Dell Federal Systems, L.P. v. United States
Opinion
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 action
1
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
,
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
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 was valued in excess of $100 million, the Army was likely required to conduct discussions with offerors pursuant to DFARS 215.306(c)(1). See J.A. 7018-19 (explaining that the SSEB's reasoning of award delay did not constitute a reasonable basis for forgoing discussions); see also J.A. 5534 (providing the SSEB's reasoning). Second, counsel found that there was "ambiguity in the requirements or the [Army's] instructions [on] how to fill out the [Equipment Submission Form and Business Process Form Microsoft Excel] spreadsheet[s]," which "could have easily and quickly been resolved" before award and could have been addressed in discussions. J.A. 7020; see J.A. 7020 (stating many of the "Unacceptable" ratings were "merely compliance issues with filling out the form rather than a deficiency in the item proposed"). The Army summarized two representative examples of the ambiguities: (1) the presence of a thick, black line "hard-line" in the Equipment Submission Form spreadsheet between the hard-drive and solid-state drive requirements; and (2) the conflicting instructions that "an upgrade [to a base model] must be an increase in capability" and "that selection of an item in a drop-down [menu] is acceptable when there are items in the drop-down that are not upgrades to a base model." J.A. 7020; see, e.g. , J.A. 386 (depicting the hardline). Ultimately, Army's counsel recommended that "[d]ue to the significant litigation risk, the ambiguities in the spreadsheet ..., and a matter of policy to do what is right, ... [the Army] take limited corrective action to resolve the issues with Offerors' Technical Proposals." J.A. 7021.
As a result of the Army's proposed corrective action, the GAO dismissed the unsuccessful offerors' protests as moot. See J.A. 7022-23. The Army subsequently notified offerors that "[d]iscussions with all offerors in the competitive range are now open" and invited offerors to present their "best and final proposal," J.A. 7047 (letter to originally successful offeror), and the Army advised originally unsuccessful offerors to "address the deficiencies in [their] proposal[s]," J.A. 7076, and to revise their final prices "to their best and final prices," J.A. 7077. In addition, "to remedy [any] potential competitive [dis]advantage" to offerors whose prices were disclosed by the original award notice, the Army sent all offerors a Microsoft Excel spreadsheet of the final proposed prices, with offerors not identified. J.A. 7378; see J.A. 7379-80 (listing prices).
IV. The Relevant Proceedings
Two of the nine initial awardees, specifically Dell and Blue Tech, sued the Government in the Court of Federal Claims, seeking to enjoin the Army's corrective action,
see
J.A. 290, and five other initial awardees, including Red River, joined as intervenors,
Dell
,
In its Opinion and Order, the Court of Federal Claims granted the Appellees' request for declaratory relief and a permanent injunction of the Army's corrective action.
DISCUSSION
On appeal, Appellants contend that we should reverse the Court of Federal Claims' grant of a permanent injunction because (1) the Court of Federal Claims applied the wrong standard in considering success on the merits because it assessed whether the Army's proposed corrective action was "narrowly targeted" to remedy a procurement defect, Gov't's Br. 21, 7 and (2) under the proper legal framework, "the Army's corrective action is rationally related to the procurement defect," id. at 26 (capitalization modified). We begin with the governing standards and then address Appellants' arguments in turn.
I. Standard of Review and Legal Standard
We review "the [Court of Federal Claims'] determination on the legal issue of the government's conduct, in a grant of judgment upon the administrative record, without deference."
Per Aarsleff A/S v. United States
,
In evaluating a bid protest case, the Court of Federal Claims "may award any relief that the court considers proper, including declaratory and
injunctive relief
."
II. Injunctive Relief
A. The Court of Federal Claims Abused Its Discretion in Granting a Permanent Injunction Because It Improperly Assessed the Success on the Merits Prong
The Court of Federal Claims summarized the question before it as "whether holding post-award discussions is a rational remedy for failing to hold pre-award discussions."
Dell
,
The Court of Federal Claims based its decision on an error of law because corrective action only requires a rational basis for its implementation. Although the Court of Federal Claims has previously and occasionally employed a "narrow targeting" test to evaluate the appropriateness of a corrective action,
see, e.g.
