With regard to the repurchase of supplies or services not delivered under a contract terminated for default, Federal Acquisition Regulation (FAR) § 49.402-6(b) provides that a contracting officer “shall obtain competition to the maximum extent practicable.” FAR § 49.402-6(b) further provides that if, as here, the repurchase is for a quantity not over the undelivered quantity, the contracting officer may “use any terms and acquisition methods deemed appropriate for the repurchase.”

While recognizing, as a general rule, that the statutes and regulations governing regular procurements are not strictly applicable to reprocurements after default, our Office will review a reprocurement to determine whether the contracting agency acted reasonably under the circumstances. Derm-Buro, Inc., B-400558, Dec. 11, 2008, 2008 CPD ¶ 226 at 2; Adaptive Concepts, Inc., B-243304, June 25, 1991, 91‑1 CPD ¶ 605 at 3. In this context, our Office has concluded that it is reasonable to award a reprocurement contract to the next-lowest-priced, qualified offeror under the original solicitation at its original price, provided the time span between the original competition and the default is relatively short, and there is a continuing need for the services. Adaptive Concepts, Inc., supra (five and one half months between receipt of offers and reprocurement); DCX, Inc., B-232692, Jan. 23, 1989, 89-1 CPD ¶ 55 at 3 (four and one half months between receipt of offers and reprocurement). Under such circumstances, an agency reasonably can view the offers received under the original solicitation as an acceptable measure of what competition would bring, sufficient to satisfy the requirement of FAR § 49.402-6(b) for competition to the maximum extent practicable. Int’l Tech. Corp., B‑250377.5, Aug. 18, 1993, 93‑2 CPD ¶ 102 at 3; VCA Corp.--Recon., B-219305.3, Oct. 11, 1985, 85-2 CPD ¶ 403 at 1.

Based on the record here, we conclude that the agency’s decision to make the reprocurement award on the basis of the second-lowest-priced, technically acceptable offer was reasonable. In this regard, the record shows that delays resulting from the defaulted contractor’s failure to perform resulted in an urgent need for delivery of the vessel. AR, Tab 1, Source Selection Documents, at 129, 139; AR, Tab 4, Agency-Internal Correspondence, at 301. The record also shows that this urgency implicated national security concerns, as reflected in the agency’s decision to override the performance stay triggered by Maersk’s protest. AR, Tab 5, Performance Stay Override Documents, at 303-05.

Additionally, the record shows that the time span between the submission of Sealift’s FPR and the reprocurement award was relatively short--approximately six months. See AR, Tab 1, Source Selection Documents, at 128, 146. Finally, the record shows that after consulting with agency contracting personnel, the contracting officer determined that the market prices for United States-flagged time charter vessels had risen since the time FPRs were submitted. Id. at 128‑29. For all of these reasons, we see no basis to question the agency’s decision to make the reprocurement award on the basis of Sealift’s second-lowest-priced offer rather than initiate a new procurement process.  (Maersk Line, Limited, B-410445, B-410445.2: Dec 29, 2014)  (pdf)

The protester contends that the agency's determination of nonresponsibility was improper, given that the protester is currently challenging the termination for default before GAO's Contract Appeals Board. Further, the protester attempts to challenge the grounds of its termination for default, and contends that a decision from our Office should be stayed pending a decision by the Contract Appeals Board regarding whether the termination for default was justified. The agency contends that the determination of nonresponsibility was a reasonable exercise of the contracting officer's discretion.

