Digitalis Education Solutions, Inc. v. United States ( 2012 )

.
United States Court of Appeals
for the Federal Circuit
__________________________
DIGITALIS EDUCATION SOLUTIONS, INC.,
Plaintiff-Appellant,
v.
UNITED STATES,
Defendant-Appellee,
and
MORRIS & LEE, (DOING BUSINESS AS SCIENCE FIRST),
Defendant-Appellee.
__________________________
2011-5079
__________________________
Appeal from the United States Court of Federal
Claims in case no. 10-CV-855, Judge Eric G. Bruggink.
___________________________
Decided: January 4, 2012
___________________________
CHRISTOPHER H. HOWARD, Schwabe, Williamson &
Wyatt, P.C., of Seattle, Washington, argued for plaintiff-
appellant. With him on the brief was AVERIL BUDGE
ROTHROCK.
WILLIAM P. RAYEL, Trial Attorney, Commercial Litiga-
tion Branch, Civil Division, United States Department of
Justice, of Washington, DC, argued for defendant-
DIGITALIS EDUCATION SOLUTIONS v. US 2
appellee, United States. With him on the brief were TONY
WEST, Assistant Attorney General, JEANNE E. DAVIDSON,
Director, and KIRK MANHARDT, Assistant Director.
JAMES E. KRAUSE, James E. Krause, P.A., of Jackson-
ville, Florida, for defendant-appellee, Morris & Lee, (doing
business as Science First).
__________________________
Before LOURIE, BRYSON, and MOORE, Circuit Judges.
MOORE, Circuit Judge.
Digitalis Education Solutions, Inc. (Digitalis) appeals
the Court of Federal Claims’s dismissal of its post-award
protest of a sole-source procurement. Because Digitalis is
not an actual or prospective bidder, and because it lacks
the requisite direct economic interest, we affirm the Court
of Federal Claims’s dismissal for lack of standing.
BACKGROUND
Digitalis makes and sells digital planetariums used to
teach astronomy. Digitalis Educ. Solutions, Inc. v. United
States, 97 Fed. Cl. 89, 90 (2011). The Department of
Defense uses digital planetariums in schools overseen by
the Department of Defense Educational Activity (De-
partment). Id. For years, Department schools have used
planetariums called “STARLAB” developed by Morris &
Lee (doing business as Science First) (Science First). Id.In 2009, the Department conducted an unadvertised sole-
source procurement of analog STARLAB planetariums
from Science First. As part of its justification for the sole-
source to Science First, the Department noted that its
curricula were geared toward the product. In 2010, the
Department wished to procure more planetariums and
chose to purchase digital, rather than analog systems. Id.This procurement is the focus of the litigation.
3 DIGITALIS EDUCATION SOLUTIONS v. US
The Department began the process of procuring the
planetariums at issue in this case in September 2010.
Because its funding expired at the end of the fiscal year,
the Department wished to expedite the procurement.
Before posting any notice of its intention to sole-source
the contract, the Department communicated with Science
First to inquire about possible terms. Id. On Friday,
September 17, 2010, the Department posted on
www.fedbizopps.gov (fedbizopps) a notice of intent to
award a sole-source contract to Science First. 1 Id. at 90-
91. The notice stated that if any party challenged the
sole-source contract to Science First, then it should file a
statement no later than Wednesday, September 22, 2010,
detailing its capability to fulfill the order. In parallel with
this process, the Department prepared and approved a
Justification and Authorization (J&A) as required for a
sole-source procurement. Part of the J&A stated that
“[c]urriculum standards and specific lessons for the
STARLAB components are already in place and there are
teacher trainers for this product.” Id. at 91.
During the period for response, another producer of
planetariums, Sky Skan, submitted a statement of capa-
bility in response to the notice of the sole-source procure-
ment. Id. Upon receiving Sky Skan’s statement, the
Department sought to refine the requirement by asking
Science First to provide additional specifications to add to
the notice. Science First obliged and provided an exten-
sive list of hardware, software, accessories, warranties
and other information specific to STARLAB. Id. at 91-92.
The Department added language to the notice of intent to
sole-source to state “[The Department] has standardized
1 www.fedbizopps.gov is “the Governmentwide
point of entry (‘GPE’) where government contracting
opportunities are made publicly available.” Government
Br. 6 (citing 48 C.F.R. §§ 5.003, 5.102(a)(1), 5.201(d)).
