Case 1:15-cv-00158-MBH Document 25 Filed 03/15/15 Page 1 of 18 IN THE UNITED STATES COURT OF FEDERAL CLAIMS BID PROTEST Number 15-158C Judge Marian Blank Horn VISUAL CONNECTIONS, LLC, v. Plaintiff, THE UNITED STATES, Defendant, And KNIGHT POINT SYSTEMS, LLC, Defendant-Intervenor. PLAINTIFF S SUPPLEMENTAL BRIEF ON THE ISSUE OF WAIVER
Case 1:15-cv-00158-MBH Document 25 Filed 03/15/15 Page 2 of 18 TABLE OF CONTENTS TABLE OF AUTHORITIES............................................................................................ ii-iii STATEMENT OF THE CASE........................................................................................... 1-5 ARGUMENT.........................................................................................................5-13 I. REQUEST FOR QUOTATIONS NUMBER AHRQ-15-10003 WAS UNLAWFUL; IT VIOLATED REGULATION AND STATUTE BOTH....................................................5-9 II. THE WAIVER RULE IS NOT ABSOLUTE.............................................................. 9-11 III. CHALLENGES TO SOLICITATIONS WHICH VIOLATE STATUTE ARE NOT BARRED BY THE WAIVER RULE........................................................ 11-13 CERTIFICATE OF SERVICE.............................................................................................14 - i -
Case 1:15-cv-00158-MBH Document 25 Filed 03/15/15 Page 3 of 18 TABLE OF AUTHORITIES STATUTES 41 U.S.C. 152(3).............................................................................4, 8, 6, 12 41 U.S.C. 3307(e)(2)(B)(ii)...................................................................4, 6, 8, 12 41 U.S.C. 3307(e)(2)(D)............................................................................. 4 41 U.S.C. 6701-6707.............................................................................. 12 REGULATIONS Federal Acquisition Regulation 2.101, Definitions, 48 C.F.R. Ch. 1 (10-1-13 Edition)................................................................ 3, 5, 6-7, 7-8 Federal Acquisition Regulation 8.004, Use of other sources, 48 C.F.R. Ch. 1 (10-1-13 Edition)........................................................................... 5 Federal Acquisition Regulation Subpart 8.4, Federal Supply Schedules, 48 C.F.R. Ch.1 (10-1-13 Edition)..........................................................................2, 5 Federal Acquisition Regulation 8.404, Use of Federal Supply Schedules, 48 C.F.R. Ch.1 (10-1-13 Edition)....................................................................... 5-6, 9 Federal Acquisition Regulation 12.302, Tailoring of provisions and clauses for the acquisition of commercial items, 48 C.F.R. Ch. 1 (10-1-13 Edition)........................................................................... 4 - ii -
Case 1:15-cv-00158-MBH Document 25 Filed 03/15/15 Page 4 of 18 United States General Service Administration, GSA Acquisition Manual, GSAM 512.203(a)........................................................................................ 3, 8 United States General Service Administration, GSA Acquisition Manual, Part 538.................................................................................................. 3, 4 United States General Service Administration, GSA Acquisition Manual, GSAM 538.271(a)......................................................................................3, 6, 8 United States Government Accountability Office, Bid Protest Regulations, 4 C.F.R. 21.2(a)(i) (2014)................................................................................. 12 CASES Bannum, Inc. v. United States, Fed. Cir. No. 2014-5085, March 12 th, 2015, 2015 U.S. App. LEXIS 3850............................ 10-11 Blue & Gold Fleet, L.P. v. United States, 492 F.3d 1308 (Fed. Cir. 2007)................................................................ 10, 11, 12 CGI Federal, Inc. v. United States, Fed. Cir. No. 2014-5143, March 10 th, 2015, 2015 U.S. App. LEXIS 3685...............................7-8 Kingdomware Technologies, Inc. v. United States, 754 F.3d 923 (Fed. Cir. 2014)......................................................................... 6 Missouri Pacific Railroad Co. v. United States, 558 F.2d 596 (Ct. Cl. 1977).......................................................................... 13 - iii -
