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There are some interesting legal nuances regarding subcontracting plans of which most government contractors are not aware.¬† Most contractors know that, in negotiated acquisitions, each solicitation of offers to perform a contract or contract modification, that individually is expected to exceed $650,000 ($1.5 million for construction) and that has subcontracting possibilities, must include FAR clause 52.219-9, Small Business Subcontracting Plan.¬† The clause requires contractors to submit a “Subcontracting Plan” to the Contracting Officer during a procurement that must be negotiated and found acceptable by the Government prior to any contract award.¬†¬† The subcontracting plan must address how the prime contractor will distribute subcontracting dollars under the contract award to various types of small businesses.

According to the FAR, the Contracting Officer must require the “apparently successful offeror” to negotiate an “acceptable” subcontracting plan and if it fails to do so, the apparently successful offeror “will be ineligible for award.”¬† FAR 19.702(a)(1).¬† Seems simple enough.¬† This language appears to suggest that if a contractor submits an unacceptable subcontracting plan, its proposal will¬† be found to be unacceptable.¬† Under standard protest law, a technically unacceptable proposal cannot form the basis for a contract award.

A recent GAO, case, however, reminds this Northern Virginia government contracts lawyer¬†that this analysis is not so straightforward.¬† As reflected in¬†a recent GAO case,¬†MANCON,¬† B-405663, (February 9, 2012), GAO has interpreted the language above, regarding the “ineligibility” of the apparent successful offeror, as an issue of “responsibility” and not “acceptability,”¬†even though the subcontracting¬†plan may be submitted¬†with an offeror proposal and the submission¬†is considered in the evaluation of proposals.¬† InMANCON, the RFP informed offerors that the award would be made on a best value basis and that “socio-economic” was a factor that would be considered.¬† This factor required offerors to submit a subcontracting plan.¬† Offerors were informed that the socio-economic factor would be evaluated on a pass/fail basis.¬† The agency initially found MANCON’s proposal to be “unacceptable” under the socio-economic factor and the agency informed MANCON of the plan’s deficiencies during discussions.¬† After reviewing final proposal revisions, the agency still considered MANCON’s proposal to be considered unacceptable and made a contract award to another offeror.

MANCON challenged the award to the other offeror arguing that the agency unreasonably determined that its subcontracting plan was unacceptable.¬† In reviewing this allegation, GAO explained that because the FAR subcontracting plan language applies to the “apparent successful offeror,” the FAR subcontracting plan¬†requirement relates to an offeror’s responsibility, even where the solicitation requests the offeror to submit its plan with its offer.¬† The GAO acknowledged that an agency may make “responsibility criteria,” such as a subcontracting plan, ¬†part of a technical evaluation, but noted that such a responsibility criterion will only be considered part of a proposal evaluation if the evaluation criterion allows for a “comparative assessment” among offerors.¬† Stated another way, if the offerors are graded or scored on the content of the subcontracting plan, then a deficient plan will be considered to render a proposal unacceptable instead of making an offeror not responsible.¬† Because in¬†MANCON¬†the agency reviewed subcontracting plans on a pass/fail basis, rather than a comparative basis, the GAO held that the issue in this case¬†addressed MANCON’s responsibility.

Okay, so you say toe-may-toe and¬†I¬†say toe-ma-toe, what’s the difference between finding a contractor not responsible vs. finding its proposal unacceptable?¬†Either way, the contractor is not going to get the award.¬† Well, there are some important differences, particularly in the protest context.¬† First, the standard of review is different.¬† The GAO affords broad discretion to Contracting Officers on issues of responsibility.¬† It is very hard to overturn a Contracting Officer’s determination that a contractor is not responsible (unless it is a small business)¬†and it’s even harder to dispute a Contracting Officer’s affirmative determination of responsibility.¬† ¬†In contrast, if a Contracting Officer finds a subcontracting plan is technically¬†unacceptable, then a protester need only show that the determination is unreasonable given the evaluation criteria, solicitation requirements, statements in the proposal etc.

Second, there is a difference regarding the¬†effect of communications¬†in which the agency and a contractor may engage with respect to each issue.¬† MANCON argued that the agency should have discussed the remaining deficiencies in its subcontracting plan with MANCON before determining that MANCON was not eligible for award.¬† The agency countered that, if it had made such inquiries with MANCON after receipt of final proposal revisions,¬†those exchanges¬†would have amounted to discussions and the agency would have been obligated to open discussions again with¬†all¬†offerors.¬† The GAO disagreed with the agency.¬† The GAO explained that where the acceptability of a small business subcontracting plan is a responsibility issue, exchanges between an agency and an offeror concerning such plans are not discussions but rather “clarifications.”¬† Under standard protest law, an agency can seek clarifications from one or more offerors anytime up until award without having to engage in “clarifications” with all offerors.

