This paper evaluates the Glen Mar Construction protest against the Department of Veterans Affairs' contract award to Hanke Constructors for medical center construction. The analysis examines whether the VA's price evaluation was fair and reasonable, comparing competitive versus sole-source procurement approaches. The paper concludes that while the VA conducted a competitive bidding process with six bidders, evaluation errors occurred when the agency failed to properly account for additive option pricing at the time of award. The paper argues that competitive bidding, despite this case's shortcomings, remains the superior procurement method for ensuring cost efficiency and protecting taxpayer interests, though legitimate exceptions exist for emergency and national security situations.
Glen Mar Construction, Inc. filed a protest regarding the Department of Veterans Affairs' award of a contract under Invitation for Bids (IFB) No. VA260-14-B-0412 for the construction of a medical center building. Glen Mar contended that the agency's price evaluation was unfair and unreasonable because the award went to a bidder other than the lowest-priced respondent. The bidders were required to submit unit prices for ten line items related to clinic construction and nine additive options. Notably, the agency sustained Glen Mar's protest (GAO 2015). The objective of this paper is to evaluate whether the VA's award to Hanke Constructors was just and fair, and to examine the broader principles governing federal procurement decisions.
Government procurement is the process by which the United States government acquires goods and services. The federal government heavily regulates such contracts through the United States Code. In the case of the Hanke award, the procurement was competitive, making the process reasonable and fair because six bidders submitted competitive bids. Specifically, the VA issued a competitive procurement open to interested firms. Manuel (2009) defines a competitive procurement as any contract that has undergone a procurement procedure expressly authorized by federal statute and subject to the CICA (Competition in Contracting Act). By contrast, any procurement not subject to the CICA is referred to as sole-source procurement. The CICA mandates that procurements go through competitive procedures, although sole-source procurement can be applied when only one firm can offer the required service or supply.
The Department of Veterans Affairs' procurement was competitive and open to all interested firms. The agency received timely bids from six firms, including both Hanke and Glen Mar. Since Hanke was not the sole-source bidder, the bidding was genuinely competitive. Competitive bidding occurs when multiple bidders submit proposals for the same contract. The primary benefit of competitive bidding is that it allows an agency to select the bidder best qualified to complete high-quality work at a reasonable price. Moreover, competitive bidding ensures value for the agency's expenditure; bidders know they face competition, and submitting an unreasonably high price will likely result in rejection. In the VA procurement, the agency ultimately offered the contract to one of the lowest bidders among six competitors, resulting in cost savings for the agency. Competitive procurement is superior to sole-sourced procurement because sole-source procurement may force the agency to pay higher prices than would be necessary under competitive conditions. Additionally, competitive procurement saves taxpayer money and avoids procuring unnecessarily expensive contracts.
The agency awarded the contract to Hanke Constructors based on information in the solicitation and guidance from the government program office. The VA received bids from six firms; Hanke's price for both the base bid and additive options was lower than Glen Mar's equivalent pricing. Under IFB Amendment No. A00002 (GAO 2015, p. 4), the agency determined it would award the contract based on the combined base bid and additive options pricing. Hanke submitted the lowest combined bid of $9,036,214, while Glen Mar submitted $9,039,186—slightly higher. However, examining the base bids alone revealed a different picture: Glen Mar's base bid was $7,962,932, while Hanke's was $8,004,923, making Hanke's base bid higher for the same work. The agency awarded the contract to Hanke because the combined price for additive options and base bid was lower than Glen Mar's combined price, for a total contract value of $8,004,923.
An additional factor in the award decision was that Glen Mar did not challenge any ambiguity in the solicitation before the agency received bids. Although the agency awarded the contract to Hanke based on the lower combined price, Glen Mar later contended that the agency's price evaluation was neither fair nor reasonable, arguing that Glen Mar's base price and additive prices were actually lower individually. However, the agency initially nullified Glen Mar's first protest contention because it had not evaluated additive prices separately at the time of award. Since Glen Mar did not challenge solicitation ambiguities before bids were submitted, its subsequent protest faced procedural barriers. Under Bid Protest Regulations, 4 C.F.R. § 21.2(a)(1) (2014) (GAO 2015, p. 4), federal agencies may dismiss untimely protests of solicitations. A solicitation might contain ambiguity if it reflects multiple interpretations or contains obvious and glaring errors. However, if a protester does not challenge a solicitation before bids are submitted, the agency may rightfully dismiss a subsequent challenge to the solicitation's terms.
The agency's authority to award the contract was partly based on discretionary evaluation within the parameters set by the solicitation and available funding. Typically, IFB awards follow FAR clause 52.217-5, Evaluation of Options (GAO 2015, p. 2). Under this clause, the government should evaluate award purposes by adding the total base requirement cost to the total price of all options. In this case, the VA based its award decision on the approved project budget. The total budget was $9.3 million, with $7,870,000 allocated for construction, $1.03 million for design, and $400,000 for contingency. At the time of award, only $7,993,000 of the $9.3 million was available. The VA had no option but to award the contract to the lowest combined bidder. Hanke's combined bid for nine additive options and base construction was $9,036,214, while Glen Mar's was $9,039,186. The price difference revealed a shortfall greater than $600,000 if all additive options were to be procured.
