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December 14, 2021 - Protests & Litigation

Harmonia Holdings: Denied Pre-Award Protest Rises from the Dead Five Months Later as a Post-award Protest

December 2021 Bid Protest Roundup

The U.S. Court of Appeals for the Federal Circuit has issued its long-awaited decision in Harmonia Holdings Group, LLC v. United States, vacating a bid protest decision the U.S. Court of Federal Claims rendered nearly two years ago. The new decision is an important new data point in the evolving timeliness rules for bid protests filed with the Court of Federal Claims.

Under Harmonia, a plaintiff does not waive the opportunity for post-award litigation of a pre-award challenge to the terms of a solicitation if the protester filed a timely pre-award protest of those terms with the procuring agency itself or the U.S. Government Accountability Office (GAO). Under this new decision, that is true even if the agency or GAO denies the pre-award protest and the protester does not resurrect its challenge until months after the denial, after the agency has completed its evaluation and source selection and awarded a contract under the allegedly defective solicitation. (This decision applies only to protests before the Court of Federal Claims; such protests remain untimely under the GAO’s regulations.)

Although the facts of Harmonia are unusual, the decision opens the door to greater procurement delays, will require the Court of Federal Claims to consider the merits of pre-award protest grounds that otherwise might have been summarily dismissed, and may result in more agency-level protests to preserve solicitation challenges for potential use in post-award protests. It may be time for Congress to give the Court of Federal Claims clearer filing deadlines, along the lines of the GAO’s bid protest regulations.

Factual Background

In 2018, U.S. Customs and Border Protection (CBP) issued a solicitation for “application development and operation and maintenance support services” and received initial proposals. This procurement was set aside for small business and conducted under the authority of Federal Acquisition Regulation (FAR) Part 8, for orders issued under the General Services Administration’s Federal Supply Schedule program. After receipt of initial proposals, CBP amended the solicitation (principally with respect to staffing and pricing) and requested proposal revisions from offerors. CBP allowed offerors to revise their proposals only with respect to the Staffing Plan/Key Personnel subfactor and price, which CBP determined were the only proposal areas affected by the solicitation amendments.

Before the date set for submission of proposal revisions, Harmonia filed a timely agency-level protest, objecting to the limitation on permissible proposal revisions. Harmonia contended CBP was required to allow offerors to revise all aspects of their proposals, without limitation. Harmonia also objected to CBP’s addition of the Limitations on Subcontracting clause—a clause that is generally mandatory for small business set-aside procurements.

On December 6, 2018, CBP issued a written decision denying Harmonia’s protest. Harmonia chose not to refile its pre-award protest with the GAO during the 10 days in which it had to file a follow-on GAO protest. Nor did Harmonia promptly proceed to the Court of Federal Claims.

Over the next four and half months, CBP proceeded with the evaluation of proposals and source selection. By April 23, 2019, CBP had determined that Harmonia’s proposal was the lowest rated of all proposals received and another offeror represented the best value to the Government. On April 25, 2019, CBP informed Harmonia of the award decision.

Court of Federal Claims Protest

On May 7, 2019, Harmonia filed a bid protest at the Court of Federal Claims. In addition to challenging the evaluation of proposals in its post-award protest, Harmonia dusted off its pre-award arguments, which had lain dormant since CBP denied them five months earlier. Harmonia argued, as it unsuccessfully argued more than five months before, that it and all offerors were entitled to submit completely revised proposals if they chose to do so, and CBP was required to make the award based upon these new proposals rather than the ones received in November 2018.

The Government and the awardee moved the court to dismiss Harmonia’s pre-award protest grounds. They argued Harmonia waived its solicitation challenges by sitting on its hands for five months after receiving CBP’s formal denial of the pre-award protest. If Harmonia wanted to preserve its argument that the scope of permissible proposal revisions was too narrow, they argued it should have diligently proceeded with a GAO or court protest. Instead, it waited to see whether it would win the order under the existing (and allegedly improper) solicitation terms.

The Court of Federal Claims agreed with the Government and awardee. Under Blue & Gold Fleet, L.P. v. United States, “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 waiver rule exists in large part to “prevent[ ] contractors from taking advantage of the government and other bidders, and [to] avoid[ ] costly after-the-fact litigation.” Id. at 1314. The court situated the waiver rule in the context of a party’s duty to pursue its claims diligently.  See, e.g., Advanced Am. Constr., Inc. v. United States, 111 Fed. Cl. 205, 219–21 (2013) (finding protester diligently and timely pursued its pre-award protest where protester, within a week of receiving an adverse decision in its timely agency-level protest, filed a protest at the GAO and, days after the GAO dismissed its protest, filed a protest with the court); DGR Assocs. v. United States, 94 Fed. Cl. 189, 204 (2010) (“[The] proper inquiry is to assess whether a party has timely pursued an alleged defect in a solicitation as allowed by law, and whether the party has diligently pressed its position without waiver at each step of the way.”).