,
Amazon Web Servs., Inc. v. United States
,
Instead, we have consistently reviewed agencies' corrective actions under the APA's "highly deferential" "rational basis" standard.
Croman
,
When determining whether a court committed legal error in selecting the appropriate legal standard, we determine which legal standard the tribunal
applied
, not which standard it recited.
See
Int'l Custom Prods., Inc. v. United States
,
This error is due in part to the Court of Federal Claims' improper reliance on its decision in
Amazon Web
.
See
Dell
,
We disagree with the Appellees' main counterargument that we should view the "narrowly targeted" requirement not as a heightened standard but rather as an application of the rational basis standard.
See
Blue Tech's Br. 24-25; Dell's Br. 16-19. Specifically, Appellees argue that corrective action cases are too "fact specific" for only one agreed-upon application of the legal standard, and they advocate a "reasonable under the circumstances" analysis. Blue Tech's Br. 24 (quoting
WHR Grp., Inc. v. United States
,
B. The Army's Corrective Action Had a Rational Basis
The Court of Federal Claims concluded, inter alia, that despite it being "reasonable" for the Army to "consider[ ] its failure to conduct discussions to be a procurement defect," the only time to have those discussions was
pre
-award, and therefore reopening procurement
post
-award was overbroad and improper.
10
Dell
,
Reviewing the corrective action under the proper legal standard, we hold the Army's original notice of corrective action was reasonable, and through our reversal of the lower court's injunction, this is the corrective action we analyze and reinstate. See J.A. 7009 (Notice of Corrective Action). The Army's corrective action "consists 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's proposed corrective action to reopen procurement and allow proposals to be revised is rationally related to the procurement's defects, i.e., failure to conduct discussions and spreadsheet ambiguities. Spreadsheet ambiguities may not always require reopening the procurement process.
See
Info. Tech. & Applications Corp. v. United States
,
Contrary to the Court of Federal Claims' incorrect characterization of the identified spreadsheet defects as "relatively minor," we find that the identified defects in the Solicitation that led to "the majority of the offerors" being disqualified-due to their submission of technically unacceptable offers-were highly material.
Dell
,
Pursuant to the APA, an agency's actions must be "in accordance with law."
FAR 2.101 defines "should" to mean "an expected course of action or policy that is to be followed unless inappropriate for a particular circumstance," and the GAO has applied FAR 2.101 to interpret DFARS 215.306(c)(1).
See
Sci. Applications Int'l Corp
. (
SAIC
), No. B-413501,
The Appellees contend that the Army's decision to conduct discussions was an unreasonable corrective action, "even assuming the [Court of Federal Claims] applied the 'wrong standard.' " Blue Tech's Br. 27 (capitalization modified). Specifically, they argue the action was unreasonable because the defects were identified after the initial award decisions were made, in effect arguing that the reasonableness inquiry is different in the pre- and post-award context. See id. at 27-28 ("[T]he posture of this procurement is fundamentally different from what it would have been had the Army engaged in discussions before announcing nine of the offerors' proposed prices."); Dell's Br. 30 ("Even accepting that the Army should have held discussions earlier in the process, it does not follow that the proper remedy for that error is to hold far-reaching discussions now ."); Red River's Br. 8 ("While failure to conduct pre-award discussions could be properly remedied by conducting discussions before the awards were announced and the awardees' prices disclosed, the same is not true in the post-award environment."). However, the Appellees cite no precedent, nor do we find any, to support the imposition of a pre- and post-award dichotomy in our reasonableness analysis for corrective action. Since opening discussions was a reasonable corrective action, see supra , pursuant to the express terms of the Solicitation, "[i]f discussions are opened, all proposals, to include small business proposals previously removed for unacceptability ... will be included," J.A.
1384. We do not disrupt on appeal the Army's adherence to the terms of the Solicitation in implementing its corrective action to open discussions.