Case 1:15-cv-00158-MBH Document 25 Filed 03/15/15 Page 5 of 18 PLAINTIFF S SUPPLEMENTAL BRIEF ON THE ISSUE OF WAIVER STATEMENT OF THE CASE Request for Quotations Number AHRQ-15-10003 conducted by the United States Department of Health & Human Services sought Quotations for Information Technology (IT) Professional Support Services only from those Service-Disabled, Veteran-Owned, Small Business Concerns holding one of the many GSA Schedule 70, SIN 132-51, Multiple-Award Schedule Contracts. Because this Acquisition was set-aside only for Service-Disabled, Veteran-Owned, Small Business Concerns, the Service-Disabled, Veteran-Owned, Small Business Concern awarded the proposed Task Order must itself have provided at least one-half of the cost (direct labor, labor-specific overhead, and general and administrative expense) incurred for personnel. These are not standard commercial terms and conditions. ECF Document Number 22-1, pages 9 through 10 of 18, filed March 4 th, 2015. Competition was open to all concerns holding one of the many General Services Administration (GSA) Information Technology Schedule 70 Multiple Award Schedule Contracts (http://gsa.gov/- portal/content/104506, last visited February 27 th, 2015), and open only to such of those concerns - 1 -
Case 1:15-cv-00158-MBH Document 25 Filed 03/15/15 Page 6 of 18 otherwise qualified under the non-standard commercial terms and conditions which were imposed. This Competition was conducted under Federal Acquisition Regulation Subpart 8.4 Federal Supply Schedules, 48 C.F.R. Ch. 1 (10-1-13 Edition). ECF Document Number 22-1, page 5 of 18, filed March 4 th, 2015. IT Support Services are required for continued Application maintenance and end-user support of the United States Department of Health & Human Services Agency for Healthcare Research and Quality s (AHRQ s) deployed software systems. Based on requirements identified in a Statement of Work, Offerors were to propose their own staffing levels and set out relevant qualifications and experience of proposed personnel. It was up to each Offeror to describe its plan for organizing, staffing, and managing the Tasks required in the Statement of Work. All this was to be accomplished in a page and format-limited Technical Response. ECF Document Number 22-1, pages 10 through 11 of 18, filed March 4 th, 2015. IT Support Services at estimated labor-hour ceiling Prices and at rates discounted from publicly-announced GSA IT Schedule 70 pricing were sought for a Base Year and four one-year Options. Included also was an unfunded Option for Application Development; this unfunded Op- - 2 -
Case 1:15-cv-00158-MBH Document 25 Filed 03/15/15 Page 7 of 18 tion had a labor-hour ceiling Price of $7,500,000. A single labor-hour type GSA Task Order was to be issued. ECF Document Number 22-1, page 11 of 18, filed March 4 th, 2015. In the GSA Acquisition Manual (GSAM) GSA prescribes policies and procedures for Multiple-Award Schedule Contracts. GSAM Part 538 allows these Multiple Award Schedule Contracts only for commercial items as defined in FAR 2.101. Pricing of these Contracts is to be negotiated as a discount from established catalog prices. GSAM 538.271(a). And GSAM further provides that the contracting officer shall use the policies in FAR Part 12 under Multiple-Award Schedule Contracts. GSAM 512.203(a). The GSAM is available online at http://www.acquisition.gov/- gsam/current/pdf/gsam.pdf, last visited March 13 th, 2015. Federal Acquisition Regulation Subpart 2.101 Definitions defines Commercial item at subparagraph (6) as [s]ervices of a type offered and sold competitively in the commercial marketplace based on established catalog or market prices for specific tasks performed or specific outcomes to be achieved and under standard commercial terms and conditions.... 48 C.F.R. Ch. 1 (10-1-13 Edition) (Emphasis added). - 3 -
Case 1:15-cv-00158-MBH Document 25 Filed 03/15/15 Page 8 of 18 Federal Acquisition Regulation Subpart 12.302 Tailoring of provisions and clauses for the acquisition of commercial items provides the following at subparagraph (c) Tailoring inconsistent with customary commercial practice: The contracting officer shall not tailor any clause or otherwise include any additional terms or conditions in a solicitation or contract for commercial items in a manner that is inconsistent with customary commercial practice for the item being acquired unless a waiver is approved in accordance with agency procedures. The request for waiver must describe the customary commercial practice found in the marketplace, support the need to include a term or condition that is inconsistent with that practice and include a determination that use of the customary commercial practice is inconsistent with the needs of the Government.... 48 C.F.R. Ch. 1 (10-1-13 Edition). Only when Agencies follow GSAM procedures requiring the delivery of commercial services at discounts from published catalog Prices under Task Orders obligating Agencies to standard commercial terms and conditions, are they deemed, under 41 U.S.C. 152(3), to be using competitive procedures when they make use of GSA Multiple-Award Schedule Contracts. Task Orders issued after Competitions among the many holders of GSA Multiple-Award Schedule Contracts may include only those clauses determined to be consistent with standard commercial practice. 41 U.S.C. 3307(e)(2)(B)(ii), (e)(2)(d). - 4 -
