Solicitations Cannot Have Terms Contrary to Those Used in Customary Commercial Practices

In this pre-award bid protest, the General Service Administration (“GAO”) sought offers from contractors to provide various federal agencies with web-based travel management services.  One contractor, CW Government Travel, Inc. (“CW”) protested the solicitation because it required the contractors to offer a 15-year fixed price schedule.  CW complained that this pricing schedule violated customary commercial practice and was, in the absence of a valid waiver, arbitrary, capricious, and contrary to law.  The Court of Federal Claims agreed and ordered this requirement stricken from the solicitation.  The case is CW Government Travel, Inc. v. United States, 2011 U.S. Claims LEXIS 1894 (September 16, 2011).

The Federal Acquisition Regulation (“FAR”) requires that contracts for the acquisition for commercial items shall, to the maximum extent practicable, include only those clauses determined to be consistent with customary commercial practice.  FAR 12.301(a) (2).  The Contracting Officer cannot tailor clauses or include additional terms that are inconsistent with customary commercial practice unless a waiver is obtained.  FAR 12.302 (c).  In evaluating whether a solicitation’s terms are consistent with customary commercial practice, the agency must engage in market research with the purpose of generating a meaningful exchange of information between the agency and industry.

CW alleged that requiring offerors to submit a fixed price schedule that cannot be renegotiated over the 15-year contract term was contrary to commercial practice.

The Court found that the government’s market research did not demonstrate that the 15-year fixed pricing schedule was consistent with customary commercial practice.  Although GSA’s market research demonstrated that a 15-year term was common in complex contracts, the research revealed nothing about whether setting the price for each option period at the outset was consistent with customary commercial practice.

The government argued that it properly obtained a waiver to exceed the five-year limit on the duration of government contracts set by FAR 17.204 (e) and that the waiver extended to the 15-year fixed pricing schedule.  However, the court held that the waiver to exceed the five-year limit only dealt with the length of the contract and didn’t exempt the GSA from requirements that the solicitation’s terms be consistent with customary commercial practice – the firm fixed price for the duration of the contract.

The Court ordered the GSA to modify its solicitation so that it didn’t violate the customary commercial practice relating to the 15-year fixe pricing schedule.  CW’s bid protest was sustained.

Dave Albo – Attorney are bid protest attorneys and government contracts lawyers.

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