In the United States Court of Federal Claims
No. 17-787C
(Filed: October 17, 2017)
(Re-filed: October 27, 2017)1
**********************
FREEALLIANCE.COM, LLC, Bid protest; claim
for reinstatement to
Plaintiff, agency evaluation;
FAR 16.301(a)(3);
v. unequal treatment.
THE UNITED STATES OF AMERICA,
Defendant.
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Matthew Thomas Schoonover, Lawrence, KA, for plaintiff.
Delisa Maria Sanchez, United States Department of Justice, Civil
Division, Commercial Litigation Branch, Washington, DC, for defendant.
OPINION
BRUGGINK, Judge.
This is a pre-award bid protest by FreeAlliance.com, LLC
(“FreeAlliance”) of its exclusion from further consideration by the National
Institute of Health (“NIH”) under request for proposals no. NIHJT2016015
(“RFP”). NIH excluded plaintiff for failure to comply with the requirements
of RFP Section L.3.1.h, specifically the requirement of a verification on
1
This opinion was originally issued under seal pursuant to the protective
order entered in this case. The parties timely offered joint proposed
redactions. We adopt the parties’ proposed redactions because we find them
to be appropriate. Those redactions are indicated herein with brackets.
letterhead providing that the accounting system had been audited and
determined adequate for determining costs applicable to this contract in
accordance with the Federal Acquisition Regulation (“FAR”), 48 C.F.R. §
16.301–3(a)(1) (2016).
The parties have filed cross-motions for judgment on the
administrative record. The matter is fully briefed, and oral argument was held
on October 10, 2017. Because the government was not arbitrary and
capricious in its evaluation and did not treat FreeAlliance’s proposal
unequally, we grant the government’s cross-motion for judgment on the
administrative record and deny plaintiff’s motion.
BACKGROUND
The Office of Management and Budget has designated NIH as an
Executive Agent for government-wide IT acquisitions, authorizing it to
award and administer the Chief Information Officer-Solutions and Partners
3 (“CIO-SP3”) Small Business Government-Wide Acquisition Contract
(“GWAC”). Administrative Record (“AR”) 370. The CIO-SP3 GWAC is a
ten-year Indefinite Delivery/Indefinite Quantity Contract providing
Information Technology (“IT”) solutions and services. NIH issued the RFP
on March 14, 2016 pursuant to the CIO-SP3 GWAC.
The RFP requirement at issue here is verification of an adequate
accounting system found in RFP Section L.3.1.h. It stated that an offeror
“must have verification . . . of an accounting system that has been audited
and determined adequate for determining costs applicable to this contract in
accordance with FAR 16.301-3(a)(1).”2AR 496. Verification was necessary
because the contract could require contractors to respond to cost
reimbursement task orders.
2
FAR part 16.301-3(a)(1) provides that “[a] cost reimbursement contract
may be used only when “[t]he factors in 16.104 have been considered . . . .”
Those factors include the adequacy of the contractor’s accounting system to
“ensure that the contractor’s accounting system will permit timely
development of all necessary cost data in the form required by the proposed
contract type . . . .” FAR 16.104(i). Additionally, FAR part 16.301-3(a)(3)
reiterates that a cost reimbursement contract may not be used unless “[t]he
contractor’s accounting system is adequate for determining costs applicable
to the contract or order.”
2
NIH authorized offerors to provide verification by any one of four
sources: (1) the Defense Contract Audit Agency (“DCAA”); (2) the Defense
Contract Management Agency (“DCMA”); (3) any federal civilian audit
agency; or (4) a third-party Certified Public Accounting (“CPA”) firm. In the
event any member of a CTA relied on a third-party CPA, the verification had
to be on the letter head of the third-party CPA and certified by a CPA.
Finally, the verification instruction provided that the proposal must include:
[A] contact name and contact information (i.e., phone number,
address, email address) of its representative at its cognizant
DCAA, DCMA, federal civilian audit agency, or third-party
accounting firm and submit, if available, a copy of the Pre-
Award Survey of Prospective Contracting Accounting System
(SF 1408), provisional billing rate, and/or forward pricing rate
agreements.
AR 496.
