This installment of our monthly bid protest Law360 spotlight examines three protest decisions released in October 2019. In the first decision, Akira Technologies, Inc. v. United States, COFC No. 19-1160C (Fed. Cl. Oct. 10, 2019), the Court of Federal Claims (COFC) concluded that it does not have jurisdiction to review task order modifications. In the second decision, American Relocation Connections, LLC, v. United States, No. 2019-1245 (Fed. Cir. Oct. 11, 2019), the U.S. Court of Appeals for the Federal Circuit clarified the difference between the prejudice needed for standing to protest and the prejudice needed for a successful protest on the merits. In the third decision, Team Wendy, LLC, B-417700.2, Oct. 16, 2019 CPD ¶ ___, the Government Accountability Office (GAO) clarified its limited authority to review bid protests involving the AbilityOne procurement list.
This protest concerned task orders issued under a multiple award indefinite delivery indefinite quantity (IDIQ) contract. The Federal Acquisition and Streamlining Act of 1994 (FASA) prohibits the COFC from hearing protests concerning the issuance of task orders. The protester attempted to circumvent this jurisdictional bar by arguing that it was not protesting the issuance of a task order, but a task order modification.
The U.S. Centers for Medicare & Medicaid Services (CMS) awarded contracts to Akira and C-HIT under SPARC, a multiple award IDIQ contract to modernize CMS identity management systems and to migrate CMS applications to a cloud-based environment. Both Akira and C-HIT could compete for task orders under SPARC. CMS awarded one maintenance task order to C-HIT. Under the task order, C-HIT was required to maintain CMS’s old platform. CMS also issued a migration task order to Akira. Under this task order, Akira would be responsible for migrating CMS’ applications to the new platform.
After contract performance had begun, CMS decided that it would not exercise the option years on Akira’s migration task order and instead modified C-HIT’s task order to include the necessary migration services.
Akira filed a post-award bid protest challenging CMS’s sole-source award decision. CMS moved to dismiss Akira’s protest for lack of subject matter jurisdiction on the grounds that FASA bars the court from hearing protests in connection with the issuance of a task order, except on the grounds that the order increases the scope, period, or maximum value of the IDIQ contract. Akira attempted to circumvent the court’s lack of jurisdiction by arguing that it was not protesting the award of the task order, but instead was seeking review of CMS’s task order modification.
The court concluded that “[a] protest of a task order modification to acquire additional services directly connected to the services provided in a previously issued task order that does not otherwise increase the scope, period or the maximum amount of the IDIQ contract is a protest ‘in connection with the issuance of a task order.’” Therefore, the court granted CMS’s motion to dismiss for lack of jurisdiction.
First, the court explained that the FAR does not distinguish between new task orders and modifications of task orders. Here, CMS used a task order modification to order additional services within the scope of the established IDIQ contract. The court rejected Akira’s argument that a task order modification was different enough from a task order to not fall under the bar.
The court further explained that even if a task order modification for additional services is not a task order, Akira’s protest to the task order modification at issue is a protest made in connection with the maintenance task order originally issued to C-HIT. The modification was directly related to C-HIT’s original maintenance task order work. The fact that CMS later ordered additional migration services through the task order modification does not defeat FASA’s jurisdictional bar for protests made “in connection with” the issuance of a task order. Thus, the protest is barred under the plain terms of FASA.
Takeaway: The COFC Lacks Jurisdiction to Hear Protests Concerning Task Order Modifications
The Court’s decision is an important reminder that FASA bars the COFC from hearing protests made in connection with the issuance of task orders. Contractors should note that the Court does not make a distinction between task orders and task order modifications in assessing its jurisdiction under FASA. The legislative intent behind FASA was to allow agencies to issue task orders under IDIQ contracts without worrying about protest delays, and subsequent decisions have demonstrated that FASA bars protests over procurement decisions connected to task orders. The court, therefore, concluded that FASA’s protest bar for any protest “in connection with” the issuance of a task order should be interpreted to include protests concerning task order modifications.
American Relocation Connections, LLC (ARC) filed a pre-award bid protest arguing that Customs and Border Protection (CBP) violated Small Business Administration (SBA) regulations by failing to consult with the SBA during its market research for a solicitation for the procurement of employee relocation services. The Federal Circuit affirmed the COFC’s decision dismissing the protest because ARC could not show that it was prejudiced by CBP’s failure to consult with the SBA.
SBA regulations require that agencies setting aside orders placed against multiple award contracts for small business concerns under the Small Business Jobs Act of 2010 “conduct market research to determine the type and extent of foreseeable small business participation in the acquisition.” 13 C.F.R. § 125.2(c)(2). The regulations require agencies to consult with the SBA during their market research.
The CBP had a 2014 contract for employee relocation services that had been set aside for small businesses under the General Services Administration Federal Supply Schedule (FSS). The CBP decided to re-compete its employee relocation services contract under a different NAICS code. In preparation for the re-compete, the CBP conducted market research to determine whether the new solicitation should be set aside for small businesses. Its research found that only one certified small business was available to compete under the assigned NAICS code. Because there was not enough small business vendors to meet the competition threshold, the CBP issued its request for quotations (RFQ) without restricting the procurement to small businesses.
