Here, the record confirms and it is not disputed that SBSI’s proposal did not conform to the instructions in the RFP. Thus, the RFP included an instruction that required offerors to submit copies of their technical and past performance volumes in redacted form. Notwithstanding that requirement, SBSI acknowledges that it deliberately failed to redact references to the fact that it had been a contractor on SIFM I, and the agency correctly found multiple other failures to redact the proposal, totaling over 100 instances of non-compliance. The Court thus has no basis for upsetting the agency’s determination that SBSI’s proposal should be excluded from consideration because it failed to comply with the redaction requirement. See LS3 Inc., B-401948.11, 2010 WL 2862041 (Comp. Gen. July 21, 2010) (finding that agency properly rejected proposal that contained identifying information where solicitation explicitly required such information to be redacted); SNAP, Inc., B-402746, 2010 WL 2804498 (Comp. Gen. July 16, 2010) (same).

Although not entirely clear, the primary bases for SBSI’s bid protest in this case (at least as expressed in its briefs) appear to be that its failure to redact its proposal was not a “material” failure, that the agency should have treated the defect as a “minor informality or irregularity” within the meaning of FAR 14.405, and that, as such, the agency was required either to waive the defect or to permit SBSI to cure it.3 See Pl.’s Opp’n to Mot. for J. on the Admin. R. (Pl’s Opp’n) at 7–8, 18–20, ECF No. 19. These arguments lack merit.

First, even assuming that SBSI’s failure to comply with the redaction requirement could be considered a minor informality or irregularity, the agency was not required to give SBSI an opportunity to cure its error; nor was it required to waive the error. The mandatory opportunity to cure/waiver requirements of FAR 14.405 apply where a procurement is accomplished by means of sealed bidding. See FAR 14.101. This procurement, however, was governed by FAR Part 12 (Acquisition of Commercial Items) and FAR Part 15 (Contracting by Negotiation). Both Parts provide that a waiver of minor errors is discretionary, not mandatory.

Thus, FAR 12.301(b)(1) requires that contracts for the acquisition of commercial items include the clause set forth at FAR 52.212-1(g), which states that the agency “may . . . waive informalities and minor irregularities in offers received.” (emphasis added); see AR Tab 4a at 513–14 (incorporating FAR 52.212-1(g)). Similarly, FAR 15.306(a)(2) states that “[i]f award will be made without conducting discussions, offerors may be  given the opportunity . . . to resolve minor or clerical errors” (emphasis added)). In short, Part 15 does not “requir[e] contracting officers to clarify minor or clerical errors in negotiated procurements”; permitting such clarifications is discretionary, “unlike the mandatory nature of the comparable [rules] in Part 14 for sealed bidding.” BCPeabody Constr. Servs., Inc. v. United States, 112 Fed. Cl. 502, 510 (2013); see also Bus. Integra, Inc. v. United States, 116 Fed. Cl. 328, 334 (2014) (observing that the “regulatory regime” applicable to sealed bidding “differs significantly” from the regime applicable to procurement by negotiation); ST Net, Inc. v. United States, 112 Fed. Cl. 99, 111 (2013) (observing that “[t]his court has repeatedly recognized the permissive nature of [Section 15.306] in the context of negotiated procurements”).

In any event, SBSI’s failure to redact its proposal in over 100 places does not involve a “minor informality or irregularity,” i.e., “one that is merely a matter of form and not of substance,” and that “pertains to some immaterial defect in a bid or variation of a bid from the exact requirements of the invitation that can be corrected or waived without being prejudicial to other bidders.” FAR 14.405. For purposes of Part 14, such errors might include, for example, providing the wrong number of copies of the bid, listing the wrong number of employees, or failing to sign the bid itself where the submission includes other material indicating the bidder’s intent to be bound. See id.

The redaction requirement, however, is not a formalistic one comparable to the types of requirements violated in the examples set forth at FAR 14.405. It served a substantive purpose—promoting the unbiased evaluation of all offerors’ proposals. Moreover, the information revealed in an unredacted proposal could affect an offeror’s chances of receiving a contract award. In fact, to at least some extent, SBSI’s failure to redact was deliberate and designed to give it an advantage (or at least to remove some perceived disadvantage). It would be inappropriate to apply an exception designed to relieve an offeror of the consequences of an inadvertent minor mistake where, as here, it has acted in deliberate defiance of the solicitation’s requirements and for purposes of securing an advantage.

Similarly, SBSI’s failure to redact could not have been corrected or waived without prejudicing other offerors. For if the violation were waived, the agency’s technical evaluators would have had access to critical information about SBSI’s experience and proposed staff that the other offerors who complied with the instructions were not able to present. If, on the other hand, SBSI were allowed to cure the defect (by submitting a compliant proposal), the agency would have been required to convene an entirely new SSEB or take some other extraordinary action to ensure that those reviewing and evaluating SBSI’s proposal were not tainted by SBSI’s submission of the unredacted proposal.

In short, the failure to redact did not involve a minor informality or irregularity. And the agency clearly acted within its discretion when it rejected SBSI’s offer based on its non-compliance with the redaction requirement.

