Dell Fed. Sys., L.P. v. United States

906 F.3d 982

DELL FEDERAL SYSTEMS, L.P., Blue Tech Inc., Red River Computer Company, Inc., Plaintiffs-Appellees

Iron Bow Technologies, LLC, Govsmart, Inc., Ideal System Solutions, Inc., NCS Technologies, Inc., Plaintiffs

v.UNITED STATES, HPI Federal, LLC, CDW Government LLC, Defendants-Appellants

Alphasix Corporation, Insight Public Sector, Inc., Integration Technolgy Groups, Inc., Sterling Computers Corporation, Defendants

2017-2516, 2017-2535, 2017-2554

United States Court of Appeals, Federal Circuit.

Sealed Opinion Issued: September 24, 2018

Public Opinion Issued: October 5, 2018^*

Catherine Emily Stetson, Hogan Lovells US LLP, Washington, DC, argued for all plaintiffs-appellees. Plaintiff-appellee Dell Federal Systems, L.P. also represented by Michael F. Mason, Thomas Pettit, Christine Alice Reynolds.

Joseph Ashman, Commercial Litigation Branch, Civil Division, United States Department of Justice, Washington, DC, argued for defendant-appellant United States. Also represented by Martin F. Hockey, Jr., Robert Edward Kirschman, Jr., Chad A. Readler ; Elinor Kim, Contract and Fiscal Law Division, United States Army Legal Services Agency, Fort Belvoir, VA.

Jonathan Michael Baker, Crowell & Moring, LLP, Washington, DC, argued for defendant-appellant HPI Federal, LLC. Also represented by Daniel Ruben Forman, Elizabeth Ann Buehler, Robert Joseph Sneckenberg.

Michael J. Anstett, Fried, Frank, Harris, Shriver & Jacobson LLP, Washington, DC, for plaintiff-appellee Blue Tech Inc. Also represented by James J. McCullough, Brendan Connolly McNamara, Neaha P. Raol.

Gregory R. Hallmark, Holland & Knight, LLP, McLean, VA, for plaintiff-appellee Red River Computer Company, Inc. Also represented by Elizabeth Jochum, Tysons, VA; Rodney Mitchell Perry, Washington, DC.

David Michael Nadler, Blank Rome LLP, Washington, DC, for defendant-appellant CDW Government LLC.

Before Moore, Schall, and Wallach, Circuit Judges.

Wallach, Circuit Judge.

After initially awarding a contract for computer hardware to original awardees including Dell Federal Systems, L.P. ("Dell"), Blue Tech, Inc. ("Blue Tech"), and Red River Computer Company ("Red River") (collectively, "Appellees"), the U.S. Department of the Army ("the Army") instituted a corrective action¹ to reopen procurement and conduct additional discussions with offerors. J.A. 7009 (Corrective Action). Appellees challenged the decision to institute corrective action before the U.S. Court of Federal Claims, which granted Appellees’ cross-motions for judgment on the administrative record and permanently enjoined the Army from proceeding with its corrective action. See Dell Fed. Sys., L.P. v. United States , 133 Fed.Cl. 92, 107 (2017) ; see also J.A. 1 (Judgment).

Appellants HPI Federal, LLC ("HPI"), CDW Government, LLC ("CDW"), and the United States ("the Government") (collectively, "Appellants") appeal the opinion and order of the Court of Federal Claims. We possess jurisdiction pursuant to 28 U.S.C. § 1295(a)(3) (2012). Because the Court of Federal Claims did not apply the proper legal standard and we determine the Army’s corrective action was reasonable under that standard, we reverse.

BACKGROUND

I. The Solicitation

In May 2016, the Army solicited proposals for indefinite-delivery, indefinite-quantity contracts for "commercial-off-the-shelf" computer hardware such as desktop computers, tablet computers, and printers under Solicitation No. W52P1J-15-R-0122 ("the Solicitation"). J.A. 1341; see J.A. 1339–87. The total estimated contract value was $5 billion over a ten-year period. J.A. 1341. While the Army anticipated "mak[ing] at least eight [contract] awards, with up to five reserved for small business[es]," J.A. 1341, the Solicitation left open the possibility that "the [Army] ... may make as many, or as few, awards as deemed appropriate," J.A. 1384.