It gets a bit tricky, however, if the subcontracting plan is an “comparative” evaluation factor.¬† The FAR allows a Contracting Officer to¬†engage in “clarifications” or “discussions” with offerors regarding areas of their proposals subject to evaluation.¬† Because a Contracting Officer doesn’t have to hold “clarifications” with all offerors but does have to hold “discussions” with all offerors, in a protest context, one is often alleged as the other.¬† That is, the agency will state that it requested a “clarification” from an offeror, but a protester will allege that the alleged “clarification” was really discussions, thereby requiring the Contracting Officer to have had¬†discussions with all offerors (especially the protester who¬†now claims it¬†was unfairly left out).¬†¬†Traditionally,¬†GAO resolves these disputes by looking at whether the offeror¬†was allowed to amend its proposal following the exchange.¬† If the proposal was amended, the exchange was likely more than a “clarification” and really “discussions.”¬† Therefore, in that case, all offerors should have had discussions and the opportunity to revise¬†their proposals.

But that “acid test” is not going to work in the case of subcontracting plans.¬† Whether or not an agency’s exchanges with an offeror regarding its subcontracting plan during¬†a procurement¬†qualifies as “clarifications” or¬†“discussions” depends¬†only on whether the RFP treats the subcontracting plan submission requirement as a responsibility¬†criterion or a evaluation criterion.¬† If it¬†is a responsibility criterion, the exchange will still be considered¬†a “clarification”¬†even if¬†the offeror submits a revised subcontracting plan.¬† If it is an evaluation criterion, the agency’s exchanges, depending on their nature, could be either a clarification or discussions, but if a new subcontracting plan is submitted or the old one amended, then the agency has definitely engaged in discussions and everyone gets another bite at the¬†apple.

Got it?  The bottom line is that the type of exchanges regarding a subcontracting plan permitted under the FAR is determined by how the subcontracting plan will be considered by the agency.  If its a responsibility issue, the agency can talk with the offeror and get information from the offeror without the other offerors knowing.  However, if it is an evaluation criterion, clarifications are only appropriate with one offeror if the exchange is truly a clarification Рand no additional information is submitted to the agency following the exchange.

Ok – if your head hasn’t¬†exploded¬†yet – consider¬†another case –¬†Central¬†Texas College, B-309947 (October 12, 2007).¬†The RFP advised that the contract¬†award would be made to the lowest-priced, technically-acceptable¬†offeror with an acceptable subcontracting plan.¬† The subcontracting plan was a specific evaluation criterion, but it was scored on an “acceptable” “non acceptable” basis.¬†¬†¬† The agency found that CTC’s subcontracting plan to be unacceptable and awarded the contract to another offeror, without holding discussions or having any clarifications with any offerors.¬† CTC protested the agency’s failure to hold discussions and GAO found that the agency was not required to hold discussions with CTC.¬† Makes sense, right ?¬†The subcontracting plan was an evaluation criterion, so discussions would occur if there were substantive exchanges regarding the plan.

But, wait.¬† Remember¬†MANCON?¬† In¬†MANCON, the subcontracting plan appeared to be part of the evaluation as well, but the GAO rejected that idea on the basis that the agency was going to evaluate the subcontracting plan on a “pass/fail” basis.¬† In¬†CTC, the subcontracting plan was also part of the evaluation and was evaluated on an “acceptable/non acceptable basis.”¬† In¬†MANCON, the exchanges were held to be “clarifications;” in¬†CTC,¬†the GAO considered the exchanges to qualify as “discussions”.

Seems inconsistent, no?¬†¬†While not addressed in¬†CTC, I think¬†another case provides the answer as to why both cases might¬†be right.¬† In¬†Computer Sciences Corp., B-298494.2 (May 10, 2007), ¬†the subcontracting plan was an identified evaluation criterion and was scored as acceptable/unacceptable.¬† The agency found many offeror submissions unacceptable, held “clarifications” with those offerors regarding same, and those offerors revised their subcontracting plans, rendering them acceptable.¬† A protest was filed challenging this action.¬† The GAO agreed with the protesters that the exchanges with a few of the offerors on the subcontracting plans were discussions, not clarifications.¬† Seems consistent with¬†CTC¬†but not with¬†MANCON, right?¬† Here’s the difference – although in¬†CSC¬†the subcontracting plan evaluation factor¬†was graded on an acceptable/not acceptable basis, in fact, the strengths/weaknesses of each subcontracting plan were identified by both the evaluators and the SSA.¬† So there was a “comparative assessment” of the subcontracting plan, although you wouldn’t necessarily know that where “acceptable”/”unacceptable” are the grades/scores given offerors.

Fascinating, isn’t it?¬† Just don’t bring this up at cocktail parties; for some reason¬†other people¬†don’t share¬†our industry’s enthusiasm for the legal nuances of GAO protests.