Case 1:15-cv-00158-MBH Document 25 Filed 03/15/15 Page 9 of 18 Quotations were received on July 28 th, 2014. No Offeror questioned the use of Federal Acquisition Regulation Subpart 8.4 Federal Supply Schedules even though, since this Acquisition was set-aside and restricted to only Service-Disabled, Veteran-Owned, Small Business Concerns, this Acquisition, as defined by Federal Acquisition Regulation Subpart 2.101 Definitions, was not for a Commercial Item because the proposed Task Order would require that the Service- Disabled, Veteran-Owned, Small Business Concern awarded the proposed Task Order must itself have provided at least one-half of the cost (direct labor, labor-specific overhead, and general and administrative expense) incurred for personnel, and these are not standard commercial terms and conditions. ECF Document Number 22-1, pages 13 through 14 of 18, filed March 4 th, 2015. ARGUMENT I. Request For Quotations Number AHRQ-15-10003 Was Unlawful; It Violated Regulation And Statute Both. Federal Acquisition Regulation Subpart 8.004 Use of other sources separates Agency use of GSA s Multiple-Award Schedule Contracts from Agency use of Service-Disabled, Veteran-Owned, Small Business Concern set-asides, creating a preference for the former, not the latter. 48 C.F.R. Ch. 1 (10-1-13 Edition). Federal Acquisition Regulation Subpart 8.404 Use of Federal - 5 -
Case 1:15-cv-00158-MBH Document 25 Filed 03/15/15 Page 10 of 18 Supply Schedules at subparagraph (a) General provides that Agencies shall not seek competition outside of [GSA s Multiple-Award Schedule Contracts]. 48 C.F.R. Ch. 1 (10-1-13 Edition). (Emphasis added). Kingdomware Technologies, Inc. v. United States, 754 F.3d 923, 925 (Fed. Cir. 2014). Request For Quotations Number AHRQ-15-10003 unlawfully sought competition outside GSA s Multiple Award Schedule Contracts since it was a Task Order Competition among the many holders of GSA Information Technology Schedule 70 Multiple Award Schedule Contracts and also it was also set-aside and restricted only to those Offerors which are Service-Disabled, Veteran-Owned, Small Business Concerns. It cannot have been both. It was not competitive procedures as required by 41 U.S.C. 152(3) and it must have been withdrawn. This set-aside and restriction only to those Offerors which also are Service-Disabled, Veteran- Owned, Small Business Concerns likewise precluded this Request for Quotations from complying with 41 U.S.C. 3307(e)(2)(B)(ii) and GSAM 538.271(a) because it imposed non-standard commercial terms and conditions (the Service-Disabled, Veteran-Owned, Small Business Concern awarded the proposed Task Order must itself have provided at least one-half of the cost (direct labor, labor-specific overhead, and general and administrative expense) incurred for personnel). Federal Acquisition Regulation Subpart 2.101 Definitions which defines Commercial item at - 6 -
Case 1:15-cv-00158-MBH Document 25 Filed 03/15/15 Page 11 of 18 subparagraph (6) imposes a two-fold definition of commercial services: (1) these services must be offered and sold competitively in the commercial marketplace based on established catalog or market prices, and (2) these services must be obtained under standard commercial terms and conditions. There is no issue about the commerciality of these IT Support Services required for AHRQ: it was on the premise of their published catalog Prices that the Offerors here were qualified for one of the 5,000 GSA Information Technology Schedule 70 Multiple Award Schedule Contracts, and this then enabled them to compete for the Task Order proposed by Request For Quotations Number AHRQ-15-10003. Confusion about the requirement that Support Services required for delivery under Task Orders resulting from Competitions among holders of GSA Multiple Award Schedule Contracts be obtained under standard commercial terms and conditions, the second aspect of a Commercial item, was resolved last Tuesday by the United States Court of Appeals for the Federal Circuit in CGI Federal, Inc. v. United States, Fed. Cir. No. 2014-5143, March 10 th, 2015, 2015 U.S. App. LEXIS 3685. That Case had arisen when the Centers for Medicare and Medicaid Services, one of AHRQ s sister Agencies, placed non-standard payment terms on a Task Order proposed - 7 -
