November 2020 Bid Protest Roundup (Law360 Spotlight)

Morrison & Foerster LLP - Government Contracts Insights

 

Law360 - December 8, 2020

[co-author: David Allman]

This installment of our monthly Law360 bid protest spotlight examines three protest decisions from three different forums: one from the Government Accountability Office (GAO), one from the U.S. Court of Appeals for the Federal Circuit, and one from U.S. Court of Federal Claims (COFC). In Mayatech Corp., the GAO addressed its jurisdiction to hear bid protests of task orders valued at less than $10 million in limited circumstances. The Federal Circuit also addressed a jurisdictional question this month in LAX Electronics, Inc., where it interpreted the meaning of the requirement that a bid protest must be “in connection with a procurement or proposed procurement” to invoke the COFC’s bid protest jurisdiction. Finally, in Utech Products, the COFC provided a reminder of the rigorous standards protesters must meet to demonstrate entitlement to reimbursement for proposal costs and attorneys’ fees.

The Mayatech Corp., B-419313, Nov. 9, 2020, 2020 WL 6625963

The U.S. Federal Acquisition and Streamlining Act of 1994 (FASA), as amended, establishes a $10 million jurisdictional threshold for the GAO to hear protests of task orders issued under multiple-award contracts that are awarded by civilian agencies. GAO does, however, have jurisdiction to hear protests of task orders valued at less than $10 million where the protester asserts that the task order increases the scope, period, or maximum value of the contract under which the order is issued. Mayatech Corporation (“Mayatech”)—attempting to invoke an exception to the jurisdictional threshold—protested the award of a task order valued at less than $10 million to the GAO under the theory that the task order solicitation changed the scope of the underlying Indefinite Delivery Indefinite Quantity (IDIQ) contract.

Specifically, Mayatech claimed that the U.S. Department of Health and Human Services (DHHS) changed the scope of the underlying IDIQ contract by allegedly failing to follow the evaluation scheme laid out in the task order solicitation, thereby “materially chang[ing] the scope” of the base IDIQ’s ordering clause. Mayatech interpreted this ordering clause, which states that the issuance of any task order would be in accordance with section 16.505(b) of the FAR, to mean that awards of task orders must be in accordance with the evaluation scheme outlined in the task order solicitation. Mayatech argued that DHHS deviated from this requirement, citing to the fact that it should have won the task order award if DHHS had followed the stated evaluation scheme. The GAO disagreed with Mayatech’s interpretation, finding it to be a futile attempt at expanding the definition of “scope.”

GAO explained that the analysis of whether a task order is outside the scope of an IDIQ contract is whether there is a material difference between the task order and the contract. In determining whether there is a material difference, GAO will look at various changes between the contract and task order, including changes in the type of work, performance period, and costs. Ultimately, the overall inquiry is whether the task order is of a nature that potential offerors would reasonably have anticipated. However, the GAO noted that Mayatech made no attempt to argue that there had been a change in the type of work, the performance period, or the costs of the IDIQ. Rather, Mayatech simply argued that it could not anticipate that DHHS would not follow the stated evaluation schemes for task order awards.

The GAO found Mayatech’s attempt at expanding the definition of scope amounted to nothing more than mere disagreement with DHHS’s evaluation. In short, Mayatech’s expansion of the definition would swallow the exception to the $10M threshold rule. According to the GAO, if Mayatech had its way then any “departure from the task order solicitation . . . would result in a task order that exceeds the scope . . . and all protests related to task orders would fit within the ‘increases the scope’ exception . . . .”

Takeaways:

The GAO’s decision in Mayatech Corp. provides a helpful reminder of both the jurisdictional threshold for task order protests, as well as possible exceptions to that threshold. While Mayatech’s attempt at fitting within one of those exceptions ultimately failed, unsuccessful offerors for task orders below $10 million (or $25 million for U.S. Department of Defense (DoD) agencies) should not immediately give up all hope at protesting the award decision. Instead, offerors should carefully review whether the task order increases the scope, period, or maximum value of the contract under which the order is issued. However, in doing so, offerors should be wary of potential timeliness issues, and should raise any such arguments before proposals are due if they are known at that time.