DIGITALIS EDUCATION SOLUTIONS v. US 4
curricula developed exclusively for the STARLAB portable
planetarium. Curriculum standards and specific [lessons]
for the STARLAB components are [already] in place.” Id.
at 92. The Department responded to Sky Skan’s submis-
sion by pointing it to this additional language. Id.On September 25, the Department awarded the con-
tract to Science First for fifty digital planetariums. Id.On October 11, after learning of the contract, Digitalis
contacted Congressman Norm Dicks to object to the way it
was awarded. The Congressman forwarded the complaint
to the Department. Six weeks later, the Department
responded to the Congressman stating that because
Digitalis did not file a capability statement or otherwise
protest the sole-source award, the Department would not
consider Digitalis’s objections. Id. On December 2, Digi-
talis objected for the first time directly to the Department
and on December 6, it filed the instant case at the Court
of Federal Claims. Id.The government (along with Intervenor Science First)
filed a motion to dismiss for lack of standing and a motion
for judgment on the administrative record. Digitalis filed
a cross motion for judgment on the administrative record.
Id. The Court of Federal Claims held that Digitalis could
not demonstrate prejudice, a prerequisite for standing,
because it did not have a substantial chance of winning
the contract. Id. at 93. Because Digitalis failed to review
fedbizopps and submit a statement of capability during
the prescribed period, the court explained that “[e]ven if
the procurement had proceeded flawlessly, Digitalis’s
chances to get the contract would not have been any
different.” Id. The court reasoned that a longer response
time would have led to the same result because Digitalis
did not check fedbizopps for weeks. Id. The Court of
Federal Claims also denied Digitalis’s motion for judg-
ment on the administrative record.
5 DIGITALIS EDUCATION SOLUTIONS v. US
Digitalis appeals. We have jurisdiction under 28
U.S.C. § 1295(a)(3).
DISCUSSION
We review determinations of standing de novo.
Labatt Food Serv., Inc. v. United States, 577 F.3d 1375,
1379 (Fed. Cir. 2009). Any underlying fact findings are
reviewed for clear error. Id. We review a denial of judg-
ment on the administrative record without deference,
meaning that we apply the “arbitrary and capricious”
standard. Centech Grp., Inc. v. United States, 554 F.3d
1029, 1037 (Fed. Cir. 2009).
Only an “interested party” has standing to challenge a
contract award. Rex Serv. Corp. v. United States, 448
F.3d 1305, 1307 (Fed. Cir. 2006). An interested party is
an actual or prospective bidder whose direct economic
interest would be affected by the award of the contract.
Id. Thus, a party must show that it is 1) an actual or
prospective bidder and 2) that it has a direct economic
interest. “[I]n 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 solicita-
tion.” MCI Telecomms. Corp. v. United States, 878 F.2d
362, 365 (Fed. Cir. 1989). To prove a direct economic
interest, a party must show that it had a “substantial
chance” of winning the contract. Rex Serv., 448 F.3d at
1308.
Digitalis argues that the Court of Federal Claims
should have first determined whether the Department
was required to conduct a full competition for the contract
rather than a sole-source notice. Then, if we find that the
Department should have conducted a full competition,
Digitalis argues that it is clear that it would have had a
substantial chance of prevailing.
DIGITALIS EDUCATION SOLUTIONS v. US 6
Digitalis also argues that its failure to submit a
statement of capability is “irrelevant” to the analysis. It
contends that the filing of a capability statement would
have been futile based on the Department’s response to
Sky Skan that basically required it to emulate Science
First. Further, Digitalis argues that the period for sub-
mitting statements of capability was unreasonably short.
The government responds that Digitalis is not an “in-
terested party” under 28 U.S.C. § 1491(b)(1) because it
fails both prongs of the relevant test: it is not an actual or
prospective bidder and it does not possess a direct eco-
nomic interest. The government argues that Digitalis
was not an “actual or prospective bidder” because it failed
to submit a capability statement. It analogizes to Rex
Service where we held that if a party does not bid during
the bid period, it does not have standing regardless of any
illegalities by the government in the bid process. Gov-
ernment Br. 15 (citing Rex Serv., 448 F.3d at 1308). The
government contends that five days is a reasonable
amount of time for a notice of intent to sole-source. It
argues that the Court of Federal Claims previously found
a six-day window reasonable and, regardless, Digitalis
would have needed a twenty-three day window in order to
see the notice.
The government argues that Digitalis does not have a
“direct economic interest” for similar reasons. It asserts
that it is not enough for a party to simply show that it
would have competed in a competition had there been
one. It notes that even if the Department had held a
flawless sole-source procurement with a notification
period of over twenty days, Digitalis still would have been
unable to file a statement of capability because it would
not have known of the contract.
