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FAR 10.002:  Market Research Procedures

Comptroller General - Key Excerpts

 

Comptroller General - Listing of Decisions

For the Government For the Protester
   

U. S. Court of Federal Claims - Key Excerpts

The language of 10 U.S.C. § 2377(a) instructs that “[t]he head of an agency shall ensure that, to the maximum extent practicable” the “requirements of the agency with respect to a procurement of supplies or services are stated in terms of” the functions, the characteristics, and the required performance, and that “offerors of commercial items and nondevelopmental items other than commercial items are provided an opportunity to compete in any procurement to fill such requirements.” 10 U.S.C. § 2377(a) (emphasis added). As the statute contemplates that offerors of commercial items have an opportunity to compete in any procurement, the court interprets an issue of 10 U.S.C. § 2377 to fall within the court’s bid protest jurisdiction and proper for consideration.

As an initial matter, the court notes that the application of 10 U.S.C. § 2377 has not been squarely addressed in this court in the context of a bid protest. Turning to the language of 10 U.S.C. § 2377, Palantir first focuses on the two instances of the phrase “to the maximum extent practicable.” In 10 U.S.C. § 2377(a), the statute instructs: “The head of an agency shall ensure that, to the maximum extent practicable . . . such requirements are defined so that commercial items or, to the extent that commercial items suitable to meet the agency’s needs are not available, nondevelopmental items other than commercial items, may be procured to fulfill such requirements,” and “offerors of commercial items and nondevelopmental items other than commercial items are provided an opportunity to compete in any procurement to fill such requirements.” Id. In 10 U.S.C. § 2377(b), the statute requires that “[t]he head of an agency shall ensure that procurement officials in that agency, to the maximum extent practicable,” “acquire commercial items or nondevelopmental items other than commercial items to meet the needs of the agency,” and “modify requirements in appropriate cases to ensure that the requirements can be met by commercial items or, to the extent that commercial items suitable to meet the agency’s needs are not available, nondevelopmental items other than commercial items.” 10 U.S.C. § 2377(b). Palantir argues that:

[T]he Army has a requirement for a Data Management Platform; Palantir has a Data Management Platform that is available as a commercial item; and the law requires the Army to meet its requirements through the procurement of commercial items “to the maximum extent practicable.” 10 U.S.C. § 2377. Yet the Army chose to issue a Solicitation that makes it impossible for Palantir to compete through a bid that meets the Army’s requirements by supplying its commercial item. That is a blatant violation of § 2377.

Palantir further argues that: “The use of the word ‘maximum’ in the phrase ‘to the maximum extent practicable’ cannot be ignored.” (footnote omitted). Defendant, by contrast, argues that “[t]he language, ‘to the maximum extent practicable,’ qualifies all of the agency’s responsibilities, e.g., its responsibility to define requirements in terms of functions, performance, or essential physical characteristics, and its responsibility to define requirements so that commercial items may be procured to fulfill such requirements.”  In addition, defendant argues, citing Hydro Engineering, Inc. v. United States, 37 Fed. Cl. at 474, that “[t]his discretionary language – ‘to the maximum extent practicable [sic] - qualifies the agency’s obligations.”

The phrases “to the maximum extent practicable” and “appropriate to the circumstances” in 10 U.S.C. § 2377 are not further defined in the statute or the implementing regulations. Moreover, the same phrases “to the maximum extent practicable” and “appropriate to the circumstances” in the context of 10 U.S.C. § 2377, have not been judicially defined to date and are not easily subject to bright line tests. Turning to dictionary definitions, “maximum” is defined as “as great, high or intense as possible as permitted” New Oxford American Dictionary 1082 (3d ed. 2010); “practicable” is defined as “able to be done or put into practice successfully,” id. at 1372; and “appropriate” is defined as “suitable in the circumstance.” Id. at 77. Although these dictionary definitions provide little further clarification, the words chosen by Congress make it clear that a factual, case-by-case, compliance approach with the statutory dictate that an agency consider commercially available alternatives is expected.