The Solicitation stated that the competition would be conducted in accordance with the procedures outlined in Federal Acquisition Regulations ("FAR") Part 15, "Contracting by Negotiation," and the Army would therefore award contracts to the lowest priced, technically acceptable offerors. J.A. 1384; see FAR 15.101-2(a) (2015) (explaining that the "lowest price technically acceptable source selection process is appropriate when best value is expected to result from selection of the technically acceptable proposal with the lowest evaluated price"). The Solicitation further stated offerors would be evaluated based on "an integrated assessment of three evaluation factors" of "Technical Approach, Past Performance, and Price," and any relevant attendant sub-factors. J.A. 1385. To be considered for an award, the Solicitation required offerors to achieve an " ‘Acceptable’ [rating] ... for the Technical Approach and its two sub-factors and the Past Performance [f]actor." J.A. 1385. For the two Technical Approach sub-factors, offerors were required to complete an attached "Equipment Submission Form" and "Business Process Form" in Microsoft Excel. J.A. 1381–82; see, e.g ., J.A. 1388–421 (Equipment Submission Form spreadsheet template), 1422–25 (Business Process Form spreadsheet template). For the Equipment Submission Form, offerors were instructed to "complete all cell entries" and "identify the Original Equipment Manufacturer (OEM)[ ] model and salient characteristics of each proposed item," and were advised that "[a]n incomplete or blank entry will indicate that the proposed item does NOT meet minimum requirements." J.A. 1382.

To evaluate the offerors’ bids, the Army’s evaluation team consisted of a Source Selection Authority ("SSA"), a Source Selection Evaluation Board ("SSEB"), and a Procuring Contracting Officer ("CO"). J.A. 1303. The SSEB would "review and evaluat[e] ... proposals against the [S]olicitation requirements and the approved evaluation criteria," J.A. 1307, and document their evaluation results in a Source Section Decision Document report, J.A. 5573. Based upon that report, the SSA would either "[m]ake a determination to award without discussions or enter into discussions" and make "the final source selection decision ... before contracts [were] awarded or announced." J.A. 1304.

The Army reserved the right "to conduct discussions and to permit [o]fferors to revise proposals if determined necessary by the [CO]." J.A. 1379; see J.A. 1468 (stating, in an amendment to the Solicitation, "the [Army] intends to award without conducting discussions"); see also FAR 15.306(d) (defining discussions as exchanges "undertaken with the intent of allowing the offeror to revise its proposal"). The Solicitation further explained that "[i]f discussions are opened, all proposals, to include small business proposals previously removed for unacceptability[,] ... will be included. After discussions are closed and final proposal revision[s] are received, the [Army] will separate proposals, re-list[,] and evaluate" in accordance with the procedures for the competition categories, i.e., full and open competition category, and reserved small business category. J.A. 1384.

II. Source Selection and Award

The Army received fifty-eight proposals, with fifty-two from small businesses. J.A. 5574. Three proposals were rejected as non-responsive, and of the fifty-five proposals that were evaluated, nine were deemed acceptable for the Technical Approach and Past Performance evaluation factors, see J.A. 5574; see also J.A. 5575–77 (detailing each party’s rating for each evaluation factor), with all nine final prices found to be fair and reasonable, see J.A. 5579–80. The SSEB said it did "not have a meaningful reason to open discussions" with offerors because doing so "would significantly delay award." J.A. 5534. In February 2017, the Army awarded nine contracts: five contracts under the small business category, including to Blue Tech and Red River, and four under the full and open competition category, including to Dell. J.A. 5573, 5580; see J.A. 5579 (identifying which awardees relate to each category).

III. Post-Award Protests and the Army’s Corrective Action

Following the award decision, HPI, CDW, and nineteen other unsuccessful offerors filed protests at the U.S. Government Accountability Office ("GAO"). See, e.g ., J.A. 6296–305 (CDW’s GAO protest), 6346–427 (HPI’s GAO protest). An Army memorandum for record ("MFR"), inter alia, summarizes how the "primary protest allegations" protested the Army’s evaluations as unreasonable because the proposal deficiencies the Army considered disqualifying were minor or "clerical errors and misunderstandings" resulting from Solicitation ambiguities that could have been resolved through clarifications as defined in FAR 15.306(a)(2).² J.A. 7019; see, e.g. , J.A. 6033, 6297. Several protests also argued that the Army should have engaged in discussions with offerors to resolve these spreadsheet-related misunderstandings, as required by Defense Federal Acquisition Regulations Supplement ("DFARS") 215.306(c),³ and to resolve claimed misunderstandings relating to the completion of the Excel spreadsheets. See, e.g ., J.A. 6367–69; see also DFARS 215.306(c)(1) ("For acquisitions with an estimated value of $100 million or more, contracting officers should conduct discussions." (emphasis added) ).

In response to the GAO protest, the Army conducted an internal review, see J.A. 7018, and issued its Notice of Corrective Action, informing GAO that it had decided "that it would be in the Army’s best interest to take corrective action to resolve all the protests," J.A. 7009 (emphasis added). The Army stated that such corrective action would "consist of the following: (1) opening discussions with all of the remaining offerors, including those who filed protests, (2) requesting final revised proposals, and (3) issuing a new award decision." J.A. 7009.

The Army also released its MFR documenting its rationale for proposing corrective action in light of the GAO protests. See J.A. 7018–21 (MFR). First, the CO explained how the Army’s counsel found that because the procurement...