November 10, 2021 - Protests & Litigation

OCTOBER 2021 BID PROTEST ROUNDUP

This month’s Law360 Bid Protest Roundup features three cases from the Court of Federal Claims (COFC). The court’s decisions provide important insights into bid protest standing, challenges to Small Business Innovation Research (SBIR) decisions under bid protest jurisdiction, and the significance of timely filing requests for intervention.

Aero Spray

In multiple-award indefinite delivery/indefinite quantity (IDIQ) contracts, parties receiving awards sometimes seek to contest the award of an IDIQ contract to other offerors to help reduce the competition for task orders. This unique protest situation is not permitted at the Government Accountability Office (GAO). But the door was opened at the COFC with Judge Lettow’s decision in National Air Cargo,[1] which held that winners of an IDIQ could have standing to contest awards to other offerors, creating a split between the GAO and the COFC. The recent case of Aero Spray, Inc. v. United States[2] departs from that rule and carries that split to the COFC itself, as Judge Solomson, after carefully considering the National Air Cargo opinion, chose to align with the GAO, finding a protester lacks standing to challenge an identical award to another offeror.

Importantly, with regard to this decision, the COFC has different standards for establishing standing in pre-award and post-award protests. Because injury in a post-award bid protest hinges upon the protester’s loss of a direct economic interest, the protester must establish standing by showing that it stood a “substantial chance” of receiving the award, absent the challenged conduct.  In a pre-award protest, however, the Federal Circuit permits litigants to instead establish standing by demonstrating a “non-trivial competitive injury that may be redressed by judicial relief.”[3] Applying the standard of review applicable to a post-award protest could effectively close the courtroom doors to these protests, rendering them effectively unreviewable.

In the protest at issue, Aero Spray challenged a Department of the Interior IDIQ procurement seeking aerial firefighting services. Aero Spray protested, arguing it was unfair that it expended substantial funds to ensure its aircraft met solicitation requirements by the time proposals were due, causing its bid to be higher than other offerors whose bids were deemed acceptable despite not meeting all standards at that time, insisting these other offerors should not have received an award.

The court found that while Aero Spray would have had standing under the Administrative Procedure Act, which confers standing on any person aggrieved by agency action, Federal Circuit precedent has created a more exacting test for bid protest standing under the Tucker Act. The Federal Circuit has determined that “interested party” under the Tucker Act has the same definition as “interested party” in the Competition in Contracting Act of 1984.[4] That is, an interested party is “[1] an actual or prospective bidder or offeror whose [2] direct economic interest [3] would be affected by [4] the award of the contract or by failure to award the contract.”[5] The COFC concluded that under either the pre-award or post-award test, Aero Spray did not qualify as an interested party. To the court, the nature of the objection was important to establish interested party status. Here, Aero Spray was not objecting to a solicitation or the cancelation of a solicitation; instead, it was contesting award of a contract to other parties where it had also received the same award. Therefore, Aero Spray, having received a contract award, was not an actual offeror with respect to the other contract awards. Because Aero Spray had a contract, it could not obtain anything more than it already had.

The court distinguished this situation from other multiple-award procurements, such as a disappointed offeror challenging an award to another party or a multiple-award scheme that provided for materially different awards in terms of scope, geography, or other factors. In those situations, a protester who had already been awarded one contract could seek other awards because there were material differences between them. Here, Aero Spray could not obtain the other offerors’ awards even if it prevailed. The court concluded that the general rule is that once a party becomes an awardee, it is no longer an interested party with standing to bring a bid protest under the Tucker Act for that award.

The court determined that even under the “non-trivial competitive injury” standard, intended for pre-award protests, Aero Spray could not establish standing. The court concluded that Weeks Marine was concerned with competitive injury to prospective offerors within the competition, not injury resulting from the competition. Because Aero Spray received a contract, it could not demonstrate a reduced chance of winning a contract under the solicitation. Therefore, the government’s conduct did not affect Aero Spray’s opportunity to compete for the current award or future task orders. The court followed GAO precedent, which held that an awardee is by definition not an actual or prospective offeror, which bars protest from an awardee. The court also held—like the GAO—that a recipient of a multiple award IDIQ contract was unable to demonstrate direct economic interest because it had no expectation of receiving future task orders, only a guaranteed minimum number of orders. Therefore economic interest in future task orders was too speculative to constitute a direct economic interest under the Tucker Act.

Takeaways

In the unique situation in which a multiple-award contract winner seeks to challenge other awardees receiving identical awards, this case creates a split within the COFC. If the protester can obtain no more from a procurement challenge, having already received an award, it most likely lacks standing under Aero Spray, but potentially has standing under National Air Cargo. Thus, depending on the jurist or whom that jurist follows, a protester bringing such a protest may or may not have standing.

