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Agency’s Conduct “An Egregious Example Of Intransigence And Deception,” Court Says

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Koprince Law LLC

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A procuring agency’s conduct in the course of evaluating proposals–and defending itself in four subsequent bid protests–was an “egregious example of intransigence and deception,” according to the Court of Federal Claims.

In a recent decision, Judge Eric Bruggink didn’t hold mince words, using terms like “agency misconduct,” “untruthful,” and “lack of commitment to the integrity of the process,” among other none-too-subtle phrases, to describe the actions of the Department of Health and Human Services.  But Judge Bruggink’s decision is striking not only for its wording, but because it demonstrates the importance of good faith bid protests to the fairness of the procurement process, in a case where HHS unfairly sought to “pad the record” in support of a favored bidder–and would have gotten away with it were it not for the diligent efforts of the protester.

The Court’s decision in Starry Associates, Inc. v. The United States and Intellizant, LLC, No. 16-44C (2017) ostensibly was a case about attorneys’ fees.  The legal question before the Court was whether Starry Associates, Inc., which had prevailed in a prior protest, Starry Associates Inc. v. United States, 127 Fed. Cl. 539 (2016), should recover its fees.  But in answering this question, the Court took HHS to task for repeated egregious conduct in its underlying source selection, and in the bid protest process itself.

Back in 2014, HHS issued an RFQ seeking a range of business operations to support HHS’s financial management system, known as the Unified Financial Management System, or UFMS.  The RFQ was issued as a small business set-aside, and called for award to the lowest-priced, technically acceptable offeror.

Three companies submitted quotations.  Starry Associates, Inc., the incumbent contractor, was one of these companies.  However, the lowest-priced quote was submitted by a competitor, Intellizant, LLC.  Because Intellizant had submitted the lowest-priced quote, HHS evaluated Intellizant’s quote for technical acceptability.

Technical proposals were evaluated by a Technical Evaluation Panel consisting of three individuals: John Thompson, Karen Slater, and Arlette Peoples.  And here’s where things got interesting.  According to internal HHS correspondence (as well as sworn statements made in connection with the protest), the composition of the TEP was determined, at least in large part, by an HHS employee named John Davis.  Mr. Davis happened to be a former Intellizant employee, and had been involved in Intellizant’s unsuccessful bid for the incumbent contract (the contract won by Starry).

Ms. Slater, for her part, was the Contracting Officer’s Representative on an unrelated HHS contract being performed by Intellizant.  On November 21, 2014, Ms. Slater prepared a Past Performance Questionnaire for Intellizant on that contract, and rated Intellizant as “Exceptional” in every category.  Just four days later, the TEP was convened.  When Mr. Thompson asked whether Ms. Slater might appear to be biased, having prepared such a glowing PPQ for Intellizant so recently, Ms. Slater responded that she was asked to serve on the TEP “per the direction of John Davis,” who had informed Ms. Slater that it was appropriate for her to serve on the TEP.

Mr. Thompson rated Intellizant unacceptable overall, finding that the proposal didn’t meet several RFQ requirements.  Ms. Peoples also questioned whether she ought to rate Intellizant as unacceptable.  However, another HHS official incorrectly informed Ms. Peoples that HHS would be able to hold discussions with Intellizant to clear up those concerns.  Ms. Slater, for her part, rated Intellizant’s proposal as acceptable.

The Source Selection Authority, Cassandra Ellis, reviewed the TEP’s report, and then evaluated the proposal herself.  She found Intellizant’s proposal to be acceptable.  Starry was notified that the award had been made to Intellizant.

Starry filed a GAO bid protest, arguing that Intellizant could not satisfy all of the RFQ’s requirements and lacked key personnel.  In January 2015, HHS announced that it would take corrective action.  However, upon inquiry from the GAO, HHS stated that it would not solicit new proposals or reevaluate existing proposals; instead, it said that the protest had revealed “gaps in the record” which it would correct in its “contract file.”

Believing this so-called corrective action to be insufficient, Starry announced its intent to file a bid protest with the Court.  HHS then changed its tune, stating that it would reevaluate proposals and make a new award decision.  In response, Starry agreed to withdraw its notice of intent to protest in the Court.

The same TEP reevaluated proposals.  Again, there was no consensus: Mr. Thompson rated Intellizant as unacceptable, while Ms. Peoples and Ms. Slater rated it as acceptable.  Ms. Ellis, the SSA, again concluded that Intellizant was acceptable; Intellizant was announced as the awardee for a second time.

