Veteran Shredding, LLC v. United States ( 2020 )

In the United States Court of Federal Claims
No. 19-945C
Filed: December 18, 2019
Redacted Version Issued for Publication: January 14, 20201
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VETERAN SHREDDING, LLC, *
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Plaintiff, Pre-Award Bid Protest; Cross-
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Motions for Judgment on the
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v. Administrative Record; Standing;
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Rule of Two Doctrine; Service-
UNITED STATES, *
Disabled Veteran-Owned Small
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Defendant. Business.
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Joseph A. Whitcomb, Whitcomb, Selinsky, PC, Denver CO, for protestor.
Igor Helman, Trial Attorney, Commercial Litigation Branch, Civil Division, United
States Department of Justice, Washington, D.C., for defendant. With him were Douglas
K. Mickle, Assistant Director, Commercial Litigation Branch, Robert E. Kirschman, Jr.,
Director, Commercial Litigation Branch, and Joseph H. Hunt, Assistant Attorney General,
Civil Division. Of counsel was Natica Chapman Neely, Staff Attorney, Department of
Veterans Affairs, Office of General Counsel, District Contracting National Practice Group,
Jackson, MS.
OPINION
HORN, J.
Protestor, Veteran Shredding, LLC, is a Minnesota-based limited liability company
and a service-disabled veteran-owned small business (SDVOSB). Protestor filed the
above-captioned pre-award bid protest2 to challenge Solicitation No. 36C26319Q0276
(the ‘276 Solicitation) for document destruction services at the Minneapolis Veterans
Affairs Healthcare System (MVAHCS) issued as a 100% small business set-aside and
1This Opinion was issued under seal on December 18, 2019. The parties were asked to
propose redactions prior to public release of the Opinion. This Opinion is issued with
some of the redactions that the parties proposed in response to the court’s request. Words
which are redacted are reflected with the notation: “[redacted].”
2The court notes that protestor’s bid protest complaint refers to the above-captioned bid
protest as a pre-award bid protest. Protestor’s counsel reiterated that the above-
captioned bid protest was filed as a pre-award bid protest at oral argument.
not issued as an SDVOSB set-aside. Protestor alleges its “direct economic interest has
been affected by the failure to award the contract to an SVDOSB [sic]” under the ‘276
Solicitation. According to protestor, the ‘276 Solicitation’s designation as a 100% small
business set-aside instead of as a 100% SDVOSB set-aside was arbitrary, capricious, an
abuse of discretion, or otherwise not in accordance with the law. Protestor requests this
court to issue a declaratory judgment that the United States Department of Veterans
Affairs’ (VA) cancellation of the previous solicitation, Solicitation No. 36C26318Q0181
(the ‘181 Solicitation), for the services, which was issued as an SDVOSB, was “arbitrary,
capricious, an abuse of discretion or otherwise not in accordance with law and regulation,”
and order the ‘276 Solicitation to “be cancelled and resolicited as a 100% SVDOSB [sic]
set-aside.” Protestor also requests the court to order “the VA to pay VS [Veteran
Shredding, LLC] damages in the amount of its bid preparation and proposal costs.”
FINDINGS OF FACT
Prior to the issuance of the ‘276 Solicitation, the VA issued the ‘181 Solicitation on
February 12, 2018 for document destruction services at the Minneapolis VA Healthcare
System as a 100% SDVOSB set-aside. See Veteran Shredding, LLC v. United States,
140 Fed. Cl. 759, 761 (2018). The Independent Government Cost Estimate (IGCE) for
the ‘181 Solicitation was $[redacted] for the base and option years. See id. at 762-63. In
response to the ‘181 Solicitation, five SDVOSBs, including protestor, submitted offers.
See id. Chad L. Raterman, the contracting officer, requested revised quotes as all offers
received greatly exceeded the IGCE, ranging from [redacted]% greater than the IGCE for
the base and option years to protestor’s quote which exceeded the IGCE by [redacted]%.
After the offerors revised their quotes for the ‘181 Solicitation, all bids continued to exceed
the IGCE, ranging from [redacted]% to [redacted]% over the IGCE for the base and option
years.
[redacted] [redacted]
VENDOR NAME: [redacted] Veteran Shredding [redacted] IGCE
CLIN PRICING
0001 (BASE YEAR) $[redacted] $[redacted] $[redacted] $[redacted] $[redacted] $[redacted]
1001 (OY1) $[redacted] $[redacted] $[redacted] $[redacted] $[redacted] $[redacted]
2001 (OY2) $[redacted] $[redacted] $[redacted] $[redacted] $[redacted] $[redacted]
3001 (OY3) $[redacted] $[redacted] $[redacted] $[redacted] $[redacted] $[redacted]
4001 (OY4) $[redacted] $[redacted] $[redacted] $[redacted] $[redacted] $[redacted]
TOTAL $[redacted] $[redacted] $[redacted] $[redacted] $[redacted] $[redacted]
REVISED QUOTES
CLIN PRICING
0001 (BASE YEAR) $[redacted] $[redacted] $[redacted] $[redacted] $[redacted]
1001 (OY1) $[redacted] $[redacted] $[redacted] $[redacted] $[redacted]
2001 (OY2) $[redacted] $[redacted] $[redacted] $[redacted] $[redacted]
3001 (OY3) $[redacted] $[redacted] $[redacted] $[redacted] $[redacted]
4001 (OY4) $[redacted] $[redacted] $[redacted] $[redacted] $[redacted]
TOTAL $[redacted] $[redacted] $[redacted] $[redacted] $[redacted]
As reflected in the chart above, protestor’s revised offer was [redacted]% above the IGCE
for the base and option years. The Contracting Officer concluded that all the revised
quotes received were too high and subsequently cancelled the ‘181 Solicitation on March
1, 2018. See id. at 763-64. Protestor filed a pre-award bid protest challenging the
cancellation of the ‘181 Solicitation at the United States Government Accountability Office
(GAO) and then at the United States Court of Federal Claims. The GAO dismissed
protestor’s pre-award bid protest of the ‘181 Solicitation as untimely and the Court of
2
Federal Claims dismissed protestor’s bid protest of the ‘181 Solicitation for lack of
standing. See Veteran Shredding, LLC v. United States, 140 Fed. Cl. at 763-65.3
Following the cancellation of the ‘181 Solicitation, the Contracting Officer
conducted market research on March 6, 2018 to evaluate if veteran-owned small
businesses (VOSB) were available and capable to provide document destruction services
for the MVAHCS. The Contracting Officer stated:
[T]here are four (4) VOSB vendors listed in VIP [Vendor Information Pages]
utilizing NAICS [North American Industry Classification System] 561990
[representing the NAICS code for All Other Support Services] with keyword
“shredding.” In addition, GSA [General Services Administration] eLibrary
under [S]IN [Special Item Number] 51 507, Destruction Services, provided
only 1 VOSB listing. All vendors identified were contacted via phone calls
to determine their capability.
After contacting the five VOSBs, the Contracting Officer found:
1. [redacted] stated they would only be able to provide shredding services
if the VA would ship the material for them to destruct. It is therefore
determined they do not have the capability to provide the service
required.
2. [redacted] stated they do not have the capability to perform the service
in the required location.
3. [redacted] could not be reached with numerous attempts to contact.
4. [redacted] stated they would be interested in the requirement but would
have to subcontract as they are not located in the required location. They
stated they do not believe there is an SDVOSB or VOSB vendor in the
local area in which they could partner/subcontract with.
5. [redacted] stated they are not able to provide the services in the location
of the requirement therefore could not perform these services.
Consequently, the contracting specialist, Shane Galles, concluded in a June 26, 2018
memorandum:
[T]he VA Rule of Two cannot be met with respect to VOSB concerns. The
Contracting Officer does not have a reasonable expectation that two or
more capable and verified VOSB offerors will submit quotes and that award
can be made at a fair and reasonable price offering best value to the United
States.
Concurrent with the market research into VOSBs, the Contracting Officer searched for
small businesses that could potentially fulfill the document destruction services contract
for the MVAHCS. The Administrative Record includes a search of the GSA eLibrary
filtered to small businesses with a Special Item Number (SIN) code of 51 507 for
3The GAO dismissed protestor’s bid protest in an unpublished decision. In re: Veteran
Shredding, LLC, B-416144 (Comp. Gen. June 4, 2018).
3
Destruction Services resulting in 38 vendors identified. The Administrative Record also
includes the results of a search within the System for Award Management database
limited to the Minneapolis, Minnesota region for vendors matching North American
Industry Classification System (NAICS) code 561990 for All Other Support Services and
Product Service Code R614 for Paper Shredding Services that generated 17 results.
To supplement the March 6, 2018 market research, the Contracting Officer issued
a Sources Sought notice on June 6, 2018 asking for information from vendors interested
in the MVAHCS document destruction services contract to submit information related to
the vendor size and type, capabilities, and resources. In response to the Sources Sought
notice, four vendors submitted information: [redacted], an SDVOSB, protestor Veteran
Shredding, LLC, an SDVOSB, [redacted], a small business, and [redacted], a small
business. From the responses, the Contracting Specialist concluded in a June 26, 2018
memorandum that “it is evident there are sufficient small businesses available to support
competition for which the requirement should be solicited through GPE [government
point-of-entry] as a SB [small business] set-aside.”
In a January 7, 2019 memorandum, the Contracting Officer indicated that
“additional market research was conducted to determine if there were changes in the
market conditions since the time initial research was performed” following this court’s
dismissal of protestor’s pre-award bid protest for the cancellation of the ‘181 Solicitation
on November 26, 2018. See Veteran Shredding, LLC v. United States, 140 Fed. Cl. 759.
The memorandum also stated “[t]he IGCE was re-evaluated and updated as a result” on
January 7, 2019.4 The updated IGCE stated a base year estimate of $[redacted] and a
total estimate for the base and options years of $[redacted], representing an increase of
$[redacted] from the IGCE used for the ‘181 Solicitation. The IGCE indicated that past
contract pricing, the GSA Federal Supply Schedule Published Prices, and informal vendor
quotes were utilized in forming the IGCE.5
The IGCE contained a breakdown of the base year figure of $[redacted]:
$[redacted] per week per personal sized container for document destruction, $[redacted]
per week per 32-gallon container, and $[redacted] per week per 96-gallon container. The
IGCE stated that the MVAHCS possessed 622 containers of various sizes such that the
aggregate cost based on containers per week and $[redacted] stop charges would
amount to $[redacted] for the base year. The IGCE then assumed a [redacted]% increase
in price per option year.
4 The date listed on the IGCE is January 7, 2018. Defendant, however, notes in its motion
for judgment on the administrative record that this is a typographical error and that the
IGCE was prepared on January 7, 2019.
5 The Contracting Officer’s January 29, 2019 memorandum states that additional market
research was done following the dismissal of Veteran Shredding, LLC v. United States,
140 Fed. Cl. 759, on November 26, 2018. There is no other indication of market research
in the Administrative Record before the court between November 26, 2018 and January
7, 2019 beyond what is noted directly within the IGCE and the Contracting Officer’s
memoranda.
4
On January 8, 2019, Requisition 618-19-2-6133-0149 was submitted for the
incumbent MVAHCS document destruction services incumbent vendor, Shred-N-Go, for
an additional year of document destruction services for $[redacted].
In order to confirm “VOSB availability and to determine SB [small business]
availability,” the Contracting Officer published a Sources Sought notice on January 23,
2019 that requested the same information as the June 6, 2018 Sources Sought notice.
The Sources Sought elicited three responses that are included in the Administrative
Record:[redacted], a small business in the process of securing VOSB status, [redacted],
which had previously responded to the June 6, 2018 notice and had submitted a bid in
response to the ‘181 Solicitation, and [redacted], an SDVOSB. Protestor and the
incumbent vendor Shred-N-Go, Inc. (Shred-N-Go), also responded with interest.6
Consequently, in a January 29, 2019 memorandum, the Contracting Officer determined
“based on previous market research as well as the market research performed in January
2019, the VA Rule of Two could not be met by VOSB concerns. In conclusion, the
solicitation is set-aside for Small Business to assure sufficient competition.”
On January 31, 2019, the Contracting Officer wrote an addendum to the January
29, 2019 memorandum summarizing the rationale for moving forward with the MVAHCS
document destruction services solicitation as a small business set-aside following the
dismissals of protestor’s bid protests in regards to the ‘181 Solicitation:
It was determined all 5 quotes [received from SDVOSBs for the ‘181
Solicitation] exceeded available funding and all 5 quotes were determined
to not be fair and reasonable based on historical pricing data and the IGCE.
The solicitation was canceled which resulted in a protest to GAO and later
to the Court of Federal Claims. . . .
Upon the conclusion of the protest, a new Fiscal Year had begun.
Contracting requested a new Acquisition Plan and 2237 with FY19 funding
be provided. It was also recommended by legal counsel to conduct
additional market research in order to confirm market pricing and if there
have been any changes in the market.
Because almost one year has passed since the initial solicitation was
issued . . . market research was conducted to determine industry
changes. . . .
Market Research Report Addendum 1 [on January 29, 2019] referenced
additional market research that was conducted on 3/6/2018 and determined
there were insufficient VOSB vendors that could provide the service.
6 The Contracting Officer’s January 29, 2019 memorandum and January 31, 2019
addendum indicate protestor and Shred-N-Go expressed interest. No record of their
interest between the January 23, 2019 issuance of the Sources Sought notice and
January 29, 2019 response date, however, was included within the Administrative
Record. The Administrative Record does include correspondence between protestor and
the Contracting Officer following the issuance of the ‘276 Solicitation.
5
A source’s sought notice was published . . . on 1/23/2019 to confirm VOSB
availability and to determine SB availability. The sources sought produced
three (3) responses -- Two (2) responses from SDVOSBs, [redacted] and
Veteran Shredding both who had previously quoted in response to RFQ
36C26318Q0181 and one (1) response from a Small Business, [redacted],
who looks to be an extremely new start-up that may or may not have the
capability or capacity to perform the requirement. In addition, Shred-N-Go
Inc, the incumbent contractor and a small business, is still interested in the
requirement.
Based on the results of results of the sources sought and prior market
research, the solicitation will be set-aside as a small business set-aside.
The Contracting Officer issued the ‘276 Solicitation on March 1, 2019 for document
destruction services at the MVAHCS. The ‘276 Solicitation was designated as a 100%
small business set-aside and stated that the solicitation “INCORPORATES BY
REFERENCE FAR [Federal Acquisition Regulation] 52.212-1, 52.212-4. FAR 52.212-3
AND 52.212-5 ARE ATTACHED.” (capitalization in original). The factors to be evaluated
for an award to be made under the ‘276 Solicitation included price, vendor capabilities,
and safety policies. The ‘276 Solicitation stated:
Award will be made using the Lowest Price Technically Acceptable
(LPTA) process, where the non-price factors are evaluated on an
acceptable/unacceptable basis. Award will be made to the Offeror of the
technically acceptable quote with the lowest price.
This solicitation is for a commercial item acquisition using Simplified
Acquisition Procedures under the authority of FAR 13.5 Simplified
Procedures for Certain Commercial Items.
(emphasis in original). The ‘276 Solicitation included a breakdown of the document
destruction needs at the MVAHCS, totaling 622 consoles of documents which would need
to be picked up and destroyed as well as the number of service calls each console
required per year. On March 12, 2019, the Contracting Officer issued Amendment 0001
to the ‘276 Solicitation which contained the Contracting Officer’s answers to questions
received from interested vendors. In response to [redacted]’s question of “will federal
government approved pricing be considered fair and reasonable, e.g. GSA Schedule
approved pricing?” the Contracting Officer responded that “[p]rice will be evaluated in
accordance with FAR 13.106-3.”
The VA received four timely proposals in response to the ‘276 Solicitation.
[redacted], a small business, submitted a proposal for the base and option years of
$[redacted], incumbent small business vendor Shred-N-Go submitted a proposal for the
base and options years of $[redacted], [redacted] submitted a proposal for the base and
option years of $[redacted], and [redacted] submitted a proposal for the base and option
years of $[redacted]. Protestor did not submit a proposal for the ‘276 Solicitation.
