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Shootout at the bid contest: Remington v. Colt

Remington Arms Company and Colt Defense recently had a “shootout” about a government contract before the U.S. Court of Federal Claims. Remington won.

Solicitation

The U.S. Army wanted to have some M4 and M4A1 carbines manufactured and issued a solicitation on December 5, 2014. The solicitation sought up to two contractors and expected each to provide between 2,000 and 6,000 weapons a month. Later orders were to be competed between these two contractors. The solicitation set forth four evaluation factors (listed in descending order of importance):

  1. Production capability.
  2. Past performance.
  3. Price.
  4. Small business participation.

Production capability was further divided into three subfactors:

  1. Manufacturing plan (identified as the most important subfactor).
  2. Key tooling and equipment.
  3. Quality control.

The offeror’s risk of nonperformance was to be evaluated, with a range of five possible ratings: outstanding (very low risk), good (low risk), acceptable, marginal, and unacceptable (high risk). Other considerations included—

  1. Whether the proposed production facility could handle from 2,000 to 6,000 carbines a month.
  2. Availability of weapon and ammunition storage facilities.
  3. Capability of key tooling and equipment used to produce the carbines.
  4. Adequacy of critical subcontractors in producing barrels, bolts, and receivers.
  5. Whether the quality management systems were compliant with ISO9001 standards.
  6. Whether the offeror had processes for inspecting, identifying, and preventing nonconforming products.

The contractors were to be determined by best-value trade-off procedures.

Evaluation of the offers

The Army received six offers, including those from Colt, Remington, and FN America. The source selection authority (SSA) determined that only Colt, Remington, and FN were in a competitive range. After a discussion with the contracting officer (CO), each of these offerors submitted their revised final proposals. The proposals were then evaluated by a source selection evaluation board (SSEB).

Colt received an outstanding rating for production capability, which included an outstanding for the manufacturing plan and an outstanding for key tooling and equipment (subfactors). Colt received a good rating for quality control. Overall, Colt had 7 significant strengths and 12 strengths under production capability. Colt’s risk of nonperformance was rated as very low.

Remington received a good rating for production capability, which included good ratings for all three subfactors (manufacturing plan, key tooling and equipment, and quality control). Despite Remington’s 2014 experience in producing up to 600 M4 carbines daily for an international military customer, it did not have an already-operating production line that would allow the government to waive the first-article-testing (FAT) requirement. Remington’s risk of nonperformance was rated as low.

For the past-performance factor, both Colt and Remington received a rating of satisfactory confidence and FN received a higher rating of substantial confidence. Colt had the lowest price at $206 million and Remington had the highest price at $230 million. FN’s price was $219 million.

As part of its evaluation, the Army directed the Defense Contract Management Agency (DCMA) to evaluate the offers. The DCMA found FN’s and Remington’s financial condition to be satisfactory, but that Colt’s financial condition was unsatisfactory. Among other things, the DCMA reported that Colt’s current liabilities exceeded its current assets by more than $332 million and that its net profit margin was -53%. At this point, Colt was in the midst of Chapter 11 bankruptcy proceedings.

After receiving the DCMA report, the CO investigated Colt’s financial condition by asking a series of questions of Colt’s management. She ultimately concluded that Colt was a responsible contractor, apparently because the information in the DCMA report was based on information available before Colt had filed its bankruptcy petition and that Colt’s financial condition was being closely monitored by the bankruptcy court.

Contracts were awarded to Colt and FN.

Bid Protest

Remington protested the award to Colt, but not FN, for two reasons:

  1. The CO’s responsibility determination was not supported by the record.
  2. The technical evaluation was arbitrary, capricious, or an abuse of discretion.

Court’s findings

The court found that the CO’s responsibility determination was not supported by the record. The government can only award contracts to responsible offerors; and before awarding a contract, the CO must make an affirmative determination of responsibility. Although being in bankruptcy does not solely determine the issue, the CO made her decision at a time when it wasn’t clear whether Colt would be reorganized, sold, or even liquidated. Furthermore, Colt’s lease of its production facility was uncertain. The CO should not have relied on Colt’s self-serving statements to conclude that it was responsible, especially in view of having looked at the records filed with the bankruptcy court.

Before the court, Colt argued that the case was moot because Colt had exited bankruptcy and had entered into a long-term lease for its production facility. But the court pointed out that Colt’s disclosure statement contained approximately 30 pages of risks to Colt creditors and that the CO had not evaluated those risks.

The court rejected Remington’s second reason for protesting the bid, explaining that the financial condition of Colt should not be considered in the technical evaluation.

Relief granted

The court enjoined the Army from awarding any new task orders to Colt for 30 days or until the agency had performed a new responsibility determination that addressed Colt’s current financial status.

Lessons learned

  1. Awareness of what your competitors are doing can be helpful in determining whether it’s useful to protest a bid. In this case, knowing that Colt was in bankruptcy proceedings gave Remington a reason to question whether Colt was a responsible contractor.
  2. When a CO’s decision about an issue is different from another evaluator’s decision about an issue, the difference is an important factor to consider. The DCMA’s purpose is to ensure that government supplies and services are delivered on time at projected cost and meet all performance requirements. Since this goal insures military readiness, their opinion may carry a bit more weight than a contracting officer’s determination.

When considering whether a bid protest is worthwhile, a government contractor should always look for good evidence to support its position. A difference between what a CO says and what another independent evaluator says usually indicates a good possibility for success of the bid protest when the independent evaluator’s position favors the protester.

For more information, see Remington Arms Co., LLC, v. United States, decided by the U.S. Court of Federal Claims on March 30, 2016.

Items on this web page are general in nature. They cannot—and should not—replace consultation with a competent legal professional. Nothing on this web page should be considered rendering legal advice.

© 2016

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Saturday, 21 October 2017

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