This month’s Law360 Bid Protest Roundup starts on a promising note as courts begin opening their doors after months of restricted access due to the COVID-19 pandemic. This Roundup covers decisions addressing the Blue and Gold Fleet rule, recovery of protest costs at the GAO, unequal treatment, and agency responsibilities when inadvertently disclosing proprietary pricing data.
The Federal Circuit has announced it will hold in-person hearings for the September 2021 session (which begins on August 30, 2021).[1] The Federal Circuit’s COVID-19 Response and Information web page contains a helpful archive of notices, orders, and procedures issued over the 15 months since public buildings closed at the onset of the public health crisis. On June 30, 2021, the Court of Federal Claims extended its May 24, 2021 guidance restricting access to the National Courts Building through August 31, 2021. The Court’s COVID-19 web page provides up-to-date guidance on court operations. The GAO is also proceeding under its existing policies, and continuing to operate remotely.
Inmarsat Prevails on Government Release of Pricing Data
In Inmarsat Government Services,[2] the GAO affirmed that agencies that inadvertently disclose recent proprietary pricing data have a responsibility to take steps to mitigate the disclosure’s effects and, if those steps are inadequate, competitive prejudice results. Inmarsat successfully protested the inadvertent release of pricing data by the Defense Information Systems Agency (DISA). Inmarsat bid on DISA’s second Commercial Satellite Services Contract (CSSC II), having performed as an incumbent on the predecessor contract (CSSC I) as a provider of multiple services under several contract line item numbers (CLINs). These services were essentially identical to the CLINs in the follow-on contract.
When DISA posted its pre-solicitation announcement for CSSC II, it included a draft solicitation, which contained a spreadsheet that offerors could use to calculate their pricing for certain services. The spreadsheet included “assumptions and methodologies,” which described how DISA generated its independent government cost estimate (IGCE), and listed Inmarsat’s CSSC I as a data source for bandwidth pricing. In addition to posting the methodology, DISA inadvertently posted Inmarsat’s incumbent pricing data used to create the IGCE. Some of this data was in “hidden” tabs that could be viewed by “unhiding” them using a drop-down menu on the Microsoft Excel program.
Inmarsat filed a protest with the GAO, alleging that DISA failed to mitigate competitive harm caused by the release of the pricing data, along with two other unsuccessful protest grounds. In response, DISA argued that that edits in subsequent versions of the solicitation rendered the disclosed pricing data less useful. In the agency’s view, the information was not competitively useful because it would not permit another offeror to recreate Inmarsat’s technical solutions.
The GAO disagreed and concluded that the pricing information DISA released was “comprehensive, detailed, and recent.” The GAO observed that FAR 9.505(b)(1) provides that an unfair competitive advantage occurs when a competitor for a federal contract possesses proprietary information obtained from the government without authorization. This means that unfair competitive advantage is presumed when an offeror obtains competitively useful, nonpublic information that would help the offeror obtain the contract. Thus, there is no need to determine whether the information actually assisted the offeror. The GAO further faulted DISA for taking few steps to restrict further distribution based on the reasoning that the draft solicitation had already been obtained by third-party aggregators. The subsequent steps that the GAO took to change some of the CLINs structure were inadequate to compensate for the competitive harm, and were no more than “minor or cosmetic.”
The GAO noted that it had previously denied a protest for inadvertent release of data because the disclosure was limited, the agency restricted distribution of the data and “scoured” its websites for unauthorized proprietary information, and the data was viewed by a single employee of a competitor, who was removed from the proposal team and signed a non-disclosure agreement.[3] During cleanup actions, the agency in that case found another unauthorized disclosure, and accordingly changed how the solicitation calculated certain fees, and also required offerors to certify they did not possess or access the unauthorized information. These steps satisfied the GAO that there was no competitive prejudice from the disclosure in that case.