6
[redacted [redacted]
VENDOR NAME: [redacted] [redacted VETERAN SHREDDING IGCE
SIZE STATUS SB SB VOSB SDVOSB SDVOSB
DUNS [redacted] [redacted] [redacted] [redacted]
CLIN PRICING
0001 (BASE YEAR) $[redacted] $[redacted] $[redacted] $[redacted] $[redacted]
1001 (OY1) $[redacted] $[redacted] $[redacted] $[redacted] $[redacted]
2001 (OY2) $[redacted] $[redacted] $[redacted] $[redacted] $[redacted]
3001 (OY3) $[redacted] $[redacted] $[redacted] $[redacted] $[redacted]
4001 (OY4) $[redacted] $[redacted] $[redacted] $[redacted] $[redacted]
TOTAL $[redacted] $[redacted] $[redacted] $[redacted] $0.00 $[redacted]
NO QUOTE SUBMITTED
BY PROTESTOR
During oral argument, the government indicated that the offers only received a price
review and that no technical evaluation of the offers had yet occurred as of September
25, 2019.
On March 17, 2019, protestor filed a pre-award bid protest with the GAO
challenging the ‘276 Solicitation’s designation as a 100% small business set-aside. In the
VA’s response to the bid protest, the Contracting Officer submitted a memorandum to the
GAO dated April 16, 2019 detailing the process and analysis leading to the 100% small
business set-aside decision. In the memorandum, the Contracting Officer offered
explanations of the decisions made in reference to the ‘276 Solicitation. In the April 16,
2019 memorandum, the Contracting Officer stated:
[B]ecause all offered pricing exceeded available funding for the base period
of the contract and none of the quotations received were fair and reasonable
because the quotes still significantly exceeded the IGCE. I determined that
RFQ 36C26318Q0181 should be cancelled and I would resolicit for the
requirement with a revised set-aside.
In addition to reiterating the information stated in the January 29, 2019 memorandum and
the January 31, 2019 addendum, the April 16, 2019 memorandum also offered additional
context for proceeding with the ‘276 Solicitation as a 100% small business set-aside. In
reference to the two SDVOSBs, [redacted] and protestor, who had responded to the June
6, 2018 Sources Sought notice, the Contracting Officer stated:
17. [redacted] and Veteran Shredding had previously submitted quotes in
response to [the ‘181 Solicitation]. Their quotes exceeded available funding
and significantly exceeded the IGCE. Based on these previous quotes
submitted by [redacted] and Veteran Shredding, I determined that I did not
have a reasonable expectation that [redacted] and Veteran Shredding
would submit fair and reasonable pricing that fell within the funding allocated
for the re-solicitation of the document destruction services requirement for
MVAHCS.
18. I reviewed the capability statements submitted by [redacted] and
[redacted], and I determined that both vendors were capable of providing
the services. In addition, the small business incumbent, [redacted], stated
that it was interested in the requirement and would be submitting a quote in
response to the solicitation.
7
19. Based on this information, I determined that at least two small business
concerns would submit offers in response to the solicitation.
Furthermore, in the April 16, 2019 memorandum, the Contracting Officer stated that the
contract could be awarded “to a small business concern at fair market prices” because
small business concerns currently hold the document destruction services
contracts for other facilities in NCO [Network Contracting Office] 23. These
contracts were all competitively awarded. Those facilities and contractors
are: Sioux Falls VAMC (Nexcut LLC), Iowa City VAHCS (Nexcut LLC),
Fargo VAHCS (Coast2Coast Shredding), St. Cloud VAHCS (Shred N Go)
and MVAHCS (Shred N Go). Lastly, [redacted], the current contractor for
MVAHCS, was successfully awarded two of the contracts by NCO 23.
(capitalization in original). In the April 16, 2019 memorandum, the Contracting Officer also
stated that even with an increased IGCE, “the five quotes previously received from
SDVOSBs [for the ‘181 Solicitation] still exceeded available funding for the base period
and still vastly exceeded the IGCE.” The Contracting Officer elaborated on why the ‘276
Solicitation was not an SDVOSB set-aside following the responses by [redacted] and
[redacted] to the January 23, 2019 Sources Sought notice:
[redacted] had previously submitted a quote in response to RFQ
36C26318Q0181. Its quote exceeded available funding and significantly
exceeded the IGCE. Based on this previous quote submitted by [redacted],
I determined that I did not have a reasonable expectation that [redacted]
would submit fair and reasonable pricing that fell within the funding allocated
for the resolicitation of the document destruction services requirement for
MVAHCS.
In the April 16, 2019 memorandum, the Contracting Officer also indicated that [redacted]
had submitted a quote in response to an October 2018 solicitation for document
destruction services at the St. Cloud VA Healthcare System that exceeded the base year
funding available by 246%. Furthermore, [redacted]’s quote exceeded a July 2017
solicitation for document destruction at the Black Hills VA Healthcare System’s base
funding available by 65%, and [redacted]’s quote exceeded the awardee of the Fargo VA
Healthcare System document destruction services solicitation by 150%. The Contracting
Officer indicated:
The document destruction services requirement for MVAHCS is larger in
size and scope than the requirements for St. Cloud VA HCS [Healthcare
System], VA Black Hills HCS and Fargo VA HCS. However, the actual
document destruction services are the same and the applicable VA policy
and procedures pertaining to document destruction services are the same.
In addition, the MVAHCS and St. Cloud VA HCS are very close in proximity.
The city centers of Minneapolis and St. Cloud are located approximately 65
miles apart, and the HCSs are located approximately 80 miles apart.
MVAHCS and St. Cloud VA HCS, due to this proximity, draw from the same
group of vendors in both marketplaces to meet their requirements.
8
As a result, the Contracting Officer stated:
Based on my personal knowledge of and experience with [redacted] and its
pricing practices, I did not have a reasonable expectation that [redacted]
would submit fair and reasonable pricing that fell within the funding
available.
The Contracting Officer did not consider [redacted] as an eligible VOSB at the time since
it was unclear whether it had the capability or capacity to perform the
requirement because it was a new start-up with no experience. [redacted]
was a small business concern when it submitted its response to the
[January 23, 2019] sources sought notice on January 25, 2019. It indicated
in its response that it had begun the process of applying for VIP VOSB
certification but had not yet received verification. I did not know that
[redacted] had become a verified VOSB until after I issued [the ‘276
Solicitation] when [redacted] submitted its quote.
The Contracting Officer reiterated in the April 16, 2019 memorandum concerning the ‘276
Solicitation that since he had received responses from small business concerns and the
incumbent Shred-N-Go, he decided that “at least two capable small business concerns
would submit offers in response to the solicitation” and he had the “expectation that award
could be made to a small business concern at a fair market price.” The Contracting Officer
noted that the June 26, 2018 memorandum, January 29, 2019 memorandum, and
January 31, 2019 addendum may contain some inaccuracies and stated the April 16,
2019 memorandum should be considered the full and accurate statement of the facts:
My Market Research Addendums and Memorandum for Record do include
a few factual inaccuracies. In part, this is due to typographical errors, and
in part due to me confusing in my documentation the market research
results of the MVAHCS requirement with that of the St. Cloud VAHCS. I was
conducting market research for both acquisitions at the same time and
inadvertently transposed information. The information contained in this CO
Statement of Facts accurately reflects my knowledge and my
determinations at the time they were made.
(capitalization in original).
The GAO denied protestor’s bid protest on the ‘276 Solicitation in an unpublished
decision on June 4, 2019. See In re: Veteran Shredding, LLC, B-417399 (Comp. Gen.
June 4, 2019). Protestor filed its bid protest on the ‘276 Solicitation in this court on June
28, 2019. Protestor’s complaint alleges the following two counts:
COUNT I: The officer’s evaluation of proposals and determination in the
parent solicitation 36C26318Q0181 that the SDVOSB’s prices were not fair
and reasonable were not consistent with the FAR [Federal Acquisition
Regulation] or the mandate under 38 U.S.C. § 8127(d), and therefore lacked
a rational basis; were arbitrary and capricious; and/or involved a violation of
regulation or procedure. . . .
9
COUNT II: The VA’s cancellation of the parent solicitation 36C26318Q0181,
and subsequent re-solicitation of the requirement under 36C26319Q0276
as a total small business set-aside, violates the FAR and the mandate under
38 U.S.C. § 8127(d), and therefore lacked a rational basis; was arbitrary
and capricious; and/or involved a violation of regulation or procedure
(capitalization in original). In the complaint, protestor states multiple requests for relief:7
WHEREFORE, VS [Veteran Shredding, LLC] respectfully requests that this
Court:
A. Issue a declaratory judgment that the VA’s actions making the
procurement analysis, decisions, and subsequent conclusions were
arbitrary, capricious, an abuse of discretion or otherwise not in
accordance with law and regulation;
B. Issue a declaratory judgement that PL 109-461, as codified in 38 U.S.C.
§ 8127(d), the FAR, and the Supreme Court’s decision in Kingdomware
[Techs. Inc. v. United States, 136 S. Ct. 1969 (2016)], limits the officer’s
analysis in determining that an SDVOSB’s offered price is or is not a “fair
and reasonable price that offers best value to the United States” to a
comparison of prices submitted by other SDVOSBs for the solicitation.
C. Issue a declaratory judgement that PL 109-461, as codified in 38 U.S.C.
§ 8127(d), the FAR, and the Supreme Court’s decision in Kingdomware,
prohibits the officer from canceling a 100% SVDOSB [sic] set-aside
solicitation after bid or proposal submissions by SVDOSBs [sic]. See 38
U.S.C. § 8127(d); Kingdomware Techs., Inc., 136 S. Ct. at 1977 (“. . . the
Department shall (or must) prefer veteran-owned small businesses
when the Rule of Two is satisfied.”)
D. Issue a declaratory judgment that the VA’s cancellation of the parent
solicitation 36C26318Q0181 was in violation of applicable procurement
laws and regulations;
E. Issue a declaratory judgment that the VA’s cancellation of the parent
solicitation 36C26318Q0181 was arbitrary, capricious, an abuse of
discretion or otherwise not in accordance with law and regulation;
F. Issue a declaratory judgment that the VA’s re-solicitation of the
requirement in solicitation 36C26318Q0181 as solicitation
7 Protestor’s counsel was also counsel for multiple VA document destruction services
cases filed in this court. Although not verbatim, the counts alleged and relief sought in the
complaint in the above-captioned bid protest are substantially similar to those filed by
protestor’s counsel in Land Shark Shredding, LLC v United States, 145 Fed. Cl. 530; Land
Shark Shredding, LLC v. United States, 142 Fed. Cl. 301 (2019); and Veteran Shredding,
LLC v. United States, 140 Fed. Cl. 759.
10
36C26319Q0276 under a 100% total small business set-aside was in
violation of applicable procurement laws and regulations;
G. Issue a declaratory judgment that the VA’s re-solicitation of the
requirement in solicitation 36C26318Q0181 as solicitation
36C26319Q0276 under a 100% total small business set-aside was
arbitrary, capricious, an abuse of discretion or otherwise not in
accordance with law and regulation;
H. Order that solicitation 36C26319Q0276 be cancelled and resolicited as
a 100% SVDOSB [sic] set-aside;
I. Order the VA to pay VS damages in the amount of its bid preparation
and proposal costs; and
J. Any other monetary and injunctive relief the Court determines is
appropriate.
(capitalization in original).
DISCUSSION
The parties submitted cross-motions for judgment on the Administrative Record.
Protestor argues that it has standing for its pre-award bid protest “as an SVDOSB [sic]
who originally bid upon the parent solicitation,[8] 36C26318Q0181, and, due to that
solicitation being canceled and rebid under 36C26319Q0276 as a 100% set-aside for
small business, [p]laintiff’s direct economic interest has been affected by the failure to
award the contract to an SVDOSB [sic] . . . .” Protestor cites to Weeks Marine, Inc. v.
United States in which the Federal Circuit held that a protestor in a pre-award bid protest
can have standing when they suffer a “non-trivial competitive injury which can be
redressed by judicial relief.” Weeks Marine, Inc. v. United States, 575 F.3d 1352, 1361
(quoting WinStar Comms., Inc. v. United States, 41 Fed. Cl. 748, 763 (1998)). Protestor
argues it has suffered such a non-trivial competitive injury when
[h]ere, VS [protestor] did not submit a bid for the [‘276] Solicitation, because
it believed that the set-aside should be one for SDVOSB concerns, VS knew
it failed to stand a chance in the procurement process against larger
economies of scale, because of the acquisition’s small business set
aside. . . . The VA’s decision to list the [‘276] Solicitation as a small business
set-aside prevented VS from competing for the contract.
Defendant, however, argues that protestor does not have standing as the standard
for the determination of a cognizable injury is a “substantial chance of winning the
contract” and protestor’s challenge to an agency’s evaluation of bids is necessarily post-
bid. Defendant argues that
because Veteran Shredding did not submit a quote for the ‘276 Solicitation
it would lack standing to challenge the agency’s evaluation of bids or cost
8In its filings, protestor sometimes denotes the ‘181 Solicitation the “parent solicitation”
of the ‘276 Solicitation.
11
estimates that the agency used as part of that evaluation. Given that any
challenge to the evaluation would be a “post-bid” protest, “Veteran
Shredding [would have to] demonstrate ‘a substantial chance of winning the
contract’ even though it is protesting pre-award.”
(internal citations omitted) (alteration in original). Defendant’s argument relies on
protestor’s lack of submission of an offer in response to the ‘276 Solicitation, which,
according to defendant, preclude protestor from having a substantial chance of winning
the ‘276 Solicitation contract. Defendant also argues protestor lacks standing for a lack
of ripeness.
[B]ecause the VA has not yet evaluated the quotes it received from offerors
[for the ‘276 Solicitation], a challenge to the agency’s determination of
whether the received quotes are reasonable is not yet ripe. . . . Here, there
is no allegation that the VA has already used the updated IGCE to evaluate
the quotes it received or that it analyzed the reasonableness of quotes
received in response to the ‘276 Solicitation. Thus, a challenge to the IGCE
or the agency’s price analysis is unripe.
(internal citations omitted).
It is well established that “‘subject-matter jurisdiction, because it involves a court’s
power to hear a case, can never be forfeited or waived.’” Arbaugh v. Y & H Corp., 546
U.S. 500, 514 (2006) (quoting United States v. Cotton, 535 U.S. 625, 630 (2002)).
“[F]ederal courts have an independent obligation to ensure that they do not exceed the
scope of their jurisdiction, and therefore they must raise and decide jurisdictional
questions that the parties either overlook or elect not to press.” Henderson ex rel.
Henderson v. Shinseki, 562 U.S. 428 (2011); see also Hertz Corp. v. Friend, 559 U.S. 77,
94 (2010) (“Courts have an independent obligation to determine whether subject-matter
jurisdiction exists, even when no party challenges it.” (citing Arbaugh v. Y & H Corp., 546
U.S. at 514)); Special Devices, Inc. v. OEA, Inc., 269 F.3d 1340, 1342 (Fed. Cir. 2001)
(“[A] court has a duty to inquire into its jurisdiction to hear and decide a case.” (citing
Johannsen v. Pay Less Drug Stores N.W., Inc., 918 F.2d 160, 161 (Fed. Cir. 1990)));
View Eng’g, Inc. v. Robotic Vision Sys., Inc., 115 F.3d 962, 963 (Fed. Cir. 1997) (“[C]ourts
must always look to their jurisdiction, whether the parties raise the issue or not.”). “The
objection that a federal court lacks subject-matter jurisdiction . . . may be raised by a party,
or by a court on its own initiative, at any stage in the litigation, even after trial and the
entry of judgment.” Arbaugh v. Y & H Corp., 546 U.S. at 506; see also Hymas v. United
States, 810 F.3d 1312, 1317 (Fed. Cir. 2016) (explaining that a federal court must satisfy
itself of its jurisdiction over the subject matter before it considers the merits of a case);
Cent. Pines Land Co., L.L.C. v. United States, 697 F.3d 1360, 1364 n.1 (Fed. Cir. 2012)
(“An objection to a court's subject matter jurisdiction can be raised by any party or the
court at any stage of litigation, including after trial and the entry of judgment.” (citing
Arbaugh v. Y & H Corp., 546 U.S. at 506)); Rick’s Mushroom Serv., Inc. v. United States,
521 F.3d 1338, 1346 (Fed. Cir. 2008) (“[A]ny party may challenge, or the court may raise
sua sponte, subject matter jurisdiction at any time.” (citing Arbaugh v. Y & H Corp., 546
U.S. at 506; Folden v. United States, 379 F.3d 1344, 1354 (Fed. Cir.), reh’g and reh’g en
banc denied (Fed. Cir. 2004), cert. denied, 545 U.S. 1127 (2005); and Fanning, Phillips
12
& Molnar v. West, 160 F.3d 717, 720 (Fed. Cir. 1998))); Pikulin v. United States, 97 Fed.
