May 31, 2022 - Federal Procurement

Sekri, Inc. V. United States: Are Pre-proposal-submission Email Exchanges Now Enough to Avoid Blue & Gold Waiver?

In the seminal decision Blue & Gold Fleet, L.P. v. United States, the U.S. Court of Appeals for the Federal Circuit held that “a party who has the opportunity to object to the terms of a government solicitation containing a patent error and fails to do so prior to the close of the bidding process waives its ability to raise the same objection subsequently in a bid protest action in the Court of Federal Claims.” 492 F.3d 1308, 1313 (Fed. Cir. 2007). The Blue & Gold waiver doctrine prevents an offeror from submitting a proposal against a plainly defective solicitation, waiting quietly while the government and other offerors rely upon the defective language to their detriment, and subsequently filing a protest of that defect—generally after the government awards the contract to a different offeror. Under Blue & Gold, if a party disagrees with the terms of a solicitation, it ordinarily must protest those terms before the date set for receipt of proposals or forever hold its peace. 

But what amount of “objection” to a solicitation term prior to proposal submission is sufficient to preserve one’s ability to challenge that same term at a later date?  We recently discussed the U.S. Court of Appeals for the Federal Circuit’s decision in Harmonia Holdings Group, LLC v. United States, where an apparently abandoned pre-award agency-level protest from months earlier was deemed sufficient to allow the protester to rehash the failed solicitation challenge in a later post-award protest. We wondered at the time whether sending an agency a simple email or even a question during the pre-proposal question-and-answer period would be sufficient notice to avoid a dismissal under Blue & Gold if a company later wanted to protest the terms after contract award. The Federal Circuit’s new decision in SEKRI, Inc. v. United States suggests an emailed question may indeed be enough, at least in some procurements, to preserve an objection to the terms of a solicitation. Indeed, the new decision suggests that, in some circumstances, an objection by another party may be enough. 

Background

SEKRI involved the procurement of Advanced Tactical Assault Panels (ATAPs) by the Defense Logistics Agency (DLA) for use by the U.S. Army.  SEKRI was the officially designated “mandatory source” for the Army’s ATAPs, in accordance with the Javits-Wagner-O’Day Act, 41 U.S.C. §§ 8501-06, and its implementing regulations. Under this statute, the government ordinarily must procure specified items only from a designated qualified nonprofit agency (like SEKRI) that employs blind or severely disabled people. SourceAmerica is the officially designated nonprofit agency through which participating mandatory sources may interact with procuring agencies, at least for some purposes. 

On April 21, 2020, DLA issued Amendment 6 to an existing solicitation, seeking the provision of ATAPs for the Army’s use.  The solicitation was subject to full and open competition, and DLA gave public notice of the amendment on SAM.gov. 

In June 2020, prior to the date set for receipt of proposals, SourceAmerica emailed DLA that SEKRI was the mandatory source authorized to supply the Army with ATAPs and inquired whether DLA would be willing to acquire ATAPs from SEKRI through SourceAmerica. DLA said no, and responded that it would proceed as planned with full and open competition, but SEKRI was free to submit a competitive proposal.

By the date for receipt of proposals, SEKRI neither filed a pre-award protest challenging DLA’s competitive solicitation of items it contended had to be purchased only from it, nor did it submit a proposal to compete for the work. Nearly four months later (but prior to contract award), SEKRI eventually filed a bid protest with the Court of Federal Claims, challenging the competitive procurement of items for which SEKRI stated it was the mandatory source.

The government moved to dismiss the complaint for lack of standing (because the plaintiff was not an actual or prospective offeror as of the date it filed the protest), and for untimely objection to an alleged patent solicitation error under Blue & Gold. It is the latter basis for dismissal that interests us: SEKRI had the opportunity to object to the alleged solicitation error (i.e., the omission of SEKRI as the mandatory source of supply), but it failed to protest “before the close of the bidding process.” The Court of Federal Claims granted the government’s motion and dismissed the protest.  

The Appeal

SEKRI appealed the dismissal to the Federal Circuit, which reversed the decision of the Court of Federal Claims. 

First, the appeals court strongly suggested that the Blue & Gold waiver rule simply does not apply to protests filed by mandatory sources, such as non-profit companies designated as such under the Javits-Wagner-O’Day Act: “The government cites no case in which we have extended the requirements of Blue & Gold to mandatory sources of supply in the AbilityOne Program.” 

