Couture Hotel Corporate v. United States ( 2018 )

In the United States Court of Federal Claims
No. 16-620C
(Filed: June, 21 2018)
)
COUTURE HOTEL CORPORATE, )
) RCFC 12(b)(1), lack of subject matter
Plaintiff, ) jurisdiction; RCFC 12(b)(6), failure to
) state a claim upon which relief can be
v. ) granted; Pre-Award Bid Protest; Bid
) Preparation and Proposal Costs;
THE UNITED STATES, ) Breach of Implied-in-Fact Contract
)
Defendant. )
)
Jeremy D. Camp, Dallas, TX, for plaintiff. Michael S. Gardner and Eric P. Haas, Dallas,
TX, of counsel.
Eric J. Singley, Civil Division, U.S. Department of Justice, Washington, D.C., with
whom were Chad A. Readler, Acting Assistant Attorney General, Robert E. Kirschman,
Jr., Director, and Douglas K. Mickle, Assistant Director, for defendant. Chris S. Cole,
Trial Attorney, USAF Commercial Law & Litigation Directorate, Joint Base Andrews,
MD, of counsel.
OPINION
FIRESTONE, Senior Judge
Pending before the court is the motion filed by the United States (“the
government”) to dismiss this action filed by Couture Hotel Corporation a/k/a Hugh
Black-St Mary Enterprises, Inc. (“plaintiff”) under Rules 12(b)(1) and 12(b)(6) of the
Rules of the United States Court of Federal Claims (“RCFC”) for lack of subject matter
jurisdiction or, in the alternative, for failure to state a claim upon which relief can be
granted. In its complaint, plaintiff alleges that in 2011 it purchased and renovated a hotel
near Nellis Air Force Base (“Nellis AFB”), which is located in Las Vegas, Nevada, in
order to participate in the off-base lodging business for visitors to the base when on-base
Nellis Lodging1 is not able to accommodate all visitors. Am. Compl. ¶¶ 1–3 at 1–3.
According to plaintiff, it “understood and expected” that if its hotel met Nellis AFB’s
requirements for off-base lodging and passed an inspection, Nellis Lodging would enter
into a Memorandum of Understanding (“MOU”)2 with plaintiff, “enabling [plaintiff] to
compete with other hotels for off-base lodging business for Nellis AFB.” Id. ¶ 18 at 7.
Plaintiff alleges that in order to secure the MOU for the off-base lodging business, it
“purchased the Hotel [in question] for $9,534,151.96” and “made modifications to the
Hotel property in order to comply with the Nellis AFB requirements . . . expending
$1,238,848.72.” Id. ¶ 21 at 8. After renovating the hotel to meet Nellis AFB’s
requirements, plaintiff contends that Nellis Lodging refused to enter into an MOU,
claiming that Nellis AFB “was ‘not adding any new facilities to [its] MOU listing at
[that] time.’” Id. ¶ 3 at 3.
Plaintiff states that Nellis Lodging’s refusal to enter into an MOU gives rise to two
claims. First, plaintiff asserts that Nellis Lodging failed to “conduct appropriate
1
Nellis Lodging is a non-appropriated fund instrumentality (“NAFI”). The United States Supreme Court
has described a NAFI as an entity “which does not receive its monies by congressional appropriation.”
United States v. Hopkins, 427 U.S. 123, 125 n.2 (1976). This court has jurisdiction over claims brought
against NAFIs. Slattery v. United States, 635 F.3d 1298, 1321 (Fed. Cir. 2011).
2
The MOU in question was authorized by Air Force Instruction (“AFI”) 34-246, “Air Force Lodging
Program,” dated October 29, 2008, according to which, “Air Force lodging operations, using [an MOU
would] attempt to negotiate reduced rates for [commercial lodging] accommodations in order to provide
eligible guests alternative lodging when adequate on-base lodging is not available.” AFI 34-246 ¶ 1.14 at
10 (emphasis added). Importantly, AFI 34-246 stated that “[i]f no space [was] available on base
[temporary duty] travelers ha[d] the option to accept a non availability number and find their own hotel.”