Squire Solutions

Squire Solutions, Inc. v. United States,[6] another COFC case, concerned a protest of a SBIR award. Squire challenged the U.S. Navy’s decision to award a SBIR opportunity to another contractor, alleging that the Navy’s evaluation was arbitrary and capricious, and tainted by bias. Although the case was decided on the merits, it is notable for its rejection of the Navy’s arguments that the SBIR award could not be challenged under the Tucker Act, and the court’s analysis of when a SBIR program award may quality as a “procurement,” and thus be challenged under the court’s bid protest jurisdiction.

The SBIR program is a government-sponsored seed fund that provides funding to small businesses to develop and commercialize their R&D products. There are three phases to the SBIR program. Phase I is the concept phase, in which awards are made to explore projects’ technical merit or feasibility. Phase II awards expand upon the Phase I results and involve more R&D development. In Phase III, the project progresses to commercialization; private or non-SBIR agency funds finance this stage. Eleven agencies participate in the SBIR program and allocate funds for it from their R&D budgets. Each agency administers its own program, selects its own R&D topics, and makes awards on a competitive basis, although Phase III awards may be made on a sole-source basis to prior Phase I or Phase II awardees.

In response to Squire’s protest, the Navy moved to dismiss for lack of jurisdiction and also moved for judgment on the administrative record in the alternative. The COFC rejected the Navy’s grounds for dismissal, but ruled in favor of the Navy on the merits, finding that the Navy’s evaluation was proper and that the protester did not demonstrate the Navy acted arbitrarily or in bad faith. The case, however, is notable for its exploration of the jurisdiction of the COFC under the Tucker Act.

The Navy moved to dismiss for lack of jurisdiction on three bases. First, the Navy argued that Congress has not waived sovereign immunity for judicial review of agency action under the SBIR program; second, the Navy contended the case did not involve a procurement, which was necessary to satisfy the court’s bid-protest jurisdiction; and third, the Navy asserted that the plaintiff did not have standing to bring a bid protest.

The Navy’s first argument was based on the Administrative Procedure Act (APA), which precludes judicial review of agency actions committed to the agency by law. The Navy argued that because the SBIR statute, 15 U.S.C. § 638, commits SBIR awards to agencies’ discretion, the court lacked jurisdiction under the APA. The court rejected this argument, noting that bid protests are brought pursuant to the Tucker Act, 28 U.S.C. § 1491, the main jurisdictional statute of the COFC, not the APA, providing the necessary waiver of sovereign immunity to permit suits against the United States.

The court also rejected the Navy’s second argument that the SBIR award was not a procurement, and was thus outside the court’s bid protest jurisdiction. The Navy contended that the Tucker Act granted bid protest jurisdiction only over disputes in connection with a procurement or proposed procurement.[7] The Navy argued that an SBIR acquisition was not a true procurement; in the Navy’s view, the government was not acquiring services or property, and even if it were, the work performed under the SBIR program was not for the direct benefit of the government.

The court noted that the Tucker Act does not define procurement, but the Federal Circuit has adopted the definition of the term procurement found at 41 U.S.C. § 111, which provides that a procurement includes all stages of the process of acquiring property or services.[8] The court then observed that the Federal Circuit distinguished between cooperative agreements and procurement contracts using the Federal Grant and Cooperative Agreement Act, 31 U.S.C. § 6303. That statute provides that an agency shall use a procurement contract when the principal purpose is to acquire property or services for the direct benefit or use of the government, or when the agency decides that the use of a procurement contract is appropriate.

The COFC determined that the nature of the solicitation created bid protest jurisdiction in connection with the SBIR award. The court noted that in Distributed Solutions, the Federal Circuit found that the Tucker Act permitted protest of pre-procurement decisions by granting the COFC jurisdiction over proposed procurements, which begin with the process of determining a need. Because the SBIR Phase I project at issue was intended to “determine, to the extent possible, the scientific, technical, and commercial merit and feasibility of ideas submitted under the SBIR Program,” award could be construed as a “pre-procurement decision.” Further, the SBIR Phase I project required delivery of a mockup, which is considered to be property. The court found the delivery of property important, and distinguished the case from R & D Dynamics Corp. v. United States.[9] The R & D Dynamics court observed that the source selection plan provided that R&D projects were distinct from procurement projects, and concluded that a Phase II SBIR project was not a procurement. The court was persuaded that R & D Dynamics was distinguishable because there was no indication deliverables were provided to the government in R & D Dynamics, and there was nothing in the Navy’s solicitation in this case providing that the awards were not procurements.

The court also found that the agency’s argument that it did not derive a direct benefit was contradicted by the solicitation. Although private sector recipients of SBIR awards are encouraged to commercialize their developments, the court found this did not prevent the government from obtaining a benefit. The SBIR statute defined commercialization to include products and services for sale to or use by the federal government.  Moreover, the primary focus of the SBIR project in question was use by small-unit leaders in the Navy. These factors, along with numerous other indicia,[10] led the court to conclude that this SBIR announcement was, in fact, a procurement.

