Source: http://www.iclg.co.uk/practice-areas/public-procurement/public-procurement-2016/usa
Timestamp: 2016-10-28 06:29:23
Document Index: 491126380

Matched Legal Cases: ['§ 3729', '§ 2101', '§ 2635', '§ 552', '§ 5000', 'art 25', 'art 25', 'art 13', 'art 19', '§ 51', 'art 19', 'art 9', 'art 9', 'art 6', 'art 14', 'art 8', 'art 15', 'art 15', 'art 7', '§ 3552', 'art 4', 'art 33', '§ 6305', 'art 42', 'art 8', 'art 19']

USA - Public Procurement 2016 · ICLG - International Comparative Legal Guides
Home Practice area Public Procurement Public Procurement 2016 USA
The rules governing federal procurement in the United States are set forth in various statutes, regulations, and decisions that interpret the procurement laws. Federal procurement is governed primarily by Titles 10 and 41 of the United States Code. The Federal Property and Administrative Services Act of 1949 (“FPASA”) and the Armed Services Procurement Act of 1949 (“ASPA”) are the foundation for modern federal procurement, but Congress has enacted several significant changes to the basic regime over the years, including:
the Truth in Negotiations Act of 1962 (“TINA”), which established rules requiring tenderers to disclose certain cost information during the bidding process and imposed penalties for failure to disclose accurate cost data; the Competition in Contracting Act of 1984 (“CICA”), which enhanced competition in federal procurement and established a variety of acquisition procedures, including competitive negotiation; and
the Federal Acquisition Streamlining Act of 1994 (“FASA”) and the Federal Acquisition Reform Act of 1995 (“FARA”), which simplified the federal procurement process. The Federal Acquisition Regulation (“FAR”) and agency FAR Supplements reflect the regulatory implementation of the governing statutes and provide uniform policies and procedures for most federal agency acquisitions. The FAR is found in Title 48 of the Code of Federal Regulations (“C.F.R.”).
The United States is a party to the WTO Government Procurement Agreement (“GPA”) as revised on March 30, 2012. Three submissions from the United States to the WTO (available at http://www.wto.org) provide a useful overview of federal procurement policies and procedures. See World Trade Organization Document No. S/WPGR/W/11/Add.6 to the WTO Working Party on GATS Rules (October 21, 1996); WTO Document No. GPA/23, submitted on July 15, 1998; and WTO Document No. GPA/50, submitted on June 15, 2001.
In addition to the sophisticated body of federal procurement law that has developed over the years, general contract law and certain criminal laws also apply to parties that do business with the federal government. Of particular note are the various statutes targeting fraud, waste, and abuse of federal funds. For example, under the civil False Claims Act, 31 U.S.C. §§ 3729-3733, contractors may find themselves subject to trebled damages and statutory penalties for submitting false or fraudulent claims to the government. Similarly, contractors must be careful to comply with the post-government employment restrictions set forth in the Procurement Integrity Act, 41 U.S.C. §§ 2101-2107, and implementing FAR and Office of Government Ethics regulations. See FAR 3.104; 5 C.F.R. § 2635.
Although government records are generally available to the public under the Freedom of Information Act, 5 U.S.C. § 552, there are exemptions that prohibit the release of contractor trade secrets and confidential commercial information.
Federal tax law can also be relevant to federal procurement. For example, since January 2, 2011, a 2% excise tax has been imposed on any payments to a foreign person or foreign business entity under a federal procurement contract for goods produced in a country that is not a party to an “international procurement agreement” (e.g., the WTO GPA) or for services provided in a country that is not a party to such an agreement. See 26 U.S.C. § 5000C. The Internal Revenue Service has issued proposed regulations for implementing Section 5000C, including adding certain exemptions (see 80 Fed. Reg. 22,449 (April 22, 2015)), along with a list of countries with tax treaties exempting nationals of those countries from the tax (see I.R.S. Notice 2015-35).
Procurement in the United States is subject to the federal procurement statutes as implemented by the FAR and, where applicable, the agency FAR Supplements and other agency guidance. For example, military procurement, which is primarily carried out by the Department of Defense, is subject to special rules found in the Department of Defense FAR Supplement (“DFARS”) and in guidance published by the Director of Defense Procurement Acquisition Policy. See http://www.acq.osd.mil/dpap.
All federal “executive agencies” are covered by the FAR. See FAR 1.101, 2.101. However, several federal agencies, such as the Federal Aviation Administration, the U.S. Postal Service, various government-sponsored enterprises (e.g., Fannie Mae, Freddie Mac), and certain federal corporations (e.g., the Federal Deposit Insurance Corporation), are not subject to the FAR and, instead, promulgate their own acquisition rules and procedures that are generally similar to those contained in the FAR.
The FAR and the agency FAR Supplements cover all acquisitions by contract of supplies or services (including construction) by and for the use of the federal government.
Purchasers must comply with legal requirements, regardless of the nationality of the tenderers. FAR Subpart 25 governs acquisitions of foreign supplies, services, and construction materials, and, in some cases, domestic sources may receive preference over foreign sources. Under FAR 25.403(a), eligible products from WTO GPA countries and countries with trade agreements with the United States are entitled to nondiscriminatory treatment.