LAX Elecs., Inc. v. United States, No. 2020-1498, 2020 WL 6437779 (Fed. Cir. Nov. 3, 2020)

LAX Electronics, Inc. d/b/a Automatic Connector (“Automatic”) is a longtime supplier of electronic connectors to the U.S. government and government contractors. Automatic has numerous connectors listed on the Defense Logistics Agency (DLA) Qualified Parts List (QPL), which designates government-approved sources of supply. As such, Automatic has historically been able to supply the government and government contractors with its connectors in procurements that require QPL listings. However, after an audit of Automatic’s manufacturing facility found several violations of certain DLA standards, DLA informed Automatic that it had thirty days to provide corrective action plans, which required DLA approval, to remedy DLA’s identified technical deficiencies. In the meantime, DLA ordered Automatic to cease shipment and production of the connectors. Although Automatic timely sent DLA its proposed corrective actions, DLA never responded. Instead, DLA removed two of Automatic’s electronic connectors from its QPL. As a result of this removal, Automatic is barred from bidding on subsequent DoD procurements for those parts.

However, DLA continued to solicit numerous bids for the electronic connectors, which Automatic could no longer supply after its removal. Automatic identified at least five solicitations for which it would no longer be able to compete. Therefore, Automatic challenged its removal from the QPL at COFC, claiming DLA violated DoD Manual 4120.24 and FAR § 9.205(a) by not allowing it “an opportunity to correct any deficiencies,” or enough time to “arrange for qualification before award.” [1] For both protest grounds, Automatic relied on COFC’s bid protest jurisdiction “to render judgment on an action by an interested party objecting to . . . any alleged violation of statute or regulation in connection with a procurement or a proposed procurement.”[2]

DLA moved to dismiss for lack of subject matter jurisdiction and failure to state a claim upon which relief could be granted. Regarding Automatic’s first protest ground, i.e., that DLA violated DoD Manual 4120.24 when it removed Automatic from the QPL, DLA contended that Automatic was not an interested party and its dispute did not relate to an identified procurement or a proposed procurement. COFC agreed, finding that Automatic’s claim was not made in connection with a particular procurement because Automatic’s removal from the QPL related to DLA’s actions in connection with an audit not a procurement. Therefore, COFC found it did not have jurisdiction to hear the claim and transferred it to the U.S. District Court for the Eastern District of New York.

As to Automatic’s second claim that DLA violated FAR § 9.205, which requires agencies to allow offerors sufficient time to meet certain qualifications it deems necessary before award, COFC held that it had bid protest jurisdiction because it was in connection with the five solicitations Automatic identified. Nevertheless, the Court dismissed the protest ground for failure to state a claim, finding that FAR § 9.205(a) only requires agencies to allow potential offereors sufficient time to meet new qualifications—not qualifications a previously qualified contractor no longer meets.[3]

Automatic subsequently appealed the Court’s decision to the United States Court of Appeals for the Federal Circuit. The Federal Circuit vacated COFC’s jurisdictional dismissal on the first claim, and upheld COFC’s dismissal of the second claim, but on other grounds.

Regarding Automatic’s first claim, the Federal Circuit disagreed with COFC’s reliance on an unpublished opinion, Geiler/Schrudde & Zimmerman v. United States, 743 F. App’x 974, when it found that Automatic’s claim was not in connection with a procurement. In Geiler/Schrudde & Zimmerman, the protester attempted to invoke COFC’s bid protest jurisdiction in a challenge to an agency decision to remove the protester’s Service Disabled Veteran Owned Small Business (SDVOSB) status.[4] In that decision, the Federal Circuit held that the challenge was not “in connection with a procurement or a proposed procurement,” as the protester did not allege that removal of SDVOSB status affected its ability to compete for a specific procurement.[5]

In LAX Electronics, Inc., however, the Federal Circuit explained that a more recent case, Acetris Health, LLC v. United States, 949 F.3d 719, was more applicable to the case at hand. In Acetris, the Federal Circuit explained that the “in connection” standard is broad and can be met where a contractor can “identify any future procurements on which the protestor intended to bid.”[6] Here, the Federal Circuit reasoned that Automatic’s first claim met this standard because DLA continuously solicited bids for Automatic’s electronic connectors after it removed Automatic from the QPL, yet the removal precluded Automatic from competing for those opportunities. Therefore, “the violation alleged to have infected the removal from the QPL was in connection with those likely procurements.”[7] Therefore, the Federal Circuit found COFC has bid protest jurisdiction to hear Automatic’s first claim, and remanded it for further proceedings.

As to Automatic’s second claim that DLA violated FAR § 9.205(a), the Federal Circuit affirmed COFC’s dismissal, but did not uphold COFC’s determination that FAR § 9.205(a) applies only to a “new qualification.” Instead, the Federal Circuit concluded that Automatic failed to state a claim because it was not an argument that DLA failed to provide Automatic with sufficient time to qualify for the solicitations, as required by the FAR. Rather, it was an argument that DLA denied Automatic an opportunity to qualify for the solicitations by not providing feedback to Automatic’s proposed corrective actions after the audits.

