Taking Exceptions

June 3, 2009 on 2:22 pm | In Bids and Proposals | 4 Comments

There is boilerplate in almost every government solicitation, and many from prime or higher-tier contractors, that says in effect. “you must accept our terms and conditions or you will not be considered for award.” The exact phrasing varies, but the point is clear – in any battle of the forms, buyer wins.

And it is also true that almost all offerors (especially under a government RFP or a subcontract request from a higher-tier; less so under an IFB since that will risk being found automatically non-responsive) will engage in that classic battle of the forms (see the classes on the UCC) and take exception to some portion of the terms and conditions.

So the question becomes in a government solicitation, when is it appropriate to take exception to the terms, conditions, or requirements, and when will you run a greater-than-usual risk that you will be found non-responsive, or fail to meet an essential element of the solicitation? That was the question raised in the protest of Northern Light Productions against a competition held by the National Park Service and decided just this week.

The solicitation, which was for the purchase of various audio-visual productions, stated that the government expected to get unlimited rights in anything produced by the contractor. Once they paid for it, they had no interest in dealing with future licenses or royalties. It was, as is often the case, designed to be a “work for hire” that would let NPS use the material for training, publication, advertising, or whatever. Forever. It was to be theirs to do with as they pleased. Part of the evaluation specifically said, “Evaluation will also include your understanding of the Rights in Data clause and other licensing requirements.”

In its initial proposal Northern Lights made no reference to data rights, but in a later revision it stated that the rights to be granted were “for educational and museum presentation use for the life of the program, up to twenty years.” This was factored into the evaluation by the evaluation team, but upon review by the contracting officer, she determined that this reservation made the proposal unacceptable for failing to meet an essential requirement of the solicitation.

So what was it, a minor exception to a term or condition or a material element of the solicitation? The GAO cited the rule that in “negotiated procurements, a proposal that fails to comply with the material terms of the solicitation should be considered unacceptable and may not form the basis of award.” In a footnote to that rule GAO further explained that “clearly stated RFP requirements are considered material to the needs of the government.” GAO further noted that the RFP contained a “deviations and exceptions” clause that notified offerors that exceptions would not, in and of themselves, automatically cause a proposal to be deemed unacceptable.

The protestor argued that since the exception had been evaluated and scored, it could not later be a strict past/fail criterion. It was part of a ten-point factor, and even if they had been scored as a zero in that factor, they should still be considered for award. Further, it argued, since it did not list anything in the “deviations and exceptions” clause, it could not be considered a disqualifying item.

None of this was persuasive to GAO. They denied the protest on the basis that the requirement was clearly stated, it was reviewed by the agency (thus it was not an “automatic” disqualification) and in the agency’s discretion, the failure to permit unlimited rights was a material deviation thus making the proposal unacceptable. GAO, while it might have reached a different conclusion regarding the structure of the RFP or in the evaluation scheme, it was not inclined to say that the agency acted unreasonably in meeting its needs.

So what are the lessons? First, do not make material changes in an updated proposal. Introducing an exception that late in the process is just asking for trouble. Address the items that were raised during discussions, fine tune a few things if you choose, but do not take exception to a clearly articulated government requirement. And that is the second lesson. When the government says they need something – give it to them. If you can’t, don’t make an offer in the first place. If you think that the requirements are overly restrictive, the time to ask that question is BEFORE the initial submission, not after you have lost the competition.

Taking exceptions with the government is always risky. Companies that are more accustomed to commercial practices where the Uniform Commercial Code will step in to determine the terms of the contract are often surprised at the rigidity of the government process. In the expenditure of public funds, and fairness to all competitors, the government cannot permit such deviations. Yes, certain exceptions will generally not get you thrown out, but talk to someone who knows. Taking exceptions is not a best practice with clearly stated government requirements.

Northern Light Productions, B-401182, decided June 1, 2009.

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