1. Plaintiff Lacks Standing to Challenge Its Exclusion From the Competition

As a threshold matter, defendant argues that plaintiff lacks standing to challenge its exclusion from the competition. “[T]he question of standing is whether the litigant is entitled to have the court decide the merits of the dispute or of particular issues.” Warth v. Seldin, 422 U.S. 490, 498 (1975). The standing inquiry involves both Article III “case or controversy” limitations on federal jurisdiction and “prudential limitations on its exercise.” Id. The plaintiff bears the burden of establishing its standing to protest. Lujan v. Defenders of Wildlife, 504 U.S. 555, 561 (1992).

“The standing issue in this case is framed by 28 U.S.C. § 1491(b)(1), which . . . imposes more stringent standing requirements than Article III.” Weeks Marine, Inc. v. United States, 575 F.3d 1352, 1359 (Fed. Cir. 2009). Under section 1491(b)(1), bid protests may only be brought by “interested parties.” The term “interested party” is construed in accordance with the Competition in Contracting Act of 1984, and, accordingly, “standing under § 1491(b)(1) is limited to actual or prospective bidders or offerors whose direct economic interest would be affected by the award of the contract or by failure to award the contract.” Am. Fed’n of Gov’t Emps. v. United States, 258 F.3d 1294, 1302 (Fed. Cir. 2001) (citing 31 U.S.C. § 3551(2)(A) (2000)); see also Info. Tech. & Applications Corp. v. United States, 316 F.3d 1312, 1319 (Fed. Cir. 2003) (interpreting this standard as requiring a protester to show that it was an interested party prejudiced by the procuring agency’s action and holding that “because the question of prejudice goes directly to the question of standing, the prejudice issue must be reached before addressing the merits”); Myers Investigative & Sec. Servs., Inc. v. United States, 275 F.3d 1366, 1370 (Fed. Cir. 2002) (defining “prejudice” as “injury”). Therefore, plaintiff must establish that it “(1) is an actual or prospective bidder, and (2) possesses the requisite direct economic interest.” Rex Serv. Corp. v. United States, 448 F.3d 1305, 1307 (Fed. Cir. 2006).

In this case, there is no dispute that plaintiff is an actual bidder. Thus, the first prong of the interested party test has been satisfied. With regard to the second prong, however, defendant contends that plaintiff does not possess the necessary direct economic interest that would be affected by award of the contract. The United States Court of Appeals for the Federal Circuit (“Federal Circuit”) has described two ways in which a protester may demonstrate the requisite direct economic interest, depending on the timing of the protest. In postaward bid protests, a protester must show that it had a “substantial chance” of receiving the contract. Id. at 1307. In other words, “[t]o have standing, the plaintiff need only establish that it ‘could compete for the contract’ . . . .” Myers Investigative & Sec. Servs., Inc., 275 F.3d at 1370 (quoting Impresa Construzioni Geom. Domenico Garufi v. United States, 238 F.3d 1324, 1334 (Fed. Cir. 2001)). And, in at least some preaward bid protests, a protester must show “a ‘non-trivial competitive injury which can be addressed by judicial relief.’” Weeks Marine, Inc., 575 F.3d at 1361-63 (quoting WinStar Commc’ns, Inc. v. United States, 41 Fed. Cl. 748 (1998)). Defendant argues that plaintiff’s direct economic interest should be analyzed under the “substantial chance” test applied in postaward bid protests.  At oral argument, it explained that although this protest was lodged before the Army awarded any contracts, the fact that offerors had already submitted proposals made this protest more analogous to a postaward protest for purposes of determining standing.

The key issue presented here is whether the test endorsed by the Federal Circuit in Weeks Marine, Inc.–a nontrivial competitive injury that can be addressed by judicial relief–applies in this preaward bid protest. In Weeks Marine, Inc., the protester objected to the contract vehicle selected by the agency for a dredging procurement, and filed its protest before proposals were due. See Weeks Marine, Inc. v. United States, 79 Fed. Cl. 22, 23, 27-28 (2007) (indicating that the solicitation was issued on June 4, 2007, that the solicitation was amended ten times from June to September 2007, that the protest was filed on September 28, 2007, and that the agency agreed to extend the due date for proposals to November 1, 2007), aff’d in part, rev’d in part, 575 F.3d at 1352. The Federal Circuit remarked:

[W]here a prospective bidder/offeror is challenging a solicitation in the pre-award context[,] . . . it is difficult for a prospective bidder/offeror to make the showing of prejudice that we have required in post-award bid protest cases. The reason of course is that, in a case such as this, there have been neither bids/offers, nor a contract award. Hence, there is no factual foundation for a “but for” prejudice analysis. However, Article III considerations require a party such as [the protester] to make a showing of some prejudice.

575 F.3d at 1361 (citation omitted). It therefore held: “[I]n a pre-award protest such as the one before us, [a] prospective bidder or offeror must establish ‘a non-trivial competitive injury which can be redressed by judicial relief’ to meet the standing requirement of § 1491(b)(1).” Id. at 1363.

There is a lack of unanimity in the Court of Federal Claims concerning whether the test endorsed in Weeks Marine, Inc. applies in all preaward bid protests, regardless of the stage of the procurement. In most preaward bid protests decided after Weeks Marine, Inc. where standing was at issue, the court has analyzed a protester’s direct economic interest under the Weeks Marine, Inc. test.  In some cases the protest was filed before the deadline for proposals. See, e.g., CW Gov’t Travel, Inc. v. United States, No. 11-298C, 2011 WL 4363087 (Fed. Cl. Aug. 26, 2011) (applying the test in a challenge to certain terms in the solicitation); Jacobs Tech. Inc. v. United States, No. 11-180C, 2011 WL 2215018 (Fed. Cl. May 27, 2011) (applying the test in a challenge to a reprocurement that occurred as part of an agency’s corrective action). In other cases, the protester submitted a proposal but the procuring agency had not yet awarded a contract. See, e.g., ICP Nw., LLC v. United States, 98 Fed. Cl. 29 (2011) (applying the test where the protester submitted bids on seven solicitations and then challenged the terms of the solicitations); Camden Shipping Corp. v. United States, 89 Fed. Cl. 433 (2009) (applying the test where the protester submitted a timely proposal but was later eliminated from the competition after its offer had expired, and holding that had the protester “successfully proved the facts alleged, it would have suffered a non-trivial competitive injury resulting from a prejudicial error made by [the agency]”).

In contrast to the decisions in which the court has applied the test endorsed in Weeks Marine, Inc., the court in CS-360, LLC suggested, albeit in dicta, that the Weeks Marine, Inc. test should not be applied in all preaward bid protests 94 Fed. Cl. at 495 n.6. It distinguished the posture of the procurement in the protest before it–where the protester submitted an offer and was declared the lowest bidder–from the posture of the procurement in Weeks Marine, Inc., and concluded: “The traditional ‘substantial chance’ test . . . seems more appropriate given the facts of this case. The standard applied by the Federal Circuit in Weeks Marine is sui generis to that case.” Id. Nevertheless, because the protester in its case was ineligible to participate in the procurement in the first instance, id. at 500, the court recognized that its holding would be the same regardless of which test was used, id. at 495 n.6. Although the facts in CS-360, LLC are distinguishable from those in this case the court reaches the same conclusion: plaintiff lacks standing regardless of which test the court applies.

Plaintiff contends that the Army both could have, and should have, evaluated its cost/price proposal as submitted; in other words, that the cost/price data from five of its teaming partners omitted from its proposal was unnecessary for the Army’s evaluation. Plaintiff’s contention is premised upon its interpretation of section L of the solicitation, which, according to plaintiff, contains only guidelines for preparing and submitting proposals, and not proposal requirements. It therefore argues that teaming partner cost/price data was not a required part its proposal. Plaintiff’s argument lacks merit.

As a preliminary matter, the court notes that although it is generally required to assume that allegations in a complaint are true and construe those allegations in the plaintiff’s favor, it need not do so when jurisdiction is at issue. Here, plaintiff’s allegation that its proposal was timely and complete because it “contained all the information necessary for the Agency to evaluate its proposed costs and prices,” Compl. ¶ 6, and its allegation that section L of the solicitation contained “guidelines,” not “requirements,” id. ¶ 7, are central to the issue of plaintiff’s standing. Thus, the court is entitled to look beyond the complaint to ascertain whether these allegations have a factual basis. As the court explains more fully below, the evidence in the administrative record and the relevant regulations belie plaintiff’s allegations.

First, plaintiff’s general contention that the provisions of section L of the solicitation are mere guidelines and not requirements is clearly contradicted by the plain language of the solicitation. The solicitation contained explicit language requiring offerors to comply with everysection of the solicitation–in other words, sections A through M–including all terms, conditions, representations, certifications, and technical requirements. AR 131, 209, 213, 225. In fact, in section M–the section describing the evaluation factors for award–the Army noted that a successful proposal would conform to all of the solicitation’s requirements, specifically including those set forth in section L. Id. at 225. 

Second, plaintiff’s more specific assertion that the submission of detailed cost/price data for each teaming partner was not required is also contrary to the plain language of the solicitation. The solicitation contained an unambiguous requirement that offerors either supply their teaming partners’ price/cost data to the Army or ensure that the Army received the data directly from their teaming partners by the proposal deadline. Id. at 223. Moreover, the Army clearly indicated in the solicitation that it would use offerors’ teaming partner cost/price data to perform a cost realism analysis. Id. at 231; see also FAR 15.403-3(a)(1)(ii) (noting that an agency can “[r]equire submission of data . . . from the offeror to the extent necessary to determine a fair and reasonable price,” including “data from an offeror to support a cost realism analysis”).  Plaintiff’s attempt to cast the solicitation’s language concerning teaming partner cost/price data as permissive rather than mandatory cannot succeed.