The Takeaways
When an agency inadvertently releases proprietary information, the first inquiry is whether the information causes competitive harm. In other words, the release of the information does not excuse the protester from the requirement of demonstrating competitive prejudice. The protester must show that the information was nonpublic proprietary information that could help another offeror obtain the contract. Faced with a disclosure of source selection information, the agency must take remedial steps—up to canceling the procurement—to address the harm to the procurement process. If a company encounters a release of its proprietary data, it is important to notify the agency swiftly and, if possible, determine whether the measures the agency takes are sufficient to mitigate the harm from the release. Regardless of whether the disclosure results in a protest, fast cleanup of the spill can help prevent further promulgation of the data.
Iron Mountain Mines Some Gold at the GAO
One useful nugget a company can pick up at the GAO is the recovery of certain costs when an agency unduly delays taking voluntary corrective action in the face of a clearly meritorious protest.[4] If there are protest grounds of dubious merit, or even grounds that are merely meritorious, however, the GAO may “sever” these costs from the “clearly meritorious” protest grounds, if possible. The GAO recently recommended in Iron Mountain Information Management that the protester be reimbursed its costs for its successful protest.[5]
Iron Mountain protested at the GAO, contesting the U.S. Department of Veterans Affairs’ award of a task order under a federal supply services (FSS) contract to a company that was sold after quotes were submitted, but before the task order was issued. Iron Mountain alleged several protest grounds, not all of which were successful: (1) the agency did not consider the impact of the sale of the awardee on its ability to perform the contract; (2) the awardee and its parent failed to inform the agency of the sale; (3) the agency unreasonably evaluated the vendors’ prices by including the price of destruction and transfer of records in each year of performance, even though records could only be transferred and destroyed once; (4) the agency unreasonably assessed a significant weakness against Iron Mountain for an inadequate transition plan when the solicitation did not require such a plan; (5) the agency used an unstated evaluation factor, transition time, in evaluating Iron Mountain’s proposal; (6) the agency unreasonably assigned a weakness to Iron Mountain for failure to identify quality measures or processes; (7) the agency failed to assign a significant weakness or deficiency to the awardee for its plan to destroy documents; (8) the agency should have assessed the awardee’s current responsibility; and (9) that these errors tainted the best-value determination.
During the alternative dispute resolution conference, the GAO advised Iron Mountain that some of its protest grounds were meritorious. The GAO determined that the challenge to the agency’s method for evaluating vendor’s prices was untimely, because it was raised after the due date for quotations. The GAO also noted that the assertion that the agency was required to perform another responsibility determination was incorrect because agencies need not make responsibility determinations when placing an order under an FSS contract. Of the remaining grounds, the GAO informed the parties it would likely sustain the argument that the agency failed to consider the impact of the awardee’s sale and that the awardee should have informed the agency. In addition, the GAO would likely sustain the challenge to the awardee’s proposed plan for document destruction. Following the conference, the agency took voluntary corrective action, and Iron Mountain timely filed its claim for costs.
The GAO determined that Iron Mountain’s challenge to the evaluation of its proposal and the responsibility determination were “severable” from its clearly meritorious protest grounds because these arguments turned on different facts and legal theories. Iron Mountain’s challenge to the best-value determination, however, was determined to be intertwined with its challenge to the evaluation of the awardee’s proposal, so costs for that protest ground were allowed.
The Takeaways
Cost recovery in voluntary corrective action cases is limited to situations in which the agency unduly delayed corrective action in the face of a clearly meritorious protest. The GAO considers corrective action delayed if it is taken after the due date for the agency report responding to the protest. The GAO will “sever” protest costs based upon whether the grounds are successful and whether they can be separated from unsuccessful protest grounds. The determination of whether costs are severable is based on whether the successful and unsuccessful claims are intertwined because they arise from the same facts and legal theories. For this reason, Iron Mountain’s best-value determination was considered too intertwined with its evaluation challenge because each involved the same set of facts and closely related legal theories.
