It’s Time to Use the Legislative History of the Federal Acquisition Regulation

by Cyrus E. Phillips, IV

April 2002

Where is this guidance, you ask?  Just take a look at one of the Federal Acquisition Circulars.   For our analysis here, we’ll look at Federal Acquisition Circular 97-02, the “FAR Part 15 Re­write,” a final rule that makes fundamental changes in the competitive negotiations process.  Looking at Federal Acquisition Circular 97-02, you’ll find a précis, followed by a “Final Regulatory Flexibility Act Analysis.”  While there is helpful information in the précis, it is the Final Regulatory Flexibility Act Analysis that is the most important.  

Your understanding of this later point requires a bit of a detour.  First, recall that one of the fundamental principles of the Administrative Procedure Act is the requirement that rules such as those contained in the Federal Acquisition Regulation must be offered for public comment, that public comments are to be considered, and that only then are final rules to be published, published together with a “a concise general statement of their basis and purpose.” 5 U.S.C. § 553(c).  Next, look at the eponymous Regulatory Flexibility Act, 5 U.S.C. §§ 601-612.  Here, at 5 U.S.C. § 604, is the statutory requirement for a Final Regulatory Flexibility Act Analysis.  Turn to subparagraph (a) of this section, and you’ll see that there are five, detailed requirements for the content of each Final Regulatory Flexibility Analysis:

(1) a succinct statement of the need for, and objectives of, the rule;

(2) a summary of the significant issues raised by the public comments, of agency assessment of these issues, and of any changes made as a result;

(3) a description of, and an estimate as to the number of, the small businesses to which the rule will apply;

(4) a description of the projected compliance requirements of the rule, particularly including compliance requirements for small businesses; and

(5) a description of the steps taken to minimize any significant economic impact on small businesses, including a statement of the reasons for selecting the alternative(s) adopted.

Id.

If you’ll look back at Federal Acquisition Circular 97-02, you’ll find an extensive discussion for each of these detailed content requirements. The discussions for items numbers (1), (2), and (5) are here the most informative.  Read on: read the Federal Circuit’s decision in Ramey v. Gober, 120 F.3d 1239, 124546 (Fed. Cir. 1997), which holds that this sort of material is “powerful extrinsic evidence,” “strong support” of the original intent of a regulation.

Now to sum up: (a) I’ve shown you an example of the rich history of the Federal Acquisition Regulation that is presented in the Federal Acquisition Circulars, and (b) I’ve given you a case, binding precedent, which explains that this rich history must inform any inquiry into a particular application of the Federal Acquisition Regulation.  So, have I made my point?

Think about it.  If I have your attention, then let me explain the problem that stems from ignoring this legislative history.

Consider Federal Acquisition Regulation 15.306(d)(1), newly issued with the FAR Part 15 Rewrite, which requires that the contracting officer conduct discussions with each offeror within the competitive range, if award will not be made on initial proposals, and here look at subsection (d)(3) of this regulation, as it was first issued:

The contracting officer shall . . . indicate to, or discuss with, each offeror still being considered for award, significant weaknesses, deficiencies, and other aspects of its proposal (such as cost, price, technical approach, past performance, and terms and conditions) that could, in the opinion of the contracting officer, be altered or explained to enhance materially the proposal’s potential for award.

Federal Acquisition Regulation 15.306(d)(3) (emphasis added).  What might this have meant to the framers of the FAR Part 15 Rewrite? (This language has since been changed, and now it is clear that contracting officers are only “encouraged” to discuss other aspects of particular competitive proposals that could “be altered or explained to enhance materially the proposal’s potential for award.”)

