April 5, 2021 - Protests & Litigation

March 2021 Bid Protest Roundup

Protests and LitigationThis past month marked the release of multiple notable bid protest decisions. On an issue of first impression, the Federal Circuit in Safeguard Base Operations[1] held that the Court of Federal Claims (COFC) has jurisdiction over bid protests based on the implied-in-fact contract theory that the government must evaluate bids fairly. In both VS2, LLC,[2] and Peraton, Inc.,[3] the U.S. Government Accountability Office (GAO) dismissed protests as untimely, illustrating two scenarios in which contractors should remain vigilant and bring protests earlier, rather than later.

Safeguard Base Operations: Protests Concerning Implied-in-Fact Contracts Are Welcome in the Court of Federal Claims

In Safeguard Base Operations v. United States, the Federal Circuit held, on a question of first impression, that the COFC has jurisdiction under the Administrative Dispute Resolution Act (ADRA)[4] to hear implied-in-fact contract claims in the context of bid protests under 28 U.S.C. § 1491(b)(1).

In this case, Safeguard alleged that the Government violated an implied contract to fairly and honestly consider its proposal. Historically, the Claims Court was a forum only for bringing contract claims, and only for money damages. In the twentieth century, the Court assumed protest jurisdiction on its own authority, based upon its ability to adjudicate contract claims based on an implied-in-fact contract theory that the government would evaluate bids fairly. If the government “breached that contract” by evaluating an offeror unfairly, then the court could award bid and proposal costs to the aggrieved offeror as breach damages. This was a legal fiction to allow the court to hear protests. After the court received true bid protest authority with injunctive powers, there was a legal question about whether the previous protest jurisdiction, based on breach of the implied-in-fact contract to evaluate proposals fairly, still survived.

The solicitation underlying the bid protest claim was issued by the Department of Homeland Security (DHS). It contemplated a firm fixed price contract for dormitory maintenance services at the Federal Law Enforcement Training Center in Glynco, Georgia, seeking a base performance period with seven one-year options. The solicitation included a “Schedule B” in which the Government listed the contract line item numbers (CLINs) for all required supplies and services, organized by the period of performance or option period when they would be needed.

Schedule B stated that offerors should indicate in their proposals the corresponding dollar amount they would charge for each CLIN. Sixteen of these CLINs directed offerors not to submit pricing information, but rather to refer to Government-provided prices, though these prices were not found in the solicitation documents. At least one offeror submitted questions regarding these missing prices; in response, the Government provided the prices for the sixteen CLINs in question via a lengthy Q&A document. The solicitation was not formally amended to include these prices.

Safeguard Base Operations (“Safeguard” or “protester”) brought three bid protests at the GAO, primarily contesting deficiencies assigned to it by DHS due to its failure to include in its proposal the prices for the sixteen CLINs discussed above. The GAO dismissed the first two protests as moot when DHS indicated it would take corrective action; the GAO denied the third protest. Safeguard then protested at the COFC, claiming that “the Government arbitrarily and capriciously disqualified Safeguard’s proposal and violated an implied contract to fairly and honestly consider Safeguard’s proposal.” The COFC, finding that it had jurisdiction over the implied-in-fact contract claim, ruled in favor of the Government.  Safeguard appealed to the Federal Circuit.

Before addressing the merits of the case, the Federal Circuit analyzed whether, and under what authority, the COFC has jurisdiction to decide claims related to implied-in-fact contracts. The Federal Circuit noted that such jurisdiction could derive from either 28 U.S.C. § 1491(a)(1), under which the court has jurisdiction to hear claims concerning implied contracts, or 28 U.S.C. § 1491(b)(1), related to bid protests – both sections of the ADRA.

Discussing the history of judicial review in the procurement context, the Federal Circuit looked in particular to its own decision in Resource Conservation Group v. United States, finding that Congress intended for the ADRA to “unify bid protest law in one court under one standard.”[5] The Court found that the plain language of 28 U.S.C. § 1491(b)(1), supported by Congressional intent to provide the COFC with jurisdiction over all procurement bid protest matters, grants jurisdiction at the COFC to protest claims based upon the old theory that every procurement creates an implied-in-fact contract between the Government and offerors to evaluate bids fairly.

