United States: September 2016 Protest Roundup

In the second installment of our new monthly feature, we identify a few noteworthy bid protest decisions from the month of September and discuss briefly some of the developments or trends observed in those decisions.

Palantir Technologies, Inc. et al. v. United States (Fed. Cl. 2016).

The consequences of the Federal Circuit's 2007 decision in Blue & Gold Fleet, L.P. are still being fleshed out by the Circuit and the Court of Federal Claims (COFC). In Palantir, the Government attempted to broaden the Blue & Gold rules concerning timeliness and waiver of bid protests before the court. In this case, the protester filed a pre-award protest at the GAO prior to the due date for the submission of proposals challenging the terms of the solicitation. Palantir did not submit a proposal. The GAO denied Palantir's protest on its merits. Forty-three days later, but still before award, Palantir filed its complaint at the COFC.

The Government moved to dismiss the complaint on several grounds: (i) by waiting 43 days to file at the court, the plaintiff failed to pursue its claims diligently and thus ceased to be an interested party, (ii) Palantir did not have the requisite economic interest in the protest because it did not submit a proposal or respond to the Government's request for information (RFI), and (iii) that certain of the arguments in the plaintiff's complaint were waived because they were not raised during the GAO protest.

The court, in an opinion by Judge Horn, denied the Government's dismissal request. Despite the 43-day passage of time between the GAO's decision and the initiation of the COFC protest, the court found that Palantir had diligently pursued its protest. The court emphasized that the agency had not yet made an award, and noted that "a pre-award protest is in a different posture than a post-award protest." The court declined the Government's request to adopt the GAO's statutory 10-day filing window. The upshot: waiting 43 days may be too late in some circumstances, but not here. The court, citing precedent from the Circuit, then rejected the notion that the plaintiff's failure to submit a proposal or respond to RFIs waived its ability to protest. Here, the plaintiff had responded to earlier RFIs, and had adequately demonstrated its economic interests in the task order. Lastly, the court rejected the Government's novel "issue waiver" argument, finding that there was neither legal nor factual support for limiting the plaintiff to the precise arguments it presented to GAO.

Aided by the Government's persistent quest to narrow the COFC's bid protest jurisdiction as much as possible, this case presents another example of how Blue & Gold can manifest in unique ways.

Medfinity LLC, B-413450, September 9, 2016

Medfinity challenged the reasonableness of the Agency's decision to cancel a solicitation. The GAO denied the protest. The GAO's decision is unremarkable, but the facts underlying it are noteworthy.

The initial solicitation was for the supply of optometry equipment for the Department of Health and Human Services (HHS). The solicitation identified some equipment using brand names and model numbers. Medfinity proposed different products but asserted in its proposal that they were equivalent to the brand names identified in the solicitation. HHS initially awarded the task order to Medfinity as the lowest-priced offeror, but a disappointed bidder protested the award to the agency and asserted that Medfinity's proposed equipment was not equivalent and would not meet the agency's needs. The agency sustained the protest and required HHS, if it still needed the goods, to amend the solicitation to identify the salient characteristics of the products the agency requires. The agency terminated Medfinity's task order and cancelled the solicitation. Medfinity asserted to the agency and then again in a follow-on protest to GAO that the agency had improperly cancelled the solicitation. As it does in almost all cases involving a challenge to an agency's decision to cancel a solicitation, the GAO denied the protest, citing the significant discretion afforded to agencies when making such threshold decisions.

The facts of this case reinforce two important practice tips. First, in the right scenario, agency level protests (see recent post on such protests) can be an effective and efficient way to resolve plain agency error. In Medfinity, it appeared the agency clearly failed to compare the equivalency of the products Medfinity offered against the agency's needs. In cases of clear error or obvious procedural defects, there is often no need to run off to the GAO or the CFOC; bringing the issue to the agency's attention may suffice. Second, solicitations identifying solutions by brand names can be problematic. Many companies see such requirements as anticompetitive, especially when the company that owns the brand is competing for the same award or if a competitor has an exclusive arrangement with the brand name owner. This case presented a different issue, in which the solicitation's identification of brand names was insufficient to identify potentially equivalent products in accordance with FAR § 11.104. Companies should take a close look at solicitations that include brand names and assess whether they present grounds for a question to the agency or possibly a protest to the agency or GAO concerning the agency's appetite for a full and open competition.

