Interview transcript

Terry Gerton You’ve got an interesting story about a protest this morning from a company who actually won the bid. Tell us about that.

Zach Prince Sure. So this involved a Department of Homeland Security procurement from ICE for detention services for folks detained for immigration law violations. So the protester here is a company, Active Deployment Systems. They’re a Texas-based company that markets itself as specializing in rapidly deploying and operating temporary facilities — so, exactly what ICE is looking for for this procurement. So ICE said that they were going to be issuing five or more IDIQ contracts, and then task orders would be competed for particular tasks. Each of the offerers would bid on only those types of tasks that they want to be considered for going forward. ADS, Active Deployment Systems — they received an award, but they were one of 42 offerers that received the award. And you get the sense reading the protest that they don’t like the fact they’re competing now with fewer, slightly fewer than they were competing with for the IDIQ award, but not many. So it’s still gonna be big, big competitions going forward. Maybe they’re trying to level or eliminate some of those competitors.

Terry Gerton So this was an IDIQ contract, right? Does this what does this tell us about the structure of these? Was ADS’s expectation reasonable in terms of the number of winners that they would have?

Zach Prince No, and in fact this is happening pretty commonly where agencies have these very large IDIQ awards that they might issue 50, 100+ individual IDIQs that, it does narrow the playing field a little bit going forward, but what it really does for the agency is speed along the competition for that next stage when they actually have the identifiable requirements that they’re going to have bids on.

Terry Gerton And you can kind of understand ADS’s perspective. I guess the fewer the competitors on — or the fewer the awardees — on the actual contract, the more likelihood they have of winning those orders and the higher their revenue might be. So their projections might have been off a little.

Zach Prince Yeah, that’s right. And you know, I think the better arguments that they had here, and maybe their real concern was about the price structure of this IDIQ. But the problem was that they raised these challenges while also submitting a bid for a contract they received, right. So to tell you a little bit more about that, for each of the objectives that you could bid on for this IDIQ, there was a set pricing volume that contained the government’s independent government estimate for what prices should be to be fair and reasonable. Among those estimates was a hard cap, essentially a hard cap on prices per bed per detainee. ADS argue that this harms them if they’re stuck with this because it might put them in a losing position going forward for the actual task orders.

Terry Gerton So the court kind of said that, well, the time to challenge that is not after you’ve won, but before you’ve won, right?

Zach Prince Yeah, that’s right. And they did try, to give ADS credit. They challenged this at the agency level and an agency level protest. But agency level protests don’t actually stop anything. They just tell the agency, hey, we think this is unworkable. You’re hoping the agency looks at it and says, Oh, yeah, you’re right. But here they didn’t. So, you know, ADS took a contract based on this price structure that they think isn’t proper. And as the court noted, they don’t have to bid on any task orders. So if they really think that this is a losing proposition for them, first of all, they shouldn’t have bid on the contract. And the same thing is true for the 50 something other offerors. But now they don’t have to take losing contracts. They can do the analysis on a task order basis and say, we don’t want to be part of this. Whether it’s good business for the agency, well, maybe not, but I think the agency was moving quickly and just wants to get this thing done for urgent needs to be fulfilled.

Terry Gerton I’m speaking with Zach Prince. He’s a partner at Haynes Boone. So we talked a little bit about ICE’s strategy and you’re seeing this more often in these IDIQs, where agencies will bring on a lot of winners and then use this as a means to simplify later competition.

Zach Prince Yeah, we are seeing quite a lot of this. And I think there are a couple reasons for it. One is perhaps strategically, from a protest perspective, that this — if you just issue contracts essentially to everyone who submitted a reasonably responsive offer, then you’re limiting the IDIQ level protests, which generally can be heard at various forums, Court of Federal Claims, GAO. Maybe then you could have protests of the task order competitions, but those are limited only to GAO and only when they’re above certain dollar values. So the protest possibility becomes much more limited. You also can only have protests for whoever bid on the initial IDIQ or from whoever bid on the initial IDIQ. So it might be a management of protest strategy. It might just be because if you can get a framework in place from the agency that has the pricing mechanisms and the ordering mechanisms, it makes it a lot faster to buy what you need later on.

Terry Gerton So do you take any lessons from this particular protest resolution on how the court views these kind of arguments?

Zach Prince Yeah, I think in general, even if you haven’t waived an argument because you didn’t bring it up before, which it usually is the case. That is, if you submit a proposal and you have arguments that the solicitation was ambiguous or otherwise flawed, you can’t then complain later. That’s not always the case if you’ve launched agency level protests like ADS did here or there’s some other exception. But you really can’t have your cake and eat it too in this regard. And contractors are in a tough position, because you don’t want to be kicked out of competition for choosing not to bid. You don’t want to annoy the customer by protesting, perhaps unnecessarily, in advance. But if you don’t have clarity on terms or you’re gonna have to accept terms you don’t like, the protest mechanism is what’s there for you.

Terry Gerton Then should contractors change the way they approach these large IDIQs? Is there a different competition strategy that they should be employing to be more competitive going forward?

Zach Prince I don’t think there really is, unfortunately. I think — I have this conversation with clients all the time where there is a very ambiguous RFP, RFQ. I don’t know what it means. The agency won’t respond to questions and it makes a significant difference for the business on how they put their proposal together. But if they don’t bid, then they’re totally out of the game. If they bid making assumptions that prove to be unwarranted because the agency thinks it means something else, they might take a loss. So they could protest and annoy the customer and potentially delay the procurement. They can’t always protest because the protest rights are not so sweeping. And it also costs a lot of money. Or they just proceed and hope for the best.

Terry Gerton Or as the court told ADS, don’t take an order.

Zach Prince Yeah, that’s right. And I think ADS is likely going to take orders. I mean that was what they told the court. They want to keep this contract.

Terry Gerton This is an interesting case, Zach. Thanks for sharing it with us today.

Zach Prince Sure. Thanks for having me, Terry.

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