As to non-responsiveness and non-responsibility, the difference is in the details.  Despite the likely easy confusion between the two due to the similar spellings, the difference between the two is important and can alter the remedy available to a bid protester.  This point is illustrated in Matter of:  Tessa Structures, LLC (“Matter of Tessa”).

On May 26, 2004, the Department of Transportation (“DOT”) issued an Invitation for Bids (“IFB”) for a fixed-priced contract requiring bridge-related repairs.  The IFB stated that the award would be based on the lowest total project price, which would be the sum of the bid price and the contract administrative costs associated with the length of the performance period stated in the bid ($2,200 per calendar day bid).  Matter of Tessa, at *1.  The IFB set out a maximum performance period of 305 days, but the IFB provided no minimum performance period.

Three bids were timely submitted.  Tessa Structures, LLC (“Tessa”) submitted the lowest evaluated price of $2,542,730 based on a bid of $2,278,730 and a performance period of 120 days.  Fort Myer’s submitted the second lowest evaluated price of $2,546,430 based on a bid of $1,996,430 and a performance period of 250 days. 

DOT responded to Tessa’s bid by letter, informing Tessa that the agency was “very concerned” with the brevity of Tessa’s 120-day performance period submitted in its bid.  Id. at *2.  The letter noted that the agency had estimated a significantly longer performance period and, therefore, requested that Tessa submit a construction schedule explaining how it expected to complete the work on-time.  Tessa submitted a timely response which included, among other required information, an estimated start date of August 28. 

DOT replied to Tessa’s letter stating that Tessa’s suggested start date of August 28 was contrary to the requirements of the IFB.  Tessa again responded by letter to the agency explaining that the IFB did not preclude a start date of August 28, and, in the alternative, even with a later start date, it could still complete the work on-time.  Finally, in response to Tessa’s letter, DOT informed Tessa that it was rejecting Tessa’s bid as non-responsive.  The letter stated Tessa had failed to adequately address the agency’s concerns regarding its 120-day proposed work schedule.  Tessa filed a timely bid protest.

In its protest, Tessa asserted that its bid complied with all contract requirements and, therefore, was responsive.  Tessa further asserted that if the agency had concerns with its proposed work schedule, the agency should have instead made a finding of non-responsibility – not non-responsiveness.  Responsiveness concerns whether a bidder has unequivocally promised, as shown on the face of its bid, to provide the items or services called for by the material terms of the IFB.  Id. at *3.  Responsibility, on the other hand, concerns whether a bidder can perform as promised in its bid.  Id.  Because Tessa’s bid, on its face, met the services required by the IFB, Tessa’s bid was responsive.  The agency’s concerns regarding Tessa’s proposed work schedule affect Tessa’s bid responsibility.

Because Tessa was considered a small business, the difference in the determination was important.  An agency finding of non-responsiveness allows that agency to reject the bid; however, an agency finding of non-responsibility allows a small business, such as Tessa, to challenge that agency’s finding through the Small Business Administration (“SBA”) certificate of competency (“COC”) procedures.

Accordingly, Tessa’s bid protest was sustained by the Comptroller General.  For Tessa’s remedy, the General required DOT to refer its determination to SBA for review under COC procedures.  Further, the General awarded Tessa reimbursement of its protest costs, including reasonable attorneys’ fees.  See 4 C.F.R. § 21.8(f)(1).

For a copy of the opinion in Matter of Tessa, please visit http://www.gao.gov/decisions/bidpro/298835.htm.

When a government agency procures a fixed-priced contract, the government agency cannot reject the low bidder because its bid falls below the Government Cost Estimate (“GCE”) unless the government agency can show cause.  In other words, if the government agency rejects a bid for being too low without explaining why the low bid is technically unacceptable, the low bidder may be able to be successfully protest the award of the contract. See Matter Of:  A1 Procurement, JVG, 2011 Comp. Gen. B-404618 Lexis 46 (Mar. 14, 2011) (hereafter “Matter of A1”).