Protesters who receive voluntary corrective action after briefing is complete should consider whether they have a viable claim to recover some or all of their protest costs. Note, however, that large businesses have a cap on legal fees, which may limit their recovery.[6]
Blue and Gold Fleet Rule Complicates Logistics
In its recent opinion in Logistics Health, Inc. v. United States, the Court of Federal Claims cited the Federal Circuit’s longstanding rule, set forth in Blue and Gold Fleet, barring disappointed bidders from challenging, after award, patent defects in solicitation terms that were not raised prior to the close of bidding.[7]Logistics Health challenged the U.S. Army’s award of a contract to provide health readiness services, which included providing immunizations, physical examinations, health assessments, and related medical services through a network of providers.
While Logistics raised a number of protest grounds, we will focus on four: (1) that the Army unequally evaluated the proposals, providing the awardee with a strength for offering mobile audiology testing vans, but not awarding a strength to Logistics, which also proposed such a service; (2) that the Army’s best-value analysis was flawed; (3) that the Army’s technical evaluation was inadequate; and (4) that the Army failed to evaluate whether pricing in proposals was balanced. In addition to their counterarguments, the defendant and intervenor asserted that three of the protester’s arguments were time‑barred under the Blue and Gold Fleet rule.
Unequal Treatment
The court did not find that the Army engaged in unequal treatment because there were sufficient differences in the proposals to distinguish them. To prevail on an unequal treatment argument, a protester must show that its proposal was substantively indistinguishable from other proposals that received more favorable treatment. Thus, if there are substantive differences in proposals, the argument fails. The court found that the awardee’s and Logistics’ proposals were distinguishable, even though both offered mobile audiology services, because the awardee’s proposal was unconditional. The awardee proposed providing vans as part of its technical solution; however, Logistics offered to provide mobile audiology vans as an option if the government requested them. Because of this difference, the court determined that the Army’s decision to award a strength to the awardee, and not Logistics, was reasonable.
For the remaining protest grounds listed above, the court ruled that the government prevailed on the merits. But this opinion is notable for separately devoting a section to analyzing the three protest grounds under the Blue and Gold Fleet rule as well. The rule operates as a time bar for protest grounds based on patent errors in solicitations and some other procurement defects that a would-be protester could have challenged prior to proposal submission. The rule is based on the premise that a protester who is aware of a solicitation error (or who should be aware of an obvious error) must protest before the close of bidding. This waiver rule, which derives from the statutory requirement that the court must resolve protests expeditiously, is analogous to a similar regulatory time bar at the GAO.
Best-Value Analysis
The court found Blue and Gold Fleet rule barred Logistics’ argument that the Army’s best-value analysis was flawed. Logistics insisted that the evaluation scheme distorted the prices of each offer because it did not subtract the prices of base-year procedures, but examined only the total evaluated price in the best-value tradeoff. This, Logistics contended, rendered the awardee’s price advantage “illusory” and distorted the comparison of proposals in the best-value tradeoff analysis. The government asserted that because the tradeoff procedure was set forth in the solicitation and the Army followed it, Logistics’ argument was an untimely challenge under Blue and Gold Fleet rule. The court agreed, observing that the plaintiff could have availed itself of the alleged defect in the procedure as the awardee had done, or contested it prior to the close of bidding, but it did neither, and was thus time-barred from raising an objection to the process now. The court found the other two challenges were not time-barred, however.
Sufficiency of the Technical Evaluation
Logistics argued that the Army’s technical evaluation was “inadequate,” contending that a majority of material requirements in the solicitation had been ignored during the evaluation. Logistics contended that because the Army did not document its ratings for what Logistics considered “major requirements,” the evaluation was superficial. The government and intervenor countered that the mere fact that the government did not provide a rating for every area did not mean that these areas were not considered. The court agreed, finding that an agency’s decision need not explain aspects of a proposal that it finds adequate and not material to the best-value determination. However, the court determined this argument was not time-barred under the Blue and Gold Fleet rule because it was based upon the agency’s alleged actions and whether it properly followed the terms of the solicitation, rather than a disagreement over the terms of the solicitation.