Plaintiff’s reliance on decisions from the Comptroller General and the General Services Board of Contract Appeals (“GSBCA”) cannot detract from the solicitation’s plain language.  In All Phase Environmental, Inc., the Comptroller General remarked that “rather than establishing minimum evaluation standards, the instructions of section L generally provide guidance to assist offerors in preparing and organizing proposals.” B-292919.2 et al., 2004 CPD ¶ 62 (Comp. Gen. Feb. 4, 2004). There is no indication, however, that the solicitation at issue in that case contained the explicit language present in the solicitation here requiring offerors to comply with section L. Id. In Syntrex Inc., the protester contended that section L language indicating that proposed software be “described by giving the ‘date of release for general use’” required that “all offered software must have been released for general use at the time for submission of proposals.” GSBCA No. 8696-P, 87-1 BCA ¶ 19497. The GSBCA disagreed with the protester’s interpretation of the quoted language, finding it “was merely an instruction regarding the format for proposals which required offerors to identify the release date for software,” but the GSBCA did not hold that all section L language constituted instructions. Id. Thus, neither decision provides support for plaintiff’s position.

Given the plain language of the solicitation, plaintiff cannot establish standing to protest under any standard. Under the “substantial chance” standard, plaintiff must show that it could compete for the contract but for the Army’s alleged error in disqualifying its proposal. Plaintiff cannot make this showing because it failed to submit information–complete cost/price data for all> of its teaming partners–clearly required in the solicitation, and plainly necessary for the Army to conduct a cost realism analysis. Acceptance of plaintiff’s argument that complete cost/price data for all of its teaming partners was unnecessary to perform a cost realism analysis would be akin to shifting the burden of providing the information required for a cost realism analysis from plaintiff to the Army. If the burden shifted in that manner, the Army would be forced to examine a teaming partner’s total proposed cost for a particular position and guess the amount of each component of that cost, such as the hourly wage rate, the fringe benefit amount, and the general and administrative cost. The Army, however, is not responsible for filling in missing data, much less filling in missing data with its own guesses. Because plaintiff failed to include critical information in its proposal, it had no chance, much less a substantial chance, of receiving a contract award. Further, under the standard endorsed in Weeks Marine, Inc., plaintiff must demonstrate that it suffered a nontrivial competitive injury that is within the court’s power to remedy. Plaintiff has not made this showing. Because it failed to submit all of the information the Army required to evaluate its proposal, as specified in the solicitation, plaintiff could not have been injured by the Army’s failure to evaluate its proposal.

In sum, regardless of which standard the court employs, plaintiff has not established that it has a direct economic interest in the competition. Therefore, it is not an interested party. Accordingly, plaintiff lacks standing to assert its first claim for relief.  (Orion Technology, Inc. v. U. S. and Strategic Resources, Inc., No 11-573C, December 1, 2011)  (pdf)

Until January 1, 2012, in order to be awarded a contract, an otherwise qualified SDVOSB must be listed in the VIP database. See id. § 8127(e) (“A small business concern may be awarded a contract under this section only if the small business concern and the veteran owner of the small business concern are listed in the database of veteran-owned businesses maintained by the Secretary under subsection (f).”); FAR 804.1102 (“Prior to January 1, 2012, all . . . SDVOSBs must be listed in the VIP database, available at http://www.vetbiz.gov , and also must be registered in the Central Contractor Registration (CCR) (see 48 CAR subpart 4.11) to receive contract awards under VA’s Veteran-owned Small Business prime contracting and subcontracting opportunities program.”). Also until December 31, 2011, an applicant can self-represent its status as a SDVOSB in the VIP database. See FAR 819.7003(b) (“At the time of submission of offer, the offeror must represent to the contracting officer that it is a—(1) SDVOSB concern . . . and (3) Verified for eligibility in the VIP database.”).

After December 31, 2011, the regulations require that an applicant be “listed as verified” in the VIP database. FAR 804.1102 (“After December 31, 2011, all . . . SDVOSBs, must be listed as verified in the VIP database, and also must be registered in the CCR to be eligible to participate in order to receive new contract awards under this program.”). The VA Center for Veterans Enterprise (the “CVE”) evaluates applications for inclusion in the VIP database to verify whether an applicant satisfies the eligibility requirements to be listed as a SDVOSB. See 38 C.F.R. § 74.11(a) (2011) (“The Director, Center for Veterans Enterprise, is authorized to approve or deny applications for VetBiz VIP Verification. The CVE will receive, review and evaluate all VetBiz VIP Verification applications.”). “Once an application, a request for reconsideration, or an appeal to a cancellation notice, as applicable, has been denied, the applicant or participant shall be required to wait for a period of 6 months before a new application will be processed by CVE.” 38 C.F.R. § 74.14.

38 C.F.R. Part 74 and FAR Part 819, when read together, establish a comprehensive regulatory scheme to ensure verification of SDVOSB status in order to prevent unscrupulous offerors from misrepresenting their veteran or service-disabled ownership status. In so doing, the VA is fulfilling its verification obligation according to congressional mandate, as prescribed by 38 U.S.C. § 8127(f)(4) (“In maintaining the database, the Secretary shall carry out at least the following two verification functions: (A) Verification that each small business concern listed in the database is owned and controlled by veterans. (B) In the case of a veteran who indicates a service-connected disability, verification of the service-disabled status of such veteran.”). FAR 819.7003 sets forth the eligibility requirements for SDVOSBs and provides that such eligibility is governed by certain SBA regulations, “except where expressly directed otherwise by . . . 38 C.F.R. verification regulations for SDVOSBs . . . .” Id. § 819.7003(a). Moreover, this regulation also requires an offeror bidding on a solicitation to represent to the contracting officer that the offeror is “[v]erified for eligibility in the VIP database.” Id. § 819.7003(b)(3). 38 C.F.R. § 74.2, in turn, lists “the eligibility requirements for VIP verification.” VA Acquisition Regulation: Supporting Veteran-Owned and Service-Disabled Veteran-Owned Small Businesses, 74 Fed. Reg. at 64,619. 38 U.S.C. § 8127(e) conditions award of a SDVOSB contract upon inclusion in the VIP database. If plaintiff is ineligible to be listed therein, it cannot show a substantial chance of securing the contract and, therefore, cannot establish prejudice. Without such a showing, plaintiff is not an interested party for Tucker Act purposes and lacks standing to bring its claim in the Court of Federal Claims.

In protesting both the GSA and DLA Solicitations as improper, plaintiff alleged that the agencies failed to make any attempts to encourage participation by SDVOSBs in contravention of Executive Order 13,360, Exec. Order No. 13,360, 69 Fed. Reg. 62,549 (Oct. 20, 2004), and 15 U.S.C. § 644(g)(1), which set minimum goals for participation by small businesses in procurement contracts. Additionally, in its protest of the DLA Solicitation, plaintiff alleged that the Solicitation was improper in that it required all SDVOSBs and SBCs to satisfy the NMR. According to plaintiff, these improprieties rendered the Solicitations unlawful, necessitating a rebidding.

On August 26, 2011, defendant filed a notice to the effect that plaintiff is neither certified as nor qualified to be a SDVOSB. Def.’s Br. filed Aug. 26, 2011, at 1. The actual letter from the CVE denied plaintiff’s application for inclusion in the VIP database. The CVE letter explained that plaintiff is a wholly-owned subsidiary of BSE Holdco, LLC, a holding company that itself is a wholly-owned subsidiary of BlueStar Energy Holdings, Inc., a corporation owned 75% by a service-disabled veteran. Given this chain of ownership, the entity owned by the service-disabled veteran is BlueStar Energy Holdings, Inc., not plaintiff. Plaintiff, therefore, is unable to satisfy the “direct ownership” requirement for certification as a SDVOSB.

The CVE letter also announced that plaintiff is unable to satisfy the “control” requirement even though the service-disabled veteran sits on plaintiff’s Board of Directors. Plaintiff’s bylaws provide that it is managed and governed by a Board of Directors (the “Board”) that can act when a quorum—a majority of directors—is present. Given that plaintiff’s Board consists of five directors, three must be present to constitute a quorum. Consequently, because the Board can act in the absence of the service-disabled veteran, it cannot be said that the service-disabled veteran has control of the Board and/or plaintiff. Failure to meet the control requirement for a SDVOSB therefore prevented plaintiff from qualifying as a SDVOSB.

Defendant takes the position that plaintiff’s ineligibility for SDVOSB set-asides is decisive that plaintiff lacks standing to pursue these protests. To establish its standing, plaintiff was required to prove both that it is an actual or prospective bidder and that it had a direct economic interest in the award of the contract. For the reasons stated above, see supra Part II.1-II.2, plaintiff has failed to show that it is an actual or prospective bidder and that it has a direct economic interest in the award of the contract. Defendant reasons that plaintiff was not prejudiced by any government action or inaction as to SDVOSB set-asides because, having failed to qualify as a SDVOSB, plaintiff was not eligible to benefit from these set-asides. Moreover, defendant contends that plaintiff’s ineligibility for the set-asides precludes the court from affording plaintiff the requested relief, thereby rendering plaintiff’s claims moot. Def.’s Br. filed Aug. 26, 2011, at 1.