Starry protested again at the GAO.  This time, among its arguments, Starry alleged that Mr. Davis was biased in favor of Intellizant and had attempted to exert influence to guide the award to that company.  In response, Mr. Davis informed the GAO that he had “recused” himself from the protest process.  The GAO issued a decision sustaining a portion of Starry’s protest.  However, based on Mr. Davis’s representation, the GAO denied the bias allegation.

After receiving the GAO’s decision, Mr. Davis decided to cancel the solicitation entirely.  Starry protested again, arguing that the cancellation was an improper pretext to allow the work to be contracted to Intellizant under a new RFQ.  The GAO denied the protest in December 2015.

Starry then took its case to the Court.  In the Court, Starry was able to obtain additional evidence that had not been available at the GAO.  Starry’s new evidence included the depositions of several HHS officials, including Ms. Slater, Ms. Ellis, and Mr. Davis.

In July 2016, the Court issued a decision sustaining Starry’s protest.  The Court wrote that “[o]nce the initial decision to award to Intellizant had been made, Ms. Ellis and Ms. Slater make clear that any other result was unwelcome and not seriously considered.”  Instead, “they viewed their task as bolstering the initial decision, not reevaluation.”  Although HHS told the GAO and Starry that it was performing a full and fair reevaluation following Starry’s record protest, “the record does not reflect such an effort.”

Further, the Court found, in a “cavalier disregard for the truth of representations made to the GAO,” Mr. Davis did not recuse himself from the procurement process.  In fact, “he remained directly involved in the selection of the TEP and ultimately made the critical decision to moot out the series of protests by canceling the solicitation.”  Further, based on Mr. Davis’s deposition, his ultimate rationale for canceling the solicitation was “completely illusory.”

The Court issued an injunction setting aside the cancellation.  The Court also ordered that Ms. Ellis, Ms. Slater, and Mr. Davis could not be involved in “any subsequent agency actions involving this solicitation.”

After winning at the Court, Starry sought attorneys’ fees under the Equal Access to Justice Act.  EAJA caps the recovery of attorneys’ fees at $125 an hour (a sum which probably sounded mighty princely when it was adopted back in 1996, but won’t get a traffic ticket defended in many jurisdictions 21 years later).  However, there are exceptions to the cap, including when there is a “special factor” that the court finds justifies a higher amount.

At issue in Starry’s case was whether there was a special factor present that justified deviating from the $125 cap (plus a cost-of-living adjustment, which the government did not oppose).  Judge Bruggink began his analysis this way: “[w]hat the agency did here constitutes an egregious example of intransigence and deception, not just with regard to the bidder, but to the GAO and to the court.  It is fortunate, but relevant, that this was anomalous conduct.”

Judge Bruggink then summarized the history of the procurement.  He wrote that, after Starry’s first protest, “HHS did not conduct a meaningful reevaluation but instead undertook an effort to pad the record to better support award to Intellizant.”  In the course of the second protest, HHS “misled GAO” with the “untruthful” representation that Mr. David had recused himself from the process.  When Mr. Davis later decided to cancel the solicitation, he provided “an illusory basis for that decision.”  In addition, “[t]he fact that the agency left the decision of what to do with the procurement to Mr. Davis after it had just represented to GAO that he was uninvolved is a further reflection of its lack of commitment to the integrity of the process.”

The Court continued:

The extreme measures that [Starry] was forced to pursue to vindicate its right to a rational and lawful federal procurement process, combined with the shocking disregard of the truth by the agency, justify an award at higher than the default rate.  Both Starry and the GAO were misled on multiple occasions.  Although we do not reach the question of bias, the record is replete with examples of agency misconduct.

Judge Bruggink held that Starry was entitled to recover attorneys’ fees and costs under EAJA, and that a “special factor” adjustment was appropriate, allowing Starry to recover for the rates actually billed by its attorneys.

Starry should be congratulated for its perseverance, and Judge Bruggink should be commended for holding HHS’s feet to the fire–and not mincing words when it became apparent that HHS had engaged in improper conduct.  It’s rare, to say the least, to see a federal judge unload on an agency like Judge Bruggink did here, but it’s readily apparent that HHS deserved it.

Judge Bruggink labeled the circumstances here “particular and unique,” and I think he’s right.  In my experience, the vast majority of agency officials take great care to act fairly and honestly.  For example, contrary to common misconception, these fair and honest agency officials do not automatically blackball contractors who file good faith bid protests–in fact, many such good faith protesters are awarded a contract after a fair re-evaluation.

