November 20, 2019

Court Rules Sole Source FSS Task Order Extension Permissible for Complex IT Project

Holland & Knight Government Contracts Blog
David S. Black | Angela M. Jimenez

A recent protest decision highlights a little-known sole source authority unique to GSA Schedule procurements that could benefit federal contractors and their agency customers working on complex information technology projects.

Many federal agencies are using the GSA Schedule to procure services to support information technology modernization projects, such as the migration of a suite of legacy enterprise applications to a cloud environment. It is not uncommon for such projects to experience legitimate delays and require additional time beyond the period of performance provided for in a GSA Schedule task order. FAR subpart 8.4 offers a unique sole source authority that allows a customer to maintain contractor continuity and the institutional knowledge and experience of a well-performing incumbent with greater flexibility than the sole source authorities under FAR part 6.

Orders placed under the GSA Schedule contracts are not subject to the sole source rules of FAR Part 6. Rather, the rules for limiting sources under the GSA Schedule are governed by FAR 8.405-6. FAR 8.405-6(a)(1)(i)(C) includes a sole source authority that is more flexible and has broader application to complex IT migrations and implementations than the common authorities provided under FAR Part 6. An agency is authorized to issue a sole source task order under the GSA Schedule under the following circumstance:

In the interest of economy and efficiency, the new work is a logical follow-on to an original Federal Supply Schedule (FSS) order provided that the original order was placed in accordance with the applicable Federal Supply Schedule ordering procedures. The original order or BPA must not have been previously issued under sole-source or limited-sources procedures.

FAR 8.405-6(a)(1)(i)(C). This GSA-unique sole source authority was recently successfully applied by an agency to issue a sole source task order to an IT contractor who was performing a cloud migration project that took longer than the period of performance of the initial FSS order. The agency's decision survived a protest at both GAO and COFC.

In a decision released on November 12, 2019 (available here), the Court of Federal Claims held that a federal agency (the International Trade Administration in the Department of Commerce) was justified in issuing a sole source task order to an incumbent contractor to continue and complete a task to modernize the agency's IT systems, including transitioning legacy applications to a cloud environment and updating extremely complex and heavily customized applications that are unique to the agency. When the work was not completed after the initial five-year period of performance of the competitively awarded GSA Schedule task order, the agency issued a sole source task order to the incumbent contractor under the "logical follow-on" authority of FAR 8.405-6(a)(1)(i)(C).

The COFC rejected the protest of an interested competitor that claimed the sole source award was unlawful and the follow-on work must be competed. The COFC reasoned that the agency acted well within its discretion under FAR 8.405-6(a)(1)(i)(C):

In this case, the agency concluded that it was in the "interest of economy and efficiency" that [the incumbent contractor] be awarded a "logical follow-on" contract to finish the IT modernization project. FAR 8.405–6(a)(1)(i)(C). As explained in detail above, it did so in light of the tight schedule that the agency had established to update soon-to-be obsolete applications, and because it was critically important to the agency that it remain on schedule to fulfill [the agency's] mission and strategic plan. The agency determined that [the incumbent contractor's] "institutional knowledge and intellectual capital gained through performance of the original contract cannot be transferred to a new contractor without a substantial duplication of time resulting in a duplication of costs, missed milestone deliveries and delays in obtaining efficiencies and effectiveness for the [the Agency's] globally dispersed workforce." It further concluded that, unless the award were made to [the incumbent contractor], "significant time will need to be devoted to bringing the knowledge base up to the current level of [the incumbent contractor] which is necessary for successful and timely completion" resulting in "a corresponding slip in delivery schedule that makes meeting the 2021 fully modernized IT environment unattainable."

These determinations were based on the expertise of agency IT staff (including its CIO), as well as market research, as described below. The Court agrees with GAO that the agency's decision reflects a reasonable exercise of its broad discretion under FAR 8.405–6(a)(1)(i)(C) to award a follow-on contract on a sole-source basis in the interests of economy and efficiency. It turns, therefore, to Harmonia's challenges to the process by which that decision was made, including the adequacy of the agency's market research.

Harmonia Holdings Group, LLC v. United States, et al., No. 19-1064C, slip op. at 12-13 (Ct. Cl. Oct. 25, 2017) reissued for publication (Nov. 12, 2019).

While contractors and their customers hope to complete complex IT projects within the originally allotted time, they should be aware of this clause for their contracting "tool box" if a particular project awarded under the GSA Schedule requires additional time. By using 8.405-6(a)(1)(i)(C), an agency can guarantee the economy and efficiency of maintaining the incumbent team to perform additional work required to complete the task order.

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