Generally, the statutes and regulations governing federal procurements are not strictly applicable to reprocurements of defaulted requirements. Essan Metallix Corp., B‑310357, Dec. 7, 2007, 2008 CPD para. 5 at 2. In particular, under the standard termination for default clause incorporated into GPO solicitations and contracts, the contracting officer may reprocure "under the terms and in the manner the Contracting Officer considers appropriate" for the repurchase. GPO Contract Terms, Pub. No. 310.2, Contract Clauses sect. 20(a)(2)(b). We will review a reprocurement to determine whether the agency acted reasonably under the circumstances. Bluff Springs Paper Co., Ltd./R.D. Thompson Paper Products Co., Inc. Joint Venture, B‑286797.3, Aug. 13, 2001, 2001 CPD para. 160 at 2. With regard to determinations of nonresponsibility, we generally will not question a negative determination of responsibility unless the protester can demonstrate bad faith on the part of the agency or a lack of any reasonable basis for the determination. Bilfinger Berger AG Sede Secondaria Italiana, B-402496, May 13, 2010, 2010 CPD para. 125 at 3. Further, our Office has specifically held that an agency may properly exclude a defaulted contractor from a reprocurement for the remaining work in the defaulted contract. Essan Metallix Corp., supra, at 3; Montage, Inc., B-277923, Dec. 29, 1997, 97-2 CPD para. 176 at 3 ("although 'competition to the maximum extent practicable' must be obtained in the reprocurement, that standard does not, in our view, mean that an agency must consider an offer from a defaulted contractor for the reprocurement of the very work for which it was defaulted"). This view is consistent with various Board of Contract Appeals decisions reviewing agency's default terminations, which have long held that the contracting officer's broad discretion in conducting reprocurements includes the discretion to exclude the defaulted contractor from the repurchase. See Zan Mach. Co., Inc., ASBCA No. 39462, June 4, 1991, 91-3 BCA para. 24,085 at 120,542; Morton Mfg., Inc., ASBCA No. 30716, Oct. 31, 1988, 89-1 BCA para. 21,326 at 107,553; see also Edwards v. U.S., 22 Cl. Ct 411, 417 n.6 (1991). This reasoning applies despite the fact that the protester has appealed the default termination to a Board of Contract Appeals. See Automated Datatron Inc., B-232048, 88-2 CPD para. 481 at 3; S.A.F.E. Export Corp., B-209491, Aug. 2, 1983, 83-2 CPD para. 153 at 3 (terminations for default are proper matters for consideration in determining a contractor's responsibility despite pending appeals with a Board of Contract Appeals).

In accordance with our prior holdings in Essan Metallix Corp. and Montage, Inc., the agency's decision to exclude Colonial Press from the reprocurement does not provide a basis for sustaining the protest.  (Colonial Press International, Inc., B-403632, October 18, 2010)  (pdf)

Citing our decision in Montage Inc., B-277923, B-277923.2, Dec. 29, 1997, 97-2 CPD para. 176, the agency first argues that we should dismiss the protest. In Montage, we reexamined our previous view that a defaulted contractor may not be automatically excluded from a competition for the defaulted requirement because such an exclusion would constitute an improper premature determination of nonresponsibility. In recognition of the broad authority to reprocure accorded the contracting officer by Federal Acquisition Regulation (FAR) sect. 49.402-6, we adopted the position that we would decline to review an agency’s decision not to solicit a defaulted contractor in the reprocurement of work remaining under the defaulted contract. The agency argues that the Montage decision should control here because Derm-Buro, although not the defaulted contractor in connection with the anti-gravity suits being reprocured, was recently terminated for default for failure to timely present first article test (FAT) samples and make deliveries under other contracts for anti-gravity suits.

We decline to extend the decision in Montage beyond the situation presented in that case, and again more recently in Essan Metallix Corp., B-310357, Dec. 7, 2007, 2008 CPD para. 5, wherein a contractor protests its exclusion from a reprocurement necessitated by the termination of its own contract. As that is not the situation presented here, we will review whether the agency’s decision to exclude Derm-Buro was reasonable.

Generally, the statutes and regulations governing federal procurements are not strictly applicable to reprocurements of defaulted requirements. Essan Metallix Corp., supra, at 2. Rather, under FAR sections 49.402-6(a), (b), and 52.249-8, an agency may use any terms and acquisition method deemed appropriate for repurchase of not more than the undelivered quantity for which the contract was terminated, although an agency must obtain competition to the maximum extent practicable and as reasonable a price as practicable. Id. These FAR provisions allow the agency to purchase the needed supplies as expeditiously as possible while preserving the government’s right to seek excess reprocurement costs from the defaulted contractor. Id.

The agency argues that it was not required to solicit Derm-Buro in connection with the reprocurement, and properly made awards to Switlik and Mustang in accordance with FAR sect. 49.402-6(a), (b). The agency states that it elected to limit competition to Switlik and Mustang on the basis that the two firms were the only firms that were currently, or had recently, delivered the required suits successfully. AR, Contracting Officer’s Report, at 5. Of the five firms whose products were listed on the QPL at the time the solicitation was issued, one was the contractor terminated for default under the prior contract and two, including Derm-Buro, had not delivered anti-gravity suits recently enough to be eligible for a waiver of FAT requirements. Id. at 5-6. Thus, the agency determined that Switlik and Mustang were the only firms that could be practicably included in the competition in order to ensure continuous deliveries without a break in production and thereby secure the expeditious replacement of the quantity of anti-gravity suits remaining undelivered from the terminated contract.

Derm-Buro counters that the agency’s rationale does not hold because the delivery schedule under the reprocurement contracts will allow sufficient time for all contractors on the QPL to compete, including Derm-Buro, and that by not soliciting all contractors on the QPL the agency failed to obtain competition to the maximum extent practicable and repurchase at as reasonable a price as practicable. Derm-Buro insists that it is fully capable of producing the required anti-gravity suits, has successfully delivered approximately 65,000-70,000 units in the past and, as it has argued before the Armed Services Board of Contract Appeals, was improperly terminated under its prior contracts.