The court acknowledged that the specific holding in Blue & Gold requires dismissal of a protest ground only when a party fails to object to a patent solicitation error “prior to the close of the bidding process”—something Harmonia actually did in its unsuccessful November 2018 agency-level protest. The court also acknowledged the Federal Circuit has suggested in dicta that, under some circumstances, “filing a formal, agency-level protest before the award would likely preserve a protestor’s post-award challenge to a solicitation, as might a pre-award protest filed with the GAO.” Bannum, Inc. v. United States, 779 F.3d 1376, 1380 (Fed. Cir. 2015) (emphasis added). Thus, the court conceded “Harmonia facially met the requirements under Blue & Gold.”

The court nevertheless found Harmonia waived its pre-award protest grounds “by failing to timely and diligently pursue its objections” after CBP denied the agency-level protest in December 2019. Allowing a protester to sit and wait in silence for months after the denial of its solicitation challenge while a procurement continued apace “would clearly frustrate the spirit of the law set forth in Blue & Gold.” Therefore, the court dismissed the stagnant pre-award protest grounds for lack of diligent pursuit. The court then denied the remaining post-award protest grounds on the merits as subjective disagreement with the CBP’s reasonable judgments.

Appeal to the Federal Circuit

Harmonia appealed its loss to the Federal Circuit. One of the three judges on the Circuit’s panel—and the judge who authored the Harmonia opinion—was Judge Jimmie Reyna, who penned a notable dissent in another recent Blue & Gold waiver case. In Inserso Corp. v. United States, 961 F.3d 1343 (Fed. Cir. 2020), Judge Reyna opposed the panel majority’s decision to uphold the Court of Federal Claims’ application of the waiver rule to a protest objecting to an alleged conflict of which the protester had pre-award knowledge but failed to raise until after award. The judge opined that the Supreme Court’s decision in SCA Hygiene Products Aktiebolag v. First Quality Baby Products, LLC, 137 S. Ct. 954 (2017), called into question the continued viability of Blue & Gold waiver. The dissent characterized the Blue & Gold waiver as a judge-made rule that arguably conflicted with the general six-year statute of limitations that Congress allowed for filing suits at the Court of Federal Claims. At the very least, Judge Reyna wrote, the Federal Circuit should be wary of expanding the waiver rule beyond the specific terms of the Blue & Gold decision itself.

A similar wariness of extending the waiver rule marks the Circuit’s decision in Harmonia.

The decision’s short legal analysis begins with the general statute of limitations for most lawsuits filed with the Court of Federal Claims: “Every claim of which the United States Court of Federal Claims has jurisdiction shall be barred unless the petition thereon is filed within six years after such claim first accrues.” 28 U.S.C. § 2501. The decision then characterizes the Blue & Gold waiver rule as a judicially created restriction on that six-year timeframe.

Like the Court of Federal Claims, the Federal Circuit’s decision cites Bannum, Inc. v. United States for the principle that “a formal, agency-level protest before the award would likely preserve a protestor’s post-award challenge to a solicitation . . . as might a pre-award protest filed with the GAO.” 779 F.3d 1376, 1380 (Fed. Cir. 2015). This observation, the Circuit emphasizes, means the Blue & Gold waiver rule “is predicated not only on the notion of avoiding delay that could benefit the delaying party, but also on the notion of preserving challenges and providing notice to interested parties.”

The Circuit does not distinguish between when a pre-award protest “might” preserve a later challenge, and when it “might not.” Instead, it simply holds: “Harmonia’s undisputedly timely, formal challenge of the solicitation before CBP removes this case from the ambit of Blue & Gold and its progeny.” The Circuit appears to read Bannum’s “would likely preserve” and “might [preserve]” as “will preserve.” If a pre-award protest ground is preserved notwithstanding an unexplained five-month delay between a pre-award denial and refiling the ground as a post-award protest, it is difficult to imagine when a ground would not be preserved.