FAR Subpart 25.4 concerns “Trade Agreements” and sets forth the rules for applying the WTO GPA to federal procurement, including certain exceptions. Under FAR 25.402, the value of the acquisition is the determining factor with respect to the applicability of the WTO GPA to federal procurement contracts. These values are adjusted approximately every two years. The current threshold values for federal procurements are US$204,000 for contracts for goods and services and US$7,864,000 for construction contracts. See GPA/W/325/Add.1 (December 16, 2013).
There are also certain dollar thresholds that trigger specialised treatment or procedures under the FAR. FAR Part 13 includes simplified rules that allow federal agencies to buy products or services under the simplified acquisition threshold of US$150,000 more quickly, more economically, and with a focus on small businesses. Under FAR Part 19, contracts under US$150,000 are required to be set aside for small businesses.
Concession contracts are not generally used in federal procurement. One notable exception, however, is the Department of the Interior, which regularly uses concession contracts as defined in 36 C.F.R. § 51.3.
The rules governing small business participation are found in FAR Part 19. Federal agencies are strongly encouraged to conduct procurements so as to maximise small business participation. See FAR 19.201.
Procuring agencies have significant discretion in establishing specifications, contract requirements, and timescales for federal procurements. There are no specific minimum timescales for the procurement process. Agencies using the streamlined ordering processes available for task and delivery order contracts may be required to provide “fair notice of the intent to make a purchase” and to provide a “fair opportunity to submit an offer”. See FAR 16.505(b).
Tenderers may be excluded from a competition at multiple stages of the procurement process. To be eligible for award of a federal contract, a tenderer must be “presently responsible” as of the date of award, based upon factors set forth in FAR Subpart 9.1. Also, tenderers may be suspended, debarred, or proposed for debarment (i.e., excluded from federal contracting) for a variety of civil or criminal offences or for non-compliance with contract requirements. See FAR Subpart 9.4. Excluded tenderers may not be awarded any federal contract or subcontract, absent a “compelling reason” as determined by the Agency Head.
In negotiated procurements, an agency may publish presolicitation notices that provide a generalised description of the scope of the acquisition and that allow the agency to advise potential tenderers regarding their potential to be viable competitors. See FAR 15.202. An agency may also limit the number of proposals eligible for award by establishing a “competitive range” composed of the most highly rated tenderers. See FAR 15.306. Establishing a “competitive range” after an initial evaluation is the most common type of “short-listing” that occurs in federal procurement. Under FAR Subpart 6.2, a procuring agency may exclude in certain circumstances a particular source from a contract action in order to establish or maintain an alternative source of supply.
The rules on evaluating tenders vary depending on the nature of the procurement. Specific evaluation rules for negotiated procurements are found at FAR 15.305, for commercial items or services acquisitions at FAR 12.602, and for simplified acquisition procurements at FAR 13.106-2. For other types of procurements, such as sealed bidding (FAR Part 14) or Schedule contracts (FAR Subpart 8.4), the governing FAR rules should be consulted.
In competitive procurements, a designated agency official decides which tenderer or tenderers should be awarded a contract based upon an evaluation of cost/price, technical, past performance, and any other source selection criteria set forth in the agency’s RFP. See FAR 15.308. The decision must be documented and must include the agency’s rationale for any trade-offs made (e.g., why the additional costs of the awardee’s proposal are justified by its technical superiority).
The rules on debriefing unsuccessful bidders vary depending on the type of procurement. For negotiated procurements, the rules are set forth in FAR Subpart 15.5. In procurements other than negotiated procurements, unsuccessful bidders may be entitled only to a “brief explanation” of the basis for the award decision. See, e.g.,FAR 8.405-2(d) (Schedule contracts); and FAR 13.106-3(d) (simplified acquisition procedures). For individual task and delivery order competitions under multiple award IDIQ contracts over US$5 million, the rules in FAR Subpart 15.5 apply. See FAR 16.505(b)(6).
If an agency intends to award a contract without first engaging tenderers in discussions regarding various aspects of their proposals, the agency may elect to allow tenderers to submit proposals that deviate from the agency’s stated requirements with an explanation as to why the tenderer believes the deviation would result in advantage to the government. See FAR 15.203(a)(2)(i), 15.209(a)(2). The agency may either accept or reject the alternative proposal or revise the requirements in its solicitation accordingly.
Under federal procurement law, certain activities that are deemed “inherently governmental functions” (e.g., conducting criminal investigations, commanding military forces, or conducting foreign relations) must be performed by government employees and cannot be performed by contractors. See FAR Subpart 7.5; OMB Circular A-76, “Performance of Commercial Activities”; 76 Fed. Reg. 56,227 (September 12, 2011).
Federal procurement law provides for various enforcement procedures and remedies. Tenderers that submit proposals or that plan to submit proposals in response to a federal agency’s solicitation may “protest” the procuring agency’s decision with respect to the procurement, and the vast majority of disappointed tenderers file such protests with the Government Accountability Office (“GAO”), which has authority under 31 U.S.C. § 3552 to resolve such protests. The regulations at 21 C.F.R. Part 4 govern the GAO’s protest procedures, and only actual or prospective tenderers whose direct economic interest would be affected by the award of a contract may file or participate in a GAO protest. The protesting party additionally must show that but for the procuring agency’s action, the protestor would have had a substantial chance of receiving the contract.
