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'Best Value' Public Procurements;
Substantially Lowest Price Might Not Equal Winning Offer
by John S. Mrowiec
Most of our readers are familiar with local government public
construction procurements under the "lowest responsive
responsible bid" standard. We discussed those procurements
in the August 2002 article, "Protesting Local Public
Contract Bids: Who Is the Lowest Responsive Responsible Bidder?"
In a lowest responsive responsible bid procurement, provided
the lowest bid is responsive (really not materially unresponsive)
and the bidder is responsible, the bidder with the lowest
price bid normally must be awarded the contract.
The federal government often uses a different type of construction
procurement method, "best value." Under a "best
value" procurement, low price is only one of the factors
considered by the government. Indeed, low price might not
even be the most important factor depending on the terms of
the "best value" bid solicitation.
Federal construction contractors are becoming more familiar
with "best value" procurements as their use becomes
more common. But even those contractors who only pursue state
or local public construction might find themselves in a "best
value" situation. Some state and local agencies have
been authorized to use that procurement method.
A recent case shows that great care in presentation of the
bid proposal for submission to the government is critical.
Even where the bidder was $5.5 million low, 8 percent lower
than the winning bid, the government rejected the low bidder
in Fru-Con Construction
Co. v. United States, 2003 U.S. Dist. LEXIS 239
(Ct. Cl. Aug. 7, 2003).
The Fru-Con
Construction case involved a "best value"
solicitation by the architect of the U.S. Capitol for expansion
of the West Refrigeration Plant at the Capitol. The "best
value" solicitation required submission by bidders of
separate proposals for technical and price criteria.
The solicitation provided, "Technical Evaluation Criteria
are more important than price, but as the difference in technical
merit between proposals becomes less significant, the relative
importance of the proposed prices will increase."
The architect did not conduct a price evaluation unless he
first found that the bidder was technically qualified. The
technical evaluation criteria were:
General Contractor's Corporate Experience and Past
Performance
Chiller Manufacturer's Corporate Experience and Past
Performance
Organization and Key Personnel
Management Plan
Subcontractor Management Capabilities
Chillers
The architect rated bidders "Acceptable" or "Unacceptable"
on all six factors.
Minor deficiencies or weaknesses easily correctable would
not result in an "Unacceptable" rating. Major or
extensive deficiencies would.
The six technical factors had equal weight but "[a] rating
of Unacceptable or Marginal for any factor will deem the overall
technical proposal unacceptable or marginal.
Award shall not be made to a contractor with a Marginal or
Unacceptable rating."
The architect determined that the low bidder's proposal was
unacceptable in four of the six technical areas: General Contractor's
Corporate Experience and Past Performance; Organization and
Key Personnel; Management Plan; and Subcontractor Management
Capabilities.
The low bidder's price proposal was for $61.7 million. The
accepted bidder's price proposal was for $67.2 million, a
bid that was $5.5 million higher. The architect rejected the
low bidder's proposals.
The low bidder filed a bid protest with the General Accounting
Officer. Another bidder also protested but in the U.S. Court
of Federal Claims. The court dismissed the other bidder's
case and then decided the low bidder's case. The low bidder
asked to enjoin the construction and to order the contract
awarded to the low bidder.
The Fru-Con
Construction court first listed the legal standards
to be applied to any federal procurement bid protest. These
standards provide that the court will uphold an agency's decision
unless low bidder shows that it is "arbitrary, capricious,
an abuse of discretion, or otherwise not in accordance with
law" (5 U.S.C. §706(2)(A); 28 U.S.C. §1491(b)(4)).
A court may not interfere with an agency's procurement decision
unless "it is clear that the agency's determinations
were irrational and unreasonable" (Acra,
Inc. v. United States, 44 Fed. Cl. 288, 293 (1999)
(citation omitted)). Government agencies have wide discretion
in determining whether an offer meets technical requirements
of a solicitation (CW
Govt Travel, Inc. v. United States, 53 Fed. Cl.
580, 590 (2002); see E.W.
Bliss Co. v. United States, 77 F.3d 445, 449 (Fed.
Cir. 1996)).
The protesting bidder must show that the agency's evaluation
was arbitrary and capricious and that the bidder was prejudiced
in the process (CCL
Serv. Co. v. United States, 48 Fed. Cl. 113, 120
(2000)). The fact that a bidder disagrees with the evaluator's
conclusions is not enough for a court to overturn them (ITT
Fed. Servs. Corp. v. United States, 45 Fed. Cl.
174, 185-186 (1999); CRC
Marine Servs., Inc. v. United States, 41 Fed. Cl.
66, 83-84 (1998)). A court will not substitute its judgment
for that of a contracting officer in such circumstances (ManTech
Telecom & Information Sys. Corp. v. United States,
49 Fed. Cl. 57, 63 (2001)). The protesting bidder must show
that the government's procurement decisions had no rational
basis (Delbert
Wheeler Constr., Inc. v. United States, 39 Fed.
Cl. 239, 247 (1997)).
Regarding the specifics of the case, the low bidder complained
that it had substantial construction experience and that it
could easily correct missing or generic information.
The government disagreed, noting that the low bidder had not
tailored its proposal to the West Refrigeration project, did
not include appropriate organization charts, a top manager's
resume or detailed subcontractor plans and most of the low
bidder's experience on chiller plants was as a subcontractor
not a prime contractor.
The Fru-Con
Construction court rejected the low bidder's protest:
"We do not question low bidder's ability or experience.
The issue is whether the defendant acted reasonably in deciding
that [the low bidder's] proposal was Unacceptable in that
it did not meet the specific and detailed requirements of
the Agency's Solicitation. It is important to the procurement
process that all bidders submit offers according to the same
rules. Adequate written proposals are central to efficient
procurement of services. This is particularly true of a complex
project such as this, where the offeror's price is secondary
to its technical expertise.
"This was partly because low bidder's 'cut and paste'
method was not an effective approach to submitting a proposal
that it should have tailored to this job. The administrative
record and counsel's arguments at oral argument support the
Agency's misgivings."
The lessons of Fru-Con
Construction are match carefully the proposal contents
to the Solicitation's requirements and do not count on a better
price saving a carelessly assembled technical proposal.
John S. Mrowiec is a partner
with Chicago-based Conway & Mrowiec, a construction
and public contracts law and litigation practice. He may
be reached at (312) 658-1100. For information, go to the
firm's Web site at www.cmcontractors.com.
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