Cl. 71, 76, appeal dismissed, 425 F. App’x 902 (Fed. Cir. 2011). In fact, “[s]ubject matter
jurisdiction is an inquiry that this court must raise sua sponte, even where . . . neither
party has raised this issue.” Metabolite Labs., Inc. v. Lab. Corp. of Am. Holdings, 370
F.3d 1354, 1369 (Fed. Cir.) (citing Textile Prods., Inc. v. Mead Corp., 134 F.3d 1481,
1485 (Fed. Cir.), reh’g denied and en banc suggestion declined (Fed. Cir.), cert. denied,
525 U.S. 826 (1998)), reh’g and reh’g en banc denied (Fed. Cir. 2004), cert. granted in
part sub. nom Lab. Corp. of Am. Holdings v. Metabolite Labs., Inc., 546 U.S. 975 (2005),
cert. dismissed as improvidently granted, 548 U.S. 124 (2006).
This court has jurisdiction to hear bid protests pursuant to 28 U.S.C. § 1491(b)(1)
(2012) of the Tucker Act, which provides that this court has
jurisdiction to render 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 or any alleged
violation of statute or regulation in connection with a procurement or a
proposed procurement.
28 U.S.C. § 1491(b)(1); see also Weeks Marine, Inc. v. United States, 575 F.3d 1352,
1359 (Fed. Cir. 2009). The Administrative Dispute Resolution Act of 1996, codified at 28
U.S.C. § 1491(b)(1)–(4), amended the Tucker Act to establish a statutory basis for bid
protests in the United States Court of Federal Claims. See Impresa Construzioni Geom.
Domenico Garufi v. United States, 238 F.3d 1324, 1330–32 (Fed. Cir. 2001).
In order to have standing to sue as an “interested party” under this provision, a
disappointed bidder must show that it suffered competitive injury or was “prejudiced” by
the alleged error in the procurement process. See Todd Constr., L.P. v. United States,
656 F.3d 1306, 1315 (Fed. Cir. 2011) (To prevail, a bid protester must first “‘show that it
was prejudiced by a significant error’ (i.e., ‘that but for the error, it would have had a
substantial chance of securing the contract).’” (quoting Labatt Food Serv., Inc. v. United
States, 577 F.3d 1375, 1378, 1380 (Fed. Cir. 2009)); Blue & Gold Fleet, L.P. v. United
States, 492 F.3d at 1317; see also Sci. Applications Int’l Corp. v. United States, 108 Fed.
Cl. 235, 281 (2012); Linc Gov’t Servs., LLC v. United States, 96 Fed. Cl. 672, 693 (2010)
(“In order to establish standing to sue, the plaintiff in a bid protest has always needed to
demonstrate that it suffered competitive injury, or ‘prejudice,’ as a result of the allegedly
unlawful agency decisions.” (citing Rex Serv. Corp. v. United States, 448 F.3d at 1308;
Statistica, Inc. v. Christopher, 102 F.3d 1577, 1580–81 (Fed. Cir. 1996); Vulcan Eng’g
Co. v. United States, 16 Cl. Ct. 84, 88 (1988); Morgan Bus. Assocs., Inc. v. United States,
223 Ct. Cl. 325, 332 (1980))). In order to establish what one Judge on this court has called
“allegational prejudice” for the purposes of standing, the bidder must show that there was
a “substantial chance” it would have received the contract award, but for the alleged
procurement error. See Linc Gov’t Servs., LLC v. United States, 96 Fed. Cl. at 675;
Hyperion, Inc. v. United States, 115 Fed. Cl. 541, 550 (2014) (“The government
acknowledges that proving prejudice for purposes of standing merely requires
“allegational prejudice,” as contrasted to prejudice on the merits . . . .”); Bannum, Inc. v.
United States, 115 Fed. Cl. 148, 153 (2014); see also Bannum, Inc. v. United States, 404
13
F.3d 1346, 1358 (Fed. Cir. 2005); Galen Med. Assocs., Inc. v. United States, 369 F.3d
1324, 1331 (Fed. Cir.), reh’g denied (Fed. Cir. 2004); Info. Tech. & Applications Corp. v.
United States, 316 F.3d 1312, 1319 (Fed. Cir.), reh’g and reh’g en banc denied (Fed. Cir.
2003); Statistica, Inc. v. Christopher, 102 F.3d at 1581; Archura LLC v. United States,
112 Fed. Cl. 487, 497 (2013); Lab. Corp. of Am. v. United States, 108 Fed. Cl. 549, 557
(2012). Because standing is a jurisdictional issue, this showing of prejudice is a threshold
issue. See Corus Grp. PLC. v. Int’l Trade Comm'n, 352 F.3d 1351, 1357 (Fed. Cir. 2003);
Myers Investigative & Sec. Servs., Inc. v. United States, 275 F.3d 1366, 1370 (Fed. Cir.
2002).
In the context of a pre-award bid protest,9 the United States Court of Appeals for
the Federal Circuit has determined that to show the requisite “direct economic interest,”
and, therefore, to be an “interested party” under the Tucker Act, the protestor has to have
suffered a “‘non-trivial competitive injury which can be redressed by judicial relief.’” See
Orion Tech., Inc. v. United States, 704 F.3d 1344, 1348 (Fed. Cir. 2013) (quoting Weeks
Marine, Inc. v. United States, 575 F.3d at 1362–63); see also CGI Fed. Inc. v. United
States, 779 F.3d 1346, 1348 (Fed. Cir. 2018); COMINT Sys. Corp. v. United States, 700
F.3d at 1383 n.7 (“[I]n Weeks Marine this court specifically held that the ‘non-trivial
competitive injury’ standard was applicable to ‘a pre-award protest.’” (quoting Weeks
Marine, Inc. v. United States, 575 F.3d at 1362)) (emphasis in original); MVS USA, Inc.
v. United States, 111 Fed. Cl. 639, 647 (2013); Miles Constr., LLC v. United States, 108
Fed. Cl. at 797. This is a lower standard than the “substantial chance” standard used in
post-award bid protests, but still requires a “showing of some prejudice.” Orion Tech., Inc.
v. United States, 704 F.3d at 1348-49 (quoting Weeks Marine, Inc. v. United States, 575
F.3d at 1362) (emphasis in original).
As explained by the United States Court of Federal Claims in Digitalis Education
Solutions, Inc. v. United States:
Only an “interested party” has standing to challenge a contract award. Rex
Serv. Corp. v. United States, 448 F.3d 1305, 1307 (Fed. Cir. 2006). An
interested party is an actual or prospective bidder whose direct economic
interest would be affected by the award of the contract. Id. Thus, a party
must show that it is 1) an actual or prospective bidder and 2) that it has a
direct economic interest. “[I]n order to be eligible to protest, one who has
not actually submitted an offer must be expecting to submit an offer prior to
the closing date of the solicitation.” MCI Telecomms. Corp. v. United States,
878 F.2d 362, 365 (Fed. Cir. 1989). To prove a direct economic interest, a
party must show that it had a “substantial chance” of winning the contract.
Rex Serv., 448 F.3d at 1308.
Digitalis Educ. Solutions, Inc. v. United States, 664 F.3d 1380, 1384 (Fed. Cir. 2012); see
also Am. Fed’n of Gov't Emps. v. United States, 258 F.3d 1294, 1302 (Fed. Cir. 2001),
cert. denied, 534 U.S. 113 (2002); Centech Grp., Inc. v. United States, 78 Fed. Cl. 496,
503-504 (2007).
9As noted above, protestor’s bid protest complaint specifically refers its protest as a pre-
award bid protest.
14
As indicated above, for protestor to have standing in this pre-award protest, plaintiff
must “show that it is (1) an actual or prospective bidder, and (2) that it has a direct
economic interest.” CGI Fed. Inc. v. United States, 779 F.3d at 1348 (citing Digitalis Educ.
Solutions, Inc. v. United States, 664 F.3d at 1384). Amendment 001 to the ‘276
Solicitation set a bid deadline of March 18, 2019. Protestor did not submit a bid in
response to the ‘276 Solicitation. Protestor argues the ‘276 Solicitation’s status issued as
a 100% small business set-aside made it impossible for protestor to have a chance of
success to receive an award. Protestor filed its bid protest challenging the terms of the
‘276 Solicitation at the GAO on March 17, 2019, the day before the bidding deadline to
submit responses to the ‘276 Solicitation. The GAO subsequently dismissed protestor’s
bid protest on June 4, 2019. Protestor then filed a bid protest in this court on June 28,
2019.
Defendant argues that protestor does not have a substantial chance of winning the
contract as protestor did not submit a bid and therefore cannot be a prospective bidder to
have standing. Defendant cites Orion Technology, Inc. v. United States, 704 F.3d 1344
(Fed. Cir. 2013), Veteran Shredding, LLC v. United States, 140 Fed. Cl. 759, and Omran
Holding Group v. United States, 128 Fed. Cl. 273 (2016) in which the substantial chance
test was utilized in pre-award bid protests. These cases also are distinguishable from the
above-captioned bid protest. Regarding Orion Technology, the court notes there are
numerous differences between the protestor in Orion and protestor. As noted by the
Federal Circuit in Orion:
Orion is not challenging the terms of the solicitation, as was the case in
Weeks Marine; it is challenging the Army's application of those solicitation
criteria to Orion. The Army evaluated Orion's bid for compliance with the
terms of the solicitation and then gave detailed reasons for rejecting Orion’s
proposal. In addition, Orion's bid was within the competitive range later
established by the Army after Orion's exclusion but before the Army's initial
response to Orion's first GAO protest. Given the circumstances, there is an
adequate factual predicate to ascertain under the traditional “substantial
chance” standard whether Orion was prejudiced by the Army's decision to
exclude its initial proposal.
Orion Tech., Inc. v. United States, 704 F.3d at 1349. In addition, in Orion Technology, the
Federal Circuit protestor was “not challenging the terms of the solicitation . . . it is
challenging the Army’s application of those solicitation criteria to Orion.” Id. The VA did
not evaluate a proposal from protestor because one was not submitted. Therefore, unlike
in Orion, the VA could not protestor’s bid for compliance with the terms of the solicitation
or give detailed reasons for rejecting the proposal.
In Veteran Shredding and Omran Holding Group, the protestors had all submitted
bids and were actual offerors who were found not to have a substantial chance of
succeeding as their bids were too high and ranked too low, respectively. See Veteran
Shredding, LLC v. United States, 140 Fed. Cl. at 764-65; Omran Holding Grp. v. United
States, 128 Fed. Cl. at 284-85. In Veteran Shredding, the Judge of the United States
Court of Federal Claims determined:
15
The VA received five offers for its lowest priced technically acceptable
solicitation, three of which were technically-acceptable. Veteran Shredding
was among the group which had technically acceptable proposals, but its
price was the highest of that trio. And, the claims of error it makes in this
protest focus primarily on VA's price reasonableness determination, which
allegation of error would affect each of the three technically acceptable
proposals equally. Had the VA found Veteran Shredding's offer fair and
reasonable, it would have also found the two lower bids fair and reasonable.
See, e.g., Universal Marine[ Co. K.S.C. v. United States], 120 Fed. Cl. [240,]
248-49 [2015] (finding no standing when the protest of the fourth highest
bidder did not challenge the eligibility of two lower-priced offers). In sum,
because Veteran Shredding offered the third highest technically acceptable
bid, the court concludes that Veteran Shredding lacked a substantial chance
at award. Therefore, Veteran Shredding cannot show a direct economic
interest in the protest, and thus cannot be an interested party.
Veteran Shredding, LLC v. United States, 140 Fed. Cl. at 765. In Omran Holding Group,
the Judge of the United States Court of Federal Claims first noted, “[i]t is uncontested that
Omran was an actual offeror,” Omran Holding Grp. v. United States, 128 Fed. Cl. at 284,
the Judge then determined:
Assuming the agency had evaluated Omran’s proposal, the best possible
outcome would have been that it rated Omran acceptable on all three
technical factors. If it found Omran to be technically acceptable, the agency
would then have ranked Omran’s proposal on its proposed price, along with
the other technically acceptable responsive proposals. As none of Omran’s
allegations pertain either to the awardee's proposal, the solicitation, or the
source selection process as a whole, Omran’s success on any of its claims
would not disturb the evaluations or ranking of the twenty-two responsive,
technically-acceptable offerors. Thus, in a ranking on price, Omran would
have ranked nineteenth out of twenty-three offerors.
Id. at 285 (internal citation omitted).
Unlike Orion Technology, Veteran Shredding, and Omran Holding Group, in the
above-captioned bid protest, protestor did not submit a bid as it asserts it believed that if
it submitted a bid it would not have had any chance of success competing in a 100%
small business set-aside.
The current protest also differs from a recent decision by the undersigned in Land
Shark Shredding, LLC v. United States, 145 Fed. Cl. 530 (2019). The Land Shark
Shredding protestor, represented by the same counsel as in the above-captioned bid
protest now brought by Veterans Shredding LLC, lodged a pre-award bid protest in the
United States Court of Federal Claims, and because the Land Shark Shredding protestor
had submitted a bid that was 163.59% above the available government funding, the
undersigned concluded that the Land Shark Shredding protestor did not possess standing
as it did not have a substantial chance of being awarded the contract having submitted a
16
quote which was substantially over the available funding.10 The above-captioned bid
protest is distinguishable from Land Shark Shredding. Unlike in Land Shark Shredding,
the protestor in the above-captioned bid protest did not submit a bid in response to the
‘276 Solicitation, but is attempting to protest the type of set-aside in the solicitation. The
protestor is challenging the terms of the ‘276 Solicitation being a 100% small business
set-aside whereas the Land Shark Shredding protestor challenged the price analysis and
evaluation of proposals.11
The above-captioned bid protest is most analogous to the case of CGI Fed. Inc. v.
United States, 779 F.3d 1346 (Fed. Cir. 2015) in which a non-trivial competitive injury, in
conjunction with a showing that the CGI protestor was a prospective bidder sufficed to
establish standing. See id. at 1349-51. In CGI, the United States Department of Health
and Human Service’s Centers for Medicare and Medicaid Services issued requests for
quotes in order to issue contracts that would use the awardees to determine if Medicare
claims had been correctly paid. See id. at 1347. The Federal Circuit indicated if the
contractor identified an overpayment, the agency would send a demand letter to the
provider and repayment, and then pay the contractor a contingency fee. See id. In CGI,
CGI protested the payment terms of the requests for quotes, contending that the terms
violated certain statutory and regulatory provisions. See id. As noted by the Federal
Circuit:
Five different contractors bid on the 2014 RFQs, but CGI did not. Instead,
before bidding closed, CGI filed a timely pre-award protest at the
Government Accountability Office (“GAO”) challenging the revised payment
terms. While the GAO protest was pending, the bidding period closed. The
GAO subsequently denied the protest. Three business days later, CGI filed
a protest in the United States Court of Federal Claims.
Id. at 1348. The Federal Circuit recognized that “CGI never submitted a bid in response
to the 2014 RFQs and thus is not an actual bidder. CGI must therefore show that it was
a prospective bidder at the time it filed its protest in the Court of Federal Claims. We hold
that it has made such a showing.” Id. The Court of Federal Claims judge found that even
absent a bid, the CGI protestor was a prospective bidder because “CGI was a qualified
bidder, expected to bid, would have bid but for the unacceptable payment term and timely
challenged this term prior to the close of bidding.” CGI Fed. Inc. v. United States, 118
Fed. Cl. 337, 351 (2014), rev’d, 779 F.3d 1346 (Fed. Cir. 2015) (reversed and remanded
10 The court notes that Veteran Shredding, LLC submitted a bid in response to the ‘181
Solicitation and revised the price downwards upon the request of the Contracting Officer.
It is possible, therefore, that Veteran Shredding, LLC, theoretically, could have proposed
an even lower bid for the ‘276 Solicitation, however, the court will not speculate on
whether protestor would have submitted a competitive price quote in response to the ‘276
Solicitation.
11The court, however, notes that both the above captioned protest and Land Shark
Shredding, LLC v. United States, 145 Fed. Cl. 530 did raise concerns over the Rule of
Two analysis, or lack thereof, by the VA.
17
on the merits). In considering whether or not CGI was a prospective bidder, the Federal
Circuit explained:
CGI was a prospective bidder when it promptly initiated and diligently
pressed its protest in the GAO forum, which Congress has encouraged
protestors to use before suing in court. Unsuccessful in the GAO, it
immediately filed for relief in court. We do not think that Congress meant for
a protestor in CGI’s position to lose its entitlement to sue just because
delays engendered by the GAO adjudicatory process pushed completion
past the closing date for bid submissions. Concluding, as we do, that CGI
filed a protest prior to the close of bidding and thereby established its
prospective bidder status, and that CGI thereafter diligently pursued its
rights, CGI has prospective bidder status to pursue its Court of Federal
Claims protest.