Plaintiff’s counsel conceded during oral argument that, because an offeror must be certified as a SDVOSB to be eligible for a VA procurement like that in the GSA Solicitation, plaintiff’s failure to obtain such certification renders moot its contention that GSA improperly included a VA procurement in a contract bundle that did not comply with the procedures required for VA procurements (Count III of the GSA Complaint). According to plaintiff, its other claims were not mooted because plaintiff could self-certify its status as a SDVOSB.

As to the GSA Solicitation, defendant’s position is correct. Plaintiff cannot demonstrate the requisite prejudice because it was ineligible to bid for the contract. It ultimately is plaintiff’s own ineligibility, not GSA’s alleged failure to encourage participation by SDVOSBs and SBCs, that would bar plaintiff from availing itself of the set-aside. Defendant also is correct that plaintiff would be unable to demonstrate the requisite prejudice because plaintiff, given its ineligibility for SDVOSB status, could not show that it had a substantial chance of securing the contract. See Labatt, 577 F.3d at 1378. Moreover, by plaintiff’s own admission, it cannot self-certify itself as a SDVOSB for this Solicitation because the Solicitation contains a VA procurement, and such procurements can only be awarded to an entity that is listed in the VIP as a verified SDVOSB. 38 U.S.C. § 8127(e) (requiring small business concern and veteran owner to be listed in database in order to be eligible for award of VA procurement); 38 C.F.R. pt. 74 (establishing verification procedures for SDVOSBs). Because plaintiff did not qualify for inclusion in the VIP, it was not eligible for the GSA contract and cannot maintain suit for GSA’s alleged failure to encourage participation by SDVOSBs. Accordingly, Count II of the GSA Complaint is mooted.

Regarding the DLA Solicitation, it should be noted that DLA dissolved all set-asides> after determining that none of the offerors qualified as a SDVOSB or SBC; therefore, plaintiff’s ineligibility to qualify as a SDVOSB does not preclude it from being awarded the contract as it does with respect to the GSA Solicitation. Nonetheless, it does render plaintiff’s claims moot. Specifically, plaintiff has prayed that this court declare that the DLA (1) failed to make any attempts to encourage participation by SDVOSBs and SBCs (Count II of the DLA Complaint) and (2) impermissibly incorporated the NMR requirement into the Solicitation (Count III of the DLA Complaint). Plaintiff has also requested that this court enter an injunction dissolving the portions of the RFP designated as SBC and SDVOSB setasides and requiring DLA to re-bid those portions without the NMR requirement. These claims are mooted in light of plaintiff’s inability to qualify as a SDVOSB.

Plaintiff contends that it can salvage these claims by self-certifying itself as a SDVOSB. Self-certification, it argues, is acceptable because the DLA Solicitation does not contain a VA procurement and thus does not require that an offeror be listed as a verified SDVOSB in any database. Although self-certification may be acceptable, it is not available in this case. To be considered a SDVOSB, a small business concern “must be at least 51 percent unconditionally and directly owned by one or more veterans or service-disabled veterans.” 38 C.F.R. § 74.3. Moreover, the service-disabled owner must control the “day-today management and long-term decisionmaking” of the entity. 38 C.F.R. § 74.4(a). As explained in the CVE letter, the service-disabled veteran does not directly own plaintiff; rather, the service-disabled veteran owns BlueStar Energy Holdings, Inc., which indirectly owns plaintiff through one of its wholly-owned subsidiaries. This does not satisfy the requirement that the service-disabled veteran directly own the small business concern. See 38 C.F.R. § 74.3(a) (“An applicant or participant owned principally by another business entity . . . that is in turn owned by one or more veterans or service-disabled veterans does not meet th[e] [direct ownership] requirement.”). The CVE letter also indicated that plaintiff does not satisfy the “control” requirement because plaintiff’s Board of Directors could take decisive action in the absence of the service-disabled veteran. The CVE’s finding is accurate and does prevent plaintiff from satisfying the control requirement. See 38 C.F.R. § 74.4(b) (“An applicant or participant’s management and daily business operations must be conducted by one or more veterans or service-disabled veterans.”). Because these decisions can be made without any involvement by the service-disabled veteran, plaintiff cannot be deemed to be controlled by the service-disabled veteran. Plaintiff, therefore, cannot in good faith certify that it qualifies as a SDVOSB. Consequently, Counts II and III of the DLA Complaint are dismissed as moot.

Plaintiff’s inability to qualify as a SDVOSB also serves to deconstruct its futility argument. Essentially, plaintiff contends that it qualified as a prospective bidder for purposes of determining whether or not it is an interested party despite its failure to submit price proposals in response to the Solicitations. Plaintiff explained that it was futile to submit such proposals because GSA and DLA had made no attempts to encourage participation by SDVOSBs, resulting in a diminished likelihood that plaintiff would be awarded the contract. Given this showing and its intention to submit offers in response to any re-solicitations, plaintiff deems itself to be a prospective bidder. Plaintiff, however, is not a SDVOSB; therefore, the agencies’ failure to encourage participation by such entities would not have rendered it futile for plaintiff to submit a bid. As such, plaintiff cannot establish its standing to bring these protests, and the remaining counts—Count I in both the GSA and DLA Complaints—are dismissed for lack of standing.  (BlueStar Energy Services, Inc. d/b/a BlueStar Energy Solutions, v. U. S. Nos. 11-460C and 11-461C, September 22, 2011)  (pdf)

1. The VIP database and SDVOSB contracts

The Veterans Benefits, Health Care, and Information Technology Act of 2006, Pub. L. No. 109-461, §§ 502-03 (codified at 38 U.S.C. §§ 8127-28 (2006)), was enacted to increase contracting opportunities for service-disabled veteran and veteran-owned qualified small businesses. See 38 U.S.C. § 8127(a). Accordingly, the [Department of Veterans Affairs] DVA sets aside certain contracts for SDVOSB concerns. See id. §§ 8127-28. The DVA keeps an online database of qualified SDVOSBs at its [Vendor Information Pages] VIP website, www.VetBiz.gov. See id. § 8127(f) ("[T]he Secretary shall maintain a database of small business concerns owned and controlled by veterans and the veteran owners of such business concerns.”); 48 C.F.R. 2/ § 804.1102 (2010) (providing VIP online database).

Until January 1, 2012, in order to be awarded a contract, an otherwise qualified SDVOSB must be listed in the VIP database. See id. § 8127(e) (“A small business concern may be awarded a contract under this section only if the small business concern and the veteran owner of the small business concern are listed in the database of veteran-owned businesses maintained by the Secretary under subsection (f).”); 48 C.F.R. § 804.1102 (“Prior to January 1, 2012, all VOSBs and SDVOSBs must be listed in the VIP database, available at http://www.VetBiz.gov , and also must be registered in the Central Contractor Registration (CCR) (see 48 CAR subpart 4.11) to receive contract awards under VA's Veteran-owned Small Business prime contracting and subcontracting opportunities program.”). Also until December 31, 2011, an applicant can self-represent its status as an SDVOSB in the VIP database. See 48 C.F.R. § 819.7003(b) (2010) (“At the time of submission of offer, the offeror must represent to the contracting officer that it is a–(1) SDVOSB concern or VOSB concern; . . . and (3) Verified for eligibility in the VIP database.”).

After December 31, 2011, the regulations require that an applicant be “listed as verified” in the VIP database. 48 C.F.R. § 804.1102 (“After December 31, 2011, all VOSBs, including SDVOSBs, must be listed as verified in the VIP database, and also must be registered in the CCR to be eligible to participate in order to receive new contract awards under this program.”). The Center for Veterans Enterprise (the “CVE”), a division of the DVA, evaluates applications for inclusion in the VIP database to verify whether an applicant satisfies the eligibility requirements to be listed as a SDVOSB. See 38 C.F.R. § 74.11(a) (2010) (“The Director, Center for Veterans Enterprise, is authorized to approve or deny applications for VetBiz VIP Verification. The CVE will receive, review and evaluate all VetBiz VIP Verification applications.”). The CVE has authority to remove from the VIP database a firm “found to be ineligible due to an SBA protest decision or other negative finding,” and the firm will not be eligible to participate in the 38 U.S.C. § 8127 program. 38 C.F.R. § 74.2(e) (2010). “Once an application, a request for reconsideration, or an appeal to a cancellation notice, as applicable, has been denied, the applicant or participant shall be required to wait for a period of 6 months before a new application will be processed by CVE.” 38 C.F.R. § 74.14 (2010).

An interested offeror bidding on a procurement may challenge another offeror’s listing status as an SDVOSB in the VIP database by filing a protest with the VA Office of Small and Disadvantaged Business Utilization (the “OSDBU”). See 48 C.F.R. § 819.307(c) (2010).  Pending an interagency agreement with the Small Business Administration (the “SBA”), the Executive Director of the OSDBU decides protests of SDVOSB status raised by either another offeror or the contracting officer. Id. His decision is final. Id.

(sections deleted)

2) Analysis

Defendant bases its claim that plaintiff has no standing on two regulations, 48 C.F.R. § 819.307(c)(3) and 38 C.F.R. § 74.2(e), which, respectively, acts to bar a purported SDVOSB from bidding on a future procurement if a status protest has been sustained against that bidder and grants the CVE authority to remove the bidder from the VIP database. Defendant argues that the two regulations “go hand in hand” and accuses plaintiff of “parsing” the regulatory scheme by differentiating between being listed on the VIP database, 48 C.F.R. § 804.1102, from the VIP verification application process, 38 C.F.R. § 74.11, in 12 order to misrepresent its status as an SDVOSB. 8/ Def.’s Br. filed Aug. 19, 2010, at 4-5 (citing Pl.’s Br. filed Aug. 6, 2010, at 8).

