By Paul Emanuelli

This article is an excerpt from The Art of Tendering: A Global Due Diligence Guide, which is available for purchase.

Avoiding unnecessarily restrictive requirements is one of the common core global standards that apply to open public procurement. The following sections discuss the increasing challenges faced by public institutions in adhering to these neutrality standards.

Public Institutions Face Specification Challenges

As evidenced by a long line of reported case law, suppliers are becoming increasingly vigilant in their pursuit of a level playing field and are launching an increasing number of bid protests challenging the government’s specifications on the grounds that they are unnecessarily restrictive to competition and contrary to governing open procurement rules.

Court Upholds Prequalification Requirement
In its December 1966 decision in City of Opa-Locka v. Trustees of the Plumbing Industry Promotion Fund, the Florida Third District Court of Appeal upheld a certificate of competency requirement in a prequalification process after finding no evidence that the requirement was used to promote local preferences or create unfair barriers to competition. As the Court stated:

Where competitive bidding is required, any ordinance which unduly limits the number of bidders thus tending to increase the cost of the work is void; in addition, such ordinances are void on the constitutional ground of discrimination. However, attempts to qualify bidders prior to the receipt of the bids have been sustained as long as the method of prequalification is unobjectionable. By statute, cities in New York having a population of one million or more may restrict bidding to those who shall have qualified prior to the receipt of bids according to standards fixed by the board of education.
The objective of § 10-3(b) Code of Metropolitan Dade County is reasonable insofar as it limits bidders to those who are responsible and competent. On its face, § 10-3(b) does no more than require that a bidder be certified as competent prior to bidding on a public works project. The procedure of prequalifying bidders must not be a scheme to promote favoritism among bidders, but must treat all alike. The record before us does not reflect the procedure whereby Dade County prequalifies bidders. We can not take judicial notice of municipal ordinances. We have, therefore determined that the chancellor was correct in finding that § 10-3(b), supra, is a valid legislative enactment.

As this case illustrates, while local preferences that create barriers to competition may be invalid, legal prohibitions against unnecessarily restrictive requirements do not preclude public bodies from establishing valid pre-screening conditions when those conditions are applied equally to all contractors, irrespective of their place of origin, and are otherwise rationally connected to contract performance.

Court Rejects Retroactive Attack on Specifications
In its September 1983 decision in National Advanced Systems Corporation v. The School Board of Orange County, the Florida Division of Administrative Hearings rejected a losing bidder’s after-the-fact challenge regarding allegedly biased specifications after finding the challenge to be untimely. The case dealt with an Invitation to Bid (ITB) for the lease of an IBM 3031 CPU and related equipment, “or their equal”. The complainant, referred to as NAS, failed to challenge the specifications during the bidding process, but then retroactively challenged the specifications after losing the bidding process. The Court ruled that a complainant cannot challenge specifications for alleged biased after the fact, and should instead challenge those specifications when they are first presented to ensure that the challenge is filed in a timely manner:

The more salient point in this examination of the specifications “issue” is that the specifications were set and unchallenged at the time of the bid opening and thereafter and the issue upon which the cause was remanded by the Fifth District Court of Appeal and provided for in the rules, that is, which bidder had the “lowest and best bid,” does not include a consideration of whether the equipment specified in the bid documents actually best suited the School Board’s needs. No preponderant evidence was adduced to demonstrate that the School Board acted arbitrarily or exceeded its discretion in determining its specific equipment requirements in this regard, especially in view of the unrefuted evidence in the record showing thorough and intensive study done by an objective evaluation committee made up of both School Board employees and outside consultants.
In any event, NAS has failed to timely challenge the specifications or the contract execution. Instead, it asked for and received various clarifications and interpretations to the 1980 bid specifications which were favorable to it and indeed rendered it assured of submitting a responsive bid. NAS never challenged the basis of the specifications until after it had lost the bid. In a similar vein, NAS never challenged the rental contract between IBM and the School Board, entered into in January, 1980, prior to collaterally attacking it in this proceeding. Even had the rental contract been timely challenged, the above rules only apply to purchases, thus the solicitation of three competitive quotes for rental equipment was not required in the first place.
This failure to timely challenge either bid specifications or the award of a public contract has not been looked upon with favor by Hearing Officers or Courts in most jurisdictions. A persuasive case from another jurisdiction is Saturn Construction Company v. Board of Chosen Freeholders, 181 N.J. Super. 403, 437 A.2d 914, 915 (1981), wherein the Court held that an unsuccessful bidder cannot challenge the specifications in an invitation to bid after the bids are actually opened. A similarly applicable opinion appears in Richardson Engineering Co. v. Rutgers, the State University, 51 N.J. 207, 238 A.2d 673, 679-80 (1968) Florida Courts, Hearing Officers and Administrative Agencies in a like manner have recognized that Courts and Hearing Officers should not lightly disrupt the public procurement process and that a challenge to a procurement process, specifications or award of bid, must be most prompt. See, Dedmond v. Escambia County, 244 So.2d 758, 761 (Fla. 1st DCA 1971); Wayne Blackwell and Company, Inc. v. Department of Health and Rehabilitative Services, 2 F.A.L.R. 648-A (1980).