Had a tribunal concerned with the scope of the discussion obligation in the newly minted Federal Acquisition Regulation 15.306(d)(3) looked to the Final Regulatory Flexibility Analysis that is contained in Federal Acquisition Circular 97-02, it would have learned that the framers of the FAR Part 15 rewrite intended to “infuse innovative techniques into the source selection process” so as “facilitate the acquisition of best value products and services” (content requirement (1)).  Such a tribunal would have learned that one of the steps taken to minimize significant economic impact on small businesses (content requirement (5)) was to enlarge the scope of the discussion obligation:

In response to public comments, the second proposed rule requires a more robust exchange of information during discussions. The language requires the Government to identify, in addition to significant weaknesses and deficiencies, other aspects of an offeror’s proposal that could be enhanced materially to improve the offeror’s potential for award.  This change should benefit all offerors, including small businesses, because it permits offerors to develop a better understanding of the Government’s evaluation of their proposal, and permits them to optimize their potential for award.

Federal Acquisition Circular 97-02, 62 Fed. Reg. 51229 (1997).

But this didn’t happen. Instead, in Du & Associates, Inc., B-280283.3, Dec. 22^nd, 1998, the General Accounting Office ignored the legislative history of the FAR Part 15 Rewrite, and decided that it was not “the intention of the rewrite to limit the contracting officer’s discretion in this manner.” Id., at 7. What?  What about the explicit, contrary language in the Final Regulatory Flexibility Analysis?

Thus the problem:  is it the FAR Council that sets the policies expressed in the Federal Acquisition Regulation, or is it the General Accounting Office?  I don’t think that the General Accounting Office intends to set federal procurement policy, but because Du did not consider the legislative history of Federal Acquisition Regulation 15.306­(d)(3) that is set out in Federal Acquisition Circular 97-02, it is not too much of a stretch to suppose that the General Accounting Office, an arm of the Legislative Branch, is a de facto policymaking institution for the Executive Branch.

A better approach, when applying the Federal Acquisition Regulation to particular matters, is to look to its legislative history, particularly, as in Du, when dealing with significant changes to existing policy.  Just this happened in ManTech Telecommunications and Information Systems Corp. v. United States and Lockheed Martin Services, Inc., 49 Fed. Cl. 57, 60-63 (2001).  At issue there were reopened discussions as a result of a prior, successful protest.  The Army proposed to convene another round of discussions so as to enable correction of demonstrated weaknesses unrevealed in a previous technical evaluation.

The successful protester complained to the Court that doing so would amount to “technical leveling.”  This is a shibboleth previously contained in the Federal Acquisition Regulation, but, try as you might, you’ll find nothing about it in the FAR Part 15 Rewrite.  The ManTech court looked, however, to the legislative history, the Final Regulatory Flexibility Analysis contained in Federal Acquisition Circular 97-02, and, doing so, found that the omission of the concept of “technical leveling” was purposeful, was part of an overall scheme to enhance best value through multiple rounds of discussions enabling proposal enhancements.  ManTech was recently affirmed by the United States Court of Appeals for the Federal Circuit, without a published opinion.

This affirmance is not an endorsement of looking to legislative history, but neither is there now a need to correct an unclear acquisition regulation as was clearly necessary as a result of Du.  Had the Court not properly regarded the legislative history of the FAR Part 15 Rewrite, ManTech could have resulted in the same sort of difficulty.

Whether or not the scope of the discussion obligation is enlarged is not the only problem that stems from ignoring the legislative history of the Federal Acquisition Regulation, particularly, the legislative history of the FAR Part 15 Rewrite.  Next, we’ll look at the ability vel non of offerors to address adverse past performance information before it can be used in a source selection.

It needs to be understood that I’m speaking here about past performance information that is submitted by offerors, and gathered by agencies, both on a one-time basis, for source selection purposes.  Guidance for systematic collection and maintenance of past performance information (which includes an opportunity to comment) is set out in Federal Acquisition Regulation Subpart 42.15, “Contractor Performance Information.”  Guidance for the ad hoc past performance evaluations that I’m concerned with here is set out in Federal Acquisition Regulation Subpart 15.3, “Source Selection.”