The RFP provided that offerors were permitted to form contractor
team arrangements (“CTA”) as defined by FAR part 9.601. 3 The offeror
forming a CTA would include with its proposal “the information required
under subpart (1) of this section, ‘Instructions regarding FAR 9.601(1)
CTAs,” including a “verification of an adequate accounting system.” AR
493-96. Each member of the CTA was individually required to provide
verification of an adequate accounting system. “Failure to do so will result
in an unacceptable rating.” AR 496.
The RFP also stated, “The Government intends to evaluate proposals
and award a contract without discussion with Offerors (except clarifications
as described in FAR 15.306(a)). . . . The government reserves the right to
conduct discussions if the Contracting Officer later determines them to be
necessary.”4 AR 483-84. RFP Section M.1.3 reiterated, “The Government
3
A CTA is “an arrangement in which (1) [t]wo or more companies form a
partnership or joint venture to act as a potential prime contractor; or (2) [a]
potential prime contractor agrees with one or more other companies to have
them act as its subcontractors under a specified Government contract or
acquisition program.” FAR 9.601.
4
The RFP defined discussions as “negotiations that occur after establishment
of the competitive range that may, at the Contracting Officer’s discretion,
result in the Offeror being allowed to revise its proposal.” AR 480.
3
reserves the right to award contracts without discussions.” AR 504.
Evaluation of Proposals
NIH evaluated proposals in two phases. The first phase of evaluation
was compliance with four “Go/No-Go requirements.” AR 503. The first two
Go/No-Go requirements are at issue in this claim:
During Phase 1, the Government will evaluate proposals using
the following four (4) Go/No-Go requirements:
1) Compliant Proposal - If the proposal does not contain the
required documents, the Government may deem the proposal
to be “unacceptable” and ineligible for further consideration
for award.
2) Verification of an Adequate Accounting System - The
Government will evaluate evidence that the Offeror, and all
CTA members (if applicable) have an adequate accounting
system in accordance with FAR 16.301-3(a)(1), as required
under Section L.3.1.h. If the Offeror and all CTA members (if
applicable) fail to furnish verification of an adequate cost
accounting system will result in an “unacceptable” rating, the
proposal will be determined “Unacceptable” and ineligible for
further consideration going forward.
3) Factor 1 – Subfactor 1 – Task Area 1, IT Services for
Biomedical Research, Health Sciences, and Healthcare . . . .
4) Factor 2 – Subfactor 1 – Domain-Specific Capability in a
Health-Related Mission . . . .
AR 503.
The second phase of evaluation was assessing proposals using a best
value methodology, including price and non-price factors. AR 506-13. Phase
two is not at issue in this protest.
FreeAlliance’s CTA & Proposal
FreeAlliance formed a FAR part 9.601(1) CTA with HealthTech
4
Solutions LLC (“HealthTech”) and Nish Consulting, Inc. (“Nish”), on March
23, 2016, which qualified FreeAlliance’s proposal for HUBZone
consideration. FreeAlliance submitted a proposal on May 13, 2016. The
agency received 552 proposals of which seventy were HUBZone proposals,
such as the FreeAlliance proposal.5
In its CTA documents, FreeAlliance designated itself the Team Lead
for the CTA. Additionally, FreeAlliance stated it would be [
] AR
654. FreeAlliance included in its proposal a DCAA “Independent Audit
Report on FreeAlliance LLC’s Preaward Accounting System Design.” AR
666. The DCAA report stated, [
] AR 668. The report listed
the capabilities of the FreeAlliance accounting system, including but not
limited to [
] AR 674.
Neither HealthTech nor Nish [ ]. Instead, for
HealthTech and Nish, the FreeAlliance CTA chose to use a third-party CPA
to verify their accounting systems. Neither verification was submitted on a
third-party CPA letterhead. Instead, both verifications were on a brief form,
not furnished by the agency. The form recites that “[i]n support of the CIO-
SP3 Ramp On proposal, the below company has been or is proposed as part
of the Contractor Team Arrangement. Determination of compliant and
adequate accounting system is marked necessary for performance under this
subcontract. This form or representative certification is therefore [required].”
AR 675-76.