“The rules of statutory construction apply when interpreting an agency regulation.” Roberto v. Dep’t of the Navy, 440 F.3d 1341, 1350 (Fed. Cir. 2006). The court begins its analysis of the regulations by “reviewing its language to ascertain its plain meaning.” Am. Airlines, Inc. v. United States, 551 F.3d 1294, 1299 (Fed. Cir. 2008). The court may consider the language of other, related regulations to guide its analysis. Roberto, 440 F.3d at 1350. The court will defer to the relevant agency’s interpretation of a statute or regulation that is “not clear on its face or does not speak directly to an issue.” Am. Airlines, 551 F.3d at 1299-1300 (citing Chevron, U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837, 842-45 (1984)); see also Roberto, 440 F.3d at 1350 (“[I]f the regulation is silent or ambiguous, the court then gives deference to the agency’s own interpretations.”). However, when the regulation’s text is clear, the court’s inquiry ends with the plain meaning. Roberto, 440 F.3d at 1350.

The court agrees in part with plaintiff’s construction of 48 C.F.R. § 819.307(c)(3). Defendant argues that plaintiff’s interpretation of the regulation “fails to include a situation, such as the one at issue here, where a status protest has already been sustained against an offeror.” Def.’s Br. filed Aug. 19, 2010, at 5. Section 819.307(c)(3) provides:

If the Executive Director sustains a service-disabled veteran-owned or veteran-owned small business status protest and the contract has already been awarded, then the contracting officer cannot count the award as an award to a VOSB or SDVOSB and the concern cannot submit another offer as a VOSB or SDVOSB on a future VOSB or SDVOSB procurement under this part, as applicable, unless it demonstrates to VA that it has overcome the reasons for the determination of ineligibility.

48 C.F.R. § 819.307(c)(3). This regulation applies to status protests of successful bidders to whom “the contract has already been awarded,” not merely protests sustained against an unsuccessful bidder. Id. Nothing in the text suggests a broader application. Indeed, the VA’s own final rule confirms this construction: “Lastly, 819.307 is clarified to explain that if a SDVOSB or VOSB status protest is granted, if contract award has already been made, VA will not be required to terminate the award . . . .” VA Acquisition Regulation: Supporting Veteran-Owned and Service-Disabled Veteran-Owned Small Businesses, 74 Fed. Reg. 64,619, 64,627 (Dec. 8, 2009) (emphasis added). Defendant’s construction of the regulation to encompass unsuccessful bidders ignores the conjunctive clause “and the contract has already been awarded,” 48 C.F.R. § 819.307(c)(3), which would render meaningless the immediately succeeding clause, “then the contracting officer cannot count the award as an award to a VOSB or SDVOSB,” id. This result the court cannot sanction, as it “would contravene the ‘longstanding canon of statutory construction that terms in a statute should not be construed so as to render any provision of that statute meaningless or superfluous.’” Roche v. Merit Sys. Prot. Bd., 596 F.3d 1375, 1380 (Fed. Cir. 2010) (quoting Beck v. Prupis, 529 U.S. 494, 506 (2000)). The court must also follow the “cardinal rule that statutory language must be read in context since a phrase gathers meaning from the words around it.” Hawkins v. United States, 469 F.3d 993, 1001 (Fed. Cir. 2006) (citation omitted) (internal quotation marks omitted). The court concludes that, by its plain terms, 48 C.F.R. § 819.307(c)(3) only applies to status protests sustained against firms that already have been awarded a contract.

Applying this construction to the facts of this case, it becomes clear that the regulation is inapplicable. When the OSDBU sustained the status protest against plaintiff on April 30, 2010, by plaintiff’s own admission, see Pl.’s Br. filed Aug. 6, 2010, at 4, the protested procurement had not been awarded to plaintiff. Nothing in the regulation’s text supports applying its penalty clause—barring sustained protested firms from future bids—to an anomalous situation where, as here, the sustained protested firm was an unsuccessful bidder. Therefore, 48 C.F.R. § 819.307 does not bar plaintiff from bidding on the Solicitation.

For the same reason, however, plaintiff cannot take refuge in the regulation’s safe harbor provision, “unless it demonstrates to VA that it has overcome the reasons for the determination of ineligibility.” 48 C.F.R. § 819.307(c)(3). The regulation simply does not apply to a sustained status protest regarding an offeror’s prior, unsuccessful bid. Even though the regulation does not bar plaintiff from bidding, that does not mean that, by negative implication, the regulation permits plaintiff to bid on future procurements after the CVE’s determination of ineligibility for SDVOSB status. In other words, § 819.307(c)(3) does not apply to this case.

Defendant argues that the DVA’s amendment to the pre-solicitation notice to conform it to 38 U.S.C. § 8127(e) and the DVA’s own interpretation of that statute in Corners Construction confirm that plaintiff has until the actual award of the contract to be listed in the VIP database. Plaintiff insists that, in light of the CVE’s acknowledgment that plaintiff cured the defects identified in the OSDBU’s April 30 letter, nothing prevents it from being placed back on the VIP database prior to the contract’s award. The court concludes, however, that notwithstanding the CVE’s observations pertinent to the OSDBU’s status protest, plaintiff is ineligible to bid by virtue of 48 C.F.R. § 819.7003(a) and 38 C.F.R. § 74.2(e).

38 C.F.R. Part 74 and 48 C.F.R. Part 819, when read together, establish a comprehensive regulatory scheme to ensure verification of SDVOSB status in order to prevent unscrupulous bidders from misrepresenting their veteran- or service-disabled ownership status. In so doing, DVA is fulfilling its verification obligation according to congressional mandate, as prescribed by 38 U.S.C. § 8127(f)(4) (“In maintaining the database, the Secretary shall carry out at least the following two verification functions: (A) Verification that each small business concern listed in the database is owned and controlled by veterans. (B) In the case of a veteran who indicates a service-connected disability, verification of the service-disabled status of such veteran.”). Defendant correctly contends that these two provisions cannot be considered in isolation. Each provision is examined in turn.

48 C.F.R. § 819.7003 sets forth the eligibility requirements for SDVOSBs and provides that such eligibility is governed by certain SBA regulations, “except where expressly directed otherwise by . . . 38 C.F.R. verification regulations for SDVOSBs and VOSBs.” Id. § 819.7003(a). Moreover, this regulation also requires an offeror bidding on a solicitation to represent to the contracting officer that the offeror is “[v]erified for eligibility in the VIP database.” Id. § 819.7003(b)(3) (emphasis added). 38 C.F.R. § 74.2, in turn, lists “the eligibility requirements for VIP verification.” VA Acquisition Regulation: Supporting Veteran-Owned and Service-Disabled Veteran-Owned Small Businesses, 74 Fed. Reg. at 64,619. Section 74.2(e) provides:

U.S. Small Business Administration (SBA) Protest Decisions. Any firm registered in the VetBiz VIP database that is found to be ineligible due to an SBA protest decision or other negative finding will be immediately removed from the VetBiz VIP database. Until such time as CVE receives official notification that the firm has proven that it has successfully overcome the grounds for the determination or that the SBA decision is overturned on appeal, the firm will not be eligible to participate in the 38 U.S.C. [§] 8127 program.

38 C.F.R. § 74.2(e) (emphasis added). Plaintiff disputes the applicability of 38 C.F.R. § 74.2(e) on the ground that it is specific to SBA decisions. See Pl.’s Br. filed Aug. 6, 2010, at 5 (“The title of the clause alone speaks to its inapplicability . . . .”). However, a regulation is not interpreted merely according to its title. See Fla. Dep’t of Revenue v. Piccadilly Cafeterias, Inc., 554 U.S. 33, __, 128 S. Ct. 2326, 2336 (2008) (“To be sure, a subchapter heading cannot substitute for the operative text of the statute.”); Pa. Dep’t of Corrections v. Yeskey, 524 U.S. 206, 212 (1998) (explaining that title of statute does not limit plain meaning of its text). As the text of the regulation explicitly provides, a firm will be removed from the VIP database if it is found to be ineligible due to “[an]other negative finding,” not only an SBA decision. Moreover, the CVE’s authority to remove a bidder upon a negative finding by the DVA and bar that bidder from bidding on future procurements is not so readily discounted, and the court declines to do so now. 48 C.F.R. § 819.7003 expressly conditions eligibility for SDVOSB status on satisfying the verification requirements of 38 C.F.R. Part 72. Upon plaintiff’s application, which proceeded in tandem with the Solicitation, the CVE removed plaintiff from the VIP database on April 30, 2010, thereby rendering plaintiff ineligible to participate in the Solicitation. Nothing in the regulatory scheme permits a firm to represent itself as an SDVOSB once it has been removed from the VIP database. To do so would turn the DVA’s verification process on it head. 38 U.S.C. § 8127(e) conditions award of an SDVOSB contract upon inclusion in the VIP database. Because plaintiff is ineligible to be listed therein, it cannot show a substantial chance of securing the contract and, therefore, cannot establish prejudice. Without such a showing, plaintiff is not an interested party for Tucker Act purposes and lacks standing to bring its claim in the Court of Federal Claims.  (CS-360, LLC, v. U. S., No 10-457C, September 16, 2010) (pdf)

I. Standing

Standing is a threshold jurisdictional issue. Myers Investigative & Sec. Servs., Inc., v. United States, 275 F.3d 1366, 1369 (Fed. Cir. 2002) (citing Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83, 102-04 (1998)). The doctrine of standing ensures that the party seeking redress is properly entitled to have the court decide the dispute or issue. Warth v. Seldin, 422 U.S. 490, 498 (1975). It is an outgrowth of the Constitution’s “case or controversy” requirement, and, although we are an Article I court, we generally apply the same standard as the federal courts created under Article III. Anderson v. United States, 344 F.3d 1343, 1350 n.1 (Fed. Cir. 2003). This standard requires that, to have standing, a litigant must have suffered a concrete and particular injury that is fairly traceable to the defendant’s action and which is likely to be redressed by a favorable decision. Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61 (1992).