7 DIGITALIS EDUCATION SOLUTIONS v. US
We agree with the government that the rule of Rex
Service controls the result of this case. In Rex Service, the
government issued a request for proposals and received
bids from contractors. One day before the end of the
period to submit proposals, Rex Service filed an objection
to the request for proposal. Rex Serv., 448 F.3d at 1307.
It argued that the government’s violations of certain
statutes and regulations prevented it from filing a pro-
posal or bid. Id.We held that Rex Service did not satisfy either prong
of the test for standing because it failed to submit a
proposal during the prescribed time. Id. at 1307-08. We
noted 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”
and that the opportunity to become a prospective bidder
ends when the proposal period ends. Id. at 1308 (quoting
MCI, 878 F.2d at 365). We further held that Rex Service
had no direct economic interest because it had no sub-
stantial chance to be awarded the contract due to its
failure to submit a bid. Id. at 1308.
We see no reason to limit this rule to competitive pro-
curements. Indeed, the Court of Federal Claims has
already extended it to sole-source contracts under similar
facts. See Infrastructure Def. Techs. v. United States, 81
Fed. Cl. 375 (2008). In a sole-source award such as this
one, the notice of intent issued by the government is
analogous to a request for a proposal. Interested parties
are invited to submit statements of capability in order to
convince the government that it should hold a full compe-
tition for the contract rather than sole-source the contract
to the proposed contractor. We therefore hold that in
order to be an actual or prospective bidder, a party must
submit a statement of capability during the prescribed
period. Failure to do so also means that a party does not
DIGITALIS EDUCATION SOLUTIONS v. US 8
have the requisite direct economic interest because it
cannot have a “substantial chance” of convincing the
government to hold a formal competition and subse-
quently bid on the contract. Rex Serv., 448 F.3d at 1308.
This holding should not be read, however, as foreclos-
ing challenges to the reasonableness of the procurement
time period. Digitalis attempts to do this by challenging
the five-day period. Digitalis argues that the selected
time period is unreasonably short and that therefore
Digitalis should be permitted to challenge the procure-
ment despite not having filed a statement of capability
within the time period. The government seemed to argue
that a party who fails to submit a statement of capability
during the prescribed period may only object to the rea-
sonableness of the time period if it is so short that it was
impossible for the contractor to bid. We do not agree.
Determining whether the time period is reasonable is
necessarily a fact intensive analysis. In the context of
commercial item procurement, regulations require that
the government “establish a solicitation response time
that will afford potential offerors a reasonable opportu-
nity to respond . . . .” 48 C.F.R. § 5.203(b). Because
commercial items are often readily available to the public,
a brief time period for soliciting responses may be reason-
able. See, e.g., Cal. Indus. Facilities Res., Inc. v. United
States, 80 Fed. Cl. 633, 635-36 (2008) (holding that a
period of six days was reasonable in a solicitation for
commercial items). Contrary to the government’s argu-
ment, the proper inquiry is not whether it is possible for a
party to submit a statement of capability during the time
period, but whether it is reasonable to expect contractors
to see a notice and respond.
As the Court of Federal Claims noted, “the adminis-
trative record lends credence to a number of Digitalis’s
allegations of hasty and shoddy contracting.” Digitalis, 97
9 DIGITALIS EDUCATION SOLUTIONS v. US
Fed. Cl. at 95. Yet at least one potential offeror, Sky
Skan, saw the notice and filed a statement of capability,
which suggests that the time period was not unreasonably
short. We do not need to decide whether the posting time
was unreasonable, however, because Digitalis did not
check fedbizopps or otherwise notice the sole-source
award to Science First for more than twenty days. As the
Court of Federal Claims held, a twenty-day period would
have certainly been reasonable and Digitalis would still
have failed to file a statement of capability. Because
Digitalis did not even discover the procurement posting
for more than twenty days, we conclude it was not an
interested party. We cannot analyze standing in a vac-
uum, but rather must take into account the circumstances
of the litigant. To conclude otherwise would open the
procurement process up to an infinite number of chal-
lenges even long after the procurement process ended.
We do not reach the merits of whether five days is a
reasonable time period because we conclude that Digitalis
was not an interested party with standing to challenge
the reasonableness of the time period.
We have considered Digitalis’s other arguments re-
garding standing and find them unpersuasive. Because
the Court of Federal Claims correctly determined that
Digitalis does not have standing to protest this sole-
source contract award, we need not reach the additional
issues in this case.
AFFIRMED