3. CONTRACT WAS MODIFIED BEYOND THE SCOPE

Overview of This Protest Ground: In light of the time and amount of work needed to award a new contract, the government has an ever-present incentive to interpret existing contracts broadly to allow new work to be added. Simply stated, it is generally much easier and faster to modify an existing contract to add new work than to get a new contract awarded for that new work. A modification to a contract can be accomplished quickly, whereas a new contracting action can take many months (or sometimes even more than a year), may require multiple reviews and levels of approval, and can be delayed by protests. Consequently, it is not surprising that the government’s decisions to modify existing contracts beyond their scope are frequently challenged in protests.

The main problem with modifying contracts beyond their scope is that the work that is added was never open to competition, in violation of the Competition in Contracting Act. Both the GAO and the courts employ a “scope of competition” test as part of this analysis to examine whether the field of competition for the contract, as modified, would be significantly different from the field of competitors for the originally awarded contract. The corollary to this test is whether a reasonable contractor would have anticipated this type of change based on what was in the original solicitation. This is, by its very nature, a case-by-case inquiry. The GAO and the courts also seek to determine whether there was a “material difference” between the modified contract and the contract that was originally awarded, that is, whether the modification is within the scope of the contract’s “changes clause.” Ultimately, if the GAO or the courts find the contract modification to be out of scope, they will recommend either that it be terminated and subject to a new solicitation or that the agency execute a J&A with sufficient facts and rationale to support the CICA exception.

CAFC’s Key Language

The Competition in Contracting Act (CICA) requires executive agencies, when procuring property or services, to “obtain full and open competition through the use of competitive procedures.” 41 U.S.C. § 253(a)(1)(A) (1988). CICA, however, does not prevent modification of a contract by requiring a new bid procedure for every change. Rather only modifications outside the scope of the original competed contract fall under the statutory competition requirement. CICA sets forth no standard for determining when modification of an existing contract requires a new competition or falls within the scope of the original competitive procurement.

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This case does not ask whether Government modifications breached a contract, but asks instead whether Government modifications changed the contract enough to circumvent the statutory requirement of competition. The cardinal change doctrine asks whether a modification exceeds the scope of the contract’s changes clause; this case asks whether the modification is within the scope of the competition conducted to achieve the original contract. In application, these questions overlap. See American Air Filter Co., 57 Comp.Gen. 567, 572-73 (1978) (affirming on reconsideration 57 Comp.Gen. 285 (1978)). A modification generally falls within the scope of the original procurement if potential bidders would have expected it to fall within the contract’s changes clause. Id. at 573.

In determining whether a modification falls within CICA’s competition requirement, this court examines whether the contract as modified materially departs from the scope of the original procurement. See Neil R. Gross & Co., B-237434, 90-1 CPD ¶ 212 at 2-3 (Feb. 23, 1990), aff’d on reconsideration, B-237434.2, 90-1 CPD ¶ 491 (May 22, 1990) (“[W]e look to whether there is a material difference between the modified contract and the prime contract that was originally competed.”); American Air Filter, 57 Comp.Gen. at 286 (The test is “whether a changed contract is materially different from the competed contract.”). The analysis thus focuses on the scope of the entire original procurement in comparison to the scope of the contract as modified. Thus a broad original competition may validate a broader range of later modifications without further bid procedures.

AT&T Communications, Inc. v. Wiltel, Inc., 1 F.3d 1201 (Fed. Cir. 1993).

COFC’s Key Language

Perhaps the most common factual scenario that implicates the cardinal change doctrine in bid protests occurs when a disappointed bidder learns of changes in the awardee’s contract, and then attempts to invalidate the contract modification on the grounds that the changed contract is not that which was competed by the agency. Nevertheless, the basic analytical framework of the cardinal change doctrine is the same whenever a protestor alleges that competition has been frustrated by modifications to a contract, i.e., that the procuring agency has impermissibly strayed from the scope of the contract requirements that were advertised to offerors. Regardless of the procurement scenario, the inquiry is fundamentally the same—“whether Government modifications changed the contract [requirements] enough to circumvent the statutory requirement of competition.” AT&T, 1 F.3d at 1205.

Aircraft Charter Solutions, Inc. v. United States, 109 Fed. Cl. 398 (2013).