SBSI’s remaining claims of error also lack merit. Thus, SBSI contends that because the technical evaluation panel discovered the redaction errors while evaluating SBSI’s proposal, the exclusion must have been based on an unstated evaluation criterion, which is unlawful under FAR 15.304. See Pl.’s Opp’n at 9–10. But while SBSI’s failure to redact was not discovered until the evaluation of the proposals began, the exclusion of the proposal was not a result of the application of some unstated evaluation criterion—it was a result of SBSI’s failure to follow the instructions in the solicitation regarding redaction. And SBSI offers no support whatsoever for its further argument that—once the evaluation process began—the agency was required to conduct an evaluation of its proposal pursuant to the factors set forth in section M of the RFP, notwithstanding that SBSI’s proposal was not redacted as the RFP required.

Finally, SBSI claims that the redaction requirement itself was unfair and improper at least insofar as it required SBSI to redact reference to its status as a contractor for SIFM I. See Transfer Compl. ¶ 30(d); see also Pl.’s Opp’n at 28–29. Specifically, in its complaint, SBSI alleged that “the last instruction in the redacting requirements violated CICA in that it required proposals [to] redact any and all references to SIFM I,” which had the effect of “adversely impact[ing] SBSI as it was the only small business/prime that had SIFM I IDIQ experience.” Transfer Compl. ¶ 30(d). Because SBSI did not raise its objection to the solicitation’s terms until after the award was made, however, the objection is waived. Blue & Gold Fleet, L.P. v. United States, 492 F.3d 1308, 1315 (Fed. Cir. 2007); see also COMINT Sys. Corp. v. United States, 700 F.3d 1377, 1381–82 (Fed. Cir. 2012).  (Strategic Business Solutions, Inc. v. U. S., No. 16-81C, January 3, 2017)

B. Navy’s Determination that WIT’s Proposal Expired and Was Not Revived

The issue before the Court on the merits is whether the Navy’s determination that WIT’s proposal had expired and that WIT declined to revive it was arbitrary, capricious or contrary to law. The government and the intervenor contend that WIT’s offer expired on June 23, 2014 because the Solicitation incorporated the language of FAR 52.212-1(12), which required offerors to hold their prices firm for thirty days after the proposals were due. They contend that “[o]ffers that must be held firm for 30 days under FAR 52.212-1(12) logically expire if they are not accepted or otherwise extended within that time period.” Def.’s Mot. 24. They further argue that WIT was properly eliminated from the competition because WIT declined to revive its offer (or waive the acceptance period) when given an opportunity to do so by the government, by email of December 23, 2014. Def.’s Mot. 21; Intervenor’s Mem in Supp. of Mot. 34.

For the reasons set forth in greater detail below, the Court agrees with the government and the intervenor that WIT’s offer expired on June 23, 2014. It further agrees that the Navy’s conclusion that WIT declined to revive its offer and therefore withdrew itself from the competition was not arbitrary, capricious, or contrary to law. Accordingly, the government and intervenor are entitled to judgment on the administrative record with respect to this issue.

1. Navy’s Finding that WIT’s Offer Expired on June 23, 2014

As noted, the government argues that WIT’s offer expired on June 23, 2014. It notes that the Solicitation incorporated the language of FAR 52.212-1(12), providing as follows: “Period for acceptance of offers. The offeror agrees to hold the prices in its offer firm for 30 calendar days from the date specified for receipt of offers, unless another time period is specified in an addendum to the solicitation.” AR 1:80. It further points out, correctly, that this period of acceptance was not modified in an addendum to the original solicitation or in any subsequent amendment to the Solicitation. Def.’s Mot. 22.

In response, WIT emphasizes that FAR 52.212-1(12) imposes a minimum acceptance period but does not create an outer limit on the period for acceptance. Pl.’s Reply & Resp. 8, May 5, 2015, ECF No. 41. WIT further observes that it did not provide any specific period of acceptance in its final proposal revision. Pl.’s MJAR 9-11, Apr. 8, 2015, ECF No. 26. Accordingly, it contends, under FAR 52.212-2, which was also incorporated into the Solicitation, the proposal did not expire and could be accepted by the government within a reasonable period of time. See id. 10-11. WIT cites International Graphics Division of Moore Business Forms v. United States, 4 Cl. Ct. 515 (1984), as supportive of its position. Id. at 11.

The Court agrees with WIT that the purpose of FAR 52.212-1(12) is to establish a minimum duration period for offers in the context of commercial goods and services. In other words, under FAR 52.212-1(12), a thirty-day period applies unless some longer period is either set forth in an addendum to the Solicitation or identified by the offeror in its proposal. Cf. FAR 52.214-15 (entitled “Period for Acceptance of Bids” and providing for an acceptance period of sixty days unless another period is inserted by the bidder); FAR 52.214-16 (entitled “Minimum Bid Acceptance Period” and providing that the government will specify a required “minimum acceptance period” but will allow the bidder to specify a longer acceptance period); 60 Fed. Reg. 48231 (Sept. 18, 1995) (FAR 52.212-1 “contains solicitation instructions unique to government procurement and is based upon existing FAR language . . . . For the most part, the simplified paragraphs in the new provision do not contain new concepts.”). In this case, WIT did not specify a longer acceptance period in its original proposal or in its final proposal revision submitted on May 23, 2014. Moreover, WIT’s original proposal states that it “complies with the solicitation’s requirements.” AR 33:1511.