During oral argument, one judge of the panel mused that perhaps the case should be remanded for consideration of whether the doctrine of laches (prejudicial undue delay) might be a better ground for dismissal than Blue & Gold. The decision itself, however, does not mention laches or appear to give the Court any discretion to apply laches here. The absence of a discussion of laches may reflect the Inserso dissent, which expressed an opinion (shared by at least one judge on the lower court) that recent Supreme Court precedent has eliminated the applicability of laches to bid protests.

The Harmonia decision does not, however, completely prohibit the Court of Federal Claims from taking a protester’s delay into account. Rather, in remanding the case for consideration of Harmonia’s solicitation challenge on the merits for the first time, the Circuit emphasized the lower court’s discretion to fashion an appropriate remedy if the protest is successful. That discretion includes the ability to factor delay into the choice of relief:

Our opinion should not be read as condoning delay in filing actions in the Court of Federal Claims. Under certain circumstances, delaying bidders may face adverse consequences, but we are not persuaded in this case that imposition of a Blue & Gold waiver should be one of those consequences. The Court of Federal Claims has relatively broad authority under 28 U.S.C. § 1491(b)(2) to fashion a remedy: the court may “award any relief that the court considers proper, including declaratory and injunctive relief except that any monetary relief shall be limited to bid preparation and proposal costs.” On remand, the Court of Federal Claims might decide under the circumstances of this case that injunctive relief is appropriate.

It is not clear, however, whether the Circuit is holding that the Blue & Gold waiver may never be a consequence of delaying the re-filing of a solicitation challenge after an unsuccessful agency-level or GAO protest, or simply that the five-month delay in this particular case was not sufficiently egregious to trigger a waiver. On its face, the decision suggests the former is the answer.

Accounting for Unnecessary Delay When Selecting a Protest Remedy

The Harmonia decision is careful not to state that Harmonia’s five-month delay should have no adverse consequences at all for its protest on remand—only that it should not result in a waiver. The consequence of the delay might be limiting relief (if any) to Harmonia’s bid preparation and proposal costs if the protest succeeds on the merits. This would be consistent with Judge Reyna’s dissent in Inserso, where he interpreted the statutory mandate for expeditious resolution of bid protests as a constraint on relief: “Specifically, [where a party’s delay impinges on the court’s statutory mandate for expeditious resolution of the protest,] the Claims Court should consider whether to order the government to restart the procurement process underlying the bid protest or to award relief which would not extend the procurement process, such as bid and proposal costs or declaratory relief.” Inserso, 961 F.3d at 1356 (Reyna, J., dissenting) (emphasis added).  

But might the court, at least in some cases, limit relief in a way that approximates the effect of Blue & Gold waiver or laches, making it unnecessary even to reach the merits? In deciding motions for a preliminary injunction, the Court of Federal Claims occasionally denies a motion without deciding the likelihood of success on the merits, simply because one or more of the other injunctive factors weigh strongly enough against the movant. See, e.g., Aero Corp., S.A. v. United States, 38 Fed. Cl. 237 (1997) (denying motion for preliminary injunction without considering the likelihood of success on the merits where the other factors weighed in favor of the Government). On rare occasions, generally in cases involving national security, the court has denied a motion for a permanent injunction without ever reaching the merits. See Arkham Tech. Ltd. v. United States, 145 Fed. Cl. 751, 753 (2019) (“At the conclusion of oral argument, the court announced that it would not grant plaintiff relief because the harm to the United States caused by delay inherent in any relief ordered by the court was too grave and because the public interest in preventing any such harm was overwhelming. . . . Because it was unnecessary to do so, we did not reach the issue of whether plaintiff would have succeeded on any of its arguments on the merits.”). In most cases where a permanent injunction is denied due to the balance of harms or public interest, the court nevertheless will address the merits of a protest ground, if only to determine whether to grant bid preparation and proposal costs, if the protester sought that relief. See, e.g., Ereh Phase I LLC v. United States, 95 Fed. Cl. 108, 124, n.14 (2010); CSE Constr. Co., Inc. v. United States, 58 Fed. Cl. 230, 236 (2003). But, where a protester has requested only a permanent injunction, and the court determines that the protester’s unnecessary delays have shifted the balance of harms or other injunctive factors far enough in the Government’s favor that an injunction is inappropriate, the court might exercise judicial economy by not reaching the merits at all and denying the injunction on non-merits grounds.

In the Harmonia remand, for example, the Court of Federal Claims might begin its injunctive analysis with the balance of harms factor rather than, as is customary, a consideration of the merits of the plaintiff’s claim. The court might find the five-month delay during which CBP completed its evaluation and source selection, coupled with the need to restart the procurement with submission of new proposals more than three years after the pre-award protest, tips the balance of harms so much in the Government’s favor that Harmonia would not be entitled to an injunction even if it were to prevail on the merits. If Harmonia’s excessive delay means it will not get an injunction even if its delayed protest grounds had merit, consideration of the merits would be a pointless exercise—not because of waiver, but because potential success on the merits would not alter the relief that the court was willing to grant at this late date.

