Determining which contract modifications are in scope vs. those that are out of scope is as much as art as a science. There have never been any firm regulations or guidance that provide a CO any assistance to make such a determination. Normally, a CO can modify a contract without violating the Competition in Contracting Act as long as the modification is “in scope.”
That’s exactly what happened when GAO denied a protest challenging an agency’s modification of a contract where the modification was within scope and of a nature that competitors could have reasonably anticipated at the time of award. Interestingly GAO used this case to explain the difference between an in scope and out of scope modification, as well as those factors GAO will use to determine whether the modification is permissible.
The GAO’s decision in Zodiac of North America, Inc., B-414260 (Mar. 28, 2017), involved a U.S. Army Contracting Command solicitation for a contractor to produce a seven-person inflatable combat raiding craft (I-CRC) and a 15-person inflatable combat assault craft (I-CAC).
The solicitation included purchase descriptions for the boats and motors. The submersible outboard motors required that “they propel a fully-loaded craft (2,120 pounds and 4,000 pounds, respectively) at 16 knots during sea state 1 (calm water) within two minutes.” In the RFP, offerors were required to provide two units of each boat for article testing. If the first article was disapproved by the government, and the government asked them to do so, the contractor had to make any necessary changes to the first article or select another first article for testing.
The Army evaluated proposals and awarded the contract. Zodiac, an unsuccessful offeror, protested the award to GAO arguing that the Army should not have found the awardee’s proposal technically unacceptable because their proposed boats did not meet the speed requirements in the solicitation. GAO denied the protest stating that Zodiac had proposed the same motors as the awardee, and the Army had reasonably relied on the awardee’s test reports demonstrating the product’s compliance with the solicitation’s speed requirements.
Unhappy with the GAO decision, Zodiac filed a Freedom of Information Act request. Zodiac found out that the Army had modified the contract requirements after the awardee twice failed product testing. These changes resulted in a 10 percent reduction in the propeller weight of the motors, a three-inch increase in the hard deck floor and storage bag, and removal of the airborne transportability requirement. Zodiac believed that these revisions created an improper sole source award contract and protested again.
In its next decision, GAO explained that the Competition in Contracting Act ordinarily requires “the use of competitive procedures” to award government work. However, “[o]nce a contract is awarded…[it] will generally not review modifications to the contract because such matters are related to contract administration and are beyond the scope of [its] bid protest function.”
A modification that changes the contract’s scope of work is an exception to this rule and is only a problem where there is a “material difference” between the modified contract and the original contract. A material difference exists when “a contract is so substantially changed by the modification that the original and modified contracts are essentially and materially different.” A material difference normally occurs when an agency increases a contract’s scope of work; however, allowing flexibility in the contract requirements post-award (as alleged by Zodiac) can also be a material difference.
In assessing whether there is a material difference, GAO will look to:
“[T]he extent of any changes in the type of work, performance period, and costs between the modification and the original contract, as well as whether the original solicitation adequately advised offerors of the potential for the change or whether the change was the type that reasonably could have been anticipated, and whether the modification materially changed the field of competition for the requirement.”
Using the factors they had outlined, GAO found that the modification did not substantially change the scope of the original contract, competitors for the initial solicitation could have reasonably anticipated the changes to the contract, and the changes to the contract would not have had a substantial impact on the field of competition for the original contract award. The deliverables still functioned as seven-person I-CRCs and 15-person I-CACs, and the awardee remained subject to the same performance period. GAO said there was not a material difference and denied Zodiac’s protest.
This finding is pretty interesting because I can see where Zodiac would feel like the government had made so many allowances to the awardee, they had created a sole source situation. However, GAO provided their guidance and outlined the factors they will use. In the end, they felt that there was no basis for the protest and denied it.