/>iIn January 2023, the U.S. Army Corps of Engineers (USACE) issued an invitation for bids (IFB) for a dune and berm replenishment and renovation project along the New Jersey coast. The USACE received two sealed bids for the project, but both bids exceeded the independent government estimate (IGE) for the project by over $21 million. When additional funding to support the project could not be obtained, the USACE canceled the IFB because, in its view, (1) the bids received were unreasonably high, (2) the bids received exceeded the IGE by more than 25%, and (3) the bids received exceeded available funding. The USACE then advised the bidders that it was changing the method of procurement to a FAR Part 15 negotiated procurement by converting the IFB to a request for proposals.
Great Lakes Dredge & Dock Company, LLC, the low bidder from the IFB, lodged a protest (Matter of: Great Lakes Dredge & Dock Company, LLC) with the Government Accountability Office (GAO) challenging the cancellation of the IFB and the conversion of the project to a negotiated procurement. Great Lakes contended that the USACE’s three reasons for cancelling the IFB did not provide a compelling reason to justify cancellation. When appearing before the GAO, the USACE abandoned the first two reasons for cancellation and asked the GAO to determine solely whether it was sufficient for the USACE to cancel the IFB based on a lack of funding.
The GAO described the standard for evaluating the USACE’s cancellation as follows:
Generally, when an agency issues an IFB and opens bids, award must be made to the responsible bidder that submitted the lowest responsive bid unless there is a compelling reason to reject all bids and cancel the IFB. The standard for canceling an IFB after bids have been opened differs from the standard for canceling a request for proposals after award, where an agency need only demonstrate a reasonable basis for the cancellation. The standard requiring a compelling reason for cancellation applies to IFB procurements because of the potential adverse impact on the competitive bidding system of cancelation after bid prices have been exposed at a public bid opening.
An agency’s determination that funds are not available is a sufficient reason to cancel a solicitation, as agencies cannot award contracts that exceed available funds. A contracting agency properly may cancel an IFB when sufficient funds are not available, regardless of any disputes concerning the validity of the government estimate. It is not our role to question the unavailability of funds; the management of an agency’s funds generally depends on the agency’s judgement concerning which projects and activities should receive increased or reduced funding. (internal citations omitted).
Given the deferential standard for canceling due to unavailability of funds, the GAO first determined that the USACE properly canceled the IFB under FAR subsection 14.404-1(c)(10). However, turning to the question of whether USACE properly converted the solicitation to a negotiated procurement, the GAO concluded that the USACE lacked authority to do so based on lack of available funding.
The GAO noted that the FAR only permits an agency to convert a sealed bidding procurement to a negotiated procurement “where the cancellation is pursuant to FAR section 14.404-1 subsection(c)(6) (only unreasonable prices were received, or only one bid for which price reasonableness cannot be determined); (c)(7) (bids were collusive or submitted in bad faith); and (c)(8) (no responsive bid received from a responsible bidder). FAR 14.404-1(e)(1).” Because the USACE had deserted its justification for cancellation based on the unreasonableness of the bids received in response to the IFB, it could not rely on FAR 14.404-1 subsection(c)(6) to pursue a negotiated procurement.
The USACE’s decision to cancel the IFB arose from FAR 14.404-1(c)(10), which permits cancellation based on other reasons clearly in the public interest, but that the FAR provision did not provide the USACE “with the authority to convert the sealed bidding procurement to a negotiated procurement.” Instead, the GAO found the FAR expressly precluded “a conversion in this circumstance, stating that instead, the contracting officer shall proceed with a new acquisition.” The GAO, therefore, sustained the protest and ordered the USACE to rescind its determination to convert the IFB to a negotiated procurement and reimburse Great Lakes for its reasonable costs, including attorneys’ fees.
This GAO decision highlights the importance of understanding the regulations applicable to any bid protest. The FAR regime can be complicated and difficult to parse, and agencies may, often inadvertently, skirt the limits of their delegated authority. Being able to navigate these complex provisions may be the key to a successful bid protest.