Takeaways

Although Squire lost this protest on the merits, the court took the time to analyze bid protest jurisdiction related to SBIR program awards. This decision provides a roadmap for establishing that a SBIR transaction is a “procurement,” which can be challenged under the COFC’s Tucker Act bid protest jurisdiction. This case indicates that an SBIR solicitation is more likely to qualify as a procurement where three criteria are met: first, the solicitation involves delivery of property or services to the government; second, the protester shows that the government will derive a benefit from the contract (which could be as simple as a later commercialization of the product or service, with the government being a prospective customer); and finally, the solicitation contains other indicia of a procurement, such as requirements that the offeror must comply with the FAR and common government contractor offeror registration requirements.

SAGAM Sécurité Senegal

Timeliness requirements are at the forefront of bid protest practitioners’ minds. A late filing can forever close the courtroom doors to a meritorious complaint. A recent Court of Federal Claims decision highlighted that untimeliness can also bar a motion to intervene. In SAGAM Sécurité Senegal v. United States,[11] the COFC denied an intervention request as (very) untimely.

SAGAM originally filed a pre-award protest at the COFC alleging that following a violation of the Procurement Integrity Act, the U.S. Department of State improperly canceled a procurement of security services for its embassy in Senegal. In June 2021, SAGAM prevailed in that protest; the court determined that the solicitation should not have been cancelled, that Torres, the offeror who received the protected information, should be disqualified, and that award should be made to the next eligible, responsible offeror. The court’s decision was subsequently appealed to the Court of Appeals for the Federal Circuit. Following the State Department’s notice of appeal, the awardee of the cancelled solicitation, Torres-SAS Security, moved to intervene in the protest.

Torres filed its motion to intervene with the COFC on September 10, 2021, to access protected information and participate in the appeal. The court remarked that while the standard for intervention is to be construed liberally in favor of intervention, only timely motions to intervene may be granted. The court set forth three factors for evaluating the timeliness of a motion to intervene: (1) the length of time that the intervenor knew or should have known of its right to intervene; (2) whether the prejudice to existing parties’ rights outweighs the prejudice to the intervenor in denying the intervention; and (3) unusual circumstances for or against a determination that the intervention is timely.

The court noted that Torres did not intervene after being notified of the protest at the court on March 31, 2021, or after receiving numerous other notices throughout the litigation through redacted filings and proceedings at both the court and the GAO. Finally, the court commented that although it issued its decision setting forth all of the elements of relief on June 25, 2021, Torres did not file its motion to intervene until September 10, 2021.

The court was not persuaded by Torres’s argument that timeliness concerns were outweighed by prejudice and unusual circumstances.  The court found no unusual circumstances justifying the delay, and observed that Torres could seek permission to file an amicus brief before the Federal Circuit. Addressing Torres’s concern that it would lack access to protected information, the court noted the parties requested no redactions to its merits opinion, thus prejudice toward Torres was minimal relative to the prejudice to SAGAM were it required to litigate against a late-arriving party. Torres had simply delayed far too long to take part in the case. In a statement capturing the speed of bid protests, the court noted that “[o]ver five months elapsed between the filing of the complaint and the filing of Torres’s motion to intervene, which, in a bid protest, is an eternity.”

Takeaways

Although the delays in this case were extreme, in most cases parties have to make quick decisions in bid protest litigation. If a party chooses not to intervene, there is always a chance that the decision will not favor it, a critical fact might remain undiscovered, or a winning argument might not be raised. While courts apply a generous standard when granting motions to intervene, the generally permissive policy is not without limits. Parties may need to be reminded frequently, and perhaps nudged from time to time, to make decisions in time to assert their rights.

[1] 126 Fed. Cl. 281 (2016).

[2] No. 21-1079C, 2021 WL 5023371 (Fed. Cl. Oct. 28, 2021).

[3] Weeks Marine, Inc. v. United States, 575 F.3d 1352, 1361 (Fed. Cl. 2009).

[4] Am. Fed’n of Gov’t Emp. v. United States, 258 F.3d 1294, 1302 (Fed. Cir. 2001).

[5] 31 U.S.C. § 3551(2).

[6] Squire Sols., Inc. v. United States, No. 21-1494C, 2021 WL 4805540 (Fed. Cl. Sept. 30, 2021).

[7] 28 U.S.C. § 1491(b)(1).

[8] Distributed Sols., Inc. v. United States, 539 F.3d 1340, 1345 (Fed. Cir. 2008).

[9] 80 Fed. Cl. 715, 720-22 (2007), aff’d, 309 F. App’x 388 (Fed. Cir. 2009).

[10] These indicia included numerous references in the solicitation to the FAR and other acquisition regulations, SBA policies requiring SBIR solicitations satisfy competition requirements in procurement statutes, and requirements that applicants be registered in the government’s System for Award Management, a common requirement for offerors for government procurements.

[11] SAGAM Sécurité Senegal v. United States, No. 21-1138C, 2021 WL 4621966 (Fed. Cl. Oct. 7, 2021).