In the bid protest context, the standing issue is framed by 28 U.S.C. § 1491(b)(1), which grants jurisdiction over a protest brought by an “interested party”:

Both the Unites [sic] States Court of Federal Claims and the district courts of the United States shall have jurisdiction to render judgment on an action by an interested party objecting to a solicitation by a Federal agency for bids or proposals for a proposed contract or to a proposed award or the award of a contract or any alleged violation of statute or regulation in connection with a procurement or a proposed procurement. . . .

28 U.S.C. § 1491(b)(1) (2006). Though the statute does not speak of standing, its requirement of an interested party has been interpreted as “impos[ing] more stringent standing requirements than Article III.” Weeks Marine, Inc. v. United States, 575 F.3d 1352, 1359 (Fed. Cir. 2009) (citing Am. Fed’n of Gov. Employees v. United States, 258 F.3d 1294, 1302 (Fed. Cir. 2001)). Here, the crux of the standing argument is whether Navarro is an interested party.

At first blush, Navarro—the incumbent contractor and a disappointed bidder—seems the very model of an interested party, having failed in its bid to receive a contract valued at nearly $30 million. The government, however, argues that Navarro does not qualify as an interested party and thus lacks standing. The government’s argument, discussed in more detail below, is drawn from decisions in which the plaintiff was challenging the merits of an award. We believe that Navarro’s situation is sufficiently different from the typical bid protest that a different standing requirement should apply here.

The government’s argument begins by noting that, although 28 U.S.C. § 1491 does not define an interested party, past cases have applied the definition found in the Competition In Contracting Act, 31 U.S.C. § 3551(2) (2006). Def. Resp. 4 (citing Rex Serv. Corp. v. United States, 448 F.3d 1305, 1307 (Fed. Cir. 1996)). Under this definition, interested parties are those “actual or prospective bidders or offerors whose direct economic interest would be affected by the award of the contract or by failure to award the contract.” 31 U.S.C. § 3551(2)(A); Rex Serv. Corp., 448 F.3d at 1307. While plaintiff would obviously meet that requirement, the government next draws from decisions holding that a protestor has a “direct economic interest” only if it could be put in a position for award as a result of prevailing in its bid protest. Def. Resp. 5 (citing United States v. Int’l Bus. Machs. Corp., 892 F.2d 1006, 1011 (Fed. Cir. 1989)). In other words, the contractor “must show that there was a ‘substantial chance’ it would have received the contract award but for the alleged error in the procurement process.” Info. Tech. & Applications v. United States, 316 F.3d 1312, 1319 (Fed. Cir. 2003); see also Myers, 275 F.3d at 1369-70 (“[P]rejudice (or injury) is a necessary element of standing.”).

In the present action, Navarro is not challenging the procurement decision itself but rather seeks to enforce a post-award procedural remedy—an allegedly mandatory debriefing. In other words, even if Navarro were to prevail here, it would not be awarded the contract. It would still have to obtain review of the merits of the award and succeed. Thus, the government argues, Navarro has no direct economic interest, is not an interested party, and therefore lacks standing. Although the precise question presented is one of first impression,6 we believe that the relevant statutes and related case law mean that the government is incorrect.

The government’s argument relies on standing doctrine developed in typical bid protests, in which the winner of the competition has been announced or even awarded the contract. In such a “substantive” challenge to a procurement, it makes sense to insist that the protestor has a substantial chance at the award. Otherwise, the court’s ruling would serve no purpose, neither changing the award nor redressing the protestor’s real grievance.

In Weeks Marine, Inc. v. United States, 575 F.3d 1352 (Fed. Cir. 2009), the Federal Circuit confronted a challenge to standing in a pre-award protest, in which the plaintiff challenged the agency’s decision to use task order contracts rather than sealed bidding procedures. Id. at 1354-58. The challenge, in other words, was not unique to the plaintiff’s circumstances. It went to the validity of the entire solicitation process. The Court of Federal Claims had ruled in favor of the contractor and enjoined the agency from moving forward with the solicitation. On appeal, the government, relying on standing decisions developed in post-award contexts, made the same challenge to standing which it makes here—that plaintiff’s injury was too speculative because there was no assurance that, if successful with the protest, plaintiff would receive the award.

The Federal Circuit rejected the government’s argument. It began with the proposition that determining bid protest standing is a two-prong test requiring the protestor “to establish that it ‘(1) is an actual or prospective bidder and (2) possess[es] the requisite direct economic interest.’” Id. at 1359 (quoting Rex Serv. Corp., 448 F.3d at 1308). The first prong was not disputed. Id. at 1359-60. As to the second prong, the Weeks Marine court held that the unique context of pre-award bid protests merited a modification of the usual standing requirement. It rejected the “substantial chance” definition of direct economic interest in favor of a more inclusive test. Id. at 1361-62. The court adopted the standard used by the trial court, in which “standing is established by alleging a ‘non-trivial competitive injury which can be redressed by judicial relief.’” Id. at 1361 (quoting unattributed source). This standard “strikes the appropriate balance between the language of § 1491(b)(1) . . . and Article III’s standing requirements.” Id. at 1362. The court noted that a different result would lead to the anomalous outcome that the protestor had no standing, but if it subsequently challenged an actual award at a later point in the process, it would be confronted with the argument that, by not protesting, it had waived the right to challenge the terms of the solicitation.

The court also reasoned that a different result would be at odds with prior decisions recognizing the broad terms of 28 U.S.C. § 1491’s jurisdictional grant to this court. See RAMCOR Serv. Group, Inc. v. United States, 185 F.3d 1286, 1289 (Fed. Cir. 1999) (noting that language in § 1491(b)(1) “is very sweeping in scope”). This court has been given jurisdiction to hear challenges to “any alleged violation of statute or regulation in connection with a procurement or a proposed procurement.” 28 U.S.C. § 1491(b)(1). Denying standing to a protestor attempting to enforce one of the statutory requirements related to a procurement would be tantamount to making the procedure illusory.

We therefore conclude that the Weeks Marine standard strikes the appropriate balance in a bid protest seeking an allegedly mandatory post-award debriefing. An interested party is an actual or prospective bidder alleging a non-trivial competitive injury related to the procurement which can be redressed by judicial relief. Here, Navarro satisfies this standard and therefore has standing.

Navarro satisfied the first prong of the test—an actual or prospective bidder—when it submitted a bid on the RFQ. We also believe Navarro has satisfied the second prong by alleging a non-trivial competitive injury capable of judicial redress. If Navarro were to prevail here and receive the debriefing it seeks, it would then have the ability, assuming it refiled a protest at GAO, to trigger a stay of the transition to the new contractor. In such situations, it is not uncommon for the incumbent contractor to continue performance during the pendency of the stay. The ability to perform during this interim period is not a trivial benefit. Furthermore, the information gleaned from the debriefing could be helpful to Navarro in its protest at GAO and in shaping its future bidding strategies. Finally, a stay in place during the pendency of a protest allows the court, in the event the protest is well founded in fact and law, to award injunctive relief without the extraneous concern that too much work has been performed by the putative awardee to prevent undue harm to it or the government.

In sum, Congress created a mechanism that gives a bidder the presumptive right to a stay during the pendency of a bid protest at GAO. We need not second guess why Congress believed it important to the competitive process to create such a possibility. Nor do we second guess the assignment to this court of the responsibility to hear protests involving a statute or regulation connected with that same procurement. It is sufficient to say that our obligation to hear the latter type claim would be meaningless if the protestor here had to persuade us that it would succeed at GAO. Plaintiff has standing.  (Navarro Research and Engineering, Inc. v. U. S., and Portage, Inc., No. 10-481C, August 16, 2010)  (pdf)

