Focus. Vol. 49, No. 31 August 22, 2007

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1 Reprinted from The Government Contractor, with permission of Thomson West. Copyright Further use without the permission of West is prohibited. For further information about this publication, please visit or call The Government Contractor Information and Analysis on Legal Aspects of Procurement Vol. 49, No. 31 August 22, 2007 Focus 320 FEATURE COMMENT: Ending Ambiguity The Federal Circuit Ends The COFC Debate On When A Bid Protest Challenging The Terms Of A Solicitation Must Be Filed Blue & Gold Fleet, LP v. U.S., 2007 WL (Fed. Cir. June 26, 2007) The U.S. Court of Appeals for the Federal Circuit ended an ongoing debate at the U.S. Court of Federal Claims by determining when a bid protest challenging the terms of a solicitation must be filed. On June 26, 2007, the Federal Circuit held that a party who has the opportunity to object to the terms of a government solicitation containing a patent error and fails to do so prior to the close of the bidding process waives its ability to raise the same objection subsequently in a bid protest action in the Court of Federal Claims. Blue & Gold Fleet, LP at *3. While the Federal Circuit called its decision one of first impression, id. at *3, it was more accurately a case of last impression because the Federal Circuit has applied this identical rule in other bid protest cases and various other contexts of contract cases. This Feature Comment provides a background of the Federal Circuit s previous decisions on this point, the varying decisions at the COFC (that the Federal Circuit in Blue & Gold harmonized), the basis for the Federal Circuit s ruling in Blue & Gold and what the rule could mean for practitioners before the COFC in future cases. The Federal Circuit s Patent Ambiguity Waiver Rule in the Bid Protest and Other Contexts Long before its Blue & Gold decision, the Federal Circuit was applying essentially the iden- tical waiver rule based on the duty to inquire regarding a patent ambiguity in both the bid protest and other contexts. As professors Nash and Cibinic noted, The patent ambiguity rule had its genesis in claims litigation but has taken on a life of its own in contract award controversies. Patent Ambiguities & Protests: Timing is the Key, 18 Nash & Cibinic Rep. 40. The Blue & Gold decision represents only an exclamation point on the patent ambiguity waiver doctrine, as the Federal Circuit previously applied it in both claims and protest contexts. The normal maxim to construe an ambiguity in a contract is contra proferentum, i.e., that a contract should be construed most strongly against the drafter, which usually is the Government when a private party enters into a contract with the U.S. See U.S. v. Seckinger, 397 U.S. 203, 210 (1970); HPI/ GSA-3C, LLC v. Perry, 364 F.3d 1327, 1334 (Fed. Cir. 2004). However, the law creates an exception if a contract or solicitation includes a patent ambiguity. Triax Pacific, Inc. v. West, 130 F.3d 1469, 1474 (Fed. Cir. 1998). A patent ambiguity is one that is obvious, gross, glaring, and otherwise blatantly ascertainable from the face of a solicitation. H & M Moving, Inc. v. U.S., 499 F.2d 660, 671 (Ct. Cl. 1974). A patent ambiguity triggers a contractor s duty of inquiry to the contracting officer before submitting a bid or proposal. See also Triax Pacific, 130 F.3d at If a contractor does not inquire, courts generally will construe a patent ambiguity against the contractor regardless of the reasonableness of the contractor s interpretation. Triax Pacific, 130 F.3d at The Federal Circuit stated that the patent ambiguity waiver rule was established to prevent contractors from taking advantage of the government, protect other bidders by assuring that all bidders bid on the same specifications, and materially aid the administration of government contracts by requiring that ambiguities be raised before the contract is bid, thus avoiding costly litigation after the fact. Cmty. Heating & Plumbing Co. v. Kelso, 987 F.2d 1575, 1580 (Fed. Cir. 1993). The result of

2 320 The Government Contractor not inquiring about a patent ambiguity effectively waives a contractor s ability to provide its reasonable interpretation and obtain damages in a contractual dispute with the Government. Prior to the Blue & Gold decision, the Federal Circuit applied the patent ambiguity waiver doctrine in bid protests without much fanfare on at least six occasions. At first, the Federal Circuit merely applied the then-existing rule at the General Services Board of Contract Appeals, which at the time had jurisdiction over some bid protests. See Lockheed Missiles & Space Co. v. Bentsen, 4 F.3d 955, 958 (Fed. Cir. 1993). That GSBCA rule, which mirrored the Government Accountability Office rule, proscribed protests of any alleged improprieties in the terms of a solicitation after offerors submitted proposals in negotiated procurements or after bid opening in sealed procurements. Compare 48 CFR (b)(3)(i) (1994) ( A ground of protest based upon alleged improprieties in any type of solicitation which are apparent before bid opening or the closing time for receipt of initial proposals shall be filed before bid opening or the closing time for receipt of initial proposals. ) with 4 CFR 21.2(a)(1) (2007) ( Protests based upon alleged improprieties in a solicitation which are apparent prior to bid opening or the time set for receipt of initial proposals shall be filed prior to bid opening or the time set for receipt of initial proposals. ). However, as the Federal Circuit continued to hear protest appeals from the GSBCA, it began marrying the GSBCA rule to the patent ambiguity waiver rule. See Statistica, Inc. v. Christopher, 102 F.3d 1577, (Fed. Cir. 1996) ( Statistica had a duty to seek clarification from the government [regarding the patent ambiguity], and its failure to do so precludes acceptance of its interpretation. ); Grumman Data Sys. Corp. v. Dalton, 88 F.3d 990, 998 (Fed. Cir. 1996) ( If a solicitation contains contract language that is patently ambiguous, a protester cannot argue, before the Board or before this court, that its interpretation is proper unless the protester sought clarification of the language from the agency before the end of the procurement process. ); Grumman Data Sys. Corp. v. Widnall, 15 F.3d 1044, 1047 (Fed. Cir. 1994) (noting that contra proferentum would apply had the alleged improprieties not been apparent prior to bidding and that the principle has been repeatedly applied in the field of government contracts ). The Federal Circuit precedent set the table for using the patent ambiguity waiver doctrine in an appeal from a COFC protest, which is not subject to the GS- BCA or GAO rule regarding alleged improprieties on the face of the solicitation. In Stratos Mobile Networks USA, LLC v. U.S., the protester successfully challenged the price terms of the solicitation at the COFC, claiming that the evaluation criteria in the challenged solicitation were latently ambiguous and, thereby, to be construed against the Government. 213 F.3d 1375, 1379 (Fed. Cir. 2000). On appeal, however, the Federal Circuit rejected this reading of the solicitation and concluded that the evaluation criteria were, at most, patently ambiguous, and that the protester s failure to seek clarification before submitting its offer precluded acceptance of the protester s interpretation of the ambiguity. Id. at In Stratos Mobile, the Federal Circuit relied on its decision in Statistica for the patent ambiguity waiver doctrine. Statistica, of course, was an appeal from the GSBCA and had, in part, relied on the GSBCA rule regarding the need to challenge improprieties before submitting a bid. By 2004, three years before Blue & Gold, the Federal Circuit had applied the patent ambiguity waiver doctrine to a bid protest appeal without relying on its prior bid protest decisions, instead citing only its decisions in claims cases. See NVT Techs., Inc. v. U.S., 370 F.3d 1153, 1162 (Fed. Cir. 2004) (citing, inter alia, H & M Moving and Triax Pacific). Thus, between its decisions in Stratos Mobile and NVT Techs., the Federal Circuit elucidated its intent to apply the patent ambiguity waiver doctrine in bid protest appeals from the COFC. The COFC Debates the Time Limit for a Challenge to the Terms of a Solicitation While the Federal Circuit was steadily applying the patent ambiguity waiver doctrine to bid protest appeals challenging the terms of a solicitation, various COFC judges conducted a parallel debate, often focusing on whether the COFC should apply the GAO timeliness rule for challenging improprieties on the face of a solicitation. See Protests of Solicitation Improprieties: Different Timeliness Rules, 20 Nash & Cibinic Rep. 41. For the most part, the COFC followed the same waiver doctrine that the Federal Circuit was shaping, but it usually discussed the doctrine without adopting GAO s timeliness rules and often without referring to the evolving bid protest jurisprudence of the Federal Circuit. See Aerolease Long Beach v. U.S., 31 Fed. Cl. 342 (1994) ( If an offeror recognizes an ambiguity or other problem in the solicitation, proper procedure dictates that the offeror challenge the problem before