See
Croman
,
While the Appellees take issue with alleged anti-competitiveness of the Army's release of all offerors' pricing in order to maintain fairness in the corrective action rebidding, see Blue Tech's Br. 28; Dell's Br. 31-32; Red River's Br. 5, this does not alter our analysis. Here, the relevant timeline of events lends itself to a unique procedural posture. After the Army notified all offerors of the award, it sent debriefing letters in February 2017 to the unsuccessful offerors "in accordance with FAR 15.506." J.A. 5949; see, e.g. , J.A. 5948-49 (Debriefing Letter to HPI). FAR 15.506 sets forth the required deadlines for "[p]ost[-]award debriefing of offerors" and provides that upon written request by any offeror "within 3 days after the date on which that offeror has received notification of contract award," see FAR 15.506(a)(1), an agency must, within five days, see FAR 15.506(a)(2), debrief said offerors as to, inter alia, the prices of the " successful offeror," FAR 15.506(d)(2) ; see FAR 15.506(d) (outlining the "minimum" required post-award debriefing information). However, in this case, a month later and after protests were filed at the GAO, as discussed supra , see Background Section III, the Army conceded that procurement defects occurred, and it decided to proceed with its corrective action to open discussions following GAO approval, see J.A. 7021 (MFR dated March 22, 2017). Then, on March 27, 2017, during the course of discussions and "[a]s part of the ... corrective action, the [Army] ... decided to release all offerors' total proposed prices in an effort to remedy the potential competitive advantage held by the offerors in the competition whose prices were not disclosed." J.A. 7378; see J.A. 7379-80 (listing total bid prices for all fifty-five offerors whose bids were deemed responsive).
We find no binding authority preventing, on the facts of this case, the release of the pricing information of all offerors. Moreover, we find that the Government provides a reasonable explanation for its actions. Under these circumstances, the Government concluded it would, upon rebidding, level the playing field for those successful offerors who did not propose the lowest price and now deserve a chance to revise their proposals to fairly compete during the rebidding process. See Oral Arg. at 8:54-9:51 (Q: "It seems that the Army ... decided in fairness that since [offerors] now have a target to shoot at-namely, they now know what the awardee listed for everything, so they know how to come in under it-[did] it seem[ ] only fair ... to list everyone else's [prices]?" A: "Yes, your Honor .... In this case, ... the initial awardees, they were not the lowest priced offerors. So, if the offerors who were not initially technically acceptable, they get a chance to revise their proposals, the initial awardees may likely be pushed out of the competition." Q: "When they did release all of the numbers that each person gave in the proposal, did they strip [the] name[s] of the proposer?" A: "That's right your Honor."). We find this to be reasonable action in light of a defective procurement, which the parties concede was defective. See supra n.10; see also Oral Arg. at 29:57-30:07 (conceding, by Dell's counsel, that "[w]e won the procurement submitting a technically acceptable offer, ... [but] to a defective procurement").
The FAR explains that, when conducting discussions, "[a]t a minimum, the [CO]
must ... indicate to, or discuss with, each offeror still being considered for award, [inter alia,] deficiencies" in the offeror's proposal "to which the offeror has not yet had an opportunity to respond." FAR 15.306(d)(3). The Army only proposes to allow an offeror to "address deficiencies in [their] proposal" and "make revisions to correct the deficiencies listed" by the Army. J.A. 7097 (noting in letter opening discussions with offeror that "[i]f you make changes to areas of your technical proposal that have already been found acceptable, you are at risk of being found technically unacceptable"). Given these reasonable limitations, the corrective action has a rational basis.
Nevertheless, the Appellees maintain that clarifications are the only reasonable corrective action.
See, e.g
., Dell's Br. 29, 31. However, requests for clarifications are "limited exchanges," designed to "clarify certain aspects of proposals" or "resolve minor or clerical errors" in the offerors' proposals. FAR 15.306(a)(1)-(2). "Clarifications are not to be used to cure proposal deficiencies or material omissions, materially alter the technical or cost elements of the proposal, or otherwise revise the proposal."
JWK Int'l Corp. v. United States
,
Finally, Appellees argue that the Army's failure to consider other "[m]ore [l]imited" corrective actions is arbitrary and capricious. Dell's Br. 33. The Army was not legally required to address every option, but rather to provide a reasonable corrective action and adequately explain its reasoning for doing so.