GAO’s Key Language

Here, [the protester] is challenging the modification of [the incumbent contractor’s] existing contract, not the award of a sole-source contract per se. As a general rule, our Office will not consider protests against contract modifications, since they involve matters of contract administration and are beyond the scope of our bid protest function. See 4 C.F.R. § 21.5(a) (2010). An exception to this general rule is where a protester alleges that a modification is beyond the scope of the original contract, as [the protester] argues in this case, since, absent a valid sole-source justification, the work covered by the modification would be subject to the competition requirements established under CICA.

In determining whether a modification triggers CICA’s competition requirements, we look to whether there is a material difference between the modified contract and the contract that was originally awarded. Evidence of a material difference between the modification and the original contract is found by examining changes in the type of work, performance period, and costs between the contract as awarded and as modified.

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As discussed below, we do not need to decide the question of whether the modification is within the scope of [the awardee’s] contract because, even assuming that it was not, the agency properly supported the modification with a reasonably based J&A under 10 U.S.C. § 2304(c)(1).

WorldWide Language Resources, Inc., B-299315.7, B-299315.8, Aug. 12, 2010.

We also consider whether the solicitation for the original contract adequately advised offerors of the potential for the type of changes found in the modification, and thus whether the modification would have materially changed the field of competition.

Emergent Bio Solutions, Inc., B-402576, Jun. 8, 2010.

Where the type of work under a contract as modified remains substantially unchanged, we do not view modifications of the technical requirements of performance to be outside the scope. Our decisions have acknowledged that additional latitude for changing a contract may exist where the contract is for research and development, noting that the scope of such contracts is often flexible because of unanticipated changes due to the lack of definitiveness of the government’s requirements. Furthermore, a technical change to a contract should be viewed in the context of the contractor’s obligations “as a whole.”

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…even substantial increases in cost do not inexorably compel a conclusion that a contract has been modified outside its original scope.

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Although we look to the performance period to determine whether a modification exceeds the scope of the original contract, time does not have the same degree of importance in every type of contract. Where, as here, a contractor is provided additional time to perform a contractual obligation, that modification does not necessarily constitute an out of scope change, unlike the situation where time is used to define the extent of the obligation, such as under a requirements contract. Additionally, as discussed above, our decisions have recognized that research and development contracts can justify additional latitude for changes to their performance terms, including duration, because the type of work under these contracts involves greater uncertainty.

Biodefense, Inc., B-296358.3, B-296358.4, Jan. 31, 2006.

Where an agency has relaxed a contract’s performance requirements, our Office also looks to whether the change in requirements was the type that reasonably would have been anticipated under the solicitation, and whether the modification materially changed the field of competition for the requirement.

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An agency may not modify a contract by changing or relaxing requirements where the resulting work is fundamentally different from the work anticipated by the original solicitation.

Poly-Pacific Technologies, Inc., B-296029, June 1, 2005.

FAR Crosswalk: FAR §§ 6.001(c) and 17.207(f).

Other Relevant Cases: See page 291 in the Index of Representative Cases.

Commentary: The GAO and the courts will not allow what should be a new contract to masquerade as a contract modification unless the agency has properly supported the modification with a J&A that supports the CICA exception at issue. The protest forums are particularly interested in understanding whether the “field of competition” could have been different if the new work had been competed. As with many protest grounds, this is a fact-specific inquiry and there is no simple bright-line test that an agency can use to ensure that the GAO or the COFC will deem its potentially questionable modification to be within the scope of the existing contract.

Often, when drafting the statement of work (SOW) or performance work statement (PWS), agencies forget that they need to anticipate that the situation or requirements may change somewhat during the contract’s period of performance. That is, agencies often focus primarily on the work they know has to be completed without an eye toward planning for contingencies that may arise during contract administration.

Agencies are wise to use broad language at times (particulary in ID/IQ contracts) and to describe various types of changes that may arise during the course of the contract. By expressly stating that certain (broad and nonexclusive) types of changes can be expected in the course of the contract, the agency will find itself in a better position to defend against this particular type of protest while complying with CICA. Conversely, agencies should ensure that they are not actually modifying contracts beyond their scope. Such actions are not only in violation of CICA, but they also deprive the taxpayer of the savings that can be gained through the power of competition.