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Is A Solicitation Requirement for Financial Liquidity and Solvency Unduly Restrictive?

Writer's picture: R.D. Lieberman,ConsultantR.D. Lieberman,Consultant

In a recent solicitation by the Department of Veterans Affairs (“VA”) for a ten year, indefinite delivery, indefinite contract for supply chain modernization services, IBM protested that the evaluation criteria assessing offerors’ financial liquidity and solvency were unduly restrictive of competition.  The Government Accountability Office (“GAO”) disagreed and denied the protest. International Business Machines Corp., B-421841, Oct. 11, 2023.


The evaluation of offerors involved a two step process, with the first step assessing corporate experience (including a need to demonstrate that offerors were financially liquid and solvent), the second step being a technical evaluation and the third step being a live demonstration of their products. 


IBM protested that the solicitation contained unduly restrictive tests for financial liquidity and solvency.  (Liquidity refers to a company’s ability to pay short-term obligations, while solvency refers to a company’s capacity to meet its long-term financial commitments).  In response to the protest, the VA asserted that liquidity and solvency tests are common and universally understood, and the scoring (up to 10,000 points) was reasonable.  VA assigned specific minimum values for each element.


The GAO noted that agencies have broad discretion when selecting evaluation criteria---even if such criteria is burdensome or makes a firm’s proposal less competitive, as long as the agency demonstrates that the evaluation criteria are reasonably related to its needs, can withstand logical scrutiny and doesn’t violate a procurement law or regulation.

The GAO noted that these tests for liquidity and solvency provide insight into an offeror’s ability to meet short and long-term financial obligation, and therefore withstand logical scrutiny.  Further, the tests apply to a wide variety of industries, and it wasn’t necessary for the VA to research or conduct an exhaustive analysis of them.


GAO concluded there was nothing objectionable in VA’s evaluation methodology.  Furthermore, a solicitation is not unduly restrictive merely because the chosen evaluation method may adversely impact some offerors.  The test is as stated above, within the broad discretion that the agencies have in selecting evaluation criteria, and VA’s criteria are not objectionable.


Takeaway.  In order to protest restrictive evaluation criteria you must show that the criteria do not withstand logical scrutiny, are not reasonably related to the agency’s needs, or violate applicable procurement laws or regulations. If you cannot do that, the agency’s determination of the criteria will not be objectionable to the GAO.


For other helpful suggestions on government contracting, visit:

Richard D. Lieberman’s FAR Consulting & Training at https://www.richarddlieberman.com/, and Mistakes in Government Contracting at https://richarddlieberman.wixsite.com/mistakes.

 

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The website of Richard Donald Lieberman, a government contracts consultant and retired attorney who is the author of both "The 100 Worst Mistakes in Government Contracting" (with Jason Morgan) and "The 100 Worst Government Mistakes in Government Contracting." Richard Lieberman concentrates on Federal Acquisition Regulation (FAR) consulting and training, including  commercial item contracting (FAR Part 12), compliance with proposal requirements (FAR Part 15 negotiated procurement), sealed bidding (FAR Part 14), compliance with solicitation requirements, contract administration (FAR Part 42), contract modifications and changes (FAR Part 43), subcontracting and flowdown requirements (FAR Part 44), government property (FAR Part 45), quality assurance (FAR Part 46), obtaining invoiced payments owed to contractors,  and other compliance with the FAR. Mr.Lieberman is also involved in numerous community service activities.  See LinkedIn profile at https://www.linkedin.com/in/richard-d-lieberman-3a25257a/.This website and blog are for educational and information purposes only.  Nothing posted on this website constitutes legal advice, which can only be obtained from a qualified attorney. Website Owner/Consultant does not engage in the practice of law and will not provide legal advice or legal services based on competence and standing in the law. Legal filings and other aspects of a legal practice must be performed by an appropriate attorney. Using this website does not establish an attorney-client relationship. Although the author strives to present accurate information, the information provided on this site is not guaranteed to be complete, correct or up-to-date.  The views expressed on this blog are solely those of the author. FAR Consulting & Training, Bethesda, Maryland, Tel. 202-520-5780, rliebermanconsultant@gmail.com

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