Id. Most such travelers, however, were expected to accept the assistance offered by Air Force lodging
operations “by going to one of [their] available [commercial lodging facilities.]” Id.2
competitive procedures to procure . . . off-base lodging services” and further violated
those procedures when it “preclude[d] [plaintiff] from competing for those services.” Id.¶ 2 at 2. Plaintiff asserts that by using an MOU process and then failing to provide
plaintiff with the opportunity to enter into an MOU to compete for off-base services, the
government violated the requirements of the Competition in Contracting Act (“CICA”),3
10 U.S.C. § 2304, and various associated procurement regulations. Id. ¶¶ 37–38 at 13–
14. Plaintiff claims that in this litigation it is seeking the following as bid preparation and
proposal costs: (a) $2,732,836.43 which covers the cost of purchasing the hotel less the
amount plaintiff received from the subsequent sale of the hotel and (b) $1,238,848.72 for
the costs plaintiff incurred in modifying the property to meet the MOU requirements. Id.¶ 51 at 18–19.
Second, plaintiff asserts, in the alternative, that Nellis Lodging’s refusal to enter
into an MOU resulted in a breach of an implied-in-fact contract between plaintiff and
Nellis Lodging. Id. ¶¶ 53–57 at 19–20. Plaintiff alleges it “moved forward with the
purchase and renovation of the Hotel . . . in furtherance of satisfying the Nellis AFB
requirements needed to obtain the MOU.” Id. ¶ 54 at 20. Plaintiff contends that Nellis
Lodging breached the implied-in-fact contract when it refused to add plaintiff’s hotel to
3
CICA was passed into law in 1984 and set out a general requirement that executive agencies “obtain full
and open competition through the use of competitive procedures” when “conducting a procurement for
property or services.” Pub.L. No. 98–369, § 2711, 98 Stat. 494, 1175 (1984). CICA originally did not
include a definition of “procurement,” but in 2011 Congress amended the Act to define the term. An Act
to Enact Certain Laws Relating to Public Contracts as Title 41, United States Code, “Public Contracts,”
Pub.L. No. 111–350, sec. 3, 41 U.S.C. § 111, 124 Stat. 3677, 3681 (2011). CICA now defines
“procurement” as “all stages of the process of acquiring property or services, beginning with the process
for determining a need for property or services and ending with contract completion and closeout.” 41
U.S.C. § 111.
3
its MOU listing for reasons not related to plaintiff’s failure to meet the criteria for an
MOU, but because of Nellis AFB’s “‘budgetary climate.’” Id. ¶ 56 at 20. Plaintiff seeks
the same damages it seeks for bid preparation and proposal costs for breach of the
implied-in-fact contract. Id. ¶ 57 at 20.
The government, in its motion to dismiss, argues first that plaintiff’s claims for the
above-stated bid preparation and proposal costs must be dismissed for lack of subject
matter jurisdiction. Def.’s Mot. to Dismiss at 13–15; Def.’s Reply in Supp. of Mot. to
Dismiss at 7–10. The government argues that plaintiff’s CICA and associated claims are
barred under the Federal Circuit’s holding in Blue & Gold Fleet, L.P. v. United States,
492 F.3d 1308 (Fed. Cir. 2007), because the plaintiff failed to timely object to the MOU
process employed by Nellis Lodging to secure off-base accommodations. Def.’s Mot. to
Dismiss at 14. According to the government, plaintiff needed to object to the MOU
process before it sought to comply with the MOU by buying and renovating a hotel. Id.
at 15. The government argues that under Blue & Gold and its progeny, plaintiff’s
objections to Nellis Lodging’s use and implementation of the MOU process were
therefore waived. Id. at 13–15. The government further contends that the costs plaintiff
incurred to meet the MOU requirements are not recoverable as bid preparation costs in
any case. Id. at 11. According to the government, “‘[c]osts incurred in anticipation of’”
entering into a government contract are not “‘recoverable bid preparation expenses.’” Id.
(quoting Lion Raisins, Inc. v. United States, 52 Fed. Cl. 629, 631 (2002) (citing Coflexip
& Servs., Inc. v. United States, 961 F.2d 951, 953 (Fed. Cir. 1992)) (other citations
omitted)).
4
Finally, the government argues that plaintiff’s alternative claim for breach of an
implied-in-fact contract must be dismissed for failure to state a claim. Id. at 18–19. The
government contends that a careful review of the amended complaint demonstrates that
plaintiff has not alleged the facts necessary to establish an implied-in-fact contract. Id.To prove the existence of an implied-in-fact contract with the United States, a plaintiff
must show “(1) mutuality of intent to contract; (2) consideration; (3) an unambiguous
offer and acceptance[;] and (4) ‘actual authority’ on the part of the government’s
representative to bind the government.” Schism v. United States, 316 F.3d 1259, 1278
(Fed. Cir. 2002) (en banc) (citing City of Cincinnati v. United States, 153 F.3d 1375,
1377 (Fed. Cir. 1998)); see also Trauma Serv. Grp. v. United States, 104 F.3d 1321, 1325
(Fed. Cir. 1997). The government argues that plaintiff has not alleged facts to meet the
elements of mutuality of intent to contract, consideration, and lack of ambiguity in offer
and acceptance. Def.’s Mot. to Dismiss at 18. Moreover, the government maintains that
commitments made to plaintiff were not made by a person with actual binding authority.
