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May 08, 2023 - Protests & Litigation

April 2023 Bid Protest Roundup: Nonofferor Protest, Irrational Analysis

GAO Finds CIO-SP4 Solicitation Is Unduly Restrictive of Competition

This month’s Bid Protest Round-Up examines two recent decisions by the U.S. Court of Federal Claims (“COFC”). 

The first, Percipient.AI, Inc. v. United States, COFC No. 23-28C, involves the protest by a non-offeror of a contract awarded over two years ago. The second, Digiflight Inc. v. United States, COFC No. 22-521C, involves an irrational price realism analysis and an unreasonable technical evaluation that essentially converted a best-value procurement into a lowest-price, technically acceptable procurement.

Percipient.AI, Inc. v. United States

Over three years ago, the National Geospatial-Intelligence Agency (“NGA”) issued the SAFFIRE solicitation for an indefinite delivery, indefinite quantity (“IDIQ”) contract. The solicitation, in part, contemplated integration of a computer vison system to enhance the NGA’s ability to produce, review, and classify intelligence from millions of images. 

Plaintiff Percipient.AI, Inc. (“Percipient”) developed a computer software called Mirage that could accomplish SAFFIRE’s computer vision requirements. However, Percipient did not bid on the SAFFIRE contract because it could not perform the remaining contract requirements.  

In January 2021, NGA awarded the SAFFIRE contract to CACI. At the suggestion of NGA, Percipient met with CACI to discuss a potential partnership. CACI expressed an interest in working with Percipient on future projects, but explained that they were not in a position to work together on SAFFIRE. Two months later, Percipient met with CACI again to demonstrate Mirage. Mirage received positive feedback, and CACI promised to evaluate the software more fully. It was not until several months later, however, that Percipient learned CACI would be developing its own computer vision system. 

As a result, Percipient met with NGA and asked to set up a demonstration. After determining that Mirage met NGA’s analytical transportation requirements, Percipient and NGA eventually came to an agreement that would allow NGA to test Mirage. Shortly thereafter, NGA informed Percipient that it evaluated Mirage as an enterprise Machine Learning Platform, as opposed to an analytical tool, and would not recommend Mirage as a possible commercial solution. Following that determination, Percipient filed a protest, alleging that NGA violated 10 U.S.C. § 3453, which requires defense agencies and their contractors to acquire commercial products to the maximum extent practicable. In response to this protest, both the Government and CACI moved to dismiss. 

In evaluating Percipient’s protest, the court first considered whether it possessed subject-matter jurisdiction under the Tucker Act. Under the Tucker Act, the court has jurisdiction over “non‑frivolous allegations of statutory or regulatory violations in connection with a procurement or a proposed procurement.” Neither the Government nor CACI alleged that Percipient’s allegations are frivolous. However, CACI argued that the Federal Acquisition Streamlining Act (“FASA”) excludes from the court’s jurisdiction any protest in connection with the “issuance or proposed issuance of a task or delivery order.” The court cited 10 U.S.C. § 3406(f)(1)(B) and explained that FASA’s task order bar “will not apply when, as here, a task order exceeds $25,000.” Although this is a plainly incorrect statement because only the Government Accountability Office (“GAO”) has jurisdiction to hear task order protests, which the court later acknowledged, the court determined that it had subject-matter jurisdiction and moved on to the issue of standing.

A plaintiff has standing to challenge a procurement if it is an interested party, which is defined as an actual or prospective bidder that has a direct economic interest in the award of a contract. This usually means the protester must show that, but for the alleged procurement error, it would have had some likelihood of award itself. The Government argued Percipient was not an interested offeror because Percipient did not bid on the contract and could not satisfy the contract requirements. The court explained that normally, a protester is an actual or prospective bidder if it submits, or expects to submit, a proposal before the solicitation closes. The court emphasized, however, that these requirements are not unconditional and depend on the specific claim at issue. In analyzing whether Percipient had standing, the court analyzed Section 3453 to determine whether offerors of commercial products have rights under the statute. Because Section 3453 requires that agencies give offerors of commercial products an opportunity to compete in any procurement to fill the agency’s requirements, a violation of this statute would deny a company like Percipient an opportunity to compete. The Government emphasized the fact that Percipient could not perform the entire contract, but the court found that the statutory text, which provides that agencies must require prime contractors and subcontractors to incorporate commercial products “as components of items supplied to the agency,” does not appear to support the notion that protest standing is limited to those offerors that can meet every contract requirement. As a result, the court held that offerors of commercial products that do not (or cannot) bid on a prime contract have standing pursuant to Section 3453. 

