Land Shark Shredding, LLC v. United States ( 2019 )

In the United States Court of Federal Claims
No. 19-508C
Filed: October 9, 2019
Redacted Version Issued for Publication: November 2, 20191
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LAND SHARK SHREDDING, LLC, *
Protestor, *
Pre-Award Bid Protest; Motion to
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Dismiss; Failure to State a Claim;
v. *
Lack of Subject Matter Jurisdiction;
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UNITED STATES, Service-Disabled Veteran-Owned
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Small Business Rule of Two
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Defendant. Doctrine.
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Joseph A. Whitcomb, Whitcomb, Selinsky, McAuliffe, PC, Denver, CO, for
protestor.
Sonia M. Orfield, Trial Attorney, Commercial Litigation Branch, Civil Division,
United States Department of Justice, Washington, D.C., for defendant. With her was
Steven J. Gillingham, Assistant Director, Commercial Litigation Branch, Robert E.
Kirschman, Jr., Director, Commercial Litigation Branch, and Joseph H. Hunt, Assistant
Attorney General, Civil Division. Of counsel was Natica C. Neely, Staff Attorney, United
States Department of Veterans Affairs, Office of General Counsel, District Contracting
National Practice Group, Washington, D.C.
OPINION
HORN, J.
Protestor Land Shark Shredding, LLC (Land Shark Shredding) challenges the
cancellation of Solicitation No. 36C24119Q0003 for document shredding and destruction
services issued by the Department of Veterans Affairs (VA) for the White River Junction
VA Medical Center, located at White River Junction, Vermont, and for seven surrounding
White River Junction clinics located in Vermont and New Hampshire, also known as White
River Junction Community Based Outpatient Clinics (CBOCs). Because, according to
protestor, Land Shark Shredding is a service-disabled veteran-owned small business
(SDVOSB) contractor, and the lowest-priced of two available SDVOSB contractors that
1This Opinion was issued under seal on October 9, 2019. The parties were asked to
propose redactions prior to public release of the Opinion. This Opinion is issued with
some of the redactions that the parties proposed in response to the court’s request. Words
which are redacted are reflected with the notation: “[redacted].”
bid on Solicitation No. 36C24119Q0003, according to protestor, the VA was required to
make a contract award to protestor under the “Rule of Two” doctrine contained at 38
U.S.C. § 8127(d) (2018). Protestor argues that the VA’s decision to cancel Solicitation
No. 36C24119Q0003 because the VA had found that neither protestor’s nor the second,
offering SDVOSB contractor’s prices were “fair and reasonable” it was a “flagrant
disregard for federal procurement law and Congressional intent,” and, thus, “lacked a
rational basis.”
FINDINGS OF FACT
Task Orders VA241-14-F-0113 and VA241-14-F-1928 for Document Shredding Services
In 2013, the VA awarded Task Order VA241-14-F-0113 in the amount of
$64,800.00 for document shredding services at the White River Junction VA Medical
Center and Task Order VA241-14-F-1928 in the amount of $65,260.20 for document
shredding services at the White River Junction CBOCs. The two task orders were
awarded under the General Services Administration (GSA) Federal Supply Schedule
(FSS) and both were awarded to Shred This Inc., SecurShred (SecurShred), “a small
business.” Performance under the two task orders was scheduled to end on March 31,
2019. The VA subsequently issued a modification to Task Order VA241-14-F-0113 for
the White River Junction VA Medical Center, which increased the award amount from
$64,800.00 to approximately $106,950.00. The total for both task orders, including the
modifications to Task Order VA241-14-F-0113, was approximately $172,210.20.
Subsequently, the VA submitted a requirement for document shredding services
at the White River Junction VA Medical Center and the White River Junction CBOCs, with
performance set to start on April 1, 2019, following the March 31, 2019 end date of
SecurShred’s performance under Task Order VA241-14-F-0113 and Task Order VA241-
14-F-1928. Unlike the two previous task orders, which were issued under the GSA FSS,
the VA decided to compete the requirement for document services at the White River
Junction VA Medical Center and the White River CBOCs as a SDVOSB set-aside
procurement.
July 19, 2018 Independent Government Cost Estimate Memorandum
On July 19, 2018, the VA issued an internal memorandum with the subject line
“Independent Government Cost Estimate for VA-241—14-F-0113,” which summarized
the independent government cost estimate (IGCE) for SecurShred’s VA-241-14-F-0113
Task Order for the White River Junction VA Medical Center. The July 19, 2018 IGCE
memorandum stated:
the independent government estimate for the proposed solicitation[2] are
[sic] as follows:
2Although the July 19, 2018 IGCE memorandum addressed SecurShred’s VA-241-14-F-
0113 Task Order, it is unclear to which solicitation is the “proposed solicitation”
2
(i) The estimated budget is as indicated:
(a). [sic] Base Period: 01 October 2018 –
30 September 2019: $[redacted]
(b) Option year 1-$[redacted]
(c) Option year 2-$[redacted]
(d) Option year 3-$[redacted]
(e) Option year 4-$[redacted]
(ii) The estimated budget is inclusive to base plus four (4) one-year option
periods. The budget estimate is based on historical data and an assessment
of future needs. The contract will not represent a commitment to, or imply
funding for, specific option periods or business areas. All option periods and
business areas will be authorized and/or funded on an individual basis. The
grand total including option years is $[redacted] [sic]
(emphasis in original).
The July 19, 2018 IGCE memorandum also stated that “this estimate draws heavily
on researched past price history with minor adjustments for changes in specifications,
quantities, location and task frequency.”
According to defendant’s motion to dismiss and cross-motion for judgment on the
administrative record, the VA used the July 19, 2018 IGCE memorandum as a price
comparison tool when evaluating protestor’s proposal for Solicitation No.
36C241119Q0003, the solicitation at issue in the above-captioned protest. Also,
according to the contracting officer’s internal memorandum, dated January 11, 2019, the
contracting officer used the July 19, 2018 IGCE memorandum as a justification for her
decision to cancel the solicitation because protestor’s price exceeded the July 19, 2018
IGCE memorandum.
October 29, 2018 Funding Request
On October 29, 2018, the VA issued a document titled “REQUEST, TURN-IN, AND
RECEIPT FOR PROPERTY OR SERVICES,” addressed to the “REQUESTING OFFICE”
of the “OFFICE” of “FACILITIES MANAGEMENT SERVICE” for federal funding for “1 YR”
for the “REMOVAL OF SECURE SHRED CONTAINERS FROM WHITE RIVER
JUNCTION, VT MEDICAL CENTER AND COMMUNITY BASED OUTPATIENT CLINICS
(CBOC’S),” and listed the “TOTAL COST” as “$35000.00.” (all capitalization and
emphasis in original). It is unclear from the October 29, 2018 document, however,
whether the funding request was approved. The only reference contained on the October
29, 2018 document regarding an approval of funding is the following notation:
referenced.
