The Unrecognized Sole-Source Requirement: A Lesson in Failing to Understand the Specifications

Construction and Procurement Newsletter Q2 2014

Client Alert


In the recent decision of CMEC/ARC Electric JV v. Dep’t of Veterans Affairs, the Civilian Board of Contract Appeals (CBCA) denied a contractor’s claims for defective specifications when the performance specification at issue created a sole-source requirement.

The appeal involved a contract to replace and upgrade generators at the Spokane VA Medical Center. The contract included a performance specification to install a digital HVAC control system. Importantly, the specification required that one database be used to operate the entire system. After the award of the contract, the contractor identified a solution that would utilize two separate databases. The VA rejected this solution, and the contractor submitted a request for equitable adjustment (REA) on the grounds that the requirement for a single database amounted to a sole-source requirement. In essence, the contractor argued that because only one control system would work under the specification, it was entitled to relief because of a defective specification, a constructive change, and/or because of the VA’s failure to disclose its superior knowledge.

The contracting officer denied the REA, and the contractor appealed. The CBCA likewise denied the appeal based on a plain-language reading of the specification. Despite the contractor’s argument that the procurement was to be open-source, the CBCA concluded that there was no ambiguity. One database was clearly required, and because the contractor did not comply, the VA was entitled to reject the contractor’s claim for additional relief.

Generally speaking, performance specifications identify the outcome to be achieved and leave it to the contractor to determine the best method to accomplish the result. Here, the language of the specification was performance-based. However, the requirement to use only one database effectively turned the specification into a design or “cookbook” specification, as opposed to a performance specification. In other words, the nature of the one-database requirement meant that the contractor did not have the discretion it believed it had, which leads to the central lesson of the case: the contractor apparently was not aware that only one system would work for the database until after the bid had been awarded. Had the contractor objected to the sole-source requirement during the bid process or better understood the specification requirements, perhaps its loss could have been prevented. Instead, the contractor was left to argue about the sole-source nature of the specification after the award was made, and as the CBCA noted, such protests “come too late.”