with a responsibility determination.

For example, the General Services Administration (GSA) wanted to lease office space in Clearwater, Florida. The solicitation required offerors to furnish a number of requested items demonstrating that they could perform the work. One of the documents required was what the solicitation described as “satisfactory evidence of at least a conditional commitment of funds in an amount necessary to prepare the space. The commitment was required to be signed by an authorized bank officer and, at a minimum, state the amount of the loan, its term in years, the annual percentage rate, and the length of the loan commitment.” The document was not provided by one of the offerors, Melbourne Commerce, LLC, which was notified by GSA that it would not win the lease because its offer was deemed “non-responsive to the minimum requirements” of the solicitation. GAO ruled that the issue was not responsiveness because the requirement did not involve the technical acceptability of Melbourne’s offer (Melbourne Commerce, LLC, B-400,049.2, January 9, 2009).

    217 Why should a small business be especially concerned about this responsibility/responsive distinction?

Although a CO has the final say on whether an offer is responsive or acceptable, the Small Business Administration (SBA) has the final say on whether a small business offeror is responsible. When a small business loses a contract, it should make sure that the CO’s decision was based on a responsive or acceptability issue—one properly resolved by the CO—and not on the basis of a responsibility issue—one properly resolved by the SBA.

The process can get tricky, and the CO can make mistakes, because some issues cannot neatly be sorted into responsive or responsible. In one GAO decision, an issue that seemed to involve a vendor’s responsiveness—its ability to get necessary parts—was actually an issue of responsibility.

The U.S. Army Aviation and Missile Command issued a solicitation for the overhaul of tail rotor gearboxes for the AH-64 helicopter. The government would deal only with approved sources. Fabritech was told it was an approved source if it would agree to buy all critical safety item replacement parts from other approved and tested sources. Fabritech’s response to the government did not convince the government that the vendor could get the parts in time so the government awarded the contract to another vendor. Fabritech protested to GAO, arguing that the issue the government raised should have been referred to the SBA since it involved responsibility.

The agency tried to justify its rejection of Fabritech in federal law. It said it rejected Fabritech’s offer because it did not meet a qualification requirement; thus, there was no requirement for referral to the SBA. GAO did not agree with the agency’s argument. It did not see this case as one involving compliance with a qualification requirement. It distinguished “findings relating to compliance with qualification requirements [from] those relating to an offeror’s responsibility.” For example, “the ability of an offeror to supply a qualified product—but not whether a product was properly qualified—concerns the offeror’s responsibility.”

The issue here was responsibility: “the reasons given for the agency’s rejection relate directly to the protester’s ability or capability to perform, and the agency’s concerns clearly align with the description in the relevant FAR provisions of elements bearing on responsibility … [e.g.] FAR sect. 9.104-1(b), [that a firm must be] ‘able to comply with the required or proposed delivery or performance schedule’; sect. 9.104-3(a), [that] ‘the contracting officer shall require acceptable evidence of the prospective contractor’s ability to obtain required resources’; that evidence ‘normally consists of a commitment or explicit arrangement, that will be in existence at the time of contract award, to rent, purchase, or otherwise acquire the needed facilities, equipment, other resources, or personnel’” (Fabritech, Inc., B-298247; B-298247.2, July 27, 2006).

    What are definitive responsibility criteria?

Sometimes the government wants to make sure that a contractor has some special qualifications to do a job. These are the cases where the typical responsibility criteria, like capability to perform and business integrity, are not enough to convince the government that it’s got the right contractor for the job. To make sure that a specially qualified contractor gets the job, the government sometimes uses special responsibility criteria—definitive responsibility criteria. These are responsibility criteria over and above the normal criteria a contractor has to satisfy before getting a contract.

Here’s a good example from a GAO decision. The General Services Administration (GSA) issued an Invitation for Bids (IFB) for building management services. The IFB required bidders to prove that their key personnel were well qualified. For example, a project manager (and the alternate project managers) had to have four years of experience (“within the past five years”) “in managing the operation, maintenance and repair, custodial services, building alterations, customer relations requirements, and all other operational components of a building with at least 800,000 square feet” of space. Only the apparent low bidder had to submit the résumés and the résumés had to be submitted “within five working days after notice to the apparent low bidder.”