Id. In this connection, the government argues that plaintiff’s amended complaint is best
read as stating a claim for breach of an implied-in-law contract based on principles of
promissory estoppel. Id. at 5–8. The government maintains that this court does not have
jurisdiction over implied-in-law contract claims. Id. See, e.g., Hercules, Inc. v. United
States, 516 U.S. 417, 423 (1996).4
4
At oral argument, plaintiff conceded that this court does not have jurisdiction over implied-in-law
contracts but argued that the factual allegations made in the amended complaint also give rise to a breach
of an implied-in-fact contract claim. See Oral Argument at 11:32:00 a.m.–11:32:38 a.m. (May 15, 2018).
5
For the reasons set forth below, the court finds that plaintiff’s bid protest claims
regarding Nellis Lodging’s use and implementation of the MOU process must be
dismissed for lack of subject matter jurisdiction and that plaintiff’s costs in buying and
renovating the hotel are not recoverable bid preparation costs in any case. Second, the
court finds that plaintiff has failed to state a claim for breach of an implied-in-fact
contract. Accordingly, the government’s motion to dismiss is GRANTED.
I. Background Facts5
Nellis AFB is one of the largest Air Force bases in the world, where training is
conducted together with air and ground units of the Army, Navy, Marine Corps, and Air
forces from allied nations, and frequently hosts a substantial number of military
servicemen and officers, along with their families. Am. Compl. ¶ 1 at 1.
To accommodate the large numbers of members of the United States military and
other visitors, Nellis AFB provides temporary on-base lodging via Nellis Lodging, the
Nellis AFB office responsible for providing on- and off-base lodging. Id. at 1–2.
However, the demand often exceeds the capacity for on-base lodging. Id. at 2. As a
result, Nellis Lodging has entered into agreements with Las Vegas area hotels for off-
base lodging. Id.
In 2011, plaintiff “began exploring an opportunity to acquire the Hotel [in
question], which was located in close proximity to Nellis AFB[,]” because plaintiff
“believed that, under [plaintiff’s] ownership and management, the Hotel would be
5
The following jurisdictional facts are taken from plaintiff’s amended complaint filed July 25, 2016 (ECF
No. 9).
6
uniquely positioned to provide Nellis AFB with off base lodging at the best location, best
price, and with the best services.” Id. ¶ 13 at 5. Accordingly, plaintiff contacted Nellis
Lodging to “inquire about the opportunity to provide lodging services to Nellis AFB and
the procurement process required in order to do so.” Id. at 5–6.
In July and August 2011, plaintiff’s representatives met with Cathy Fierstein,
Lodging General Manager of Nellis Lodging, about plaintiff’s “interest in competing for
off-base lodging business.” Id. ¶ 14 at 6. Plaintiff “was surprised to learn that Nellis
AFB did not utilize standard competitive procedures to solicit and award the lodging
business such as an invitation to bid or request for proposal process.” Id. Ms. Fierstein
explained that “Nellis AFB awarded off-base lodging business to hotels that met certain
requirements and, after passing an inspection, signed [an MOU] with Nellis AFB[,]”
which she claimed was justified because of the “tight lodging market in previous years.”
Id. Ms. Fierstein also explained that the hotel plaintiff wished to purchase “was not, at
that time, eligible to compete for the lodging business under the MOU procurement
process because it did not meet certain requirements mandated by Nellis AFB.” Id. ¶ 15
at 6. Ms. Fierstein told plaintiff that the hotel needed to be renovated to meet the MOU
requirements “and, if it did so, it would then receive an MOU.” Id.
Following that meeting, plaintiff “requested a copy of the MOU which contained
Nellis AFB’s requirements[,]” which it received on August 29, 2011. Id. at 6–7. The
sample MOU stated that it “serve[d] ‘to establish a rate for government travellers on an
as needed basis when lodging on base [was] fully occupied.’ In furtherance of that
objective, the MOU provide[d] that the commercial hotel signatory ‘[would] furnish
7
lodging accommodations for Nellis AFB, Nevada on a rental basis’—at agreed rental
rates to be specified in the MOU—and set[] forth ‘[t]he performance standards and
requirements for these services.’” Id. ¶ 16 at 7. The sample MOU also provided that “a
hotel [would] not be approved for an MOU unless and until it [met] certain requirements
and passe[d] [the relevant] inspection[.]” Id. ¶ 17 at 7.