WIT contends, nonetheless, that a reasonable period of time should be deemed to be the acceptance period rather than the thirty days specified in the Solicitation. It cites FAR 52.212-2 in support of that argument. That provision states as follows:

A written notice of award or acceptance of an offer, mailed or otherwise furnished to the successful offeror within the time for acceptance specified in the offer, shall result in a binding contract without further action by either party. Before the offer’s specified expiration time, the Government may accept an offer (or part of an offer), whether or not there are negotiations after its receipt, unless a written notice of withdrawal is received before award.

AR 1:84-85.

WIT’s reliance on this provision for the proposition that its offer remained open for a reasonable period of time, rather than for only thirty days, is unavailing. The result of FAR 52.212-2, when read in conjunction with the language of FAR 52.212-1(12), is that within thirty days after WIT made its offer, the government could have accepted the offer, issued an award, and created a binding contract, unless WIT had formally withdrawn the offer before the expiration of the thirty-day period. The Court is unaware of any authority for the proposition urged by WIT here, that an offer remains valid for a reasonable time even where, as here, a thirty-day acceptance period is specified in the solicitation and no longer period of time is set forth in the offer itself.

(sections deleted)

In this case, the agency decided not to wait until after it made an award determination to request a waiver. Instead, as in Rice Services, Ltd., it asked both offerors whether they wanted to revive their offers by validating the prices in their final proposal revisions and agreeing that they would remain valid up through the time the agency contemplated making a final award decision.

The agency found that WIT declined to revive its offer when given an opportunity to do so. The Court’s review of this finding is limited to a determination of whether “(1) the procurement official’s decision lacked a rational basis; or (2) the procurement procedure involved a violation of regulation or procedure.” Weeks Marine, Inc. v. United States, 575 F.3d 1352, 1358 (Fed. Cir. 2009) (quoting PGBA, LLC v. United States, 389 F.3d 1219, 1225 (Fed. Cir. 2004)). In conducting such review, the Court may not “substitute its judgment for that of the agency.” Turner Constr. Co., Inc. v. United States, 645 F.3d 1377, 1383 (Fed. Cir. 2011)..

On this record, the Court cannot find that the agency’s reading of WIT’s December 23, 2014 email was arbitrary and capricious or lacked a rational basis. The December 23, 2014 email from Ms. Smith to WIT’s President, Eugene Smoot, advised him that she was emailing him in reference to WIT’s May 23, 2014 proposal. AR 42:1613. She indicated that the purpose of her email was to secure from WIT a commitment that the pricing set forth in that proposal was still “valid” and would remain valid until March 1, 2015. Id. She explained that the award had been and was being delayed due to the fact that legal counsel was tied up with “other urgent actions that they must address prior to the end of the month” and the fact that the package for the Solicitation would have to be forwarded to headquarters for review before an award was made. Id.; see also AR 49:1621 (January 30, 2015 email from Ms. Smith to Eugene Smoot noting that “[d]ue to the numerous protests, we are having to forward the package to headquarters for review”).

Eugene Smoot responded to Ms. Smith’s email on the same day it was sent. See AR 45:1616. But Mr. Smoot did not provide the requested confirmation that WIT was willing to stand by the prices in the offer it had made on May 23, 2014. See id. To the contrary, Mr. Smoot’s response began by referencing the amount of time that had passed since that offer had been made, noting that “[a]s of today it has been two hundred and fourteen (214) days since our proposal was submitted.” AR 45:1616. Then, rather than confirming that WIT was still willing to accept a contract award on the conditions set forth in its May 23, 2014 offer, he stated that “WIT Associates Inc. want and need to submit a final proposal revision with updated rates given the economic conditions.” Id.

By contrast, Platinum’s response to an essentially identical email that Ms. Smith sent to its President, Mario Smoot (also sent on the same day, December 23, 2014), was unequivocal. See AR 44:1615. Its first sentence stated that “I have no choice but to extend my prices until the 1st of March 2015.” Id. Thus, Mario Smoot explained, because Platinum had been told in November of 2013 that it had been awarded the contract and that it should proceed, it had already incurred the costs of purchasing trucks, trailers, packing materials, and forklifts as well as the costs of shipping items to Guantanamo. Id.

The agency’s conclusion that this email exchange evinced Platinum’s willingness but WIT’s refusal to stand by their original offers was rational.