After Vador Ventures, Inc., lost, it protested to GAO. It argued that the solicitation’s experience requirements were definitive responsibility criteria and the winner did not meet these requirements.

First, GAO discussed how definitive responsibility criteria are related to responsibility in general. “Responsibility is a term used to describe the offeror’s ability to meet its contract obligations. In most cases, responsibility is determined on the basis of what the FAR refers to as general standards of responsibility, such as adequacy of financial resources…. In some cases, however, an agency will include in a solicitation a special standard of responsibility, FAR sect. 9.104-2, which is often referred to as a definitive criterion of responsibility. Definitive responsibility criteria are specific and objective standards established by an agency as a precondition to award which are designed to measure a prospective contractor’s ability to perform the contract.”

GAO then described when a vendor must prove it meets definitive responsibility criteria. “Because definitive responsibility criteria limit the competition to those who can meet them, and because compliance with them is not a matter of subjective business judgment but can be determined objectively, offerors must meet such criteria as a precondition for award.”

GAO concluded that the government’s experience requirements had “all of the principal characteristics of a definitive responsibility criterion—they concern the capability of the offeror, not a specific product, and they are objective standards established by the agency as a precondition to award” (Vador Ventures, Inc., B-296394, B-296394.2, August 5, 2005).

    Does the CO have to warn me that I was looking non-responsible and give me a chance to prove I am responsible?

Generally, no, unless the non-responsibility decision is based on lack of business integrity. It is the offeror’s job to prove it is a responsible offeror. “The obligation to timely and clearly establish the capability to perform a contract generally lies with the bidder. Thus, the burden ordinarily is on the bidder to present all relevant information to the agency …” (Mid-America Engineering and Manufacturing, B-247146, April 30, 1992).

    What is an organizational conflict of interest?

When it comes to conflicts of interest, some are easy to see and deal with and others are not. A personal conflict of interest, such as a CO awarding a contract to a spouse, is easy to spot. But an OCI, described at FAR 9.504(a) and 9.505, is not.

One problem is the vagueness of its FAR definition: “‘Organizational conflict of interest’ means that because of other activities or relationships with other persons, a person is unable or potentially unable to render impartial assistance or advice to the Government, or the person’s objectivity in performing the contract work is or might be otherwise impaired, or a person has an unfair competitive advantage” (FAR 2.101).

More helpful, perhaps, are the descriptions of these “other activities or relationships” given by GAO:

    What kind of situations create an unequal-access-to-information OCI?

GAO found an unequal-access-to-information OCI in an Air Force procurement for a wide range of communications services called the Uni-Comm procurement. It needed help in preparing the solicitation. To provide that help, it competed a task order with two phases: Phase 1a was preliminary procurement planning work and Phase 1b was writing the statement of work (SOW). SI Engineering, a separate division of SI International, was part of the team that won the first task order. After the solicitation was prepared and competed, General Dynamics Information Technology, Inc. (GDIT) won. Because GDIT would use SI Telecom, another separate subdivision of SI International, as a subcontractor, unsuccessful offeror L-3 Services, Inc., filed a protest at GAO. L-3 argued that the award was improper because GDIT, as a result of SI Engineering’s performance on the task order, gave GDIT “access to competitively useful, non-public information and thus created an unequal access to information organizational conflict of interest for GDIT.” Even the government conceded that “SI handled competitively useful information in the form of unredacted copies of contracts, core communications requirements … and proprietary information of other companies that was subject to non-disclosure agreements” (L-3 Services, Inc., B-400134.11; B-400134.12, September 3, 2009).

    What kinds of situations create a biased-ground-rules OCI?

GAO considered a biased-ground-rules OCI in a Navy solicitation. The Navy wanted to develop ways to save energy at Naval Station Norfolk, Virginia. In August 2008, it issued a task order under a GSA IDIQ contract to Virginia Natural Gas (VNG) to perform a feasibility study for steam decentralization at Norfolk. Specifically, VNG was to identify energy conservation measures for lighting, water, heat, and the removal of two hangars from the station’s central steam heat system. The goal of the study was “to determine whether particular conservation project opportunities proposed are feasible.”

