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June 24, 2022

Contractors Must Dance With the IDIQ That Brought Them: Protester’s Too Late Objection to Task Order Solicitation That Mirrors the Base Contract Solicitation


Indefinite Delivery/Indefinite Quantity (IDIQ) contracts are intended to simplify contract competitions in several ways. IDIQ contracts reduce the field of competitors for each task order to the pool of awardees, but they also narrow the terms of the competition by establishing rules of the road applicable to all task order competitions. The GAO recently held in Enterprise Resource Performance, Inc., B-420714, that where an IDIQ solicitation states that every task order competition under that contract will use a particular source selection approach, a protester cannot object when that approach later appears in a task order solicitation, however prejudicial that term may be to the protester. This is another in a series of recent GAO decisions (see here and here) reinforcing the importance of careful consideration of the terms of any solicitation prior to award. In Enterprise Resource Performance, the lesson for contractors is clear; if you anticipate any problems abiding by the rules of the road set out in the IDIQ solicitation—even those related to future task order competitions, you must speak prior to submission of proposals for the IDIQ contract. Conversely, if you hold your fire until the problem emerges in a subsequent task order competition, it will be too late. The case also presents a cautionary tale for small businesses that are contemplating acquisition at the same time they compete for set-aside IDIQ contracts.

For context, the protester ERPi was a service-disabled veteran‑owned small business (SDVOSB) that competed for, and won a place in, the Veteran Enterprise Contracting for Transformation and Operational Readiness (VECTOR) IDIQ, an SDVOSB-only IDIQ contract issued by the Department of Veterans Affairs (the VA or Agency). ERPi made no objection during the 2016 competition to the mandatory term in the IDIQ solicitation explaining that the Agency reserved the right to evaluate and award based on cascading tiered set aside system. "Tier 1" the preferred set of competitors were SDVOSBs that subcontracted only to other SDVOSBs and veteran-owned small businesses (VOSB). Less preferred tiers were established for use if insufficient competition existed in the preferred tiers: Tier 2 for SDVOSBs that subcontracted to other small businesses; and Tier 3 for SDVOSBs that subcontracted with large businesses, and joint ventures that include large businesses. IDIQ contract awardees that lost SDVOSB status were to be either off-ramped from the IDIQ altogether, or relegated to Tier 3 for the remainder of the base contract term.

ERPi was awarded an IDIQ contract as a Tier 1 awardee, and successfully competed for a task order shortly after contract award (TO 19). After this initial success, however, ERPi lost its small business status.1 On April 1, 2022, the Agency issued its solicitation for VECTOR TO 88, which was a "follow on" requirement to TO 19, previously awarded to ERPi. The TO 88 solicitation established a best value award process, and stated that "proposals would be evaluated using the mandatory tiered set-aside evaluation approach established in the VECTOR IDIQ solicitation."

ERPi filed its pre-award protest before the deadline for proposal submission in response to the TO 88 solicitation. ERPi principally challenged the terms of the TO 88 solicitation, contending the "tiered set-aside evaluation approach conflicts with the use of a best-value tradeoff process because it 'restricts the Agency from evaluating all proposals under the stated evaluation factors.'" The Agency requested that GAO dismiss the protest as an untimely challenge to the terms that the base IDIQ solicitation established for future task order awards. ERPi opposed dismissal, contending that it was not challenging the tiered evaluation approach generally but rather the Agency's ability to use that approach in this task order competition that called for award to the best value offeror.

GAO granted dismissal and disagreed with ERPi on several grounds. Most importantly, GAO emphasized that base IDIQ solicitation made clear that the VA would apply the tiered set-aside evaluation approach regardless of the evaluation criteria and award methodology specified. Therefore, GAO reasoned, ERPi was on notice beginning in 2016 that "regardless of whether a future TO solicitation used [a Lowest-Price, Technically-Acceptable], best-value tradeoff, or some other award methodology," the Agency would begin evaluating proposals in the Tier 1, SDVOSBs teaming or subcontracting with SDVOSBs or VOSBs, before considering proposals of offerors in the other tiers. In other words, GAO found ERPi's contention "wholly unpersuasive" because "pairing a best-value tradeoff methodology with the mandatory tiered evaluation approach . . . was exactly how the VECTOR IDIQ solicitation was structured." Because ERPi did not challenge this explicitly stated evaluation scheme in 2016, GAO dismissed the protest as untimely.

The decision brings into stark relief that contractors must review IDIQ solicitation terms with the future in mind. Due to their long-term nature, the terms of IDIQ solicitations--like the cascading set-aside evaluation approach established in VECTOR IDIQ solicitation—can apply to task order competitions years later. Accordingly, contractors should carefully consider how IDIQ solicitation terms interplay with their business goals and strategies. In today's active acquisitions marketplace, both buyers and targets must consider the impact that a change in small business or other favored status can have on competitive prospects, now, and even years down the road.

© Arnold & Porter Kaye Scholer LLP 2022 All Rights Reserved. This Advisory is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.

  1.  GAO does not discuss why ERPi changed to "other than small," but it was likely connected to ERPi's acquisition by large business ASGN, Inc.