Government Contracts Monitor

Remember, the RFP Is Your Touchstone in Both Structuring Your Proposal Team and Selecting Past Performance Examples

May 10, 2016

The solicitation is always your quintessential touchstone, in both constructing your proposal team and preparing your response, including particularly demonstrating your experience and selecting your past performance examples. You therefore need to carefully review the solicitation, and understand both what the agency says it wants, and what it requires and is willing to consider in evaluating your or your team’s capabilities. While it certainly helps to offer a good price, and even better to be the low-priced offeror, such alone may not be enough, particularly in a best value procurement where other factors, including past performance, are being evaluated. This basic maxim was highlighted in a recent Court of Federal Claims decision in which the Court stated the solicitation terms may have led to “an unusual and not particularly fair result,” but nevertheless were neither improper nor objectionably applied. Q Integrated Companies, LLC v. United States, COFC Case No. 16-101, issued April 28, 2016 (Lettow, J.).

The case involved a solicitation (RFP) issued by the U.S. Department of Housing and Urban Development (HUD) for single-award, indefinite delivery/indefinite quantify (IDIQ), Asset Management contracts in 12 geographical areas to market and sell single-family homes acquired by HUD after the owners defaulted on mortgages held by the Federal Housing Administration. Nine of these areas were set aside for small businesses, and two for women-owned small businesses, with a $7M AAR size standard, while one area was unrestricted.

The RFP provided that technical proposals would be evaluated for technical acceptability, while price would be evaluated for reasonableness. Award was to be made on a best value basis, with past/present performance being weighted approximately equal to cost. Each offeror was limited to three past/present performance references, which could be for either the prime or any entity, including a subcontractor, proposed to perform at least 25% of the work. Past/present performance was to be evaluated based on three criteria – recency, quality and relevancy. Recency was defined as performance within the past three years prior to proposal submission. Quality was to be determined by evaluating questionnaires regarding the prior contracts and other sources, such as performance reporting databases. As to relevancy, HUD was to assign a rating of Very Relevant, Relevant, Somewhat Relevant or Not Relevant for each submitted contract based on the number of properties for which the offeror or proposed subcontractor had performed similar asset management services. In determining relevance, HUD would consider “the extent to which the offeror performed the work,” and offerors were instructed to “identify the percentage of work [it] performed as a subcontractor on an incumbent contract.” Based on the recency, quality and relevancy elements, HUD was to assign each offeror an overall past/present performance confidence rating of Excellent/High Confidence, Good/Significant Confidence, Fair/Some Confidence, No Confidence and Neutral/ Unknown Confidence.

After initial proposal evaluations, the elimination of technically unacceptable offerors and one unreasonably priced offeror, HUD established a competitive range for each area, held written discussions and evaluated final proposal revisions (FPRs). HUD awarded the three areas at issue to an entity called Sage Acquisitions, LLC, which was an 8(a) Mentor/Protégé joint venture (JV) between Raine & Company, LLC (“Raine”), the 8(a) protégé, and PEMCO, Limited (PEMCO), its large business mentor. Sage, while higher-priced than Q Integrated, was deemed to offer the best value due to its superior past/present performance rating. In its FPR Sage elected to submit three PEMCO contracts as its past performance references. Despite having no examples for Raine, HUD gave Sage the highest possible rating based upon excellent ratings for PEMCO and HUD’s noting that PEMCO could perform up to 60% of the work under the M/P JV and would mentor Raine as to the balance.

After being debriefed, Q Integrated filed a bid protest at GAO challenging the subject three awards to Sage, and then filed at the Court of Federal Claims after GAO dismissed its protest because another offeror had filed a separate protest at the Court challenging a different area award.

Among other things, Q Integrated challenged HUD’s evaluation of both its and Sage’s past/present performance. Q Integrated bid a prime/sub arrangement, with its former, no longer small, prime – Matt Martin Real Estate Management, LLC (Martin) – as a sub, with a proposed 49% share of the work. Q Integrated initially submitted past performance examples of work it had performed as a sub to Martin, as well as work performed by Martin as a prime. In its FPR, Q Integrated took a different course than Sage, and submitted only three examples that it had performed as a sub to Martin, rather than any of Martin’s well-regarded prime contract performance. Unbeknownst to Q Integrated, HUD was downgrading its subcontract work (i) as to relevancy since Q integrated, as the subcontractor, had only performed only 20% of the work, and (ii) as to quality because Martin’s references were deemed not to be arms-length due to Martin's proposed subcontract role on the current effort. Q Integrated ultimately won its Court protest due to HUD’s failure to have disclosed these latter concerns during discussions.

However, the Court denied Q Integrated’s past performance challenges. First, as to Q Integrated, the Court held that the downgrading of Q Integrated’s performance based upon its performance of only 20% of the work was consistent with the RFP. Further, the Court determined that it was not unreasonable for the agency to consider potential rating bias. The Court specifically rejected the suggestion that the agency needed direct or significant circumstantial proof of actual bias. Second, as to Sage, the Court again found that the evaluation was consistent with the RFP, which permitted offerors to select which examples to submit, and permitted examples from either the prime or a subcontractor. Indeed, the Court noted that Q Integrated similarly could have submitted examples only for Mason, and likely would have rated much higher had it done so.

The Court also rejected Q Integrated’s argument that the RFP improperly favored JVs because the large business mentor could perform as up to 60% of the work. The Court stated that this circumstance was due to the applicable regulatory framework, and that “[t]he government is not obligated to explain to offerors the applicable regulations or the relevant advantages of using a particular business organization and arrangement under these regulations.” Thus, while agreeing that the result here may have been “unusual and not particularly fair,” in that Sage got a higher rating without showing any pertinent past performance by Raine, while Q Integrated showed substantial experience and similarly had a highly experienced teaming partner, the Court found that Q Integrated’s concerns were more the result of its bidding choices and failure to appreciate the particular advantages offered by different teaming structures.

This decision highlights first the importance of offerors understanding and carefully evaluating not only their own team structure and bidding strategy, but also what their competitors may be doing, under both the applicable regulatory framework and the particular RFP terms. Second, the decision demonstrates the importance of carefully considering and selecting your past performance or experience examples, so as to best posture your proposal in the evaluation process, consistent with the RFP terms. Of course, if you don’t like the RFP terms, and deem such unfair or unjustifiably slanted against your being able to compete on a level playing field, the time to challenge such terms is up-front, before initial proposal submission.

Attorneys

Hopewell Darneille