(sections deleted)

(WIT Associates, Inc. v. U. S. and Platinum Services, Inc., No. 15-254C, June 30, 2015)  (pdf)

CGI argues that CMS [Centers for Medicare and Medicaid Services] violated the Federal Acquisition Streamlining Act and FAR 12.301, 12.302, and 10.002 by including payment terms in the RFQs that are inconsistent with customary commercial practice without first conducting market research or obtaining a waiver.18 CGI points to FASA’s mandate that agencies use clauses “consistent with standard commercial practice,” 41 U.S.C. §§ 3307(b), (e)(2)(B)(ii), which the FAR Council implemented “in FAR Part 12 (among other places).” Pl.’s Mot. 15. FAR 12.301(a)(2) provides that “contracts for the acquisition of commercial items shall, to the maximum extent practicable, include only those clauses [d]etermined to be consistent with customary commercial practice.” FAR 12.302(c) directs that the Government “shall not tailor any clause or otherwise include any additional terms or conditions in a solicitation or contract for commercial items in a manner that is inconsistent with customary commercial practice . . . unless a waiver is approved . . . .” In order to request a waiver, an agency must draft a waiver request that “describe[s] the customary commercial practice.” To ascertain the customary commercial practice, the agency must first conduct market research in accordance with FAR 12.302(c) and 10.002(b). See FAR 12.302(c) and FAR 10.002(b).

CGI’s argument is contingent on the assumption that FAR Part 12 applies to Federal Supply Schedule purchases addressed in FAR Subpart 8.4. FAR Part 12 governs the acquisition of commercial items generally, and the parties agree that [RAC Recovery Audit Contractors] services qualify as commercial items. As such, the Court must determine whether FAR Part 12 applies to Schedule buys under FAR Subpart 8.4.

Neither FAR Subpart 8.4 Nor FAR Part 12 Requires That Terms of RFQs for FSS Buys Comply with FAR Part 12 Procedures

CGI contends that because RAC services meet the FAR’s definition of commercial items and the FAR states that Part 12 shall apply to acquisitions of commercial items, the agency was required to adhere to Part 12 in fashioning the RFQs. The application of Part 12 would have required CMS to include in the RFQs only terms consistent with customary commercial practice or obtain a waiver, which CMS concedes it did not do here. See FAR 12.302(c).

FAR Subpart 8.4 governs the Federal Supply Schedule which provides federal agencies with a simplified process for obtaining commercial supplies and services at prices associated with volume buying. See FAR 8.402. In Sharp Electronics Corporation v. McHugh, the Federal Circuit explained how the Federal Supply Schedule operates:

Under the current version of the GSA Schedules Program, also called the Federal Supply Schedule Program or Multiple Award Schedule Program, [], GSA “acts as the contracting agent” for the federal government, negotiating base contracts with suppliers of commercial products and services. Each supplier publishes an Authorized Federal Supply Schedule Pricelist listing the items offered pursuant to its base contract, as well as the pricing, terms, and conditions applicable to each item. See FAR 8.402(b). Individual agencies issue purchase orders under the base contract as needed. The terms of the base contract, referred to as the “schedule” contract, are incorporated by reference into the order. ... Schedule contracts are intended to simplify the acquisition process.

707 F.3d 1367, 1369-70 (Fed. Cir. 2013) (internal citations omitted); see also Tektel, Inc. v. United States, 116 Fed. Cl. 612, 614 (2013).

FAR Subpart 8.4 expressly lists FAR provisions that do and do not apply to the FSS, but does not list Part 12 in either category. FAR Subpart 8.4 explicitly mentions Part 12 in three places. First, Subpart 8.402 instructs agencies that they may add items not on the FSS—“open market items”—to Blanket Purchase Agreements (“BPA”) or FSS orders, but “only if” the agency complies with “all applicable acquisition regulations pertaining to the purchase of the items not on the Federal Supply Schedule . . . (e.g., publicizing (Part 5), competition requirements (Part 6), acquisition of commercial items (Part 12), contracting methods (Parts 13, 14, and 15), and small business programs (Part 19)).” FAR 8.402(f) (emphasis added). Second, under Subpart 8.406-4, a termination for cause must comply with FAR 12.403.” Third, under Subpart 8.406-5 “[t]erminations for the Government’s convenience must comply with FAR 12.403.” Thus, FAR Subpart 8.4 only provides that FAR Part 12 applies in three instances—termination for cause, termination for convenience, and adding open market items to FSS orders. These instances in which FAR Part 12 applies are different species than a payment clause.

FAR 8.404 lists FAR sections that generally do not apply to FSS orders—FAR Parts 13, 14, 15, and 19—but does not include Part 12. CGI contends that where Subpart 8.4 explicitly excludes and includes other provisions of the FAR, those mentioned provisions are “process oriented,” e.g. negotiated procurements, sealed bidding, whereas Part 12 is policy, and is therefore generally applicable, whether expressly mentioned or not. Tr. Oral Arg. 61, June 6, 2014. This distinction between process-oriented provisions and policy is not persuasive in this context—all of these provisions have elements of policy and process—solicitation, evaluation, and award using sealed bidding, negotiations, or simplified acquisitions delineate processes that embody policy, as do the provisions of FAR Subpart 8.4 describing procedures to implement what is supposed to be a simplified acquisition process for Schedule buys. More fundamentally, the notion that a court should apply regulations where they do not say they apply because they contain “policy” invites unwarranted judicial intrusion into the realm of regulation writing. Whether FAR Part 12’s requirements for customary commercial practices ought to be injected into a given procurement process is a matter for the FAR Council to determine, and the Council has not seen fit to add that requirement to FSS buys.

