September 5, 2018 - Protests & Litigation

August 2018 Bid Protest Roundup

Protests and LitigationThis month, we bring you three bid protests from three fora.  The first is not a decision at all, but an interesting dissenting opinion from two judges of the Court of Appeals for the Federal Circuit, calling into question that court’s recent narrowing of the Court of Federal Claims’ (COFC) jurisdiction over certain kinds of bid protests.  The second is a COFC decision adopting the Government Accountability Office’s (GAO) approach to addressing key personnel who become unavailable after proposal submission.  The final decision is from the GAO, sustaining a protest because of ambiguities as to the identity of an offeror.

Cleveland Assets, LLC v. United States (Fed. Cir. 2018):  In the latest chapter of the Cleveland Assets bid protest, the Federal Circuit denied a petition for an en banc rehearing of its previous decision denying the protester’s appeal.  Much more interesting than the one-paragraph denial is the nine-page dissent that followed.

This protest involved a challenge to the terms of a Government Services Administration (GSA) Request for Lease Proposals.  The protester filed suit at the COFC, alleging that GSA’s solicitation sought to lease additional spaces not included in a prospectus that, pursuant to 40 U.S.C. § 3307, the agency was required to submit for Congressional approval.  The COFC dismissed this ground of the protest for reasons not relevant here, and the protester appealed.

The Federal Circuit, without addressing the basis for the lower court’s dismissal of this ground, held that the COFC lacked jurisdiction to consider the protester’s argument.  The court cited one prong of the COFC’s protest jurisdiction under 28 U.S.C. § 1491(b)(1), which allows challenges to “any alleged violation of statute or regulation in connection with a procurement or a proposed procurement.”  The Federal Circuit previously has held that “any alleged violation of statute or regulation in connection with a procurement or a proposed procurement” is a broad grant of jurisdiction, including statutory or regulatory violations connected “with any stage of the federal contracting acquisition process, including the process for determining a need for property or services.”  Distributed Solutions, Inc. v. United States, 539 F.3d 1340, 1346 (Fed. Cir. 2008) (internal citations and quotations omitted).  The panel held, however, that the COFC’s jurisdiction was not so broad as to encompass this protest ground because the protester alleged the violation of an appropriations statute rather than a violation of a procurement statute.

In their dissent, Judges Wallach and Newman observed that the relevant text of 28 U.S.C. § 1491(b)(1) provides jurisdiction over “any alleged violation of statute or regulation in connection with a procurement or a proposed procurement.”  After reviewing binding precedents that emphasized the “sweeping” nature of this grant of jurisdiction, the dissenting judges argued that the majority erred by requiring, contrary to the plain language of the statute, that a protester allege a violation of a procurement statute.  A proper application of the statute, the dissenters insisted, provided jurisdiction because the alleged violation of the appropriations statute in question was directly “in connection with” the agency’s authority to conduct a procurement and the specifically challenged terms of a solicitation.  The dissenters also chided the majority for failing to address why there was no jurisdiction under 28 U.S.C. § 1491(b)(1)’s separate grant of jurisdiction over “an action . . . objecting to a solicitation by a Federal agency” – which this protest fairly clearly was.

Takeaway:  The Federal Circuit’s questionable jurisdictional holding in the previous decision, and its refusal to revisit that decision en banc, signals a narrowing of the COFC’s ability to review certain kinds of bid protests.  Protesters invoking non-procurement statutes should carefully frame their pleadings to satisfy the Federal Circuit’s most recent shift in its own precedent.

 United Valve Co., B-416277; B-416277.2, July 27, 2018:  What’s in a name (or a CAGE code)?  Sometimes it is the difference between winning and losing a contract.  In this GAO protest, the agency sought helicopter parts that had to be manufactured by approved manufacturers.  The solicitation included a list of approved sources, along with the Commercial and Government Entity (CAGE) code and part number(s) corresponding to each approved source.  CAGE codes are unique government-issued codes that correspond to a particular contractor facility at a specific location.  The solicitation identified Logistical Support, LLC, CAGE code 55064, as the approved source for a particular part.  The agency received proposals from various offerors, including Logistical Support, LLC, CAGE code 1HFE7.  The approved CAGE code 55064 appeared nowhere in the offeror’s proposal.  The agency asked for clarification of the discrepant CAGE codes, and the offeror replied that both codes belonged to the same facility at the same location.  The agency accepted the response and awarded the contract to Logistical Support, LLC.  A disappointed offeror filed a protest, alleging that the awardee was not an approved source and therefore was ineligible for award.