Of the ten bids submitted to the Department of Veterans’ Affairs (“VA”) for a ground maintenance contract at the Golden Gate National Cemetery, A1 Procurement, JVG (“A1”) submitted the low bid.  However, VA rejected A1’s bid for being too low.  Specifically, VA concluded that A1’s proposed unit price of $7,200 for trimming expenses fell too far below the GCE of $16,200 and, therefore, represented a “significant risk to performance.”  A1 responded that it was able to bid so low because its firm’s headquarters is only two blocks from the Cemetery.  Yet, VA awarded the contract to the second lowest bidder, whose bid was only 6% higher than A1’s.  A1 protested the award of the contract.

The Comptroller General held that VA’s rejection of A1’s bid was “unreasonable” and ordered VA to “re-evaluate” A1’s bid to determine if its proposal was “technically acceptable.”  Matter of A1 at *4.  If so, the Comptroller recommended that VA terminate the awardee’s contract and make award to A1.  Further, the Comptroller ordered that A1 should be reimbursed of all “reasonable costs of filing and pursuing the protest.”  Id.  See also Bid Protest Regulations, 4 C.F.R. § 21.8(d)(1) (2010).

Before awarding a fixed-price contract, an agency is required to determine that the price offered is fair and reasonable.  Federal Acquisition Regulations (“FAR”) § 15.402(a).  This provision is normally used to reject bids for being too high, although VA used the provision to reject A1’s bid for being too low.   While the provision can properly be used to reject a bid for being too low, a valid explanation is required.  In response to VA’s rejection of A1’s low bid, the Comptroller stated, “There is no documentation in the record (nor does the Agency claim) that [any] analysis was performed with respect to [A1’s] proposal.”  Matter of A1 at *4.  Essentially, the Comptroller found that VA’s rejection of A1’s proposal because of the discrepancy in A1’s proposed costs for trimming compared to the GCE was a “conclusory judgment.”

While a government agency may be able to validly reject a bid for being too low, the government agency must provide the low bidder with a reasonable explanation.  Further, while not mentioned in the Comptroller’s opinion, I believe that because the contract was for a fixed-price contract, which presents minimal financial risk to a government agency, a low bidder will likely be successful in protesting the government’s rejection of its bid.

For a copy of the opinion in Matter of A1, please visit http://www.gao.gov/decisions/bidpro/404618.pdf.

Generally, a firm protesting that a competing firm is not qualified to be awarded a contract may wait until the competing firm has actually been awarded that contract.  However, a decision by the Comptroller General holds that if a firm has knowledge that disqualifies a competing firm, the firm must protest the bid immediately or risk that its protest will be considered “untimely” – even if this means challenging the competing firm before it has been awarded the contract.  See Matter of:  Caddell Construction Company, Inc., 2009 U.S. Comp. Gen. B-401281 (June 23, 2009) (hereafter “Matter of Caddell”).

The dispute in Matter of Caddell was over a Department of State (“State”) contract for the design and construction of a U.S. Embassy.  The contract limited potential bidders to “United States persons” under the Omnibus Diplomatic Security and Antiterrorism Act of 1986 (“the Act”).  22 U.S.C. § 4852.  Procurement of the contract occurred in two rounds.  First, potential bidders submitted various certifications and other information to allow State to determine whether each bidder qualified as a United States person under the Act.  Second, qualified bidders were allowed to submit bids.

During the first stage, Framaco International Inc. (“Framaco”) submitted its prequalification package.  State initially determined that Framaco did not qualify as a United States person under the Act, but Framaco protested State’s determination.  In response to the protest, State then determined that Framaco did indeed qualify as a United States person under the Act.  Caddell Construction Company, Inc. (“Caddell”), the eventual protestor, also submitted its prequalification package and was deemed a United States person.  Three other firms were prequalified as well.

Once the bidding process began, only Framaco and Caddell submitted bids by the deadline.  Framaco was awarded the contract.  After Framaco was awarded the contract, Caddell protested the award claiming that Framaco was not a United States person under the Act and, therefore, was not qualified to be awarded the contract. 

Caddell’s protest proved unsuccessful because the Comptroller General found that Caddell had the evidence it presented to the Comptroller General during the first round of the contract procurement, but brought forth its evidence only after Framaco was awarded the contract.  The Comptroller failed to reach the merits of Caddell’s allegation, simply calling Caddell’s protest “untimely.”  Matter of Caddell at *2 (“We conclude that the above issues are untimely and therefore not for consideration by our Office.”).  The Comptroller acknowledged the general rule that allows a protestor to challenge a competing firm’s qualifications after a contract has been awarded.  However, the Comptroller further acknowledged the reason behind such a rule is that only after a contract has been awarded does specific information about that firm’s qualifications become public. 