In section one, the HealthTech verification provided the name, title,
signature, and contact information for a HealthTech representative. Form
5
To facilitate awards to small business concerns under the RFP, the
contracting officer was allowed to divide offerors into groups based on their
socio-economic categories and to make award decisions based on a separate
evaluation of each offeror in a group. In this instance, the agency divided the
HUBZone offerors into a group and the FreeAlliance CTA was evaluated
during NIH’s review of HUBZone proposals.
5
language in section two recited, [
] and, [
]. AR 675. In section three, form language provided [
] however, a third-party
accounting firm review was conducted and the accounting system found to
be adequate.” Id. The form listed [ ] as the
“Auditor” with a name, title, signature, and contact information for a point
of contact in section three. A footnote on the form indicated that “Healthtech
Solutions’ accountant [ ] utilizes a DCAA compliant
version of [ ] and HealthTech has purchased a DCAA compliant
time keeping system from [ ]. Additionally, HealthTech has engaged [
] to conduct a third-party review of the design of
accounting system controls in place.” Id.
Nish’s verification used the same form: it began with the name, title,
signature, and contact information for a point of contact at Nish in section
one. The form [
] AR 676.
Nish did not provide any [
] In section three, the form language reflected that [
] however, a third-party
accounting firm review was conducted and the accounting system found to
be adequate.” Id. The form listed [ ] as the “Auditor”
with a name, title, signature, and contact information for a point of contact.
Nish’s verification did not include supplemental notes.
NIH Phase One Evaluation: FreeAlliance Eliminated
Upon receiving the proposals, NIH began evaluating HUBZone
offerors under the phase one Go/No-Go requirements. As part of the agency
evaluation, NIH asked offerors that proposed as a CTA whether they
proposed as a FAR part 9.601(1) or 9.601(2) CTA. An agency evaluates a
FAR part 9.601(1) CTA as one team, evaluating each member’s
qualifications. On the other hand, in a FAR part 9.601(2) CTA, the agency
will only evaluate the prime contractor’s qualifications. FreeAlliance replied
that it proposed as a FAR part 9.601(1) CTA. NIH evaluated each member
of the CTA based on the four Go/No-Go requirements, including the
verification of an adequate accounting system.
NIH gave the FreeAlliance proposal an “unacceptable” rating based
on (1) the failure of its two CTA members to submit verifications on CPA
6
letterhead and (2) their failure to verify that the accounting system “has been
audited and determined adequate for determining costs applicable to the
contract in accordance with FAR 16.301-3(a)(1) as is required.” AR 807.43.
The agency stated that FreeAlliance provided its own forms with a
CPA signature and contact information, but those forms were not on
letterhead of a third-party CPA. NIH noted that the verification “simply
stated that the accounting system was found to be adequate; it does not state
that the accounting has been audited and determined adequate for
determining costs applicable to the contract in accordance with FAR 16.301-
3(a)(1) as is required.” AR 807.43. Thus, NIH wrote, “[i]n accordance with
section M.2.a(2), the Agency finds the proposal unacceptable and ineligible
for award.” Id. NIH informed FreeAlliance of its elimination from the
evaluation process on August 3, 2016.
NIH Treatment of Other Offerors
Plaintiff alleges that NIH evaluated offerors unequally during its
review of the four Go/No-Go requirements, deeming other deficient
verifications as acceptable or engaging in discussions. In its briefing, plaintiff
relies on the following phase one evaluations to demonstrate unequal
treatment.
[ ] submitted a verification of adequate accounting system that
was not on CPA firm letterhead and that was not signed by a CPA. Instead,
[ ] submitted a Standard Form (“SF”) 1408 prepared by [
] third-party CPA. NIH marked [ ] acceptable for the
Go/No-Go requirements factor two verification of an adequate accounting
system.
[ ] did not reference FAR part 16.301-3(a)(1) nor did it use the
language “audited or reviewed” in its verification of adequate accounting
system. NIH marked [ ] acceptable for the Go/No-Go
requirements factor two verification of an adequate accounting system. NIH
is currently revisiting its assessment of the four Go/No-Go requirement
factors for [ ] as the consequence of a still-pending GAO protest.