The Court therefore dismissed the untimely complaint and upheld the School Board of Orange County’s contract award.

Court Rejects Restrictive Specification Challenge
In its March 1985 decision in Eastman Kodak Company v. Department of Health and Rehabilitative Services, the Florida Division of Administrative Hearings rejected an unfair specifications challenge after finding that the complainant failed to prove its claim. The case dealt with a tendering process for the purchase of used photocopiers. The complainant, Eastman Kodak Company (Kodak), challenged the requirement for used photocopiers, arguing that it was a restrictive specification that put the incumbent, Xerox, at an unfair advantage. However, the Court rejected this argument:

As was stated in the Findings of Fact, above, the solicitation was for used equipment and was admittedly aimed at procurement of the Xerox equipment already in the possession of and in place in DHRS. Nothing has been established by Petitioner, who bears the burden of proof in this case, to show that had Kodak been willing to meet the terms of the solicitation at a better price than Xerox, it would not have been given the award. To contend that the terms about which Kodak now complains are unduly restrictive and limit competition is stretching an argument beyond reason. It is simply unbelievable that Kodak does not have or have access to used equipment which would fill the needs of DHRS and which could be supplied at a competitive price. It is clear that Kodak chose to go another route, offering new equipment which was substantially more expensive than that asked for, with the possibility that such offer could be realized if the challenge to Xerox’s proposal was sustained.

While the complainant’s strategy of making a counter-offer for new equipment and then legally challenging the used equipment requirement ultimately proved unsuccessful, this case serves as a useful reminder to public institutions that they remain subject to legal challenge on the appropriateness of their specifications. Public institutions should therefore be prepared to defend those specifications against any allegations of bias or unnecessary restrictiveness.

Comptroller Strikes Down Branded Fitness Equipment
In its September 1998 decision in American Sports and Fitness Services, Inc., the Office of the New York State Comptroller struck down a contract award after finding that the State University of New York’s branded specifications constituted an unfair sole-source. The bid protest involved a Request for Quotation (RFQ) for exercise equipment containing a list that specified certain brands and stated “Must Be Equipment Listed – No Substitutes”. The Comptroller determined that the University had no basis for determining that the costlier equipment was worth the additional expense without quantifying its advantages through a competitive procurement. It therefore rejected the contract award.

Cancellation Upheld Over Restrictive Specifications
In its November 1999 decision in Neel Mechanical Contractors, Inc. v. Florida Agricultural and Mechanical University, the Florida Division of Administrative Hearings upheld the Florida Agricultural and Mechanical University’s decision to cancel a tendering process due to concerns over biased specifications. The case dealt with a tendering process for a chilled water plant construction project. The Court found no evidence of improper motive in the decision by the University, referred to below as FAMU, to cancel the tendering process due to concerns that an unnecessarily restrictive specification amounted to an improper sole-source:

The evidence presented by Neel Mechanical is not sufficient to establish with the requisite degree of certainty that FAMU acted fraudulently, arbitrarily, illegally, or dishonestly in deciding that it was in the best interest of FAMU to reject all of the bids submitted on May 11, 1999, for Project BR-389… [F]AMU’s concerns that, by inadvertently including a technical specification that could be met by only one manufacturer, it had limited competition with respect to the chiller to be used in Project BR-389 and had inadvertently put out an illegal “sole source” specification were legitimate concerns.

While the Court noted that the statutory right of a public institution to cancel a tendering process under Florida statute is “not unbridled” and remains subject to judicial review, it ultimately concluded that the cancellation decision was legally valid given the concerns over the potentially restrictive specification. The challenge to the cancellation decision was therefore rejected.

Branding Allowed Only as a Last Resort
In February 2002 in Re Cognos Inc., the Canadian International Trade Tribunal determined that the government was allowed to use branding in its specifications only as a last resort. The dispute dealt with a Request for Proposals (RFP) for an online analytical processing platform. The complainant challenged the government’s specifications, arguing that they improperly referred to a competitor’s brand.

The Tribunal recognized that the North American Free Trade Agreement (NAFTA) called for performance-based specifications that incorporate recognized industry standards:

The Tribunal notes that the fact that entities are responsible for determining their requirements does not relieve them from the obligation to ensure that the technical specifications that they prepare, adopt or apply do not have as a purpose or effect the creation of unnecessary obstacles to trade. Article 1007(2) of NAFTA is clear in this respect and stipulates that the technical specifications prescribed by entities must be specified in terms of performance criteria rather than design or descriptive characteristics and be based on international or recognized national standards, regulations and codes.