To take part in the “off-base lodging procurement process, [plaintiff] was required
to purchase the Hotel [in question], make the necessary changes (physically and
operationally) to comply with the MOU requirements, and have the property pass
inspection.” Id. ¶ 18 at 7. Based on its discussions with Ms. Fierstein, plaintiff
“understood and expected that the Hotel would receive an MOU—enabling it to compete
with other hotels for off-base lodging business for Nellis AFB—once it met the
requirements mandated by the Government.” Id. “Given Nellis AFB’s requirement that
any hotels desirous of providing off-base lodging follow the MOU process, and
[plaintiff’s] understanding that it would receive an MOU if it complied with the
requirements specified by Nellis AFB, plaintiff undertook the activities necessary to
prepare to compete for the lodging business.” Id. ¶ 20 at 8. Plaintiff therefore purchased
the hotel it had identified to Ms. Fierstein for $9,534,151.96 and made the necessary
renovations to meet the MOU’s requirements at a cost of $1,238,848.72. Id. ¶ 21 at 8.
Plaintiff “would not have incurred those costs but for the necessity that it do so in order
to participate in the MOU procurement process utilized by Nellis AFB and obtain the
MOU purportedly necessary to obtain lodging business from Nellis AFB.” Id.
8
When plaintiff completed the renovations to the hotel in 2012, plaintiff sent an e-
mail to Ms. Fierstein requesting a time and date for the inspection required under the
MOU. Id. ¶ 22 at 8–9. Ms. Fierstein wrote back to plaintiff in an e-mail, in which she
stated that Nellis Lodging was “not adding any new facilities to [its] MOU listing at
[that] time.” Id. ¶ 23 at 9. According to Ms. Fierstein, “‘[t]he amount of business [Nellis
Lodging] sen[t] off base d[id] not warrant the need for additional off base MOU’s [sic] at
[that] time,’ and that ‘[u]nless the budgetary climate for the military improve[d] greatly in
the near future, [she] d[id] not believe that [Nellis Lodging could] anticipate needing to
add to [its] listing for the next year or two.’” Id.
As a result of plaintiff’s surprise by “Nellis AFB’s reversal of course on the MOU
procurement process and its apparent refusal to allow [plaintiff] to participate in open
competition for the lodging business, plaintiff requested “a formal administrative hearing
regarding the Nellis AFB lodging procurement.” Id. ¶ 25 at 9. Nellis Lodging’s response
to plaintiff’s request for a formal hearing was that “there [was] no requirement or
mechanism to accommodate [its] request [for a hearing] because there ha[d] been no
contract action on which to base [its] request[,]” maintaining that “‘there [was] not a
contract in place by which’ the Nellis AFB lodging facility referred personnel to off-base
hotels and, therefore, ‘there [was] not a competition requirement.’” Id. ¶ 26 at 9.
Ultimately, plaintiff had to file for bankruptcy because of the loss of “the
anticipated revenue from Nellis AFB business,” and because it was “saddled with the
additional costs and operating expenses imposed by compl[ying] with the MOU
requirements[.]” Id. ¶ 30 at 10–11. The hotel “was placed into receivership” and “was
9
sold at a loss for $6,801,315.53 in order to mitigate [plaintiff’s] losses resulting from
Nellis AFB’s refusal to follow the procurement process it had required or to even open up
the off-base lodging business to competition.” Id. at 11.
Plaintiff filed the present action on May 25, 2016, and its amended complaint on
July 25, 2016, seeking compensation for the purchase of the hotel and the relevant
renovations it undertook to meet the MOU requirements, asserting claims under the
court’s bid protest jurisdiction and contract jurisdiction. As also noted above, the
government moved to dismiss the action on September 15, 2016.
Briefing on the government’s motion was completed on March 28, 2018. Oral
argument was held on May 15, 2018.
II. Standard of Review
Similar to a motion to dismiss pursuant to RCFC 12(b)(6) for failure to state a
claim upon which relief can be granted, when considering a motion to dismiss for lack of
subject matter jurisdiction pursuant to RCFC 12(b)(1), “the court must accept as true all
undisputed allegations of fact made by the non-moving party and draw all reasonable
inferences from those facts in the non-moving party’s favor.” Westlands Water Dist. v.
