Opinion ID: 6661188
Heading Depth: 2
Heading Rank: 3

Heading: Elimination of NTE Price Caps

Text: Although the contracts stated that the prices bid by offerors in task order proposals could not be more than the NTE price identified in the offerors’ responses to the RFP, by June of 2006 the Government observed that contractors were exceeding their NTE rates. AR Tab 32 at 4427 (noting that only three of four contractors responded to a request for task order proposal and “[a]ll three of the respondents proposed prices exceeding their NTEs for a physician assistant”). In September of 2006, Magnum Medical quoted more than the NTE for a Clinical Nurse position, explaining that “in order to successfully recruit and retain a qualified Clinical Nurse our price must exceed our (NTE)”— otherwise, the position would suffer from increased turnover. AR Tab 33 at 4429. The Air Force’s practice in receiving such a request was to determine whether the supplied explanation was a “valid reason [ ] to excuse [the contractor] from their NTEs for that requirement.” AR Tab 35 at 4505. After examining Magnum Medical’s request, the Air Force declined to excuse Magnum Medical from compliance with its NTE prices. The Air Force also asked for a “written corrective action plan” outlining the steps Magnum Medical was taking to “ensure compliance with the not-to-exceed provision ... of Ltheir] contract.” AR Tab 43 at 4598. Some of the difficulty in meeting NTEs resulted from upward pressure on the cost of SCA-eovered positions due to new SCA Wage Determinations. In May of 2007, Magnum Medical asked to revise its NTE rates because the Fiscal Year 2007 SCA Wage Determinations had (1) included more positions than had previously been covered, and (2) raised the wage rates for certain previously covered jobs. AR Tab 34 at 4432. Joseph Boudreau, who was the Contracting Officer for most of the contract term, 3 noted the many issues raised by the SCA adjustments with respect to “non-professional” positions. AR Tab 35 at 4504. Mr. Boudreau concluded that “there [was] no ‘clean’ way” to make the requested adjustments given the contract language. AR Tab 35 at 4505. Mr. Boudreau noted that he had several options. He could (1) approve Magnum Medical’s request, leaving task order competition to assure reasonable pricing; (2) deny Magnum Medical’s request, since the contract did not provide for making the requested adjustment; (3) deny Magnum Medical’s request, but allow for NTE adjustments on a case-by-case basis; or (4) undertake a complete, lengthy and complicated analysis of what the appropriate NTE would be for the SCA-eovered positions. Id. Mr. Boudreau came up with an “outside the box” solution — simply eliminating the NTE rates for the positions covered by the SCA. He observed that: We have to have some pricing in the contract, so we could never do away with all of our NTEs. The professional positions, and any other positions that are not covered by SCA, must remain in that table. No question about that. But I do not see an added benefit to having a larger number of NTE rates. AR Tab 35 at 4506. 4 Mr. Boudreau’s solution was not .implemented, but “[m]ost of the ID/IQ contract holders continued to submit proposals exceeding their NTE rates.” Defs Reply at 11. The Air Force found it increasingly difficult to enforce compliance with NTE ceiling rates and became concerned that “due to the unforeseen complexity in the relationship between the NTE ceiling rates, escalation rates, and application of SCA increases, the overall delivery of healthcare services Air Force-wide could be impacted.” Def.’s Reply at 11 (citing AR Tab 35 at 4506 (“I do not believe that our NTE tables provide reliable information for AFMS budgeting purposes.”)). TerraHealth submitted requests for equitable adjustments seeking additional compensation on certain task orders due to changes in the SCA Wage Determinations. AR Tab 43 at 4591. The Air Force denied these claims, and TerraHealth filed complaints with this court and the Armed Services Board of Contract Appeals. Def.’s Reply at 11-12. The Air Force ultimately settled the cases, agreeing to “remove the requirement to comply with NTE ceiling rates in table 1 for purposes of subsequent task orders.” Defs Reply at 12; AR Tab 43 at 4596. On October 24, 2008, the Air Force issued identical bilateral contract modifications to each awardee’s contract, which “remove[d] the requirement for the contractor to comply with not-to-exceed rates in Section B of the contract” (that is, in Table 1) and eliminated consideration of the NTEs from the criteria for awarding task orders. 5 See, e.g., AR Tab 37 at 4509. None of the contract holders objected to the modifications, which, defendants contend, were intended to benefit all of the contractors equally. Luke’s Reply in Support of its Motion to Dismiss at 8 (“Luke’s Reply”) (docket entry 51, March 15, 2010).