3
SIGNATURE OF APPROVING OFFICIAL DATE
/ES/ JOSEPH NOLIN
JOSEPH NOLIN
ASST CHIEF, FMS, WRJ OCT 22, 2018
(all capitalization and emphasis in original). In addition, there is no explanation contained
in the October 29, 2018 document which explains to which contract the funding would be
allocated or why the government requested only $35,000.00 in funding. The October 29,
2018 document notes that the “VENDOR” was “TBD [to be determined].” (capitalization
in original). Defendant in the above-captioned case cites to the October 29, 2018
document as evidence that the government allocated $35,000.00 in funding for the first-
year base period of the five-year contract being solicited under Solicitation No.
36C241119Q0003, the solicitation at issue in the above-captioned bid protest.
VA’s December 17, 2018 Acquisition Planning Summary
According to a document dated December 17, 2018, which presented a “summary”
of the VA’s “acquisition planning” (the December 17, 2018 Acquisition Planning
Summary), the VA had previously conducted market research for the procurement of a
“firm fixed price” contract for “Shredding White River Junction.” The December 17, 2018
Acquisition Planning Summary does not state whether the market research addressed
document shredding services for the White River Junction VA Medical Center or for the
White River Junction CBOCs, or for both. According to the December 17, 2018 document,
the VA determined that there were “10 SDVOSB and VOSB [veteran-owned small
business] businesses” in the market that offered shredding services, and that “[t]hree of
the ten Vet Biz vendors are listed on GSA Ebuy (Land Shark Shredding LLC, RW Lone Star
Security, LLC and TrussCrane, Inc).” According to the December 17, 2018 Acquisition
Planning Summary, the VA issued a request for quotes on August 7, 2018 to the three
SDVOSBs listed on GSA Ebuy, and protestor was the only contractor that responded.
The VA subsequently cancelled the August 7, 2018 request for quotes3 “because Land
Shark Shredding’s price in the amount of $[redacted] was $[redacted] or [redacted]
percent higher than the IGCE amount of $[redacted].”4
The December 17, 2018 Acquisition Planning Summary also stated that on
September 26, 2018, a “sources sought notice was posted on FBO [FedBizOpps]” and
that “[c]apability statements were provided from the following vendors:”
Document Security Solutions (SDVOSB)
Land Shark Shredding (SDVOSB)
Secure Shred (SB) [Small Business]
Veteran Shredding (SDVOSB)
3 In the protest currently before the court, the protestor does not challenge the VA’s
cancellation of the August 7, 2018 request for quotes.
4The July 19, 2018 IGCE memorandum indicated that: “The grand total including
option years is $[redacted][.]” (emphasis in original).
4
Skip Pettit (SDVOSB – Email that he can partner with Shred It)
The “Sources Sought Notice” was attached to the December 17, 2018 Acquisition
Planning Summary, and noted that it was “not a request for quotes. This request is solely
for the purpose of conducting market research to enhance VHA’s [Veterans Health
Administration] understanding of market’s offered services, capabilities and potential
small business sources.” The Sources Sought Notice also stated that the place of
performance for the document shredding services would be the White River Junction VA
Medical Center and White River Junction CBOCs.
The December 17, 2018 Acquisition Planning Summary concluded that, based on
the “responses from the sources sought notice,”
there are two[5 SDVOSB vendors that may be able to provide the services.
It is unknown if the prices would be fair and reasonable due to the location
of the vendors. A solicitation will be posted on FBO as a SDVOSB set aside
and a fair and reasonable determination will be made prior to award.
Solicitation No. 36C241119Q0003
On December 19, 2018, the VA issued Solicitation No. 36C241119Q0003, the
solicitation at issue in the above-captioned protest, for a contract for document destruction
services for the White River Junction VA Medical Center and seven CBOCs associated
with the White River Junction VA Medical Center, located throughout Vermont and New
Hampshire. Solicitation No. 36C241119Q0003 stated, “the solicitation is issued as a
request for quotation (RFQ),” and that “[t]his requirement is being issued as a Service
Disabled Veteran Owned Small Business set aside. The associated NAICS code is
561990 with a size standard of $11Million.”
Solicitation No. 36C241119Q0003 also stated:
The Government intends to award a firm-fixed price award for 12 months
(04/01/2019-03/31/2020) with four (4) twelve month options. The
Contractor shall provide all labor, supervision, material, equipment, and
travel to provide document destruction services for Government- provided
documents, containing sensitive confidential and medical records at the
VAMC [VA Medical Center] White River Junction and other clinics
throughout VT as listed in the Performance Work Statement.
(capitalization and emphasis in original). The “Place of Performance is the White River
Junction VA Medical Center, 215 North Main Street, White River Junction, VT 05009 and
several VA Clinics through VT (see Performance Work Statement).”
5The December 17, 2018 Acquisition Planning Summary did not identify which two
SDVOSB vendors may have been able to provide the services.
5
Solicitation No. 36C241119Q0003 provided that “[a]ward will be made to the best
value, as determined to be the most beneficial to the Government.” The solicitation also
explained, under the section titled “Evaluation Process,” that:
Quotes shall be evaluated under FAR Part 13.106-2(b) -- Evaluation of
Quotations or Offers. Therefore, the Government will not determine a
competitive range, conduct discussions with all contractors, solicit final
revised quotes, or use other techniques associated with FAR Part 15. The
Contracting Officer will conduct a comparative evaluation of quotes in
accordance with FAR 13.106-2 (b).
The Government will award a contract resulting from this solicitation to the
responsible quoter whose quote conforming to the solicitation will be most
advantageous to the Government, price and other factors considered.
The three factors that would be used to evaluate quotes were price, past performance,
and technical experience and capabilities.
Regarding pricing, according to the solicitation’s “PERFORMANCE WORK
STATEMENT,” “[t]he Contractor shall provide 64-gallon, lockable, wheeled totes that
have a slot in the top to accept all materials to be shredded,” and “[t]he Contractor shall
provide ‘36’ tall front feed lockable consoles.” (capitalization in original). The number of
64-gallon totes and 36’’ tall consoles required, as well as the number of weekly pick-ups
of shredding material the contractor would have to make, varied by location of the clinic,
as follows:
White River Junction VA Medical Center (provide approximately 30-40 totes
& 30-35 consoles, pickup once a week)
215 North Main Street
White River Junction VT, 05009
White River Junction VA Medical Center Outer Bldgs.
