Intelligent Waves LLC v. United States ( 2018 )

United States Court of Federal Claims
No. 18-465 C
(Filed Under Seal: April 13, 2018)
(Reissued: May 9, 2018) 1
__________________________________
INTELLIGENT WAVES, LLC,
Plaintiff, Injunctive Relief; Department
of Veteran Affairs;
v. Competition in Contracting
Act; CICA Stay; Bid Protest;
UNITED STATES OF AMERICA, Declaratory Judgment
Defendant,
and
SYSTEMS MADE SIMPLE, INC.,
Defendant-Intervenor.
__________________________________
Lee Dougherty, Esquire, Montgomery Fazzone PLLC, Washington, D.C., for plaintiff.
Alexis J. Echols, Esquire, U.S. Department of Justice, Commercial Litigation Division,
Washington, D.C., for defendant.
Daniel R. Forman, Esquire, Crowell & Moring LLP, Washington, D.C., for defendant-
intervenor.
ORDER AND OPINION
Hodges, Senior Judge.
Plaintiff protested a task order awarded to intervenor Systems Made Simple by the
Department of Veterans Affairs. The Competition in Contracting Act (“CICA”) imposes a
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We issued this Opinion under seal on April 13, 2018, and invited counsel to propose
redactions prior to its publication. Neither party requested any redactions. The April 13,
2018 Opinion is hereby reissued for publication, unsealed, with no alterations.
mandatory stay on further contract action in such circumstances until the Government
Accounting Office (“GAO”) issues a ruling on the protest. However, CICA allows
government agencies to override the stay when they can make a showing that it would
serve the “best interests” of the United States. Veterans Affairs issued an override in this
case, claiming that the override would serve the Government’s interests.
Plaintiff sued for a declaration that the agency’s override of the stay was arbitrary
and capricious and therefore in violation of law. It also petitioned for a preliminary
injunction. It became clear during a hearing on April 4, 2018, that the Department of
Veterans Affairs did not have appropriate justification for issuing the override. As
defendant has not made a sufficient showing in support of the agency’s decision to
override, we find that the override decision was arbitrary and capricious. The automatic
stay is reinstated.
BACKGROUND
The Department of Veteran Affairs awarded contracts to twenty-nine entities in
support of the Department’s “Transformation Twenty-One Total Technology Next
Generation” multiple-award, indefinite delivery/indefinite quantity contract. Plaintiff was
among those awarded a “Veteran-Owned” contract. The agency issued a solicitation for a
“Request for a Task Execution Plan” to support certain operations services in November
2017, and plaintiff filed a timely response thereafter. The operations services contracted
for were similar to those being performed at the time by intervenor Systems Made Simple
(“SMS”) under a prior task order.
The agency issued a contract to intervenor SMS to perform the new task order
several months later, on March 7, 2018. Plaintiff obtained an in-person debriefing on
March 15, and filed a bid protest with GAO on March 20. GAO notified Veterans Affairs
of the protest and the automatic stay on March 21. The agency issued an override based on
the “best interests” of the United States on March 27.
STANDARD OF REVIEW
This court has jurisdiction over objections to an agency’s override of the automatic
stay required under CICA. 28 U.S.C. § 1491(b)(2011) (“Tucker Act”). Consideration of
the stay is entirely separate from any review of the contract award to which it relates. See
RAMCOR Servs. Grp., Inc. v. US, 185 F.3d 1286, 1290 (Fed. Cir. 1999); PGBA, LLC v.
United States, 57 Fed. Cl. 655, 658 (2003) (stating that the court “review[s] the merits of
an override independent of any consideration of the merits of the underlying contract
award.”).
Authority for the automatic stay and the limitations on its override comes from
CICA. 31 U.S.C. §3553. That Act provides that an agency may override the automatic stay
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only “upon a written finding that—(I) performance of the contract is in the best interests
of the United States; or (II) urgent and compelling circumstances that significantly affect
the interest of the United States will not permit waiting for the decision of the Comptroller
General concerning the protest.” 31 U.S.C. §3553(d)(3)(C).
An agency’s decision to override an automatic stay is reviewed according to the
standards provided in the Administrative Procedure Act. 5 U.S.C. § 706 (2006). The
standard for review is whether the override was “arbitrary, capricious, an abuse of
discretion, or otherwise not in accordance with law.” 5 U.S.C. § 706(2)(A). A decision is
arbitrary and capricious if:
the agency has relied on factors which Congress has not intended it to
consider, entirely failed to consider an important aspect of the problem,
offered an explanation for its decision that runs counter to the evidence
before the agency, or is so implausible that it could not be ascribed to a
difference in view or the product of agency expertise.
