For many contractors, the process of obtaining or renewing a Federal Supply Schedule (FSS) contract is a loathsome chore only slightly less painful than repeatedly sticking needles in one’s eyes. Firms with this attitude often “go along to get along”, choosing the path of least resistance between them and their coveted Schedule contract. As a result, they might get their contract sooner but they also sometimes end up with contract terms that are less than favorable in the long run. The recent Government Accountability Office (GAO) decision in Knight Point Systems, LLC, B-414183.3; B-414183.5 (May 31, 2017), reminds us that such pyrrhic victories can be avoided by taking the time to negotiate beneficial terms – and then consistently basing proposals to prospective FSS purchasers on those terms.
The protest involved a challenge to the issuance of blanket purchase agreements (BPAs) to three vendors under a request for quotations (RFQ) issued by the Department of Homeland Security (DHS) for agency-wide enterprise computing services and cloud computing services. The solicitation, which was limited to vendors holding a General Services Administration (GSA) FSS Contract 70, sought to afford DHS components the ability to acquire commercial, commodity-based Infrastructure-as-a-Service (IaaS) cloud services.
The RFQ contemplated the award of three to five BPAs on a best-value basis, considering price and four non-price evaluation factors, listed in descending order of importance: (1) breadth of IaaS cloud services solutions offered; (2) cloud service solutions experience; (3) customer service approach; and (4) past performance. Under the solicitation, Vendors were to list the specific IaaS cloud systems being offered and were allowed to structure their quotations as either a GSA Multiple Award Schedules (MAS) Contractor Teaming Arrangement or as a GSA Prime Contractor/Subcontractor arrangement. With respect to vendors opting the latter approach (as Knight Point did here), the RFQ stated that, “The Prime cannot contract to offer services for which it does not hold a Schedule contract.”
During evaluation, Knight Point’s technical rating was ultimately downgraded based on the agency’s conclusion that the majority of the services offered by Knight Point were not on its FSS contract. More particularly, only one of the multiple cloud service solutions proposed – and listed as required by the RFQ – was owned by Knight Point and listed by brand name on its FSS contract. The rest were cloud systems offered by its subcontractors.
When it learned that it had not been selected for award, Knight Point filed the protest, challenging DHS’ technical evaluation and the notion that all the cloud systems Knight Point offered in response to the RFQ had to be listed by name on its Schedule contract.
In its consideration of the issue, GAO first noted that the relevant inquiry when a concern arises that a vendor is offering services outside the scope of its schedule contract is whether the services offered are actually included on the vendor’s contract, as reasonably interpreted.
While it was undisputed that Knight Point ’s Schedule contract does not list cloud systems offered by its subcontractors by brand name, that lack reflects the conscious decision of Knight Point. As explained in its response to the RFQ, Knight Point took a different approach than some other Schedule holders by adopting a flexible approach that allowed it to offer cloud systems provided by its subcontractors while obviating the need to make constant updates to its GSA schedule contract. According to Knight Point, because its FSS contract lists generic product names and descriptions of cloud computer services that include the services sought in the RFQ, the services and functions offered by its proposed subcontractors fall within the item numbers and categories on its schedule contract. In other words, Knight Point argued that the services and functions it offers in this acquisition are the same as those included on its schedule contract.
In response, DHS acknowledged that the relevant issue was whether or not the services offered (rather than the brand names) are included on Knight Points FSS contract. However, it then contended – with no further explanation – that “Knight Point’s proposed subcontractor cloud services that are not offered on their schedule contract.” Unfortunately for the agency, the record did not support that bald assertion. For example, the final technical evaluation report concluded that no credit was due for the subcontractor cloud services providers because they “were not on [Knight Point’s] GSA schedule contract.”
Ultimately, GAO concluded on the basis of the record evidence that DHS had failed to reasonably consider this question and instead relied solely upon the fact that the proposed cloud systems were not listed by brand name on Knight Point’s FSS contract. In addition, GAO found that the agency failed to identify any requirement -- either within the RFQ or elsewhere -- that would restrict a vendor’s use of IaaS cloud systems to those systems that were listed by brand name on the vendor’s FSS contract.
Yes, Knight Point might have had an easier time getting its FSS contract had it simply gone along with the prevailing approach to FSS contracts for cloud services. But doing so would also have meant giving up the flexibility offered by the “harder” path it choose: describing the cloud services offered without identifying specific brand names. The more rigid tactic would have tied Knight Point to specific providers and limited its options when it came to responding to RFQs like that issued in this case. In contrast, by negotiating the FSS contract terms that fit its business model and preparing a quote consistent with those terms, Knight Point was able to position itself to successfully establish that the agency evaluation was unreasonable -- even when the RFQ reflected the more common approach. Contractors considering their FSS contract negotiation strategy should remember that such an outcome can be significantly more valuable than making it easy to get a Schedule contract in place.
Eric Whytsell is responsible for the contents of this Article.
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