The GAO found the contemporaneous record insufficient to justify the agency’s conclusion that Logistical Support, LLC, CAGE code 1HFE7 was the same entity as Logistical Support, LLC, CAGE code 55064.  The GAO noted that, although the record showed that the entities associated with CAGE codes 55064 and 1HFE7 shared the same name and address, they had different DUNS numbers, different Doing-Business-As names, and different activation dates in the System for Award Management.  The record also showed that various affiliated companies and subsidiaries shared the address listed for both entities.  Although it was fairly clear that the two entities were somehow related, the GAO found it was unreasonable for the agency to conclude that this record established that they were the same legal entity.  The GAO accordingly sustained the protest and recommended that the agency go back and figure out whether the putative awardee really was the approved source eligible for award.

Takeaway:  Offerors should be very careful about the names, addresses, CAGE codes, and DUNS numbers they put on their proposals.  The same legal entity may very well have two CAGE codes, and a fancy trade name may sound better than the offeror’s official name of Acme Conglomerated, LLC.  But, if the proposal does not make completely clear the precise identity of the offeror, the company is inviting an agency to come to an adverse conclusion or for a disappointed offeror to file a protest that may be sustained.

C2C Innovative Solutions, Inc., B-416289; B416289.2, July 30, 2018This procurement sought a Qualified Independent Contractor (QIC) to handle reconsiderations of denials of Medicare claims related to durable medical equipment.  As explained in the GAO decision, under Centers for Medicare and Medicaid Services (CMS) procedures, QICs provide the second level of appeals in the Medicare appeals process.  QIC decisions, in turn, may be appealed to a higher level of agency review.  If the QIC decision is overturned by higher review, an Administrative QIC (AdQIC) may refer an appeal of that decision to a review by the Medicare Appeals Council, prior to an aggrieved party having the right to seek judicial review.

The agency awarded the task order.  A disappointed offeror (the incumbent) protested to the GAO, raising various protest grounds, including alleging that the awardee was impeded by multiple OCIs.  The core of this allegation was that the awardee’s wholly-owned subsidiary simultaneously served as an AdQIC under another CMS contract.

The protester alleged an Impaired Objectivity OCI arose because the AdQIC subsidiary would be in a position “to withhold issues regarding its own processing of QIC reconsiderations while at the same time emphasizing to CMS any discrepancies or aberrancies in the reconsideration of its competitors, including [the protester’s], or any other non-affiliated QIC’s.”  The protester also alleged that the awardee, through its AdQIC subsidiary, “is authorized to make referrals to the Appeals Council of administrative decisions that overturn or partially overturn reconsideration decisions made by [the awardee].”  The GAO agreed there appeared to be a potentially significant OCI and found that the record indicated that the agency’s OCI investigation failed to address this possibility of biased recommendations and improperly deferred to the awardee’s conclusion that no OCI existed.

The protester also alleged an Unequal Access to Information OCI arose because the awardee potentially had access to non-public, competitively useful information in the Medicare appeals system as a result of its subsidiary’s AdQIC contract – allegedly including files generated by the protester’s own incumbent performance as a QIC contractor.  The GAO again found that the agency’s analysis of the potential OCI was superficial and insufficient, notably “fail[ing] to address the substance of the conflict of interest inquiry required by the RFP, namely, whether the information was non-public and, if so, whether it might provide a competitive advantage.”

On these two grounds, the GAO sustained the protest and recommended that the agency perform a reasonable and better documented OCI analysis.

Takeaway:  This case is a good reminder that an OCI can arise as a result of an affiliate’s work.  Although there are mitigation strategies that may reduce that risk, an award is vulnerable to challenge if the procuring agency’s own investigation is inadequate or insufficiently documented.