Finally, both CACI and the Government argued that Percipient’s protest is untimely. The Government argued Percipient’s challenge was actually a challenge to the solicitation and thus barred by Blue & Gold Fleet v. United States, which stands for the proposition that a protester waives its right to protest if it has the opportunity to object to solicitation terms and fails to do so before the close of bidding. The court disposed of this argument quickly, concluding that nothing in the solicitation appears to violate Section 3453. CACI argued that Percipient’s complaint was barred by the doctrine of laches because this protest should have been brought in March 2021, when Percipient first learned of a potential violation of Section 3453. Although the doctrine of laches remains a disputed defense to a protest, the court held that, because this claim was brought within the six-year statute of limitations established for a claim in the COFC, the claim is timely, and a defense of laches is therefore not a valid affirmative defense. 

In sum, the court denied both motions to dismiss, finding that it had jurisdiction to adjudicate the protest, Percipient had standing as an interested party, and the protest, filed more than two years after award of the contract, was not untimely. 

Takeaways:  First, the court’s error in finding that it has subject-matter jurisdiction over task orders is notable. On April 27, 2023, the court issued an order on a motion for reconsideration filed by both the Government and CACI. The court acknowledged that, in denying the motions to dismiss, it held that FASA’s task order bar does not apply to task orders over $25,000,000. However, the court admitted that this exception is inapplicable because the statute cited gives jurisdiction of those claims only to the Government Accountability Office, not the court. In light of this error, the court asked the parties to submit additional briefing to determine whether Percipient’s protest is in connection with a task order and, if so, whether any other exception to the task order bar may apply. 

Second, the holding that a non-offeror like Percipient, which could be described as nothing more than a disappointed subcontractor, can file a bid protest when it admittedly cannot perform the entire contract and did not bid on it, is a relatively sweeping conclusion. This holding potentially grants any rejected offeror, vendor, subcontractor, etc., that can provide any commercial component or item that might be required in connection with performance of a contract, standing to protest. 

Third, from a policy perspective, this decision begs the question: Does this requirement to incorporate commercial items “to the maximum extent possible” become a viable protest ground for anyone that believes an awarded contract could have had additional commercial items incorporated? If so, this decision opens the door for basically any commercial item provider to scour contract requirements to determine whether it has a basis of protest.

Digiflight Inc. v. United States

In Digiflight, the Army issued a Request for Quotations (“RFQ” or “Solicitation”) for programmatic support services for the Aviation and Missile Command (“AMCOM”). The procurement was exclusive to vendors with EXPRESS Blanket Purchase Agreements (“BPAs”) with the General Services Administration (“GSA”). The RFQ contemplated a FAR subpart 8.4 procurement,[1] and award would be made to the offeror whose quotation provided the best value to the Government after an evaluation of Technical Expertise, Risk Mitigation, and Price. 

The RFQ provided that the Technical Expertise and Risk Mitigation and Management factors were of equal importance and more important than Price. Each non-price factor was to be assessed an adjectival rating reflecting how well the quotation demonstrated a clear understanding of the requirements and the offeror’s ability to successfully perform the contract. With respect to Price, the RFQ provided that the Army would use price analysis to determine whether the overall proposed price is reasonable and realistic.

The Army awarded the task order to The Tolliver Group, Inc. (“TTGI”). In its evaluation, the Army assessed TTGI an Acceptable rating for both Technical Expertise and Risk Mitigation and Management. The Army, however, assessed DigiFlight an Acceptable rating for Technical Expertise and a Good rating for Risk Mitigation and Management. DigiFlight received a strength under the Risk Mitigation and Management factor for its proposed team, which accounted for its higher overall rating under that factor. No other offerors received strengths, weaknesses, or deficiencies. In its Price evaluation, the Army found that all three offerors’ prices were reasonable and realistic. The Army then conducted a trade-off analysis, finding that, because the adjectival ratings were the same for Technical Expertise and DigiFlight was more expensive than TTGI, TTGI represented the best value to the Government. DigiFlight protested. This trade-off did not consider DigiFlight’s higher rating under the Risk Mitigation and Management factor. DigiFlight protested.

Focusing on the protester’s allegation that the Army failed to conduct a proper price realism analysis, the court determined the Army’s realism determination was flawed in several respects. 

First, in conducting its price realism analysis, the Army compared the two lowest composite rates – submitted by TTGI and another offeror – to the IGCE. The Army determined that, although the rates were well below the IGCE composite rates, the fact that more than one company submitted low composite rates suggested there was no evidence of an attempt to offer unrealistically low prices as a way of winning the award. The court rightfully questioned the Army’s logic, suggesting it was possible that more than one offeror misunderstood the requirements, underestimated the work required, or saw some value in underbidding the contract. In responding to Defendant‑Intervenor’s suggestion[2] that comparing prices between offerors is an allowable method of evaluating price realism, the court explained that, here, Plaintiff was not challenging the method of comparing prices, but rather the irrational application of the method. And here, the application was clearly irrational. 