Takeaways:

The Federal Circuit’s decision is helpful precedent for understanding the breadth of COFC’s bid protest jurisdiction. Contractors who are required to meet specific agency-imposed qualifications are reminded that a bid protest is a potential avenue for challenging an agency’s decision to deny or remove such qualifications from them. However, it is important to bear in mind that to properly invoke the Court’s jurisdiction in such cases, the contractor must be able to point to instances where the removal of the qualification precludes the contractor from bidding on specific solicitations. As in many bid protest cases, specificity is key.

Utech Prods. v. United States, No. 20-1082C, 2020 WL 6687480 (Fed. Cl. Nov. 6, 2020)

Earlier this year, Utech Products d/b/a EndoSoft, LLC (“EndoSoft”) successfully challenged (at the COFC)[8] a sole-source contract award by the Department of Veterans Affairs (VA) to ProVation Medical, Inc. (“ProVation”) for a gastrointestinal electronic medical record software system. Based on that challenge, COFC enjoined the VA from implementing the contract and ordered the award to be set aside. Three months later, however, the VA again issued a solicitation for the same subject matter as the prior contract, stating that ProVation’s system was to be used.

Predictably, EndoSoft filed another pre-award protest while it began preparing to submit a proposal after the VA indicated it would not cancel the solicitation. However, two hours after EndoSoft filed its protest with COFC, the VA reversed course and cancelled its solicitation. Subsequently, EndoSoft sought bid preparation and proposal costs pursuant to the Tucker Act, and attorneys’ fees pursuant to the Equal Access to Justice Act (EAJA).

Although the test to determine whether a protester is entitled to such costs and fees requires slightly different analyses under the two statutes, a decision on the merits is a prerequisite for entitlement in both tests. In the context of bid preparation and proposal costs under the Tucker Act, COFC has held that there can be no decision on the merits of a contract award where the government cancels the solicitation before the Court has a chance to reach the merits of the case, thereby rendering the protest moot. Therefore, the Court found that because the VA cancelled the solicitation after EndoSoft filed its complaint, EndoSoft was not entitled to bid preparation and proposal costs.

The Court similarly found EndoSoft was not entitled to attorneys’ fees under EAJA, reasoning that its lack of authority to award bid preparation and proposal costs “determines its [in]ability to award attorneys’ fees to EndoSoft. . . .” Under EAJA, a claimant must be a “prevailing party,” which requires the claimant to have been granted relief on the merits of its claim. Although EndoSoft sought cancellation of the solicitation in its protest, which ultimately occurred, the VA did not cancel the solicitation due to any action by the Court on the merits of the protest (i.e., there was no judicial imprimatur).

Takeaways:

Without knowing the requirements to establish entitlement to bid preparation costs and attorneys’ fees, one would presume that the VA’s actions at issue here would surely render a finding that EndoSoft was entitled to some relief for what appears to be unnecessarily incurring bid preparation costs and attorneys’ fees. However, as jarring as it seems that the VA informed EndoSoft it would not cancel the solicitation, thereby forcing EndoSoft to file its protest, then wound up cancelling the solicitation anyway, a mere two hours after EndoSoft filed its complaint—at the end of the day, the VA’s actions were not enough to establish entitlement. What mattered was that the Court never reached the merits of EndoSoft’s protest. This case is another example that just because the plaintiff may achieve the result it sought when filing its protest at COFC does not always mean that it can recover the related fees it incurred. It is worth noting, however, that entitlement to such costs at the GAO follows different standards.

[1] LAX Elecs., Inc. v. United States, 2020 WL 6437779 at *5 (Fed. Cir. Nov. 3, 2020).

[2] Id. (emphasis added).

[3] The Court also noted that FAR § 9.202(e) conflicts with Automatic’s argument, as it provides that “a contracting officer need not delay a proposed award in order to provide a potential offeror with an opportunity to demonstrate its ability to meet the standards specified for qualification.”

[4] Geiler/Schrudde & Zimmerman v. United States, 743 F. App’x 974 (Fed. Cir. 2018).

[5] Id.

[6] Acetris Health, LLC v. United States, 949 F.3d 719, 727-28 (Fed. Cir. 2020).

[7] LAX Elecs., Inc. v. United States, 2020 WL 6437779 at *10 (Fed. Cir. Nov. 3, 2020).

[8] EndoSoft unsuccessfully protested this sole source contract award at both the VA and GAO before it finally was successful at COFC. This serves as a subtle reminder that if at first you do not succeed, try, try again (in a different bid protest forum).

[View source.]

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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