3 Vol. 49, No. 31 / August 22, submission of an offer. If the offeror declines to challenge the problem, the reviewing tribunal may find that the offeror waived its right to protest. ), aff d tbl., 39 F.3d 1198 (Fed. Cir. 1994); see also Argencord Mach. & Equip., Inc. v. U.S., 68 Fed. Cl. 167, 175 n.14 (2005) ( Vendors cannot sit on their rights to challenge what they believe is an unfair solicitation, roll the dice and see if they receive award and then, if unsuccessful, claim the solicitation was infirm. ); EDP Enters., Inc. v. U.S., 56 Fed. Cl. 498, 500 (2003); N.C. Div. of Servs. for the Blind v. U.S., 53 Fed. Cl. 147, 165 (2002) ( [W]here an offeror recognizes a significant deficiency or problem in a solicitation (e.g., the erroneous application of a particular statute/regulation to the solicitation), the proper procedure for the offeror to follow is not to wait to see if it is the successful offeror before deciding whether to challenge the procurement, but rather to raise the objection in a timely fashion... ), aff d, 60 Fed. Appx. 826 (Fed. Cir. 2003) (unpub.); Novell, Inc. v. U.S., 46 Fed. Cl. 601, 615 (2000) ( Offerors may challenge the terms of the solicitation, but only prior to submission of final proposals. ); MVM, Inc. v. U.S., 46 Fed. Cl. 126, 130 (2000); Allied Tech. Group, Inc. v. U.S.s, 39 Fed. Cl. 125, 146 (1997) ( Objections to the face of a solicitation should be raised prior to submission of proposals. There is a duty to inquire and seek clarification of obvious omissions, inconsistencies, or discrepancies of significance, otherwise waiver occurs. ), aff d table, 173 F.3d 435 (Fed. Cir. 1998). However, some COFC decisions took a contrary view, declining to apply a waiver rule because it appeared to emanate from GAO rules that had no binding effect on COFC jurisdiction. See Transatlantic Lines LLC v. U.S., 68 Fed. Cl. 48, 52 (2005); Consolidated Eng g Servs., Inc. v. U.S., 64 Fed. Cl. 617, 624 (2005). For example, one decision concluded that the court s jurisdictional grant included no limitation on the timeliness of bid protest submissions. See Software Testing Solutions, Inc. v. U.S., 58 Fed. Cl. 533, 535 (2003) (noting that the Administrative Dispute Resolution Act (P.L ), 12(a), amended the Tucker Act to allow bid protest jurisdiction without regard to whether suit is instituted before or after the contract is awarded and that delay in bringing suit may apply to the question of laches, but such delay does not constitute an independent legal ground for rejecting a request for injunctive relief ); Miss. Dep t of Rehabilitation Servs. v. U.S., 58 Fed. Cl. 371, 373 (2003) ( It is by no means clear that the Court has the authority to limit its statutory jurisdiction any more than it has the authority to broaden its jurisdiction. ). In particular, one decision noted that the Federal Circuit (without citing its bid protest decisions) emphasized the narrowness of the patent ambiguity waiver doctrine and asserted that the application of the doctrine to bar objections to a solicitation s terms in a postaward protest would create an expansive and relatively absolute rule that would thus envelop the narrowly-tailored patent ambiguity rule. Wit Assocs., Inc. v. U.S., 62 Fed. Cl. 657, (2004). Nevertheless, in these cases, the Court considered the delay in raising concerns about a solicitation, but usually did so while analyzing whether to grant equitable relief to enjoin the U.S. With this background, the trial judge in Blue & Gold faced, inter alia, the question of whether to apply the waiver rule to a protester s challenge of the National Park Service s failure to apply the Services Contract Act to a solicitation for ferry services for Alcatraz Island. See Blue & Gold Fleet, LP v. U.S., 70 Fed. Cl. 487, 513 (2006). The COFC rejected the belated challenge to the terms of the solicitation, noting that the protester knew that the National Park Service did not intend to use the SCA before it submitted its proposal. Id. The Court concluded, Plaintiff has missed its chance to protest when it did not challenge the terms of the solicitation. Id. at Thus, the protester waived its challenge to the terms of the solicitation by not challenging the solicitation before submitting is proposal. Blue & Gold and the Patent Ambiguity Waiver Doctrine Come to the Federal Circuit On appeal, the Federal Circuit agreed with the trial judge that the protester s challenge regarding the omission of the SCA constituted a challenge to the terms of the solicitation WL , at *3. Next, the Federal Circuit unequivocally ruled that the doctrine applies in bid protests challenging the terms of a solicitation: We also hold that a party who has the opportunity to object to the terms of a government solicitation containing a patent error and fails to do so prior to the close of the bidding process waives its ability to raise the objection subsequently in a bid protest action in the Court of Federal Claims. Id. In clarifying this standard, the Federal Circuit identified a host of reasons for the rule, answered critics of the patent ambiguity waiver doctrine and harmonized the critical decisions. First, the Federal Circuit implicitly addressed the concerns expressed