[ ] faxed a verification of adequate
accounting system certification form from a third-party CPA that was not on
CPA firm letterhead. NIH nevertheless marked [
] acceptable for the Go/No-Go requirements factor two
7
verification of an adequate accounting system. Despite NIH marking [
] verification acceptable, NIH ultimately deemed the [ ] CTA
unacceptable under the Go/No-Go requirements factor one, because it failed
to submit the required CTA agreements.
[ ] did not reference FAR part 16.301-3(a)(1) in its
verification of adequate accounting system and did not provide any
substantive verification in its submission. NIH marked [
] acceptable for the Go/No-Go requirements factor two
verification of an adequate accounting system. Yet [
] CTA, like [ ], was determined unacceptable for Go/No-Go
factor one for overall compliance. NIH now takes the position that the
accounting verification submitted by [ ] was in fact inadequate.
A number of offerors’ verifications of an adequate accounting system
did not explicitly cite FAR part 16.301-3(a)(1) in their verification. Yet NIH
marked the following offerors acceptable for the Go/No-Go requirements
factor two verification of an adequate accounting system: [
].
Several offerors’ verifications of an adequate accounting system were
signed by the CPA firm rather than signed by a CPA. Nevertheless, NIH
marked these offerors acceptable for the Go/No-Go requirements factor two
verification of an adequate accounting system: [
]. On the other hand, [
] and [ ] submitted verification of
an adequate accounting system on an individual CPA’s letterhead rather than
a CPA firm’s letterhead. NIH also marked these offerors acceptable for the
Go/No-Go requirements factor two verification of an adequate accounting
system. Shivoy submitted a duplicative SBA Program Representation form
rather than a verification of adequate accounting system on any letterhead.
NIH marked Shivoy’s verification acceptable.
Still other offerors received a “Go–with clarification” rating under
Go/No-Go requirement factor one overall compliance, which plaintiff argues
also demonstrates unequal treatment or NIH engaging in improper
discussions. Among these offerors, [
] did not provide a DUNS number as
required by the RFP prior to award. [ ]
8
failed to state that the replacement of a CTA member is subject to
government approval. [
] did not acknowledge Amendment 0004 as required by
the RFP. [
] failed to acknowledge agreement with the RFP’s terms,
conditions, and provisions. [
] did not include the 360-day acceptance period in their
offers.
Finally, NIH requested the CPA license number of [
] verifying CPA due to NIH questioning whether he was in fact a CPA.
NIH marked [ ] acceptable for the Go/No-Go
requirements factor two verification of an adequate accounting system.
Subsequent Proceedings
FreeAlliance filed a protest at the Government Accountability Office
(“GAO”) on August 15, 2016. FreeAlliance argued that the agency’s
exclusion of its proposal amounted to a non-responsibility decision that
should have been referred to the Small Business Administration. On
November 10, 2016, GAO denied the protest. AttainX, Inc.; FreeAlliance,
LLC, B-413104.6, 2016 CPD ¶ 330 (Comp. Gen. Nov. 10, 2016). GAO
found:
[T]he agency’s elimination of [FreeAlliance’s proposal] from
further consideration was not based on any evaluated problems
with the accounting systems of the respective CTA members .
. . . Rather the record shows that NIH rated the proposals
unacceptable based on the fact that both protestors failed to
submit the specific documentation required by the RFP . . . .
AR 1672.
Plaintiff filed its suit here on June 13, 2017. Plaintiff’s complaint
alleges that NIH acted arbitrarily and capriciously when it failed to seek
clarification of the FreeAlliance proposal; failed to refer its decision to the
SBA for a Certificate of Competency determination; and eliminated the
FreeAlliance proposal for an alleged clerical error rather than on its
substance. After the filing of the Administrative Record, plaintiff moved for
judgment on the administrative record. Plaintiff argues that NIH acted
9
arbitrarily and capriciously by finding its proposal unacceptable and that the
FreeAlliance proposal received unequal evaluation in violation of federal
procurement principles. Defendant filed a cross-motion for judgment on the
administrative record.