Second, the Army used the GSA Contract Awarded Labor Categories (“CALC”) tool to “substantiate a random sample of labor category prices offered by all three Offerors” to determine that the offered labor category prices were within the acceptable range. The Army described the CALC tool as a publicly available pricing tool that would allow vendors and government officials to review position-specific hourly rates for contracts awarded under GSA schedule contracts, including the EXPRESS BPA. The record, however, contained no documentation regarding the Army’s use of the CALC tool. The court found that, although the use of the CALC tool might be an effective method of evaluating price realism, there was no way to know whether the CALC tool was utilized reasonably without contemporaneous documentation in the administrative record. 

Third, after conducting its price realism analysis, the Army concluded, without justification, that the proposed prices for all three offerors “reflect[ed] a clear understanding of the requirements.” However, nowhere else in the record does the Army describe the offerors’ understanding of the requirements as “clear.” In fact, the evaluators assessed all three offerors an Acceptable rating for Technical Expertise, which, per the definition of Acceptable, meant each offeror had an “adequate” level of expertise and understanding of the requirements. This type of conclusory analysis, without more, further reinforced the court’s determination that the Army engaged in an irrational price realism evaluation.

Lastly, the Army concluded its price realism evaluation by stating that it examined the level of effort and mix of labor – but not the actual hourly rates – and found that the effort and labor mix proposed for each offeror reflected an understanding of the requirements, was consistent with other parts of the quotation, and was realistic to support the proposed approach. The court found that this analysis, without any consideration of price at all, was insufficient to support a conclusion that the proposed prices were realistic.  

The protester further argued that the Army failed to adequately evaluate offerors under the Technical Expertise factor, which essentially converted a best-value procurement to a lowest-price, technically acceptable procurement. 

According to the Plaintiff, the Army evaluated all three Technical Expertise proposals identically – assessing no strengths, weaknesses, or deficiencies, and an overall Acceptable rating to each offeror – and thus failed to conduct an analysis of the differences among those proposals. In response, the Government contends that the lack of documentation is due to this being a FAR Part 8 procurement, which allows for more streamlined documentation than, for example, a FAR Part 15 procurement. The court acknowledged the requirements are different in a FAR Part 8 procurement, but noted that the difference does not allow an agency to provide “almost no rationale for the decisions made on the technical evaluation.” The court found that the Army’s repetitive and conclusory evaluation under the Technical Expertise factor was nearly verbatim for each offeror and did not comport with the requirements of FAR Subpart 8.4, which already represents a low bar for documenting the agency’s evaluation. 

Interestingly, in discussing whether the Plaintiff demonstrated prejudice as a result of the Army’s failure to conduct a rational Technical Expertise evaluation, the court inferred that, although Plaintiff argued it would have received eleven strengths under this factor had the Army performed a reasonable evaluation, Plaintiff was not really arguing that it should have received additional strengths, but rather it argued that the Army failed to document its technical evaluation and its rationale for not awarding any strengths, weaknesses, or deficiencies. The court found that this evaluation failure essentially converted the procurement from best-value to an improper lowest‑price, technically acceptable procurement. 

After finding that Plaintiff prevailed on the merits, the court turned to the remaining three injunctive relief factors (irreparable harm, balance of hardships, and public interest). The court highlighted the fact that the Government simply glossed over or did not even bother to respond to Plaintiff’s arguments – a defect that plagued the Government’s briefs throughout the protest – and easily determined that the issuance of a permanent injunction was warranted. 

Takeaways: There are a couple. The first is a general reminder that, even though a FAR Part 8 procurement requires less documentation of the agency’s evaluation, it does not eliminate the agency’s obligation to document its evaluation methodology or the rationale behind its trade-off analysis. Second, and more specifically, a price realism evaluation with nothing more than unsupported assumptions, insufficient documentation, and inadequate rationale will not carry the day, even in a FAR Part 8 procurement. 

[1] Unlike the Percipient AI case, this task order challenge is permissible. As we’ve previously explained, Federal Supply Schedule contracts are not treated as task or delivery order contracts. This means that FAR Part 8 orders are not subject to the COFC’s bar on task or delivery order protests. 

[2] Notably, the Government failed to respond at all to this argument in its cross-motion. The Government attempted to cure this omission by citing to a case in its reply brief, but the court found this to be insufficient.