Second, and of potentially wider impact, the court suggested that SEKRI’s protest would have been timely even if it had been subject to the standards of Blue & Gold. In the court’s analysis, SEKRI satisfied Blue & Gold, as interpreted by Harmonia, because SourceAmerica posed a question on SEKRI’s behalf that put DLA on notice of the alleged solicitation defect prior to the date set for receipt of proposals:

Here, SEKRI, through SourceAmerica—early in the bidding period and shortly after SEKRI learned of the solicitation—gave notice to DLA that it was a mandatory source of ATAP participating in the AbilityOne Program. DLA confirmed its receipt of the SourceAmerica contact, and it responded with its determination that it would proceed with a competitive bid. Based on these facts, SEKRI satisfied its obligation under Harmonia to submit a “timely, formal challenge” of the solicitation.

The court’s determination that SEKRI “satisfied its obligation under Harmonia” appears to mean that, to the extent an offeror is subject to Harmonia (and Blue & Gold), doing what SEKRI did is enough to preserve a solicitation challenge for a subsequent protest at the Court of Federal Claims. The factual findings in the Court of Federal Claims’ decision make it clear just how little action is actually necessary. 

What the Federal Circuit characterized as SEKRI’s “timely, formal challenge” was actually an exchange of emails between SourceAmerica (not SEKRI itself) and DLA, in which SourceAmerica asked DLA a question: whether DLA would consider procuring the ATAPs from SEKRI, which was the mandatory source.  The Court of Federal Claims found: “At most the emails were an inquiry, not a complaint and certainly not a protest.” The Claims Court cited the Federal Circuit’s precedent in Bannum, Inc. v. United States, 779 F.3d 1376 (Fed. Cir. 2015), for the principle that “mere notice of dissatisfaction or objection is insufficient to preserve [the protester’s] defective-solicitation challenge.” 779 F.3d at 1380. Relying on the controlling precedent of Bannum, the Claims Court held that SourceAmerica’s email exchange with DLA did not preserve SEKRI’s right to file the subsequent protest with the Court of Federal Claims.  The court also noted that, even if SourceAmerica’s email exchange had constituted a sufficient complaint, that at best would have preserved a challenge by SourceAmerica, not SEKRI. 

The Federal Circuit’s decision does not explain how SourceAmerica’s email exchange constituted a “formal challenge” to the solicitation, sufficient to satisfy the rule in Harmonia. Nor does it explain how the email exchange passed muster under Bannum’s requirement for more than “mere notice of dissatisfaction or objection,” or why emails from SourceAmerica were sufficient to preserve a subsequent protest from SEKRI. 

Potential Answers

Perhaps one can resolve these apparent contradictions because the appeals court intended SEKRI to be confined to its unusual facts: These are different timeliness rules applicable only to protests filed by mandatory sources under the Javits-Wagner-O’Day Act. But, if that is what the court intended, why cite Harmonia at all? And, more to the point, why hold that SEKRI “satisfied its obligation under Harmonia” if SEKRI had no obligation to satisfy? 

On the other hand, to avoid making the appeals court’s entire Harmonia discussion a nullity, perhaps one should read SEKRI as re-focusing the Blue & Gold analysis to be almost exclusively an exercise in ensuring an agency is “on notice” of objections to specific solicitation terms prior to proposal submission. That concern appears to have been the main determining factor in Harmonia, and also appears to be of primary importance in SEKRI. If the Federal Circuit intends SEKRI to apply to ordinary pre-award protests filed by ordinary protesters, and notice really is the key, it is hard to see how run-of-the-mill industry questions submitted as part of typical question-and-answer exchanges in most procurements would be any less effective (or any less “formal”) than the email exchange in SEKRI. That potentially opens the floodgates for otherwise untimely solicitation challenges. 

To avoid such an outcome, the Bannum court held that even strenuous and clearly articulated objections to solicitation terms were insufficient to avoid a subsequent waiver if they fell short of a formal protest to the procuring agency or the U.S.Government Accountability Office. It is difficult to square SEKRI’s outcome with Bannum’s strictures, unless the answer is that SEKRI’s more lenient rule applies only to mandatory sources under the Javits-Wagner-O’Day Act.    

Whatever the answer is, SEKRI is another potentially important data point in understanding the evolving scope of the Blue & Gold waiver rule.