CGI Fed. Inc. v. United States, 779 F.3d at 1351.12
The CGI protestor did not need to prove a substantial chance of winning the
contract to show a direct economic interest. Therefore, the Federal Circuit in CGI stated,
a protestor can fulfill the requirement if it shows that it “suffered ‘a non-trivial competitive
injury which can be redressed by judicial relief.’” CGI Fed. Inc. v. United States, 779 F.3d
at 1351 (quoting Weeks Marine, Inc. v. United States, 575 F.3d at 1361-62). As the
Federal Circuit explained in Weeks Marine:
We have not had occasion to discuss what is required to prove an economic
interest, and thus prejudice, in a case such as this, where a prospective
bidder/offeror is challenging a solicitation in the pre-award context. In such
a case, it is difficult for a prospective bidder/offeror to make the showing of
prejudice that we have required in post-award bid protest cases. The reason
of course is that, in a case such as this, there have been neither bids/offers,
nor a contract award. Hence, there is no factual foundation for a “but for”
prejudice analysis. . . . Upon consideration of the matter, we conclude that
the standard applied by the Court of Federal Claims [a non-trivial
competitive injury which can be redressed by judicial relief] in this case
strikes the appropriate balance between the language of § 1491(b)(1),
which contemplates “an action by an interested party objecting to a
solicitation for bids or proposals . . . or any alleged violation of statute or
regulation in connection with . . . a proposed procurement,” and Article III
standing requirements. We therefore consider whether Weeks has
12 The Federal Circuit in CGI reversed the trial court’s determination that the that the
modified payment terms did not violate any statutory or regulatory provisions, concluding
“[b]ecause FAR Part 12 applies to the 2014 RFQs and the revised payment terms violate
FAR Part 12's prohibition against including contract terms inconsistent with customary
commercial practice, we reverse the Court of Federal Claims grant of judgment on the
administrative record to the government.” CGI Fed. Inc. v. United States, 779 F.3d at
1354 (emphasis in original).
18
demonstrated a “non-trivial competitive injury which can be addressed by
judicial relief.” We conclude that it has.
Weeks Marine, Inc. v. United States, 575 F.3d at 1361-62 (quoting 28 U.S.C.
§ 1491(b)(1)) (internal citations omitted). In CGI Federal Inc., the Federal Circuit found
that, in the pre-award bid protest context, the CGI protestor showed a non-trivial
competitive injury when it was a qualified bidder who would have performed successfully
but alleges “that the payment terms in the 2014 RFQs [we]re illegal and that they caused
CGI to protest instead of bid.” CGI Fed. Inc. v. United States, 779 F.3d at 1351.
Protestor’s position in the above-captioned bid protest not unlike to the CGI
protestor as Veteran Shredding, LLP did not submit a proposal in response to a
solicitation. Protestor also filed a GAO protest prior to the close of bidding on the ‘276
Solicitation and filed a bid protest in this court 24 days after the GAO’s dismissal of
protestor’s bid protest.13 Protestor in the above-captioned protest is also similarly situated
to the CGI protestor which “filed pre-award bid protests at the GAO, claiming that, contrary
to FAR Part 12, the payment terms were inconsistent with customary commercial
practice, unduly restrictive of competition, and violated the recovery audit program’s
enabling statute as well as prompt payment requirements.” CGI Fed. Inc. v. United States,
118 Fed. Cl. at 346, rev’d, 779 F.3d 1346 (Fed. Cir. 2015). Protestor in the above-
captioned bid protest is likewise seeking to challenge the validity and terms of the ‘276
Solicitation, which protestor argues effectively precluded it from submitting an offer, and
not an evaluation of offers received, when arguing the ‘276 Solicitation violated the Rule
of Two. In the above-captioned bid protest, protestor alleges an injury of being unable to
compete for the ‘276 Solicitation because it argues that the ‘276 Solicitation was
improperly designated as a small business set-aside. As a result, since the protestor here
is seeking a change in the ‘276 Solicitation’s set-aside terms, protestor has shown that it
had a “‘definite economic stake in the solicitation being carried out in accordance with
applicable laws and regulations’” to possess a direct economic interest. Id. (quoting
Weeks Marine, Inc. v. United States, 575 F.3d at 1362). Although it is close decision, the
court determines that protestor has standing in the above caption protest, and, therefore,
considers the parties’ cross-motions for judgment on the Administrative Record on the
merits.
Rule 52.1(c)(1) (2019) of the Rules of the United States Court of Federal Claims
(RCFC) governs motions for judgment on the administrative record. The court’s inquiry is
directed to “‘whether, given all the disputed and undisputed facts, a party has met its
burden of proof based on the evidence in the record.’” Mgmt. & Training Corp. v. United
States, 115 Fed. Cl. 26, 40 (2014) (quoting A & D Fire Prot., Inc. v. United States, 72 Fed.
Cl. 126, 131 (2006) (citing Bannum, Inc. v. United States, 404 F.3d 1346, 1356-57 (Fed.
Cir. 2005))); see also Centerra Grp., LLC v. United States, 138 Fed. Cl. 407, 412 (2018)
(citing Bannum, Inc. v. United States, 404 F.3d at 1356-57); Informatics Applications Grp.,
Inc. v. United States, 132 Fed. Cl. 519, 524 (2017) (citation omitted); Strategic Bus. Sols.,
13The undersigned in Palantir previously stated that, “[i]n the case of Palantir USG, and
applying the specific facts and circumstances of Palantir USG's situation, the court
concludes that the 43 days delay does not deprive Palantir USG of its status as a
perspective bidder.” Palantir Techs. Inc. v. United States, 128 Fed. Cl. 21, 34 (2016).
19
Inc. v. United States, 129 Fed. Cl. 621, 627 (2016), aff’d, 711 F. App’x 651 (Fed. Cir.
2018); Rotech Healthcare Inc. v. United States, 118 Fed. Cl. 408, 413 (2014); Eco Tour
Adventures, Inc. v. United States, 114 Fed. Cl. 6, 21 (2013); DMS All-Star Joint Venture
v. United States, 90 Fed. Cl. 653, 661 (2010). Pursuant to RCFC 52.1, in a bid protest,
the court reviews the agency’s procurement decision to determine whether it is supported
by the administrative record. See CW Gov’t Travel, Inc. v. United States, 110 Fed. Cl.
462, 481 (2013); see also CR/ZWS LLC v. United States, 138 Fed. Cl. 212, 223 (2018)
(citing Bannum, Inc. v. United States, 404 F.3d at 1353-54).
The Administrative Dispute Resolution Act of 1996 (ADRA), Pub. L. No. 104-320,
§§ 12(a), 12(b), 110 Stat. 3870, 3874 (1996) (codified at 28 U.S.C. § 1491(b)(1)–(4)),
amended the Tucker Act to establish a statutory basis for bid protests in the United States
Court of Federal Claims. See Impresa Construzioni Geom. Domenico Garufi v. United
States, 238 F.3d 1324, 1330-32 (Fed. Cir. 2001); see also Sys. Application & Techs., Inc.
v. United States, 691 F.3d 1374, 1380 (Fed. Cir. 2012) (explaining that the Tucker Act
expressly waives sovereign immunity for claims against the United States in bid protests).
The statute provides that protests of agency procurement decisions are to be reviewed
under APA standards, making applicable the standards outlined in Scanwell Labs., Inc.
v. Shaffer, 424 F.2d 859 (D.C. Cir. 1970), and the line of cases following that decision.
See, e.g., Per Aarsleff A/S v. United States, 829 F.3d 1303, 1309 (Fed. Cir. 2016)
(“Protests of agency procurement decisions are reviewed under the standards set forth
in the Administrative Procedure Act (‘APA’), see 28 U.S.C. § 1491(b)(4) (citing 5 U.S.C.
§ 706), ‘by which an agency’s decision is to be set aside only if it is arbitrary, capricious,
an abuse of discretion, or otherwise not in accordance with law[.]’” (quoting NVT Techs.,
Inc. v. United States, 370 F.3d 1153, 1159 (Fed. Cir. 2004)) (citing PAI Corp. v. United
States, 614 F.3d 1347, 1351 (Fed. Cir. 2010))); Impresa Construzioni Geom. Domenico
Garufi v. United States, 238 F.3d at 1332; Res. Conservation Grp., LLC v. United States,
597 F.3d 1238, 1242 (Fed. Cir. 2010) (“Following passage of the APA in 1946, the District
of Columbia Circuit in Scanwell Labs., Inc. v. Shaffer, 424 F.2d 859 (D.C. Cir. 1970), held
that challenges to awards of government contracts were reviewable in federal district
courts pursuant to the judicial review provisions of the APA.”); Galen Med. Assocs., Inc.
v. United States, 369 F.3d 1324, 1329 (Fed. Cir.) (citing Scanwell Labs., Inc. v. Shaffer,
424 F.2d at 864, 868, for its “reasoning that suits challenging the award process are in
the public interest and disappointed bidders are the parties with an incentive to enforce
the law”), reh’g denied (Fed. Cir. 2004); Banknote Corp. of Am., Inc. v. United States, 365
F.3d 1345, 1351 (Fed. Cir. 2004) (“Under the APA standard as applied in the Scanwell
line of cases, and now in ADRA cases, ‘a bid award may be set aside if either (1) the
procurement official’s decision lacked a rational basis; or (2) the procurement procedure
involved a violation of regulation or procedure.’” (quoting Impresa Construzioni Geom.
Domenico Garufi v. United States, 238 F.3d at 1332)); Info. Tech. & Applications Corp. v.
United States, 316 F.3d at 1319.
When discussing the appropriate standard of review for bid protest cases, the
United States Court of Appeals for the Federal Circuit addressed subsections (2)(A) and
(2)(D) of 5 U.S.C. § 706, see Impresa Construzioni Geom. Domenico Garufi v. United
States, 238 F.3d at 1332 n.5, but focused its attention primarily on subsection (2)(A). See
Croman Corp. v. United States, 724 F.3d 1357, 1363 (Fed. Cir.) (“‘[T]he proper standard
20
to be applied [to the merits of] bid protest cases is provided by 5 U.S.C. § 706(2)(A)
[(2006)]: a reviewing court shall set aside the agency action if it is “arbitrary, capricious,
an abuse of discretion, or otherwise not in accordance with law.”’” (alterations in original)
(quoting Banknote Corp. of Am. v. United States, 365 F.3d at 1350-51 (citing Advanced
Data Concepts, Inc. v. United States, 216 F.3d 1054, 1057-58 (Fed. Cir.), reh’g denied
(Fed. Cir. 2000)))), reh’g and reh’g en banc denied (Fed. Cir. 2013). The statute says that
agency procurement actions should be set aside when they are “arbitrary, capricious, an
abuse of discretion, or otherwise not in accordance with law,” or “without observance of
procedure required by law.” 5 U.S.C. § 706(2)(A), (D) (2018);14 see also Veterans
Contracting Grp., Inc. v. United States, 920 F.3d 801, 806 (Fed. Cir. 2019) (“In a bid
protest, we follow Administrative Procedure Act § 706 and set aside agency action ‘if it is
arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.’”
(quoting Palladian Partners, Inc. v. United States, 783 F.3d 1243, 1252 (Fed. Cir. 2015));
Tinton Falls Lodging Realty, LLC v. United States, 800 F.3d 1353, 1358 (Fed. Cir. 2015);
Orion Tech., Inc. v. United States, 704 F.3d 1344, 1347 (Fed. Cir. 2013); COMINT Sys.
Corp. v. United States, 700 F.3d 1377, 1381 (Fed. Cir. 2012) (“We evaluate agency
actions according to the standards set forth in the Administrative Procedure Act; namely,
14 The language of 5 U.S.C. § 706 provides in full:
To the extent necessary to decision and when presented, the reviewing
court shall decide all relevant questions of law, interpret constitutional and
statutory provisions, and determine the meaning or applicability of the terms
of an agency action. The reviewing court shall—
(1) compel agency action unlawfully withheld or unreasonably delayed;
and
(2) hold unlawful and set aside agency action, findings, and conclusions
found to be—
(A) arbitrary, capricious, an abuse of discretion, or otherwise not in
accordance with law;
(B) contrary to constitutional right, power, privilege, or immunity;
(C) in excess of statutory jurisdiction, authority, or limitations, or short
of statutory right;
(D) without observance of procedure required by law;
(E) unsupported by substantial evidence in a case subject to sections
556 and 557 of this title or otherwise reviewed on the record of
an agency hearing provided by statute; or
(F) unwarranted by the facts to the extent that the facts are subject
to trial de novo by the reviewing court.
In making the foregoing determinations, the court shall review the whole
record or those parts of it cited by a party, and due account shall be taken
of the rule of prejudicial error.
5 U.S.C. § 706.
21
for whether they are ‘arbitrary, capricious, an abuse of discretion, or otherwise not in
accordance with law.’” (quoting 5 U.S.C. § 706(2)(A); and Bannum, Inc. v. United States,
404 F.3d at 1351)); Savantage Fin. Servs. Inc., v. United States, 595 F.3d 1282, 1285-86
(Fed. Cir. 2010); Weeks Marine, Inc. v. United States, 575 F.3d 1352, 1358 (Fed. Cir.
2009); Axiom Res. Mgmt., Inc. v. United States, 564 F.3d at 1381 (noting arbitrary and
capricious standard set forth in 5 U.S.C. § 706(2)(A), and reaffirming the analysis of
Impresa Construzioni Geom. Domenico Garufi v. United States, 238 F.3d at 1332); Blue
& Gold Fleet, L.P. v. United States, 492 F.3d 1308, 1312 (Fed. Cir. 2007) (“‘[T]he inquiry
is whether the [government]’s procurement decision was “arbitrary, capricious, an abuse
of discretion, or otherwise not in accordance with law.”’” (quoting Bannum, Inc. v. United
States, 404 F.3d at 1351 (quoting 5 U.S.C. § 706(2)(A) (2000)))); NVT Techs., Inc. v.
United States, 370 F.3d at 1159 (“Bid protest actions are subject to the standard of review
established under section 706 of title 5 of the Administrative Procedure Act (‘APA’), 28
U.S.C. § 1491(b)(4) (2000), by which an agency’s decision is to be set aside only
if it is ‘arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with
law,’ 5 U.S.C. § 706(2)(A) (2000).” (internal citations omitted)); Info. Tech. & Applications
Corp. v. United States, 316 F.3d at 1319 (“Consequently, our inquiry is whether the Air
Force’s procurement decision was ‘arbitrary, capricious, an abuse of discretion, or
otherwise not in accordance with law.’ 5 U.S.C. § 706(2)(A) (2000).”); Synergy Sols., Inc.
v. United States, 133 Fed. Cl. 716, 734 (2017) (citing Banknote Corp. of Am. v. United
States, 365 F.3d at 1350); Eco Tour Adventures, Inc. v. United States, 114 Fed. Cl. at 22;
Contracting, Consulting, Eng’g LLC v. United States, 104 Fed. Cl. 334, 340 (2012). “In a
bid protest case, the agency’s award must be upheld unless it is ‘arbitrary, capricious, an
abuse of discretion, or otherwise not in accordance with law.’” Turner Constr. Co. v.
United States, 645 F.3d 1377, 1383 (Fed. Cir.) (quoting PAI Corp. v. United States, 614
F.3d at 1351), reh’g en banc denied (Fed. Cir. 2011); see also Tinton Falls Lodging
Realty, LLC v. United States, 800 F.3d at 1358 (“In applying this [arbitrary and capricious]
standard to bid protests, our task is to determine whether the procurement official’s
decision lacked a rational basis or the procurement procedure involved a violation of a
regulation or procedure.” (citing Savantage Fin. Servs., Inc. v. United States, 595 F.3d at
1285-86)); Glenn Def. Marine (ASIA), PTE Ltd. v. United States, 720 F.3d 901, 907 (Fed.
Cir.), reh’g en banc denied (Fed. Cir. 2013); McVey Co., Inc. v. United States, 111 Fed.