Caddell argued that bringing a protest before the contract had been awarded would have been premature and inefficient.  The Comptroller disagreed stating, “Underlying our timeliness rules regarding solicitation improprieties is the principle that challenges which go to the heart of the underlying ground rules by which a competition is conducted, should be resolved as early as practicable during the solicitation process, but certainly in advance of an award decision, if possible, not afterwards.”  Id. at *3.

While not explicit in the decision, part of the Comptroller’s rigidity with the untimeliness of Caddell’s challenge may be due to the two-part procurement of the contract.  Because Caddell waited until after the second round of procurement to challenge State’s decision in the first round, Caddell’s untimeliness seems more egregious than if the procurement process only had one phase.

For a copy of the opinion in Matter of Caddell, please visit http://www.gao.gov/decisions/bidpro/401281.pdf

If a principal company is disqualified from making a responsive bid, its affiliates are likely also disqualified from making a responsive bid.  Under most of these relationships, an affiliate will likely be ineligible to bid even if the relationship between the affiliated companies is only partial.  The Louisiana case of Gibson & Associates, Inc. v. State of La., Dept. of Transp. and Development, 68 So. 3d 1128 (La. Ct. App. 2011) demonstrates these issues.

In Gibson, the Louisiana Department of Transportation and Development (“DOTD”) bid a construction contract for interstate bridge joint repairs and replacements on Interstates 10 and 110 in Louisiana.  The project was a federal aid project; therefore, the DOTD mandated that bidders comply with Disadvantaged Business Enterprise (“DBE”) regulations.  TOPCOR Services, Inc. (“TOPCOR”) bid the bridge contract during its initial procurement and was the low bidder.  TOPCOR was thereafter notified by the DOTD that it must complete paperwork that ensured its compliance with DBE regulations.  TOPCOR failed to timely submit such paperwork, and the DOTD disqualified TOPCOR from re-bidding the project.

The contract was re-bid during a second procurement round.  During this round, Lamplighter Construction LLC (“Lamplighter”) was the low bidder, and the DOTD awarded Lamplighter the contract.  However, Gibson & Associates, Inc. (“Gibson”), the second-lowest bidder, protested the contract award to Lamplighter.  Gibson claimed Lamplighter’s bid was disqualified and, therefore, non-responsive.  If merited, Gibson’s claim would make Gibson the lowest responsive bidder.  Specifically, Gibson alleged that because Lamplighter was an affiliate of a disqualified bidder, TOPCOR, regulations also disqualified Lamplighter from producing a responsive bid.

Section 102 of the 2006 Louisiana Standard Specifications for Roads and Bridges provides that bids “may be considered irregular and non-responsive . . . [i]f an owner or a principal officer(s) of the bidding entity is also an owner or a principal officer(s) of a contracting entity which has been declared by the [DOTD] to be ineligible to bid.”  Evidence later presented showed that the sole owner of TOPCOR also owned 29 percent of Lamplighter, and TOPCOR’s president/secretary was also the secretary/treasurer of Lamplighter.  Thus, Lamplighter’s affiliation with TOPCOR directly conflicted with Section 102.  However, it is worth noting, the language of Section 102 is discretionary (“may be considered irregular and non-responsive”), yet the appellate court held that because the Louisiana Standard Specifications were made a part of the construction proposal, the DOTD had no discretion or authority to waive any of the requirements therein as they applied.

The case went to trial.  The trial court agreed with the plaintiff Gibson that Lamplighter and TOPCOR were sufficiently affiliated to disqualify Lamplighter’s bid, and the court enjoined the DOTD from awarding the contract to Lamplighter.  Further, the trial court required the DOTD to award the contract to Gibson since it was now the lowest responsive bidder.  Lamplighter appealed.

