HVF W., LLC v. United States

HVF WEST, LLC, Protestor, v. UNITED STATES, Defendant, v. LAMB DEPOLLUTION, INC., Defendant-Intervenor.

No. 20-541C

United States Court of Federal Claims

Redacted Version Issued for Publication: September 18, 2020¹

September 4, 2020

Post-Award Bid Protest; Mixed-Transaction Contract; Subject-Matter Jurisdiction; Standing; Cross-Motions for Judgment on the Administrative Record.

E. Sanderson Hoe, Covington & Burling LLP, Washington, D.C., for protestor. With him were Thomas Brugato, Andrew R. Guy, and Darby J. Rourick, also of Covington & Burling LLP, Washington D.C.

Ioana Cristei, Trial Attorney, Commercial Litigation Branch, Civil Division, United States Department of Justice, Washington, D.C., for defendant. With her were Douglas K. Mickle, Assistant Director, Commercial Litigation Branch, Robert E. Kirschman, Jr., Director, Commercial Litigation Branch, and Ethan P. Davis, Acting Assistant Attorney General, Civil Division. Of counsel was Gregory J. Gusching, Attorney Advisor, Defense Logistics Agency, Battle Creek, MI.

Shar Bahmani, Sacks Tierney P.A., Scottsdale, AZ, for defendant-intervenor.

OPINION

The post-award bid protest at issue in the above-captioned bid protest filed by protestor, HVF West, LLC (HVF) arises out of the award of a bridge contract issued by the Defense Logistics Agency, Disposition Services (DLA DS) of the Department of Defense, for the removal, demilitarization, mutilation and sale of government "scrap" awarded to defendant-intervenor, Lamb Depollution, Inc. (Lamb). HVF responded with the highest price offer to purchase the government property to be removed from government facilities, and subsequently demilitarized or mutilated prior to being disposed of by the contractor, pursuant to the bridge contract No. A0008025 (the Solicitation). After HVF was found to be "non-responsible," the contract was awarded to the defendant-intervenor, Lamb, which submitted the second highest price offer. Protestor argues that in finding it non-responsible, and then awarding the bridge contract to Lamb, DLA DS acted arbitrarily and capriciously, and seeks to permanently enjoin the award. The parties cross-moved for judgment on the administrative record. Defendant and defendant-intervenor also filed motions to dismiss, arguing that this court's bid protest jurisdiction, pursuant to 28 U.S.C. § 1491(b)(1) (2018), does not provide subject-matter jurisdiction to hear protestor's bid protest because the bridge contract at issue is one for the sale of government property, and that protestor lacks standing to challenge the award to Lamb.

By way of background, the Solicitation at issue in the case currently before the undersigned was preceded by a previous award of a solicitation by DLA DS, pursuant to Solicitation No. A0007598 (the '598 Contract), which also concerned the removal, demilitarization, mutilation, and sale of government property. The '598 Contract, also was awarded to Lamb, and the award also was protested by HVF in the United States Court of Federal Claims. See HVF West, LLC v. United States, Case No. 19-1308C. On November 22, 2019, Chief Judge Sweeney found in favor of HVF on the protest of the '598 Contract, finding that the Sales Contracting Officer (SCO) for DLA DS had "acted irrationally by not following the evaluation process set forth in the solicitation" when evaluating Lamb for award, and that HVF was prejudiced by the SCO's actions. See HVF West, LLC v. United States, 146 Fed. Cl. 314, 334-39 (2019) (HVF West I), recons. denied, 16 Fed. Cl. 451 (2020), appeal docketed, No. 20-1414 (Fed. Cir. Jan. 30, 2020). Chief Judge Sweeney also found that the United States Court of Federal Claims had "subject-matter jurisdiction over HVF's protest because the resulting contract from the solicitation at issue [the '598 Contract] was for a mixed transaction—the awardee would be buying property from the government while also providing a non-de minimis service to the government." See id. at 328-29. Chief Judge Sweeney also found that HVF had "demonstrated a direct economic interest in the DLA's award of the contract," and, therefore, HVF had standing to challenge the previous award to Lamb. See id. at 329-31. Chief Judge Sweeney ultimately granted HVF's request for injunctive relief, stating that

the appropriate remedy is for the SCO to either (1) cancel its contract with Lamb and determine a new awardee under the existing solicitation, or (2) cancel its contract with Lamb and rebid the procurement under a newsolicitation. The DLA must choose one of those options to cure the errors noted above.