4,6,7,9,37,58,59,60,62,63,66 & 67
(provide 14 totes & 6 consoles, Pickup twice a month)
Bennington CBOC (provide 2 consoles, pickup two times per month)
186 North Street
Bennington, VT 05201
Brattleboro CBOC (provide 1 tote & 2 consoles, pickup every 4 weeks)
71 GSP Drive
Brattleboro, VT 05301
Burlington Lakeside CBOC (provide 2 totes, pickup weekly)
128 Lakeside Avenue, Suite 260
Burlington, VT 05401
6
Newport Outpatient Clinic (provide 1 tote, pickup every 4 weeks)
1734 Crawford Farm Road
Newport, VT 05855
Rutland CBOC (provide 2 consoles, pickup every 2 weeks)
232 West Street
Rutland, VT 05701
Keene Outpatient Clinic (provide 1 console, pickup every 4 weeks)
640 Marlboro Street, Route 101
Keene, NH 03431
Littleton CBOC (provide 4 consoles, pickup every 4 weeks)
264 Cottage Street
Littleton, NH 03561
The solicitation required the bidder to submit its pricing for 64-gallon totes and 36’’
tall consoles and the scheduled pickups at the above-listed locations on a yearly basis in
the table below, which was included in the solicitation:
Item # Description- Base Year – Qty Unit Price Amount
04/01/2019-03/31/2020
0001 The contractor shall 12 MO
provide document
destruction services in
accordance with the
Performance Work
Statement.
Item # Description- Base Year – Item #[7]
04/01/2020-03/31/2021[6]
1001 The contractor shall 12 MO
provide document
destruction services in
accordance with the
Performance Work
Statement.
6It appears as if Item # 1001 should have been “Description- Option 1– 04/01/2020-
03/31/2021,” instead of “Description- Base Year –04/01/2020-03/31/2021.”
7 Likewise, it appears as if Item # should have been “Amount.”
7
Item # Description- Option 2 – Qty Unit Price Amount
04/01/2021-03/31/2022
2001 The contractor shall 12 MO
provide document
destruction services in
accordance with the
Performance Work
Statement.
Item # Description- Option Qty Unit Price Amount
3 04/01/2022-
03/31/2023
3001 The contractor shall 12 MO
provide document
destruction services in
accordance with the
Performance Work
Statement.
Item # Description- Option 4 – Qty Unit Price Amount
04/02/2023-04/01/2024
4001 The contractor shall 12 MO
provide document
destruction services in
accordance with the
Performance Work
Statement.
The solicitation stated that:
Except when it is determined in accordance with FAR 17.206(b) not to be
in the Government’s best interests, the Government will evaluate offers for
award purposes by adding the total price for all options to the total price for
the basic requirement. Evaluation of options will not obligate the
Government to exercise the option(s). The Government will evaluate prices
for the option under FAR 52.217-8 by using last year’s option prices to
calculate the price for six months of effort, and adding that amount to the
base and other option years to arrive at the total.
Responses to Solicitation No. 36C241119Q0003 were due by January 3, 2019, and were
required to be submitted by email to the contracting officer, Tammy Davis.
8
In response to Solicitation No. 36C241119Q0003, the VA received four separate
emails from potential bidders, including protestor, with questions regarding the
solicitation. Protestor’s email, dated December 26, 2018, included 11 questions regarding
various topics, including price, subcontracting limitations, and past performance. On
December 31, 2018, the VA issued “amendment A00001” to Solicitation No.
36C241119Q0003, extending the closing date from January 3, 2019 to January 11, 2019
at 12:00 p.m. EST. (capitalization in original). Amendment A00001 also stated that the
VA would issue a second amendment with responses to the questions emailed in by
potential bidders.
On January 4, 2019, the VA issued “Amendment A00002,” which provided
“responses to Contractor questions,” including two pricing questions previously asked by
protestor in its December 26, 2018 email, and relevant to the above-captioned protest.
The first pricing question by protestor was:
Is it safe to assume if an offeror bids a per container price for this solicitation,
that has been accepted as fair and reasonable per the GSA Schedule, and
that the VA has recently awarded in other shredding contracts – that said
price per container will be considered inherently fair and reasonable and
therefore competitive?
The VA responded in Amendment A00002 that, “No, this is an open market solicitation;
price reasonableness shall be in accordance with FAR 13.106-3.” The second pricing
question was, “Was an IGCE performed and if so on what was it based?” Amendment
A00002 provided in response that “Yes, Independent Government Cost Estimates are for
official use only and not for public disclosure.”
Protestor also had previously asked the VA in its December 26, 2018 email: “Is
there a current contract for the work being solicited? If so, please provide that awarded
contract number (NOT the incumbent GSA contractor number). Also please provide the
name of the incumbent contractor and the contract amount.” (capitalization in original)
Amendment A00002 provided in response that:
Yes, the requirement was split into two contracts as follows:
VA241-14-F-1928 (WRJ CBOCS) Shred This Inc (SECURESHRED) -
Awarded in the amount of $65,260.20 (total) for the Base and Four Option
Years.
VA241-14-F-0113 (White River Junction - Shred This Inc
(SECURESHRED) – The contract amount total is $106,950 for the Base
and Four Option Years.
Protestor also had previously asked the VA in its December 26, 2018 email “[i]s the level
of effort being performed under the current contract fundamentally the same as what will
be required to fulfill #36C24119Q0003?” Amendment A00002 responded “Yes.”
9
Amendment A00002,” also provided responses to questions from other potential
offerors. For one of the questions, Question 4, a potential offeror asked:
[W]ill assessments of the winning Contractor’s compliance to Limitations on
Subcontracting requirements be performed? If not, then how will the VA
KNOW the winning contractor is in compliance with this law? If the VA does
not evaluate and monitor this requirement, then the VA is running the risk
of a Qui Tam Lawsuit after the first twelve months of this contract.
(capitalization in original). The VA responded:
No, it is not anticipated that the total contract amount will be greater than
the simplified acquisition threshold of $250K. In accordance with 13 CFR
125.6 - In order to be awarded a full or partial small business set-aside
contract with a value greater than the simplified acquisition threshold, a
small business concern must agree that: it will not pay more than 50% of
the amount paid by the government to it to firms that are not similarly
situated. Any work that a similarly situated subcontractor further
subcontracts will count towards the 50% subcontract amount that cannot be
exceeded.