See
Chapman
,
Accordingly, we hold that the original corrective action was rationally related to the procurement defect and that the Court of Federal Claims abused its discretion in finding that Appellees demonstrated, inter alia, success on the merits. Because proving success on the merits is a necessary element for a permanent injunction, 13 we reverse the Court of Federal Claims' grant of an injunction. The Army may proceed with its proposed corrective action, which we hereby reinstate.
CONCLUSION
We have considered the parties' remaining arguments and find them unpersuasive. Accordingly, the Judgment of the U.S. Court of Federal Claims is
REVERSED
A "corrective action in the bid protest context" is an "agency action, usually taken after a protest has been initiated, to correct a perceived prior error in the procurement process, or, in the absence of error, to act to improve the competitive process."
Dellew Corp. v. United States
,
Clarifications "are limited exchanges, between the Government and offerors, that may occur when award without discussions is contemplated." FAR 15.306(a)(1). "If award will be made without conducting discussions, offerors may be given the opportunity to ... resolve minor or clerical errors." FAR 15.306(a)(2).
While the FAR System establishes "uniform policies and procedures for acquisition by all executive agencies," FAR 1.101, the DFARS is the Department of Defense's "implementation and supplementation of the FAR," DFARS 201.301(a)(1), and "is codified under chapter 2 in title 48, Code of Federal Regulations," DFARS 201.303(a)(i).
Because the parties do not dispute the relevant procedural history, see generally Gov't's Br.; HPI's Br.; CDW's Br.; Blue Tech's Br.; Dell's Br.; Red River's Br., we cite to the Court of Federal Claims' recitation for convenience.
The Army voluntarily stayed the corrective action pending resolution of the litigation. J.A. 281.
As to irreparable harm, the Court of Federal Claims found this factor weighed in favor of the Appellees because "[Appellees] would be forced to re[-]compete wholesale for contracts they have already won" and "discussions would also force the [Appellees] to bid against their own prices."
Dell
,
Appellants make substantially similar arguments on appeal. See Gov't's Br. 22; HPI's Br. 15; CDW's Br. 15. For ease of reference, we cite only to the Government's arguments unless otherwise noted.
Before discussing the merits of the appeal, we first address the threshold issue of jurisdiction.
See
Bender v. Williamsport Area Sch. Dist.
,
Even the Appellees do not dispute that we ultimately determine whether an agency's corrective action lacked a "rational basis" by assessing the reasonableness of the corrective action. See, e.g. , Dell's Br. 14 ("To be found reasonable, an agency's corrective action must be rationally related to the defect to be corrected ...."); Blue Tech's Br. 21 (similar); Red River's Br. 5 (similar). However, as addressed herein, Appellees dispute the latitude afforded the lower court to apply and narrow the reasonableness analysis. See, e.g. , Dell's Br. 18 (disagreeing with the Government's "conten[tion] that [use of] th[e] 'more narrowly targeted' test unduly constrains the Army's discretion" under a court's reasonableness review).
The parties do not dispute the Court of Federal Claims' finding that procurement defects existed, namely the separate, identified defects of spreadsheet ambiguities and the failure to conduct discussions.
Dell
,
Indeed, the Court of Federal Claims acknowledged that, while "many of the losing offerors in this procurement made minor or clerical errors" allegedly capable of correction through clarifications,
Dell
,
The Appellees also contend that our precedent in
Systems Application
counsels against reinstating the Army's selected corrective action because "post-award corrective action that allows previously unsuccessful offerors to revise their proposals after the awardee's price has been disclosed causes harm to the original awardees." Red River's Br. 4-5 (citing
Sys. Application & Techs., Inc. v. United States
,
We may balance the remaining three
Centech
permanent injunction factors-irreparable harm, balance of hardships, and public interest-when deciding whether to grant or deny injunctive relief; however, because we find the Court of Federal Claims erred in finding that the Appellees had "succeeded on the merits," the great weight we accord this factor as compared to the other three precludes the possibility of an injunction.
See
Centech Grp.
,
Reference
- Full Case Name
- 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
- Cited By
- 138 cases
- Status
- Published