Case: 20-1231 Document: 49 Page: 1 Filed: 01/11/2021
NOTE: This disposition is nonprecedential.
United States Court of Appeals
for the Federal Circuit
______________________
LAND SHARK SHREDDING, LLC,
Plaintiff-Appellant
v.
UNITED STATES,
Defendant-Appellee
______________________
2020-1231
______________________
Appeal from the United States Court of Federal Claims
in No. 1:19-cv-00508-MBH, Senior Judge Marian Blank
Horn.
______________________
Decided: January 11, 2021
______________________
JOSEPH ANTHONY WHITCOMB, Whitcomb, Selinsky, PC,
Denver, CO, argued for plaintiff-appellant. Also repre-
sented by TIMOTHY TURNER.
SONIA MARIE ORFIELD, Commercial Litigation Branch,
Civil Division, United States Department of Justice, Wash-
ington, DC, argued for defendant-appellee. Also repre-
sented by JEFFREY B. CLARK, STEVEN JOHN GILLINGHAM,
ROBERT EDWARD KIRSCHMAN, JR.; NATICA CHAPMAN NEELY,
Case: 20-1231 Document: 49 Page: 2 Filed: 01/11/2021
2 LAND SHARK SHREDDING, LLC v. UNITED STATES
Office of General Counsel, United States Department of
Veterans Affairs, Portland, OR.
______________________
Before PROST, Chief Judge, REYNA and HUGHES, Circuit
Judges.
HUGHES, Circuit Judge.
The Department of Veterans Affairs withdrew a solici-
tation for bids that was set aside for service-disabled vet-
eran-owned small businesses after determining that no
qualifying businesses bid a price that was fair and reason-
able. Land Shark, the lowest bidder on the solicitation,
challenged the withdrawal of the solicitation. The Court of
Federal Claims granted the government’s motion to dis-
miss on the grounds that Land Shark lacked standing to
challenge the withdrawal of the solicitation and that Land
Shark failed to state a claim. Because we agree that Land
Shark failed to state a claim, we affirm.
I
Land Shark Shredding, LLC is a service-disabled vet-
eran-owned small business (SDVOSB) that bid unsuccess-
fully on a contract for document destruction services at
White River Junction VA Medical Center and its associated
clinics in Vermont and New Hampshire.
In December 2018, the VA issued the solicitation at is-
sue on the Federal Business Opportunities (FBO) website
as an SDVOSB set-aside. The decision to issue the solici-
tation as an SDVOSB set-aside was based on the contract-
ing officer’s determination under
38 U.S.C. § 8127(d),
which requires that the VA provide certain preferences to
veteran-owned small businesses in its award of contracts:
[A] contracting officer of the Department shall
award contracts on the basis of competition re-
stricted to small business concerns owned and con-
trolled by veterans or small business concerns
Case: 20-1231 Document: 49 Page: 3 Filed: 01/11/2021
LAND SHARK SHREDDING, LLC v. UNITED STATES 3
owned and controlled by veterans with service-con-
nected disabilities if the contracting officer has a
reasonable expectation that two or more small
business concerns owned and controlled by veter-
ans or small business concerns owned and con-
trolled by veterans with service-connected
disabilities will submit offers and that the award
can be made at a fair and reasonable price that of-
fers best value to the United States.
In accordance with the threshold requirement, known
as the “Rule of Two,” the contracting officer conducted mar-
ket research to determine whether there were two or more
SDVOSBs that were likely to submit offers at fair and rea-
sonable prices. Based on this research, the contracting of-
ficer concluded that “there are two SDVOSB vendors that
may be able to provide the services,” but that “[i]t is un-
known if the prices would be fair and reasonable due to the
location of the vendors.” J.A. 47. The contracting officer
therefore decided that “[a] solicitation will be posted on
FBO as an SDVOSB set aside and a fair and reasonable
determination will be made prior to award.”