On the merits, the Federal Circuit found that the COFC did not err in ruling in favor of the Government, approving the COFC’s findings that (1) the solicitation reasonably required offerors to submit the government-provided amounts for the sixteen contested CLINs in their price proposals; (2) the solicitation provided reasonable notice to offerors that omission of those prices could lead to elimination from competition; and (3) Safeguard’s omission of those prices was material and therefore could not have been addressed by DHS through mere clarifications. The Federal Circuit also affirmed the COFC’s denial of Safeguard’s request to supplement the administrative record because the existing record did not support Safeguard’s allegations that the agency was biased toward Safeguard.

In a dissenting opinion, Federal Circuit Judge Newman found that the court “[w]ithout doubt” had jurisdiction over the bid protest, and did not need to strain to use the old implied-in-fact contract theory to get there. Instead, Judge Newman stated, “[t]he government’s obligation to deal fairly and honestly with offerors is a covenant that underlies all government procurement. … The obligation to deal fairly and honestly with offerors is not subject to negotiation, mutuality of understanding, and consideration—the requirements of an implied-in-fact contract.”

Judge Newman disagreed with the majority on the merits, finding that the omission of prices for the sixteen CLINs in the solicitation and later-released Q&A document created inconsistencies which should have been resolved by DHS via amendment of the solicitation. Judge Newman also found that Safeguard’s allegations of bias should have permitted supplementation of the administrative record below.

Takeaway

The Federal Circuit’s holding in Safeguard clarifies the broad scope of the COFC’s bid protest jurisdiction and stands for the principle that, in any procurement, the court has jurisdiction over a protest ground alleging that the government failed to evaluate proposals fairly. Many attorneys would argue that this was never in doubt. The Federal Court’s decision now confirms this, and ties its jurisdiction to the historical implied-in-fact contract theory via § 1491(b)(1).

VS2, LLC: It’s Never a Good Idea to Sit and Wait

The GAO’s decision in VS2, LLC should serve as a warning to unwary intervenors that, if they want to go on the offensive, they may need to act fast, rather than sit by and see what happens. Any party to a bid protest may request reconsideration of a GAO decision, but that request must be filed within 10 days of when the basis for reconsideration is known or should be known. In this case, the intervenor waited too long to raise allegations disagreeing with the GAO’s earlier decision and recommended course of corrective action.

Original Source Selection and Protest

The Department of the Army previously awarded a task order for logistics support services at Fort Benning, Georgia, to VS2. Both Vectrus Mission Solutions Corporation and a second concern filed protests challenging the award, and VS2 intervened in the protests.

The RFP provided that the award would be made to the lowest cost/price, technically acceptable proposal with a substantial confidence rating under the past performance factor. Vectrus had submitted the lowest overall cost/price; however, in evaluating Vectrus’s protest, the Army applied an upward most probable cost adjustment, which resulted in Vectrus having a more expensive evaluated cost/price than VS2. As a result, the Army concluded that VS2 submitted the lowest overall cost/price proposal and issued the task order to VS2.

Vectrus protested the agency’s decision to apply an upward most probable cost adjustment to its proposal, arguing that the cost at issue was capped. Because additional costs could not be passed on to the agency, it was erroneous to apply an upward most probable cost adjustment, as a most probable cost adjustment is supposed to reflect most probable cost to the Government, and here the Government would never incur the costs in question.

In its October 27, 2020 decision, the GAO agreed that Vectrus had legally bound itself to absorb any excess costs. Therefore, for evaluation and source selection purposes, Vectrus’s cost/price should have been $250,831,287, the amount proposed by Vectrus. This correction meant that Vectrus’s proposal was less expensive than VS2’s proposed cost/price of $257,097,548. In light of this, the GAO found that Vectrus was entitled to receive the task order based on the express terms of the RFP, which guaranteed award to the offeror with the lowest-cost, technically acceptable proposal, with a substantial confidence rating for past performance – here, Vectrus. The GAO recommended that the agency terminate the task order award to VS2 and issue the task order to Vectrus, “if otherwise proper.”

The Army followed the GAO’s recommendation, terminating the task order issued to VS2 and issuing a task order to Vectrus.

VS2’s Current Protest

Rather than object to the GAO’s recommendation or the law and facts upon which it was based, VS2 bided its time and allowed the agency to implement the recommended corrective action, including termination of VS2’s order and award to Vectrus. Only after corrective action was completed did VS2 raise an objection, in a bid protest it filed with the GAO on December 11, 2020, more than 10 days after the GAO’s decision. Although VS2 asserted that it was challenging the Army’s most recent award decision, the GAO concluded that the current protest was actually an untimely request for reconsideration.