The Louisiana Court of Appeals upheld the portion of the trial court’s order that enjoined the DOTD from awarding the contract to Lamplighter due to its affiliation with TOPCOR.  However, the appellate court reversed the portion of the trial court’s order requiring the DOTD to award the contract to Gibson.  Because Gibson’s bid price exceeded the established preconstruction estimate limit, the appellate court allowed the DOTD to again re-bid the contract.

In conclusion, both the trial and appellate courts held that the disqualification of a principal company from bidding a contract will likely also disqualify any affiliated companies from bidding that contract, even if the principal partially owns the affiliate.

A recent decision was issued by the Chief Procurement Officer for Construction (“CPOC”) concerning four contractors’ bid protest of South Carolina State University’s (“SCSU”) Notice of Intent to Award a contract for the James E. Clyburn Transportation Research and Conference Center –Transit Research Center (“Project”).

On this Project, the invitation for bid provided as a goal that SCDOT certified Disadvantaged Business Enterprise (“DBE”) contractors or subcontractors would perform work equaling at least 20% of the value of the awarded contract. After receiving 17 bids that failed to meet that goal, SCSU requested that each bidder provide documentation substantiating their good faith efforts. Once a bidder submitted documentation that it was a SCDOT certified DBE performing at least 20% of the work, SCSU notified the 15 lower bidders that their documentation of efforts to achieve the DBE participation goal was determined to be non-responsive. Four contractors subsequently submitted their protests.

The CPOC first dealt with the issue of whether federal regulations concerning DBE contractor requirements should be applied to this procurement. The CPOC noted that the project was being funded by a grant from the Federal Highway Administration. Thus, as a condition, SCSU agreed to comply with the FHWA Disadvantaged Business Enterprise Program in accordance with 49 C.F.R. § 26.

Next, CPOC tackled the issue of whether SCSU committed error under the federal standards in determining the protestants’ bids to be non-responsive for failure to show adequate good faith efforts to meet the DBE participation goal. The CPOC noted that “[t]he efforts employed by the bidder should be those that one could reasonably expect a bidder to take if the bidder were actively and aggressively trying to obtain DBE participation.” 49 C.F.R. § 26 App. A. Even though SCSU’s approach to evaluate efforts was “overly stringent,” CPCO found that no error was committed and the protest of each contractor was denied.

It is interesting to note that CPOC prefaced its entire decision by stating that there was a “general feeling that the process was unfair,” however because these were federal funds with federal requirements, “dissatisfaction with the state is misplaced.”

In a previous post, we recognized the issue of whether a local code had to mirror The South Carolina Consolidated Procurement Code (the State Code) in order to comply with state law. Although the 2008 case of Edward D. Sloan v. Greenville County, et al. touched on the issue, it did not directly decide it. Recently, however, the South Carolina Supreme Court decided a case that took the issue head on.
In Sloan v. Greenville Hospital System, Mr. Sloan brought three declaratory judgment actions against the Hospital challenging the Hospital’s procurement procedures for three constructions services. (http://sccourts.org/opinions/displayOpinion.cfm?caseNo=26827) After the circuit court ruled against Mr. Sloan on two of the services, he appealed, arguing the circuit court erred in finding the Hospital was not a governmental body subject to the State Code and, in the alternative, if the Hospital is a political subdivision, several of the Hospital’s policy provisions violate § 11-35-50’s mandate that political subdivisions enact ordinances or procedures embodying sound principles of appropriately competitive procurement.
Regarding Mr. Sloan’s first argument, the classification of the Hospital was important because, if the Hospital is a governmental body, it is subject to the requirements of the State Code. In contrast, if it is not a governmental body, the Hospital must follow the provisions of its own Hospital Policy that it adopted to govern the procurement of construction and design services. The court upheld the circuit court’s determination that the Hospital is not a state governmental entity subject to the procurement procedures detailed in the State Code. Rather, the court held that it is a special purpose district that is entitled to, and by law is required to, establish its own provisions embodying sound principles of appropriately competitive procurement as provided by § 11-35-50.
Mr. Sloan next argued that, even if the Hospital is a local political subdivision, the Hospital Policy does not embody sound principles of appropriately competitive procurement as required by § 11-35-50. In support, he pointed to the fact that the Hospital Policy does not mirror the terms of the State’s Code, the Model Procurement Ordinance, and other regional codes. However, the court agreed with the circuit court that this difference, standing alone, is not enough to deem the Hospital Policy in violation of the statute’s mandate to adopt “sound principles of appropriately competitive procurement.”
The court noted that § 11-35-50 does not specify any particular procedures that are considered to embody the appropriately competitive standard. Rather, the court held that the statute clearly was intended to afford local governments needed flexibility to determine what is appropriately competitive in light of the public business they must transact.
However, even though Mr. Sloan lost his above mentioned appeal on two services, there was a third service in which he emerged victorious at the circuit court level. In an order regarding the Parking Deck Case, the circuit court found the Hospital had improperly utilized the “Sole Source Procurement” method of selecting construction services under the Hospital’s own procurement policy and that the contract for that work was, therefore, invalid and void. In a separate consent order, Sloan was awarded costs and attorney’s fees of $ 21,789.95 in that matter and no appeal has been filed.