Motor Vehicle Mfrs. Ass’n of US, Inc. v. State Farm Mut. Auto. Ins. Co, 463 U.S. 29, 43,
(1983).
DISCUSSION
This court regularly applies a four-part test to determine whether an agency override
of a CICA stay based on urgent and compelling circumstances was “arbitrary and
capricious.” See Reilly’s Wholesale Produce v. United States, 73 Fed. Cl. 705, 711 (2006). 2
In weighing its decision to override the stay, the agency considered the four Reilly factors,
despite stating that the decision was based on the “best interests” exception rather than
“urgent and compelling circumstances.” Plaintiff also relies heavily on these factors in
arguing that the override should be declared invalid. However, the focus here is on the
2 Reilly’s Wholesale Produce sets forth the following four-part test:
(i) whether significant adverse consequences will necessarily occur if the
stay is not overridden ...; (ii) conversely, whether reasonable alternatives to
the override exist that would adequately address the circumstances
presented ...; (iii) how the potential cost of proceeding with the override,
including the costs associated with the potential that the GAO might sustain
the protest, compare to the benefits associated with the approach being
considered for addressing the agency’s needs ...; and (iv) the impact of the
override on competition and the integrity of the procurement system, as
reflected in [CICA]....
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standard provided by the Administrative Procedures Act as this court has interpreted it in
relation to the “best interest” exception.
A. “Best Interests”
Presumably, prompt performance of most contracts awarded by government
agencies would be in the country’s best interests or the contracts would not be awarded in
the first place. It follows that the justification for an automatic stay override mandated by
Congress requires something more than showing that the contract’s original purpose serves
the United States’ interests. See Nortel Gov’t. Solutions, Inc. v. United States, 84 Fed. Cl.
243, 247-248 (2003) (explaining that a best interests determination calls for more than an
argument that the override serves the original purpose of the contract) (citations omitted);
see also Advanced Sys. Dev., 72 Fed. Cl. 25, 31 (2006); PGBA, 57 Fed. Cl. at 662. An
assertion that a new contract is in essence better than a current one is not sufficient to show
“best interests.” Advanced Sys. Dev., 72 Fed. Cl. at 31 (“To allow a best interests
determination to rest on such a common ground would permit the override exception to
swallow the Congressionally mandated rule that stays be automatic.”)(citations omitted).
This court has provided varying interpretations as to whether the standards for
“urgent and compelling” should be stricter than those for “best interests.” See Spherix, Inc.
v. United States, 62 Fed. Cl. 497, 505 (2004) (noting that “one of the two justifications
recognized by the CICA for allowing a stay is minimal; hence, plaintiff’s ability to succeed
on the merits-to demonstrate that the Chief of the [agency]’s written finding is arbitrary or
capricious-faces an uphill battle.”); Advance Sys. Dev., 72 Fed. Cl. at 31 (noting
disagreement with the Spherix opinion that “best interests” requires a lesser showing.).
Regardless of whether the standard is less strict for a “best interests” justification than for
an “urgent and compelling circumstances” justification, the reasoning provided by the
agency in this case does not show how the override is in the best interests of the United
States.
We have interpreted the “best interests” justification in a small number of cases,
none of which has included agency justifications similar to those in this case. The court
came closest in Spherix, where the agency’s “best interests” justification for an override of
an automatic stay was sufficient because the justification emphasized the importance of
sticking to a specific timeline for implementation of the services at issue. Spherix, 62 Fed.
Cl. at 506. In that instance, a stay on the performance of the contract would have
jeopardized the ability of the system to be operational during a busy season. Id. The key
fact in that case dealt with the additional time constraint placed on the Government to meet
a go-live date in the contract prior to the use of the system during the busy season. In other
words, meeting the deadline was crucial to the purpose of the entire contract. In addition,
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the court noted that the particular program was “a Presidential priority, not an ordinary
governmental program.” Id.
Defendant contends that the timing in this case is crucial but does not explain why
the timing of performance of the new task order is crucial where a continuation or bridge
contract could suffice. Instead, defendant simply argues that a lapse in services is an
“unacceptable risk.”
The agency had ample time to consider such a lapse and take appropriate measures
to avoid it. CICA provides an exception to the override when the override is in the best
interests of the United States, not an individual agency or subset of citizens. 3 We
acknowledge the importance of this agency’s mission, and we considered carefully whether
its constituents could be harmed by a delay, if any. Defendant did not show a direct
connection between any possible delay in performance of the new task order and a harm
that will necessarily affect veterans adversely. Certainly, no claim was made that the
program is a “Presidential priority,” for example, or that timing of performance of the new
task order, as opposed to continuation of the old order or an interim bridge contract, would
be crucial to the health or safety of veterans. See Spherix, 62 Fed. Cl. at 506.