United States, 109 Fed. Cl. 177, 190 (2013) (cases cited therein). “If a motion to dismiss
for lack of subject matter jurisdiction . . . challenges the truth of the jurisdictional facts
alleged in the complaint, the . . . court may consider relevant evidence in order to resolve
the factual dispute.” Reynolds v. Army & Air Force Exch. Serv., 846 F.2d 746, 747 (Fed.
Cir. 1988) (citing Land v. Dollar, 330 U.S. 731, 735 (1947)). When assessing a motion
to dismiss for failure to state a claim pursuant to RCFC 12(b)(6), “unchallenged
10
allegations of the complaint should be construed favorably to the pleader.” Hamlet v.
United States, 873 F.2d 1414, 1416 (Fed. Cir. 1989) (citing Scheuer v. Rhodes, 416 U.S.
232, 236 (1974)).
III. Discussion
A. Plaintiff’s Bid Protest Claim is Barred by Blue & Gold and its progeny
In the instant case, plaintiff argues that the government failed to comply with the
provisions of the Competition in Contracting Act (“CICA”) and implementing
regulations by using MOUs to secure off-base lodging instead of “the authorized
competitive procedures[.]” Am. Compl. ¶ 38 at 13. Specifically, plaintiff argues that the
government’s violation of CICA provisions was in connection with the procurement or
proposed procurement of off-base lodging services from plaintiff. Id. ¶¶ 37–38 at 13–14.
As such, plaintiff argues that the government’s decision not to grant plaintiff an MOU to
compete for “off-base lodging business . . . was arbitrary, capricious, and not in
accordance with law.” Id. ¶ 8 at 4.
The government argues that plaintiff’s bid protest must be dismissed because its
bid protest claim is barred by the Federal Circuit’s decision in Blue & Gold and its
progeny. In Blue & Gold, the Federal Circuit held that if an offeror who had the
opportunity to timely object to an obvious error in the terms of a solicitation, but failed to
do so, has waived the right to challenge that same error in a subsequent bid protest. Blue
& Gold, 492 F.3d at 1313. In COMINT Systems Corp. v. United States, the Federal
Circuit extended Blue & Gold to apply to all pre-award situations where the protesting
party had the opportunity to challenge aspects of a solicitation before the award but failed
11
to do so. 700 F.3d 1377, 1378 (Fed. Cir. 2012). Requiring a party to protest errors or
ambiguities in a solicitation before award—or else waive the right to do so—rests on the
policy that a party should not be allowed to “wait and see” if it has received the contract
award before challenging the terms of the solicitation. Id. at 1383 (citing Blue & Gold,
492 F.3d at 1314). The court in COMINT Systems reasoned that the policy behind Blue
& Gold supported its extension to all pre-award situations where the party has the time
and opportunity to raise its objections. Id. at 1382. In this case, the government argues
that because plaintiff knew that Nellis Lodging used an MOU process and thus had the
opportunity to challenge Nellis Lodging’s MOU process before incurring the costs of
acquiring and renovating a hotel, plaintiff has waived its objection to Nellis Lodging’s
use and implementation of an MOU process to secure off-base accommodations. Def.’s
Mot. to Dismiss at 13–15.
In response to the government, plaintiff claims that the waiver rule established in
Blue & Gold is not applicable because, unlike the plaintiff in Blue & Gold, the plaintiff in
this case was not responding to a solicitation. Pl.’s Resp. to Def.’s Mot. to Dismiss at 12.
Rather, plaintiff objects to the process selected and the manner in which it was
implemented. Id. at 12–14. Additionally, plaintiff maintains that Blue & Gold is
inapplicable because “[p]laintiff is not seeking to enjoin the award of a contract or to
reverse a contract award and restart the bidding process.” Id. at 13.
The court finds that plaintiff’s arguments are without merit and that, as the
government argues, plaintiff’s bid protest claim must be dismissed under the waiver rule
established in Blue & Gold. Under Blue & Gold, a plaintiff that “has the opportunity to
12
object to the terms of a government solicitation containing a patent error and fails to do
so . . . waives its ability to raise the same objection subsequently in a bid protest action in
the Court of Federal Claims.” Blue & Gold, 492 F.3d at 1313. A patent error is “an
obvious omission, inconsistency or discrepancy of significance[.]” E.L. Hamm & Assocs.
v. England, 379 F.3d 1334, 1339 (Fed. Cir. 2004). In determining whether a patent error
exists, “the court must consider both what a reasonable offeror in the industry would
know and even, to an extent, the offeror’s particular business acumen.” Jay Cashman,
Inc. v. United States, 88 Fed. Cl. 297, 309 (2009) (citing Dalton v. Cessna Aircraft Co.,
98 F.3d 1298, 1305–06 (Fed. Cir. 1996); Helix Elec., Inc. v. United States, 68 Fed. Cl.
571, 585 (2005)). Further, parties in a government contract action “‘are charged with
knowledge of law and fact appropriate to the subject matter[.]’” Res. Conservation Grp.,
LLC v. United States, 96 Fed. Cl. 457, 466 (2011) (quoting Turner Constr. Co., Inc. v.