The Tribunal also found that the NAFTA and the World Trade Organization’s Agreement on Government Procurement permit “the use of a particular trademark or name, patent, design or type in preparing technical specifications only when there is no sufficiently precise or intelligible way of otherwise describing the procurement requirements.” In other words, purchasing institutions that are subject to trade treaties should, as a general rule, use branded specifications only as a last resort. In this case, the specifications were found to violate the neutrality standards of the applicable treaties, so the Tribunal ordered the government to cancel, amend, and reissue its RFP.

Skewed Past-Experience Weightings Ruled Out of Order
In December 2005 in the case of P&L Communications v. Public Works and Government Services Canada, the Canadian International Trade Tribunal found that the government’s evaluation weightings were skewed. The case involved a Request for Proposals (RFP) for media-monitoring services. As the Tribunal stated, “the current RFP unduly and inappropriately allocates points to bidders with more experience.”

The complainant contested the disproportionate weighting system, which awarded its competitor twenty-nine points for seven past projects and seven years’ experience while awarding it only seven points for five past projects and five years’ experience. The Tribunal agreed with the complainant’s claim that the weightings were skewed. The government was ordered to cancel its RFP, restructure its weighting scheme, and reinitiate its procurement process. As this case demonstrates, evaluation weightings should be rationally connected to the subject matter and should not create arbitrary and unbalanced scoring results.

Court Upholds Security Requirements
In its March 2006 decision in Liberty Behavioral Health Corporation v. Department of Children and Family Services, the Florida First District Court of Appeal rejected a bid protest that challenged the government’s prior experience requirements and alleged that the government’s specifications were unnecessarily restrictive. The case dealt with a Request for Proposals (RFP) for the construction and operation of a $500 million (USD) facility for sexually violent predators. The complainant challenged, among other things, the requirement in the RFP that the facility be built to meet prison security standards.

As the Court of Appeal summarized, the complainant had prior performance problems, having lost control of a facility that contained 500 sexually violent predators, which required the intervention of 450 law enforcement officers:

…it was uncontested that, during the course of Liberty’s performance of the existing contract, security problems had led to DCF and Liberty requesting and receiving assistance from the Department of Corrections (DOC) to reestablish command and control of Liberty’s current facility.   DOC, together with local law enforcement and a private security vendor, conducted an intervention at Liberty’s facility.   This intervention involved 450 law enforcement officers, during which Liberty’s population of approximately 500 sexually violent predators was again secured.   As a result of this incident, DOC and DCF entered into a contract for continued monitoring and oversight of Liberty’s facility.   Liberty presented evidence to show the security problems were less serious than perceived by DCF, but acknowledged the existence of security problems that implicated life safety issues at the facility prior to DOC’s intervention.
The hearing officer noted that whether Liberty adequately performed its obligation under the existing contract was not the issue in the specification protest.   Thus, Liberty’s factual claims regarding the level of security, the extent of command and control problems, and the extent to which Liberty did or did not cure security deficiencies, need not be resolved.   The hearing officer concluded the sole issue for resolution was whether DCF’s decision to include the challenged RFP specifications was arbitrary and capricious or, stated differently, whether DCF’s decision to include the specifications was supported by logic so that it was not irrational.   The hearing officer found the decision to include the specifications was reasonable, and within the agency’s discretion.   The hearing officer’s order resulted in Liberty filing the second appeal.

After finding that the prior experience requirements were not arbitrary, the Court of Appeal also ruled against the complainant’s allegations that building the facility to prison standards was an unreasonably restrictive specification:

The dangerous nature of the individuals to be committed, and the fact that they are required by statute to be committed to a secure facility, supports DCF’s decision to require the sexually violent predator treatment facility be constructed to the security specifications of an ACA approved prison, and that bidders have correctional experience. Further support for the contested RFP specifications can be found in DCF’s “real world” experience of Liberty’s management of the existing facility.   During this time Liberty lost control of its sexually violent predator population.   The loss of control required DOC intervention to regain command and control of the facility and resulted in continued DOC monitoring. DCF’s decision to include the challenged RFP specifications was rational and supported by logic and reason.   The fact that the challenged specifications may preclude Liberty from bidding does not render DCF’s decision to include them arbitrary and capricious.

The Court of Appeal therefore upheld the RFP requirements and rejected the bid protest. As this case illustrates, since specifications remain subject to legal challenge, public institutions should be prepared to defend the reasonableness of those specifications against allegations that they are unnecessarily restrictive to competition. The determination of these challenges will ultimately remain a fact-specific analysis based on the evidence presented by the parties to the bid protest.