Cl. 387, 402 (2013) (“The first step is to demonstrate error, that is, to show that the agency
acted in an arbitrary and capricious manner, without a rational basis or contrary to law.”);
PlanetSpace, Inc. v. United States, 92 Fed. Cl. 520, 531-32 (“Stated another way, a
plaintiff must show that the agency’s decision either lacked a rational basis or was
contrary to law.” (citing Weeks Marine, Inc. v. United States, 575 F.3d at 1358)),
subsequent determination, 96 Fed. Cl. 119 (2010).
The United States Supreme Court has identified sample grounds which can
constitute arbitrary or capricious agency action:
[W]e will not vacate an agency’s decision unless it “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
22
expertise.”
Nat’l Ass’n of Home Builders v. Defenders of Wildlife, 551 U.S. 644, 658 (2007) (quoting
Motor Vehicle Mfrs. Ass’n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983)); see
also F.C.C. v. Fox Television Stations, Inc., 556 U.S. 502, 552 (2009); Tinton Falls
Lodging Realty, LLC v. United States, 800 F.3d at 1358; Ala. Aircraft Indus., Inc.-
Birmingham v. United States, 586 F.3d 1372, 1375 (Fed. Cir. 2009), reh’g and reh’g en
banc denied (Fed. Cir. 2010); In re Sang Su Lee, 277 F.3d 1338, 1342 (Fed. Cir. 2002)
(“[T]he agency tribunal must present a full and reasoned explanation of its decision. . . .
The reviewing court is thus enabled to perform meaningful review . . . .”); Textron, Inc. v.
United States, 74 Fed. Cl. 277, 285-86 (2006), appeal dismissed sub nom. Textron, Inc.
v. Ocean Technical Servs., Inc., 223 F. App’x 974 (Fed. Cir. 2007). The United States
Supreme Court also has cautioned, however, that “courts are not free to impose upon
agencies specific procedural requirements that have no basis in the APA.” Pension
Benefit Guar. Corp. v. LTV Corp., 496 U.S. 633, 654 (1990).
Under an arbitrary or capricious standard, the reviewing court should not substitute
its judgment for that of the agency, but should review the basis for the agency decision to
determine if it was legally permissible, reasonable, and supported by the facts. See Motor
Vehicle Mfrs. Ass’n v. State Farm Mut. Auto. Ins. Co., 463 U.S. at 43 (“The scope of
review under the ‘arbitrary and capricious’ standard is narrow and a court is not to
substitute its judgment for that of the agency.”); see also Dell Fed. Sys., L.P. v. United
States, 906 F.3d 982, 990 (Fed. Cir. 2018); Turner Constr. Co., Inc. v. United States, 645
F.3d at 1383; R & W Flammann GmbH v. United States, 339 F.3d 1320, 1322 (Fed. Cir.
2003) (citing Ray v. Lehman, 55 F.3d 606, 608 (Fed. Cir.), cert. denied, 516 U.S. 916
(1995)); Synergy Sols., Inc. v. United States, 133 Fed. Cl. at 735 (citing Impresa
Construzioni Geom. Domenico Garufi v. United States, 238 F.3d at 1332-33). “‘“If the
court finds a reasonable basis for the agency’s action, the court should stay its hand even
though it might, as an original proposition, have reached a different conclusion as to the
proper administration and application of the procurement regulations.”’” Weeks Marine,
Inc. v. United States, 575 F.3d at 1371 (quoting Honeywell, Inc. v. United States, 870
F.2d 644, 648 (Fed. Cir. 1989) (quoting M. Steinthal & Co. v. Seamans, 455 F.2d 1289,
1301 (D.C. Cir. 1971))); Limco Airepair, Inc. v. United States, 130 Fed. Cl. 544, 550 (2017)
(citation omitted); Jordan Pond Co., LLC v. United States, 115 Fed. Cl. 623, 631 (2014);
Davis Boat Works, Inc. v. United States, 111 Fed. Cl. 342, 349 (2013); Norsat Int’l
[America], Inc. v. United States, 111 Fed. Cl. 483, 493 (2013); HP Enter. Servs., LLC v.
United States, 104 Fed. Cl. 230, 238 (2012); Vanguard Recovery Assistance v. United
States, 101 Fed. Cl. 765, 780 (2011).
Stated otherwise by the United States Supreme Court:
Section 706(2)(A) requires a finding that the actual choice made was not
“arbitrary, capricious, an abuse of discretion, or otherwise not in accordance
with law.” To make this finding the court must consider whether the decision
was based on a consideration of the relevant factors and whether there has
been a clear error of judgment. Although this inquiry into the facts is to be
searching and careful, the ultimate standard of review is a narrow one. The
court is not empowered to substitute its judgment for that of the agency.
23
Citizens to Pres. Overton Park, Inc. v. Volpe, 401 U.S. 402, 416 (1971) (internal citations
omitted), abrogated on other grounds by Califano v. Sanders, 430 U.S. 99 (1977); see
also U.S. Postal Serv. v. Gregory, 534 U.S. 1, 6-7 (2001); Bowman Transp., Inc. v.
Arkansas-Best Freight Sys., Inc., 419 U.S. 281, 285 (1974), reh’g denied, 420 U.S. 956
(1975); Co-Steel Raritan, Inc. v. Int’l Trade Comm’n, 357 F.3d 1294, 1309 (Fed. Cir. 2004)
(In discussing the “arbitrary, capricious, and abuse of discretion, or otherwise not in
accordance with the law” standard, the Federal Circuit stated: “the ultimate standard of
review is a narrow one. The court is not empowered to substitute its judgment for that of
the agency.”); In re Sang Su Lee, 277 F.3d at 1342; Advanced Data Concepts, Inc. v.
United States, 216 F.3d at 1058 (“The arbitrary and capricious standard applicable here
is highly deferential. This standard requires a reviewing court to sustain an agency action
evincing rational reasoning and consideration of relevant factors.” (citing Bowman
Transp., Inc. v. Arkansas-Best Freight Sys., Inc., 419 U.S. at 285)); Lockheed Missiles &
Space Co. v. Bentsen, 4 F.3d 955, 959 (Fed. Cir. 1993); By Light Prof’l IT Servs., Inc. v.
United States, 131 Fed. Cl. 358, 366 (2017); BCPeabody Constr. Servs., Inc. v. United
States, 112 Fed. Cl. 502, 508 (2013) (“The court ‘is not empowered to substitute its
judgment for that of the agency,’ and it must uphold an agency’s decision against a
challenge if the ‘contracting agency provided a coherent and reasonable explanation of
its exercise of discretion.’” (internal citations omitted) (quoting Keeton Corrs., Inc. v.
United States, 59 Fed. Cl. 753, 755, recons. denied, 60 Fed. Cl. 251 (2004); and Axiom
Res. Mgmt., Inc. v. United States, 564 F.3d at 1381)), appeal dismissed, 559 F. App’x
1033 (Fed. Cir. 2014); Supreme Foodservice GmbH v. United States, 109 Fed. Cl. at 382;
Alamo Travel Grp., LP v. United States, 108 Fed. Cl. 224, 231 (2012); ManTech
Telecomms. & Info. Sys. Corp. v. United States, 49 Fed. Cl. 57, 63 (2001), aff’d, 30 F.
App’x 995 (Fed. Cir. 2002).
According to the United States Court of Appeals for the Federal Circuit:
Effective contracting demands broad discretion. Burroughs Corp. v. United
States, 223 Ct. Cl. 53, 617 F.2d 590, 598 (1980); Sperry Flight Sys. Div. v.
United States, 548 F.2d 915, 921, 212 Ct. Cl. 329 (1977); see NKF Eng’g,
Inc. v. United States, 805 F.2d 372, 377 (Fed. Cir. 1986); Tidewater
Management Servs., Inc. v. United States, 573 F.2d 65, 73, 216 Ct. Cl. 69
(1978); RADVA Corp. v. United States, 17 Cl. Ct. 812, 819 (1989), aff’d, 914
F.2d 271 (Fed. Cir. 1990). Accordingly, agencies “are entrusted with a good
deal of discretion in determining which bid is the most advantageous to the
Government.” Tidewater Management Servs., 573 F.2d at 73, 216 Ct. Cl.
69.
Lockheed Missiles & Space Co. v. Bentsen, 4 F.3d at 958-59; see also Res-Care, Inc. v.
United States, 735 F.3d 1384, 1390 (Fed. Cir.) (“DOL [Department of Labor], as a federal
procurement entity, has ‘broad discretion to determine what particular method of
procurement will be in the best interests of the United States in a particular situation.’”
(quoting Tyler Constr. Grp. v. United States, 570 F.3d 1329, 1334 (Fed. Cir. 2009))), reh’g
en banc denied (Fed. Cir. 2014); Grumman Data Sys. Corp. v. Dalton, 88 F.3d 990, 995
(Fed. Cir. 1996); Geo-Med, LLC v. United States, 126 Fed. Cl. 440, 449 (2016); Cybertech
Grp., Inc. v. United States, 48 Fed. Cl. 638, 646 (2001) (“The court recognizes that the
agency possesses wide discretion in the application of procurement regulations.”);
24
Furthermore, according to the United States Court of Appeals for the Federal Circuit:
Contracting officers “are entitled to exercise discretion upon a broad range
of issues confronting them in the procurement process.” Impresa
Construzioni Geom. Domenico Garufi v. United States, 238 F.3d 1324,
1332 (Fed. Cir. 2001) (internal quotation marks omitted). Accordingly,
procurement decisions are subject to a “highly deferential rational basis
review.” CHE Consulting, Inc. v. United States, 552 F.3d 1351, 1354 (Fed.
Cir. 2008) (internal quotation marks omitted).
PAI Corp. v. United States, 614 F.3d at 1351; see also AgustaWestland N. Am., Inc. v.
United States, 880 F.3d at 1332 (“Where, as here, a bid protester challenges the
procurement official’s decision as lacking a rational basis, we must determine whether
‘the contracting agency provided a coherent and reasonable explanation of its exercise
of discretion,’ recognizing that ‘contracting officers are entitled to exercise discretion upon
a broad range of issues confronting them in the procurement process.’” (quoting Impresa
Construzioni Geom. Domenico Garufi v. United States, 238 F.3d at 1332-33 (internal
quotation marks and citation omitted))); Weeks Marine, Inc. v. United States, 575 F.3d at
1368-69 (“We have stated that procurement decisions ‘invoke [ ] “highly deferential”
rational basis review.’ Under that standard, we sustain an agency action ‘evincing rational
reasoning and consideration of relevant factors.’” (alteration in original) (quoting CHE
Consulting, Inc. v. United States, 552 F.3d at 1354 (quoting Advanced Data Concepts,
Inc. v. United States, 216 F.3d at 1058))).
A disappointed bidder has the burden of demonstrating the arbitrary and capricious
nature of the agency decision by a preponderance of the evidence. See Tinton Fall
Lodging Realty, LLC v. United Sates, 800 F.3d at 1364; see also Grumman Data Sys.
Corp. v. Dalton, 88 F.3d at 995-96; Enhanced Veterans Sols., Inc. v. United States, 131
Fed. Cl. 565, 578 (2017); Davis Boat Works, Inc. v. United States, 111 Fed. Cl. at 349;
Contracting, Consulting, Eng’g LLC v. United States, 104 Fed. Cl. at 340. The Federal
Circuit has indicated that “[t]his court will not overturn a contracting officer’s determination
unless it is arbitrary, capricious, or otherwise contrary to law. To demonstrate that such a
determination is arbitrary or capricious, a protester must identify ‘hard facts’; a mere
inference or suspicion . . . is not enough.” PAI Corp. v. United States, 614 F.3d at 1352
(citing John C. Grimberg Co. v. United States, 185 F.3d 1297, 1300 (Fed. Cir. 1999)); see
also Turner Constr. Co., Inc. v. United States, 645 F.3d at 1387; Sierra Nevada Corp. v.
United States, 107 Fed. Cl. 735, 759 (2012); Filtration Dev. Co., LLC v. United States, 60
Fed. Cl. 371, 380 (2004).
A bid protest proceeds in two steps. First . . . the trial court determines
whether the government acted without rational basis or contrary to law when
evaluating the bids and awarding the contract. Second . . . if the trial court
finds that the government’s conduct fails the APA review under 5 U.S.C.
§ 706(2)(A), then it proceeds to determine, as a factual matter, if the bid
protester was prejudiced by that conduct.
Bannum, Inc. v. United States, 404 F.3d at 1351; T Square Logistics Servs. Corp. v.
United States, 134 Fed. Cl. 550, 555 (2017); FirstLine Transp. Sec., Inc. v. United States,
119 Fed. Cl. 116, 126 (2014), appeal dismissed (Fed. Cir. 2015); Eco Tour Adventures,
25
Inc. v. United States, 114 Fed. Cl. at 22; Archura LLC v. United States, 112 Fed. Cl. at
496. To prevail in a bid protest case, the protestor not only must show that the
government’s actions were arbitrary, capricious, or otherwise not in accordance with the
law, but the protestor also must show that it was prejudiced by the government’s actions.
See 5 U.S.C. § 706 (“[D]ue account shall be taken of the rule of prejudicial error.”); see
also Glenn Def. Marine (ASIA), PTE Ltd. v. United States, 720 F.3d at 907 (“In a bid
protest case, the inquiry is whether the agency’s action was arbitrary, capricious, an
abuse of discretion, or otherwise not in accordance with law and, if so, whether the error
is prejudicial.”); IT Enter. Sols. JV, LLC v. United States, 132 Fed. Cl. 158, 173 (2017)
(citing Bannum v. United States, 404 F.3d at 1357-58); Linc Gov’t Servs., LLC v. United
States, 96 Fed. Cl. 672, 694-96 (2010). In describing the prejudice requirement, the
Federal Circuit also has held that:
To prevail in a bid protest, a protester must show a significant, prejudicial
error in the procurement process. See Statistica, Inc. v. Christopher, 102
F.3d 1577, 1581 (Fed. Cir. 1996); Data Gen. Corp. v. Johnson, 78 F.3d
1556, 1562 (Fed. Cir. 1996). “To establish prejudice, a protester is not
required to show that but for the alleged error, the protester would have
been awarded the contract.” Data General, 78 F.3d at 1562 (citation
omitted). Rather, the protester must show “that there was a substantial
chance it would have received the contract award but for that error.”
Statistica, 102 F.3d at 1582; see CACI, Inc.-Fed. v. United States, 719 F.2d
1567, 1574-75 (Fed. Cir. 1983) (to establish competitive prejudice, protester
must demonstrate that but for the alleged error, “‘there was a substantial
chance that [it] would receive an award--that it was within the zone of active
consideration.’” (citation omitted)).
Alfa Laval Separation, Inc. v. United States, 175 F.3d 1365, 1367 (Fed. Cir.), reh’g denied
(Fed. Cir. 1999); see also Glenn Def. Marine (ASIA), PTE Ltd. v. United States, 720 F.3d
at 912; Allied Tech. Grp., Inc. v. United States, 649 F.3d 1320, 1326 (Fed. Cir.), reh’g en
banc denied (Fed. Cir. 2011); Info. Tech. & Applications Corp. v. United States, 316 F.3d
at 1319; Impresa Construzioni Geom. Domenico Garufi v. United States, 238 F.3d at
1332-33; OMV Med., Inc. v. United States, 219 F.3d 1337, 1342 (Fed. Cir. 2000);
Advanced Data Concepts, Inc. v. United States, 216 F.3d at 1057; Stratos Mobile
Networks USA, LLC v. United States, 213 F.3d 1375, 1380 (Fed. Cir. 2000).
Protestor argues that the issuance of the ‘276 Solicitation as a 100% small
business set-aside contravenes the Rule of Two as codified in 38 U.S.C. § 8127(d)
(2012). Protestor argues that, as a result of the five SDVOSB bids received in response
to the ‘181 Solicitation, the Contracting Officer’s actions in issuing the ‘276 Solicitation not
as an SDVOSB set-aside “w[ere] arbitrary, capricious, or otherwise contrary to law.”
Protestor argues:15
15 Protestor’s counsel made an identical argument as in the above-captioned bid protest
regarding the Rule of Two in an earlier case he filed, Land Shark Shredding, LLC v. United
States, Case No. 19-508C, also adjudicated by the undersigned. The quoted sections
from protestor’s motion for judgment on the administrative record in the above-captioned
26
PL 109-461 as codified in 38 U.S.C. § 8127(d), states unequivocally, “a
contracting officer of the Department shall award contracts on the basis of
competition restricted to small business concerns owned and controlled by
veterans if the contracting officer has a reasonable expectation that”: (1)
two or more small business concerns owned and controlled by veterans will
submit offers; and that (2) the award can be made at a fair and reasonable
price that offers best value to the United States. 38 U.S.C. § 8127(d)
(emphasis added). The Supreme Court interpreted the clause in this statute
as a mandate [in Kingdomware Technologies, Inc. v. United States, 136 S.