5.3 Before which body or bodies can remedies be sought? Parties aggrieved in the procurement process may seek relief by filing a protest with the GAO or the procuring agency or by filing an action in the Court of Federal Claims. The available fora may be restricted depending on the type of contract. For example, FAR 16.505(a)(10) prohibits protests of IDIQ task orders unless the order exceeds US$10 million, in which case protests are restricted to the GAO.
For protests brought to the GAO, pre-award protests must be filed prior to the due date for submission of proposals; post-award protests must be filed within ten days of the date the protester knew or should have known of the grounds for protest, or within ten days of a requested and required debriefing. If a party protests within ten days of award, or within five days after a requested and required debriefing, the procuring agency must automatically suspend performance of the awarded contract, pending the outcome of the protest. See FAR 33.104. Substantially similar timing rules apply to agency-level protests. See generally FAR 33.103.
5.8 What are the leading examples of cases in which remedies measures have been obtained? The GAO resolves hundreds of protests each year by written decision. Thus, it is difficult to identify current leading examples of GAO bid protest decisions; nevertheless, GAO decisions do have precedential value and are often relied on in resolving future bid protests. A discussion of recent significant bid protest decisions may be found athttp://www.gao.gov/assets/670/665549.pdf. A discussion of the most common reasons for sustaining a protest may be found at http://www.gao.gov/assets/670/667024.pdf.
If the procuring agency has been required to suspend performance of an awarded contract because a protest has been filed, the agency may override the stay of performance upon a finding of either the best interests of the United States or urgent and compelling circumstances which significantly affect the interests of the United States. See FAR 33.104(c)(2). Procuring agencies are authorised to take voluntary corrective action in response to a protest to address issues identified in the protest. The nature, scope, and timing of any voluntary corrective action are within the broad discretion of the procuring agency.
Pre-award changes to the bidding entity (i.e., through sale or corporate restructuring) may be allowed under certain circumstances. See Consortium HSG Technischer Service GmbH et al., B-292699.6, June 4, 2004, 2004 CPD ¶ 134. Generally, the assignment of proposals “when such transfer is effected by operation of law, or merger, or corporate reorganization, or sale of an entire business, or sale of an entire portion of a business embraced by a proposal” is permissible. Numax Elecs., Inc., B-181670, January 16, 1975, 75-1 CPD ¶ 21. A mere change in the corporate name should have no effect on a proposal’s acceptability. See Baker Support Servs., Inc.; Management Tech. Servs., Inc., B-256192.3, B-256192.4, September 2, 1994, 95-1 CPD ¶ 75. Where changes may affect the resources available for contract performance, tenderers should disclose that information to the agency before contract award. See, e.g., FCi Federal, Inc., B-408558.7, B-408558.8, August 5, 2015, 2015 CPD ¶ 245; Dual, Inc., B-280719, November 12, 1998, 98-2 CPD ¶ 133.
Disputes concerning contract changes after award are primarily governed by the Contract Disputes Act of 1978 (“CDA”), which provides both an administrative and a judicial process for the resolution of all claims (by both contractor and government) relating to an existing contract. See also FAR Subpart 33.2. Most contract administration disputes are settled at the procuring agency level by negotiating a request for equitable adjustment of the contract price and schedule to reflect the changes to the agency’s requirements. FAR 33.214 also encourages the use of Alternative Dispute Resolution (“ADR”). However, if a dispute is not settled informally at the agency level, the contractor may file an action at the Court of Federal Claims or at a board of contract appeals.
The Assignment of Contracts Act, 41 U.S.C. § 6305, prohibits the transfer of a government contract to another entity unless the government consents to the transfer or the transfer occurs “by operation of law” (i.e., through a merger). See Tuftco Corp. v. U.S., 614 F.2d 740, 745 (Ct. Cl. 1980). Formal consent for a transfer of a contract is obtained through the novation process, which is governed by FAR Subpart 42.12. Agencies may not award a contract with the intent to transfer the contract to another entity. See, e.g., Acepex Mgmt. Corp., B-283080 et al., October 4, 1999, 99-2 CPD ¶ 77.
There is a strong culture of enforcement in the federal procurement community. For example, the number of bid protests at the GAO has been on the rise for most of the past five years.
The court in CGI Federal Inc. v. U.S., 779 F.3d 1346 (Fed. Cir. 2015), confirmed that purchases of commercial items under Schedule contracts governed by FAR Subpart 8.4 cannot include terms that are inconsistent with customary commercial practice.
The federal procurement laws and regulations are constantly changing. For example, in the coming year, new rules on contractor “Fair Pay and Safe Workplaces” requirements and cybersecurity incident reporting are expected to be finalised.
Policies to encourage participation by small businesses and underrepresented categories of bidders, including veteran-owned and women-owned businesses, are coordinated by the U.S. Small Business Administration and included in FAR Part 19.