Comptroller Overrules Branded Golf Cart Specifications
In its July 2009 decision in Textron Inc., the Office of the New York State Comptroller rejected a contract award by the Department of Parks and Recreation due to branded specifications. The dispute involved a solicitation for 50 electric golf carts that named a specific manufacturer. The Department defended the specifications on the basis that the branded golf carts came with lighter aluminium frames, which caused less wear and tear on the golf course. The Comptroller disagreed, finding that the Department was unable to provide any empirical evidence to support its claim regarding the branded technical specifications. The contract award was denied.

Tribunal Finds Bias Buried in Technical Specifications
In its May 2010 determination in Halkin Tool Limited v. Department of Public Works and Government Services, the Canadian International Trade Tribunal determined that the government used biased specifications in a hydraulic press brake Request for Proposals. The Tribunal ordered the government to cancel its procurement process and redraft its RFP using specifications that complied with the applicable treaty rules.

In its determination, the Tribunal considered the technical details of the challenged specification and ultimately determined that they breached the relevant requirements by referring to a specific design or type, rather than referring to generic functionalities:

Article 1007 of NAFTA provides as follows:
  1. Each Party shall ensure that any technical specification prescribed by its entities is, where appropriate:
1. specified in terms of performance criteria rather than design or descriptive characteristics; and
2. based on international standards, national technical regulations, recognized national standards, or building codes.
3. Each Party shall ensure that the technical specifications prescribed by its entities do not require or refer to a particular trademark or name, patent, design or type, specific origin or producer or supplier unless there is no sufficiently precise or intelligible way of otherwise describing the procurement requirements and provided that, in such cases, words such as “or equivalent” are included in the tender documentation.
Halkin submitted that the mandatory requirements for the solicitation at issue were not specified in terms of performance criteria, but rather made reference to a particular design or type, namely, clevis-mounted hydraulic cylinders and centreline loading construction. PWSGC, on the other hand, submitted that the mandatory requirements support DND’s legitimate operational requirements and are generic in nature and not specific to any particular design.
In the Tribunal’s opinion, the requirements set out in mandatory technical specifications 2.1.2 and 2.1.17 refer to a particular design or type and cannot be construed as being generic in nature. It is clear to the Tribunal that, in making reference to clevis-mounted hydraulic cylinders and centreline loading construction, PWGSC was making reference to a design or to descriptive characteristics for the product that it was procuring rather than specifying the performance that it was seeking to achieve through the particular design, even if this type of design is well known in the industry.
In its GIR, PWGSC included a letter dated January 28, 2010, signed by a DND employee (a professional engineer) who was involved in establishing the technical specifications for the solicitation at issue in which the employee claims that the concepts of clevis-mounted hydraulic cylinders and centreline loading construction are not specific to any particular design. However, the Tribunal notes that, despite this claim, the letter includes the following passages: “…the use of the clevis mounting creates a superior design…” and “[t]he placement of the cylinders directly over the ram in the centre-line loading construction concept yields a simplified design… .” This only serves to reinforce the Tribunal’s belief that the requirements set out in mandatory technical specifications 2.1.2 and 2.1.17 refer to a particular design or type.
By not including words such as “or equivalent” in these specifications, as required by Article 1007(3) of NAFTA and the similar provisions of the other applicable trade agreements, hydraulic press brakes based on other designs, which can potentially meet DND’s operational requirements, are precluded from being considered by PWGSC. The Tribunal finds that such an omission creates or has the effect of creating an unnecessary obstacle to trade.
Therefore, in light of the foregoing, the Tribunal determines that Halkin’s complaint, insofar as it relates to the improper formulation of the mandatory technical specifications, is valid.

In light of the above, the Tribunal determined that “not framing requirements in accordance with the applicable trade agreements represents a serious deficiency in the procurement process.” As this case illustrates, the consideration of biased specifications will often be a complex assessment of facts requiring a close understanding of the relevant technical details. In these situations, qualified technical subject matters experts should be responsible for preparing defensible neutral specifications.

Comptroller Strikes Down Prior Experience Requirement
In its September 2010 decision in Robert Konefal, the Office of the New York State Comptroller rejected a Department of Environmental Conservation contract award due to unnecessarily restrictive prior experience requirements. The dispute involved an Invitation for Bids (IFB) for a cafeteria and cocktail lounge concession. The solicitation required five years’ experience over the last ten as a concessionaire. This led to only one responsive bid. The Comptroller ruled that the requirement of experience as a concessionaire, as opposed to general food and beverage experience, was unnecessary since other state contracts did not contain that same requirement. The contract award was rejected.