In a similar vein, FAR Part 12 itself does not expressly state its provisions apply to FSS buys. In general, FAR Part 12 prescribes policies and procedures for the acquisition of commercial items. It “implements the Federal Government’s preference for the acquisition of commercial items . . . by establishing acquisition policies more closely resembling those of the commercial marketplace and encouraging the acquisition of commercial items and components.” FAR 12.000. While Part 12 states that contracts for commercial items are also subject to policies and procedures found in other parts of the FAR, it does not mention Subpart 8.4 or the FSS in this acknowledgement. FAR 12.102(c) (“Contracts for the acquisition of commercial items are subject to the policies in other parts of the FAR.”).

FAR Part 12 only expressly mentions Subpart 8.4 or the Federal Supply schedule in three instances, which are of no help here. These three references simply direct a contracting officer to follow procedures in subpart 8.4 when using the Federal Supply Schedule. Concomitantly FAR Part 12 lists five situations where Part 12 does not apply, but does not mention Schedule buys: “(1) At or below the micro-purchase threshold; (2) Using the Standard Form 44 (see 13.306); (3) Using the imprest fund (see 13.305); (4) Using the Government[-]wide commercial purchase card . . . ; or (5) Directly from another Federal agency.” FAR 12.102(e).

Other provisions of Part 12 indicate that its provisions have some applicability to different FAR sections, but fail to mention Subpart 8.4 or the FSS. For example, FAR 12.203 directs contracting officers to use the policies in Part 12 “in conjunction with the policies and procedures for solicitation, evaluation and award prescribed in [P]art 13, Simplified Acquisition Procedures; [P]art 14, Sealed Bidding; or [P]art 15, Contracting by Negotiation, as appropriate for the particular acquisition.” FAR 12.203.

In interpreting these regulations, the Court follows the long-established principle of expressio unius est exclusio alterius—the express mention of one thing excludes all others. See e.g., Slattery v. United States, 635 F.3d 1298, 1323 (Fed. Cir. 2011) (“As a textual matter, the amendment applies only to the enumerated entities in light of the canon expressio unius est exclusio alterius”) (citing Tenn. Valley Auth. v. Hill, 437 U.S. 153, 188 (1978)). Both FAR Subpart 8.4 and FAR Part 12 expressly list other instances or types of acquisitions where FAR Part 12 applies, but neither mentions the scenario at issue here—payment terms in an FSS purchase. Under maxim expressio unius est exclusio alterius, this Court finds that FAR Part 12 does not apply to the payment term in the RFQs issued under CGI’s FSS contract. There is no basis to refrain from applying this maxim here because there is no intent expressed in either FAR Subpart 8.4 or FAR Part 12 suggesting that customary commercial payment terms ought to apply to FSS orders. Cf. Andrus v. Glover Constr., 446 U.S. 608, 619 (1980) (quoting DeCoteau v. District County Court, 420 U.S. 425, 447 (1985) (“[a] canon of construction is not a license to disregard clear expressions of . . . congressional intent.”).

CGI also invokes FAR 12.102(c) which provides that “[w]hen a policy in another part of the FAR is inconsistent with a policy in this part, this [P]art 12 shall take precedence for the acquisition of commercial items.” FAR 12.102(c). CGI contends that because Part 12 applies to the acquisition of commercial items and requires contracts to contain terms consistent with customary commercial practice absent a waiver, then Part 12 conflicts with Subpart 8.4 and, consequently, Part 12 prevails. Pl.’s Mot. 15. Plaintiff, however, relies only on FAR Subpart 8.4’s silence and has failed to identify an actual conflict between the provisions of FAR Subpart 8.4 and the provisions of FAR 12. As explained above, Part 12 delineates the type of commercial item acquisitions to which it applies and does not include RFQs issued under FSS contracts.

Plaintiff also suggests that failing to apply FAR Part 12 at the FSS order level would lead to an anomalous result where the terms of the FSS contract would meet FAR Part 12 but the order placed under that contract would not. That is not the situation before this Court, however. CGI could have avoided this anomalous result by listing, as part of its Schedule Contract, “the items offered pursuant to its base contract, as well as the pricing, terms, and conditions applicable to each item” as required by FAR 8.402(b) (emphasis added). See also, Sharp Elec. Corp., 707 F.3d at 1369-70. Orders made through the FSS, FAR Subpart 8.4, must be consistent with the schedule contract. FAR 8.406-1(c). CGI’s “pricelist,” or price terms on its schedule contract listed a contingency fee of up to 19.55%, but stated that payment terms would be “negotiated at the order level.” Def.’s Mot. App. 25. CGI’s Schedule itself said nothing about payment terms including when invoicing could be done, leaving room for the agency to insert a payment term in its RFQ that was not inconsistent with CGI’s FSS contract, but problematic for CGI nonetheless. Id.