4 320 The Government Contractor by several COFC decisions that the patent ambiguity waiver rule had no basis in the statutory jurisdiction granted to the COFC to hear bid protests by ADRA. See Wit Assocs., 62 Fed. Cl. at 661; Software Testing, 58 Fed. Cl. at 535. The Federal Circuit tethered the waiver rule to 28 USCA 1491(b)(3), added as part of ADRA 12(a) in That section mandates in bid protest cases that the COFC shall give due regard to the interests of national defense and national security and the need for expeditious resolution of the action (quoting 1491(b)(3) (emphasis added by the Federal Circuit)). The Federal Circuit noted, Recognition of a waiver rule, which requires that a party object to solicitation terms during the bidding process, furthers this statutory mandate WL , at *3. Second, the Federal Circuit discussed its precedents on the patent ambiguity waiver doctrine, recognizing that it applied the doctrine in previous bid protests WL , at *3 *4 (citing Stratos Mobile and Statistica). The Federal Circuit quoted its earlier decision in Cmty. Heating & Plumbing, which did not involve a bid protest, see quote above, for the proposition that equity served as an important basis for implementing the patent ambiguity waiver doctrine. The Federal Circuit explained the need for equity also justified application of the patent ambiguity waiver doctrine in the bid protest context. In the absence of a waiver rule, a contractor with knowledge of a solicitation defect could choose to stay silent when submitting its first proposal. If its first proposal loses to another bidder, the contractor could then come forward with the defect to restart the bidding process, perhaps with increased knowledge of its competitors. A waiver rule thus prevents contractors from taking advantage of the government and other bidders, and avoids costly after-the-fact litigation WL , at *4. Third, as another basis for the patent ambiguity waiver rule, the Federal Circuit recognized GAO s timeliness rule, which, as previously discussed, requires challenges to improprieties in a solicitation to be raised before bid opening in sealed procurements or the time for submitting a proposal in negotiated procurements. See 4 CFR 21.2(a)(1). The Federal Circuit noted that COFC decisions have applied the waiver rule, recognizing the utility of the GAO timeliness regulation... See N.C. Div. of Servs. for the Blind, Argencord, MVM, Allied Tech. and Aerolease. Fourth, the Federal Circuit noted that in its separate jurisdiction over patents appeals, it often applies the analogous doctrines of laches and estoppel to bar relief if no statute of limitations applies WL , at *5. And, in a master stroke, the Federal Circuit coopted the COFC decisions that critiqued the adoption of the waiver rule, noting that those decisions, like the Federal Circuit s patent decisions, applied analogous equitable doctrines in the bid protest context. Id. (citing, inter alia, Transatlantic, Wit Assocs., Software Testing and Miss. Dep t of Rehab. Servs. COFC decisions without mentioning that they rejected the waiver doctrine but acknowledged the use of other equitable maxims and doctrines). Thus, the Federal Circuit harmonized the body of COFC caselaw and concluded that for all the reasons considered, a protester waives its objections to a patently ambiguous solicitation if it does not challenge the solicitation before the close of the bidding process. Id. Some Questions that Remain for the Practitioner While the Federal Circuit brought together some contradictory precedent from the COFC and effectively tethered the patent ambiguity waiver doctrine to statute, it left some questions unanswered. What does closing of the bidding process mean?: In describing when a protester must challenge a patently ambiguous term of a solicitation, the Federal Circuit stated that waiver would occur unless the protester files its protest before closing of the bidding process. Blue & Gold, 2007 WL , at *3, *5. Interestingly, the Federal Circuit previously used a similar formulation in describing when a protest should be filed. See, e.g., Grumman Data Sys., 88 F.3d at 998 (using the term end of the procurement process ). Close of the bidding process could mean that a protest must be filed by the time a bid or proposal must be submitted, which is consistent with the GAO rule, or at any time prior to award, which has been hinted at by some COFC decisions. See, e.g., N.C. Div. of Servs. for the Blind, 53 Fed. Cl. at 165 (noting that a protest challenging the terms of the solicitation must be filed prior to the closing date for receipt of proposals or, at the latest, prior to contract award ). The first application of the Blue & Gold decision by the COFC appears to endorse the conclusion that a challenge must be made before the closing date for submitting proposals. Moore s Cafeteria Servs. v. U.S., 77 Fed. Cl. 180, 185 (2007) (concluding that a protester must challenge the terms of the solicitation