The agency’s decision to limit competition for the reprocurement to the two firms currently producing anti-gravity suits, and the only firms on the QPL not subject to FAT requirements, was reasonable. With respect to not soliciting Derm-Buro, the firm’s last successful delivery of anti-gravity suits was in November 2006. Therefore, as stated by the agency, Derm-Buro would be required to submit FAT samples and pass a FAT before it could begin production. Given that the recent terminations for default on Derm-Buro’s contracts were a result of its failure to provide FAT samples in a timely manner and failure to make deliveries within the timeframe established in its contract, the agency had a reasonable concern that soliciting Derm-Buro (or any other firm subject to FAT requirements) could have an adverse effect on the agency’s ability to expeditiously reprocure the critically needed suits. In light of the agency’s critical need and the broad discretion granted the agency in determining how to conduct a reprocurement, we conclude that the agency obtained maximum practicable competition by soliciting the two firms on the QPL that were not subject to FAT requirements, and could therefore ensure continuous deliveries of anti-gravity suits with no breaks in production.  (Derm-Buro, Inc., B-400558, December 11, 2008) (pdf)

Montage challenges its exclusion from the Navy's competition of the reprocurement and argues that limiting the competition to three sources does not satisfy the requirement that competition be obtained to the maximum extent practicable.

Generally, the statutes and regulations governing federal procurements are not strictly applicable to reprocurements of defaulted requirements. E. Huttenbauer & Son, Inc., B-239142.2 et al., Aug. 17, 1990, 90-2 CPD para. 140 at 2. Rather, the contracting officer may use any terms and acquisition method deemed appropriate for the repurchase; however, the contacting officer must repurchase at as reasonable a price as practicable and must obtain competition to the maximum extent practicable. Federal Acquisition Regulation (FAR) sec. 49.402-6(a), (b). The FAR provision allows the agency to purchase needed supplies and services as expeditiously as possible while preserving the government's right to seek excess reprocurement costs from the defaulted contractor.

There have been no cases where our Office has sustained a protest against a contracting officer's failure to solicit the defaulted contractor. However, we have stated that a defaulted contractor may not automatically be excluded from a competition for the defaulted requirement because such an exclusion prior to the submission of bids or proposals would constitute an improper premature determination of nonresponsibility. See PRB Uniforms, Inc., 56 Comp.Gen. 976, 978 (1977), 77-2 CPD para. 213 at 3. More recently, however, we have concluded that whether a defaulted contractor should be solicited depends on the circumstances of each case and that the contracting officer has a wide degree of discretion in this regard. For example, we have upheld a contracting officer's determination not to solicit the defaulted contractor where the defaulted contractor declined to perform the contract requirements, such that the contracting officer reasonably concluded that the defaulted contractor could not and would not perform the contract. E. Huttenbauer & Son, Inc., supra, at 3. Also, we have found that a contracting officer need not solicit a defaulted contractor where a competitive reprocurement was reasonably not conducted. See ATA Defense Indus., Inc., B-275303, Feb. 6, 1997, 97-1 CPD para. 61 at 3 (sole source order under the Federal Supply Schedule).

Our earlier statement that the automatic exclusion of a defaulted contractor from a reprocurement constitutes an improper premature determination of nonresponsibility reflected the regulations then in effect, which generally provided for reprocurement competitions within the context of general procurement statutes and regulations. Specifically, Armed Services Procurement Regulation (ASPR) sec. 8-602.6(b) (1976) provided that:

the PCO may use formal advertising procedures [although not required to do so]. If the PCO decides to negotiate the repurchase contract, he may either (1) use any authority listed in [ASPR] 3-201 through 3-217 (10 U.S.C. 2304(a)(1)-(17)), as appropriate, or (2) if none of those authorities to negotiate is used, the contract shall identify the procurement as a repurchase in accordance with the provisions of the Default clause in the defaulted contract.

Unlike the ASPR, the current regulation does not require the use of any particular procurement process but "authorizes the contracting officer to use any terms and acquisition method deemed appropriate for the repurchase." FAR sec. 49.402-6(b). Although agencies are required to "obtain competition to the maximum extent practicable for the repurchase," there is no requirement for full and open competition. Id.