On January 11, 2019, the VA received only two proposals for Solicitation No.
36C241119Q0003, one from [redacted], an SDOVSB located in [redacted], Indiana, and
one from protestor, located in Bowling Green, Kentucky. In [redacted]’s January 11, 2019
email to Contracting Officer Davis, to which [redacted]’s proposal was attached,
[redacted] noted that it is not a document shredding business, but “handle[s] the
[redacted] Account for your [VA] Boston VAMC contract- on year number 2” and that it
was “partnering with [redacted] to propose a competitive bid for the shredding services at
White River Junction.” [redacted]’s proposal proposed a total price for the base year and
the four option periods of “$[redacted].” (emphasis in original). According to the following
tables included in [redacted]’s proposal, [redacted]’s price was:
Item # Description- Base Year – Qty Unit Price Amount
04/01/2019-03/31/2020
0001 The contractor shall provide 12 MO $[redacted] $[redacted]
document destruction
services in accordance with
the Performance Work
Statement.
Item # Description- Base Year – Item #
04/01/2020-03/31/2021
10
1001 The contractor shall provide 12 MO $[redacted] $[redacted]
document destruction
services in accordance with
the Performance Work
Statement.
Item # Description- Option 2 – Qty Unit Price Amount
04/01/2021-03/31/2022
2001 The contractor shall provide 12 MO
$[redacted] $[redacted]
document destruction
services in accordance with
the Performance Work
Statement.
Item # Description- Option 3 Qty Unit Price Amount
04/01/2022-03/31/2023
3001 The contractor shall provide 12 MO
document destruction $[redacted] $[redacted]
services in accordance with
the Performance Work
Statement.
Item # Description- Option 4 – Qty Unit Price Amount
04/02/2023-04/01/2024
4001 The contractor shall provide 12 MO $[redacted] $[redacted]
document destruction
services in accordance with
the Performance Work
Statement.
TOTAL $[redacted]
(capitalization and emphasis in original).
Also, on January 11, 2019, protestor sent an email to Contracting Officer Davis,
which attached its proposal for Solicitation No. 36C241119Q0003. Protestor’s proposal
stated that it was a “Service Disabled Veteran Owned Small Business” and that its
SDVOSB status was certified by the VA’s Center for Verification and Employment.
(capitalization and emphasis in original). Protestor’s proposed total contract price was
11
“$[redacted].” According to the following tables included in protestor’s proposal,
protestor’s price for the base period and four option periods was:
Item # Description- Base Year - Qty Unit Price Amount
04/01/2019-03/31/2020
0001 The contractor shall provide 12 MO $[redacted] $[redacted]
document destruction services
in accordance with the
Performance Work Statement.
Item # Description- Base Year - Item #
04/01/2020-03/31/2021
1001 The contractor shall provide 12 MO $[redacted] $[redacted]
document destruction services
in accordance with the
Performance Work Statement.
Item # Description- Option 2 - Qty Unit Price Amount
04/01/2021-03/31/2022
2001 The contractor shall provide 12 MO $[redacted] $[redacted]
document destruction services
in accordance with the
Performance Work Statement.
Item # Description- Option 3 Qty Unit Price Amount
04/01/2022-03/31/2023
3001 The contractor shall provide 12 MO $[redacted] $[redacted]
document destruction
services in accordance with
the Performance Work
Statement.
Item # Description- Option 4 - Qty Unit Price Amount
04/02/2023-04/01/2024
12
4001 The contractor shall provide 12 MO $145,244.45 $145,244.45
document destruction
services in accordance with
the Performance Work
Statement.
TOTAL ______$[redacted]
(capitalization in original). Protestor’s proposal also noted that “We are 1 of only 3 GSA
Certified SDVOSB Document Destruction Companies,” and that its “Prices [were]
Approved by the General Services Administration, a division of the United states [sic]
Federal Government under” the “Federal Supply Schedule – SIN 51 507 Destruction
Services.” (capitalization, emphasis, and underline in original).
On January 11, 2019, the same day that [redacted] and protestor submitted their
proposals for Solicitation No. 36C24119Q003, the VA issued “Amendment A00003,”
which cancelled the solicitation and corrected the “response to question #4 from
Amendment A00002.” As noted above, in Question 4, a potential offeror had asked the
VA:
[W]ill assessments of the winning Contractor’s compliance to Limitations on
Subcontracting requirements be performed? If not, then how will the VA
KNOW the winning contractor is in compliance with this law? If the VA does
not evaluate and monitor this requirement, then the VA is running the risk
of a Qui Tam Lawsuit after the first twelve months of this contract.
(capitalization in original). The VA responded:
No, it is not anticipated that the total contract amount will be greater than
the simplified acquisition threshold of $250K. In accordance with 13 CFR
125.6 - In order to be awarded a full or partial small business set-aside
contract with a value greater than the simplified acquisition threshold, a
small business concern must agree that: it will not pay more than 50% of
the amount paid by the government to it to firms that are not similarly
situated. Any work that a similarly situated subcontractor further
subcontracts will count towards the 50% subcontract amount that cannot be
exceeded.
Amendment A00003, however, restated Question 4 as “will assessments of the winning
Contractor’s compliance to Limitations on Subcontracting requirements be performed?”
Amendment A00003 stated that “yes, Limitations of subcontracting are applicable.”
(capitalization in original). The VA explained in a January 11, 2019 internal memorandum,
discussed below, that the “correction” to Question # 4 in Amendment A00003 “was issued
for informational purposes only for reference on future solicitations for this requirement;
13
however, the question/answer does not have any impact on this solicitation,” or “bearing
on the determination for fair and reasonable pricing.”
According to the VA’s internal memorandum, documenting its rationale for
cancelling Solicitation No. 36C24119Q0003, dated January 11, 2019:
Because both quotes were more than [redacted] percent higher than the
incumbent’s pricing for the shredding services and more than [redacted]
percent higher than the IGCE amount of $[redacted], neither price can be
determined fair and reasonable. Because a reasonable price was
unattainable due to the significantly high quotes, the technical and past
performance were not evaluated and the solicitation was cancelled. An
email was sent to both contractors on 1/11/2019 and an amendment
A00003 was posted to FBO.gov with notice of cancellation.