A subcontractor on that study was Energy Systems Group (ESG). ESG’s job was to assess 32 buildings for conversion from steam to natural gas heat, assess 53 buildings for lighting upgrades, assess 37 buildings for water upgrades, and prepare cost estimates for the work. At the time the work was done, all parties expected any follow-on contract to be a sole-source contract allowed under current law. After the feasibility study was done, the Navy got funding to do some of the work. But the money was part of recent legislation requiring competition. The Navy therefore issued a competitive RFP for the work in October 2009. According to the Navy, approximately 80 percent of the requirements for the solicitation’s SOW was based on the feasibility study prepared by ESG. Offerors were provided a copy of the feasibility study as an attachment to the RFP. ESG wanted to be involved in the solicitation, so it asked the Navy if there was an OCI related to its preparation of the feasibility study. While acknowledging its role in the feasibility study, ESG argued that the OCI could be mitigated or that the Navy could waive the conflict.

But the Navy did not agree. It told ESG that it was being excluded from the competition because there was an OCI that could not be mitigated nor waived. According to GAO, the Navy CO based her OCI determination on the fact that ESG had prepared the feasibility study, and the study led “directly to the statement of work of the subject RFP,” and that ESG’s work placed the firm “in a position to describe the work in the subject RFP [in] a manner beneficial to itself.” She also concluded that release of the ESG feasibility study to the other offerors did not mitigate the OCI and that the Navy would not waive the conflict.

GAO agreed and upheld the CO’s decision: “an agency’s decision to exclude a potential offeror from a competition based on the offeror’s preparation of materials that are incorporated into a SOW generally involves a backward-looking analysis, in that the agency must assess whether the offeror’s prior work created an OCI. In this regard, adopting ESG’s interpretation of FAR 9.5 would prohibit an agency from excluding an offeror from a competition based on a biased ground rules OCI unless the agency and offeror were aware that the offeror’s work might at some point in the future be used in a SOW. Such a restriction would unreasonably obligate an agency to either avoid using contractor-prepared materials in a SOW or allow a contractor to compete for a contract award where it has, effectively, set the ground rules for the competition” (Energy Systems Group, B-402324, February 26, 2010).

    What kind of situations create an impaired-objectivity OCI?

In this type of OCI, “a firm’s obligations under one contract could impair its objectivity in providing advice or assistance to the government under another contract.” When the Army did an A-76 study in connection with its installation support services requirements at Fort Benning, Georgia, for services such as building maintenance, family housing maintenance, utility systems operations and maintenance, heating, and so on, it awarded the contract to IT Corporation, which had a teaming arrangement with Innovative Logistics Techniques, Inc. (INNOLOG). INNOLOG was performing an integrated sustainment maintenance (ISM) contract. Under the ISM contract, INNOLOG maintained the Executive Management Information System (EMIS) database, which had data on maintenance activities performed at various Army installations worldwide (including Fort Benning). In GAO’s eyes, “using the EMIS, it is possible to obtain relatively in-depth, comprehensive historical information relating to maintenance activities performed at Fort Benning.” Because INNOLOG under its existing contract could be asked to evaluate other installations “and those recommendations could ultimately have an impact on the amount of work to be performed by the IT team at Fort Benning” there was an impaired-objectivity OCI. “Simply stated, there is a fundamental conflict between performing installation support services, on the one hand, and evaluating the efficiency of those services (and making recommendations about where those activities should be performed), on the other” (Johnson Controls World Services, Inc., B-286714.2, February 13, 2001).

    Whose job is it to monitor whether there is an OCI?

It’s both the CO’s job and the contractor’s job. The offeror has the initial job of identifying and mitigating OCIs but ultimately it’s the CO’s job (Energy Systems Group, B-402324, February 26, 2010).

    What is the CO’s role in OCIs?

The CO is responsible for determining whether there is an OCI and, if so, whether that OCI can be mitigated. GAO interprets the FAR as requiring a CO to exercise “common sense, good judgment, and sound discretion” in assessing whether a potential conflict exists and in developing appropriate ways to resolve it; the primary responsibility for determining whether a conflict is likely to arise, and the resulting appropriate action, rests with the contracting agency. Once an agency has given meaningful consideration to potential conflicts of interest, GAO will not sustain a protest challenging a determination in this area unless the determination is unreasonable or unsupported by the record” (Energy Systems Group, B-402324, February 26, 2010).