Standing

The Government contends that L-3 does not have standing and that this Court lacks jurisdiction because L-3 is not an interested party under the ADRA. The Federal Circuit has construed the term “interested party” in the ADRA to have the same meaning that it has under the Competition and Contracting Act, 31 USC § 3551-56 (“CICA”). E.g., Rex Service Corp. v. United States, 448 F.3d 1305, 1307 (Fed. Cir. 2006); American Federation of Government Employees v. United States, 258 F.3d 1294, 1302 (Fed. Cir. 2001). CICA defines the term “interested party” to mean “an actual or prospective bidder or offeror whose direct economic interest would be affected by the award of the contract or by failure to award the contract.” 31 U.S.C. § 3551(2)(A). Defendant contends that L-3 fails to qualify as an interested party because it was not an actual or prospective offeror and did not submit a proposal -- indeed it did not even exist when its predecessor submitted its offer. While this is true, this argument ignores the reality that L-3 is the complete successor-in-interest to the actual offeror, Raytheon Company, and embraces the identical business unit which submitted Raytheon Company’s bid in the C-5 AMP procurement. As such, L-3 stands in the shoes of Raytheon Company in the instant case and has standing to pursue this claim. See Alabama Aircraft Industries, Inc. v. United States, 83 Fed. Cl. 666, 682 (2008) (holding that successor-ininterest to the original offeror, was in effect, the same legal entity which had submitted its proposal and was an interested party under ADRA); accord, Coggeshall Dev. Corp. v. United States, 23 Cl. Ct. 739, 743 (1991) (holding that successor-in-interest under Government deed had a contractual relationship with the United States and could maintain a breach of contract action); Harnischfeger Corp., B-224371, 86-2 CPD ¶ 296. As such, L-3 is an interested party under ADRA and has standing to pursue this protest.  (L-3 Communications Integrated Systems, L. P., v. U. S. and Lockheed Martin Aeronautics Company, No. 06-396C-Costs, Filed November 26, 2008, Reissued December 5, 2008) (pdf)

The Air Force and Boeing claim that Alabama Aircraft fails to qualify as an “interested party” because “it is not the same entity that submitted a proposal” and because it lacks adequate financial resources to perform the KC-135 contract. Intervening Def.’s Reply to Pl.’s Opp’n to Def.’s and Intervening Def.’s Mot. to Dismiss at 1-2 (“Intervening Def.’s Reply on Standing”); see also Def.’s Mot. to Dismiss at 10. The Air Force further argues that “[i]f Pemco actually wished to change its name, or declare [Alabama Aircraft] a successor in interest to the bid, as [Alabama Aircraft] appears to allege, Pemco should have done so formally so that the Government could determine if its interests are protected.” Def.’s Mot. to Dismiss at 11. Alabama Aircraft resists these contentions on the grounds that it is the same corporate entity as Pemco Aeroplex, that the Air Force had notice of the sale of Pemco World Air and the resulting name change, and that it has the financial capability to perform the contract, as evidenced by an audit report prepared in June 2008 by the Defense Contract Audit Agency. Pl.’s Opp’n to Def.’s and Intervening Def.’s Mot. to Dismiss at 10, 19-20 (“Pl.’s Opp’n). Whether Alabama Aircraft qualifies as an “interested party” and has standing to protest must be addressed as a threshold issue in this case.  (p. 19)

(sections deleted)

Alabama Aircraft has standing to challenge the Air Force’s award of the KC-135 PDM contract because it satisfies the definition of “interested party.” Despite its name change and the sale of a sister subsidiary, Alabama Aircraft is the same legal entity as the company that submitted its second final proposal revision in June 2007. Alabama Aircraft has the same operational capabilities as its predecessor and due to the sale to the sister company it is in a stronger financial position to perform the instant contract. Furthermore, the Air Force had ample notice of the sale of the sister company and failed to initiate any inquiries about whether the sale called into question Alabama Aircraft’s capabilities to perform the contract. The DCAA audit report completed in June 2008, while not the equivalent of a responsibility determination, confirms that for the near future Alabama Aircraft has sufficient financial resources to perform under the contract. For these reasons, Alabama Aircraft continues to be an interested party with standing to pursue this bid protest.  (p. 24)  (Alabama Aircraft Industries, Inc. - Birmingham v. U. S., and The Boeing Company, No. 08-470C, October 7, 2008) (pdf)

1. Standing as a function of relative responsiveness

Plaintiff argues that it has standing to pursue this action (1) because it was an actual offeror in this Solicitation and (2) because its direct economic interest would be affected adversely by the award to CSC, the successful bidder. Plaintiff contends that the MCC arbitrarily excluded plaintiff’s proposal from the competitive range because plaintiff’s final proposal still contained open-market items (plaintiff argues that this nonconformity was illusory), whereas CSC’s final proposal manifested the same type of noncompliance for a similar requirement.

Defendant had argued in its two briefs that the MCC’s exclusion of plaintiff’s final proposal as noncompliant defeats its claim to standing. See Def.’s Br. filed Aug. 8, 2008, at 1; Def.’s Br. filed July 31, 2008, at 19. During oral argument, however, defendant conceded that plaintiff has standing to challenge the MCC’s determinations that plaintiff’s proposal was noncompliant and that CSC’s proposal was compliant. See Transcript of Proceedings, at 36, Dyonyx, L.P. v. United States, No. 08-458C (Fed. Cl. Aug. 19, 2008) (“Tr.”). (“Our view is that Dyonyx has standing to address two issues here. First, whether or not their proposal was in fact compliant, which goes to the open-market issue, and, secondly, whether or not CSC’s proposal was in fact compliant.”) Defendant nonetheless would limit the court’s consideration to these issues.

Although jurisdiction cannot be established by a litigant’s concession, see Industrial Addition Ass’n v. Comm’r, 323 U.S. 310, 313 (1945) (stating that parties cannot confer jurisdiction by mutual consent), accord Grantham v. Brown, 114 F.3d 1156, 1158 (Fed. Cir. 1997); Gould v. Control Laser Corp., 866 F.2d 1391, 1393 (Fed. Cir. 1989); Glasstech, Inc. v. AB Kyro OY, 769 F.2d 1574, 1577 (Fed. Cir. 1985), defendant, in effect, acknowledged that using the acceptability of a proposal to determine standing could produce an inane result. Thus, defendant would be arguing that, even if CSC’s proposal was materially noncompliant, plaintiff lacked standing to question the award because plaintiff’s proposal was materially noncompliant. Ultimately, defendant argued that plaintiff’s final proposal failed a mandatory requirement that pertained to compliance, whereas CSC’s proposal manifested a weakness in staffing, a non-mandatory technical subfactor that the MCC considered in weighing the minimum qualifications of the staff proposed by both plaintiff and CSC. This argument is not an issue of standing.

The caselaw has confused the legal issue whether a noncompliant proposal forfeits the offeror’s status as an actual offeror. This confusion arises within the Court of Federal Claims and not in the binding precedent of the Federal Circuit. The confusion traces to the Federal Acquisition Regulation, which attaches the concept of responsiveness to eligibility “[t]o be considered for award.”

PART 14 – SEALED BIDDING
SUBPART 14.3 – SUBMISSION OF BIDS

14.301 Responsiveness of bids.

(a) To be considered for award, a bid must comply in all material respects with the invitation for bids [IFB]. Such compliance enables bidders to stand on an equal footing and maintain the integrity of the sealed bidding system.

The FAR confines the concept of responsiveness to sealed bidding. FAR Part 15 Contracting by Negotiation, governing competitive procurements, neither employs the term nor the concept of “responsiveness.” This distinction is significant. As the Federal Circuit held in AFGE, 258 F.3d at 1302, “the term ‘interested party’ in [28 U.S.C.] § 1491(b)(1), . . . [as related to standing] is limited to actual or prospective bidders or offerors whose direct economic interest would be affected by the award of the contract or by failure to award the contract.”

Subsequently, the Court of Federal Claims in A&D Fire Protection, Inc. v. United States, 72 Fed. Cl. 126, 139 (2006), involving a negotiated procurement (an RFP) held that, by failing to prove that it submitted a bid bond, the offeror has failed to show that it was a “qualified bidder” and therefore lacked standing. The court also held that the solicitation’s prohibition of submission of a bid bond via facsimile transmission rendered the proposal nonresponsive. See id. at 138-40. The court in Dismas Charities, Inc. v. United States, 75 Fed. Cl. 59 (2007), another negotiated procurement, cited and quoted A&D for the proposition that a bidder submitting a nonresponsive bid lacks standing and continued:

Although responsiveness is generally used to describe sealed bids, the same concept applies to final offers submitted after negotiations. Just as a sealed bid that does not meet the minimum solicitation requirements is non-responsive and cannot be considered for contract award, FAR § 14.301(a), a Final Proposal Revision that does not conform to the solicitation requirements is technically unacceptable and cannot be considered for award unless the agency reopens negotiations for all offerors or modifies the solicitation. See FAR § 15.307(b); cf. Labat-Anderson, Inc. v. United States, 42 Fed. Cl. 806, 841 (1999) (contrasting technically unacceptable initial proposals with technically unacceptable Best and Final Offers).

Dismas Charities, 75 Fed. Cl. at 61.

FAR § 15.307(b) addresses proposal revisions in negotiated procurements. Although Labat-Anderson states that generally a technically unacceptable proposal must be excluded from the competitive range, neither FAR § 15.307(b) nor Labat-Anderson purports to address standing as a function of technical acceptability. Nor does Burroughs Corp. v. United States, 617 F.2d 590 (Ct. Cl. 1980), 3/ cited by Labat-Anderson for the proposition that a technically unacceptable proposal cannot be considered for award. Id. at 596 (cited in Labat-Anderson, 42 Fed. Cl. at 841).

Defendant’s opening brief seized on Dismas as authority for its argument that plaintiff’s proposal was “non-responsive” and “non-compliant” and thereby forfeited plaintiff any standing to protest. Def.’s Br. filed July 31, 2008, at 19. However, Dismas cited a regulation and case, FAR § 15.307(b) and Labet-Anderson, that apply to consideration of evaluation of negotiated proposals after discussions.