But Starry Associates is a good reminder that must because the vast majority of agency officials act fairly and honestly does not mean that all agency officials do so.  In this case, Judge Bruggink found that the agency allowed a former employee of a competitor to make crucial evaluation decisions, “padded the file” to support that competitor, flat-out lied to Starry and the GAO, and more.

There’s been a lot of sky-is-falling complaining lately about bid protests. The former U.S. Chief Technology Officer wants to create a “shame list” of unsuccessful protesters.  One GSA official says she has “given up hope” for a reduction in protests.  The Senate attempted to enact strict (and poorly conceived) bid protest “reforms.”  And so on.

Underpinning these complaints, of course, are several assumptions: bid protests are commonplace, bid protests are frivolous, and–perhaps most important–government evaluators always act fairly and honestly.

All of these assumptions are readily disproved.

Let’s start with the number of protests.  In Fiscal Year 2016, there were 2,621 protests filed at GAO, and perhaps a hundred more at the Court.  That sounds like a lot, but it’s a drop in the bucket compared to the total number of government contracting actions.  A few years ago, former OFPP head Dan Gordon did the math, and concluded that “etween approximately 99.3 percent and 99.5 percent of procurements were not protested.”

Then there’s the assumption that most bid protests are frivolous.  Again, those pesky facts get in the way.  Year after year, the overall “effectiveness rate” of protests at GAO (that is, cases that result in a positive outcome for the protester, either through a “sustain” decision or voluntary corrective action) hovers somewhere around 45%.  Last year, it was 46%.  Think about that for a second: the protester has the burden of proof in a protest; given that burden, one would assume that protesters would lose most of the time.  Instead, protesters receive a positive outcome in nearly half of cases filed.

And just because a protester doesn’t win doesn’t mean the protest was intentionally frivolous.  Lots of protests are close cases, involving subjective judgment calls and gray areas of the law.  Many of these close cases (again, that burden of proof thing) go the agency’s way.  There’s a huge gap between being a losing protester and a frivolous protester–a gap that some people (I’m looking at you, Mr. “Shame List”) should acknowledge.

Sure, sometimes a protest is filed that appears frivolous.  But in my experience, many of these are filed by what we lawyers call pro se protesters, that is, protesters who aren’t represented by counsel.  Instead of being exercises in frivolity, many of these protests–although legally insufficient–are the result of a lack of legal understanding, not an attempt to game the system.  For example, a pro se protester in a small business set-aside competition may file a GAO bid protest challenging the small business size status of the awardee.  The GAO’s bid protest regulations don’t provide for jurisdiction over such issues, so the protest could appear frivolous–but how many non-lawyers have spent time poring over 4 C.F.R. 21.5?

That brings us to the final assumption–that agency evaluators will act fairly and honestly.  Again, I want to be clear: in my experience, that is absolutely true in the large majority of cases.  But Starry Associates shows that it is not always true.  Starry Associates demonstrates that every now and then an agency official pads the file, or allows a conflict of interest to permeate an evaluation, or lies to an offeror.  The bid protest process offers a way–perhaps the only way–to combat this type of malfeasance.  And human nature being what it is, what would happen if bid protests disappeared, or were severely curtailed?  I think that most agency officials would continue operating just as honestly and fairly as before–but a few, knowing that there was no chance of being caught, would be tempted to engage in unfair behavior like that seen in Starry Associates.

The procurement process is about more than speed and efficiency, as some of the “protest complainers” would have it.  Those things are important, but the process is also about fundamental fairness.  Our system of competition is worthless if the competitors believe–rightly or wrongly–that the game is rigged, and that there is no way to fix it.  As Starry Associates makes clear, every now and then, the game is rigged.  And even when (as is far more typical) an agency’s evaluation error is the result of an honest mistake, those mistakes happen quite frequently–as evidenced by the 46% bid protest effectiveness rate.

Congress has asked for an independent report on the impact of bid protests at DoD, and lawmakers undoubtedly will continue to get an earful from procurement officials who’d like to see the protest process severely curtailed or wiped out completely.  I’m not saying that the protest process cannot be improved–there is room for improvement in almost any process.  But I hope that Congress will check the statistics (and perhaps read Starry Associates) before equating “reform” with “greatly reducing access to bid protests.”  Improving the procurement process shouldn’t begin with curtailing one of the most important mechanisms available to ensure the fairness and integrity of the competitive system.


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