The RFQ’s Payment Terms Do Not Unduly Restrict Competition

CGI contends that RFQs’ payment terms unduly restrict competition by requiring RACs to wait 120 days to 420 days to invoice, thereby causing them to absorb high accounts receivable and ultimately forcing incumbent RACs to refrain from bidding on the instant RFQs. Pl.’s Mot. 28 (citing AR Tab 32 at 1293-94 ¶ 12-14). CGI points out that the Government received seven quotes in response to the 2013 RFQ that did not contain restrictive payment terms, but only four quotes in response to the January 2014 RFQ containing the restrictive terms. Pl.’s Opp’n 21; Tr. Oral. Arg. 53-54, June 6, 2014.

CGI has not demonstrated that the payment terms “actually ‘restricted competition’” as all incumbent RACs, except CGI, submitted quotes for the RFQ and the record does not establish that the payment terms were the cause of any other RACs failing to bid. Def.’s Mot. 35-36. PRGX, a RAC, made the following public statement on withdrawing its quote:

2013 was especially difficult due to changes in audit scope in the Medicare RAC program and significant delays in the rebid process, resulting in disappointing financial results for the year. As previously disclosed, we expect a difficult 2014 in this business due to continued delays in the CMS rebid process and unprofitable changes in the scope of the current subcontracts. Given the uncertain audit scope and challenging business terms as defined in the Medicare RAC rebid RFP and the ongoing pressure from the provider community to limit scope in the future, we simply believe that entering into a new Medicare RAC contract presents unacceptable level of financial risk for PRGX. Thus we have decided to dropout of the CMS rebid process and focus our future growth efforts in other areas.

AR Tab 41 at 1337.

CGI contends that the “challenging business terms” referenced in the above quote are the restrictive payment terms. However, as the Government emphasizes, the unexplained “challenging business terms” are only one of several reasons PRGX withdrew as delineated in its public statement. Based on its own words, a primary source of PRGX’s withdrawal was a more limited audit scope. As Plaintiff’s counsel acknowledged, “there’s a Congressional moratorium on about 90% of the work that’s being done under the RAC contracts until March of 2015.” Tr. Oral Arg. 74, June 6, 2014.

While CGI’s withdrawal indicates the payment terms caused some restriction in competition, CGI has not demonstrated this term “unduly” restricted competition. As the GAO found in Impact Resource Technologies, competition was not unduly restricted where a protestor challenged terms of an RFQ as unduly restrictive, but the agency received four other responsive quotations. See Impact Res. Techs., B-407259.2, 2012 CPD ¶ 335, 2012 WL 6035676, at *2 (Comp. Gen. Dec. 4, 2012).

Plaintiff Has Not Demonstrated that the Agency’s Inclusion of Payment Terms Inconsistent with Customary Commercial Practice was Arbitrary, Capricious, An Abuse Of Discretion, Or Otherwise Not In Accordance With Law

CGI also alleges that the modified payment term is arbitrary and capricious and lacks a rational basis because it is an unnecessary “solution in search of a problem” and a “belt and suspenders” approach for ensuring the Government can recoup contingency fees on overpayments that were misidentified. While CGI’s argument rings true in many respects and the modified payment term here will increase cost, reduce competition, and appears to be a bit excessive, it does not rise to the level of arbitrary and capricious conduct lacking a rational basis.

This Court may set aside an agency’s procurement decision if “either: (1) the procurement official’s decision lacked a rational basis; or (2) the procurement procedure involved a violation of regulation or procedure.” Impresa, 238 F.3d at 1332. The Federal Circuit has explained that “[w]hen a challenge is brought on the first ground ... contracting officers are ‘entitled to exercise discretion upon a broad range of issues confronting them’ in the procurement process.” Id. at 1332-33 (citing Latecoere Int’l, Inc. v. United States Dep’t of Navy, 19 F.3d 1342, 1356 (11th Cir. 1994)). An “agency must examine the relevant data and articulate a satisfactory explanation for its action including a rational connection between the facts found and the choice made.” In re Sang-Su Lee, 277 F.3d 1338, 1344 (Fed. Cir. 2002) (quotation marks omitted) (quoting Motor Vehicle Mfrs. Ass’n, 463 U.S. at 43). Here, the agency examined relevant data, considered several options, articulated a basis for its decision, did not violate statute or regulation or unfairly disadvantage any bidder or class of bidders.