United States, 367 F.3d 1319, 1321 (Fed. Cir. 2004), aff’d sub nom. Res. Conversation
Grp., LLC v. United States, 432 F. App’x 975 (Fed. Cir. 2011)).
Here, plaintiff knew of the government’s procurement procedure early on during
its discussions with Ms. Fierstein. Am. Compl. ¶ 14 at 6 (“Couture was surprised to learn
that Nellis AFB did not utilize standard competitive procedures to solicit and award the
lodging business such as an invitation to bid or request for proposal process.”). Indeed,
plaintiff has conceded that it was aware of the grounds for protest it now asserts before it
decided to acquire and renovate the hotel in question. Id. ¶¶ 14–15 at 6–7. In such
circumstance, plaintiff had ample opportunity to challenge Nellis Lodging’s MOU
process and to clarify what rights it would have under that process. By waiting until after
13
Ms. Fierstein informed plaintiff that Nellis Lodging would not be entering into any new
MOUs, plaintiff waived its right to object to both the process and its implementation.
Plaintiff’s argument that Blue & Gold is inapplicable because Nellis Lodging did
not issue a solicitation and because plaintiff is not seeking to set aside a contract is
without merit. The Federal Circuit made clear in COMINT Systems that an offeror
waives all pre-award objections to all claims associated with an acquisition process by
not making a timely challenge. COMINT Systems, 700 F.3d at 1382–83. Where, as here,
plaintiff argues that the MOU process was unlawful, it does not matter that Nellis
Lodging had not issued a solicitation or that plaintiff is not seeking to set aside a contract
award because the pre-award process encompasses the government’s selection of an
acquisition process. Distributed Sols., Inc. v. United States, 539 F.3d 1340, 1346 (Fed.
Cir. 2008) (noting that because the term “‘in connection with a procurement or proposed
procurement[]’ by definition involves a connection with any stage of the federal
contracting acquisition process, including ‘the process for determining a need for
property or services[,]’ [t]o establish jurisdiction . . . [an offeror] must demonstrate that
the government at least initiated a procurement, or initiated ‘the process for determining a
need’ for acquisition” of goods or services). The court must therefore dismiss plaintiff’s
bid protest claim for lack of subject matter jurisdiction.
Second, the court also agrees with the government that to the extent plaintiff’s bid
protest claim challenging Nellis Lodging’s refusal to enter into an MOU with plaintiff is
not barred, plaintiff is not entitled to the costs it seeks in any event under this court’s bid
protest jurisdiction. Under 28 U.S.C. § 1491(b)(2), this court is authorized to issue two
14
forms of relief under its bid protest jurisdiction, an injunction and “bid preparation costs.”
28 U.S.C. § 1491(b)(2). The costs plaintiff incurred in acquiring and renovating the hotel
are not bid preparation costs. Plaintiff alleges that the costs it incurred and seeks to
recover were necessary because the MOU was a “mandated step” in order to participate
in Nellis Lodging’s procurement process for off-base lodging services, and thus the costs
plaintiff incurred were necessarily bid preparation and proposal costs. See Am. Compl. ¶
51 at 18–19; see also Pl.’s Resp. to Def.’s Mot. to Dismiss at 9–11.