The January 11, 2019 internal memorandum included the following table which compared
protestor’s and [redacted]’s prices for Solicitation No. 36C241119Q0003 to the July 19,
2018 IGCE memorandum.
Difference Difference
IGCE Land Shark from from [redacted] Difference from Difference
IGCE $ IGCE % IGCE $ from IGCE %
$[redacted] $[redacted] $[redacted] [redacted]% $[redacted] $[redacted] [redacted]%
$[redacted] $[redacted] $[redacted] [redacted]% $[redacted] $[redacted] [redacted]%
$[redacted] $[redacted] $[redacted] [redacted]% $[redacted] $[redacted] [redacted]%
$[redacted] $[redacted] $[redacted] [redacted]% $[redacted] $[redacted] [redacted]%
$[redacted] $[redacted] $[redacted] [redacted]% $[redacted] $[redacted] [redacted]%
$[redacted] $[redacted] $[redacted] [redacted]% $[redacted] $[redacted] [redacted]%
(shading in original).
The January 11, 2019 internal memorandum included the following table that compared
SecurShred’s Task Orders VA241-14-F-1928 and VA241-14-F-0113:
VA241-14-F-1928 $ 65,260.20
VA241-14-F-0113 $ 64,800.00 Original award amount for B+4
Base $12,960.00
P00001 $23,021.82
P00002 $23,942.52
P0003 $23,942.52
P00004 ($859.38)
***Missing opt 2 $23,942.52
$106,950.00 New total with modifications
14
*** Note – Task Order VA241-14-F-0013 [sic] is missing a modification for Option Year 2,
assumed $23,942.52 for calculations.[8]
The January 11, 2019 internal memorandum also included the following table which
compared protestor’s and [redacted]’s pricing for Solicitation No. 36C241119Q0003 to
the “WRJ [White River Junction] & CBOC Historical Pricing.”9
Difference bet Difference bet Difference bet Difference bet
WRJ & CBOC Land Shark & Land Shark & [redacted] & [redacted]&
Historical Historical Pricing Historical Pricing Historical Pricing Historical
Pricing $ % $ Pricing
%
Total $172,210.20 $[redacted] [redacted]% $[redacted] [redacted]%
(capitalization, shading and spelling in original).
The January 11, 2019 internal memorandum provided that:
The contracting officer does not have a reasonable expectation, based on
market research, that two or more VOSBs listed as verified in VIP database
are likely to submit offers and an award can be made at a fair and
reasonable price; therefore, the requirement will be re-solicited as a small
business set aside.
Also, on January 11, 2019, Contracting Officer Davis sent an email notifying
protestor that its price of “$[redacted] is approximately [redacted] percent higher than the
price we are currently paying.” Contracting Officer Davis further noted in the email that
“your pricing cannot be determined fair and reasonable,” and that the “solicitation is
cancelled and will be resolicited.” Contracting Officer Davis also sent an email to
[redacted] on January 11, 2018, notifying [redacted] that its submitted price of
“$[redacted] is approximately [redacted] percent higher than the price we are paying on
the current contract,” and that, therefore, [redacted]’s “price cannot be determined fair
8The table comparing SecurShred’s Task Orders did not include any headings or further
explanations.
9The January 11, 2019 internal memorandum did not provide a definition for “Historical
Pricing” or provide any explanation for the amount of $172,210.20 as the “Historical
Pricing.” As described below, in a March 8, 2019 internal memorandum section titled
“Comparison of quoted prices to historical prices found reasonable on previous
purchases (FAR 13.106-3 (a)(2)(ii)),” Contracting Officer Davis explained that: “In 2013,
VA awarded task orders VA241-14-F-1928 and VA241-14-F-0113 were awarded [sic] to
Secure This, Inc. (SecureShed), [sic] a small business concern, under its GSA schedule
contract for the provision of WRJ shredding services. The total value of the contracts was
approximately $172,210.20.” (emphasis in original).
15
and reasonable.”10 Contracting Officer Davis stated in her email to [redacted] that the
“solicitation is cancelled and will be resolicited.”
On January 14, 2019, the VA resolicited the same requirement for document
shredding services at the White River Junction VA Medical Center and surrounding White
River Junction clinics under Solicitation No. 36C24119Q0111, which was posted to the
Federal Biz Opps website as a small business set-aside, not an SDVOSB set-aside. On
January 16, 2019, protestor submitted an agency level protest of the VA’s cancellation of
the earlier solicitation,11 Solicitation No. 36C241119Q0003, challenging the agency’s
decision to cancel the solicitation and the agency’s rejection of protestor’s price “as not
fair and reasonable.”12
On February 13, 2019, Contracting Officer Davis sent her letter decision on
protestor’s January 16, 2019 agency level protest of the first solicitation, Solicitation No.
36C241119Q0003 to protestor. Contracting Officer Davis denied the protest, noting that
the “solicitation was cancelled based on a reasonable basis; the price was not fair and
reasonable and not the best value for the United States.” Contracting Officer Davis stated
in her letter:
[T]he solicitation was cancelled based on the contracting officer’s business
judgement [sic] that the price was too high and fair and reasonable pricing,
required by the Federal Acquisition Regulation, was not attainable. The
price was evaluated in accordance with Federal Acquisition Regulation
(FAR) 13.106-3(a)(2)(ii)), Comparison of proposed prices found reasonable
on previous purchases. The terms and conditions, quantities, and market
and economic factors are not materially different than the last acquisition.
10As noted in the January 11, 2019 internal memorandum, the total price of [redacted]’s
proposal was [redacted], and not [redacted]as indicated in Contracting Officer Davis’
email.
11 On January 21, 2019, protestor submitted its bid for the second solicitation, Solicitation
No. 36C24119Q0111. Protestor does not challenge the second solicitation, Solicitation
No. 36C24119Q0111. As noted above, protestor’s challenge in the above-captioned
protest relates solely to the first solicitation, Solicitation No. 36C241119Q0003. Facts
regarding Solicitation No. 36C24119Q0111, however, have been included in this Opinion
in order to present a timeline of events surrounding the VA’s procurement process for
document shredding services at the White River Junction VA Medical Center and
surrounding CBOCs, at issue in this case.
12 Protestor did not raise the Rule of Two argument at the agency level protest, because
it was unaware of any other bidders. As indicated in its January 16, 2019 agency level
protest, Land Shark stated “[w]e submitted the question via email on 11 January 2018
asking if there were any other bidders, and to date we have yet to receive a response. If
there were other bidders, then the Rule of Two per the Supreme Court ruling in the
Kingdomware case was satisfied, and an award should have been announced.”
16
Contracting Officer Davis also noted that protestor’s price was “also compared to the
Independent Government Cost Estimate.”
