Contractors that have submitted final proposals and are awaiting award on negotiated procurements may find themselves in an unusual position these days—questioning whether they still want the award in the dramatically changed landscape created by coronavirus COVID-19. In some cases, key personnel may no longer be available or critical supply chains may have become so disrupted that the proposal would require major changes to the technical approach. Assumptions that went into proposal pricing may no longer be valid.
Contractors in this posture may face a Hobson’s choice. Should they hold firm, accept the award, and hope the government is flexible post award? If they believe that they likely cannot perform as proposed, should they withdraw their proposals or risk proposal rejection by submitting late proposal revisions?
In some cases, depending on the stage of the acquisition, there may be opportunities for proposal revisions, but the government typically notifies offerors of a time after which revisions will not be accepted. In a FAR Part 15 acquisition, before the closing date for receipt of proposals, a contractor is generally free to submit proposal revisions. If the government conducts discussions, a contractor is also generally able to revise its proposal, subject to limitations that can be imposed on the permissible scope of revisions. Offerors may withdraw proposals at any time before award.
Once the door closes to further proposal revisions, how should a contractor whose proposal is pending for possible award address the impacts of COVID-19? There are multiple possible strategies. Below are five key considerations in deciding what to do:
- Revisit the analysis that led to the decision to propose in the first place. Based on pandemic developments since then and based on how conditions could change over the coming weeks and months, how will the company’s ability to perform be impacted should it be awarded a contract? To the extent workforce availability and supply chain assumptions made prior to proposal submission are no longer valid, would the company make the same bid/no-bid decision now? If the many factors that led the company to submit a proposal—i.e., strategic importance of the program, potential profitability, potential performance challenges, investments required to propose—no longer support pursuing the contract, withdrawal may make sense. Of course, investments to propose may make withdrawal difficult, as those costs have been incurred.
- Does your company face new obstacles that have developed since proposal submission that could jeopardize successful contract performance? To the extent specific obstacles and challenges are identified, are they caused by the pandemic or by other factors? While pandemic-related difficulties should be addressed under excusable delay provisions in the contract—at least to obtain schedule relief, albeit not necessarily recovery of unanticipated costs of performance—other new obstacles that may have arisen for reasons unrelated to the pandemic are less likely to protect the contractor under excusable delay provisions. For example, if a critical source of supply is no longer available, whether resultant delays are excusable may depend on whether the unavailability is pandemic-related.
- If the opportunity for proposal revisions would help, consider requesting the Contracting Officer to allow this via a solicitation amendment that would apply to all offerors. The contracting officer may conclude this makes more sense than awarding a contract that may be infeasible to perform as previously proposed. If the Contracting Officer refuses and the contractor cannot live with the heightened risk, withdrawal prior to award announcement is still an option.
- If the decision is made not to withdraw the proposal or to seek permission to revise it, begin planning the elements of a contract modification that could be negotiated after award. This approach is risky if the contractor knows it will be unable to perform as proposed. But if the company wins the contract, the earlier it engages with the Contracting Officer on needed modifications, the better the chances of obtaining relief. While some forms of post-award modifications may trigger protests by competitors, we suspect few would be successful in the current environment.
- In the next few years there will be performance disputes and claims arising under contracts awarded to offerors whose proposals were submitted before the severity of COVID-19 became apparent, but not awarded until the severity was widely understood. Will the government argue that a contractor who could have withdrawn its proposal before award—but chose not to—assumed heightened assumption of risk, and essentially waived its right to schedule or cost relief? Might the contractor argue in response that any award during this emergency was made with government knowledge of materially changed circumstances, possibly entitling the contractor to contract reformation? Resolution of such arguments will depend on the particular circumstances and contract terms, but to ensure that such disputes can be effectively managed later, it is necessary for contractors to consider and address these issues now. Whether the possibility leads a contractor to withdraw a proposal may depend in part on its relationship with the relevant agency contracting office. Can it be counted on to address performance difficulties reasonably and fairly? Personnel changes in contracting offices over time may make this difficult to assess, but any historical difficulties in dealing with the relevant contracting office may be a red flag.
As COVID-19 issues permeate virtually all aspects of commerce nationally and internationally, we stand ready to help. Blank Rome’s Coronavirus (“COVID-19”) Task Force includes interdisciplinary resources across every business sector from insurance recovery to HR.