HVF West I, 146 at 341. Subsequent to Chief Judge Sweeney's decision in HVF West I, DLA DS did not cancel the '598 Contract awarded to Lamb, but issued a stop-work order on the '598 Contract. On December 9, 2019, DLA DS issued the interim Solicitation in the current protest, No. A0008025, as a bridge contract in anticipation of an appeal of Chief Judge Sweeney's decision to the United States Court of Appeals for the Federal Circuit, which appeal was filed on January 30, 2020.² After DLA DS awarded the bridge contract to Lamb, HVF brought the above-captioned bid protest of the award of the bridge contract in this court.³

FINDINGS OF FACT

Solicitation No. A0008025, the solicitation of the bridge contract at issue in the above-captioned protest, No. 20-541C, stated that the "Invitation for Bid (IFB) is for a firm fixed price sales contract where the bid price is expressed in United States dollars/cents per pound," and that "[t]his is a sales contract for the sale of scrap pursuant to provision in Title 40, US Code, Chapter 5 wherein the Purchaser is agreeing to conduct Demilitarization and mutilation of the property as a condition of sale." (capitalization in original). The Solicitation further stated that DLA DS "expects the Purchaser to perform all requirements under this sales contract at the bid price provided by the Purchaser," and that "[t]he Agency guarantees to issue the total combined estimated annual generation of DEMIL/MUT [Demilitarized/Mutilated] property offered in the amount of 19,000,000 lbs. for sale within the terms of the Adjustment for Variation in Quantity or Weight clause (Sale by Reference (SBR) Part 4, Condition 5)." (capitalization in original).

The Solicitation defined "Demilitarize (DEMIL)" as:

The act of eliminating the functional capabilities and inherent military design features from DOD personal property. Methods and degree range from removal and destruction of critical features to total destruction by cutting, crushing, shredding, melting, burning, etc. DEMIL is required to prevent property from being used for its originally intended purpose and to prevent the release of inherent design information that could be used against theUnited States. DEMIL applies to DOD personal property in both serviceable and unserviceable condition.

(capitalization in original). "Mutilation (Scrap Classification (SCL) MUT)" is defined as a "process that renders material unfit for its originally intended purposes by cutting, tearing, scratching, crushing, breaking, punching, shearing, burning, neutralizing, etc. Required to have Certificate of DEMIL or MUT signed by certifier and verifier." (capitalization in original).

The scrap material at issue in the Solicitation, also referred to as "property stream," "may consist of, but is not limited to":

[A]luminum and steel scrap (light and heavy), copper, brass with nonmetallic material to include plastic and textile, fiberglass, Kevlar and body armor, satellite antennas, large weapon system and parts, wheeled and tracked vehicles (lead acid batteries may be included), tank track, trailers, containers, aircraft and aircraft components that are flight safety critical aircraft parts (FSCAP) and sensitive components and textiles requiring demilitarization and/or mutilation. This property consists of DEMIL codes B, C, D[,] E, F and Q. Purchaser may also receive approved DEMIL G property with Material Documented as Safe (MDAS) certificate and DEMIL P property with declassification certificate.

(capitalization in original).

The Solicitation also explained that

[t]his sale is being offered as a bridge sale due to pending litigation involving a previous award on Solicitation No. A0007598. If an appeal is taken in the pending litigation the Agency does not expect it to be resolved for at least 12 month [sic]. Accordingly, the performance period of the sales contract resulting from this IFB shall be limited to a 12-month base period, followed by two 12-month option periods that may be exercised at the Sales Contracting Officer's (SCO) discretion. The sales contract also contains an available six-month extension period that may be offered at the SCO's discretion at the end of each performance period, under the same terms and conditions of the sales contract. In the event the extension is utilized, the SCO shall advise the contractor in writing 30 calendar days prior to the expiration of the current period of performance period [sic]. The extension may be utilized in 30-day increments, a combination of 30-day increments, or in its entirety. The entire length of the sales contract, if all option periods and extension are used, shall not exceed three years.

(capitalization in original).

Section 3 of the Solicitation, titled: "General Terms and Conditions" stated:

This is not a service contract administered in accordance with the Federal Acquisition Regulations (FAR). This is a sales contract for the sale of scrap pursuant to provision [sic] in Title 40, US Code, Chapter 5 wherein the Purchaser is agreeing to conduct Demilitarization and mutilation of the property as a condition of sale. The Government is not responsible for any indirect or inconsequential expenses related to performance under this sales contract. The measure of the Government's liability, in any case where liability of the Government to the Purchaser has been established, shall not exceed refund of such portion of the

...