B. Legislative Interpretation
In enacting the automatic stay, Congress provided an automatic and immediate
injunction pending the disposition of a bid protest in certain circumstances rather than
requiring a protester to incur the onerous burden of proof otherwise required for injunctive
relief. 4
Permitting agencies to override the stay based on broad assertions and routine
administrative roadblocks would eviscerate the automatic stay. We have noted that “[t]he
automatic stay is intended to preserve the status quo during the pendency of the protest so
3
See PGBA, 57 Fed. Cl. at 663 (observing that “the statute does not allow the agency to
override the stay when it is in the bests interests of that agency or the agency's contracting
officials. Rather, the best interests of the ‘United States’ must be involved and those
interests necessarily include weighing the benefits Congress obviously felt were furthered
by bolstering the bid protest process and, in turn, promoting competition in contracting.”)
4 See Supreme Foodservice GmbH v. United States, 109 Fed. Cl. 369, 397 (2013) (“In
creating the CICA stay of performance, Congress decided that the injunctive relief factors
need not be invoked when a bid protest is timely filed with the GAO, instead requiring that
contract performance be stayed automatically… To allow an arbitrary override to insert the
injunctive relief requirements into the process would convert the CICA stay to something
other than what Congress created.”) (citations omitted).
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that an agency would not cavalierly disregard the GAO’s recommendation to cancel the
challenged award.” Advanced Sys. Dev., 72 Fed. Cl. at 30-31 (citing PGBA, 57 Fed. Cl. at
660.) “The overarching goal of the stay is to preserve competition in contracting and ensure
a fair and effective process at the GAO.” Advanced Sys. Dev., 72 Fed. Cl at 31.
Defendant argued in its response to the motion and during the hearing that the
services provided by the task order are so crucial that without them, benefits to veterans
will be suspended and may result in death. We could not credit this line of argument,
however. The agency waited to award this contract until just six days prior to the expiration
of the previous task order covering these crucial services. Plaintiff could not have protested
the bid until after expiration of the original order. Defendant argued that “it is not possible”
to extend the previous order, and to negotiate a bridge contract would take at least 18 to 30
days. Defendant’s argument is essentially that the stay must be overridden to avoid a lapse
in services because it waited too late; it failed to extend the previous order or enter into a
bridge contract.
It is in the interest of the United States that the integrity of the competitive nature of
the bid process as mandated by Congress is upheld. See Reilly’s Wholesale Produce, 73
Fed. Cl. at 716 (“[T]he public’s interest likewise lies in preserving the integrity of the
competitive process – such, indeed, clearly was Congress’ view in providing that except in
circumstances not yet demonstrated here, the automatic stay should prevail.”) To allow an
override based merely on the fact that to work towards a bridge contract, or to have acted
timely and negotiated an extension are more difficult to accomplish than continuing to have
the incumbent perform the new contract, would allow agency manipulation of a
congressional mandate.
C. Declaratory Judgment
We find it prudent to provide declaratory judgment given the time constraints of this
stay. The effect of this judgment will be to reinstate the stay put into place by statute.
Defendant contends that injunctive relief is a “drastic and extraordinary remedy that is not
to be routinely granted.” Nat’l. Steel Car, Ltd. v. Canadian Pac. Ry., Ltd., 357 F.3d 1319,
1324 (Fed. Cir. 2004) (citations omitted). We have considered whether a declaratory
judgment in these circumstances requires review and analysis traditionally associated with
injunctive relief. Such an analysis, however, is not necessary, as “[d]eclaratory relief
preserves the scheme that Congress intended.” Chapman Law Firm Co. v. United States,
65 Fed. Cl. 422, 424 (2005) (holding that plaintiff need only establish that the override
determination is invalid; it need not meet the traditional four-part test for a preliminary
injunction to argue successfully that the override should be overturned). Because Congress
provided the automatic stay as the default, it is not necessary that additional criteria be met
to reinstate a stay that has been overridden by agency action. A ruling that the justification
provided for the override was “arbitrary and capricious,” as we have entered here, makes
it unnecessary to consider additional factors associated with injunctive relief.
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CONCLUSION
The agency has not provided an acceptable rationale for overriding the automatic
stay provided for by Congress. Given the standards established by Congress to permit
override of the stay, and by court interpretations of those standards, we must direct that the
agency’s override of the automatic stay invoked upon plaintiff’s protest to GAO be, and
hereby is OVERRULED, and the stay is REINSTATED according to the Rules of this
court.
The Clerk of Court will enter judgment in favor of plaintiff. This opinion will be
filed under seal. No costs.
IT IS SO ORDERED.
s/Robert H. Hodges, Jr.
Robert H. Hodges, Jr.
Senior Judge
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