Catching Up with the VA in 2018: Understanding Tiered Evaluations

Published: July 16, 2018

Acquisition ReformContract AwardsContracting TrendsSDVOSBVA

On February 8, 2018, cascading set-asides, also known as tiered evaluations, became authorized at the Department of Veterans Affairs. A Procurement Policy Memorandum (PPM) was issued to minimize delays to the re-solicitation process and ensure “fair and reasonable pricing” given by offerors. Before tiered evaluations emerged, requirements were required to be solicited multiple times before receiving pricing that was deemed as fair and reasonable.

The Department of Veterans Affairs has noted previous instances of excessive contract values paid to SDVOSB and VOSBs. In effort to curtail excessive funding and awards that are too costly to the government that may have instead been fair and reasonable, VA contracting officers are now able to “cascade” down tiers of bidders instead of resoliciting efforts in their entirety.

What are the tiers and how are they prioritized?

According to the Procurement Policy Memorandum (PPM) issued on February 8, 2018, contracting offices are to move through the following priority of set-asides when evaluating the basis for award of an effort, with the most preferred beginning at the first tier:

  1. Tiered evaluations limited to SDVOSB or VOSB
  2. Tiered evaluations including small business concerns
  3. Tiered evaluations including large business concerns

Initially, market research is conducted to determine the appropriate tier for any given requirement. The tier must be chosen before the final solicitation is released and include notice in the RFP indicating the set-aside used. As the contracting office evaluates their procurement process, several scenarios utilizing the tiered structure may arise:

Scenario 1: If the contracting office moves forward with a tiered evaluation limited to SDVOSB or VOSB, and companies provide offers that do not satisfy the requirement, then a re-solicitation must be issued.

Scenario 2: If the second tier, defined for small business concerns, is chosen, and SDVOSBs submit offer(s) as well for the same solicitation, then the contracting office may revert to the initial SDVOSB/VOSB tier for the resultant award. However, if there are SDVOSBs that submit offers the contracting office does not feel are representative of the best value, then an award may be granted to a small business rather than resoliciting the effort.

Scenario 3: If the third tier is chosen, to include large business concerns, then any company may submit a proposal. If the contracting office determines that any SDVOSBs offered fair and reasonable pricing when reviewing submissions, then the government will utilize the first tier for award to the SDVOSB contractor. Offers from other tiers are no longer considered. However, if fair and reasonable pricing is not received, then the set-aside may be cancelled and the contracting office will move to the next tier and consider all other businesses that submitted proposals. If pricing is still not reasonable, then the requirement as a whole will be re-solicited.

It is important to note the contracting officer is not permitted to bypass the first two tiers, soliciting only to large businesses, without comparing it to the Independent Government Cost Estimate (IGCE), even if the dollar value submitted is low. The IGCE functions to assist the contracting officer in determining the acquisition strategy and the estimated cost for the requirement. If the IGCE is found to be incorrect, then the solicitation will have to be cancelled and resolicited.

Why Utilize Tiered Evaluations in the First Place, and What Does Kingdomware Technologies, Inc. v. United States Have To Do With It?

There is discussion noting the likelihood that tiered evaluations were issued as a result of the June 16, 2016 Supreme Court case, Kingdomware Technologies, Inc. v. United States, No. 14-916 (2016).

This case was first brought to light after concern rose of the VA falling behind on achieving its three percent goal for contracting with SDVOSBs and adhering to the “Rule of Two” procedure. The Rule of Two noted competition must be set-aside for SDVOSBs if two or more verified SDVOSBs were anticipated to submit offers. Although the “Rule of Two” was technically set in place in 2006 when Congress passed the Veterans Benefits, Health Care, and Information Technology Act of 2006 (the “VA Act”), the VA refused to follow decisions made by the GAO. The VA continuously made orders off the GSA Schedule without applying the Rule of Two; and although bid protests were filed, the VA continued to avoid the resulting verdicts due to GAO bid protest decisions being considered “recommendations.” Kingdomware Technologies protested the VA’s actions, leading to a drawn out decision process.

After the Supreme Court’s initial ruling in favor of the VA, Kingdomware Technologies appealed, and the Court ruled in their favor. Thus the “Rule of Two” became a mandatory procedure.

Solicitations Utilizing Tiered Evaluations

With the authorization of tiered evaluations, several requirements issued from the Department of Veterans Affairs have begun using this procurement process. One such effort is The VHA Quality Governance requirement, solicitation 36C10X18Q0171 (Govwin Opportunity ID 168443). The contracting office identified the use of tiered evaluations as its acquisition strategy. In the solicitation, the VA states that those interested must indicate which tier they are responding to. According to the contracting office:

“A tiered evaluation for SDVOSB concerns, or in the alternative, a tiered evaluation for VOSB concerns, or in the alternative, a set aside for other small business concerns with HUBZone small business concerns and 8(a) participants having priority.”

In order for a requirement to utilize tiered evaluations as a set-aside, the tiers must be identified prior to release through the use of market research. In the sources sought notice released on April 3, 2018 under RFP number 36C10X18Q9095, the government noted research being conducted would determine the set-aside used for the acquisition.

The tiered evaluation process functions to accomplish two major goals of ensuring a swifter procurement process and aiding in better pricing received from offerors. Time will tell if this process really does prioritize SDVOSB and VOSB firms, bringing their products and services to market at a fair and reasonable value.