Professional Service Industries, Inc., B-412721.2 et al., July 21, 2016

Professional Service Industries, Inc. (PSI) successfully challenged the agency's evaluation of the awardee's proposed program manager. The solicitation required the offerors to demonstrate that their program managers have, among other things, experience managing certain facilities and "directing a diverse team of researchers and technicians." The awardee's program manager was an engineer on the incumbent task order, but apparently did not possess the requisite management experience. This issue was raised in discussions with the awardee, who, in its final proposal revision, attempted to mitigate the lack of experience by having another individual oversee the program's management. The awardee received a weakness for its program manager's lack of experience and overall technical rating of satisfactory.

Interestingly, the final evaluation included two reports from the technical evaluation team: a majority report that concluded the risk concerning the awardee's program manager had been adequately mitigated and a minority report (written by the chair of the technical evaluation team) that came to the opposite conclusion. The source selection decision noted both reports, but ultimately sided with the majority of the technical team, concurring that the risk was adequately mitigated and in accordance with the solicitation.

The GAO disagreed, concluding that the source selection authority acted unreasonably when it determined that the awardee's approach to the program manager position was consistent with the solicitation. The GAO overruled the agency's conclusion and found that there was "no basis in the record to conclude that [the program manger's] experience equates to 'directing a diverse team of researchers and technicians.'" The GAO recommended that the agency either reevaluate proposals in accordance with the solicitation or, if necessary, amend the solicitation to meet its needs and request revised proposals.

Given the brevity with which GAO opinions are written, the reader cannot know the entirety of the circumstances. Nevertheless, it is unusual for GAO to overrule agency decisions where the record, as was apparently the case here, demonstrated that the agency identified the issue, evaluated the issue thoroughly, and further demonstrated that the source selection authority had grappled with the relevant issues before making the final award decision. In cases where the agency's rationale is well documented, the GAO will typically defer to the agency, even if an alternate outcome seems more appropriate. Here, however, it seems GAO simply could not come to grips with the agency's conclusion and sustained the protest on that basis.

Technica Corporation, B-413339, September 19, 2016

Technica challenged the agency's rejection of its quotation for the award of a task order due to Technica's failure to recertify as a small business. The outcome of the protest is unremarkable, but the facts are noteworthy because they provide another example of what constitutes a request for recertification, which has arisen in numerous protest-based and counseling-based scenarios.

The recertification issue arises when a small business receives an indefinite-delivery, indefinite quantity (IDIQ) contract that is set aside for small businesses and grows to be other than small during the IDIQ contract performance period. After the company outgrows its small business size status, there are questions about whether and when the company can continue to pursue task orders issued under the small business IDIQ contract. The general rule is that the contractor can continue to pursue task orders issued under the IDIQ contract unless an issuing agency, in the context of a task order solicitation, requires offerors to recertify their size status to qualify for the task order.

The question in the Technica protest was whether the agency had actually requested that contractors recertify their size status in the request for quotation (RFQ). Although the initial draft of the RFQ did not require contractors to recertify their size status, the issuing agency received a question during the "Questions and Answers" (Q&A) phase of the procurement asking whether offerors are required to recertify as a small business. The issuing agency answered the question affirmatively.

GAO found that the Q&A constituted a solicitation provision that required offerors to recertify their size status at the time of quotation submission. GAO concluded that the Q&A is incorporated into the solicitation and can require recertification in a manner that is equivalent to a more traditional request for size status recertification.