Case 1:15-cv-00158-MBH Document 25 Filed 03/15/15 Page 12 of 18 by yet another Competition among holders of GSA Multiple Award Schedule Contracts. Id., 2015 U.S. App. LEXIS 3685 *16. This lower Court had held that the two-fold restriction of Federal Acquisition Regulation Subpart 2.101 Definitions which defines Commercial item at subparagraph (6) applied only to the GSA Multiple Award Schedule Contracts, not to the proposed Task Order, and thus had dismissed the Case before it. Id., 2015 U.S. App. LEXIS 3685 *16-*17. The Federal Circuit instead looked to the overall Legislative purpose of the Federal Acquisition Streamlining Act of 1994 which made Statutory revisions as needed to facilitate the acquisition of commercial products, S. REP. NO. 103-259, at 1 (1994), and reversed. Id., 2015 U.S. App. LEXIS 3685 *14 Request For Quotations Number AHRQ-15-10003 violated 41 U.S.C. 152(3) because it proposed a Task Order obligating the Awardee to non-standard terms and conditions, and it violated 41 U.S.C. 3307(e)(2)(B)(ii) because it incorporated a clause inconsistent with standard commercial practice. This was likewise a violation of Federal Acquisition Regulation Subpart 2.101 Definitions which defines Commercial item at subparagraph (6) and a violation of GSAM 538.271(a) and GSAM 512.203(a). - 8 -
Case 1:15-cv-00158-MBH Document 25 Filed 03/15/15 Page 13 of 18 Request For Quotations Number AHRQ-15-10003 violated Federal Acquisition Regulation Subpart 8.404 Use of Federal Supply Schedules at subparagraph (a) General because it sought competition outside GSA s Multiple Award Schedule Contracts since it was both a Task Order Competition among the many holders of GSA Information Technology Schedule 70 Multiple Award Schedule Contracts and because it was also set-aside and restricted only to those Offerors which are Service-Disabled, Veteran-Owned, Small Business Concerns. II. The Waiver Rule Is Not Absolute. It would have been futile even had Visual Connections been gifted with the clairvoyance needed to challenge before the time set for receipt this Request for Quotations combination of both a Task Order Competition among the many holders of GSA Information Technology Schedule 70 Multiple Award Schedule Contracts and a set-aside and restriction only to those Offerors which are Service-Disabled, Veteran-Owned, Small Business Concerns. Federal Acquisition Regulation Subpart 8.4 Federal Supply Schedules provides no implementation of requirements for ordering from among the many GSA Multiple Award Schedule Contracts when the Acquisition requires furnishing services subject to non-standard commercial terms and conditions. - 9 -
Case 1:15-cv-00158-MBH Document 25 Filed 03/15/15 Page 14 of 18 The Waiver Rule adopted by the Federal Circuit is limited to those patent ambiguities which can be remedied by an amended Acquisition: These reasons underlying the patent ambiguity doctrine apply with equal force 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. Accordingly, the same reasons underlying application of the patent ambiguity doctrine against parties to a government contract speak to recognizing a waiver rule against parties challenging the terms of a government solicitation. Blue & Gold Fleet, L.P. v. United States, 492 F.3d 1308, 1314 (Fed. Cir. 2007) (Emphasis added). Here an entirely new Acquisition is required; not just a restart. Bannum, Inc. v. United States, Fed. Cir. No. 2014-5085, March 12 th, 2015, 2015 U.S. App. LEXIS 3850, is another in the string of Blue & Gold Fleet Cases, and this Decision was issued by the Federal Circuit just this last Thursday. There an Offeror challenged Solicitation terms, not because they were unlawful, but instead because the Solicitation had been amended to ask for pricing confirmation after incorporating updated wage rates. Id., 2015 U.S. App. LEXIS 3850, *3. The Federal Circuit found the Offeror had conveyed only its dissatisfaction and had not challenged the Solicitation this was insufficient. Id., 2015 U.S. App. LEXIS 3850, *7-*8. - 10 -