It is well settled that bid preparation costs are the costs incurred to prepare a bid
and not those incurred in anticipation of receiving the contract. Section 31.205–18 of the
Federal Acquisition Regulation states that “[b]id and proposal (B & P) costs means the
costs incurred in preparing, submitting, and supporting bids and proposals (whether or
not solicited) on potential Government or non-Government contracts.” 48 C.F.R. §
31.205–18(a). In this connection, “[e]xpenses compensable as bid preparation costs are
those in the nature of researching specifications, reviewing bid forms, examining cost
factors, and preparing draft and actual bids[,]” not those from purchasing and renovating
hotels. Lion Raisins, 52 Fed. Cl. at 631 (citing Finley v. United States, 31 Fed. Cl. 704,
707 (1994); Power Sys.-Claim for Costs, B–210032; B–210032.2, 84–1 CPD ¶ 344, 1984
WL 44014, at *1 (Comp. Gen. March 26, 1984) (“[C]osts are limited only to those
expenses incurred in the preparation of the bid itself.”)). In such circumstances, “[c]osts
incurred in anticipation of or to qualify for a contract award[,]” like in this case, “are not
recoverable bid preparation expenses.” Id. (citing Coflexip, 961 F.2d at 953; Stocker &
Yale, Inc., B–242568, 93–1 CPD ¶ 387, 1993 WL 181158, at *3 (Comp. Gen. May 18,
15
1993)) (“Offerors may incur substantial costs in anticipation of, or in the course of,
competing for a contract, without those costs thereby becoming proposal preparation
costs.”). Thus, plaintiff’s costs of purchasing and renovating the hotel in question are in
the nature of damages and would not be recoverable under this court’s bid protest
jurisdiction as bid preparation and proposal costs even if the court had jurisdiction over
plaintiff’s bid protest claim.
B. Plaintiff’s Implied-in-Fact Contract Claim Must Be Dismissed for Failure to
State a Claim
This court has jurisdiction to hear claims based either on an express or an implied-
in-fact contract. Hercules, 516 U.S. at 423. A plaintiff’s allegation that such a contract
exists between itself and the United States “is enough to confer subject matter jurisdiction
in this [c]ourt.” Penn. Dep’t of Pub. Welfare v. United States, 48 Fed. Cl. 785, 786
(2001) (citing Trauma Serv., 104 F.3d at 1324). However, if a plaintiff fails to allege
facts sufficient to establish an implied-in-fact contract, its case may be dismissed for
failure to state a claim. See, e.g., Harbert/Lummus Agrifuels Projects v. United States,
142 F.3d 1429, 1434 (Fed. Cir. 1998); Hanlin v. United States, 316 F.3d 1325, 1328 (Fed.
Cir. 2003) (noting that plaintiff has the burden of establishing an implied-in-fact
contract); AAA Pharmacy, Inc. v. United States, 108 Fed. Cl. 321, 328–29 (2012)
(granting the government’s motion to dismiss because plaintiff failed to allege the
necessary elements showing a valid contract with the government).
In its motion to dismiss, the government maintains that plaintiff has failed to state
a claim because plaintiff has failed to allege sufficient facts to establish an implied-in-fact
16
contract with the United States. Def.’s Mot. to Dismiss at 18. Specifically, the
government argues that plaintiff has not alleged sufficient facts to demonstrate a
mutuality of intent and an unambiguous offer and acceptance, claiming that Nellis
Lodging’s response to plaintiff’s interest in entering into an MOU was “mere interest,”
which “does not establish a mutual intent to contract, or an unambiguous offer and
acceptance.” Id. at 19 (quoting Pac. Gas & Elec. Co. v. United States, 3 Cl. Ct. 329, 339
(1983)). Further, the government alleges that Ms. Fierstein, the Nellis Lodging manager
with whom plaintiff communicated, did not have contracting authority to bind the
government. Id. at 18.
In response, plaintiff asserts that the parties’ intent to contract can be inferred from
the parties’ conduct. Pl.’s Resp. to Def.’s Mot. to Dismiss at 17. Specifically, plaintiff
argues that Ms. Fierstein’s “representations and promises that [plaintiff] would receive an
MOU[,]” together with the sample MOU given to plaintiff that “specif[ied] the
requirements that [plaintiff] needed to meet,” demonstrate the government’s intent to
contract with plaintiff. Id.; see also Am. Compl. ¶ 54 at 19–20. Plaintiff further argues
that “mov[ing] forward with the purchase and renovation of the Hotel [and] making it
clear to Ms. Fierstein, its lender, and others that it was undertaking those efforts in
furtherance of satisfying the Nellis AFB requirements needed to obtain the MOU”
reflects plaintiff’s intent to enter into the MOU with the government. Id.The court agrees with the government that plaintiff’s allegations are not sufficient
to establish a claim based on an implied-in-fact contract. Even if every fact alleged by
plaintiff could be proven, based on the facts alleged, plaintiff cannot prevail on its
17
implied-in-fact contract claim that it was guaranteed an MOU before it owned a hotel or
passed all of the necessary government inspections.6 The sample MOU stated that
“[p]rior to this [MOU] being approved, a team comprised of, at a minimum, Lodging,
Fire Protection, Office of Special Investigations (OSI), and Environmental Health
personnel [would] inspect the facility.” Id. ¶ 17 at 7. In view of this language, Nellis
Lodging could not commit to entering into an MOU with plaintiff when plaintiff met with
Ms. Fierstein at Nellis Lodging before it purchased a hotel. To the contrary, the sample
MOU makes plain that Nellis Lodging could only be contractually bound by a written
agreement, i.e., the MOU, after the MOU requirements had been met and an inspection
had confirmed that the hotel met Nellis Lodging’s standards. This court has recognized
that “in negotiations where the parties contemplate that their contractual relationship
would arise by means of a written agreement, no contract can be implied.” Pac. Gas, 3
Cl. Ct. at 339. See also Essen Mall Props. v. United States, 21 Cl. Ct. 430, 439–40
(1990); City of Klawock v. United States, 2 Cl. Ct. 580, 585 (1983), aff’d, 732 F.2d 168(Fed. Cir. 1984). As the Federal Circuit has explained, agency actions “do not produce a
contract implied-in-fact until all steps have been taken that the agency procedure
requires; until then, there is no intent to be bound.” New Am. Shipbuilders, Inc. v. United
States, 871 F.2d 1077, 1080 (Fed. Cir. 1989).