Court Upholds Rejection of Alternate Bid
In its March 2011 decision in L. Cobb Construction v. Hardee County School Board, the Florida Division of Administrative Hearings upheld the Hardee County School Board’s right to reject a bid that contained unauthorized alternative materials. The case dealt with a tendering process for the award of a school roof removal and replacement project contract. The plaintiff’s bid was rejected due to its inclusion of alternate material and, consequently, it brought a bid protest challenging the rejection.

As the Court summarized, the School Board acted appropriately in rejecting the alternate bid and in not allowing the plaintiff, referred to as Cobb below, to provide further information to substantiate the equivalency of its alternative materials after the bid submission deadline, since this would have given the plaintiff an unfair advantage over other bidders:

The School Board’s stated rationale for rejection of Cobb’s bid was that the generic description of Cobb’s proposed building materials made it difficult, if not impossible, to ascertain whether they met the standards set forth in the Project Manual. This rationale is neither arbitrary nor capricious and is based on sound reasoning. Cobb’s bid, although more generic than the School Board would have liked, was nonetheless a viable bid. Cobb would have been able to explain and make his bid more specific had he been given the opportunity. However, the School Board did not owe Cobb the right to alter, amend, or explain its bid more fully after the bid process was complete. To do so would give Cobb an inequitable advantage, vis-à-vis, the competing bidders. It is very likely that Cobb could effectively and professionally complete work on the Project. However, its bid was not exactly in accordance with the requirements of the Project Manual and was justifiably rejected in favor of Latite’s bid.

The Court also concluded that the plaintiff’s failure to establish the adequacy of its alternate materials was not a minor irregularity, since the alternative materials could have been less costly and thereby could have given the plaintiff an unfair advantage over its competitors:

Cobb’s failure to provide a list of products or materials that could be deemed equal to those set forth in the Project Manual’s specifications was not a minor irregularity.  If the products were inferior or less expensive and there is insufficient evidence in the record to determine one way or the other, then Cobb may have had an improper advantage over its competitors.

The Court therefore upheld the rejection of the plaintiff’s bid and the award of the contract to a compliant competing bidder. As this case illustrates, the review and acceptance of alternate materials should be conducted during the pre-bid stages of the procurement process, as the ability to confirm alternates during a bidding process, or after the submission of bids, is subject to significant timing and legal restrictions.

Court Rules Against Biased Bus Specification Challenge
In its August 2013 decision in the Matter of Staten Island Bus Inc. v. New York City Department of Education, the New York Supreme Court ruled against an incumbent bus operator that had challenged the New York Department of Education’s employee protection provisions. The incumbent operator argued that the provisions put it at a competitive disadvantage against other bidders who would not be subject to the requirements after the future validity of the provisions was cast into doubt by a New York Court of Appeal decision. The operator argued that the provisions, which dated back to a 1979 strike, should therefore be struck out of its existing contract in order to maintain even competition among operators in future bids. As the Court noted:

Petitioners did not bid on any of the service routes covered by the December RFB. They claim that they were hobbled by the EPPs contained in their existing contracts, and that these EPPs would have required them to include higher labor costs in a bid for routes covered by the December 2013 RFB. Petitioners argue that these higher labor costs caused by the EPPs had this negative effect on the bids of incumbent venders who did bid on the December RFB. Petitioners assert that incumbent vendors were unable to submit competitive bids. It appears that only one vendor with another continuing contract with DOE was awarded any of the service classes included in the December RFB.

The Court noted that the incumbent operator interpreted its current contracts as requiring it to maintain the employment protection provisions in future contracts with the Department due to the phrase “or thereafter” contained in the provisions. The Court disagreed with that interpretation, finding that:

The words “or thereafter” do not carry the heavy freight assigned to them by petitioners. The phrase says nothing about future contracts with the DOE. Any attempt to make the EPPs apply to future contracts would run athwart the public policy that governmental entities must be free to enter into contracts that address the changing needs of the public, the availability of public funds, and a host of other factors. As the Court of Appeals stated in Varsity Transit Inc. v Saporita (48 NY2d 767, 768):
The inclusion of certain requirements in bid specifications contained in prior public contracts does not comprise an implied representation that similar requirements will be mandated with respect to subsequent contracts.

The Court therefore ruled against the incumbent operator, finding that it failed to make the case that it was being subject to a competitive disadvantage since it would not be required to maintain the employment protection provisions in future contracts unless those provisions were made part of the Request for Bids (RFB) for all operators. As this case illustrates, the performance standards established under government contracts should be uniformly applied to ensure a level playing field between competing bidders.