Thus, contracting officers are invested with wide latitude to determine how needed supplies or services are to be reprocured after the default of a contract. In the absence of a countervailing law or regulation, such a broad grant of discretion necessarily includes determining, in view of the circumstances of the default, whether or not to solicit or allow the defaulted contractor to compete in the reprocurement. The agency, with its particularized knowledge of the contractor's past performance (or failure to perform) on the requirement being reprocured, is clearly in the best position to make that determination. Although "competition to the maximum extent practicable" must be obtained in the reprocurement, that standard does not, in our view, mean that an agency must consider an offer from a defaulted contractor for the reprocurement of the very work for which it was defaulted. Accordingly, and in light of the broad authority accorded contracting officers by FAR sec. 49.402-6, we will not review an agency's decision not to solicit a defaulted contractor.

Our current view is consistent with that expressed in various board of contract appeals decisions reviewing agency's default terminations, which have long held that the contracting officer's broad discretion in conducting reprocurements includes the exclusion of the defaulted contractor from the repurchase. See, e.g., Zan Machine Co., Inc., ASBCA No. 39462, June 4, 1991, 91-3 BCA para. 24,085 at 120,542; Morton Mfg., Inc., ASBCA No. 30716, Oct. 31, 1988, 89-1 BCA para. 21,326 at 107,553; see also Edwards v. U.S., 22 Cl. Ct 411, 417 note 6 (1991). 

[T]he "general rule is that the Government is not required to invite bids on repurchase solicitations from a defaulted contractor." [Citations omitted.] The reasoning underlying this rubric would seem to be obvious: If the defaulted contractor had originally complied with its contractual obligations, the need to reprocure would never have arisen. Morton Mfg., Inc., supra, at 107,553.

In sum, the agency did not abuse its discretion in excluding Montage from the competition of the delivery order for which it had been defaulted. To the extent that PRB Uniforms, Inc., supra, and other decisions citing that case state that a defaulted contractor may not be automatically excluded from the competition for the reprocurement of the requirement as to which it defaulted, those cases will not be followed.

Montage also complains that the Navy has failed to obtain competition to the maximum extent practicable as required by FAR sec. 49.402-6. Given our conclusion that the Navy properly excluded Montage from the reprocurement, Montage is not an interested party to raise this issue because, even if Montage's protest were sustained on this ground, the protester would not be eligible to compete for award. Bid Protest Regulations, 4 C.F.R. sec. 21.0(a) (1997); King Nutronics Corp., B-259846, May 3, 1995, 95-2 CPD para. 112 at 4. In any event, soliciting three sources, as was done here, would appear to satisfy the requirement for competition to the maximum extent practicable. See FAR sec. 13.106- 2(a)(4).  (Montage, Inc., B-277923.2 Date: December 29, 1997) (pdf)

Generally, the statutes and regulations governing federal procurements are not strictly applicable to reprocurements of defaulted requirements. Bluff Springs Paper Co., Ltd./R.D. Thompson Paper Prod. Co., Joint Venture, B-286797.3, Aug. 13, 2001, 2001 CPD para. 160 at 2. Under the standard provisions applicable to fixed-price contracts, FAR sections 49.402-6(b) and 52.249-8, an agency may use any terms and acquisition method deemed appropriate for repurchase of not more than the undelivered quantity for which the contract was terminated, but must obtain competition to the maximum extent practicable. In this case, because the terminated contract was for the acquisition of commercial items, FAR sect. 49.402-6 is only applicable as guidance, and only to the extent that it does not conflict with the specific procedures applicable to commercial item acquisitions. FAR sect. 12.403(a). As applicable here, for commercial item acquisitions, FAR sect. 12.403(c)(2) provides that the government’s rights after a termination for default include all the remedies available to any buyer in the marketplace, and that the government’s preferred remedy will be to acquire similar items from another contractor and to charge the defaulted contractor with any excess reprocurement costs. These FAR provisions allow the agency to purchase the needed supplies as expeditiously as possible while preserving the government’s right to seek excess reprocurement costs from the defaulted contractor.

In Montage, Inc., B-277923, B-277923.2, Dec. 29, 1997, 97-2 CPD para. 176, our Office reexamined our previous view that a defaulted contractor may not be automatically excluded from a competition for the defaulted requirement because such an exclusion would constitute an improper premature determination of nonresponsibility. In recognition of the broad authority to reprocure accorded the contracting officer by FAR sect. 49.402-6, we adopted the position that we would decline to review an agency’s decision not to solicit a defaulted contractor in the reprocurement of work remaining under the defaulted contract. While the FAR provisions regarding the termination of contracts for commercial items use different concepts than those used in the standard default clauses, they clearly invest equal or greater latitude in the contracting officer to determine how to conduct a reprocurement after the termination of a contractor for default. As a result, in accordance with our holding in Montage, Inc., we will not review the agency’s decision to exclude Essan from the reprocurement here.  (Essan Metallix Corporation, B-310357, December 7, 2007)  (pdf)