Ct. 1969 (2016)]. It ruled, “[w]hen a statute distinguishes between ‘may’ and
‘shall,’ it is generally clear that ‘shall’ imposes a mandatory duty. We see no
reason to depart from the usual inference here.”
A plain reading of the statute instructs that the contracting officer shall
award if he or she has a reasonable expectation that the two above criteria
will be satisfied. The VA, in this case and others, has interpreted that statute
to mean that the VA shall compete procurements as SDVOSB and VOSB
set-asides when those expectations are met, and only make awards if it
receives an offer the CO [Contracting Officer] believes is “fair and
reasonable.” If, as in this case, the CO doesn’t find that the prices are fair
and reasonable based on any metric the CO can define, then, in the CO’s
estimation, Congress’s mandate does not apply. The VA’s approach reads
language into the statute that is absent and flatly frustrates the plain
meaning of the statute.
(emphasis in original) (internal citations omitted).
Protestor appears to argue that the correct interpretation of the United States
Supreme Court’s decision in Kingdomware and the legislative intent of 38 U.S.C.
§ 8127(d) require an award to an SDVOSB in the current bid protest before this court.
Protestor argues:
The Rule of Two “requires only a reasonable expectation-not absolute
certainty-that proposals will be submitted by at least two SDVOSB
concerns, and that award can be made at a fair and reasonable price.” The
only rationale offered for the VA’s determination is that previously submitted
prices on the Parent Solicitation [the ‘181 Solicitation] and Source Sought
responses by SDVOSB and VOSB concerns, exceeded the IGCE.
Additionally, the CO further based his decision to cancel the Parent
Solicitation, and make this Solicitation [the ‘276 Solicitation] a small
business set-aside, because the CO desired to have bids that were similar
to that of the incumbent’s. The VA was clearly shopping for the best price
bid protest are almost verbatim to protestor’s motion for judgment on the administrative
record in Land Shark Shredding Case No. 19-508C, in which the undersigned found the
Rule of Two did not mandate award. See Land Shark Shredding, LLC v. United States,
145 Fed. Cl. 530. Moreover, protestor’s counsel has made similar arguments in other
cases filed in this court.
27
available to the agency, however, rather than finding the best price to the
United States. The CO is required to see if an award can be made at a
reasonable price, when comparing the SDVOSB concerns’ proposals with
each other, also known as adequate price competition.
(emphasis in original) (internal citations omitted).
Protestor claims that the actions of the Contracting Officer circumvented the Rule
of Two when he made comparisons between the SDVOSB bids and the incumbent
vendor’s price for the ‘276 Solicitation. Protestor refers to FAR (Federal Acquisition
Regulation) Section 13.106-3(a)(1), stating that price reasonableness should be based
on “competitive quotations or offers.” Protestor further refers to FAR Section 15.404-1
arguing that “adequate price competition establishes a fair and reasonable price.”
According to protestor, when multiple SDVOSB bids were received in response to the
‘181 Solicitation, the received quotes constituted adequate competition, and, therefore,
fair and reasonable prices. Protestor argues that the evaluations and selection of bids
received should be solely in the context of an SDVOSB set-aside without factoring in the
incumbent contractor’s pricing, a small business market, or the larger market in general.
When competition is intentionally restricted, then fairness and
reasonableness turn not on values derived from the open competitive
environment, but from the restricted competitive environment. This was
Congress’s intent, and the VA must not thwart it. Moreover, best value to
the VA – or more accurately put, best value to the Minneapolis VA
Healthcare System – is clearly not the same as the best value for our Nation.
Again, as illustrated above, 38 U.S.C. § 8127(d) speaks to a higher
objective of encouraging veteran entrepreneurship and keeping veterans
gainfully employed (rather than homeless, addicted, and committing suicide
at alarming rates). A VA contracting officer does not have the authority to
undermine the United States Congress in determining what the United
States values more: obtaining cheap shredding services or providing much-
needed opportunity for veterans.
(emphasis in original).
Further, protestor argues that an SDVOSB must be selected to promote veteran-
owned businesses when an SDVOSB set-aside receives multiple bids. In support,
protestor cites to the legislative history of 38 U.S.C. § 8127:
Section 102 of H.R. 3949 would amend section 8127(c) of title 38, United
States Code, by changing the word “may” to “shall,” thereby giving VA
contracting officers the authority to award contracts to SDVOSBs on an
equal footing with small businesses operating under section 8(a) of the
Small Business Act.
(citing H.R. Rep. No. 111-324, at 4). Protestor continues, asserting that SDVOSB set-
asides create a restricted competition market for SDVOSBs and awards must be given to
SDVOSBs:
28
In drafting 38 U.S.C. § 8127(d), Congress instructed a government agency
to restrict competition to qualifying businesses when certain conditions are
present, knowing full well that in many cases, more competition tends to
occasion lower prices. That the government should bear somewhat higher
short-term costs in achieving a nobler long-term objective should not be
rejected – it should be lauded. Plainly, encouraging veteran enterprise and
increasing veteran employment is the laudable intent of 38
U.S.C. § 8127(d).
Defendant argues that the Contracting Officer conducted an “initial Rule of Two
assessment prior to issuing the ‘181 Solicitation” and “had a reasonable expectation that
two or more SDVOSBs would submit offers such that an award could be made at a fair
and reasonable price.” When no SDVOSB made an offer at “a fair and reasonable price,”
combined with the Contracting Officer’s market research, defendant argues the
Contracting Officer “did not reasonably expect that two or more veteran-owned small
businesses would submit quotes such that an award could be made at a fair and
reasonable price that offers best value to the United States.” Therefore, according to
defendant, the ‘276 Solicitation was not required to be an SDVOSB set-aside. Defendant
states:
The Rule of Two analysis is conducted prior to the issuance of a solicitation,
to determine whether competition should be restricted to veteran-owned
small businesses based on a contracting officer’s reasonable expectation.
This is not the end of the inquiry, however. After a solicitation issues and
quotes are received, the contracting officer reviews the actual quotes
received to determine if they are reasonable. After all, a contracting officer’s
expectation about what quotes he will receive, even if reasonable, is just
that – an expectation. It may not be borne out in practice.
(emphasis in original) (internal citations omitted). Defendant asserts that the Rule of Two
only applies regarding the setting aside of a solicitation, “[a]fter the analysis is complete,
and a solicitation is either set aside or left unrestricted, the Rule of Two ceases to be in
play.” Defendant continues:
The fact that a contracting officer had the necessary reasonable expectation
at the start of the procurement process, however, does not preclude her[16]
from subsequently evaluating quotes received in response to the solicitation
to determine whether the offered prices are reasonable. An expectation,
even a reasonable one, may not materialize: the contracting officer may not
receive any offers; or only one offer; or – contrary to her initial
expectation – she may receive only offers that are excessive and
unreasonable. The Rule of Two has no bearing on this part of the
procurement process; it concerns only the initial decision to restrict
competition for the solicitation.
16The court notes that the Contracting Officer at issue in the above captioned protest is
Chad L. Raterman.
29
(emphasis in original) (internal citations omitted). Defendant asserts that the Contracting
Officer cannot be precluded from evaluating quotes for price and technical evaluations
after the receipt of offers:
Veteran Shredding appears to believe that because the agency initially had
a reasonable expectation that prices would be fair and reasonable, that is
the end of the inquiry and the agency cannot go back and evaluate the
quotes it received, even if those quotes are excessive or unreasonable. But
that is not the law. The Rule of Two has no effect on an agency’s price
evaluation or decision to cancel a solicitation because the received quotes
were too high.
Veteran Shredding identifies no legal principle that precludes the VA from
evaluating the quotes it received and, upon realizing that all were excessive,
cancelling the solicitation.
(internal citations omitted). Defendant argues that the Contracting Officer did not
circumvent regulations when determining fair and reasonable prices in the context of
competition. In response to protestor’s reliance on FAR Section 15.404-1, defendant
argues:
[T]hat reliance does not get [protestor] very far. First, that section does not
apply to the solicitation at issue here because it falls under Part 15 of the
FAR – Contracting by Negotiation – whereas the ‘276 Solicitation “is for a
commercial item acquisition using Simplified Acquisition Procedures under
the authority of FAR 13.5.” Second, § 15.404-1 applies to analyzing
proposals “to ensure that the final-agreed-to price is fair and reasonable”
(emphasis in original) (internal citation). Defendant contends that even if FAR Section
15.404-1 is applicable, the above facts show “there was nothing arbitrary or capricious
about the agency’s use of the Shred-N-Go contract as an initial basis for the cost
estimate.” Additionally, defendant references FAR Section 13.106-3(a), arguing that the
regulation supports a contracting officer’s discretion to review the quotes to “determine
that the proposed price is fair and reasonable,” which does not preclude a contracting
officer “from subsequently evaluating quotes received in response to the solicitation.”
In order to promote federal government contracting with service-disabled veteran-
owned small businesses, Congress enacted the Veterans Benefits, Health Care, and
Information Technology Act of 2006, §§ 502, 503, 120 Stat. 3431–3436 (codified, as
amended, at 38 U.S.C. §§ 8127, 8128 (2012)) (the 2006 Act). In the 2006 Act, Congress
included the “Rule of Two” doctrine, which provides that:
Except as provided in subsections (b) and (c), for purposes of meeting the
goals under subsection (a), and in accordance with this section, a
contracting officer of the Department [of Veterans Affairs] shall award
contracts on the basis of competition restricted to small business concerns
owned and controlled by veterans if the contracting officer has a reasonable
expectation that two or more small business concerns owned and controlled
30
by veterans will submit offers and that the award can be made at a fair and
reasonable price that offers best value to the United States.
38 U.S.C. § 8127(d). The Supreme Court announced in Kingdomware, a case cited by
both parties in the above-captioned protest, that the VA’s Rule of Two doctrine “is
mandatory, not discretionary,” and requires the
Department [of Veterans Affairs] to apply the Rule of Two to all contracting
determinations and to award contracts to veteran-owned small businesses.
The Act does not allow the Department to evade the Rule of Two on the
ground that it has already met its contracting goals or on the ground that the
Department has placed an order through the [GSA] FSS [Federal Supply
Schedule].
Kingdomware Techs., Inc. v. United States, 136 S. Ct. at 1976.
Neither the Rule of Two doctrine, nor the Kingdomware decision mandate awards
to SDVOSBs without any consideration of price, nor do they prohibit the VA from
employing competitive evaluation procedures, such as price analyses. The statute at 38
U.S.C. § 8127(d) states that the VA “shall award contracts on the basis of competition.”
Id. As the Federal Circuit recently explained in PDS Consultants, Inc. v. United States,
907 F.3d 1345, 1358 (Fed. Cir. 2018):
[T]he statute applies to all contracts—not only competitive contracts. The
statute requires that, when the Rule of Two is triggered—i.e., when ‘the
contracting officer has a reasonable expectation that two or more small
business concerns owned and controlled by veterans will submit offers and
that the award can be made at a fair and reasonable price that offers best
value to the United States’—the VA must apply competitive mechanisms to
determine to whom the contract should be awarded.
Id. (emphasis in original) (quoting 38 U.S.C. § 8127(d); and citing Kingdomware Techs.,
Inc. v. United States, 136 S. Ct. at 1976).
In addition, the VA’s implementing regulation for the Rule of Two doctrine indicates
that the contracting officer, even after setting aside a procurement opportunity for only
SDVOSBs, will make an award only if the price received is “fair and reasonable” and that
the contracting officer may cancel the solicitation if he or she receives no acceptable
proposals. The “Department of Veterans Affairs Acquisition Regulation” (VAAR)17
provides in relevant part:
17 The “VA established the VAAR to codify and publish uniform policies and procedures
for VA’s acquisition of supplies and services, including construction,” and the “VAAR
implements and supplements the FAR [Federal Acquisition Regulations].” 48 C.F.R.
§ 801.101 (2019). The VAAR and the FAR apply to the above-captioned protest. See 48
C.F.R. § 801.104(a) (2019) (“Unless otherwise specified in this chapter or excepted by
31
(a) The contracting officer shall consider SDVOSB set-asides before
considering VOSB set-asides. Except as authorized by 813.106,
819.7007 and 819.7008,[18] the contracting officer shall set-aside an
acquisition for competition restricted to SDVOSB concerns upon a
reasonable expectation that,
(1) Offers will be received from two or more eligible SDVOSB
concerns; and
(2) Award will be made at a fair and reasonable price
....
(c) If the contracting officer receives only one acceptable offer at a fair and
reasonable price from an eligible SDVOSB concern in response to a[n]
SDVOSB set-aside, the contracting officer should make an award to that
concern. If the contracting officer receives no acceptable offers from eligible
SDVOSB concerns, the set-aside shall be withdrawn and the requirement,
if still valid, set aside for VOSB competition, if appropriate.
48 C.F.R. § 819.7005 (2019).
The FAR sets out its own Rule of Two doctrine, almost identical to the one
contained in the VAAR, which provides in relevant part:
(b) To set aside an acquisition for competition restricted to service-disabled
veteran-owned small business concerns, the contracting officer must
have a reasonable expectation that—
(1) Offers will be received from two or more service-disabled
veteran-owned small business concerns; and
(2) Award will be made at a fair market price.
statute (i.e., expenditures of the VA Canteen Service) or other VA regulations, the FAR
and VAAR apply to all VA acquisitions (including construction) made with appropriated
funds.”); see id. at § 801.104(b) (2019) (“Use the VAAR and the FAR together. The FAR
applies to VA acquisitions except as provided in the VAAR.”).
18 The exceptions referenced in 48 C.F.R. § 819.7005 for 48 C.F.R. § 819.7007 and 48
C.F.R. § 819.7008 are for sole source SDVOSB concerns and sole source VOSB
concerns, respectively, See 48 C.F.R. §§ 819.7007, 819.7008 (2019). The exception
referenced in 48 C.F.R. § 819.7005 for 48 C.F.R. § 813.106 reflects that “Contracting
officers may use other than competitive procedures to enter into a contract with a[n]
SDVOSB or VOSB when the amount exceeds the micro-purchase threshold up to $5
million.” See 48 C.F.R. § 813.106(a) (2019).
32
(c) If the contracting officer receives only one acceptable offer from
a service-disabled veteran-owned small business concern in
response to a set-aside, the contracting officer should make an
award to that concern. If the contracting officer receives no
acceptable offers from service-disabled veteran-owned small
business concerns, the service-disabled veteran-owned set-
aside shall be withdrawn and the requirement, if still valid, set
aside for small business concerns, as appropriate (see 19.203).
48 C.F.R. § 19.1405(b)-(c) (2019). Thus, pursuant to the VAAR and the FAR, even after
a procurement process has been set aside pursuant to the Rule of Two, the contracting
officer must still evaluate proposals to determine if the proposals received are
“acceptable,” and recognize that a contracting officer may potentially not make an award
when no acceptable proposals are received. See 48 C.F.R. § 819.7005(b); 48 C.F.R. §
19.1405(c).
In Veterans Contracting Group, Inc. v. United States, 920 F.3d at 807, a case also
brought by the same counsel representing the protestor in the above-captioned bid
protest, the United States Court of Appeals for the Federal Circuit found that the VA
rationally cancelled an SDVOSB set-aside contract due to unreasonable pricing
contained with the proposals and was not required to make an award. See id. In Veterans
Contracting Group a Judge of this court found that the decision by the Center for
Verification and Evaluation (CVE), an office within the VA, to cancel the solicitation for the
SDVOSB set-aside contract was not arbitrary and capricious because the contracting
officer rationally concluded that there were no “responsive” bids with a “fair and
reasonable” price. See Veterans Contracting Grp., Inc. v. United States, 135 Fed. Cl. 610,
616, 619-20 (2017), aff’d, 920 F.3d 801 (Fed. Cir. 2019)(internal quotation marks
omitted).19 The court noted that the contracting officer in Veterans Contracting Group
rationally concluded that protestor’s bid was not responsive, despite protestor’s lower
price, because the contracting officer
[l]ooked only to the fact that CVE had removed Veterans from the VIP
database and could not have known that CVE had acted arbitrarily. He
followed the normal procedures for handling the procurement. Because
Veterans did not meet the requirements of a solicitation [that it be listed in
the VIP database at the time it submitted its bid], it was ineligible to compete
for the contract.