The modification of the payment term was in essence a judgment call by agency officials from CMS’ procurement, financial, and legal departments. What concerned the agency was that there would be no contractual vehicle to demand a contingency fee payment back if an overpayment determination were overturned on appeal after a RAC contract ended. Previously CMS had simply deducted from future payments any contingency fees the RAC owed CMS for misidentifying the overpayment. As the agency recognized, when the RAC contract ends, CMS will no longer be regularly paying the RAC and will be unable to deduct the contingency fees owed by RACs. The agency decided that it was preferable to wait to pay the contingency fees and thus keep money in the Government’s possession, rather than turning it over to the RACs, until it appeared more likely that the contingency fee had been properly earned and an overpayment correctly identified. The agency determined that there would be sufficient benefit in structuring its program this way because of its “concern that the RACs really should not be paid until it is determined that the recoupment is deemed legitimate and appropriate.” AR Tab 94 at 8603. The agency considered various options it characterized as surety bond, withholding, trust fund, escrow, progress payments, letter of credit, financial rewards, letter of assurance from parent company, and reserve. Ultimately, CMS exercised its discretion to modify the payment term as well as to require a reserve and letter of assurance, knowing full well the RACs’ concerns with the term and the costs and benefits involved. AR Tab 59 at 2000.

The record demonstrates that CMS knew that the RACs were not “happy [with the terms] because it will increase the time period in which they will get paid.” AR Tab 94 at 8607.3. Before CMS issued the RFQs at issue, it attempted to include the contested payment terms in a contract modification with the RACs, but none of the performing RACs agreed to that modification in toto, and most expressed concern about their ability to financially tolerate the delayed invoicing requirements. One contractor, HDI, related to CMS that it anticipated the new delayed invoicing terms would cost it more than $[ ] per/year. AR Tab 161 at 10530. Similarly, Performant objected to the “unilateral changes to material contract terms” and contended that it would have a “negative impact on the RAC’s financial capacity.” Id. at 10900. HDI sent CMS a list of concerns including that the terms would bring the RAC’s “cash flow and revenue recognition []to a halt,” then CMS attached this list of concerns to an email CMS sent to all RACs and some CMS employees. Id. at 10529-30, 10539-40.

Although, before issuing the RFQs, CMS was aware that the RACs objected to these delayed invoicing payment terms and contended that their services would cost more, the agency determined that a countervailing consideration won the day—that the agency was unwilling to take on the risk of not being able to recoup contingency fees once the contract ended. This was not arbitrary, capricious, or irrational. The decision did not violate statute or regulation or result in an uneven playing field—all prospective bidders were equally disadvantaged. Nor was the curtailment of competition significant. The Court would thus be overstepping its bounds to substitute its judgment for that of the agency in determining its needs, particularly in the financial realm.

As this Court recognized in Communication Construction Services, Inc. v. United States, procurement officials possess substantial discretion in financial judgments regarding agency needs because the agency will live with the consequences of its determination. 116 Fed. Cl. 233, 268, 272 (2014). Here, the agency devised the modified payment term knowing its cost and benefit to the Government and adverse impact on bidders and was willing to impose this requirement as a solution to its needs. This was in essence a financial judgment call that this Court should not second guess.  (CGI Federal Inc. v. U. S., No.14-355C, August 22, 2014)  (pdf)

3.  The 15-Year Fixed Pricing Schedule Is Inconsistent with Customary Commercial Practice, and the Waiver GSA Obtained to Extend the Length of the Contract Beyond Five Years Does Not Affect GSA’s Obligation to Conform the Pricing Schedule to Customary Commercial Practice.

CWT also alleges that requiring offerors to submit a fixed pricing schedule that cannot be renegotiated over the 15-year contract term is contrary to customary commercial practice.  Pl.’s Mot. at 29-30. The 15-year contract consists of a three-year base period and three four-year option periods, but the contractor must propose at the outset a fixed price for each option period. AR 12-26. CWT argues that the requirement to set prices for the option periods at the beginning of a 15-year contract is inconsistent with customary commercial practice. Pl.’s Mot. at 30.
The 15-Year Fixed Pricing Schedule Is Inconsistent with Customary Commercial Practice, and the Waiver GSA Obtained to Extend the Length of the Contract Beyond Five Years Does Not Affect GSA’s Obligation to Conform the Pricing Schedule to Customary Commercial Practice.

The Government’s market research does not demonstrate that the 15-year fixed pricing schedule is consistent with customary commercial practice. Although GSA’s market research demonstrated that a 15-year term is common in complex contracts, the research revealed nothing about whether setting the price for each option period at the outset of a 15-year contract is  consistent with customary commercial practice.  AR 4677 (CO Statement of Facts). The Court therefore concludes that GSA’s market research does not show that the terms of the Solicitation that require offerors to propose fixed prices for the three-year base period and each of the three four-year option periods at the outset of the contract are consistent with commercial practice. The Court concludes that the 15-year fixed pricing schedule is inconsistent with customary commercial practice in violation of FAR 12.301(a)(2). It follows that the terms of the Solicitation requiring the 15-year fixed pricing schedule with prices set at the outset of the 15-year contract are contrary to law and therefore invalid.

The Government contends that GSA obtained a waiver to exceed the five-year limit on the duration of government contracts set by FAR 17.204(e) and that the waiver extends to the 15-year fixed pricing schedule.  Def.’s Mot. at 32 (citing AR Tab 48 (waiver)). However, the waiver to exceed the five-year limit set by FAR 17.204(e) only deals with the length of the contract and does not exempt GSA from the requirements of FAR 12.301(a)(2) that the Solicitation’s terms be consistent with customary commercial practice.