Unbalanced Pricing
Finally, in its unbalanced pricing argument, Logistics contended that the Army should have evaluated whether the awardee’s pricing for individual procedures was unbalanced. The government countered that it had no obligation to analyze the prices of individual procedures because they were not line items or subline items in the solicitation, and neither the solicitation nor the FAR requires analysis of smaller components of prices. The government also maintained that, to the extent the protester asserted that the Army should have considered these factors, this was a challenge to the terms of the solicitation, which Logistics should have raised prior to the close of bidding. Logistics asserted that the solicitation did not provide notice that the Army would not consider individual procedures to be subline items, and that FAR 15.404-1(g) required the Army to determine whether unit prices were unbalanced. Pointing to the court’s ruling in Al Ghanim Combined Grp. Co. Gen. Trade v. United States, Logistics argued that the court had previously interpreted this FAR provision to deem individual procedures as separate line items.[8] The court agreed with Logistics, determining that although the argument failed on the merits, it was not time-barred. Instead, the court found that Logistics was challenging the rationality of the agency’s decision and had requested that the court review the award decision based on the factors in the solicitation.
The Takeaways
First, it is very difficult to establish that an agency unequally evaluated proposals. To do so, a protester must show that the proposals were substantively indistinguishable, or that the agency inconsistently applied the solicitation’s requirements. Here, both offerors proposed audiology testing vans. The fact that one offeror offered to provide these vans unconditionally, while the other offered to provide them if requested, was sufficient to distinguish the proposals. Any difference between proposals can provide a means to distinguish them, and it is especially useful to intervenors when these differences are mentioned in evaluation documentation. Intervenors faced with an unequal evaluation argument should seek out these differences in proposals and highlight any relevant discussion of distinguishing features that appear in the agency record.
Second, the Blue and Gold Fleet rule bars untimely challenges to a solicitation’s terms, but not necessarily to an agency’s actions. If the agency follows the terms of the solicitation, and a protester challenges the process, Blue and Gold Fleet becomes relevant, because the actual dispute is not with the agency, but is instead with the procurement ground rules that the agency is simply following. If the challenge is to the rationality of the agency’s decision or whether the agency correctly followed the terms of the solicitation, Blue and Gold Fleet is generally not implicated. As this opinion shows, this can be a close call in some cases. There is no substitute for a close reading of the solicitation and promptly raising any objections prior to the close of bidding. A protest of a solicitation’s terms may be determined to be premature, but a challenge to those terms after the close of bidding is likely waived for good.
[1] Inmarsat Government Services, Inc., B-419583, 419583.2 (dated May 21, 2021, publicly released June 17, 2021).
[2] Iron Mountain Information Management, LLC, B-418797.4 (June 23, 2021).
[3] Logistics Health, Inc. v. United States, No. 21-759 (Fed. Cl., June 4, 2021, publicly released June 11, 2021).
[1] On June 22, 2021, Chief Circuit Judge Moore issued an Order modifying court operations. The announcement was accompanied by protocols for in-person arguments, and remote argument instructions.
[2]Inmarsat Government Services, Inc., B-419583, 419583.2 (dated May 21, 2021, publicly released June 17, 2021).
[3] S&K Aerospace, LLC, B-411648, Sept. 18, 2015, 2015 CPD ¶ 336.
[4] The GAO observed that “[a] protest is clearly meritorious where a reasonable agency inquiry into the protest allegations would have shown facts disclosing the absence of a defensible legal position.” (citing Core Tech Int’l Corp.–Costs, B-400047.2, Mar. 11, 2009, 2009 CPD ¶ 59 at 6).
[5] Iron Mountain Information Management, LLC, B-418797.4 (June 23, 2021).
[6] See Harmonia Holdings Group, LLC, B-417475.7, July 21, 2020, 2020 CPD ¶ 254 at 4.
[7] Logistics Health, Inc. v. United States, No. 21-759 (Fed. Cl., June 4, 2021, publicly released June 11, 2021).
[8]Al Ghanim Combined Grp. Co. Gen. Trade v. United States, 56 Fed. Cl. 502, 513 (2003).