Court Upholds Rejection of Specification Change
In its July 2014 decision in Skansa USA Civ. Northeast Inc. v. City of N.Y. Office of Administration, the New York Supreme Court upheld an engineer’s decision to reject a contractor’s specification change request. The case dealt with a contract for a piping system improvement project in wastewater treatment plants. That contract required the contractor to furnish and install 12-inch manual hand-wheel-type coupling produced by a specified manufacturer. After bidding on and being awarded the contract based on that specification, the contractor requested that the specification be changed to a ratchet lock pipe produced by a different manufacturer. The engineer for the Department of Environmental Protection refused the change request. The contractor challenged the refusal before the Contract Dispute Resolution Board, but the Board upheld the engineer’s decision. The contractor appealed that ruling to the New York Supreme Court, which also upheld the engineer’s decision. As the Court stated:

Because the contract does not require the Engineer to justify the basis of the rejection, petitioner’s argument that the Engineer should have given a more extensive written analysis as to the substitution is without merit… the question of whether the proposed ratchet coupling is equivalent in type, function, and quality to the hand-wheel coupling manufactured by someone else is not a matter of contract interpretation. Deciding the question might call for specialized knowledge, and the contract clearly placed that question solely within the purview of the Engineer.

The Court also stated that even “if the Engineer erred, the contract unambiguously designates the Engineer as the sole judge of whether the proposal substitute is an “approved equal”, and the Engineer’s determination is final.” The Court concluded by ruling that it “may not rewrite nor distort” the contract specification “by substituting its judgment for that of the Engineer under the guise of contract interpretation.” As this case illustrates, the courts will tend to defer to the sanctity of contract terms in order to help preserve the certainty of contracts, and will be reluctant to substitute their own interpretations for those of subject matter experts responsible for managing and interpreting technical standards within contracts.

GAO Rejects Restrictive Wound Dressing Specifications
In its January 2015 decision in Smith and Nephew, Inc., the U. S. Government Accountability Office (GAO) found that the Department of Veteran’s Affairs issued a solicitation with unnecessarily restrictive specification. The case dealt with a solicitation for sterile wound dressings. The complainant alleged that the required dressing absorption capacity was not necessary to meet the Department’s needs and therefore undermined fair and open competition. Rather than explaining how the requirements were geared to actual needs, the Department maintained that its goal was to “procure the most absorbent and fluid-handling capable dressings available” and therefore selected a “top tier” product. The GAO found that the Department had the onus of establishing that the requirement reasonably met its needs and that it failed to meet that onus:

To the extent a protester challenges a specification as unduly restrictive, that is, challenges both the restrictive nature of the requirement as well as the agency’s need for the restriction, the procuring agency has the responsibility of establishing that the specification is reasonably necessary to meet its needs. The adequacy of the agency’s justification is ascertained through examining whether the agency’s explanation is reasonable, that is, whether the explanation can withstand logical scrutiny. Trident World Sys., Inc., B-400901, Feb. 23, 2009, 2009 CPD 43 at 3.
We find the RFQ here to be unduly restrictive because the agency has not explained how the challenged specification is reasonably necessary to meet an actual need of the agency. As an initial matter, we observe that the agency has failed to identify an absorbency threshold (or range) that actually is needed by the government, but has instead identified a general “goal” of attaining “top tier” absorbency. While we recognize that the VA is entitled to great discretion in establishing its medical needs, the agency has offered no support for limiting the competition to offerors whose products can meet the specific threshold of 20 g/10cm2/24hr instead of any other number (lower or higher).

The GOA found that in developing its restrictive specifications, the Department ignored the market information it had collected in a prior Request for Information (RFI) process:

Beyond this issue, we also observe that the VA acknowledges it established the specification based only on information it received in response to the RFIs, and that it relied on this information because it knew of no supporting market research or industry standard for any specific fluid handling value. AR, Tab 6b, E-Mails Related to Second RFI, at 7. However, as shown above, only one response–[deleted] response to the first RFI–represented that a product could meet the 20 g/10cm2/24hr specification, and that representation was contradicted by another test result from the same vendor, for the same product, showing a capacity of 10 g/10cm2/24hr (half the required value).
Moreover, the agency made its decision in the face of considerable product data from other vendors indicating that the 20 g/10cm2/24hr specification was higher than any known product could achieve. See, e.g., AR, Tab 6b, [deleted] Response to the Second RFI, at 11-16.
Additionally, the agency seems to have ignored data provided by two of the vendors showing that the 20 g/10cm2/24hr specification significantly deviated from standards derived from clinical studies and industry usage. See id. at 11; AR, Tab 6e, [deleted] Response to the Second RFI at 30. Given the nature and amount of contradictory information that was presented to the agency, and the agency’s apparent failure to reasonably determine whether the 20 g/10cm2/24hr specification was nonetheless necessary, we find that the agency’s decision to rely on a single, internally inconsistent result from one vendor to establish its minimum requirement does not withstand logical scrutiny.