InfoReliance Corporation, B-413298, September 19, 2016

In InfoReliance, the protester unsuccessfully challenged an agency's decision to set aside procurement for small businesses. The solicitation (RFQ) was issued to contractors that hold General Services Administration (GSA) IT70 Federal Supply Schedule (FSS) under FAR subpart 8.4. The agency conducted market research and determined that there were at least two small businesses capable of performing the contractual requirements at a fair and reasonable price, thereby satisfying the "rule of two" requirement to set aside an order. The GAO concluded that the agency's research and documentation reasonably supported the decision to set aside the procurement for small businesses, which is within the agency's discretion.

Although the outcome of InfoReliance is not extraordinary, the decision provides the first discussion of the interplay between the preference programs described in FAR Part 19 and FAR subpart 8.4 since the Supreme Court decided Kingdomware Techs. Inc. v. United States, 136 S. Ct. 1969 (June 16, 2016). In Kingdomware, the Supreme Court ruled that set-aside requirements apply to both contracts and FSS orders, challenging GAO's and GSA's long-standing position that FSS orders are exempt from set-aside requirements. GSA has argued that the requirement to set aside contracts under the "rule of two," which is a requirement found in 15 U.S.C.A. § 644(j), does not apply to FSS orders for two reasons: (i) FAR Part 19 expressly exempts FSS procurements from small business regulations, and (ii) 15 U.S.C.A. § 644(r) permits agencies to utilize discretion when deciding to set aside FSS orders. Despite GSA's interpretation, however, 15 U.S.C.A. § 644(r) takes exception to the requirement, as section 644(j) states that all procurements between $2,500 and $100,000 must be set aside if the rule of two is satisfied.

In Inforeliance, the GAO cited FAR Part 19 and the Aldevra decision for the proposition that the preference programs contained therein are "generally not applicable to procurements under the FSS procedures or FAR subpart 8.4." Nevertheless, the Aldevra decision relies, in part, on GAO's distinction between "contracts" and "orders" (finding that the set-aside requirements in § 644(j), and FAR Part 19 apply to "contracts" but not "FSS orders"). The Supreme Court shredded that distinction in Kingdomware, ruling that there is no distinction between a "contract" and an FSS "order" in the context of the rule of two analysis.

The GAO's reliance on FAR Part 19 was best reflected in a footnote in the Inforeliance decision stating "[i]nsofar as the socio-economic programs set forth under FAR part 19 are not mandatory when placing orders under the FSS program . . . InfoReliance's assertion that the [agency] failed to comply with the requirements of FAR § 19.502-2(b) when making its set-aside decision fails to state a valid basis for protest." The citation to Aldevra and the footnote quoted above create uncertainty about whether GAO will continue to rule that agencies are not required to set aside any FSS orders (including those with a value of less than $100,000), even when the rule of two is (or can be) satisfied. To confirm the GAO's position and understand its rationale, however, we need to wait for a protest challenging an agency's failure to set aside an FSS order despite having knowledge that the rule of two can be satisfied.

You can find more information about the Kingdomware decision and the interplay between the statutes and regulations in a more detailed article about those topics. You can also find more information about GSA's interpretation of the statutory and regulatory requirements on FSS orders here.

Mercury Data Systems, Inc., B-413217, September 9, 2016

We offer a quick note on Mercury Data Systems Inc. (MDS)'s recent protest, in which it challenged the Department of Homeland Security's determination not to fund MDS's proposal for certain research projects. Among a number of other arguments, MDS argued that a weakness assessed against its proposal for failure to sufficiently explain its proposed innovations was unreasonable because the weakness directly contradicted a strength assigned for its proposed use of the same innovative technology.

Protesters often challenge technical evaluations by arguing that a weakness is unreasonable because the agency assigned a strength for the same similar aspect of the proposal. GAO took the opportunity to once again clarify the issue in Mercury Data by concluding that "aspects of a proposal may provide both benefits and weaknesses, and evaluators may identify both without being inconsistent." Although this decision does not and should not preclude protesters from identifying contradictions and inconsistencies in the agency's technical evaluation, it does reinforce the well-established deference agencies receive on matters stemming from the exercise of technical or programmatic judgment.

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.

© Morrison & Foerster LLP. All rights reserved

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