Government Contracts Monitor

What Constitutes “Discussions” Depends on Parties’ Actions, Not the Agency’s Label

February 18, 2014

By: Eric Whytsell

The recent GAO decision in Kardex Remstar, LLC, B-409030 (Jan. 17, 2014) serves as a reminder that the issue of whether a given communication amounts to “discussions” or merely “clarifications” does not turn on the agency’s characterization, even in the context of a Part 8 procurement from Federal Supply Schedule (FSS) vendors.

The protest challenged the award of an order under a Request for Quotations (RFQ) issued by the Department of Veterans Affairs (VA) for vertical storage units. The specific items sought included climate-controlled units that, in addition to other requirements, had to be “fully enclosed” and “self-contained.” Conducting a reverse auction as contemplated in the RFQ, the VA received quotations from Kardex Remstar (Kardex) and the awardee, Hanel Storage Systems (Hanel) in the amounts of approximately $800,000 and $976,000, respectively. Since Kardex’ quote was lower, the VA reviewed its quotation for technical acceptability.

After its initial review of Kardex’s quote, the VA repeatedly contacted Kardex seeking additional information about the firm’s proposed storage units. Characterizing these communications as “clarifications,” the agency claimed that they did not “allow for any changes in the equipment or price” -- despite the fact that they did ask about additional discounts off Kardex’s FSS pricing. The VA’s communications consisted of the agency providing spreadsheets to Kardex that identified 34 separate requirements and indicated, “[q]uote does not provide info on this” or “does not meet requirements,” then seeking Kardex’s responses to the agency comments. During multiple rounds of such communications, however, the agency never raised the concern that Kardex’s quote failed to comply with the RFQ requirement that the climate controlled units be self-contained or fully enclosed.

After reviewing Kardex’s responses, the VA ultimately concluded that the firm’s climate-controlled storage units did not meet the requirement that they be self-contained and fully enclosed. Turning then to Hanel’s quotation, the agency sought “clarifications and information” from that firm and determined that Hanel’s quote met all RFQ requirements.

Upon VA’s award of the order to Hanel, Kardex protested, arguing in part that the agency had conducted misleading and non-meaningful discussions because it failed to advise Kardex of any issues with its climate-controlled units. In response, the agency asserted that the communications were merely clarifications – not discussions – because it only allowed Kardex to explain or clarify, but not change, its proposal.

The GAO rejected the agency’s argument. After first noting that FAR Part 8 does not require agencies to conduct discussions with vendors but does require any exchanges to be fair, the GAO reiterated that it looks to FAR Part 15 “as guidance in defining clarifications as ‘limited exchanges’ that agencies may use to allow offerors to clarify certain aspects of their proposals (or in this case quotations) or to resolve minor or clerical mistakes.” In contrast, discussions “occur when an agency communicates with an offeror for the purpose of obtaining information essential to determine the acceptability of a proposal or quotations, or provides a vendor with an opportunity to revise or modify its proposal.”

Here, the GAO had little trouble concluding that the VA’s communications seeking input on 34 different requirements and seeking additional pricing discounts constituted discussions, as they “invited responses from Kardex that were necessary to determine the acceptability of the firm’s quotation, and in fact resulted in Kardex being permitted to supplement its quotation.” According to the GAO, “This is quintessentially the nature of discussions, not clarifications.”

In addition, the GAO concluded that the nature of the discussions were “fundamentally unfair” because the agency failed in its repeated rounds of discussions with Kardex to identify “the one requirement for which the quotation was found technically unacceptable.” Because the discussions were not fair as required by FAR Part 8, the GAO sustained the protest and recommended the agency reopen discussions with vendors and reevaluate quotations consistent with the decision.

The takeaway? Don’t let the agency’s assertions to the contrary dissuade you from arguing that the exchanges in question are really discussions. Look instead to what the agency asked and how you responded. The parties’ actions are more important than the label chosen by the agency.

Eric Whytsell is the attorney responsible for the content of this article.

Attorneys