(sections deleted)

After the three Requests for Information, the Army generated the July 2015 Market Research Report, which, although it was over fifty pages long, contained only two sentences about “Commercial Services.” Regarding “Commercial Services,” the Market Research Report stated in its entirety: “Significant portions of the anticipated Increment 2 scope of work such as Data Fusion, Intelligence Support to Cyber, and DIB upgrade are not available as a commercial product. As such, the DCGS-A Increment 2 development effort cannot be procured as a commercial product.” The Market Research Report also separately discussed each respondent, and for Palantir, only stated: “The Palantir response did not provide any examples of past experience relevant to the development of Increment 2, and was therefore found non-responsive.” (emphasis added). Just as the Market Research Report dismissed a commercial product approach, the Army’s focus on Palantir’s short comings centered on Palantir’s lack of experience related to development.

The focus on development continued as reflected in the draft Performance Work Statement distributed by the Army in July 2015. The Scope of the Performance Work Statement begins:

This Performance Work Statement (PWS) defines the efforts required for the acquisition of services for the development and integration of Distributed Common Ground System – Army (DCGS-A) Increment 2, Engineering, Manufacturing and Development (DCGS-A INC2 EMD). The requirements for Increment 2, EMD include, development of new data architecture, standards based enhanced visualization and analytical tools, cloud computing and “big data” analytic capabilities; cyber analytics and data integration, visualization capabilities, Cyber Operations, Interoperability, Counter Intelligence/Human Intelligence (HUMINT), Weather, Geospatial Intelligence (GEOINT) and Sensor Management. (emphasis added).

Furthermore, the July 1, 2016 “DETERMINATION OF NON-COMMERCIAL ITEM” (capitalization in original; emphasis removed), authored by Contracting Officer Christopher Fisher for the solicitation at issue, and Bryon Young, the Principal Assistant Responsible for Contracting, stated that regarding the market research, the three “RFIs were to canvas the market and determine the availability of commercial/nondevelopmental items/services available for satisfying the DCGS-A’s Increment 2 requirements.” The Determination of Non-Commercial Item continued:

Based upon market research conducted by Program Manager (PM) DCGSA, I find that some commercial software applications exist that could potentially satisfy portions of the DCGS-A Increment 2 requirement. The market research showed that significant portions of the scope of work, such as, the military unique capabilities classified up to the Top Secret level needed to meet the requirements associated with Signals Intelligence (SIGINT), Human Intelligence (HUMINT), Military Weather, Interoperability, Data Fusion, Intelligence Support to Cyber, and DCGS Integrated Backbone (DIB) upgrade are not available as commercial items.

The Determination of Non-Commercial Item concluded:

I find, based upon the requirements of this procurement and the market research performed, that this requirement is not appropriate as a commercial item procurement because no single commercial item of a type customarily used by the general public or one that can meet the Government’s requirement through minor modification is available; nor is there a combination of commercial items that can satisfy the DCGS-A Increment 2 requirement.

Palantir argues that “the Army felt the need to create and execute such a document after Palantir filed its lawsuit reveals that the Army knew it had not made the ‘determinations’ required by § 2377(c),” (first emphasis in original; second emphasis added). The court notes that, certainly, the timing is unusual. The Determination of NonCommercial Item, 36 was made the day after the protest was filed in this court. Defendant attempts to argue that the Determination of Non-Commercial Item could be made any time, and asserts that “there is no statutory language addressing the documentation of agency determinations based on market research, and the implementing regulation, FAR 10.002(e), does not require that such determinations must be documented, or that they must be documented before issuance of a solicitation.” The court agrees that there is not a specific documentation requirement in 10 U.S.C. § 2377 or the implementing regulations, but disagrees with defendant that “the July 1, 2016 D&F was not a post-hoc document as asserted by Palantir.” (emphasis in original). The direction of a developmental approach and conclusion that no commercial items were available to meet the Army’s requirements was evident in the October 21, 2015 Determination & Findings for “Award of a Single Source Indefinite-Delivery Indefinite-Quantity (IDIQ) Single Award Contract Exceeding $103M for Distributed Common Ground System (DCGS)-Army Increment 2, Engineering Manufacturing and Development IAW DFARS 216.504(c)(1)(ii)(D)(i),” signed by Ms. Shyu. And, clearly, when the Army issued Request for Proposals No. W56KGY-16-R-0001 for engineering, manufacturing, and development services, seeking a single contractor to be the system data architect, developer, and integrator of DCGS–A Increment 2, the decision that no suitable commercial items were available was definitively made. Furthermore, although there is a not a documentation requirement in 10 U.S.C. § 2377, the Army cannot point to any contemporaneous document issued before the solicitation was issued that demonstrates that, in compliance with 10 U.S.C. § 2377, the Army had carefully considered whether commercial items were available. The absence of any determination or indication that the Army had seriously considered whether a commercial item was available at any point in the procurement process, prior to the issuance of the solicitation, together with the numerous documents in the Administrative Record documenting the choice for a developmental approach, is a strong indication that the Army had not met the requirements of 10 U.S.C. § 2377 prior to the July 1, 2016 Determination of Non-Commercial Item, which, as noted above, was issued after the closing date of the solicitation.

