The Court of Federal Claims recently rejected a bid protester’s argument that federal procurement law required the Department of State’s Bureau of Overseas Building Operations (“OBO”) to apply an inflation adjustment to the value of one of the protester’s previous projects, which would have enabled it to satisfy the notice of solicitation’s minimum value requirement. The case, Framaco International, Inc. v. United States, No. 14-713C (Fed. Cl. Feb. 11, 2015), involved a procurement to design and build a new embassy compound in Harare, Zimbabwe. OBO issued a notice of solicitation requiring that offerors prequalify for participation in the RFP by demonstrating successful completion of a contract or subcontract involving a similar project “having a contract or subcontract value of at least $124 million.” The OBO refused to apply an inflation adjustment to Framaco’s $122 million embassy project in Belgrade, Serbia, and the company was excluded from the procurement. Framaco filed a protest arguing, among other things, that the agency’s failure to prequalify it restricted competition in violation of the Competition in Contracting Act and the Federal Acquisition Regulation, and was arbitrary, capricious, and an abuse of discretion under the Administrative Procedure Act.
The court disagreed. It observed that neither the notice of solicitation nor the authorizing statute (the Omnibus Diplomatic Security and Antiterrorism Act of 1986) required that an inflation adjustment be used, and nothing in the notice of solicitation indicated that such an adjustment would be used. On the contrary, the court noted, “the notice of solicitation included a clear, specific, and unequivocal statement that a $124 million minimum qualification threshold would be utilized,” and the OBO did not apply such an adjustment to any other submission. In these circumstances, the court concluded that the decision whether or not to apply an inflation factor is left to an agency’s discretion. The court further reasoned that, even though OBO had applied an inflation adjustment in prior procurements, the agency had offered a rational explanation for its decision not to do so in this one: namely, “to avoid uncertainty regarding the requirements of the solicitation.”
The court also rejected Framaco’s argument that the agency should have taken into account its outstanding Requests for Equitable Adjustments (“REAs”) on the Belgrade project, which would have pushed the value of that project above the $124 million threshold. The court concluded that it was reasonable for the agency not to consider those pending REAs given that they had not yet been granted, Framaco did not mention them in its prequalification submission, and OBO did not consider any other offeror’s pending REAs.
The court’s decision makes clear that, absent solicitation language to the contrary, agencies will likely be accorded discretion in deciding whether to apply an inflation adjustment to the value of bidders’ prior completed contracts. Contractors that can only meet a prior contract minimum value requirement by relying on an adjustment for inflation should carefully consider the solicitation language. In many cases, recourse to such an adjustment may not be available. An alternative option may be to bring a pre-award protest challenging the agency’s choice of a particular value threshold as unreasonable or unduly restrictive of competition.