Id. The con-
tracting officer then issued the solicitation as an SDVOSB
set-aside.
During the solicitation response period, a contractor
asked: “Is it safe to assume if an offeror bids a per container
price for this solicitation, that has been accepted as fair and
reasonable per the [General Services Administration] GSA
Schedule, and that the VA has recently awarded in other
shredding contracts – that said price per container will be
considered inherently fair and reasonable and therefore
competitive?” J.A. 173. The contracting officer replied:
“No, this is an open market solicitation; price reasonable-
ness shall be in accordance with FAR 13.106-3.” J.A. 179.
This answer was made an amendment to the original solic-
itation. J.A. 178–79.
Case: 20-1231 Document: 49 Page: 4 Filed: 01/11/2021
4 LAND SHARK SHREDDING, LLC v. UNITED STATES
Two SDVOSBs bid on the solicitation. Land Shark’s
bid was the lower of the two quotes. J.A. 303. However,
the contracting officer determined that neither of the two
bids was fair and reasonable because both quotes were sig-
nificantly higher than the incumbent company’s pricing for
these services, as well as the independent government cost
estimate (IGCE). J.A. 343. Because the contracting officer
determined that the quotes were not fair and reasonable,
the contracting officer canceled the solicitation and notified
the offerors that the solicitation would be reissued. J.A.
308–13.
Land Shark filed a protest with the VA, challenging the
withdrawal of the solicitation. Land Shark argued that the
IGCE was flawed for relying on the non-SDVOSB incum-
bent’s pricing and that it was unfair to compare Land
Shark’s pricing to that of the incumbent because the in-
cumbent was not an SDVOSB. J.A. 316–19. Land Shark
also argued that its GSA pricing had already been deter-
mined to be reasonable, and thus its current pricing was
per se reasonable because it was lower than it’s GSA pric-
ing.
Id. The contracting officer denied Land Shark’s pro-
test, and the VA reissued the solicitation as a small
business set-aside rather than an SDVOSB set-aside.
Land Shark Shredding, LLC v. United States,
145 Fed. Cl.
530, 543 (2019) (Decision).
In February 2019, Land Shark filed a bid protest with
the Court of Federal Claims. Subsequently, the contract-
ing officer withdrew her original decision on the agency
level protest and canceled the second solicitation pending
corrective action. J.A. 341. In March 2019, the contracting
officer memorialized the corrective action taken, explain-
ing that the IGCE was flawed and was no longer consid-
ered. J.A. 342–46. Nonetheless, the contracting officer
found once again that Land Shark’s pricing was not fair
and reasonable because the quote was significantly higher
than the historical pricing and exceeded the VA’s available
funding for the solicitation.
Id.
Case: 20-1231 Document: 49 Page: 5 Filed: 01/11/2021
LAND SHARK SHREDDING, LLC v. UNITED STATES 5
Land Shark again challenged the cancellation of the so-
licitation in the Court of Federal Claims. The Court of Fed-
eral Claims granted the government’s motion to dismiss,
holding that Land Shark lacked standing to challenge the
withdrawal of the solicitation, and that Land Shark failed
to state a claim upon which relief could be granted.
II
“Whether a party has standing to sue is a question of
law that we review de novo.” Rex Serv. Corp. v. United-
States,
448 F.3d 1305, 1307 (Fed. Cir. 2006). Similarly,
“[t]he question of whether a complaint was properly dis-
missed for failure to state a claim upon which relief could
be granted is one of law, which we review [without defer-
ence].” Highland Falls-Fort Montgomery Cent. Sch. Dist. v.