A CO has great latitude in making these decisions, according to a decision of the U.S. Court of Appeals for the Federal Circuit (CAFC). The decision involved an Army solicitation for renovating the hospital at Fort Benning. To help the government prepare the construction plans for the solicitation, the Army Corps of Engineers hired a joint venture of Hayes, Seay, Mattern & Mattern (HSMM) and Hellmuth, Obata & Kassbaum, Inc., in June 2007. Construction companies bidding on the work also hired consultants. To help Turner Construction, the eventual successful offeror, prepare its offer as well as during construction if it won the contract, Turner hired Ellerbe Becket (EB) to provide “overall project design coordination.”

In the middle of the solicitation process, an affiliate of HSMM, AECOM, started to consider whether to acquire EB. These discussions began in June 2008, the same month the Corps’s request for proposals (RFP) for the hospital renovation was released. The discussions ended without resolution in late November 2008 but restarted in May 2009; AECOM acquired EB in late October 2009. The Corps had awarded the contract to Turner in September 2009.

Did Turner have an improper OCI due to its subcontractor EB’s relationship with the Corps’s solicitation consultant? The CO said “no” in a five-page statement supplemented by a 150-page report resulting from her investigation; the report included 42 declarations from involved persons and telephone interviews with HSMM employees who were on the Corps’s evaluation board.

The CAFC agreed with the CO and set out some rules for how a CO should handle OCI issues:

1.   “The CO enjoys great latitude in handling OCIs.” The CO’s extensive fact-finding and analysis was important.

2.   Direct financial benefit between firms is the issue. The case law looks “to direct financial benefit between firms, rather than an attenuated or potential benefit.”

3.   Hard facts, not vague allegations, of “competitive usefulness” are required. The CO carefully assessed the information she used in concluding that the information AECOM may have had access to “lacked competitive utility” and also had been disclosed to all offerors.

4.   The hard facts need not show an actual OCI. The appeals court agreed that the hard facts required for a conflict “do not need to show an actual conflict—a potential conflict can be sufficient.”

5.   A postaward CO investigation may be appropriate. In this instance, since the first time the CO believed there was a significant potential conflict was after the award, her postaward investigation was proper:
“A CO’s post-award evaluation can clear the air of any OCI taint by showing that no significant OCI existed. If, however, the CO’s post-award war evaluation shows that a significant potential OCI did exist and went unmitigated in violation of FAR 9.504(a)(2), then serious remedial actions are appropriate” (Turner Construction Co. v. United States et al., U.S. Court of Appeals for the Federal Circuit No. 2010-5146, July 14, 2011).

When FAR Part 9 covers contractor qualifications, it includes a discussion of the various legal structures that a contractor can take, including a contractor consisting of a number of contractors—a team. In FAR 9.601, a “contractor team arrangement” is defined to include teaming as a prime in the legal form of a joint venture or partnership as well as arrangements in which a prime enlists the help of some contractors. The point of subpart 9.6 is that government procurement policy sees teaming as “desirable from both a government and industry standpoint.”

    What is a “teaming agreement”?

When several companies want to team up to prepare a winning proposal for a government solicitation, they typically sign a teaming agreement that commits the team members to cooperate in proposal preparation with the understanding that, if the team’s proposal gets the contract, the team members will share the work. Those team members can be joint ventures, partners, or prime/subcontractors.

    Are teaming agreements legally enforceable?

They may be, depending on the intent of the parties and the state law applicable to the teaming agreement.

In the previous discussion of government contracting lingo, we pointed out that the difference between an agreement and a contract is generally enforceability. A contract is a legally enforceable document and an agreement is typically not enforceable. This distinction applies generally to teaming agreements, which typically are not considered legally enforceable.

However, the fact that a particular teaming agreement may not be legally enforceable can be a serious problem if one member of the team does not cooperate and breaches the teaming agreement. It is, however, possible to make a teaming agreement enforceable if the parties want to do so, as a decision from a federal court in Virginia demonstrated. That decision shows that the parties’ attention to two issues can make it enforceable: if the teaming agreement has terms essential to a binding contract like price; and if the way the parties acted and the circumstances surrounding the teaming agreement show that the parties intended to enter into a binding contract.

