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COFC: Improper Referral to SBA Could Not Cure Awardee's Defective Proposal

March 25, 2014

Reproduced with permission from Federal Contracts Report, 101 FCR 331 (March 25, 2014). Copyright 2014 by The Bureau of National Affairs,  Inc. (800-372-1033) http://www.bna.com

Manus Medical LLC v. United States, 2014 BL 75443, Fed. Cl., No. 14-26C, 3/19/14

Key Holding: Court enjoins VA from proceeding with performance of contract to provide custom surgical packs.

Key Rationale: VA abused its discretion by referring defective proposal to the SBA for Certificate of Competency determination.

By: Daniel Seiden

March 20 --The U.S. Court of Federal Claims March 19 stopped performance of a set-aside contract for the Department of Veterans Affairs (VA) because the awardee's nonresponsive proposal should have been eliminated (Manus Medical LLC v. United States, 2014 BL 75443, Fed. Cl., No. 14-26C, 3/19/14).

The VA could not cure the proposal's defects by submitting them to the Small Business Administration (SBA) for a Certificate of Competency (COC) determination, judge Thomas C. Wheeler wrote.

Small businesses that procuring agencies have deemed nonresponsible can use the SBA's COC program to regain eligibility and compete in procurements. In December 2013, a contractor seeking a COC unsuccessfully argued that the program should extend to legislative branch agencies (100 FCR 588, 12/17/13).

In that case, the COFC upheld the Government Printing Office's (GPO's) determination that the low bidder for a printing contract was not responsible to perform due to previous late deliveries. Judge Marian Blank Horn held that the Small Business Act did not require the GPO to refer the responsibility issue to the SBA.

Here, the VA abused its discretion by referring to the SBA a matter that did not involve a responsibility issue. Rather, it involved a proposal deficiency.

Edward T. DeLisle of Cohen Seglias Pallas Greenhall & Furman PC told Bloomberg BNA that the VA made a number of procedural gaffes in attempting to deal with Marathon's deficient proposal, and it tried to fix them by “simply handing the baton” to the SBA and asking for a COC.

When seeking to award a contract on lowest-price technically acceptable basis, DeLisle said, there is a three-step process. The agency must decide:

• whether the offeror has satisfied all the criteria to determine technical capability, past performance potentially included;

• which offeror among those deemed technically acceptable has provided the lowest price; and

• whether the offeror that submitted the lowest price is a responsible contractor.

“You don't get to step number three until you get past the first two,” he said. “Certificates of competency really go to the issue of responsibility and can't fix an offeror's nonresponsive proposal.”

Small business contractors therefore should note that the COFC will deem significant proposal deficiencies to be proper grounds for elimination without the need for SBA intervention.

“That's the real lesson,” DeLisle said. “In a situation like this, the SBA cannot save a small business from its failure to properly respond to a solicitation.”

First Decision Was Correct.

The VA issued a solicitation seeking custom surgical packs to be used at five medical centers. The agency issued the solicitation as a set-aside for service-disabled, veteran-owned small businesses.

An offeror had to receive a passing grade on all nine components of the technical capability evaluation to be considered technically acceptable and eligible.

The VA received proposals from six firms. Following an initial award to Manus Medical LLC, Marathon Medical LLC filed a protest at the Government Accountability Office challenging the determination that its proposal was technically unacceptable. The GAO recommended that the VA reopen negotiations and receive revised proposals.

The VA said it would comply with the recommendation, but then asked the SBA for a COC determination. The SBA issued a COC, Marathon received the award because it had passed all of the technical capability components and offered a low price. Manus subsequently challenged the VA's SBA referral.

SBA Referral Was Improper.

The court said the VA's initial decision to eliminate Marathon from the competition was correct because the company failed to include required past performance content in its proposal.

The government and Marathon argued that the evaluation factors Marathon failed to satisfy were responsibility factors, and therefore the VA correctly referred the proposal defects to the SBA for a nonresponsibility determination.

The court disagreed because such a referral is only necessary when an apparently successful small business lacks certain elements of responsibility. Marathon's elimination was due to its deficient proposal, and thus the elimination was a proper exercise of the VA's discretion.

The court said finding that an offeror failed to submit required information for a past performance evaluation is different from finding that an offeror is not a responsible contractor.

Therefore, it enjoined the VA from awarding Marathon a contract under this solicitation.

Eric S. Crusius of Centre Law Group LLC, Vienna, Va., represented Manus Medical LLC. Joshua A. Mandlebaum and others from the Justice Department, Washington, DC, represented the government, with Bridget E. Grant, Department of Veterans Affairs, of counsel. Kristen E. Ittig and Dominique L. Casimir, Arnold & Porter LLP, represented intervenor Marathon Medical LLC.

The court's decision is available at: http://www.bloomberglaw.com/public/document/MANUS_MEDICAL_LLC_v_USA_2014_BL_75443_Fed_Cl_Mar_19_2014_Court_Op/1.