On February 19, 2019, the VA awarded a contract under the second solicitation,
Solicitation No. 36C24119Q0111, to SecurShred in the “amount of $24,906.87 for the
base year and $124,534.35 total for the base and four options.” SecurShred is a small
business and the incumbent contractor on Task Orders VA241-14-F-1928 and VA241-
14-F-0113, the two previous task orders for document shredding services at the White
River Junction VA Medical Center and surrounding White River Junction clinics.
On February 20, 2019, Don Gerard, Jr., the President and CEO of Land Shark
Shredding emailed Contracting Officer Davis regarding the VA’s evaluation of protestor’s
bid for the first solicitation, Solicitation No. 36C241119Q0003, stating that “[w]e will be
protesting your action.[13]” Also, on February 20, 2019, Mr. Gerard also sent a second
email to Contracting Officer Davis, asking whether protestor was the “ONLY SDVOSB bid
you [the VA] received on Solicitation 36C24119Q0003, which by the way was a 100%
Total SDVOSB set-aside??” (capitalization in original). On February 21, 2019,
Contracting Officer Davis responded to Mr. Gerard’s second February 20, 2019 email,
stating:
Land Shark Shredding, LLC was not the only quote received in response to
solicitation 36C24119Q0003, the Government also received one quote from
a non-shredding SDVOSB contractor. The quotes were not ranked and your
quote was lower than the other price submitted. Award was not made
because the price could not be determined fair and reasonable and was not
the best value to the Government as required by the Federal Acquisition
Regulation.
Please note that Land Shark Shredding, LLC’s price of $[redacted] is
$[redacted] higher than the awardee’s price of $124,534.35.[14]
On February 22, 2019, protestor’s counsel in the above-captioned protest
submitted a prefiling notice of a bid protest to Clerk of the Court for the United States
Court of Federal Claims, indicating that Land Shark Shredding intended to protest the first
solicitation, Solicitation No. 36C241119Q0003, and the second solicitation, Solicitation
No. 36C24119Q0111, in this court “on or about February 28, 2019.” Protestor, however,
13Mr. Gerard did not specify in the email when Land Shark Shredding would be protesting
the VA’s action regarding Solicitation No. 36C241119Q0003, nor whether Land Shark
Shredding would be filing a protest at the United States Government Accountability Office
or the United States Court of Federal Claims.
14The “awardee’s price” of “$124,534.35” referred to in Contracting Officer Davis’s
February 21, 2019 email corresponds with SecurShred’s price of $124,534.35 for
Solicitation No. 36C24119Q0111, the solicitation which the agency issued after cancelling
Solicitation No. 36C24119Q0003.
17
did not file a bid protest in this court of both Solicitation No. 36C241119Q0003 and
Solicitation No. 36C24119Q0111 by February 28, 2019. Protestor filed the above-
captioned protest regarding only the first solicitation, Solicitation No. 36C24119Q0003,
on April 8, 2019.
On March 1, 2019, Contracting Officer Davis sent protestor a letter which stated
that her February 19, 2019 decision on protestor’s January 16, 2019 agency level protest
regarding the first solicitation, Solicitation No. 36C241119Q0003, was “withdrawn” and
“The protest is dismissed in its entirety because the Agency is taking corrective action.”
According to the March 1, 2019 letter, the agency’s corrective action included the
following: “[t]he CO will reassess the decision to not make award under 36C24119Q0003
and subsequent cancellation of 36C24119Q0003. This reassessment will include, but is
not limited to, further review of the procurement record and the quotes submitted in
response to 36C24119Q0003.”
On March 6, 2019, the VA cancelled the award made to SecurShred under the
second solicitation, Solicitation No. 36C24119Q0111, and notified protestor, via email, of
the cancellation on March 7, 2019. According to defendant’s timeline of events regarding
the VA’s procurement for document shredding services at issue in this protest, attached
to defendant’s cross-motion for judgment on the administrative record, the “agency
cancelled the solicitation [No. 36C24119Q0111] and terminated the award because it
decided to take corrective action.” Defendant did not further explain the reason for the
agency’s decision to take corrective action, nor did the defendant provide details
regarding the corrective action for Solicitation No. 36C24119Q0111. Also, according to
defendant’s timeline of events, following the cancellation of the second solicitation,
Solicitation No. 36C24119Q0111, the VA awarded a short-term 3-month, base period,
bridge task order to SecurShred under SecurShred’s GSA contract, GS-03F-0004V, to
run from April 1, 2019 through June 30, 2019. The amount under the bridge task order
was for $6,270.04. The bridge task order also included a 3-month option period, which, if
exercised by the agency, could extend SecurShred’s performance until September 30,
2019. Performance began under the bridge task order on April 1, 2019 and appeared, at
the time of the oral argument in the above-captioned protest, to be on-going. Further,
according to defendant’s timeline of events,
[o]nce the protest is resolved at the COFC [United States Court of Federal
Claims], VA will be resoliciting for its requirement. The re-solicitation will not
be as an SDVOSB set-aside. VAAR [Veterans Affairs Acquisition
Regulation] 852.215-70, SDVOSB and VOSB Evaluation Factors, and
VAAR 852.215-71, Evaluation Factor Commitments, will be included in the
solicitation in accordance with VAAR 813.003-70.
Protestor does not challenge the VA’s decision to award a bridge task order to
SecurShred in the above-captioned protest. As previously noted, in the above-captioned
bid protest protestor is only protesting the first solicitation, Solicitation No.
36C24119Q0003.
18
The VA’s March 8, 2019 Corrective Action for Solicitation No. 36C24119Q0003
On March 8, 2019, Contracting Officer Davis issued her reassessment decision
“Not to Make Award under Solicitation 36C24119Q0003” in an internal VA memorandum.
(capitalization in original). In the March 8, 2019 internal memorandum, Contracting Officer
Davis noted that she had relied “in part” on the July 19, 2018 IGCE memorandum when
making her initial determination that “the quotes received in response to solicitation
36C24119Q0003 were not fair and reasonable and did not represent the best value to the
government.” Contracting Officer Davis stated that “[u]pon review of the record during this
corrective action, the CO determined that the IGCE was flawed.” Contracting Officer
Davis, however, did not explain why the agency believed the July 19, 2018 IGCE
memorandum was flawed, nor did she provide any other details regarding the July 19,
2018 IGCE memorandum.
As part of her reassessment, Contracting Officer Davis reevaluated protestor’s
price, without reference to the flawed July 2018 IGCE and concluded, once more, that
protestor’s price could not be determined to be “fair and reasonable,” and affirmed her
initial decision to cancel Solicitation No. 36C24119Q0003. Contracting Officer Davis
detailed four reasons why protestor’s price was not “fair and reasonable” in the March 8,
2019 internal memorandum. First, under the section titled: “Comparison of quoted
prices received in response to the solicitation (FAR 13.106-3 (a)(1))” Contracting
Officer Davis explained that:
[redacted]’s quote is $[redacted] or [redacted]% more than Land Shark
Shredding’s quote. In addition, Land Shark’s quote is $[redacted] or
[redacted]% more than what it had quoted five months earlier for the same
exact requirement. Land Shark increased its pricing despite the fact that it
had been made aware that its previously quoted price was higher than
expected and led to the cancellation of the procurement.[15] Although the
pricing offered by Land Shark Shredding and [redacted] is within an
approximate [redacted] percent range of each other, the pricing submitted
is significantly higher than historical pricing for these same services and
significantly higher than prices paid for similar services at other VAMCs in
New England.