For example, Cyberlock Consulting sold project management and cyber security services. It had worked with Information Experts (IE) as a subcontractor on a federal contract that ended in September 2011. When the same agency went looking for a contractor for additional work, Cyberlock and IE signed a teaming agreement to try to win the contract. The teaming agreement described the type of work and the amount of work Cyberlock would perform if IE won the contract. The companies agreed that if IE won the contract, IE would give Cyberlock a subcontract for 49 percent of the work. An exhibit to the teaming agreement described the type of work Cyberlock would perform if the contract was awarded to IE. Cyberlock also promised to give IE cost and price data. Both parties agreed that they would “exert reasonable efforts to obtain an [IE] Prime Contract” and that both would work exclusively as a team for this solicitation.

But when IE won the contract, it did not offer Cyberlock the promised subcontract on the promised terms. Instead, for example, the 51-49 percent split was missing. After the “team” failed to agree on a subcontract, Cyberlock went to court to try to enforce the teaming agreement.

At the start of the lawsuit, IE tried to get the case thrown out immediately by arguing that the teaming agreement was not enforceable. The court disagreed and concluded that the teaming agreement was enforceable.

First, the court looked at precedent describing the elements of an unenforceable teaming agreement. One involved “digitizers”; that agreement had “no mutual commitment by the parties, no obligation on the part of one of the defendants to sell the digitizers or on the part of the plaintiff to purchase them, no agreed price for the product, and no assurance that the product would be available when needed.”

Then the court looked at precedent describing a teaming agreement as enforceable: “if it is clear that the parties intended to enter into a binding contractual relationship and the agreement contains sufficient objective criteria to enforce.” The teaming agreement in that precedent had, in the court’s words:

The court further concluded that the teaming agreement sufficiently stated the essential terms of a contract for services: (1) the nature and scope of the work to be performed, (2) the compensation to be paid for that work, (3) the place of performance, and (4) the duration of the contract. Accordingly, an enforceable contract existed between the parties.

Applying the principles of these precedents to the IE-Cyberlock teaming agreement, the court found the teaming agreement to be a binding contract, because the teaming agreement stated that Cyberlock “would” be a subcontractor, not that it “might” be a subcontractor if IE won, and that Cyberlock would get 49 percent of the work, thereby establishing a “price” element of the contract. Additionally, the court found, there was an exclusive relationship between the team members; and the teaming agreement described what work Cyberlock had to do in the proposal preparation process as well as during the contract performance period if the agency gave IE the contract, “suggesting that the parties exchanged information pertaining to the nature and scope of work” (Cyberlock Consulting, Inc. v. Information Experts, U.S. District Court for the Eastern District of Virginia, Alexandria Branch, Civil Action No. 1:12cv396 (JCC/TCB), June 26, 2012).

    What is a GSA Schedule contract contractor team arrangement?

A GSA Schedule contract contractor team arrangement (CTA) is a teaming agreement unique to the GSA Federal Supply Schedule (FSS). It is a particularly useful form of a teaming agreement, because it allows vendors that have an FSS contract for some but not all the government needs under a particular solicitation to team up with another vendor that can fill that gap with its own FSS contract. When performing an FSS CTA contract, the government gets part of its needs from one vendor’s FSS contract and its other needs from one or more additional vendors’ FSS contracts. Although there must be a team leader, the government may deal directly with a team member.

In a sense, a GSA CTA is like a joint venture. In one case, a CTA consisting of Medical Staffing Network (MSN), Lockheed Martin Aspen Med Services Inc. (LMAM), and others won a DHS FSS contract. MSN was the team leader, had its name on the award, and chose to submit a single invoice to the agency, but specified that payment of that invoice would be made to the team member doing the work invoiced. The government would discuss with individual team members the required delivery order funding levels, changes to work schedules, and addition of line items, and so on.

Because these team members dealt with the agency directly and did not go through the team leader (MSN), it is no surprise that when LMAM had to file a claim for additional costs, allegedly due to late incorporation of Service Contract Act rates for a particular year, it sent the claim directly to the CO. When the government argued that LMAM did not have privity of contract with the government, the Civilian Board of Contract Appeals (CBCA) disagreed.

Each member of the CTA possessed an existing government contract and was providing services to the government via that contract. “The contractual relationship did not stem from a prime contract that flowed down to subcontractor through a subcontract between a prime and a subcontractor” (Lockheed Martin Aspen Med Services, Inc. v. Department of Health and Human Services, CBCA 2054, December 8, 2010).