DISCUSSION
This court has jurisdiction over challenges brought by interested
parties to actions taken by federal agencies in connection with pre- and post-
award procurement actions. See 28 U.S.C. § 1491(b)(1) (2012). To prevail,
the protester must establish that the agency acted arbitrarily and capriciously,
abused its discretion, or conducted itself in a manner that is otherwise not in
accordance with law. Id. § 1491(b)(4) (mandating that the court review
agency decisions pursuant to the standards set forth in the Administrative
Procedures Act, 5 U.S.C § 706 (2012)). Our standard of review is a
deferential one, requiring only that the agency had a rational basis for its
decision and observed any applicable law or regulation during the
procurement process. Weeks Marine, Inc. v. United States, 575 F.3d 1352,
1358 (Fed. Cir. 2009). Even if a reasonable person might have reached a
different conclusion, we will not set aside the agency’s determination unless
the protestor can show some irrationality or violation of law or regulation.
Redland Genstar, Inc. v. United States, 39 Fed. Cl. 220, 231 (1997). Plaintiff
must also “show that it was prejudiced by a significant error in the
procurement process,” by demonstrating that, had it not been for the error,
plaintiff had a reasonable likelihood of being awarded the contract. Labatt
Food Servs., Inc. v. United States, 577 F.3d 1375, 1378 (Fed. Cir. 2009). To
carry its burden, FreeAlliance advances three arguments regarding the
agency’s evaluation of its bid under the Go/No-Go requirements.
I. Whether The Agency Was Arbitrary And Capricious When It
Excluded FreeAlliance For Noncompliant Verifications Submitted By
HealthTech And Nish
First, plaintiff argues that the agency was arbitrary and capricious
when it excluded HealthTech’s and Nish’s verifications as noncompliant
with the requirements of the RFP. The government responds that HealthTech
and Nish submitted facially noncompliant verifications based on the
language of the RFP.
In the procurement process, the offeror is responsible for ensuring its
proposal complies with the requirements of solicitation; the agency has no
10
duty to correct an offeror’s mistakes during the procurement process. See
Mercom, Inc. v. United States, 131 Fed. Cl. 32, 40 (2017). The RFP provided
four options for verifying an adequate accounting system: DCAA audit,
DCMA audit, a federal civilian agency audit, or a third-party CPA audit. The
first two options demonstrate that the agency was seeking substance in its
verification of an adequate accounting system. A DCAA or DCMA audit
would be performed according to a standard that would assure the
government that the offeror could adequately track and account for its costs
under a cost reimbursement contract. FreeAlliance itself elected to submit to
a DCAA audit, which provided a detailed review of the adequacy of its
accounting system to determine costs applicable to a contract.
On the other hand, FreeAlliance’s CTA members submitted
verifications using the third-party CPA option. Any verification was required
to provide that the system have been “audited and determined adequate for
determining costs applicable to this contract in accordance with FAR 16.301-
3(a)(1).” AR 496. In addition, when using a third-party CPA, “the
verification letter shall be on the letter head of the third-party CPA firm . . .
.” Id. Neither HealthTech nor Nish provided a verification on CPA
letterhead. The origin of their verification forms is uncertain; FreeAlliance
stated during oral argument that they were likely from a past solicitation.
As to the substance of the verifications, HealthTech’s verification
states that a DCAA audit [ ]. Form language at
section three recites that “a third-party accounting review was conducted and
the accounting system found to be adequate.” AR 675. HealthTech states in
a footnote, however, “HealthTech has engaged [
] to conduct a third-party review of the design of accounting system
controls in place.” Id. Plaintiff asserts that, taken together, these sentences
mean that a review occurred by [ ] prior to the
verification submission. The government responds that NIH understood the
language, “has engaged” the CPA “to conduct” a review, to mean that the
review had not yet taken place at the time of submission. Neither the form
language nor the footnote recites whether the system was adequate for
determining costs for a cost reimbursement task order.