Case 1:15-cv-00158-MBH Document 25 Filed 03/15/15 Page 15 of 18 The Bannum decision confirms just the point made above the Waiver Rule exists to enforce timely resolution of Solicitation challenges when a Solicitation may be amended to remedy the challenge. The Waiver Rule is not absolute and does not encompass challenges to unlawful Solicitations which violate Statute: Our waiver rule implements Congress s directive in the Administrative Dispute Resolution Act (ADRA) of 1996, Pub. L. No. 104-320, 12, 110 Stat. 3870, 3874, that courts shall give due regard to... the need for expeditious resolution of protest claims. 28 U.S.C. 1491(b)(3); see Blue & Gold, 492 F.3d at 1313. A waiver rule implements this statutory mandate by reducing the need for the inefficient and costly process of agency rebidding after offerors and the agency ha[ve] expended considerable time and effort submitting or evaluating proposals in response to a defective solicitation. Blue & Gold, 492 F.3d at 1314 (internal quotation marks and citation omitted). In this context, clarity is not just readily achievable but important. Requiring that the prescribed formal routes for protest be followed (to avoid waiver) reduces uncertainty about whether the issue is joined and must be resolved, and thereby helps prevent both the wasted and duplicative expenses (of all bidders and the government) and the delayed implementation of the contract that would likely follow from laxer standards of timely presentation of solicitation challenges. Id., 2015 U.S. App. LEXIS 3850, *8-*9. III. Challenges To Solicitations Which Violate Statute Are Not Barred By The Waiver Rule. If Pre-Award Procurement Protests are not timely filed, are Agencies then allowed to ignore the law when Solicitations are facially noncompliant with Statute? Blue & Gold Fleet considered this very question. At issue in Blue & Gold Fleet was a missing requirement from a Solicitation - 11 -
Case 1:15-cv-00158-MBH Document 25 Filed 03/15/15 Page 16 of 18 for a successor concession Contract, a requirement that the successful Offeror pay the wages and benefits required by the Service Contract Act, 41 U.S.C. 6701-6707. This lower Court adopted the prudential timeliness Bid Protest Regulation self-made by GAO, 4 C.F.R. 21.2(a)(i) (2014), and dismissed that Post-Award Procurement Protest; the disappointed Offeror and putative Concessionaire then appealed to the Federal Circuit. Id., 492 F.3d, at 1312. In Blue & Gold Flee the Federal Circuit considered the possibility that noncompliance with GAO s prudential timeliness Bid Protest Regulation, if it were categorically applied, might allow Agencies to avoid mandatory Statutory requirements. But doing so, the Federal Circuit concluded that Blue & Gold Fleet was a Case of no-harm, no-foul, that there appear[ed] to be no harm to the intended beneficiaries of the Service Contract Act because the affected employees of the Concessionaire had Actions pending in the Northern District of California seeking imposition of Service Contract Act requirements, all of which avoided a need for the Federal Circuit to rule on that issue. Id., 492 F.3d, at 1315-1316. AHRQ s noncompliance with the Statutory mandates of 41 U.S.C. 152(3) and 41 U.S.C. 3307(e)(2)(B)(ii) is more than an alleged impropriety which can be waived by categorical application of the prudential timeliness Bid Protest Regulation devised by GAO and then subsequently - 12 -
Case 1:15-cv-00158-MBH Document 25 Filed 03/15/15 Page 17 of 18 adopted in Blue & Gold Fleet. There is a difference between Agency noncompliances with Agency Requirements and Regulations, noncompliances which can be considered as alleged improprieties, and Agency noncompliances with Statutes, Statutory mandates which cannot be waived. Missouri Pacific Railroad Co. v. United States, 558 F.2d 596, 599 (Ct. Cl. 1977) ( The requirements imposed by Treasury regulations must be distinguished from those imposed by statute; the former requirements may be waived while the latter may not. ). Respectfully submitted, /s/ Cyrus E. Phillips IV Cyrus E. Phillips IV Virginia State Bar Number 03135 March 15 th, 2015 ALBO & OBLON, L.L.P. Courthouse Plaza 2200 Clarendon Boulevard, Suite 1201 Arlington, Virginia 22201-3331 Telephone: (804) 776-0660 Facsimile: (703) 312-0415 Mobile: (703) 819-5944 Electronic Mail: lawyer@procurement-lawyer.com Attorney of record for Plaintiff, Visual Connections, LLC. - 13 -
Case 1:15-cv-00158-MBH Document 25 Filed 03/15/15 Page 18 of 18 CERTIFICATE OF SERVICE I hereby certify, under penalty of perjury, that on Sunday, March 15 th, 2015 a true and complete copy of this Plaintiff s Supplemental Brief on the Issue of Waiver was filed electronically via the Court s Electronic Case Filing System, through which notice of this filing will be sent to: Shari A. Rose, Esq. Electronic Mail: Shari.Rose@usdoj.gov Attorney of record for Defendant, United States Department of Health & Human Services, Agency for Healthcare Research and Quality. Thomas O. Mason, Esq. Electronic Mail: tmason@cooley.com Attorney of record for Defendant-Intervenor, Knight Point Systems, LLC. /s/ Cyrus E. Phillips IV Cyrus E. Phillips IV - 14 -