5 Vol. 49, No. 31 / August 22, during the bidding process and that waiver occurred because the protester did not object to the amended terms of the solicitation at the time of amendment). Considering the Federal Circuit s rationale for the waiver rule fairness to other contractors and the Government and its characterization of the Blue & Gold case as a pre-award protest, 2007 WL , at *1, this probably is the more favored reading and a protester should challenge the terms of the solicitation at the time of submission of an offer or bid, or a final proposal revision, if the challenge is to an amendment of a solicitation as in Moore s Cafeteria. Can protesters still protest first at GAO and then at the COFC?: While not specifically discussed, the Blue & Gold decision should leave untouched the ability of a protester to first protest at GAO and then later protest at the COFC if GAO does not provide full relief. See, e.g., Dismas Charities, Inc. v. U.S., 61 Fed. Cl. 191, 199 (2004). In this regard, the Competition in Contracting Act, 31 USCA 3556, specifically allows a protester to do just that: This subchapter does not give the Comptroller General exclusive jurisdiction over protests, and nothing contained in this subchapter shall affect the right of any interested party to file a protest with the contracting agency or to file an action in the United States Court of Federal Claims. CICA and the Rules of the Court of Federal Claims mirror each other with the expectation that the GAO record will become part of the administrative record at the COFC. 31 USCA 3556 ( In any such action based on a procurement or proposed procurement with respect to which a protest has been filed under this subchapter, the reports required by sections 3553(b)(2) and 3554(e)(1) of this title with respect to such procurement or proposed procurement and any decision or recommendation of the Comptroller General under this subchapter with respect to such procurement or proposed procurement shall be considered to be part of the agency record subject to review. ); RCFC, App. C, 22(u) (noting that the administrative record should normally include the record of any previous administrative or judicial proceedings relating to the procurement, including the record of any other protest of the procurement ). Once a protest ends at GAO, assuming a protest is timely filed at the COFC, the protester should be able to file its protest at the COFC because the protester will have clearly placed the Government and other contractors on notice of its challenge to the solicitation (also assuming the initial GAO protest was filed before the time for submitting proposals or bids). See, e.g., ABF Freight Sys., Inc. v. U.S., 55 Fed. Cl. 392, (2003) (concluding that a protest of the solicitation terms at the COFC was untimely because the protester filed its case with the COFC more than a month after GAO denied the protest and eight days after contract award). Will the COFC adopt the 10-day postaward limitation contained in the GAO rules?: Considering the Federal Circuit s decision, which relies more on the doctrines of waiver, equitable estoppel and laches, Blue & Gold, 2007 WL , at *5, it is unlikely that the COFC or Federal Circuit will adopt GAO s 10-day limitation for filing postaward bid protests. See 4 CFR 21.2(a)(2). Understandably, the Federal Circuit has tipped its hat to past GAO procedure, discussing it in Blue & Gold and adopting the CICA definition of interested party that applies to GAO protests. See Am. Fed n of Gov t Employees, AFL-CIO v. U.S., 258 F.3d 1294, 1302 (Fed. Cir. 2001). However, the tenor of Blue & Gold generally supports the use of equitable doctrines such as equitable estoppel and laches in postaward bid protests in the same manner that the patent ambiguity waiver doctrine is used in challenges to the terms of the solicitation. And, in fact, the Federal Circuit recognized this use of laches by citing a postaward protest in Blue & Gold, 2007 WL , at *5 (discussing, inter alia, CW Gov t Travel, Inc. v. U.S., 61 Fed. Cl. 559, (2004), for the proposition that the COFC has recognized doctrines such as laches as appropriate in determining timeliness). The Debate Moves to Whether an Ambiguity Is Latent or Patent: Now that the Federal Circuit unequivocally has explained that the patent ambiguity waiver doctrine governs challenges to a solicitation, more decisions considering this issue likely will consider whether the ambiguity is patent and waived, or latent and, therefore, reviewable. The Federal Circuit already has debated whether a challenged solicitation term is patently or latently ambiguous. See NVT Techs., 370 F.3d at 1162; id. at (dissent); see also Stratos Mobile, 213 F.3d at 1381 (reversing a COFC determination that the solicitation included a latent ambiguity). In NVT Techs., for example, the majority believed the ambiguity in the solicitation was patent, and the Federal Circuit applied the waiver doctrine. Id. at However, Judge Sharon Prost dissented and argued that the ambiguity was

6 320 The Government Contractor latent, and therefore the Federal Circuit should have considered the challenge timely. Id. at (dissent). This may be a preview of decisions to come. F This Feature Comment was written for the The Government Contractor by Daniel S. Herzfeld, a Senior Associate in the Government Contracts & Disputes Practice Group of Pillsbury Winthrop Shaw Pittman LLP. The opinions and views expressed in this article are those of the author and do not necessarily reflect those of Pillsbury Winthrop Shaw Pittman LLP.