The shortfall varied significantly across individual options, ranging from $20,003 to $23,032 for option 6 (window blinds) to $333,938 to $372,161 for option 3 (crosswalk cover) (GAO 2015, p. 7). The IFB required bidders to submit unit prices for nine additive options and ten line items for the clinic project. The agency had clearly stated that it might award any option items depending on available funding and that pricing for each optional item would reflect the full scope at the time of award. However, a critical error occurred: the agency did not use additive option pricing in the solicitation evaluation at award, creating ambiguity in the solicitation terms. Although the agency dismissed Glen Mar's first protest argument because Glen Mar had not filed the protest before bids were submitted, Glen Mar's bid was actually lower than Hanke's when options were properly evaluated. The agency awarded the contract to Hanke because price evaluation was improperly completed for the option prices, making it impossible to identify which firm submitted the lowest bid at award time.
This paper identifies significant shortcomings in the VA's award despite the budget shortfall the agency cited. It is unreasonable for the VA to combine option prices and base bid prices when the agency lacked sufficient funding to exercise all options. The VA did not possess a reasonable basis for adding base bid and construction prices for all nine additive options to conclude that Hanke's price was lowest and should receive the award. Although the agency based its decision on budgetary constraints, the more appropriate strategy would be to award based on the base bid price and only those options the VA could demonstrably afford. The VA knew it lacked sufficient funding to implement all options. Yet the contracting officer based its decision on the $600,000 shortfall to award to Hanke. The agency understood that available funds would not cover all remaining options. Thus, "the agency selected a bidder for award based on the prices of options the agency knew with reasonable certainty it could not exercise" (GAO 2015, p. 7). This evaluation approach was unjust because it made it impossible to determine which bidder offered the genuinely lowest price for the work the VA could actually afford to perform.
The proper basis for awarding the contract should be the lowest cost that the government can realistically obtain. The agency should not use the $400,000 contingency fund as justification for awarding to Hanke; rather, the award should reflect actual cost savings the government will realize. A report by Acquisition Solutions (2015) emphasizes that performance-based contracting is critical for achieving positive contract results. Performance-based criteria are fundamental to awarding contracts to qualified bidders. The report also stresses that agencies must conduct adequate market research before fixing bid prices. Through such research, agencies can collect current pricing information. Additionally, agencies must recognize profit motive, which is the chief motivator for private organizations. Despite these established best practices, the VA did not apply these criteria before awarding the contract to Hanke.
In the United States, the federal government procures funds from taxpayers to complete contracts. It is therefore critical that the government spend these funds wisely to avoid public criticism. The government may use either sole-source or competitive procurement to award contracts. Under the CICA, the U.S. government has encouraged competitive bidding over sole-source bidding. Several factors support this preference. When a contract is opened to competitive bidding, the method allows the government to acquire higher-quality products and services at lower costs, enabling delivery of superior goods and services to the American population (Arnold & Marius, 2007).
"Because the government acquires the highest-quality goods and services at the lowest prices, proponents of competition note that competition helps government officials reassure citizens that their tax dollars are not spent wastefully" (Acquisition Solutions, 2015, p. 2). Competitive bidding also allows the federal government to prevent fraud associated with contracting. For example, a bidder can challenge an agency for incorrectly awarding a contract to an unqualified firm. In this case, Glen Mar filed a protest pointing out that the VA's award to Hanke was unreasonable. The federal government accepted that the VA made a price evaluation error leading to an improper award to Hanke. The General Counsel recommended that the VA conduct a new evaluation to determine which bidder submitted the lowest price for both additive and base construction options. Thus, competitive bidding prevented potential collusion between government employees and regular suppliers.
Competitive bidding also promotes accountability, ensuring that contracting officers award contracts on merit. It prevents favoritism in the federal contracting environment and allows the government to identify qualified bidders with necessary technical skills and adequate financial resources. With competitive bidding, the government can select a bidder with a satisfactory performance record, necessary experience, operational controls, and technical skills to effectively implement the contract.
Despite these benefits, certain circumstances may make competitive bidding less advantageous for taxpayers, warranting consideration of sole-source awards. Sole-source procurement applies to services or goods needed by federal agencies that can be sourced from "only one responsible source and no other type of property or service satisfies the agency's needs" (Acquisition Solutions, 2015, p. 3). An agency may face compelling and unusual circumstances requiring immediate procurement. In such cases, "the government would be seriously injured unless the agency is permitted to limit the number of sources from which it solicits bids or proposals" (Acquisition Solutions, 2015, p. 10). Competitive bidding may be ineffective during emergencies when the government must quickly procure goods and services because lives and property are in jeopardy. Applying competitive procedures in such situations could result in loss of life and property. In these instances, sole-source awards represent the only viable option for urgent procurement.
Additionally, sole-source awards are appropriate when national security is at stake. Disclosing information to multiple bidders might compromise national security, forcing the agency to use sole-source procurement because competitive procedures would not serve the public interest. The government may also employ sole-source awards when establishing research and development centers for public benefit. Despite these legitimate exceptions, the CICA ("Competition in Contracting Act of 1983") does not grant agencies permission to award goods and services without competitive procedures except in these defined circumstances. The government maintains that competitive awards are the only award procedure that adequately serves the public interest and benefits taxpayers.
This paper evaluated Glen Mar's protest against the VA's contract award to Hanke Constructors. The evaluation revealed that the VA made a pricing evaluation error, leading the General Counsel of the federal government to sustain the protest. The General Counsel recommended that the VA conduct a new price evaluation to determine the qualified contract winner. The paper also examined competitive bidding and sole-source awards, finding that under the CICA, all federal agencies must implement competitive bidding to award contracts. However, agencies may consider sole-source awards during emergencies. Regrettably, some contractors have begun abusing sole-source awards by demanding higher prices than would prevail under competition. Overall, competitive awards represent the best contracting option and the approach most beneficial to taxpayers.
You’re 99% through this paper. Sign up to read the full paper.
Sign Up Now — Instant Access Already a member? Log inAlways verify citation format against your institution’s current style guide requirements.