6
At oral argument, plaintiff conceded that the MOU did not guarantee any specific amount of off-base
lodging business, but rather obligated the hotel to accept and provide such lodging at agreed upon rates
when such lodging was requested by Nellis Lodging. See Oral Argument at 11:29:06 a.m.–11:29:28 a.m.
(May 15, 2018).
18
In this connection, plaintiff’s reliance on Ms. Fierstein’s statements to suggest that
the parties had entered into an agreement to enter into an MOU if plaintiff met the MOU
requirements is misplaced. First, even plaintiff concedes that Ms. Fierstein’s statements
were conditioned on plaintiff meeting the MOU requirements. If acceptance of an offer
“is in any respect conditional” or if it “reserves to the party giving it a power of
withdrawal[,]” those representations and promises cannot be interpreted as binding on the
United States. Uniq Computer Corp. for Benefit of U.S. Leasing Corp. v. United States,
20 Cl. Ct. 222, 230 (1990) (quoting Corbin, Corbin on Contracts, A Comprehensive
Treatise on the Working Rules of Contract Law § 264 (1963)). Ms. Fierstein’s statements
to plaintiff, together with the delivery of the sample MOU, are therefore insufficient to
create a binding contract because “[a] mere statement of intention . . . is not enough to
manifest an unambiguous acceptance of an offer, especially when coupled with a
condition precedent.” Essen Mall, 21 Cl. Ct. at 440. Thus, Ms. Fierstein’s statements
and actions, even if true, do not evince the government’s unambiguous acceptance of an
offer or an intent to be contractually bound. “A court will not . . . imply an agreement
between parties when there was none, nor can a court imply privity when there was no
meeting of the minds between the particular parties.” Carter v. United States, 98 Fed. Cl.
632, 636 (2011).
Indeed, the Federal Circuit has noted that “it is irrelevant if the oral assurances
emanate from the very official who will have authority at the proper time[] to sign the
contract or grant,” because if the assurances are premature and “an approving official
exceeds his authority, the government can disavow the official’s words and is not bound
19
by an implied contract.” New Am. Shipbuilders, 871 F.2d at 1080 (citing Empresas
Electronicas Walser Inc. v. United States, 650 F.2d 286, 223 Ct. Cl. 686, 688, cert.
denied, 449 U.S. 953 (1980)). Regardless of whether Ms. Fierstein had the authority to
sign the MOU on behalf of Nellis Lodging, she did not have the authority to bind Nellis
Lodging in contract before the conditions of the MOU were met and thus could not have
contracted to guarantee that plaintiff would receive an MOU before purchasing and
renovating a hotel as the plaintiff claims. At best, plaintiff was in negotiations for an
agreement but had not reached an agreement. The court must therefore dismiss plaintiff’s
breach of an implied-in-fact contract claim for failure to state a claim upon which relief
can be granted.
CONCLUSION
For the reasons set forth above, the government’s motion to dismiss plaintiff’s
complaint for lack of subject matter jurisdiction pursuant to RCFC 12(b)(1) and for
failure to state a claim under RCFC 12(b)(6) is GRANTED.
The clerk is directed to enter judgment accordingly. No costs.
IT IS SO ORDERED.
s/Nancy B. Firestone
NANCY B. FIRESTONE
Senior Judge
20