Federal Acquisition Regulations and Responsibility Determinations

Overview of the Federal Acquisition Regulations

When a government agency makes a contracting decision, the contracting officer must ensure that all rules and regulations of the Federal Acquisition Regulations (FAR) are satisfied. The purpose of FAR is to safeguard the integrity of the procurement process through both civil and criminal enforcement mechanisms. By following the procedure laid out by FAR, the contracting officer is able to make what is known as a "responsibility determination."

FAR operates by stating specific requirements that a contractor seeking to sell to the government must follow. FAR also establishes the terms upon which the government is to obtain ownership, title, and control of the goods or services being purchased, and provides rules pertaining to specifications, payments, conduct, and actions as they relate to the solicitation of bids and payments owed.

FAR is codified under U.S. Code of Federal Regulations Title 48 and was issued pursuant to the Office of Federal Procurement Policy Act of 1974. The terms of FAR apply to nearly every government agency, with notable exceptions such as the United States Postal Service. FAR is jointly maintained by the Administrator of General Services, the Secretary of Defense, and the National Aeronautics and Space Administration.

FAR Objectives and the Responsibility Determination

The stated purpose of FAR is to "provide uniform policies and procedures for acquisition" (FAR 1.101). To accomplish this, FAR 1.102(b) identifies the following objectives:

Satisfy the customer's needs in terms of cost, quality, and timeliness; minimize administrative operating costs; conduct business with integrity, fairness, and openness; and fulfill other public policy objectives.

To meet these objectives, whenever a government agency issues a contract or a proposal for contracts, it must include a list of FAR provisions that are required to enter into the contract. If a party is to be awarded a contract, it must either comply with all the listed provisions or demonstrate the capacity to comply with them. Based on this information, the Contracting Officer makes what is known as a responsibility determination. However, this determination is anything but simple, as there are numerous legal and practical implications associated with the decision. Thus, in order to fully understand how a responsibility determination is to be made under FAR 9.104-1 and 9.402, one must examine case law addressing the standards of review for challenges and the necessary elements of a legally compliant responsibility determination.

Standards of Review for Bid Protest Challenges

All challenges to a responsibility determination are to be brought before the Court of Federal Claims on appeal from an initial administrative decision. In a bid protest case — hereinafter referred to as a "challenge" — the Court of Federal Claims is to treat the contractor's bid fairly and honestly. In conducting a review, the following guiding principles apply:

A breach occurs in such situations if the contracting agency acts in an arbitrary and capricious (irrational or unreasonable) manner in rejecting the bid. Determinations that allow the court to enjoin the agency and interfere with the procurement process should occur only in "extremely limited circumstances."

The standard of proof to be used in determining the legitimacy of a challenge is "a high one." If the court finds any reasonable grounds for the agency's action, the court should not take any negative action against the agency, even if not all regulations were properly administered.

In making a challenge, the challenger must show that the agency's decision of non-responsibility had "no rational basis" or that in making its decision, the agency "violated an applicable procurement statute or regulation in a manner prejudicial to the protesting bidder." Stapp Towing, Inc. v. U.S., 34 Fed. Cl. 300 (U.S. Court of Fed. Claims 1995).

Conclusion

Finally, in the administrative decision of In the Matter of Savantage Financial Services, Inc. (2003), it was held that a business may challenge an agency decision not to provide the business with a solicitation for purchase where the decision was made pursuant to FAR 8.404(b)(3) and where the business did not appear to offer best value, as determined by the agency based on information obtained from schedule vendors and product demonstrations. However, despite the availability of such challenges to indirect pre-solicitation decisions, the review board further ruled that the agency's practice was reasonable under the standard of review laid out in the above-mentioned court and administrative decisions.

Taken together, these cases illustrate that while challengers retain meaningful avenues to contest government non-responsibility determinations and contract award decisions, the courts and administrative review boards apply a highly deferential standard. A challenger must demonstrate either a lack of rational basis for the agency's decision, a violation of an applicable statute or regulation, fraud or bad faith, or — in cases involving contract awards — a material misrepresentation by the awardee. The contracting officer's discretion under FAR remains broad, and courts will intervene only in the most compelling circumstances.