SLS Fed. Servs. v. United States, 22-1215

SLS FEDERAL SERVICES, LLC, Plaintiff, v. THE UNITED STATES, Defendant, and JACOBS PROJECT MANAGEMENT CO., Intervenor.

No. 22-1215

United States Court of Federal Claims

January 3, 2023

Re-filed: January 10, 2023 ^[1]

Bid protest; post-award bid protest; price reasonableness discussions; FAR 15-404-1; DFARS 215.306; Blue & Gold injunction

Kyle R. Jefcoat, Washington, DC, for plaintiff, SLS Federal Services with whom were David R. Hazelton, Leah Friedman Genevieve Hoffman, W. Allen Perry, and W. Blake Page, of counsel.

Liridona Sinani, Attorney, United States Department of Justice, Commercial Litigation Branch, with whom were Brian M. Boynton, Principal Deputy Assistant Attorney General, Patricia M. McCarthy, Director, and Douglas K. Mickle, Assistant Director, for defendant. Nicolle A. Vasquez, Naval Facilities Engineering Systems Command Atlantic, of counsel.

Robert J. Symon, Washington, DC, for intervenor, Jacobs Project Management Co., with whom was Patrick R. Quigley and Lisa A. Markman of counsel.

OPINION

ERIC G. BRUGGINK SENIOR JUDGE

This is a post-award bid protest of the Naval Facilities Engineering Systems Command's (agency) decision to award indefinite-delivery, indefinite-quantity contracts to six contractors. Plaintiff, SLS Federal Services, LLC, argues that the agency ignored regulatory requirements, failed to follow the solicitation's terms, and engaged in an unequal and arbitrary evaluation of its proposal. As a result, SLS seeks a permanent injunction against the agency's decision.

The matter is now fully briefed on cross-motions for judgment on the administrative record. Oral argument was held on December 8, 2022. We sustain SLS's protest and, for the reasons set out below, enjoin the agency from proceeding with performance of the contracts.

BACKGROUND

From time to time, the Department of Defense and other federal agencies must respond to global emergencies, like natural disasters or humanitarian conflicts. Responding to global emergencies often requires, among other things, construction and engineering services. To secure those services, agencies sometimes enter into "global contingency construction" contracts in which a contractor's performance can arise anytime and anywhere. Administrative R. (AR) 251.

In this case, the agency issued Solicitation N62470-20-R-5003, looking to award approximately four indefinite delivery, indefinite quantity contracts for global contingency construction. As for how those contracts would be awarded, the agency was clear: awards would be made to the contractors whose offers "represented the best value to the Government." AR 822. And best value, the agency instructed, would be determined through a tradeoff analysis that considered both cost and non-cost factors.^[2] Once the contracts were awarded, the awardees would then later compete for either cost-plus-award-fee or firm fixed price task orders with a maximum contract value of $5 billion.

Most important within the agency's tradeoff analysis was cost. To consider cost, the solicitation required contractors to submit cost proposals, which the agency would analyze for both cost and price reasonableness. That said, the agency-whether by oversight or intention-requested only cost data, like hourly labor rates and indirect ceiling rates. Those figures, while helpful to understand a contractor's reimbursable expenses, did not include any anticipated profit and left a hole in the agency's evaluation. That is because the agency planned to control cost by using firm fixed price "task orders whenever possible." AR 32. In fact, of the two contract-line-item numbers (CLIN), the agency explained that over half of all work would be performed under CLIN 002 as firm fixed price task orders. See AR 252 (anticipating that $3 billion of all task orders would be firm fixed price).

More broadly, the agency's evaluation of offers involved three entities, and the interplay between them worked as follows. First, the Evaluation Board would independently evaluate each factor outlined in the solicitation. It would then compile its review into essentially two reports, one for non-cost factors and one for cost. After that, the Advisory Council would review the Board's findings, consolidate the findings into its own report, and "make[] an award recommendation." AR 258. At that point, the Source Selection Authority would review the recommendations, and if it believed that discussions were unnecessary, it would select the contractor whose "proposal offers the best value to the government." Id.