Furthermore, the waiver to extend the contract beyond the five-year limit does not comply with FAR 12.302(c), which permits a waiver from customary commercial practice only when the agency can describe the customary commercial practice, show a need to include terms that are inconsistent with the customary practice, and provide a determination that customary terms are inconsistent with the Government’s needs. GSA’s waiver to exceed the five-year limit set by FAR 17.204(e) does not meet any of the waiver requirements of FAR 12.302(c). The waiver does not address customary commercial practice, nor does it show a need to include terms that are inconsistent with customary commercial practice. Therefore, GSA has failed to obtain a waiver to require offerors to propose fixed prices for each option period at the outset of the 15-year contract. The waiver of the five-year limit only addressed the duration of the contract and did not meet FAR 12.302(c)’s requirements for authorizing a deviation from customary commercial practice.  (CW Government Travel, Inc., doing business as CWTSATOTravel (“CWT”), v U. S. and Concur Technologies, No. 11-298C, September 16, 1011)  (pdf)

B. Whether the 2014 RFQ Payment Terms Violate FAR Part 12

The 2014 RFQs being challenged here were issued pursuant to the Financial and Business Solutions Schedule, an underlying FSS contract. The Court of Federal Claims found, and neither party disputes, that the services solicited in the 2014 RFQs are commercial items and that the revised payment terms therein are inconsistent with customary commercial practice. Opinion and Order at 9, 19; see Oral Argument 37:45-41:45. We affirm these undisputed fact findings. Thus, the only issue is whether FAR Part 12’s proscription against terms that are inconsistent with customary commercial practice applies to the 2014 RFQs. If it applies, the payment terms are in violation.

Before the Court of Federal Claims, the government does not appear to have disputed that FAR Part 12’s proscription against terms inconsistent with customary commercial practice applies to solicitations for the underlying FSS contracts themselves. Opinion and Order at 12. However, the government argued that FAR Part 12’s proscription does not apply to orders made pursuant to the existing FSS contracts. The Court of Federal Claims agreed. Opinion and Order at 19-22. It reasoned that FAR Subpart 8.4, which governs the FSS program, does not expressly state that FAR Part 12 applies to orders made pursuant to an existing FSS contract. Opinion and Order at 20. It similarly found that FAR Part 12 does not expressly state that its provisions apply to such orders. Opinion and Order at 20-21. We review the Court of Federal Claims interpretation of the applicable regulations de novo. Abbott Labs. v. United States, 573 F.3d 1327, 1330 (Fed. Cir. 2009).

We conclude that FAR Part 12’s proscription against terms inconsistent with customary commercial practice applies to the 2014 RFQs and therefore that the RFQs violate that proscription. On a general level, FAR Part 12 applies to the 2014 RFQs because it makes clear that it “shall be used for the acquisition of [commercial items].” 48 C.F.R. § 12.102(a). The 2014 RFQs meet the broad definition of an “acquisition” under FAR:

Acquisition begins at the point when agency needs are established and includes the description of requirements to satisfy agency needs, solicitation and selection of sources, award of contracts, contract financing, contract performance, contract administration, and those technical and management functions directly related to the process of fulfilling agency needs by contract.

Id. § 2.101. More specifically, FAR § 12.302(c)’s proscription against any “solicitations or contracts” including terms “inconsistent with customary commercial practice” applies to the 2014 RFQs because the RFQs are a “solicitation” and the resulting order is a “contract” as those terms are defined by FAR. FAR expressly defines a solicitation to include requests for proposals: “Solicitation means any request to submit offers or quotations to the Government. . . . Solicitations under negotiated procedures are called ‘requests for proposals.’” Id. § 2.101 (emphasis added). Similarly, FAR defines a “contract” as including orders: “[C]ontracts include (but are not limited to) awards and notices of awards; job orders or task letters issued under basic ordering agreements; letter contracts; orders, such as purchase orders . . . .” Id. (emphasis added). FAR § 12.302(c) thus applies, on its face, to the 2014 RFQs.

The government and the Court of Federal Claims are correct that FAR Subpart 8.4 does not explicitly state that FAR Part 12 applies to orders made pursuant to existing FSS contracts. We conclude, however, that FAR Part 12 applies to this situation expressly by its terms. To the extent there is any perceived inconsistency between FAR Subpart 8.4 and FAR Part 12, FAR Part 12 controls. 48 C.F.R. § 12.102(c) (“When a policy in another part of this chapter is inconsistent with a policy in this part, this part 12 shall take precedence.”).

CONCLUSION

Because FAR Part 12 applies to the 2014 RFQs and the revised payment terms violate FAR Part 12’s prohibition against including contract terms inconsistent with customary commercial practice, we reverse the Court of Federal Claims grant of judgment on the administrative record to the government. We remand to the Court of Federal Claims for proceedings consistent with this decision.  (CGI Federal Inc. v. U. S., No. 2014-5143, March 10, 2015)  (pdf)