The GAO placed VS2’s allegations into four categories: (1) allegations previously raised and considered during Vectrus’s original protest; (2) allegations that could have been, but were not, raised during Vectrus’s original protest; (3) allegations challenging or disagreeing with the GAO’s earlier decision, or with the comments that Vectrus filed in the earlier protest; and (4) a challenge to the GAO’s recommended course of corrective action.

First, the GAO noted that VS2’s protest repeated arguments it already made in the comments it filed in Vectrus’s protest. Repetition of arguments from an earlier protest does not provide the GAO with a basis to reconsider an earlier decision.

Second, VS2 raised several new arguments regarding the evaluation of Vectrus’s proposal that could have been—but were not—raised during the earlier protest. Specifically, VS2 argued for the first time that the Army should not have assigned Vectrus a substantial confidence rating for its past performance because it misevaluated Vectrus’s past performance. Because VS2 made no mention of these concerns during the earlier protest, despite the fact that all of the information necessary to advance these allegations was known or should have been known to VS2 at that time, the GAO concluded that these allegations could not provide a basis to reconsider its earlier decision.

VS2 took the position that, because it was the intervenor and not the protester at that time, it was not an interested party to challenge the evaluation of Vectrus’s proposal. The GAO disagreed, stating that “VS2’s position ignores the fact that, had it made these arguments (and had we agreed with its position), this would have had the effect of rendering Vectrus ineligible for award.” A substantial confidence rating was a prerequisite under the terms of the RFP for being issued the task order. If VS2 had shown that Vectrus’s past performance had been unreasonably evaluated, Vectrus would not have been in line for award. Therefore, the appropriate time to have raised these arguments was during GAO’s consideration of Vectrus’s original protest because these challenges bore on Vectrus’s standing as a protester and could have undermined the entire protest.

GAO noted that once VS2 received its earlier decision sustaining Vectrus’s protest and recommending that the award be directed to Vectrus, VS2 could have timely requested reconsideration on the basis that the evaluation of Vectrus’s proposal was allegedly flawed. But VS2 did not do this. Because VS2 also failed to raise these allegations in a timely filed request for reconsideration, the GAO concluded that it had no basis to consider the allegations.

Third, VS2 challenged the findings and conclusions reached in the GAO’s previous decision. Again, the GAO concluded that these arguments amount to an untimely request for reconsideration, stating that, “[t]o the extent that VS2 thought we failed to take adequate cognizance of any portion of the record in the earlier case, or to the extent that it thought our decision was in error, VS2 was required by our regulations to file a request for reconsideration raising these concerns no later than 10 days after receiving our earlier decision.” Because VS2 did not raise these concerns within 10 days, these allegations did not provide GAO with a basis to reconsider its earlier decision.

Finally, VS2 argued that the Army issued the task order to Vectrus without exercising any independent judgment, or performing any substantive evaluation or analysis, and instead simply followed the recommendation in the GAO’s earlier decision. VS2 focused on the language of the GAO’s recommendation that provided for issuing the task order to Vectrus “if otherwise proper,” and interpreted this to mean that the Army had to perform an entirely new evaluation before making a new award decision. The GAO considered VS2’s protest ground an untimely argument that it should modify its earlier recommendation.

The GAO explained that the Army’s upward adjustment to the capped costs in Vectrus’s proposal was improper because the proposed cap limited the government’s liability and shifted liability for that cost to the offeror. Without the upward cost adjustment, Vectrus was entitled to issuance of the task order under the terms of the RFP. Therefore, the GAO recommended that the Army issue the task order to Vectrus, rather than reevaluating proposals. The phrase “if otherwise proper,” was merely “intended to preserve the agency’s discretion to ensure that issuing the task order to Vectrus would be proper and adequately safeguard the agency’s interests.”

Because VS2 failed to timely request reconsideration of, or a modification to, GAO’s initial recommendation, its protest was dismissed.

Takeaway

The GAO’s decision in VS2, LLC demonstrates the need for intervenors to be proactive. If an intervenor thinks that the agency has not caught a material flaw in the protester’s own proposal, the intervenor needs to raise it during the initial protest rather than waiting to pounce only after corrective action is complete and a new award decision is made.

Once the GAO has issued a decision, parties have 10 days to file a request for reconsideration. If an intervenor believes there is a problem with the GAO’s recommendation, the intervenor needs to act fast, rather than sitting by and waiting, particularly when the recommended corrective action is as direct and clear as it was here.

