This article is an excerpt from The Art of Tendering: A Global Due Diligence Guide, which is available for purchase.
Recent rulings by the U.S. Government Accountability Office (GAO) highlight the increasing use of negotiated Requests for Proposals (RFPs) with dialogue stages and best and final offers (BAFOs). While these decisions underscore the importance of due process, they also illustrate the legal defensibility of these procedures when they are properly applied and offer guidance to public institutions across all jurisdictions on the use of negotiated RFPs.
For example, in its April 2022 decision in Rice Solutions, LLC, the GAO ordered a re-evaluation after finding that the government applied unclear short-listing rules and improperly limited the dialogue stage and BAFO to a single proponent. The dispute dealt with an RFP issued by the Department of Health and Human Resources for certified registered nurse anesthetist services at a healthcare facility in South Dakota. The complainant alleged that the Department ran an unfair process since it only engaged in discussions with the awardee to the exclusion of other bidders. The GAO agreed. Citing the requirements of the Federal Acquisition Regulation, the GAO stated that “it is axiomatic that, in a negotiated procurement, once an agency chooses to conduct discussions, it must do so with all offerors in the competitive range, and that, when holding discussions, agencies may not engage in conduct that favors one offeror over another.” The GAO found that the Department failed to establish clear rules around the short-listing of proponents and improperly denied the complainant an opportunity to engage in dialogues and submit a BAFO.
With respect to the short-listing of proponents to a predefined “competitive range” of finalists, the GAO noted that “a competitive range is established for the purpose of determining which offerors will receive discussions, and to provide those offerors with an opportunity to revise proposals and address weaknesses and deficiencies.” The GAO cautioned that “an agency that fails to adequately document its evaluation of proposals or source selection decisions bears the risk that its determinations will be considered unsupported, and absent such support, our Office may be unable to determine whether the agency had a reasonable basis for its determinations.”
Further, the GAO found that the Department failed to show that it had developed a clear short-listing plan, noting that “the record is devoid of any documentation or support for the agency’s contention that a competitive range had been established before entering into discussions with only one offeror” and that “to the contrary, the sparse record evidences otherwise.”
The GAO ruled that in the absence of a predefined short-listing protocol, the Department was required to engage in dialogues with all proponents. As the GAO stated, “once an agency chooses to conduct discussions, it must do so with all offerors in the competitive range” and concluded that “because no competitive range had been established, the agency was required to conduct discussions with all offerors.” The GAO concluded that “the agency’s failure to do so–and its subsequent discussions with only the awardee–was, therefore, improper.” The GAO ordered the Department to redraft and re-tender its solicitation.
Similarly, in its September 2021 decision in Academy Leadership, LLC, the GAO ordered the government to reopen its dialogue process, receive updated proposals, and conduct a new evaluation process. The dispute dealt with an RFP issued by the Department of Homeland Security for leadership-focused training. The complainant challenged the Department’s evaluation, alleging that the Department provided insufficient feedback during its pre-BAFO discussions. The GAO agreed, finding that the Department “failed to point out during those discussions the significant weaknesses or deficiencies in the complainant’s initial proposal in order to give the complainant a reasonable chance for award.”
In fact, the GAO found that the Department “simply asked the protester for a price reduction, which did not suggest the agency’s true concerns, reflected in the technical flaws identified in Academy’s proposal.” The GAO ordered the Department to “reopen the procurement and conduct appropriate discussions with all offerors that participated in phase two of the procurement, request revised proposals, and make a new source selection decision.”
However, in its June 2022 decision in General Dynamics Information Technology, Inc., the GAO rejected a bid protest after finding that the government engaged in meaningful price discussions to assist the complainant in adjusting the pricing of its BAFO. The dispute dealt with an RFP for the Department of Defense for information technology services. The GAO stated that “it is a fundamental principle of negotiated procurements that discussions, when conducted, must be meaningful; that is, the discussions must be sufficiently detailed and identify the deficiencies and significant weaknesses found in an offeror’s proposal that could reasonably be addressed so as to materially enhance the offeror’s potential for receiving award.”
The GAO also stated that “an agency may not mislead an offeror through the framing of a discussion question or a response to a question into responding in a manner that does not address the agency’s concerns, or misinforms the offeror concerning a problem with its proposal or about the government’s requirements.” While the complainant alleged that the Department engaged in misleading discussions regarding its proposed direct labour rates and made “thinly veiled threats to reject the proposal for too low pricing”, the GAO disagreed, finding that “the obligation to provide an offeror with meaningful discussions does not obligate an agency to spoonfeed an offeror nor to, effectively, rewrite the offeror’s proposal by suggesting a specific approach.”
The GAO concluded that the complainant’s resulting price increases, which impacted its final score “were the result of its own independent business judgment.” In fact, the GAO found that “the record plainly supports that the protester made an independent business judgment to increase its proposed labor rates” and that the complainant was not coerced to change its pricing when the Department raised its legitimate concerns about the complainant’s low pricing. The protest was therefore denied.
As these cases illustrate, while dialogue RFPs, like all public procurement processes, remain subject to potential legal challenge, the outcome of those challenges will turn on the defensibility of the procedures used by a public institution in arriving at its evaluation and award decisions. Public institutions should therefore ensure that they adhere to due process standards when using these advanced procurement procedures.
