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GAO Out of Order: Options on Orders and the Impact of the AllWorld Bid Protest Decision.

Over the years, the Government Accountability Office’s (GAO’s) bid protest decisions have had a profound impact on the procurement system.  GAO’s authority to hear protests regarding alleged violations of law or regulations (31 U.S.C. 3552) has resulted in a comprehensive body of case law interpreting the Federal Acquisition Regulation (FAR) and the Competition in Contracting Act (CICA).  Contracting offices and agency counsels rely on these decisions as they address acquisition strategies, communicate requirements, and conduct formal source selections.  Indeed, in one sense, the influence of GAO decisions on daily procurement operations is so pervasive as to render it a “de facto” procurement policy arm of the executive branch.   So what happens when GAO is out of order?  The impact of the AllWorld decision provides an excellent case study.

In AllWorld Language Consultants, Inc., Comp. Gen. Dec. B-411481, Jan. 6, 2016, 2016 CPD 12; 58 GC 65, GAO concluded that an agency could not exercise options included in an FSS order after the expiration of the underlying FSS contract.  GAO’s analysis of this issue was limited.  It failed to cite any specific statute or regulation that was violated by the inclusion on an order of options that extended beyond the contract period.  GAO’s stated logic is as follows:

Exercising an option under a task order creates new contractual responsibilities for each party.  Here, for example, unless and until the options actually are exercised by the agency, SOSI [the task order awardee] is not legally obligated to provide the services contemplated by the options and, correspondingly, GSA is not legally obligated to pay for those services. However, those new contractual responsibilities do not exist in a vacuum, but instead, arise under, and are governed by, the terms and conditions of the underlying contract.  It follows that GSA cannot legally exercise the options included in the task order without a valid underlying FSS contact.

See page 8 of AllWorld

GAO’s “vacuum” legal theory misses the mark.  The terms and conditions of the underlying FSS contract do not preclude the exercise of an option on an order after the expiration of the contract.  Rather, FAR 52.216-22, which was included in the underlying FSS contract, establishes the legal framework for orders under IDIQ contracts.  The clause provides, in pertinent part, that:

Any order issued during the effective period of this contract and not completed within that period shall be completed by the Contractor within the time specified in the order.  The contract shall govern the Contractor’s and Government’s rights and obligation with respect to that order to the same extent as if the order were completed during the contract’s effective period; provided, that the Contractor shall not be required to make any deliveries under this contract after _______.

See FAR 52.216-22(d). (Emphasis added.)

This language specifically incorporates by reference in an order the underlying terms and conditions of the FSS contract.  It provides that performance shall be completed within the time specified in the order.  GAO’s “vacuum” legal theory would have one conclude that by exercising an option on an order, the underlying FSS contract terms and conditions magically disappear, despite already being incorporated by reference in the order.  The logic simply does not follow in the face of the plain language of FAR 52.216-22(d).  GAO misreads the clause and its legal effect.

As noted earlier, GAO’s decision does not cite any specific violation of statute or regulation in concluding the option could not be exercised.  Rather, it appears to be making policy outside the scope of its authority to address violations of statute and regulation. This result is especially unfortunate as contracting activities across government are struggling to address the decision.  Notwithstanding the fact that GAO “decisions” actually are recommendations, agencies and departments have cancelled orders and/or not exercised options as a direct result of the agency’s actions.  Further, the impact of GAO’s decision extends beyond the FSS program to potentially all IDIQ contracts.

It does not have to be this way.  As noted above, GAO’s conclusions are recommendations.  Thus, consistent with the law, agencies and departments can reach their own independent conclusions regarding options on orders and the meaning of FAR 52.216-22.  Further, to the extent agencies and departments seek to clarify their ability to include options and the time of performance, the following adjustments could be made to the key sentence in FAR 52.216-22(d):  Any order issued during the effective period of this contract and not completed within that period shall be completed by the Contractor within the time specified in the order, inclusive of any order option periods, if exercised. Alternatively, the clause could include a separate sentence defining the performance time specified in the order to include any option periods as exercised by the contracting officer.

Across the procurement community, there are growing rumblings regarding GAO’s bid protest authority.  These rumblings have had an impact.  Currently there is proposed language in the Senate’s NDAA that would eliminate GAO’s bid protest authority.  The House NDAA includes language seeking a study of the bid protest process and its impact on government and industry.  Unquestionably, over the years, the bid protest process has played an important role in ensuring fairness, accountability, and transparency in the procurement process.  In light of GAO’s impact on procurement operations government-wide, however, as well as its intrusion into matters settled, like here, is it any wonder that there is some consternation surrounding the process? Clearly, there may be misunderstandings on this issue, and a dialogue among members of the procurement community would be useful in allaying any concerns, like those mentioned herein. In the interests of promoting continuing improvement of the procurement system, the Coalition offers its resources to provide a forum for such a dialog.


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