The GAO directed the Department to engage in an internal review process that properly documented its product requirements and to develop revised RFQ specifications that were appropriately aligned to those needs.

Court Upholds Chopper Specifications
While it gave standing to a non-bidder, in its February 2015 decision in Airbus Helicopters Canada Ltd. v. Canada (Attorney General), the Federal Court of Canada ultimately rejected the legal challenge of a supplier who alleged that the government’s specifications were biased in favour of a competing supplier. The case dealt with a federal government tender call for a $172 million (CAD) light-lift helicopter purchase. The applicant, Airbus Helicopter Canada Ltd., brought a judicial review application after it engaged in pre-bid consultations with the government but then refused to bid due to what it alleged were biased specifications. As the Court noted, the case was unique when compared to most other judicial review challenges in that the complainant never actually submitted a bid in the challenged process. One of the key issues in the decision was whether the complainant had the right to initiate a legal challenge in those circumstances. The Court ultimately concluded that the applicant did have standing to bring the lawsuit since the government had engaged in pre-bid consultations regarding its requirements.

The Court found that the government was under a duty to develop fair and unbiased specifications, and also found that the government’s market outreach created legitimate expectations that all consulted suppliers would be treated fairly during the consultation process. While the Court determined that the government’s specification-setting decision was subject to a more deferential reasonableness standard, it also concluded that the consultation process leading up to the creation those specifications was subject to a more stringent correctness standard. However, notwithstanding the right to challenge the specification-setting decision and the process that led to that decision, the Court ultimately held that the complainant failed to make its case. With respect to the Minister of Public Works and Government Services’ technical decision on the helicopter specifications, the Court found the favouritism alleged by the applicant was never proven.

Court Upholds Bus Safety Standards
In its March 2015 decision in the Matter of Blueline Commuter Inc. v. Montgomery County, the New York Supreme Court – Appellate Division upheld the safety standards established in a school bus services Request for Bids (RFB) process. A bus contractor challenged the safety requirements, which exceeded statutory minimum standards by requiring that contractors have a fleet-wide out-of-service rate of less than 15 percent. The Court rejected the contractor’s challenge after finding that the RFB specifications were not anti-competitive since they did not create a situation where only one contractor could meet the required standard or result in unfair dealing or statutory violations:

Municipalities are permitted to include bid specifications that may be more favorable to some bidders over others, as long as the public interest is served and the specifications are not intended to ensure that one particular bidder be awarded the contract…
Including specifications in a request for bids often has the effect of disqualifying some potential bidders who cannot meet those specifications, but this reality does not invalidate those specifications. If a challenged specification is not facially anticompetitive, courts apply “ordinary rational basis review” in assessing its validity… [A] petitioner bears the burden of demonstrating that the inclusion of the challenged specifications, and the ultimate award of the contract, was the product of actual impropriety, unfair dealing or statutory violation…

Rather than being unlawful, the Court found that Montgomery County’s safety standard was validly rooted in the public interest:

The County’s bid specification requiring an out of service rate of less than 15% is not facially anticompetitive, as that standard does not, in and of itself, guarantee the award of the contract to a particular bidder…[T]he bid specification here, requiring a safety rating higher than the minimum allowed by DOT for a motor carrier to continue operating within the state, does have some rational basis rooted in the public interest, namely, attempting to assure the safety of children being transported under the County’s care.

The Court therefore dismissed the challenge, finding that the complainant had failed to establish that the requirements were improper, created an unfair process, or contravened applicable statutory provisions. As this case illustrates, while government bodies remain subject to legal challenge when establishing bid evaluation and contract performance standards, they retain the right to set such requirements provided that those requirements do not run contrary to applicable legal standards.

Court Rejects Challenge to Equity Requirements
In its March 2015 decision in David Riggins v. Polk County, the United States Court of Appeals dismissed an equal protection lawsuit launched by a white male who challenged the Polk County bidding procedures that allow women-owned and minority-owned businesses bidding on municipal contracts an opportunity to match the lowest qualifying bid if their original bids are within five percent of the low bid. The lawsuit was dismissed on technical grounds since the trial court found that the unrepresented complainant had bid under his corporate business but had then attempted to sue as an individual since applicable court rules required corporate plaintiffs to be represented by legal counsel. The trial court did not allow the plaintiff to end-run the legal representation requirement by bringing the lawsuit in his personal capacity. The Court of Appeals upheld the trial court decision and dismissed the appeal. The challenge was therefore rejected.

Slow Payment Terms Breach Procurement Rules
In its March 2015 decision in CGI Federal Inc. v. United States, the US Federal Court of Appeals ruled that delayed payment provisions contained in the federal government’s Medicare and Medicaid overpayment recovery contracts violated government regulations that mandate commercially reasonable contract terms with suppliers.