The only explicit requirement to give offerors an opportunity to address adverse past performance information before it can affect the outcome of a competition is in Federal Acquisition Regulation 15.306(b)­(1)(i), which provides that if a competitive range is to be established, then “communications shall address adverse past performance information to which an offeror has not had a prior opportunity to respond.” (Emphasis added).  But there is also a possibility of confusion, since if a contracting officer decides to make an award on initial proposals, then there is not an absolute requirement to give offerors an opportunity to address adverse past performance information:

If award will be made without conducting discussions, offerors may be [not shall be] given the opportunity to clarify certain aspects of proposals (e.g., the relevance of an offeror’s past performance information and adverse past performance information to which the offeror has not previously had an opportunity to respond) or to resolve minor or clerical errors.

Federal Acquisition Regulation 15.306(a)(2) (emphasis added).

Only if a tribunal looks to the legislative history of the FAR Part 15 Rewrite will it become clear that the FAR Council must have intended that in any event, e.g., whether an award is made on initial proposals, or whether an award is made after a competitive range determination, followed by discussions, will offerors be given an opportunity to respond to adverse past performance information to which they have not had a previous opportunity to respond.  Here again, this legislative history is set out in a step taken to minimize significant economic impact on small businesses (content requirement (5) of the five requirements for each Final Regulatory Flexibility Analysis):

We revised the final rule to require that offerors, including small entities, shall be granted the opportunity to explain situations that contributed to an adverse past performance rating to which they have not had a previous opportunity to respond before such ratings can be the determining factor for exclusion from the competitive range.  These revisions, together with the requirement to discuss all deficiencies and significant weaknesses with those offerors in the competitive range, ensure that past performance to which an offeror has not had the opportunity to respond will be addressed any time it can affect the outcome of an acquisition.

Federal Acquisition Circular 97-02, 62 Fed. Reg. 51228 (1997) (emphasis added).

Now does it come as a surprise that the General Accounting Office ignores this legislative history as well?

In Rohmann Serv­ices, Inc., B-280154.2, Nov. 16^th, 1998, at 8-9, per the General Accounting Office, the offeror was “aware of much of that information,” and the General Accounting Office refused to hold Federal Acquisition Regulation 15.306(a)(2) as a mandatory requirement, notwithstanding the clear, contrary language in Federal Acquisition Circular 97-02.  See also Inland Service Corp., B-282272, June 21^st, 1999, at 4-5 (offeror was aware of the specific deficiencies claimed, had contested them, and was pursuing a contract claim).

The General Accounting Office later elaborated on this departure from the legislative history, the guidance set out in Federal Acquisition Circular 97-02:

With regard specifically to clarifications concerning adverse past performance information to which the offeror has not previously had an opportunity to respond, we think that, for the exercise of discretion to be reasonable, the contracting officer must give the offeror an opportunity to respond where there clearly is a reason to question the validity of the past performance information, for example, where there are obvious inconsistencies between a reference’s narrative comments and the actual ratings the reference gives the offeror.  In the absence of such a clear basis to question the past performance information, we think that, short of acting in bad faith, the contracting officer reasonably may decide not to ask for clarifications.

A. G. Cullen Construction, Inc., B-284049.2, Feb. 22^nd, 2000, at 5 (emphasis added).

So for those protests that are adjudicated in the General Accounting Office, we have the ipse dixit of that arm of Congress, instead of guidance for the Executive branch formulated by the FAR Council.

This is not unlike the blind people sent to see an elephant—they were unable to see the whole of it, that which appears upon an examination of legislative history, this the guidance issued by the FAR Council in the Federal Acquisition Circular, guidance issued in compliance with the dictates of the Administrative Procedure Act, 5 U.S.C. § 553(c), and guidance issued in compliance with a mandatory Final Regulatory Flexibility Act Analysis, 5 U.S.C. § 604.

It’s wrong.  It’s time to use the legislative history of the Federal Acquisition Regulation, time to find answers in FAR Council guidance, not the imagination of the General Accounting Office.