Although both readings may be reasonable, FreeAlliance had the
responsibility of meeting the RFP requirements and now bears the burden to
prove that the agency was arbitrary and capricious in excluding its proposal
for noncompliance. We accept the government’s insistence on compliance
with the letterhead provision, because the letterhead adds credibility to the
11
third-party verification as contrasted with plaintiff’s form, which is devoid
of any comparable authentication. Further, the agency did not act arbitrarily
when it read HealthTech’s footnote to mean that the required verification had
not yet occurred. HealthTech’s verification was noncompliant due to its lack
of third-party CPA letterhead. When the format error is combined with the
ambiguous, limited substance, NIH chose a reasonable response of deeming
the verification unacceptable.
Nish submitted the same verification form as HealthTech, but its
verification form [ ]. A CPA signed after the
statement, “[H]owever, a third-party accounting firm review was conducted
and the accounting system found to be adequate.” AR 676. Nish’s
verification similarly lacks a CPA letterhead and provides no detail regarding
the depth or type of review or that the system is adequate for determining
costs applicable to the contract. Due to the deficiencies, the agency’s review
of this form was not arbitrary.
FreeAlliance argues that, as it had designated itself as Team Lead and
[ ], its accounting
verification should be given more weight than its accompanying CTA
members’ verifications. Yet the RFP did not provide an exception for
compliant verifications if a firm was not the CTA Team Lead. All members
of the CTA were required to provide verification of an adequate accounting
system. Thus, the agency was not arbitrary or capricious in applying the
language of the instructions set out in the RFP to find the HealthTech and
Nish verification unacceptable.
II. Whether The Agency Evaluated Offerors’ Verification Of Adequate
Accounting System Unequally
Plaintiff next argues that the agency did not consistently apply the
same standard for an acceptable accounting system verification to other
offerors. Plaintiff points to several categories of what it contends was
unequal treatment, including NIH deeming acceptable verifications that
lacked substance, lacked citation to FAR part 16.301-3(a)(1), lacked
signature by a CPA firm rather than a CPA, or provided an individual CPA’s
letterhead rather than a firm letterhead.
It is a foundational principle that “a contracting agency must treat all
offerors equally, evaluating proposals evenhandedly against common
requirements and evaluation criteria.” Banknote Corp. of Am. v. United
12
States, 56 Fed. Cl. 377, 383 (2003), aff'd, 365 F.3d at 1345. Here, we find
that the contracting agency treated FreeAlliance equally with the other
offerors. Among the verifications that plaintiff relies on to demonstrate
unequal treatment, no verification that NIH found acceptable was identical
to the form that HealthTech and Nish submitted.
Nevertheless, some of the verifications involved deficiencies similar
to those for which FreeAlliance was excluded. Most concerning among the
offerors plaintiff highlights are [ ] (a [
] CTA member) and [
] (a [ ] CTA member). [ ] provided a verification on
CPA firm letterhead that stated the firm had reviewed [ ] financial
statements and noted that [ ] used a contractor accounting
software. The government concedes in its response to plaintiff’s motion that
[ ] verification was unacceptable, despite a pre-decisional
spreadsheet reflecting that the verification was acceptable. Although NIH
marked the verification acceptable, the [ ] CTA did not
receive a “Go” for phase one because, during the same evaluation, NIH
marked the proposal unacceptable under factor one for compliance with the
RFP requirements. Defendant thus contends that the preliminary rating,
although indeed inconsistent with plaintiff’s treatment, should be ignored.
Similarly, [ ] submitted a faxed certification from a third-party that
was not on letterhead. The government argues that, even though the pre-
decisional spreadsheet marked [ ] submission acceptable, [ ] was
in fact excluded under factor one because its proposal was not otherwise
compliant. Plaintiff also points out that [ ] CTA member [ ]
submitted a nonresponsive document unrelated to the required verification
rather than a compliant accounting system verification. Regarding [ ], the
government responds that the pre-decisional spreadsheet made note of the
deficiency.
Plaintiff asserts that it is irrelevant that the [ ] CTA
and the [ ] CTA did not advance to the phase two evaluation due to factor
one noncompliance. NIH unequally evaluated its proposal as compared to
the [ ] CTA and the [ ] CTA, plaintiff
argues, because FreeAlliance’s CTA members were marked unacceptable for
noncompliant verifications whereas [ ] and [ ] were marked
acceptable for likewise noncompliant verifications. The government
responds that four reviewers simultaneously evaluated the four phase one
Go-No/Go requirements and, even in the event that mistakes were made
13
regarding individual CTA member’s submissions, the final “Go” or “No-Go”
for overall compliance should be controlling.