United States,
48 F.3d 1166, 1170 (Fed. Cir. 1995). “In or-
der to avoid dismissal for failure to state a claim, a com-
plaint must allege facts plausibly suggesting (not merely
consistent with) a showing of entitlement to relief.” Ac-
ceptance Ins. Cos., Inc. v. United States,
583 F.3d 849, 853
(Fed. Cir. 2009) (quoting Bell Atl. Corp. v. Twombly,
550 U.S. 544, 545 (2007)).
III
The trial court concluded that Land Shark lacked
standing to challenge the VA’s cancellation of the solicita-
tion because it was not an “interested party” under the
Tucker Act. Decision, 145 Fed. Cl. at 553–54. The Tucker
Act grants the Court of Federal Claims “jurisdiction to ren-
der judgment on an action by an interested party objecting
to a solicitation by a Federal agency for bids or proposals
for a proposed contract or to a proposed award or the award
of a contract . . . . ”
28 U.S.C. § 1491(b)(1).
“[T]o come within the Court of Federal Claims’s
§ 1491(b)(1) bid protest jurisdiction, [the plaintiff] is re-
quired to establish that it (1) is an actual or prospective
bidder and (2) possess[es] the requisite direct economic
Case: 20-1231 Document: 49 Page: 6 Filed: 01/11/2021
6 LAND SHARK SHREDDING, LLC v. UNITED STATES
interest.” Weeks Marine, Inc. v. United States,
575 F.3d
1352, 1359 (Fed. Cir. 2009) (quoting Rex Serv. Corp.,
448 F.3d at 1308) (alteration in original). “[T]o prove a di-
rect economic interest as a putative prospective bidder,
[the bidder] is required to establish that it had a ‘substan-
tial chance’ of receiving the contract.”
Id. (quoting
Rex Serv. Corp.,
448 F.3d at 1308) (second alteration in
original).
The government argues that Land Shark did not have
a substantial chance of winning the contract award be-
cause Land Shark’s bid exceeded the VA’s designated fund-
ing for the solicitation, and because an award to Land
Shark would have violated the Anti-Deficiency Act provi-
sion disallowing contracting officers from authorizing ex-
penditures that exceed appropriated amounts. See
31 U.S.C. § 1341(a)(1)(A).
To counter, Land Shark argues that it had a substan-
tial chance of winning the contract based on the Rule of
Two. Because this contract was issued as an SDVOSB set-
aside, and because Land Shark was the lowest bidder,
Land Shark argues that the government was required to
award the contract to Land Shark.
Simply exceeding the agency’s target allocation does
not deprive a party of the requisite direct economic interest
as a matter of law. See Land Shark Shredding, LLC v.
United States, No. 20-1230 (Fed. Cir. 2021) (“We decline to
establish a bright line rule that a bid in excess of an
agency’s targeted allocation per se fails the direct economic
interest prong of § 1491(b)(1) bid protest jurisdiction”). Be-
cause Land Shark had a substantial chance of receiving the
contract as the lowest bidder on the SDVOSB set-aside so-
licitation but for alleged errors, we conclude that Land
Shark had standing to protest the withdrawal of the solic-
itation and proceed to the merits.
Case: 20-1231 Document: 49 Page: 7 Filed: 01/11/2021
LAND SHARK SHREDDING, LLC v. UNITED STATES 7
IV
On the merits, Land Shark argues that (1) the contract-
ing officer should have awarded the contract to Land Shark
based on
38 U.S.C. § 8127(d) regardless of the reasonable-
ness of its bid and (2) the contracting officer did not
properly analyze the bids received for price reasonableness.
We agree with the trial court that Land Shark failed to
state a claim upon which relief could be granted. Decision,
145 Fed. Cl. at 563.
Land Shark’s first argument is based on the premise
that, the requirements of
38 U.S.C. § 8127(d) were trig-
gered here—i.e., the contracting officer had a reasonable
expectation that two or more veteran-owned concerns
would bid and that an award could be made at a fair and
reasonable price—and that, once the Rule of Two is trig-
gered, the government is required to award the contract,
regardless of the actual reasonableness of the bids them-
selves. We note that this premise is far from established.