The agency advised contractors that it intended to award contracts without discussions. It reserved the right to use them if the need arose, but it never did. Instead, at nearly every stage of evaluating offers, the agency reaffirmed its intent to award contracts without discussions because, in its view, the offers were clearly awardable.

In the end, the agency awarded contracts to six (out of nine) bidders but not SLS.^[3] Unhappy with the agency's awards, SLS filed a protest with the Government Accountability Office (GAO). Among other things, SLS argued that the agency should have conducted discussions and that it also erroneously analyzed price reasonableness. Finding "potential merit" in SLS's "price reasonableness" argument, the agency agreed to take corrective action so that it could "address the evaluation of the proposals, including, but not limited to, price reasonableness." AR 11389. On that basis, the GAO dismissed SLS's protest.

Nearly a year after the notice of corrective action, the agency announced that the awards would remain the same. In the Evaluation Board's report, it disclosed that the only corrective step it took was to remove an "inappropriate CPARS evaluation." AR 11417. Outside of that, "[t]here were no additional amendments or requests for proposal revisions made in pursuance of th[e] corrective action." Id. Because little changed from the agency's initial evaluation, SLS filed a second protest with the GAO. Disputes over document production then ensued, so SLS filed its protest with this court.

DISCUSSION

I. The agency's corrective action did not cure the original procurement defect.

We review bid protests in accordance with the standards laid out in the Administrative Procedure Act (APA). Advanced Data Concepts, Inc. v. United States, 216 F.3d 1054, 1057 (Fed. Cir. 2000) (citing 28 U.S.C. § 1491(b)(1) (1996)). Under the APA, an agency's actions cannot be "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." 5 U.S.C. § 706(2)(A) (2018). In the context of corrective action, that means that an agency's decision must be "reasonable under the circumstances and appropriate to the impropriety." PGLS, Inc. v. United States, 152 Fed.Cl. 59, 69 (2020).

A. Blue & Gold does not bar SLS's challenge to the agency's corrective action.

SLS complains that the agency was incapable of evaluating price reasonableness because the agency never requested or considered any pricing information. At its core, SLS's broader argument amounts to a challenge to the solicitation's structure. In effect, SLS argues that the solicitation did not request enough information for the agency to perform its promised price reasonableness analysis.

Jacobs, as intervenor in this protest, answers that SLS waived its price reasonableness argument, relying on Blue & Gold Fleet v. United States. 492 F.3d 1308, 1313 (Fed. Cir. 2007). It explains that SLS should have noticed the solicitation's defect and challenged it before the competition concluded. Because SLS did not do so, its challenge is untimely.

In a typical bid protest, Jacobs's waiver defense would likely prevail. Indeed, SLS conceded at oral argument that its GAO challenge could have been dismissed as too late. The agency could have raised the waiver defense at GAO (and then at this court), and, if it had, the protest would be over-at least as far as price reasonableness is concerned. What makes this protest atypical, however, is that those events never occurred. The agency did not raise the waiver defense at GAO. Instead, the agency promised to take corrective action. That choice allows SLS to challenge the agency's execution of that corrective action. See Amazon Web Servs., Inc. v. United States, 153 Fed.Cl. 602, 607 (2021). The agency cannot later (and for the first time) hide behind Blue & Gold when its corrective steps fail to solve the problem.^[4]

B. The agency failed to correct its improper price reasonableness analysis.

With SLS clearing the Blue & Gold hurdle, we turn to the merits of SLS's price reasonableness argument. Recall that SLS takes issue with the agency's solicitation. In particular, it contends that the agency failed to request any pricing information, which, in turn, made it impossible to analyze price reasonableness. The essence of SLS's position is this. A problem existed because the solicitation failed to request pricing information. At the GAO, the agency promised to take corrective action, which was assertedly to address a possible price reasonableness defect. Yet, in the time between the notice of corrective action and the new awards, the agency never acquired the missing price data. As a result, the agency remained unable to analyze price reasonableness.

The government's response is twofold, though the two positions are difficult to reconcile. On the one hand, the government reminds us that this is a global contingency construction contract. Because the nature of performance is unknown, it would be "impossible" to evaluate firm-fixed-price proposals. Yet on the other hand, the government also assures us that it did analyze price reasonableness using FAR 15.404-1(b). It understands that provision to mean that a...