ARC questioned the agency’s decision not to set aside the RFQ for small businesses. The agency responded that it had changed NAICS codes for the re-compete, and stated that under the new NAICS code ARC was designated as a large business. The CBP added that, even if ARC were a small business under the applicable NAICS code, there were not enough certified small businesses to meet the competition threshold.
ARC initially filed a protest with the GAO. The GAO concluded that the decision to set aside orders for small businesses was within the agency’s discretion and dismissed the protest. ARC then filed a pre-award bid protest with the COFC, arguing that that CBP failed to set aside the RFQ for small businesses and failed to consult with the SBA during its market research, as required by 13 C.F.R. § 125.2(c)(2). The COFC found that ARC was not prejudiced by the CBP’s failure to consult with the SBA during its market research because, even if CBP had consulted with the SBA, there would not have been enough small businesses to meet the competition threshold. Therefore, the COFC granted the government’s motion for judgment on the administrative record and dismissed ARC’s protest. ARC appealed the COFC’s dismissal of its protest to the Federal Circuit.
On appeal, the Federal Circuit agreed with the COFC’s finding that ARC could not show that it was prejudiced by CBP’s failure to consult with the SBA during its market research.
First, the Federal Circuit rejected ARC’s argument that it only needed to establish standing to protest the RFQ to show that CBP’s failure to consult with the SBA was prejudicial error on the merits. The Court explained that there is a difference between whether a protester has alleged an injury-in-fact (or prejudice) to establish Article III standing and whether a protester can prove prejudicial error on the merits:
To establish standing in a bid protest case, the protestor must show that it is an ‘interested party’ under 28 U.S.C. § 1491(b)(1), ‘which . . . imposes more stringent standing requirements than Article III.’ Weeks Marine, Inc. v. United States, 575 F.3d 1352, 1359 (Fed. Cir. 2009). Under § 1491(b)(1), a party must show that it ‘(1) is an actual or prospective bidder and (2) possess[es] the requisite direct economic interest.” Rex Serv. Corp. v. United States, 448 F.3d 1305, 1307 (Fed. Cir. 2006). In a post-award bid protest, the prospective bidder ‘must show that there was a ‘substantial chance’ it would have received the contract award but for the alleged error in the procurement process.’ Info. Tech. & Applications Corp. v. United States, 316 F.3d 1312, 1319 (Fed. Cir. 2003). In a pre-award bid protest, however, a prospective bidder need only allege a ‘non-trivial competitive injury which can be addressed by judicial relief.’ Weeks, 575 F.3d at 1363.
In this case, ARC claimed that CBP failed to comply with SBA regulations requiring agencies to consult with the SBA during market research. ARC further alleged that if the agency had consulted with the SBA, CBP would have set aside the RFQ for small businesses. The Federal Circuit acknowledged that if ARC were to succeed on the merits of its claim, and if CBP re‑issued the RFQ as a small business set-aside, then ARC would be in a better competitive position to win the contract. However, while ARC may have suffered a non-trivial competitive injury and, thus, had standing to challenge the RFQ, this did not necessarily mean that it had shown that CBP’s failure to consult with the SBA was prejudicial error on the merits.
In order to show prejudicial error on the merits, the Federal Circuit explained that “ARC must ‘show a significant, prejudicial error in the procurement process,’ meaning it must show that there is a greater-than-insignificant chance that CBP would have issued the 2018 RFQ as a set-aside for small businesses” had it not failed to consult with the SBA during market research. The Federal Circuit stated that “the record shows that even if CBP had consulted with the SBA during its market research, it would not have issued the 2018 RFQ as a small business set-aside because there were not enough qualifying small businesses to compete under the applicable NAICS code.” Therefore, the Federal Circuit affirmed the COFC’s dismissal of ARC’s protest.
Takeaway: Always Consider Prejudice
This case serves as a warning to all potential protesters to always think about prejudice. As the Court pointed out, many bid protest cases allow discussions of prejudice and standing to blend together, but that does not mean that satisfying § 1491(b)(1)’s standing requirements necessarily established that any error committed by the agency was prejudicial error on the merits. In order to succeed, a protester must always demonstrate that the procuring agency’s mistake was not just a harmless error and that it was prejudiced by the agency’s actions.
This protest concerned an item on the AbilityOne Commission’s procurement list. The AbilityOne Commission works with nonprofit agencies to provide employment opportunities for people who are blind or have significant disabilities in the manufacture and delivery of supplies and services to the Federal Government. The Javits-Wagner-O’Day (JWOD) Act authorizes the AbilityOne Commission to maintain a procurement list of supplies and services provided by qualified nonprofit agencies that train and employ people with disabilities. AbilityOne’s procurement list is a mandatory source for federal agencies, and the JWOD Act authorizes agencies to engage in noncompetitive procurements for supplies and services on the list. Nonprofit agencies, such as the National Industries for the Blind (NIB), also help administer the AbilityOne program. For example, the NIB has the ability to recommend to the AbilityOne Commission whether to add a product to the list.