(emphasis in original). Contracting Officer Davis also noted in the March 8, 2019 internal
memorandum that:
15As previously discussed, protestor had submitted a proposal with a price of $[redacted]
in response to the VA’s August 7, 2018 request for quotes for document shredding
services for the White River Junction Medical Center and White River Junction CBOCs.
The VA cancelled the August 7, 2018 request for quotes “because Land Shark
Shredding’s price in the amount of $[redacted] was $[redacted] or ~[redacted] percent
higher than the IGCE amount of $[redacted].”
19
Land Shark Shredding, LLC is a shredding contractor based in Kentucky.
In its quote document titled Vendor Comments, Land Shark Shredding
states that it intends to self-perform all contract work; however, it also states
that it reserves the right to subcontract and then goes on to describe, over
two pages, how the limitations of subcontracting are applicable. The quote
states that “the SDVOSB bidder must fairly compensate any non-similarly
situated subcontractor, and then double that figure to be in compliance with
13 CRF [sic] 125.6. That means the bid of an SDVOSB entity adhering to
the requirement of 13 CFR 125.6 will be higher than those of other bidders
who do not understand the law, or elect to not follow the law.” This language
seemingly provides an explanation as to why Land Shark Shredding’s
pricing is significantly higher than historical pricing and that is, it is doubling
its prices so that it could subcontract the work, should it need to, and still be
compensated fairly. This does not explain why its current pricing is
[redacted]% higher than the amount it quoted for the same services five
months ago. There is no discernible reason why Land Shark’s pricing would
increase 55.97% in a five-month period and further supports the CO’s
finding that the pricing offered is unreasonable.
Second, under the section titled: “Comparison of quoted prices to historical
prices found reasonable on previous purchases (FAR 13.106-3 (a)(2)(ii)),”
Contracting Officer Davis explained that:
In 2013, VA awarded task orders VA241-14-F-1928 and VA241-14-F-0113
were awarded [sic] to Secure This, Inc. (SecureShed), [sic] a small business
concern, under its GSA schedule contract for the provision of WRJ
shredding services. The total value of the contracts was approximately
$172,210.20. Land Shark Shredding, LLC submitted a quote in the amount
of $[redacted], which is $[redacted] or [redacted]% higher than historical
pricing paid for similar shredding services. [redacted] submitted a quote in
the amount of $[redacted] which is $[redacted] or [redacted]% higher than
historical pricing paid for similar shredding services.
(emphasis in original). Contracting Officer Davis stated that she “cannot find pricing that
is [redacted]% and [redacted]%, respectively, more than historical pricing paid for a
similar shredding requirement with a smaller scope to be fair and reasonable offering best
value to the agency.”
Contracting Officer Davis acknowledged that the two previous task orders to
SecurShred did not cover the exact same scope of work as the solicitation at issue in the
above-captioned case. Contracting Officer Davis explained that each of Task Orders
VA241-14-F-1928 and VA241-14-F-0113 “contains a larger scope than the current
requirement,” under Solicitation No. 36C24119Q0003. According to Contracting Officer
Davis, because SecurShred’s two task orders contained a larger scope of work, it was
“reasonable for the CO to expect that the reduced scope would result in a reduction in
price for the current requirement.” Contracting Officer Davis also acknowledged that the
20
incumbent’s prices for Task Orders VA241-14-F-1928 and VA241-14-F-0113, which were
submitted in 2013, “may increase annually leading to an increase in price for the current
requirement.” To account for this potential price increase, Contracting Officer Davis
provided “adjusted historical pricing” for SecurShred’s two task orders in her March 8,
2019 internal memorandum, explaining that:
An increase of 1.6% per year based on the last option year (2017-2018) of
each of the task orders totals $180,654.76 for the current requirement. This
is an overall increase of $8,444.56. The 1.6% increase is based on historical
consumer price index annual averages over the past 10 years from the
bls.gov website.
Contracting Officer Davis then stated that “[e]ven if the reduced scope led to no correlating
reduction in price, and even with a 1.6% annual increase, [redacted]’s quote is $[redacted]
or [redacted]% more than the adjusted historical pricing, and Land Shark Shredding’s
quote is $[redacted] or [redacted]% more than adjusted historical pricing.” Contracting
Officer Davis concluded that she “cannot find pricing that is [redacted]% and [redacted]%,
respectively, more than the adjusted historical pricing paid for a similar shredding
requirement with a smaller scope to be fair and reasonable offering best value to the
agency.”
Third, under the section titled: “Comparison of quoted prices to prices paid by
other VAMCs in the same region for the same/similar services (FAR 13.106-3
(a)(2)(ii)),” Contracting Officer Davis compared protestor’s price for Solicitation No.
36C24119Q0003 to five “other VISN[16] 1 contracts for shredding services,” which were
all being performed by small-business contractors, not SDVOSB contractors. (emphasis
in original). Contracting Officer Davis explained that she used the highest quoted rates
from the “VISN 1 Shredding Contracts” when comparing the VISN 1 shredding contracts
prices to protestor’s prices for Solicitation No. 36C24119Q0003. Contracting Officer Davis
included the following table in her March 8, 2019 internal memorandum, which displayed
the “anticipated total annual amount for the WRJ VAMC requirement” based on rates
pulled from “VISN 1 Shredding Contracts.”