How and whether the Court of Federal Claims makes undue delay a key consideration in fashioning a potential remedy on remand (if Harmonia succeeds on the merits of its solicitation challenge) rests within the court’s sound discretion.

The Problem of Notice

Harmonia’s nearly exclusive focus on providing notice of a problem in a solicitation raises questions that may have an impact far beyond this particular case. By giving short shrift to the separate question of prejudicial delay, Harmonia suggests providing notice of an objection and preserving a solicitation challenge—rather than avoiding surprise and prejudicial delay—are the principal concerns of the Blue & Gold waiver rule. That is difficult to square with the numerous decisions of both the Court of Federal Claims and the Federal Circuit that focus primarily on the need to avoid potentially costly wait-and-see gamesmanship as a competition careens toward award under ground rules a protester thinks are improper.

If ensuring timely notice of an objection is Blue & Gold’s primary concern, would timely notice without a formal protest be enough to avoid dismissal of a solicitation challenge reprised in a post-award protest? What if an offeror sends an email to the contracting officer before the proposal due date, complaining about something in the solicitation? Would that be enough to preserve a solicitation challenge for a later post-award protest if the offeror’s proposal is unsuccessful? Blue & Gold itself does not state that only a formal bid protest is able preserve a solicitation challenge. And the GAO regularly treats informal communications expressing objection and requesting a change as the legal equivalents of agency-level protests.

How about a question during the standard question-and-answer period in most procurements: “Solicitation term X is improper for Y and Z reasons. Would the Government please amend the solicitation to remove X?” If the offeror has submitted its formal question giving notice of its objection to a solicitation term, and asked for a change, and the agency rejects or ignores the request, is that sufficient notice to avoid waiver? Does Harmonia require the offeror to do anything more to preserve its right to resurrect that objection months or years later in a post-award protest? If notice of a problem is the main thing, how does the question-and-answer scenario above meaningfully differ from the unsuccessful pre-award protest that was good enough to give notice and preserve an objection in Harmonia? The Harmonia decision does not answer those questions. But clever offerors and their protest lawyers may argue in future post-award protests at the Court of Federal Claims that pre-award question-and-answer objections were sufficient to preserve challenges for post-award use under Harmonia’s logic.

Regardless of whether a complaint in a simple email or question-and-answer exchange is enough, one can imagine offerors submitting pro forma agency-level “protests” prior to proposal submission to complain about all of the solicitation terms with which they disagree. Adverse action on such protests would trigger a 10-day protest clock at the GAO. But Harmonia likely would allow such protesters to take a wait-and-see approach and mount a more fulsome solicitation challenge (if needed) after award at the Court of Federal Claims, together with any post-award grounds they wanted to include.

One thinks, for example, of the CIO-SP4 procurement, where many offerors were dissatisfied with many aspects of the final solicitation. Under Harmonia, if an offeror simply submitted a laundry list of complaints to the procuring agency prior to proposal submission, asked for relief, and took no further action, those complaints might well be fair game for inclusion in a post-award protest at the Court of Federal Claims.

Time for Clearer Rules?

For some time now, different judges on the Court of Federal Claims have applied Blue & Gold and similar delay-related rules differently and, at times, inconsistently. The Federal Circuit, too, has updated, expanded, and (at least in Harmonia) restricted the timeliness rules in unpredictable ways over the years. This creates uncertainty about what the timeliness rules are and results in inefficient use of the resources of procuring agencies, courts, and contractors. Harmonia will not be the last Blue & Gold surprise. Indeed, as Judge Reyna reminded us in Inserso, the Supreme Court’s precedent in SCA Hygiene raises the possibility that Blue & Gold itself may one day be overturned.

It may be time, and more appropriate, for Congress to give the legal certainty that courts have been unable to provide. Over the years, there have been proposals for bright-line statutory deadlines for protests to the Court of Federal Claims, along the lines of the regulatory deadlines applicable to GAO protests. So far, Congress has not acted on those proposals. The GAO’s regulations and case law have addressed the most common protest scenarios over the years and have established relatively clear and well-understood deadlines for most of them. Those scenarios—not necessarily including the GAO’s 10-day timeframes—offer a workable framework for Congress to establish deadlines for protests to the court.