The procurement at issue in this protest concerned helmet pad inserts used in the U.S. Marine Corps’ enhanced combat helmets (ECH). The pad inserts are on the AbilityOne procurement list; therefore, under the JWOD Act, the NIB procurement list is the mandatory source for the pad inserts.
The Marine Corps issued a request for proposals (RFP) for ECHs. The RFP stated that the NIB was the mandatory source for the pad inserts. However, the Marine Corps awarded the contract to Gentex, Inc., and issued a notice of a proposed sole-source award for Gentex’s “Lux Pucks” pad inserts, even though Gentex’s Lux Pucks were not on the AbilityOne procurement list. Team Wendy, LLC, a small business, was previously selected by the AbilityOne Commission to provide the helmet pad inserts listed on the procurement list. The specific pad insert that Team Wendy produced met the requirements of the Corps’ purchase description. Team Wendy challenged the Marine Corps’ sole-source award in a GAO protest. The protest alleged, among other things, that the proposed award was an improper attempt to circumvent the JWOD Act’s mandate to purchase through the AbilityOne program.
The Marine Corps took corrective action and advised the GAO that it had canceled the notice of intent and had not awarded a contract pursuant to the notice. Therefore, the GAO dismissed the protest as academic.
After its initial protest was dismissed, Team Wendy learned that the Corps had requested that NIB work with Gentex to add the Lux Pucks to the procurement list.
In its second protest before the GAO, Team Wendy argued that the Corps was still attempting to make an improper sole-source award to Gentex. Team Wendy alleged: (1) the Corps improperly requested that NIB recommend to the AbilityOne Commission that Gentex’s Lux Pucks pad inserts be added to the procurement list, (2) the agency attempted to improperly modify the helmet contract’s requirements for pad inserts to accommodate Gentex’s Lux Pucks, and (3) the Corps failed to implement the corrective action it committed to undertake in response to Team Wendy’s initial protest.
The GAO held that Team Wendy’s protest grounds regarding the AbilityOne program were matters that the GAO does not review. The Office explained: “GAO will not consider protests challenging the AbilityOne Commission’s determination regarding items to be included on the procurement list, as such determinations are within the exclusive authority vested in the Commission to establish and maintain the list in accordance with the overall purpose of the JWOD Act.”
The GAO concluded that “[a] decision by NIB to propose a Gentex pad insert for addition to the procurement list” is not the type of matter it would review. “Similarly, a decision by the AbilityOne Commission to accept a recommendation by NIB regarding the addition of a product to the procurement list is not a matter our Office will review” because “they are matters committed to the discretion to the AbilityOne Commission” and its nonprofit partners like NIB.
Team Wendy asserted that the GAO should review its protest “because it does not challenge NIB’s discretion to propose the addition of items to the procurement list.” Instead, the protester alleged that the procuring agency engaged in improper exchanges with the NIB by requesting the addition of Gentex’s pad inserts to the AbilityOne procurement list and argued that the Corps’ “‘ongoing procurement actions constitute an improper use of the AbilityOne program’ to enable the agency to make a sole-source award to Gentex for pad inserts.”
The GAO dismissed this argument, explaining: “[f]or purposes of determining whether our Office will review a challenge concerning the addition of a product to the AbilityOne procurement list, we see no difference between an agency’s request to add a product and the AbilityOne Commission’s review of that request.” The GAO concluded that “these matters are either specifically authorized for procuring agencies or committed to the discretion of the AbilityOne Commission under the JWOD Act and its implementing regulations.”
Takeaway: The GAO’s Decision Clarifies its Limited Review of Protests Involving the AbilityOne Procurement List
Contractors should take notice of GAO’s limited authority to review bid protests involving AbilityOne procurements. The GAO’s decision dismissing Team Wendy’s protest demonstrates the Office’s high degree of deference to the AbilityOne Commission’s determinations regarding goods and services to be added to the AbilityOne procurement list. This deference is warranted because such determinations are “within the exclusive authority” vested in the AbilityOne Commission “to establish and maintain” the AbilityOne procurement list. As a result, the GAO’s review of protests involving the AbilityOne procurement list is limited to “protests challenging a procuring agency’s actions in the context of the JWOD Act and its implementing regulations.” For instance, the GAO stated that it would “review whether a procuring agency has met its obligation to procure products from the procurement list or is improperly procuring products that are not on the procurement list.”
*Victoria Dalcourt Angle is a member of our Government Contracts practice in our Washington, D.C. office and not admitted to the bar.
*Roke Iko contributed to this blog post. Roke is a full-time law student at Georgetown Law and a Law Clerk with Morrison & Foerster’s government contracts practice group.