A common contractor complaint is that the government rarely does things differently – that there is little, if any, initiative, in government contracting. Surprisingly, according to a little-known provision of the Federal Acquisition Regulation (FAR), innovation in government contracting is FAR policy. Even more surprising, perhaps, is that FAR gives contractors a role in making procurement innovative.

The FAR is not as prohibitive as many tend to believe. If something is not specifically addressed by the FAR, it does not automatically mean it is prohibited. Quite the opposite – if that “something” is not prohibited by law, executive order, or other regulation – it is allowed even if not expressly addressed by the FAR. In this manner, the FAR actually advocates for procurement innovation – stressing it in FAR 1.102 as a “guiding principle” for government procurement.

Also, a little-known FAR provision gives contractors a role in the government doing things differently. FAR 1-102(c) makes contractors a part of the “Acquisition Team:”

The Acquisition Team consists of all participants in government acquisition including not only representatives of the technical, supply, and procurement communities but also the customers they serve, and the contractors who provide the products and services.

FAR 1-102(d) begins by encouraging the Acquisition Team of government and contractors to use initiative:

The role of each member of the Acquisition Team is to exercise personal initiative and sound business judgment in providing the best value product or service to meet the customer’s needs.

Contractors should know that FAR favors innovation and should, therefore, encourage contracting officers to be innovative. According to the same FAR provision:

In exercising initiative, government members of the Acquisition Team may assume if a specific strategy, practice, policy or procedure is in the best interests of the government and is not addressed in the FAR nor prohibited by law (statute or case law), executive order, or other regulation, that the strategy, practice, policy, or procedure is a permissible exercise of authority.

Notice how different the FAR policy is from a “don’t rock the boat” mentality. FAR says something is okay if it is not prohibited or addressed in law or regulations.

Notice also that a contracting officer might ask you the wrong question: “Where does it say we can do that?” According to FAR, the correct question to ask is this: “Is what I want to do prohibited by law or regulation or specifically addressed in the FAR?” Before going further, it is important for contractors to make sure that a contracting officer knows about a critical distinction – i.e., distinguishing procurement from all other agency activities. It is perfectly okay for a government lawyer to ask agency staff the question “where’s your authority” whenever they wanted to do something different. That question is proper, even essential, for almost all agency staff to address for almost all agency actions. But, it’s the wrong question for procurement. The question the agency must ask for procurement activities is the opposite: “Where does it say we can’t do that?”

Innovations That Have Used FAR 1.102’s Innovation Policy

Online Reverse Auctions

This is perhaps one of the best examples of an innovation that passed the “not prohibited nor addressed” test. When the Department of Housing and Urban Development (HUD) was looking for a contractor to do annual property inspections, it wanted to use an online reverse auction process. One vendor objected to the process because it exposed vendors’ prices. The Government Accountability Office (GAO) found no reason to object to the process, however, because there was nothing in the FAR that addressed reverse auctions, nor were reverse auctions otherwise prohibited:

[W]hile the FAR does not expressly recognize reverse auctions as a permissible procurement vehicle for goods and services, neither does it expressly prohibit the government from using auctions, and FAR 1.102(d) provides that a procurement procedure is permissible where not specifically prohibited.

MTB Group, Inc., B-295463 (Feb. 23, 2005).

The most specific challenge to HUD’s reverse auction was based on a federal statute and the implementing regulations at FAR 3.104-3 and 3.104-4 that specifically address exposing an offeror’s prices. In GAO’s opinion, however, a reverse auction did not violate the statute. Acknowledging that the statute prohibits procurement officials from knowingly disclosing contractor quotation or proposal information before award, GAO noted that the statute does not “restrict the disclosure of information to, or its receipt by, any person or class of persons authorized in accordance with applicable agency regulations or procedures, to receive the information.” Nor did it “restrict a contractor from disclosing its own quote or proposal information or the recipient from receiving that information,” which is what offerors were doing in this case. Both occur in a reverse auction:

[V]endors actually will disclose their own prices—albeit, as a condition of competing—by entering the prices on the auction website…[and] the disclosure was being to persons authorized by agency procedures to receive the information, consistent with the exception language.

MTB Group, Inc., B-295463 (Feb. 23, 2005).

The vendor’s subsequent protest making the same arguments to the U.S. Court of Federal Claims (COFC) was also unsuccessful. MTB Group, Inc. v. United States, 65 Fed. Cl. 516, 525 (2005).

Innovative Increase in Small Business Participation

When the Transportation Security Administration (TSA) wanted to increase small business participation, it issued a solicitation requiring 40% small business participation based on total contract price. That standard was challenged as being improper based on FAR 52.219–9 and Subpart 19.7, which refer to small business goals in terms of a percentage of total subcontracting dollars and not the greater amount of small business participation that would result if a contractor used total contract dollars. The COFC sanctioned the higher standard based on the language of FAR 1.102(d), i.e., that such a standard was not addressed in the FAR. Since nothing in the FAR prohibits an agency from setting a small business goal expressed as a percentage of total contract price, the COFC ruled in favor of TSA. FirstLine Transp. Sec., Inc. v. United States, 107 Fed. Cl. 189 (2012).

Precedent Finding Improper Use of FAR 1.102

The only precedent that appears to show an agency using FAR 1.102 improperly involved the second part of the FAR test: whether the innovation was specifically addressed in FAR.

The decision involved a construction project for which the Department of Transportation improperly argued that it could use two “notices to proceed” (NTPs) on a construction project. The issue came up at the end of the project when the contractor filed a claim for government delay calculated from the date the government issued an NTP after the pre-construction conference. The government denied the delay claim, concluding that any delay should be measured from the NTP with off-site work it had issued the contractor several months before the pre-construction conference. In effect, the government argued that FAR 1.102-4(e) gave the government the discretion to issue two NTPs.

The Civilian Board of Contract Appeals (CBCA) rejected the government’s argument because FAR 1.102-4(e) allows such discretion only if not “specifically addressed in FAR.” Here, the applicable FAR construction clause (FAR 52.211-10, “Commencement, Prosecution, and Completion of Work”) specifically addressed NTPs—namely the one NTP issued after the pre-construction conference. As a result, the contractor was correct to measure delay from the “later” NTP.

In this case, the government’s position may have passed the first requirement of the two-part FAR test, but not the second since the delay calculation concerning NTPs was specifically addressed in the FAR (and the applicable clause was included in the contract). Tidewater Contractors, Inc. v. Dept. of Transportation, CBCA 50, 07-1 B.C.A. ¶ 33525.

Summary

Here are FAR 1.102’s three critical points:

  • Innovation is procurement policy;
  • Both the government and the contractor share responsibility for innovation;
  • The correct question to ask in carrying out the FAR’s innovation policy is: “Where does it say we can’t do it?”

Berenzweig Leonard  is teaming up with Red Team Consulting  for a monthly newsletter featuring “Words of Wisdom” as well as upcoming contracts, key protest decisions, events, and more. This post was published in the June 2019 newsletter. To sign up for our govcon newsletters, please click here.

Terry O’Connor is a Partner at Berenzweig Leonard. Terry and Stephanie Wilson  lead the firm’s Government Contracts practice. Terry can be reached at [email protected].

These “Words of Wisdom” have been adapted from an article written by Terry O’Connor, published in the National Contract Management Association (NCMA) publication Contract Management for June 2019.