19 The judge in Veterans Contracting Group also found that that the CVE’s decision to
remove protestor from the VetBiz VIP database was arbitrary and capricious and entered
a permanent injunction to restore protestor to the database, making protestor once again
eligible to compete for SDVOSB set-aside contracts. See Veterans Contracting Grp., Inc.
v. United States, 135 Fed. Cl. at 619.
33
Id. at 619. The judge in Veterans Contracting Group explained that because the price of
the “remaining responsive bids were sufficiently above the IGE [independent government
estimate] that the officer had discretion to cancel and resubmit the solicitation.” Id. This
court, therefore, concluded that it would not “overturn” the VA’s cancellation of the
solicitation. See id. at 620.
The United States Court of Appeals for the Federal Circuit in Veterans Contracting
Group affirmed the Court of Federal Claims’ finding that the agency’s cancellation of the
SDVOSB set-aside contract was proper. See Veterans Contracting Grp., Inc. v. United
States, 920 F.3d at 806-07. The Federal Circuit noted that the protestor had “not shown
that the contracting officer lacked any rational basis for cancelling” the solicitation. See
id. at 806. The Federal Circuit also explained that “[t]he only two acceptable bids” received
by the VA “proposed costs significantly higher than the government’s estimate for the
project. Thus, the contracting officer rationally determined that these prices were
unreasonable. Under the circumstances, he had a compelling reason to request
cancellation.” Id. at 807.
The solicitation at issue in the above captioned protest, the ‘276 Solicitation, was
issued as a 100% small business set-aside after the Contracting Officer concluded that
the Rule of Two could not be met by either VOSBs or SDVOSBs. Protestor argues that
the ‘276 Solicitation should not have been issued as a 100% small business set-aside
since the Contracting Officer had received five SDVOSB bids for the cancelled ‘181
Solicitation. Protestor’s argument, however, that Kingdomware Technologies, Inc. v.
United States automatically requires an award be made to an SDVOSB when multiple
SDVOSBs submitted quotes in response to an SDVOSB set-aside is incorrect.
The issue in Kingdomware was whether the Rule of Two doctrine under 38 U.S.C.
§ 8127(d) mandates the VA to restrict competition to SDVOSBs when “it awards contracts
or whether it must use the Rule of Two only to the extent necessary to meet annual
minimum goals for contracting with veteran-owned small businesses.” Kingdomware
Tech., Inc. v. United States, 136 S. Ct. at 1973. As discussed above, in Kingdomware,
the VA awarded a contract to a non-veteran-owned small business for an “Emergency
Notification Service . . . . through the [GSA] FSS [Federal Supply Schedule] system.” Id.
at 1974 (footnote omitted). The Kingdomware protestor argued that the Rule of Two
required that the VA “could not award the contracts . . . without first checking to see
whether at least two veteran-owned small businesses could perform the work at a fair
and reasonable price.” Id. at 1975. The Supreme Court ruled in favor of the Kingdomware
protestor concluding that “[Section] 8127 is mandatory, not discretionary.” Id. at 1976.
The Supreme Court explained:
We hold that § 8127(d) unambiguously requires the Department to use the
Rule of Two before contracting under the competitive procedures. Section
8127(d) requires that “a contracting officer of the Department shall award
contracts” to veteran-owned small businesses using restricted competition
whenever the Rule of Two is satisfied, “[e]xcept as provided in subsections
(b) and (c).” (Emphasis added) . . . Except when the Department uses the
noncompetitive and sole-source contracting procedures in subsections (b)
34
and (c), § 8127(d) requires the Department to use the Rule of Two before
awarding a contract to another supplier. . . .
Accordingly, the Department shall (or must) prefer veteran-owned small
businesses when the Rule of Two is satisfied. . . .
We therefore hold that, before contracting with a non-veteran owned
business, the Department must first apply the Rule of Two.
Kingdomware Techs., Inc. v. United States, 136 S. Ct. at 1976-77 (emphasis in original)
(internal citations omitted).
Protestor’s argument that the Rule of Two requires that an automatic award be
made to an SDVOSB when there are two more offers in an SDVOSB set-aside is not
supported by Kingdomware. The Kingdomware case does not mandate such an award,
because as noted above, Kingdomware only requires that the VA to “restrict[] competition”
to SDVOSBs when the Rule of Two is satisfied. See id. at 1973-74. The Kingdomware
decision does not go so far as to state that a contracting officer always must make an
award to an SDVOSB if the Rule of Two is satisfied without regard to a contracting
officer’s determination of the fairness and reasonableness of the quotes received, and/or
the outcome of the technical capability evaluations. Moreover, once the Contracting
Officer makes the determination that the Rule of Two cannot be met, Kingdomware no
longer controls the Contracting Officer’s decision-making and the Contracting Officer
possesses the discretion to conduct analyses to further evaluate any received proposals.
Both parties reference sections 13.106-3(a) and 15.404-1(a) of the Federal
Acquisition Regulation (FAR). 48 C.F.R. § 13.106-3, in relevant part:
(a) Basis for award. Before making award, the contracting officer must
determine that the proposed price is fair and reasonable.
(1) Whenever possible, base price reasonableness on competitive
quotations or offers.
48 C.F.R. § 13.106-3(a). 48 C.F.R. § 15.404-1 states in part:
(a) General. The objective of proposal analysis is to ensure that the final
agreed-to price is fair and reasonable.
(1) The contracting officer is responsible for evaluating the
reasonableness of the offered prices. The analytical techniques and
procedures described in this section may be used, singly or in
combination with others, to ensure that the final price is fair and
reasonable. The complexity and circumstances of each acquisition
should determine the level of detail of the analysis required.
....
(b) Price analysis for commercial and non-commercial items.
....
35
(2) The Government may use various price analysis techniques and
procedures to ensure a fair and reasonable price. Examples of such
techniques include, but are not limited to, the following:
(i) Comparison of proposed prices received in
response to the solicitation. Normally, adequate price
competition establishes a fair and reasonable price
(see 15.403-1(c)(1)).
48 C.F.R. § 15.404-1(a)-(2)(i).
Protestor argues that the submission of the five SDVOSB bids in response to the
‘181 Solicitation constituted the price competition that determines a fair and reasonable
price such that the Contracting Officer is required to make an award to an SDVOSB.
Neither of these two cited regulations conflict with the Rule of Two as they serve as
methods for a contracting officer to determine when a price is fair and reasonable. The
two regulations do not speak to when a set-aside should be made or when a contracting
officer must make an award. Furthermore, the ‘276 Solicitation was solicited under FAR
Part 13, therefore FAR Section 15.404-1, on which protestor relies does not directly
apply.20
Protestor is correct when asserting that the Rule of Two, when met, creates a
restricted competition market. Protestor’s argument, however, that a contracting officer
must compare prices solely within an SDVOSB restricted market outside of the context
of any other factors, and, then, is required to subsequently make an award is misplaced.
The gravamen of protestor’s argument is that if the Rule of Two is met and a VOSB or
SDVOSB set-aside is made, if two or more VOSBs or SDVOSBs submit bids, the
submitted bids constitute the competition in of themselves. Protestor continues, arguing
that the Contracting Officer is limited to evaluating the VOSB or SDVOSB bids only in
relation to one another without consideration of any factors outside the closed universe
of a VOSB or SDVOSB set-aside which then, must be followed by an award of a contract
to a VOSB or SDVOSB.
In the above-captioned bid protest, protestor contends that when five SDVOSB
offers were received in response to the ‘181 Solicitation, the Rule of Two and
Kingdomware require the Contracting Officer to evaluate the five bids against each other
without consideration of the IGCE or the broader market. Kingdomware does not restrain
the Contracting Officer in this manner regarding price and technical evaluations before
making an award. Protestor’s counsel made a similar argument that was rejected by a
judge of this court in the Land Shark Shredding case, Case No. 18-1568C. See Land
20 Even if this court were to accept protestor’s argument on the applicability of FAR
15.404-1, the cited regulatory section concerns price comparisons and does not advance
protestor’s propositions that a fair and reasonable price is automatically established
between the offers received or that a contracting officer must award a contract to an
SDVOSB just because multiple SDVOSB offers are received in response to a solicitation.
36
Shark Shredding, LLC v. United States, 142 Fed. Cl. 301.21 The Land Shark Shredding
protestor in Case No. 18-1568C challenged the VA’s decision to compare its price with
non-SDVOSBs that bid on the same solicitation as follows:
The VA also based its evaluation of LSS’s [Land Shark Shredding’s] bid on
a comparison of LSS’s prices to the other non-SDVOSB offerors. This is not
a fair and reasonable comparison, and it totally negates the value of set-
asides. It also ignores the U.S. Supreme Court’s holdings in the
Kingdomware case, which is discussed in detail below. Comparison of
SDVOSB bids to non-veteran and other than small business concerns also
violates Congress’ express policy regarding SDVOSB assistance
programs. “The purpose of the Service-Disabled Veteran-Owned Small
Business Program is to provide Federal contracting assistance to service-
disabled veteran-owned small business concerns.” FAR § 19.1401(b).
Land Shark Shredding, LLC v. United States, 142 Fed. Cl. at 308. The Land Shark
Shredding court rejected this argument and explained:
Kingdomware does not address price comparisons, in general, or the
specific question of how the VA should determine that a[n] SDVOSB’s
prices are fair and reasonable. The Federal Acquisition Regulation (FAR)
provision cited by plaintiff is a policy statement that does not regulate
procedures for the price evaluation of proposals in procurements such as
this one. In sum, plaintiff objects to the price comparison conducted by the
VA here because it does not do enough, in plaintiff’s view, to secure
government contracts for SDVOSBs. That is a policy argument, unmoored
from statute or regulation. Without more, that policy argument is an
insufficient ground for this court to invalidate a procurement decision of a
federal agency.
Land Shark Shredding, LLC v. United States, 142 Fed. Cl. at 308
The above-captioned bid protest currently under review factually differs from Land
Shark Shredding, LLC v. United States, 142 Fed. Cl. 301, as this protest does not involve
a tiered list of set-asides in the solicitation in which awards are made to eligible
SDVOSBs, VOSBs, small businesses, and then all businesses until awards are made.
Additionally, protestor in the current bid protest does not base its argument on FAR Part
19. Protestor, however, makes a similar policy argument as the protestor in Land Shark
Shredding when referring to legislative history in H.R. Rep. 111-324 and recurring
citations to FAR Sections 13.106-3(a)(1) and 15.404-1, arguing that the Contracting
Officer must be restricted to price comparisons and evaluations within the closed universe
of an SDVOSB set-aside.
21The undersigned also rejected the same argument in Land Shark Shredding, LLC v.
United States, 145 Fed. Cl. 530, in which protestor was represented by the same counsel
as in the above cited Land Shark Shredding case and in the above-captioned bid protest
currently under review.
37
Further, Kingdomware does not address how price and technical comparisons
should be conducted within a set-aside, only that the Rule of Two must be evaluated prior
to a VA procurement. The regulations within protestor’s cited parts of the FAR do not
expressly require the Contracting Officer to evaluate SDVOSB bids in a vacuum. Based
on protestor’s cited parts of the FAR, when the Contracting Officer is evaluating the
fairness and reasonableness of quotes received, the Contracting Officer is allowed to
utilize multiple factors in the evaluation. The Contracting Officer is not required to evaluate
price fairness and reasonableness based solely on the submitted SDVOSB bids. It is
unreasonable to require a Contracting Officer to evaluate and award a contract only
based on submitted pricing within the set-aside. See In re: Veteran Shredding, LLC, B-
417399, 2019 WL 2490468 (Comp. Gen. June 4, 2019) (“[I]t defies logic that an agency
would be limited to utilizing pricing from a competition that was cancelled because all the
prices were found to be unreasonably high as the yardstick for reasonableness. Rather,
under such circumstances a contracting officer has the discretion to reasonably utilize
other price analysis techniques such as consideration of an IGCE . . . .” (footnote
omitted)).22 The Rule of Two only applies to the determination of when a set-aside should
be attempted and is not dispositive as to whether an SDVOSB set-aside mandates an
award to one of the SDVOSB offerors which submits a bid. Therefore, protestor’s
argument that the Rule of Two restrains a contracting officer into selecting an SDVOSB
bid from an SDVOSB set-aside without conducting a price analysis for reasonability that
may extend beyond the SDVOSB and a technical evaluation is misplaced.
Protestor alleges that the Contracting Officer’s analysis that two or more VOSBs
and SDVOSBs would not submit fair and reasonable bids offering best value to the United
States and, thereby, would not satisfy the Rule of Two was arbitrary and capricious.
Protestor argues that the Contracting officer “improperly relied on the comparison of VS’
[protestor’s] proposal to Shred-N-Go’s [incumbent’s] contract with the VA at that time, and
the AR [Administrative Record] contains no analysis regarding the reasonableness of
Shred-N-Go’s contract price as compared to the RFQ [the ‘276 Solicitation] that was
requested.”
Protestor further alleges “the IGCE was created using past contract pricing, but the
IGCE does not specify if these past contract prices were from SDVOSB or VOSB
concerns, which would constitute a material difference in terms of the acquisition.”
Protestor argues, without substantiation, that the Contracting Officer “failed to account for
this material difference in the prospective bidders’ differing market and economic factors”
when utilizing the incumbent’s contract as a basis for comparison. Consequently,
protestor states that the Contracting Officer and the IGCE did not adhere to the FAR when
addressing price competition between the SDVOSB bids by ignoring the “material
difference” between the incumbent’s price and the SDVOSB bids received in response to
22As noted above, the GAO denied protestor’s bid protest concerning the terms of the
‘276 Solicitation in an unpublished opinion. See In re: Veteran Shredding, LLC, B-417399
(Comp. Gen. June 4, 2019). Although GAO decisions are not binding on the United States
Court of Federal Claims, the court “may draw on GAO’s opinions for its application of [its]
expertise.” Allied Tech. Grp., Inc. v. United States, 649 F.3d 1320, 1332 n.1 (Fed. Cir.
2011).
38
the ‘181 Solicitation. Citing to FAR Part 15, protestor asserts that the IGCE for the ‘276
Solicitation was deficient because:
[T]he VA’s IGCE simply states that the basis for the IGCE was made by an
examination of past contract pricing, GSA Federal Supply Schedule
Published Prices, and informal vendor quotes. The IGCE does not state if
the past contract pricing was for SDVOSB or VOSB concerns, who
historically bid at higher rates than small business concerns. Lastly, the
IGCE did not specify any labor categories, such as SDVOSB or VOSB
concerns, nor did the IGCE state that where a labor category was not
distinguished . . . .
(internal citation omitted). Protestor argues that the IGCE was poorly documented,
alleging that “[t]he Past Contract Pricing likely derives only from the incumbent. The
Informal Vendor Quotes are not described. Only the Supply-Schedule prices can be
ascertained with any degree of accuracy.” Protestor offers samples of publicly available
pricing on the GSA eLibrary and contends that the IGCE utilized for the ‘276 Solicitation
does not take into account easily accessible pricing information and, severely
underestimates the costs associated with the contract:
The IGCE at AR 317 shows a price of $[redacted] per 96-gallon container
for paper shredding services. However, a quick, two-minute glance at the
51-507 Destruction Services GSA Supply Schedule shows another vendor
in the region [Confidential Records, Inc. in Menomonie, WI] at $30.83 per
96- gallon unit and another [Shred-N-Go, Inc. in Minneapolis, MN] at $30.23
per unit, both effective 2017. Whether the above-referenced prices are
accurate or feasible is of no matter. What is important is the VA’s improper
yet steadfast reliance on an IGCE that: (1) lacks basic documentation and
detail; and (2) does not reflect easily-ascertained price information.
Accordingly, the record shows that the VA’s price-reasonableness
determination lacked rational basis or was otherwise arbitrary and
capricious.
(emphasis in original) (footnotes and internal citation omitted). Further, protestor argues
that the IGCE is inherently inaccurate as it seeks to compare SDVOSB concerns to the
incumbent vendor who is not veteran-owned. Without documentation, protestor alleges
that SDVOSBs historically bid at higher rates and have less efficient economies of scale.
Consequently, protestor argues the Contracting Officer inappropriately
determined that all of the SDVOSB and VOSB concerns’ proposals were
not fair and reasonable, even though they all were within the same range
as each other . . . . [and] that the “award could [not] be made to an SDVOSB
concern at a fair and reasonable price that offers the best value to the
Government,” rather than deciding if the SDVOSB concerns’ proposed
prices were fair and reasonable as compared amongst each other. The prior
price of Shred-N-Go Inc., which the CO encouraged the SDVOSBs to
emulate, was not a valid basis for comparison. The terms of the incumbent’s
contract were not for SDVOSBs, and the CO failed to account for this
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material difference in the prospective bidders’ differing market and
economic factors.