The administrative record, to which this court is limited in its review,
does not discuss how the review occurred or how the pre-decisional
spreadsheet was developed. See Rules of the Court of Federal Claims 52.1.
We are reluctant, however, to hold that unequal treatment was present here
when the apparent unequal treatment is embedded in a single, larger
evaluation phase, the net outcome of which is that the other offerors were
rejected. None of the offerors with noncompliant features in their proposals
that FreeAlliance relies on proceeded to phase two evaluation.
FreeAlliance also asserts that NIH unequally evaluated other offerors’
verifications with respect to the substance of their representations. Our
review of the record, however, indicates that, as detailed below, NIH had a
rational basis for accepting each verification based on its substance.
[ ] (a [ ] CTA
member) submitted a SF 1408 prepared by a third-party CPA, detailing [
] accounting system methods and capabilities. The SF 1408 is
a government form utilized by DCAA and requested by the RFP. Plaintiff is
correct that the third-party CPA did not use the language “audited” or
“reviewed,” but the CPA did represent that the accounting system was
acceptable, noting a specific list of the current accounting system features
and that the offeror was updating the system. Plaintiff’s verifications, by
contrast, were not on a standard government form, and the form plaintiff
chose lacked any details about the purpose of the review or the adequacy of
the accounting systems for any relevant purpose.
Plaintiff asserts that [ ] (an [ ]
CTA member) did not provide a responsive verification. The government
responded that the [ ] Go/No-Go evaluation is currently under
review due to a bid protest. In the context of this protest, however, [
] is distinguishable from FreeAlliance’s verifications. [
] complied with the letterhead requirement. Also, although its
CPA stated “[w]e have not audited, reviewed, or performed internal control
reviews of the LLC in the past,” he continued, “we believed their accounting
and billing systems can adequately track contracts costs and billings for the
purpose of providing to us the information necessary to prepare the LLC’s
annual income tax returns.” Although [ ] could have submitted a
more substantial verification, at a minimum it provided NIH more substance
14
in its verification than FreeAlliance’s forms.
During oral argument, FreeAlliance also pointed to [
] and [ ] as examples of disparate treatment. The
third-party CPA letter for [ ] was on CPA firm letterhead and
signed by an individual CPA who stated that [ ] “has more
than an adequate accounting system for government contracting.” AR 978.
The letter also represented that the accounting system could accumulate and
report costs and that it was DCAA compliant ready.
[ ] verification was on letterhead, described [
] accounting system, and stated that the letter was prepared using
procedures specified in the SF 1408. [ ] verification
discussed in detail the ability of [ ] accounting system to
verify, track, and report costs. Thus, these two verifications differ from
HealthTech and Nish due to the letterhead compliance and because they
provided more detail than either HealthTech or Nish. The two letters also did
not create ambiguity regarding the origin of the form, who wrote the content,
or whether a review had taken place prior to submission.
At oral argument, FreeAlliance also alleged that [ ] provided the
same form for verification as HealthTech and Nish. In fact, the [ ] form
was more detailed than the Nish form because it stated that the accounting
system was adequate “for cost type federal contracts.” AR 1209. More
importantly, NIH deemed the [ ] form unacceptable.
Plaintiff is correct that some accepted verifications used language
ranging from “audit” to “review” to “verify.” Despite the individuality in
other offerors’ verifications, each is distinguishable from the forms
submitted by HealthTech and Nish in that the other offerors provided more
context and detail to demonstrate to NIH that the accounting system had been
reviewed for its ability to track costs for a cost reimbursement contract. When
considering a Go/No-Go factor that was directly relevant to the type of
contract contemplated, NIH did not abuse its discretion or unequally evaluate
offerors when it determined that FreeAlliance missed the mark in both form
and substance.
Plaintiff also points out that several offerors did not explicitly
reference FAR part 16.301-3(a)(1) in their verifications. The RFP did not
require an explicit reference to the FAR provision, however. Nor was
FreeAlliance excluded for the lack of such a citation. NIH employed its
15
discretion in determining which verifications provided sufficient assurance
of compliance with the substance of the FAR provision.
