Government Contracts Monitor

Willie Wonka at GAO: Everyone Gets to Compete on the Same Basis

May 4, 2015

Virtually every child of the 1970s or 80s will remember the scene from the classic movie, Willy Wonka and the Chocolate Factory, when Gene Wilder’s character, Willy Wonka, unilaterally changes the rules of competition for the factory, dashing endearing Charlie’s hopes and dreams. Justice is restored when Charlie stands up to Wonka and points out that he has been unfair. Hanel Storage Systems, L.P., B-409030.2 (Sept 15, 2014), confirms it's not a childhood fantasy to believe that justice can or will be restored. There the Department of Veterans Affairs (VA) unilaterally changed material specifications in a Request for Quotations (RFQ) without providing all vendors with an opportunity to respond to the revised RFQ. A protest followed in which the Government Accountability Office (GAO) said "no" to the VA - directing them to amend the RFQ and reopen the competition.

The Hanel protest arose after the VA issued a purchase order for vertical storage units to Kardex Remstar, LLC (Kardex) pursuant to an RFQ after a reverse auction among Federal Supply Schedule vendors. Finding that both Kardex and Hanel Storage Systems, L.P.’s, (Hanel) quotations would meet its needs, the VA issued the purchase order to Kardex because its quotation was lower-priced.

The protester, Hanel, claimed that Kardex’s quotation did not satisfy the RFQ’s material specification requirements. Specifically, the RFQ mandated that the storage system be suspended on four corners, but Kardex’s storage system was not suspended on four corners. Hanel claimed that had it known the VA would accept a 2-point center suspension extraction system, it could and would have proposed a lower-priced storage system. The VA did not dispute Hanel’s contention that Kardex’s storage system deviated from the material specifications of the RFQ. Rather, the VA claimed that because an RFQ was not an "offer," it was free to select a quotation that satisfied its needs regardless of whether it complied with the RFQ’s technical specifications.

The GAO rejected the VA’s argument that it could unilaterally accept a nonconforming quotation. Though the GAO acknowledged that an RFQ issued to FSS vendors was not an "offer" subject to acceptance, it maintained that all vendors had to receive a fair and equal opportunity to compete. According to the GAO, by accepting a non-conforming quotation, the VA denied the offerors a fair and equal opportunity to compete for the purchase order because it permitted vendors to quote on different bases. In other words, by accepting a non-conforming quotation, the VA was changing the rules of the competition without telling the competitors.

The GAO explained what the VA should have done when it realized that non-conforming specifications would satisfy its needs: amend the RFQ and reopen the competition so that all vendors could respond to the revised or alternate specifications. By failing to do so, the GAO found that the VA prejudiced Hanel: the VA denied Hanel the opportunity to quote a lower-priced, alternate product, as Kardex had quoted, because Hanel did not know that such a product would be acceptable.

Though Hanel may not ultimately have the same fairy-tale ending as Charlie, like Charlie, it will at least have the opportunity to compete based on the stated requirements of the RFQ.