It is unclear that the requirements of
38 U.S.C. § 8127(d)
were met here so as to invoke the Rule of Two, given the
contracting officer’s explicit determination that “[i]t is un-
known if the prices would be fair and reasonable.” J.A. 47.
We also have previously held that the VA can cancel
SDVOSB set-aside solicitations where there are no reason-
able bids, which would be impossible if Land Shark’s read-
ing of § 8127(d) were correct. See Veterans Contracting
Grp., Inc. v. United States,
920 F.3d 801, 806–07 (Fed. Cir.
2019).
Even if Land Shark’s premise was established, because
the government incorporated by amendment to the solici-
tation the statement that “price reasonableness shall be in
accordance with FAR 13.106-3,” J.A. 179, the contracting
officer had to perform an analysis after the fact to “deter-
mine that the proposed price is fair and reasonable.”
FAR 13.106-3. To the extent that Land Shark disagrees, it
must either challenge the validity of FAR 13.106-3 in light
Case: 20-1231 Document: 49 Page: 8 Filed: 01/11/2021
8 LAND SHARK SHREDDING, LLC v. UNITED STATES
of
38 U.S.C. § 8127(d) or challenge the application of
FAR 13.106-3 to this solicitation. Challenges to the valid-
ity of a regulation governing a procurement must be
brought in federal district court under the Administrative
Procedure Act. Southfork Sys., Inc. v. United States,
141 F.3d 1124, 1135 (Fed. Cir. 1998). Therefore, this argu-
ment exceeds the Court of Federal Claims’ jurisdiction.
And Land Shark has forfeited any challenge to the applica-
tion of FAR 13.106-3 to this solicitation by not raising it
while the procurement was pending, as it was clear from
the solicitation’s terms that a price reasonableness deter-
mination would be performed accordingly. See Blue &
Gold, Fleet, L.P. v. United States,
492 F.3d 1308, 1313
(Fed. Cir. 2007) (“[A] party who has the opportunity to ob-
ject to the terms of a government solicitation containing a
patent error and fails to do so prior to the close of the bid-
ding process waives its ability to raise the same objection
subsequently in a bid protest action in the Court of Federal
Claims.”).
Land Shark’s second argument is that the contracting
officer’s price reasonableness analysis was improper. Land
Shark argues that the contracting officer did not follow the
method for analyzing SDVOSB posted on the VA website.
This argument is unavailing because the VA website is not
a regulation that the contracting officer was required to fol-
low and because the discussion that Land Shark refers to
concerned FAR Part 15, not FAR 13.106-3. Land Shark
also argues that the contracting officer erred because “the
CO also did not administer the three prongs of the
FAR 13.106-2(b).” Appellant’s Br. at 26. But FAR 13.106-
2(b) does not have three prongs. It is true that the solicita-
tion stated that the VA would perform reasonableness
analysis based on three factors: price, past performance,
and technical factors. J.A. 78–79. However, nowhere was
there a requirement that the contracting officer continue
through the other evaluation factors after determining that
price was not fair and reasonable.
Case: 20-1231 Document: 49 Page: 9 Filed: 01/11/2021
LAND SHARK SHREDDING, LLC v. UNITED STATES 9
Land Shark has failed to state a claim because it has
not alleged facts “plausibly suggesting (not merely con-
sistent with)” entitlement for relief. Twombly,
550 U.S. at
557 (2007). Land Shark has waived part of its first argu-
ment, and the Court of Federal Claims did not have juris-
diction to hear the part of Land Shark’s first argument that
has not been waived. And Land Shark has not alleged facts
that plausibly support its second argument. For these rea-
sons, we agree with the trial court that Land Shark failed
to state a claim upon which relief could be granted.
V
We have considered the parties’ remaining arguments
and find them unpersuasive. Because Land Shark has
failed to state a claim upon which relief could be granted,
we affirm the Court of Federal Claims’ decision.
AFFIRMED