While defendant drew support from Dismas, it was also inspired by Eracent, Inc. v. United States, 79 Fed. Cl. 427 (2007), also cited in defendant’s opening brief. This case involved a GSA FSS acquisition for which a non-FSS contractor had standing to challenge whether a FSS order included non-FSS items which, by regulation, were prohibited from inclusion in a task order. The court ruled on the merits. To the extent that the non-FSS contractor/protestor was challenging a potential violation of 31 U.S.C. § 3324 (2000) (dealing with advances of public money), the court alternatively ruled that plaintiff lacked standing. 79 Fed. Cl. at 433. Judgment, however, was entered on the merits.

Given that Dismas cannot stand for the broad proposition argued in defendant’s opening brief, the court reiterates that it is the Federal Circuit, not the Court of Federal Claims, that issues the decisions defendant should cite as law. As Judge Bush pointed out in her recent decision Tip Top Construction Inc. v. United States, 2008 WL 3153607 (Fed. Cl. Aug. 1, 2008), Rex is the law of the Circuit. The Government’s efforts to whittle away the jurisdiction of the Court of Federal Claims by circular arguments attacking standing, such as in Tip Top, 2008 WL 3153607 at *11 (characterizing as “circular” defendant’s argument that protestor could not show that it was responsible and therefore could not show that it had a substantial chance of winning award), or in the case at bar (arguing that offeror had no standing based on noncompliant sources of items proposed), are transparent and misleading attempts to change binding law.  (Dyonyx, L. P., v. United States, No. 08-458C, September 15, 2008) (pdf)

The Tucker Act permits postaward bid protests to be brought by “interested parties.” 28 U.S.C. § 1491(b)(1). The United States Court of Appeals for the Federal Circuit (“Federal Circuit”) has held that the term “interested party” should be construed in accordance with the Competition in Contracting Act of 1984, and that, accordingly, “standing under § 1491(b)(1) is limited to actual or prospective bidders or offerors whose direct economic interest would be affected by the award of the contract or by failure to award the contract.” Am. Fed’n of Gov’t Employees v. United States, 258 F.3d 1294, 1302 (Fed. Cir. 2001) (citing 31 U.S.C. § 3551(2)(A)). Accordingly, plaintiff must establish that it “(1) is an actual or prospective bidder, and (2) possesses the requisite direct economic interest.” Rex Serv. Corp. v. United States, 448 F.3d 1305, 1307 (Fed. Cir. 2006). To prove that it possesses a “direct economic interest,” plaintiff must show that it had a “substantial chance” of receiving the contract. Id. at 1307. In other words, “[t]o have standing, the plaintiff need only establish that it ‘could compete for the contract’ . . . .” Myers Investigative & Sec. Servs., Inc. v. United States, 275 F.3d 1366, 1370 (Fed. Cir. 2002) (citing Impresa Construzioni Geom. Domenico Garufi v. United States, 238 F.3d 1324, 1334 (Fed. Cir. 2001)).

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As the court reads the complaint, plaintiff seeks two forms of relief. First, plaintiff requests that the court set aside the contract award to defendant-intervenor. In support of this request, plaintiff contends in Counts I and II that the Army and the SBA knowingly failed to consider defendant-intervenor’s ostensible subcontractor during the procurement process. However, plaintiff is not an “interested party” entitled to pursue either claim because under the facts of this case, there is no chance, much less a substantial chance, that plaintiff could be awarded the contract in the event that the Army’s contract with defendant-intervenor is set aside. Assuming, arguendo, that the SBA and the Army improperly considered defendant-intervenor to be a small business, plaintiff itself is not a small business and there remains a small business in the competitive range–Torres–that would be awarded the contract if the award to defendantintervenor is set aside. Plaintiff’s argument that Torres is not a small business, id. at 2, 12-17, 20, lacks merit because neither the contracting officer nor the SBA has determined that Torres is not a small business, and this court lacks any authority to entertain a size protest. See 13 C.F.R. § 121.1002 (providing that the SBA “makes all formal size determinations”); see also Compl. ¶¶ 25, 29 (alleging that plaintiff lodged a size protest of Torres with the SBA as part of its size protest of defendant-intervenor but that the SBA dismissed its size protest of defendantintervenor for lack of standing, without addressing the size protest of Torres). Thus, without any The second, and more general, form of relief requested by plaintiff is the full and open recompetition of the contract. However, to obtain such relief, the court would first be required to set aside the contract award to defendant-intervenor, relief that the court has already determined that plaintiff is foreclosed from pursuing because it lacks standing. Thus, it follows that plaintiff lacks standing to seek recompetition of the contract. As noted by defendant, Def.’s Reply Support Def.’s Mot. Dismiss Lack Standing & Non-Justiciability 7-10, the cases cited by plaintiff in support of its standing argument are unpersuasive. For example, plaintiff’s reliance upon Impresa Construzioni is unavailing because even though the Federal Circuit held that sustaining the bid protest would require the contract to be rebid, 238 F.3d at 1334, its holding was undoubtably based on the fact that after setting aside the award, there were no other offerors in the competitive range to which the award could be made, see id. at 1329. This is not true in the instant case, where Torres remains a qualified bidder in the competitive range. (International Management Services, Inc., v. U. S. and Aegis, Mission Essential Personnel LLC, No. 07-831C, Reissued January 9, 2008) (pdf)

In this bid protest action, Plaintiff, Ezenia!, Inc. (Ezenia), as well as the Defendant- Intervenor Carahsoft Technology Corp. (Carahsoft), are vendors on the Army’s Federal Supply Schedule that provide commercial software to the military. The military, and in particular the Army, use different types of software for command and control of soldiers, especially those who are engaged in combat operations. These products allow video-teleconferencing on a computer via the internet in a secure environment, while at the same time allowing the computer screen to show the windows from other computer programs such as PowerPoint presentations or battle plan diagrams. Two such products are Adobe Breeze (now called Adobe Connect) and Ezenia’s InfoWorkspace (IWS). Because of the need for interoperability, the Army standardized the software through an evaluation technique called “Best of Breed” and chose Adobe Breeze as its computer software. Ezenia clearly states in its papers that it is not protesting the actual decision of the Army to standardize, but rather is challenging the award of sole-source contracts for the brand name Adobe Connect product. Ezenia alleges that three contracts were procured in violation of the proper statutory and regulatory guidelines governing those awards. As such, Ezenia asserts that it is an interested party protesting the Army’s actions in connection with these procurements. Defendant and Defendant-Intervenor move this Court to dismiss Plaintiff’s action pursuant to Rule 12(b)(1) for want of subject-matter jurisdiction. Both Defendant and Defendant-Intervenor argue that the matter must be dismissed because Plaintiff fails to identify a procurement action within this Court’s jurisdiction, and/or that Plaintiff is not an “interested party” with standing to bring this action. Both assert that Ezenia is not an “interested party” because Ezenia is not a qualified bidder. Both further contend that Ezenia is really protesting the standardization decision of the Army to use the Adobe product and that this Court is without jurisdiction to entertain such a protest. After briefing, oral argument and careful consideration, the Court finds that it must dismiss this matter. It is clear to the Court that even though Ezenia states clearly that it is not challenging the Army’s decision to standardize, that is exactly what Ezenia is challenging. The procurements that have been identified by both Plaintiff and Defendant are purchases that were properly done within the statutory and regulatory guidelines. Although not necessary, the Court also finds that Plaintiff is not an interested party. The Court, therefore, GRANTS Defendant’s and Defendant- Intervenor’s Motions to Dismiss.  (Ezenia!, Inc. v. U. S. and Carahsoft Technology Corporation, No. 07-759C, Reissued after seal on January 4, 2007)

Even assuming, arguendo, that plaintiff could establish his financial wherewithal, technical and/or other necessary specialized expertise, and prior experience in contracting on similar projects suited to the Solicitation, plaintiff nonetheless would be unable to establish that he had a substantial chance of contract award. Because plaintiff did not submit a bid prior to the close of the period for submission of proposals, even if he could prevail on his challenge to the terms of the solicitation and the court were to order a reevaluation of the proposals with the allegedly illegal provisions removed, plaintiff would have no chance of securing award of the contract, as he has formulated it. Rex Serv. Corp., 448 F.3d at 1308 (holding that plaintiff-protestor alleging violations in solicitation process did not have “substantial chance” of receiving contract because plaintiff never bid on contract prior to close of solicitation); see also AFGE, 258 F.3d at 1302 (“Congress intended standing under the [ADRA] to be limited to disappointed bidders.”) Plaintiff does not qualify as an interested party with standing under the ADRA because he does not establish a substantial chance of award and thus does not show a direct economic interest in the award or failure to award the contract. Nonetheless, in the interest of giving full consideration to the issue of standing, the court examines the issue of plaintiff’s status as an actual or prospective bidder. (Brian X. Scott, v. U. S., No. 07-216C, August 23, 2007) (pdf)

