Contractors Need to Be Cautious in Taking Exceptions to Solicitation Terms
By: Lori Lange
Published Date: October 19, 2020
It is well established that a procuring agency may only accept an offer that conforms to the material terms of the solicitation. A solicitation term is material where it has more than a negligible impact on the price, quantity, quality, or delivery. Generally, the requirement to propose fixed prices is a material term. Where a solicitation requests proposals on a fixed-price basis, a proposed price that is conditional and not firm cannot be considered for award. This is what recently happened in a case involving a sales tax exemption certificate.
Asset Protection & Security Servs., L.P. v. United States
In Asset Protection & Security Servs., L.P. v. United States, No. 20-449C, 2020 WL 5849507 (Sep. 12, 2020), Immigration and Customs Enforcement (ICE) issued a solicitation for guard, food, and transportation services. The solicitation cautioned the offerors that any form of contingency pricing is unacceptable and that the offeror’s proposal will be removed from competition as unresponsive if the offeror includes contingency pricing.
During the procurement, an issue arose regarding the availability of a tax exemption certificate for Arizona sales tax. ICE initially stated that it would provide a tax exemption certificate. As a result, the protester included language in its proposal that sales taxes were not charged due to the Government’s expressed intent to provide the protester with a tax-exempt certificate, where applicable.
After the initial proposals were submitted, ICE advised the offerors that the Government could not delegate its tax exempt status. ICE gave the offerors multiple opportunities to revise their price proposals to reflect this change. Nevertheless, the protester kept the language in its proposal regarding sales tax and the tax-exempt certificate. As a result, ICE determined that the proposal was not eligible for award because it contained contingency pricing in the form of the sales tax exemption statement.
The protester first filed a protest with GAO arguing, among other things, that ICE unreasonably had determined that that protestor’s proposal was ineligible due to a price contingency. Although GAO denied the protest, it concluded that ICE’s determination that there was a contingency in the proposal or that the proposal took exception to the solicitation’s requirement to propose a fixed price was unreasonable. GAO found, however, that the protester was not prejudiced by the error.
The protester then filed a protest with Court of Federal Claims claiming, among other things, that it was prejudiced by ICE’s unreasonable evaluation of its price proposal. Both the Government and the awardee moved to dismiss the protest for lack of standing. The Court granted the motion. It found that, by continuing to include the language in its proposal regarding the tax-exempt certificate, the protester’s price appeared to continue to anticipate tax-exemption certificate opportunities, which was contrary to the solicitation.
The Court rejected the protester’s argument that the proposal was not contingent because it contained no indication that the proposed firm-fixed-price would change if the pricing assumption proved incorrect and the protester did not reserve a right to receive, or even request, an adjustment to its pricing if it did not receive a tax-exempt certificate. The Court held that it would not have been proper for ICE to overlook the protester’s inclusion of the tax-exemption in its proposal because the proposal was not compliant with the solicitation requirement. By keeping the language in its proposal that sales taxes were not charged due to the Government’s expressed intent to provide the protester with a tax-exempt certificate, where applicable, the protester conveyed to ICE that its firm fixed-price was subject to the condition that the protester still would be eligible to receive a tax exemption.
Proposals to the Government
Unlike proposals to commercial customers, proposals to the Government must strictly comply with the requirements of the solicitation. Offerors who condition their proposals or otherwise fail to comply with all material requirements of the solicitation may have their proposals rejected. So, offerors should be cautious before including any language in their proposals that could be viewed as deviating from the requirements.