The case dealt with a federal government Request for Quotations (RFQ) issued in 2014 for overpayment recovery services relating to the federal Medicare and Medicaid programs. The contract terms contained in the new RFQs amended prior payment provisions that typically entitled government contractors to commission payments for the collection of Medicare and Medicaid overpayments 41 days after the issuance of a demand letter. The contract terms in the new 2014 RFQs required government contractors to wait until the overpayment demand process passed the second level of a five-level appeal process, which, as the Court noted, “typically occurs somewhere between 120 and 420 days after the demand letter.” Rather than bidding on the new terms, CGI filed a bid protest. The US Court of Federal Claims rejected the protest after ruling that the payment terms did not violate statutory or regulatory provisions.

CGI appealed. The US Federal Court of Appeals reversed the trial decision, ruling in favour of CGI after finding that the revised payment terms in the new federal government RFQs were in contravention of Part 12 of the Federal Acquisition Regulations, which prohibit the federal government from including terms in its solicitations or contracts that are inconsistent with customary commercial practice.

European Court Strikes Down Subcontract Requirements
In its January 2016 decision in Ostas celtnieks SIA v. Talsu novada pašvaldība, the European Court of Justice ruled that a Latvian municipality’s requirement that contractors enter into prescribed co-operation agreements with their subcontractors was unnecessarily restrictive and contrary to the European procurement directive. The case dealt with a road repair contract. The bidder successfully challenged the co-operation agreement requirement since the Court found that under European law, “the tenderer is free to choose…the legal nature of the links it intends to establish with the other entities on whose capacities it relies in order to perform a particular contract.”

Tribunal Overrules Unfair Timing Requirements
In its November 2016 determination in Springcrest Inc. v. Department of Public Works and Government Services, a dispute over a frigate pump RFP, the Canadian International Trade Tribunal issued a redraft order after finding that the Department of National Defence had imposed unfair timing requirements for alternate product certifications. The Tribunal found that the timing requirements were unfair since they required the testing of alternate products prior to bid closing. It therefore ordered the Department to redraft the solicitation to remove the testing requirement or to permit more time to obtain the required certifications.

GAO Overrules Experience Requirements
In its December 2016 decision in Xtreme Concepts Inc, the U.S. Government Accountability Office (GAO) ordered a re-evaluation after deciding that the Army had unfairly evaluated the complainant’s lack of past government experience. As the GAO noted, the relevant federal acquisition regulations and RFP rules called for a neutral evaluation score when a bidder had no record of relevant past performance with the government. However, the GAO found that the complainant was improperly rejected on past performance grounds even though it offered the lowest cost and its overall score was higher than an accepted competing bidder. The GAO therefore ordered a re-evaluation of the unfair contract award process.

GAO Strikes Down Restrictive Requirements
In its February 2017 decision in Pitney Bowes, Inc., the U.S. Government Accountability Office (GAO) ordered the redraft of a solicitation document after finding that the government failed to justify the challenged specifications. The case dealt with a Request for Quotations (RFQ) for mail inserter/folder machines that could be reloaded “on the fly” and could handle all types of envelopes. The complainant challenged the specifications as unduly restrictive and asserted that they constituted a de facto sole-source. The GAO agreed, finding that the government failed to establish that the specifications were reasonably necessary to meet its operating needs.

European Court Upholds Performance Security
In its July 2017 decision in Ingsteel and Metrostav v. Úrad preverejné obstarávanie, the European Court of Justice ruled that a public body was permitted to screen bidders for letters of credit when assessing tender compliance. The case dealt with a €25.5 million Invitation to Tender (ITT) for restructuring, modernizing, and building 16 football stadiums in Slovakia. The complainant’s bid was rejected after it was unable to provide the required letter of credit in the prescribed form and instead provided a sworn statement confirming that it could provide the letter if its bid was successful. The Court rejected the complaint and ruled that a letter of credit was a valid bid requirement under European law.

GAO Strikes Down Airtanker Restrictions
In its November 2017 decision in Global SuperTanker Services, LLC., the U.S. Government Accountability Office (GAO) ordered the redraft of a solicitation after finding that the government was unable to defend the challenged specifications. The case dealt with an RFP for airtanker services for wildlife firefighting. The complainant challenged the government’s 5,000-gallon maximum size restrictions, arguing that it unduly limited competition. The GAO agreed, noting that the government had the onus of justifying restrictive specifications and stating that after reviewing the record it was “unable to conclude that the specifications included in the RFP are necessary to meet the agency’s needs.”

Future Considerations
As these cases illustrate, public institutions should carefully consider the requirements set down in their solicitation documents to ensure that they do not create unnecessarily restrictive barriers to open competition, since requirements are coming under increasing scrutiny and the introduction of unnecessary barriers to competition creates a heightened risk of legal challenge.