 In a previous post we saw that an ambiguity can be used aggressively to throw out a bid even after contract award.  There is more to the story. When a bid specification is ambiguous, the burden is not entirely on the specification drafter.  If the protester had opportunities to seek clarification and failed to do so, then its interpretation will not be reasonable and the specification will not be ambiguous.  In re: Protest of Andersen Consulting, SC Procurement Review Panel 1993-18 (http://www.procurementlaw.sc.gov/MMO/legal/decisions/93-18.pdf ).  Andersen Consulting stated in their proposal that “several assumptions have been made.”  This statement was not well-received by the Panel.  The Panel repeatedly referred to the impropriety of making assumptions in light of the various steps available to get clarification.  The procedures provided for in the Request for Proposals (RFP) included a pre-proposal conference, question and answer time, and the ability to ask about answers to previous questions published in amendments to the RFP.  The Panel ruled that because Andersen “did not take the proper steps” to have its questions answered, it could not claim an ambiguity, and thus the requester’s determination that Andersen’s proposal was non-responsive was upheld.

When a solicitation of bids is drafted, it is important for the requestor to be familiar with the precise requirements that lead to the procurement.  This should enable the drafter to create bid documents that are clear and specific.  Otherwise, the bid process may have to be re-done, even after an award was made. 

A specification is ambiguous if it “is of uncertain meaning and can reasonably be interpreted in more than one way.”  In re: Protest of Warehouse Distributing Company, SC Procurement Review Panel 1988-2 (http://www.procurementlaw.sc.gov/MMO/legal/decisions/88-2i.pdf).  Where a protesting bidder interpreted the specification differently than the drafter intended, the bid protester need only show that its interpretation of the specification was “reasonable” in order to establish ambiguity.  In re: Protest of Pitney Bowes, Inc., SC Procurement Review Panel 1988-14(II)  (http://www.procurementlaw.sc.gov/MMO/legal/decisions/88-14ii.pdf).

In the Pitney Bowes case, the alleged ambiguities pertained to the use of the word “reservoir” in one part of the specification and the word “and” in another part.  The specification called for a mailing machine that used an “ink reservoir,” where the requestor intended the broader, dictionary definition of the term rather than the more technical, industry-specific meaning ascribed to it by Pitney Bowes.  Further, the specification required a system capable of producing “daily, weekly, monthly, and yearly transaction and summary reports.”  Pitney Bowes asserted that the winning bidder’s machine was non-responsive in that it could not produce reports for all four time periods.  Even though the Review Panel noted that there is no such thing as a daily summary report and a yearly transaction report would be prohibitively large, Pitney Bowes’ literal interpretation of this provision was considered reasonable.  The Panel relied on both of these ambiguities in ordering the specification re-written and the contract re-bid.

The requirement that specifications not be “unduly restrictive” is an important pro-competition provision of South Carolina’s procurement law.  SC Code Ann §11-35-2730 (1973) (http://www.scstatehouse.gov/code/t11c035.htm).  Unduly restrictive specifications have been held “inadequate” or “not independently arrived at in open competition” under SC Code of Laws Regulation 19-445.2085(C) (http://www.scstatehouse.gov/coderegs/c019.htm).  In re: Protest of B&D Marine and Industrial Boilers Inc, SC Procurement Review Panel 2000-12 (http://www.procurementlaw.sc.gov/MMO/legal/decisions/00-12.pdf).  This can lead to cancellation of an award or contract and the issuance of a new award or bid solicitation. 