Even if the court were to consider the July 1, Determination of Non-Commercial Item as timely, it does not meet the requirements of compliance with 10 U.S.C. § 2377. Palantir argues that “[t]he July 1, 2016 Declaration appears to be merely parroting what the July 13, 2015, Summary of Market Research found. That document used exactly the same words—with exactly the same lack of any support whatsoever – in making the unsubstantiated assertion about the unavailability of commercial or nondevelopmental items.” (internal citation omitted). The court agrees that the language in the determination mirrors that of the Market Research Report, and, although slightly longer, the court agrees with Palantir that “[t]here is no evidence . . . to support this repeated assertion” of the unavailability of a commercial item sufficient to meet the Army’s needs. Although the Determination of Non-Commercial Item cites the Requests for Information to support the finding that a commercial item was not available, the Administrative Record reflects that even the first Request for Information was seeking information for “development projects,” and, therefore, the court does not consider the Requests for Information as demonstrable evidence that no commercial items were available. This is consistent with all the market research, and, on balance, the court disagrees with defendant that the market research was “clearly appropriate” to the circumstances. The focus of the market research was only on development and did not consider the possibility of commercial or nondevelopmental items. Although it is perhaps laudable that the Army issued three separate Requests for Information, as well as held multiple Industry Days, all of the market research appears to have been designed to elicit responses about the offerors developmental capabilities and did not address commercial items or seek information from respondents about their commercially available products even after commercially available alternatives were suggested to the Army in responses to the Requests for Information. The market research, therefore, was not appropriate for the circumstances because the market research did not appear to examine what, if any, commercial items were available.

In the protest currently before the court, the Army did market research, including three Requests for Information, Industry Days, and one-on-one meetings with potential respondents and generated reports based on the information that it learned from its market research. Unlike the Corps in Tyler, in the procurement now at issue before the court, the Army did not comply with the requirements of 10 U.S.C. § 2377, and did not evaluate whether a suitable commercial item could meet the agency’s needs, even after protestor Palantir attempted to offer such an alternative.

(sections deleted)

Without a doubt, there are circumstances in which it is clear that a “commercial alternative” offered by a prospective commercial bidder is not suitable for a procurement. The overwhelming evidence in the Administrative Record in this protest, however, demonstrates that the Army was on notice of a realistic, possible, commercially available alternative product, placing the onus on the Army to more fully consider the potential commercial options suggested before pursuing a developmental only approach to the procurement. The Army did not do so, and, therefore, acted arbitrarily and capriciously, and in violation of 10 U.S.C. § 2377, by neglecting to full investigate possible commercially available alternatives to meet the requirements of the Army’s acquisition.

(sections deleted)

CONCLUSION

Accordingly, because Palantir has demonstrated success on the merits, and because the equitable factors weigh in Palantir’s favor, a permanent injunction is warranted and awarded. The Army is permanently enjoined from issuing a contract award under solicitation number W56KGY-16-R-0001, as issued on December 23, 2015. The Army must satisfy the requirements of 10 U.S.C. § 2377, which, thus far, the Army has failed to do. Only after the Army has properly and sincerely complied with 10 U.S.C. § 2377 should defendant proceed to award a contract to meet its DCGS-A Increment 2 requirements.  (Palantir USG, Inc. v. U. S., No. 16-784C November 9, 2016)

U. S. Court of Federal Claims - Listing of Decisions
For the Government For the Protester
  Palantir USG, Inc. v. U. S., No. 16-784C November 9, 2016
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