Plaintiff also lists several offerors who submitted verifications signed
by a CPA firm rather than an individual CPA. Plaintiff argues that the RFP
required the verification be “certified by a certified public accountant,” not
by a CPA firm. AR 496. The government argues in its motion that it is
standard practice in the field of accounting to use the firm’s signature rather
than an individual’s signature and that NIH was aware of this practice.6
Plaintiff is correct that this practice is not referenced in the administrative
record. Yet regardless of whether an individual or firm signed the
verification, the offerors plaintiff points out did submit verifications with a
CPA signature of some kind. We are not persuaded that acceptance of a CPA
firm’s signature was an abuse of discretion by NIH.
III. Whether The Agency Engaged In Improper Discussions With Other
Offerors Or Was Required To Engage In Discussion With
FreeAlliance
Plaintiff alleges that NIH engaged in improper discussions with other
offerors, with the result that those offerors proceeded to the phase two
evaluation. Plaintiff argues that the agency ought to have notified
FreeAlliance that it could clarify its verifications. We note initially that the
government is correct in its response that the record reflects no “discussions”
with other offerors, as defined by the RFP or FAR part 15.306. The agency
engaged in only clarifications to correct minor clerical points in proposals,
which is permissible under FAR part 15.306(a). Second, plaintiff has not
submitted any document in verified form suggesting that it could have
satisfied the verification requirements.
Plaintiff’s argument that the agency engaged in improper discussion
with [ ] fails, because the agency was verifying the
information submitted, not requesting a change. [ ]
submitted a verification from a third-party firm, [ ], on
that firm’s letterhead, discussing the accounting system and attaching a
6
The government references the “American Institute of Certified Public
Accountants (AICPA) Statements on Auditing Standards AU paragraph
508.08, which requires the hand written or the printed signature of the
auditor’s firm.” Def.’s Cross-Motion J. Admin. R. 28-29.
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completed SF 1408. Upon review, an agency employee noted “may not be a
CPA, is Govt Contracting Consultant. [sic] Natalie requesting CPA License
Number.” AR 807.10. Rather than requesting additional substance or a new
compliant submission, the agency was confirming the CPA license number
of the person who signed the verification. That was a permissible
clarification, not improper discussion.
By comparison, if we accepted plaintiff’s argument, NIH would have
requested HealthTech and Nish to resubmit their verifications to include a
letterhead and more detail regarding whether a review of their accounting
systems had occurred and the content of that review. Instead of confirming
already-provided information, NIH would have allowed FreeAlliance to alter
its verification—an opportunity that NIH expressly denied to Fedscale. AR
941.43.
Plaintiff also points to several offerors who received phase one “Go—
with clarification,” but who would be required to provide their DUNS
number before award. Others did not include the 360-day acceptance period
in their offers or did not acknowledge Amendment 0004 as required by the
RFP. Still others would be required to acknowledge their agreement with the
RFP’s terms, conditions, and provisions and that the government must
approve any CTA member replacement. The government responds that these
offerors received “Go—with clarification” in phase one, because each of
these deficiencies were either minor clerical errors or acknowledgments that
would be required again later in the acceptance process.
We agree that the agency did not abuse its discretion by allowing these
offerors to move forward as “Go—with clarification.” These requirements
are all distinguishable from the verification of an adequate accounting
system, which is a substantive step toward demonstrating preparedness for
contract award rather than a number or acknowledgment that could be
clarified without changing the substance of an offeror’s proposal. The agency
was not required to extend HealthTech or Nish the opportunity to correct its
verification and we will not substitute our judgment for the agency’s to allow
corrections now.
CONCLUSION
The agency’s actions were not arbitrary and capricious, an abuse of
discretion, or otherwise in violation of law. Accordingly, plaintiff’s motion
for judgment on the administrative record is denied. Defendant’s cross-
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motion is granted. The Clerk is directed to enter judgment for the defendant.
No costs.
s/Eric G. Bruggink
Eric G. Bruggink
Senior Judge
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