This Court has held that "[a] bidder submitting a nonresponsive bid has no standing to protest an award, because it has no chance of receiving the award." A & D Fire Protection, 72 Fed. Cl. at 138. Although responsiveness is generally used to describe sealed bids, the same concept applies to final offers submitted after negotiations. Just as a sealed bid that does not meet the minimum solicitation requirements is non-responsive and cannot be considered for contract award, FAR § 14.301(a), a Final Proposal Revision that does not conform to the solicitation requirements is technically unacceptable and cannot be considered for award unless the agency reopens negotiations for all offerors or modifies the solicitation. See FAR § 15.307(b); cf. Labat-Anderson, Inc. v. United States, 42 Fed. Cl. 806, 841 (1999) (contrasting technically unacceptable initial proposals with technically unacceptable Best and Final Offers). The Government and Bannum claim that Dismas submitted a non-compliant proposal by including the 240-day development schedule. However, Bureau of Prisons decisionmakers evaluated Dismas's Final Proposal Revision on its merits in its Source Selection Decision (“SSD”) dated February 6, 2006, and never explicitly stated that it did not comply with the solicitation. The SSD elsewhere declared that "[a]ll of the offerors' responses to ‘Request for Final Proposal Revisions' have been reviewed and determined to be acceptable," AR 1307, that "Dismas received a color rating of Blue/Very Good" for the Site Location factor under Technical/Management, which included the comments about the 240-day start-up period, AR 1315, and that "Dismas met the minimum requirements" for Technical/Management and "was rated higher than the other offerors" for that category. AR 1319. Even the post-award debriefing letter, dated May 31, 2006, declared that "Dismas' proposal also met the requirements of the solicitation in every factor of the solicitation and had a very good solution for meeting the needs and objectives of the program.” AR 923. In a similar case, the Court determined that a plaintiff whose potentially non-responsive bid was treated as an alternative proposal by the agency, which then evaluated the bid on the merits, did have a substantial chance of receiving the award, and therefore, was an interested party for the purposes of this Court's bid protest jurisdiction. Galen Medical Assoc., Inc. v. United States, 56 Fed. Cl. 104, 108 (2003), aff'd 369 F.3d 1324 (Fed. Cir. 2004). Despite Dismas's current argument that, like the Galen bid, its 240-day proposal was "an alternative, additional option," the Final Proposal Revision never described it as such. AR 859-60. In fact, Plaintiff’s counsel admitted at the hearing that no language in the record itself supported Dismas’s argument that the 240-day startup plan was an alternative proposal. Transcript at 30-31. Instead, Dismas used the words "revise" or “revised” at least five times in the Final Proposal Revision in referring to its new plans. AR 859-60. These contemporaneous descriptors point to a replacement of the original 120-day plan with a 240-day plan, rather than a possible alternative. The fact that the Bureau of Prisons personnel evaluated Dismas based on the increased costs associated with the 240-day plan, compare AR 860 with AR 1319, demonstrates that they also considered it a substitute rather than an option. In addition, there was no evidence in Galen that the contracting officials "found plaintiff's proposal technically unacceptable." 56 Fed. Cl. at 108. In contrast, the Bureau of Prisons officials in this case noted in the final SSD that Dismas's 240-day start-up period "would extend beyond the required performance date." AR 1315. Because Dismas's 240-day proposal was not "an alternative, additional option," A & D Fire Protection provides more useful guidance. In that case, the Court held that a protestor was not an “interested party” because its bid had not included a required bid bond and was therefore non-responsive. 72 Fed. Cl. at 140. The Court concluded that the protestor did not have standing–even though its bid had been evaluated twice by the agency, and it had not been declared non-responsive. Id. Similarly, Dismas did not meet a fundamental requirement of the solicitation, and it "cannot excuse its failure to properly submit a [requirement] by the agency's lack of diligence in removing a nonresponsive bid from consideration." See id. Dismas submitted a Final Proposal Revision that did not conform to the solicitation requirements. As a result, it did not have a substantial chance of contract award and cannot be an "interested party" for purposes of this Court's bid protest jurisdiction. (Dismas Charities, Inc., v. U. S. and Bannum, Inc., 06-825C, February 7, 2007) (pdf)

Because we conclude that Fire-Trol has not shown itself to be an “interested party” within the meaning of 28 U.S.C. § 1491(b)(1), we do not reach the question whether the statutory and regulatory violations Fire-Trol alleges are “in connection with a procurement or a proposed procurement,” id., even though the USFS has not yet issued a solicitation. Nor do we reach the question whether plaintiff’s claim based on alleged violation of the APA would be within the Court’s jurisdiction if the Court were to hold that the alleged APA violation was “in connection with a procurement or proposed procurement.” Id. Though Fire-Trol has expressed its intention to bid in response to solicitations to be issued during the USFS’s 2005 procurement for wildland fire retardant, it concedes that no such solicitation has yet been issued. Given that fact, Fire-Trol is not now “an actual or prospective bidder or offeror” within the meaning of 31 U.S.C. § 3551(2). Therefore, Fire-Trol is not now an “interested party” within the meaning of 28 U.S.C. § 1491(b)(1).  (Fire-Trol Holdings, LLC v. U. S., No. 04-1389C, October 12, 2004) (pdf)

Although the United States Court of Appeals for the Federal Circuit has not explicitly addressed the standard of review for a plaintiff’s standing in a pre-award context, the court is persuaded that a plaintiff would not be required to establish that, but for the alleged error, “there was a substantial chance it would have received the contract award[.]” Alfa Laval, 175 F.3d at 1367. At the pre-award juncture, a plaintiff usually will not know who the other offerors are and may not know their bona fides. Indeed, if the plaintiff had knowledge of these facts, certainly a factual question of how that information was ascertained would raise an issue under the Sherman Act, 15 U.S.C. §§ 1 and perhaps the Procurement Integrity Act, 41 U.S.C. §§ 401-36, as well. Without at least some of this information, however, a plaintiff would have no idea whether its offer would be within the “zone of active consideration.” Statistica,102 F.3d at 1581. Of course, a rule could be fashioned that would require a plaintiff to have prior comparable industry experience or experience as a government contractor, but such a rule would preclude a new entrant from being able to assert a bid protest. For these reasons, the court declines to require the plaintiff in this case to satisfy the “substantial chance” standing test pre-award, but rather will rely on the “interested party” test until the United States Court of Appeals for the Federal Circuit directs otherwise.  (Red River Service Corp., v. U. S., No. 03-2747C, April 30, 2004) (pdf)

MCI Telecomm. Corp. v. United States, 878 F.2d 362 (Fed. Cir. 1989), presented the nearly identical question of “whether a would-be protestor wishing to bring about a resolicitation on which it says it intends to bid has the necessary status, even though it failed to either bid in response to the original solicitation or to protest before the close of the proposal period...” 878 F.2d at 364.1 In MCI, as here, plaintiff charged that the government waived mandatory contract requirements and that a resolicitation should occur. The Court reasoned that the use of the word “prospective” indicated that, “in order to be eligible to protest, one who has not actually submitted an offer must be expecting to submit an offer prior to the closing date of the solicitation...the opportunity to qualify either as an actual or a prospective bidder ends when the proposal period ends.” MCI, 878 F.2d at 365. See also Fed. Data Corp. v. United States, 911 F.2d 699, 704 (Fed. Cir. 1990); United States v. IBM, 892 F.2d 1006, 1010-11 (Fed. Cir. 1989); Ryan Co. v. United States, 43 Fed. Cl. 646, 657 (1999). Therefore, because McRae decided not to submit a bid for this contract or protest the RFP requirements prior to the close of bidding, McRae is not a “prospective bidder” and does not have standing to challenge the award.  (McRae Industries, Inc. v. U. S.. No. 01-460C, August 14, 2002)  (pdf)

We cannot accept plaintiff’s interpretation of the FAR provisions regarding sole source Section 8(a) acquisitions. In our view, the SBA and the GSA acted within the strictures of the applicable regulations when two Section 8(a) firms were nominated by the SBA, and GSA subsequently chose between the two eligible firms. In this connection, then, we cannot accept plaintiff’s argument that the subject procurement is anything other than a Section 8(a) sole source acquisition. Thus, we must reject plaintiff’s argument that the government must be required to issue a solicitation for the San Bruno contract. Resultantly, we also reject plaintiff’s argument that it became an interested party when the government failed to issue a solicitation. Furthermore, as plaintiff concedes that there was no solicitation, and it did not submit a bid, we are constrained to find that plaintiff is not an interested party, and thus lacks standing to bring this pre-award bid protest. Data Transformation, 13 Cl. Ct. at 172. Therefore, we must GRANT defendant’s motion on this basis. (Innovative Resources v. U. S., No 04-1533C, December 17, 2004) (pdf)

The term Congress did choose to define standing under § 1491(b), "interested party," is a term that is used in another statute that applies to government contract disputes, the CICA.  As set forth above, the CICA explicitly defines that term as "an actual or prospective bidder or offeror whose direct economic interest would be affected by the award of the contract or by failure to award the contract."  31 U.S.C. § 3551(2).  Section 3551, by its own terms, applies only to contract disputes decided by the Comptroller General of the GAO pursuant to 31 U.S.C. §§ 3551-56.  However, the fact that Congress used the same term in § 1491(b) as it did in the CICA suggests that Congress intended the same standing requirements that apply to protests brought under the CICA to apply to actions brought under § 1491(b)(1).  We therefore construe the term "interested party" in § 1491(b)(1) in accordance with the CICA, and hold that standing under § 1491(b)(1) is limited to actual or prospective bidders or offerors whose direct economic interest would be affected by the award of the contract or by failure to award the contract.  This construction is consistent with the legislative history of § 1491(b)(1), which, as discussed above, indicates that Congress intended to extend the jurisdiction of the Court of Federal Claims to include post-award bid protest cases brought under the APA by disappointed bidders, such as the plaintiff in Scanwell.  Because Appellants here are not actual or prospective bidders or offerors, they do not have standing to challenge the DLA's cost comparison analysis or its decision to award the depot services contract to EG&G.   (American Federation of Government Employees v. U. S., No. 00-5090,  July 23, 2001)