(emphasis in original) (internal citations omitted).
Defendant responds that the IGCE and the contracting officer’s comparison of
submitted bids to the IGCE and incumbent price was appropriate. Defendant asserts that
the market research conducted in March 2018 and January 2019 as well as the updated
IGCE appropriately led to the ‘276 Solicitation being set aside for small businesses.
Defendant argues the new IGCE was sufficiently documented to be a valid point of
comparison as the GSA Federal Supply Schedule published prices, past contract pricing,
and informal vendor quotes were factored into the IGCE value. Defendant disagrees with
protestor’s reliance on FAR Section 15.404-1, stating:
First, that section does not apply to the solicitation at issue here because it
falls under Part 15 of the FAR – Contracting by Negotiation – whereas the
‘276 Solicitation “is for a commercial item acquisition using Simplified
Acquisition Procedures under the authority of FAR
13.5.” Second, § 15.404-1 applies to analyzing proposals “to ensure that
the final-agreed-to price is fair and reasonable.” It does not address
Government cost estimates. Finally, Veteran Shredding does not explain
why an IGCE “created from past contract pricing [that was not from]
SDVOSB or VOSB concerns . . . would constitute a material difference in
the terms of the acquisition,” where the IGCE was based on a small
business performing nearly identical services. Veteran Shredding does not
identify any “differing market or economic factors” that would turn on
whether a small business was veteran-owned or not. Thus, even assuming,
for the sake of argument, that the VA was required to comply with FAR §
15.404-1 for this solicitation, there was nothing arbitrary or capricious about
the agency’s use of the Shred-N-Go contract as an initial basis for the cost
estimate.
(alteration and emphasis in original) (internal citations omitted). Consequently, defendant
argues that the IGCE and market research conducted was an appropriate basis for the
Contracting Officer to rationally conclude that the Rule of Two could not be met by
SDVOSBs with regards to the ‘276 Solicitation.
Protestor also argues that the Contracting Officer inappropriately evaluated
submitted SDVOSB quotes to designate the ‘276 Solicitation as a 100% small business
set-aside. Protestor argues that when five SDVOSB bids were received in response to
the 181 Solicitation, “[t]he C[ontracting]O[fficer] is required to see if an award can be made
at a reasonable price, when comparing the SDVOSB concerns’ proposals with each
other,” relying on FAR Section 15.404-1(b)(2)(i) for support. (emphasis in original). As
indicated in the Administrative Record, however, the ‘276 Solicitation was designated as
“a commercial item acquisition using Simplified Acquisition Procedures under the
authority of FAR 13.5 Simplified Procedures for Certain Commercial Items.” Even if FAR
Part 15 was applicable, protestor’s reliance on FAR Part 15 is unavailing. As discussed
above, FAR Part 15 allows a Contracting Officer to evaluate whether the submitted price
was fair and reasonable using different information sources including comparison of the
40
submitted prices with historical prices and the IGCE. Should the Contracting Officer find
the bids to not be fair and reasonable, as he did for all the bids received in response to
the ‘181 Solicitation, the Contracting Officer is not restricted to evaluating prices solely
from within the SDVOSB context when deciding to solicit or cancel the ‘181 Solicitation
and establishing the ‘276 Solicitation as a 100% small business set-aside instead. See
generally 48 C.F.R. § 15.404-1.
FAR Part 13 grants a contracting officer discretion to evaluate the fairness and
reasonableness of prices based on comparisons with the IGCE, incumbent pricing,
market research, and personal experience with similar contracts. This includes the
flexibility and discretion to evaluate factors not related to SDVOSBs in determining
whether an offeror’s price proposal was fair and reasonable. In protestor’s earlier bid
protest for the ‘276 Solicitation denied by the GAO, the GAO stated:
Neither 38 U.S.C. § 8127(d) nor its implementing regulations require the
contracting officer to utilize a specific type of analysis to decide whether the
agency can reasonably expect to make an award to an SDVOSB at a fair
and reasonable price. By their terms, section 13.106 and 15.404 of the FAR
apply where an agency is evaluating proposed prices in response to a
competition. They are not mandated where, as in this case, an agency is
conducting market research to assess the propriety of a set-aside decision.
Moreover, it defies logic that an agency would be limited to utilizing pricing
from a competition that was cancelled because all the prices were found to
be unreasonably high as the yardstick for reasonableness. Rather, under
such circumstances a contracting officer has the discretion to reasonably
utilize other price analysis techniques such as consideration of an IGCE
when making a set-aside decision.
In re: Veteran Shredding, LLC, B-417399, 2019 WL 2490468, at *4 (footnotes omitted)
(internal citations omitted). This court agrees with the GAO that the Contracting Officer,
pursuant to either FAR Part 13 or Part 15, was not required to conduct comparisons solely
within the SDVOSB context to determine fair and reasonable prices.
The Contracting Officer’s actions were not arbitrary or capricious when he acted
within his discretion to evaluate prices via market research in determining that the ‘276
Solicitation should be a 100% small business set-aside. Following the cancellation of the
‘181 Solicitation, the Contracting Officer conducted multiple rounds of market research.
In March 2018 and January 2019, the Contracting Officer searched government
databases using parameters to narrow down the possibilities of VOSB, SDVOSB, and
small businesses which may be capable of fulfilling the MVAHCS document destruction
services contract. The March 2018 market research produced a shortlist of VOSBs,
which, after reviewing, the Contracting Officer found none could perform the requirements
of the contract. A search for small businesses which might be able to perform the
MVAHCS document destruction services contract generated potentially, more positive
results than the search for VOSBs using the same NAICS and SIN codes.
The Contracting Officer issued a Sources Sought notice in June 2018 which
elicited responses from two SDVOSBs and two small businesses. The two SDVOSB
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responses came from [redacted] and protestor, vendors which had submitted some of the
high bids for the ‘181 Solicitation. Since the June 2018 Sources Sought was only three
months after the issuance and cancellation of the ‘181 Solicitation, it was not
unreasonable for the Contracting Officer to expect that the document destruction services
market had not significantly changed in the intervening three months. Additionally, the
Contracting Officer considered [redacted]’s and protestor’s behaviors during the ‘181
Solicitation. The Contracting Officer requested price revisions following the initial
submission of proposals in response to the ‘181 Solicitation because “none of the
quotations received were fair and reasonable because all pricing significantly exceeded
the IGCE.” The Contracting Officer “suggested that the 5 offerors review the incumbent
contractor’s pricing (Shred N Go) and provide final revised pricing” “[i]n an effort to obtain
fair and reasonable pricing” for the ‘181 Solicitation. [redacted] did not decrease its bid
after the Contracting Officer made his request and its proposed price remained
[redacted]% over the IGCE. Protestor decreased its bid, but still remained [redacted]%
above the IGCE for the ‘181 Solicitation. The Contracting Officer therefore had a
reasonable expectation that [redacted] and protestor would not “submit fair and
reasonable pricing that fell within the funding allocated for the re-solicitation of the
document destruction services requirement for MVAHCS.”
For the subsequent market research in January 2019, the Contracting Officer
issued another Sources Sought notice for the MVAHCS document destruction services
contract on January 23, 2019. [redacted], [redacted], and one small business responded.
As discussed above, [redacted] did not decrease its bid during the course of the ‘181
Solicitation and [redacted]’s had a history of high bids for document destruction services
solicitations at the Black Hills, St. Cloud, and Fargo VA Healthcare Systems. As a result,
the Contracting Officer did not act arbitrarily or capriciously when he concluded he could
not reasonably expect two or more VOSBs and SDVOSBs to make acceptable offers
based on the bidding patterns received for the ‘181 Solicitation, informal outreach, and
responses to two different Sources Sought notices.
Although the protestor alleges that new market research was done but “the IGCE
remained entirely unmodified,” there is no suggestion in the briefs or the Administrative
Record that the Contracting Officer’s approach was improper. The Contracting Officer
could reasonably conclude from his market research that two or more small businesses
could submit bids for the MVAHCS document destruction services contract. The
Contracting Officer’s search through government databases revealed more small
businesses than VOSBs or SDVOSBs which could potentially meet the contract
requirements. Additionally, two small businesses, [redacted] and [redacted] responded to
the June 2018 Sources Sought notice and were evaluated to be capable of providing the
requisite document destruction services. The incumbent small business vendor, Shred-
N-Go, twice expressed interest. The Contracting Officer also had knowledge about the
capabilities of five small businesses holding VA Healthcare document destruction
contracts in his geographic procurement area. The Contracting Officer, therefore, properly
could conclude that there was a reasonable expectation that two or more small
businesses, which could submit bids such that the ‘276 Solicitation could be set-aside for
small businesses.
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Protestor alleges the IGCE relied on an unreasonable, incumbent, contract price
of $44,000.00 and argues there is “no analysis regarding the reasonableness of Shred-
N-Go’s contract price.” Protestor’s allegation is not supported by the Administrative
Record. Although Amendment 001 to the ‘276 Solicitation stated the incumbent’s contract
was worth $44,000.00, the base year estimates for the ‘181 and ‘276 Solicitations were
$[redacted] and $[redacted], respectively. Additionally, $[redacted] was requisitioned on
January 8, 2019 for incumbent Shred-N-Go in Requisition 618-19-2-6133-0149 for a year
of “SERVICE/DOCUMENT DESTRUCTION.” (capitalization in original). Consequently,
protestor does not persuasively argue why the IGCE necessarily relied on an incumbent
price of $44,000.00 or why the reliance on incumbent pricing was unreasonable.
Protestor tries to rely on Nutech Laundry & Textile, Inc. v. United States, 56 Fed.
Cl. 588 (2003) to argue the IGCE “failed to demonstrate the basis for the estimate,” was
not accompanied by “a description of cost figures upon which it is based nor the basis”
and, therefore, was inappropriately used as a point of price comparison. The above-
captioned bid protest is distinguishable from Nutech. Unlike in Nutech, in which the
independent government estimate (IGE) was unaccompanied by substantiation, the
IGCE in this bid protest, although not exhaustively substantiated, stated it incorporated
past contract pricing, the GSA Federal Supply Schedule, and informal vendor quotes.
See id. at 594-95.
Protestor makes a conclusory allegation that SDVOSBs historically bid at higher
rates and since the IGCE does not distinguish if the historic contract prices used as a
factor in the preparation of the IGCE, the IGCE was invalid and claims that “[w]hether the
above-referenced [referencing vendor shredding prices from the GSA eLibrary] prices are
accurate or feasible is of no matter. What is important is the VA’s improper yet steadfast
reliance on an IGCE that: (1) lacks basic documentation and detail; and (2) does not
reflect easily-ascertained price information.” Protestor does not explain why the use of an
IGCE with contract pricing from small businesses is a material defect. If the small
businesses were performing similar services, as was the case in the shredding contracts,
it stands to reason that the Contracting Officer also could reasonably rely on the small
businesses’ pricing for the IGCE. As indicated above, protestor has the burden of proof
to show that the evidence demonstrates that the Contracting Officer’s conduct lacked a
reasonable basis for the price analysis conducted. Protestor does not persuasively
substantiate why the Contracting Officer’s use of IGCEs in cancelling the ‘181 Solicitation
or setting the ‘276 Solicitation as a 100% small business set-aside was defective. See,
e.g., URS Fed. Servs., Inc. v. United States, 142 Fed. Cl. 392 406 (2019) (“Because
[protestor] URS does not provide any basis for the Court to question the validity of the
historical data reflected in the IGE, the Court finds unpersuasive URS’s contention that a
remand is required to allow NASA to review the IGE and supply back-up notes and other
documentation to support it.”). When the VA documents past contract pricing, the GSA
Federal Supply Schedule, and informal vendor prices were utilized in forming the IGCE,
the IGCE is sufficiently documented and not “drawn out of thin air.” Id.
Moreover, the Contracting Officer was not arbitrary or capricious when he utilized
historic price and incumbent price comparisons in determining that all submitted SDVOSB
quotes in response to the ‘181 Solicitation exceeded the IGCE and when he cancelled
the ‘181 Solicitation. In the case of MED Trends, Inc. v. United States, a judge of this
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court found that the Department of Labor’s use of “historical data from previous similar
contracts” for the maintenance and operation of the Department of Labor’s Integrated
Management Information System was appropriate to determine whether an IGCE and the
price evaluation for reasonableness was appropriate under FAR Part 15. See MED
Trends, Inc. v. United States, 102 Fed. Cl. 1, 7 (2011). Similarly, in a case concerning
fitting, tailoring, and garment-pressing services, a judge of this court found that cost
comparisons to an IGCE based on historical costs was reasonable and satisfactory under
FAR Part 15. See Tech Sys., Inc. v. United States, 98 Fed. Cl. 228, 264 (2011). In the
above-captioned bid protest, incumbent Shred-N-Go’s pricing was utilized within the
IGCE as a point of comparison. Although protestor argues Shred-N-Go’s price was too
low because SDVOSBs historically bid at higher rates than non-veteran-owned small
businesses, the Administrative Record does not contain evidence that Shred-N-Go’s
pricing or historical inputs were unreasonably low so as to be arbitrary.
The Contracting Officer’s determination that SDVOSBs could not meet the Rule of
Two after comparing the submitted SDVOSB bids to the IGCE was not arbitrary or
capricious. After revision, the quote submitted in response to the ‘181 Solicitation for the
base and option years remained [redacted]% to [redacted]% over the IGCE. Therefore,
the Contracting Officer had a reasonable basis to determine that SDVOSBs could not
meet the Rule of Two when all quotes received for the ‘181 Solicitation exceeded the
IGCEs for both the ‘181 and ‘276 Solicitations by a large margin. In Veterans Contracting
Group, Inc., in which the protestor was represented by the same counsel who is counsel
of record in the above-captioned bid protest under review, the Federal Circuit affirmed the
decision of this court that the cancellation of a roof replacement solicitation was
reasonable because all of the bids received were higher than the government estimate.
The Federal Circuit stated:
VCG [Veterans Contracting Group] has not shown that the contracting
officer lacked any rational basis for cancelling the roof replacement
solicitation. First, the record discloses a reasonable motivation for
cancellation. . . . The only two acceptable bids proposed costs significantly
[30%] higher than the government’s estimate for the project. Thus, the
contracting officer rationally determined that these prices were
unreasonable.
Veterans Contracting Grp., Inc. v. United States, 920 F.3d at 806-07. The SDVOSB bids
received in response to the ‘181 Solicitation were even higher percentage-wise over the
government estimate than the bids received in Veterans Contracting Group, Inc. The
Federal Circuit discussed that a solicitation cannot be cancelled “solely to satisfy an
agency’s whim” such as the cancellation of a solicitation as a result of an agency’s
displeasure with the parcel of land selected for an agency’s headquarters. Id. at 806
(discussing Parcel 49C Ltd. P’ship v. United States, 31 F.3d 1147 (Fed. Cir. 1994)). The
cancellation of a solicitation may be done only if there is “a compelling reason to reject all
bids and cancel the invitation.” Id. (citing 48 C.F.R. § 14.404-1(a)(1)). The Federal Circuit
further stated:
A compelling reason may exist when “[a]ll otherwise acceptable bids
received are at unreasonable prices.” [48 C.F.R.] § 14.404-1(c)(6). VCG’s
44
bid was not acceptable because VCG was not listed in the VetBiz database
when bidding closed. See 38 U.S.C. § 8127(e). The only two acceptable
bids proposed costs significantly higher than the government’s estimate for
the project. Thus, the contracting officer rationally determined that these
prices were unreasonable. Under the circumstances, he had a compelling
reason to request cancellation.
Veterans Contracting Grp., Inc. v. United States, 920 F.3d at 806-07. Therefore, since
bids higher than the government estimate can be considered a compelling reason to
cancel a solicitation and the Administrative Record does not show any pretextual action
on the part of the Contracting Officer against protestor, the Contracting Officer was not
arbitrary or capricious in designating the ‘276 Solicitation to be a 100% small business
set-aside in the above-captioned bid protest.
CONCLUSION
For the reasons stated above, defendant’s cross-motion for judgment upon the
Administrative Record is GRANTED and protestor’s motion for judgment upon the
Administrative Record is DENIED. Protestor’s complaint is DISMISSED.
IT IS SO ORDERED.
s/ Marian Blank Horn
MARIAN BLANK HORN
Judge
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