A specification that calls for products from only one manufacturer isn’t automatically unduly restrictive.  In re: Protest of CambexCorp., SC Procurement Review Panel 1992-7 (http://www.procurementlaw.sc.gov/MMO/legal/decisions/92-7.pdf).  SC Code of Laws Regulation 19-445.2140 (http://www.scstatehouse.gov/coderegs/c019.htm) permits a bid specification to use a brand name, so long as it can serve as a basis for meeting the State’s need in a cost-effective, nonrestrictive manner.  Cambex, a computer memory manufacturer, protested an Invitation for Bids (IFB) for an upgrade from one IBM model to another IBM model.  The IFB specified that “no other make or model will be considered” and “all parts … must be manufactured by IBM.”  South Carolina’s Division of Information Resource Management (DIRM) declined to consider Cambex’s product an acceptable alternative, citing several concerns, including the complexity of maintenance and repair in a multi-vendor environment.  The Procurement Review Panel applied the familiar administrative law standard of review, deferring to the agency’s position unless the specification is “unreasonable, arbitrary, capricious, or contrary to the Procurement Code.”  The Panel upheld the DIRM’s decision to limit its IFB to a single manufacturer because Cambex failed to show that the concerns stated as a basis for doing so were “unrealistic or unreasonable.”  Additionally, the Panel noted that the use of a brand-name specification without providing for alternatives did not make the IFB a single-source procurement because the secondary used market for IBM products allowed several vendors to bid on the job. 

On the other hand, merely reciting the phrase “or approved equal” isn’t a magic bullet against undue restrictiveness.  In re: Protest of B&D Marine and Industrial Boilers Inc, SC Procurement Review Panel 2000-12 (http://www.procurementlaw.sc.gov/MMO/legal/decisions/00-12.pdf).  B&D protested an Invitation for Bids (IFB) from USC that called for a boiler to be “Cleaver-Brooks Model CBLE200-800-150ST or approved equal by Kewanee or Burnham.”  The specification drafter admitted that when he wrote the IFB, he did not know if there was an approved equal made by the named manufacturers.  It was later learned that the named manufacturers did not offer an approved equal.  Although USC allowed prospective bidders to submit technical data for approval of additional products, none of the alternates were approved.  Therefore, no approved equals were considered, and as a result, the Panel deemed the IFB an unduly restrictive single-source procurement.   The Panel then held that the finding of undue restrictiveness indicated that the IFB did not meet the State’s requirements for the goods because of the failure to assure competition under SC Code of Law Regulation 19-445.2085(C).  Thus, the Panel upheld the cancellation of the award and re-solicitation of bids.

             A frequent issue when protesting decisions by local government on bidding is whether the local codes meet the requirements of The South Carolina Consolidated Procurement Code (the State Code).  The State Code at § 11-35-50 requires all political subdivisions of the State to develop and adopt procurement laws.

            “All political subdivisions of the State shall adopt ordinances or procedures embodying sound principals of appropriately competitive procurement no later than July 1, 1983, S.C. Code Ann. § 11-35-50 (2007).”  The local codes must be “substantially similar” to the State Code.

            In a case decided October 23, 2008 entitled Edward D. Sloan v. Greenville County, et al., § 11-35-50 was construed.  The State Code contained a preference for competitive bids over competitive proposals and required a written reason if the State used competitive proposals rather than competitive bids.  The Greenville Code did not contain such a requirement.  Sloan challenged the Greenville Code.  The Court said the issues were moot because the contracts which were subject to the protest had been cancelled or fully performed by the time the Court considered the issue. 

The Court did, however, address the issue of whether the local code had to mirror the State Code in part by saying the State Code did not require local governments to adopt specific methods of procurement or the process by which to apply them, and that § 11-35-50 “clearly was intended to afford local governments flexibility to determine what is ‘appropriately competitive’ in light of the public business they must transact.”  However, this was not the holding of the case. 

            As noted above, the Court did not directly decide the issue but pointed out that the same issue was on its docket to be decided in Sloan v. Greenville Hospital System and in that case, the issue was more developed and ripe for decision.