Peraton, Inc.: “Should Have Known” Better

In a matter of first impression, the GAO clarified the deadline for protesting solicitation improprieties when an alleged flaw is discovered and no further proposal revisions are anticipated but the agency subsequently requests proposal revisions. Is the protest due by the next date that is eventually set for receipt of proposals, or is it due within 10 days (given that, at the time, no more proposal revisions are expected)? In Peraton, Inc., the GAO held that the 10-day rule governs.

This protest was the most recent of six filed by the incumbent contractor regarding the procurement by Department of State (DOS or the “agency”) of software and server development services through the National Institutes of Health CIO-SP3 government-wide acquisition contract for its Office of Consular Systems and Technology. Peraton primarily alleged that, due to the passage of time since the procurement’s commencement, the agency’s needs had changed to the point that the solicitation was no longer materially representative of those needs.

According to Peraton, it first learned of the changes in the agency’s requirements on various dates between May 2020 and November 2020. The agency did not set a time for receipt of proposals until October 30, 2020, when it notified offerors to submit updated letters of commitment by November 13, 2020. Peraton filed its protest on November 9, 2020.

There are two different timelines for raising solicitation challenges: (1) prior to the next date set for receipt of proposals; and (2) if no closing time has been established, or if no further submissions are anticipated, within 10 days. See 4 C.F.R. § 21.2(a)(1).

Peraton conceded that it learned of six out of its eight protest grounds prior to the 10-day period before which it actually filed the protest on November 9, 2020. However, Peraton insisted that its protest was timely because it filed its challenge prior to the next date set for receipt of proposals, which in this case was November 13. In response, the agency argued that, because it had not set a time for receipt of proposals until October 30, for all matters known to Peraton prior to that date it was required to follow the 10-day rule and file its protest within 10 days of when it knew or should have known the basis of its protest.

The GAO agreed with the agency, explaining, “[a]bsent an established closing date during this period, if the protester believed the solicitation needed to be amended to address changes in the agency’s requirements and the protester knew or should have known about the defects in the solicitation prior to October 30, under the plain terms of our regulations … the protester was required to raise these issues within ten days.” For these reasons, the GAO dismissed the protest because Peraton failed to file within 10 days of when it knew, or should have known, the information that constituted the basis of its protest.

The 10-day rule is the exception rather than the rule for solicitation impropriety challenges. In finding the protest untimely, the GAO noted that the 10-day rule is aimed at promoting fairness and efficiency by resolving improprieties as early on as possible in the course of a procurement.

Addressing the remaining two protest grounds, the GAO noted that the dissemination of agency guidance documents (one issued on March 19, 2020, and the other issued on August 10, 2020) were the occurrences from which Peraton should have known the bases of these protests, marking the respective starts of the 10-day filing periods. The GAO concluded that these protest grounds were also untimely because “a protester need not await perfect knowledge before filing a protest” and Peraton failed to comply with the 10-day filing period.

Further, the GAO pointed out that the passage of time was largely due to protests filed by Peraton itself, and noted the patent unfairness in Peraton filing yet another protest long after it should have known the basis for that protest. The GAO emphasized that “[p]ermitting a protestor to, in effect, hold solicitation challenges in reserve until it becomes clear that they are unlikely to prevail in a competition is antithetical to the idea that allegations of solicitation improprieties should be resolved as early as possible in the procurement process.”

Takeaway

This decision serves as yet another reminder that contractors should be constantly vigilant for any changing circumstances which could form protest grounds, or risk having protests dismissed as untimely.  Absent an established closing time, if a protester believes a solicitation needs to be amended to address changes in the agency’s requirements, the protester is required to raise these solicitation challenges within 10 days. If the agency later decides to request proposal revisions after the 10-day clock has run out, a protester does not get a second chance to raise the protest grounds it failed to raise when it did not expect there to be further proposal revisions.


[1] Safeguard Base Operations, LLC v. United States, No. 19-2261, 2021 WL 821472 (Fed. Cir. Mar. 4, 2021).

[2] VS2, LLC, B-418942.4, 2021 WL 873343 (Comp. Gen. Feb. 25, 2021).

[3] Peraton, Inc., B-416916.11, 2021 WL 1019983 (Comp. Gen. Feb. 8, 2021).

[4] 28 U.S.C. § 1491.

[5] Res. Conservation Grp., LLC v. United States, 597 F.3d 1238, 1245 (Fed. Cir. 2010).