Government Contracts Monitor

How Much Modification Is Too Much?

June 21, 2018

Savvy contractors who have lost out on a contract award often monitor contract performance and modifications in hopes of identifying business opportunities. If they can find performance problems or improper modifications, their thinking goes, they may be able to position themselves to take work from the original awardee. But such a strategy has some practical limitations. Landing new work as a result of another contractor’s poor performance can take a long time, and may require another competition. At first glance, an improper contract modification may appear to be a better option.

But contract modification issues are generally considered outside the jurisdiction of the Government Accountability Office (GAO). Even if the modification in question is sizable, it will likely not be reviewable by the GAO. The recent decision in Alliant Solutions, LLC, B-415994.2 (May 14, 2018) reminds us, however, that the GAO will consider issues of contract modification if the modifications go beyond the scope of the original contract.

The Alliant Solutions protest involved the assignment of work by the General Services Administration (GSA) to Smartronix, Inc. using a Technical Direction Letter (TDL) under an existing task order. The value of the TDL work was $10-$20 million. The task order was for the benefit of the Navy under GSA’s Alliant Government-wide Acquisition Contract (GWAC). After learning of the TDL, Alliant Solutions, LLC (“Alliant”) protested the modification before the GAO, arguing that the TDL work fell outside of the scope of Smartronix’s task order and Alliant and other holders of the GWAC should have been afforded a fair opportunity to compete for this substantial amount of work.

In determining whether a change goes beyond the scope of the original task order (or contract), the GAO will check whether there is a material difference between the original order and the modified order. The GAO looks for evidence of such a material difference by reviewing the circumstances attending the original procurement, and any changes in the type of work, the performance period, and costs between the order as issued and as modified. The GAO also considers whether the original order adequately informed competitors of the possibility for the modification at issue, which could have changed the field of competition. Here, the GAO highlighted three material differences between the TDL and the task order: (i) who the contractor was expected to support, (ii) the focus of the work, and (iii) the classification level of the work.

The task order originally sought support for the Navy’s Rapid Response Project Office (RRPO) with Command, Control, Communications, Computers (C4), Intelligence, Surveillance, and Reconnaissance (ISR). After the award of the task order to Smartronix, the Department of Defense and Navy mandated a shift from physical IT infrastructure to a Cloud-based system. Recognizing this, the GSA subsequently issued a TDL to Smartronix under the existing task order to support the Naval Air Warfare Center Aircraft Division (NAWCAD) in establishing operations in a Commercial Cloud Computing facility. The GSA and Navy apparently believed the TDL was within the scope of the task order because the RRPO is part of NAWCAD. The GAO disagreed, noting that the original task order and the TDL sought support for two different groups. The task order sought support for the RRPO, but the TDL sought assistance for NAWCAD, a broader group. The GAO rejected the GSA’s assertion that the TDL could be used to support other offices since the RRPO provides support to other groups. Instead, the GAO made clear that the RRPO work could not be used as a “foundation upon which to cantilever broad support.”

The GAO also noted that the focus of the work requested in the TDL differed substantively from the work sought in the original task order. The TDL required the contractor to assist with enterprise-wide Cloud migration and operation, as well as management of the Government’s enterprise-wide IT server and storage computing environments. But the original task order only made limited references to Cloud services in connection with requirements for research and analysis support for systems assessment, including the Cloud. The GAO also highlighted that the task order never used the phrases “enterprise” or “IT server” and did not require the contractor to perform ongoing management. According to the GAO, this constituted a material difference in the focus of work between the task order and the TDL.

Lastly, the GAO emphasized the significant difference between the classification level of the task order work and that of the TDL work. While both the TDL and the task order sought information assurance support, the task order required it in relation to classified information systems. The TDL, on the other hand, only sought support for establishing an unclassified Cloud environment. The GAO regarded the classified systems work as substantively different from the unclassified work and found that this difference could have changed the field of competition for the original task order.

In the end, the GAO concluded that the GSA’s TDL to Smartronix differed materially from the original task order, and therefore fell outside its scope. Instead of issuing Smartronix a TDL to procure the new work under the existing task order, the GSA should have allowed holders of the GWAC to compete for it. The Navy argued that the choice to use Smartronix’s task order to migrate to a cloud-based system was due to the Navy’s critical need for a proof-of-concept demonstration for a cloud-based infrastructure environment. Nevertheless, the GAO held that expediency and the desire to work under one contract does not justify issuing work through a modification that is outside the scope of the original task order.

While the GAO is deferential to agencies, especially with regard to an agency’s assessment of its changing needs and how to address them, the Alliant Solutions decision demonstrates that such deference has limits. Contractors seeking to challenge a contract modification as outside the scope of the original contract or task order should look for the sorts of differences that were held to be material in this case. While this issue is highly fact-driven and must be decided on a case-by-case basis, if the modification directs the original awardee to do different work with a different classification level for a different Government office, protesting the modification is a sound strategy.

Attorneys

Lindsay Simmons