Using Highest rates
from VISN 1
Equipment Quantity Frequency Rate Total Annual Rate
Shredding
Contracts
Shedding WRJ
Main Campus Console 35 WK $ 8.31 $ 15,124.20
Shedding WRJ
Main Campus 64 Gallon 40 WK $ 11.04 $ 22,963.20
16The March 8, 2019 internal memorandum does not define “VISN,” nor does the
administrative record in the above-captioned case define “VISN.” It appears that VISN is
an acronym for Veterans Integrated Service Network. VISN 1 refers to the VA’s New
England Healthcare System. See https://www.newengland.va.gov/
21
Outer buildings Console 6 2 WK $ 8.31 $ 1,296.36
Outer buildings 64 Gallon 14 2 WK $ 11.04 $ 4,018.56
Bennington Console 2 2 WK $ 36.00 $ 1,872.00
Brattleborro Console 2 4 WK $ 36.00 $ 936.00
Brattleborro 64 Gallon 1 4 WK $ 36.00 $ 468.00
Burlington 64 Gallon 2 WK $ 36.00 $ 3,744.00
Newport 64 Gallon 1 4 WK $ 36.00 $ 468.00
Rutland Console 2 2 WK $ 36.00 $ 1,872.00
Keene Console 1 4 WK $ 36.00 $ 468.00
Littleton Console 4 4 WK $ 36.00 $ 1,872.00
110 $ 55,102.32
Contracting Officer Davis concluded that:
Based on these rates, the anticipated total annual amount for the WRJ
[White River Junction] VAMC requirement would be $55,102.32 per year.
Land Shark Shredding, LLC’s annual price of $[redacted] exceeds this
amount by $[redacted] or [redacted]%.
Based on this comparison, the CO cannot find the pricing quoted by Land
Shark to be fair and reasonable offering best value to the agency.
Fourth, under the section titled: “Pricing received exceeds available funding for
this procurement,” Contracting Officer Davis stated that “[t]he government has
$35,000.00 of available funding for the 12-month base period. (emphasis in original).
Land Shark Shredding quoted $[redacted] for the base period and [redacted] quoted
$[redacted] for the base period. Both quotes received exceed available funds, and as
such, the VA cannot award a contract that exceeds available funding.” 17
Contracting Officer Davis concluded the March 8, 2019 internal memorandum by
stating:
It is my determination that, based on the above analysis, the pricing offered
by [redacted] and Land Shark Shredding cannot be determined fair and
reasonable and does not represent the best value to the government.
Furthermore, both quotes exceed available funding for the base period.
Because I did not receive fair and reasonable pricing in response to
solicitation 36C24119Q0003 and because both quotes exceed available
funding, my determination remains the same that award cannot be made
and solicitation 36C24119Q0003 should be cancelled.
17Although it strikes the court as odd that the agency would only allocated $35,000.00 in
funding for the shredding contract, when the agency awarded two task orders to
SecurShred in 2013 for more than $60,000.00 each, the agency is entitled to make
funding decisions as it sees fit.
22
On March 15, 2019, Contracting Officer Davis sent protestor an email that she was
reaffirming her decision not to make an award under Solicitation No. 36C24119Q0003
and to cancel the solicitation. Contracting Officer Davis explained in the email that
the pricing offered in response to solicitation 36C24119Q0003 cannot be
determined fair and reasonable and does not represent the best value to
the government. Furthermore, the quotes received exceed available
funding for the base period. Because I did not receive fair and reasonable
pricing in response to solicitation 36C24119Q0003 and because both
quotes exceed available funding, my determination remains the same, that
award cannot be made and solicitation 36C24119Q0003 should be
cancelled.
Procedural History
On April 8, 2019, protestor filed its original complaint in the above-captioned
protest, challenging the VA’s cancellation of the first solicitation, Solicitation No.
36C24119Q0003, and the VA’s recompetition for the same document shredding services
at the White River Junction VA Medical Center and surrounding White River Junction
clinics under Solicitation No. 36C24119Q0111, which also was cancelled by the VA. The
court held an initial hearing with the parties on April 10, 2019, during which time protestor
indicated to the court that it no longer intended to pursue its challenge regarding the VA’s
issuance and subsequent cancellation of Solicitation No. 36C24119Q0111. On that same
day, April 10, 2019, protestor filed an amended complaint, removing its challenge to
Solicitation No. 36C24119Q0111 and narrowing the amended complaint to solely
challenge the VA’s cancellation of Solicitation No. 36C24119Q0003.
In its amended complaint, protestor challenges the VA’s cancellation of Solicitation
No. 36C24119Q0003. According to the protestor, it was “one of two SDVOSB” offerors
which submitted “technically acceptable proposals” for Solicitation No. 36C24119Q0003.
Protestor alleges that its price was lower than the other SDVOSB’s bid price, and,
therefore, “had the VA properly evaluated the original proposal for both LSS [Land Shark
Shredding] and the second SDVOSB,” protestor “would have been awarded the contract.”
Protestor alleges that “[t]he VA arbitrarily and capriciously cancelled Solicitation No.
36C24119Q0003, a Service Disabled Veteran Owned Small business (SDVOSB) set-
aside, despite getting two SDVOSB bids that were fair and reasonable.” Protestor alleges
in the section of the amended complaint “RELIEF SOUGHT,” that
[t]he VA’s procurement decision to cancel Solicitation No. 36C24119Q0003
lacked a rational basis and ignored the VA Directive issued after the
Supreme Court’s Kingdomware decision. The Contracting Officer ignored
the cascading evaluation scheme in the Solicitation and the VA’s stated goal
of awarding a contract to a qualified SDVOSB or VOSB. The VA CO did not
evaluate the offers in an impartial manner, in violation of FAR 13.106-2. She
also did not consider LSS’s offer in light of Congressional mandates, and
23
other applicable FARS referenced in the solicitation: FAR 19.1401(b) and
FAR 19.1405(c)[.]
(capitalization in original).
Protestor raises two counts in the amended complaint. Count I is captioned: “THE
CO’S DETERMINATION THAT LSS’S PRICE WAS UNREASONABLE LACKED A
RATIONAL BASIS, WAS ARBITRARY AND CAPRICIOUS, AND INVOLVED A
VIOLATION OF REGULATION OR PROCEDURE.” (capitalization in original). According
to Count I, “[t]he decision to not award the contract to LSS because [sic] violates
Congressional intent, the Supreme Court’s Rule of Two doctrine, VA directives and the
FAR.” Count I also alleges that:
The basis of the VA’s evaluation of Land Shark’s proposal was supposed
to be based on whether the proposer is a SDVOSB or VOSB or will employ
subcontractors who are SDVOSB or VOSB, technical capability, past
performance, and price. LSS is an SDVOSB, the VA found that LSS’
proposal was technically acceptable, LSS’s past performance reviews are
all positive, and Land Shark’s prices have been deemed to be fair and
reasonable. Thus, the VA was required to fully evaluate the offers and
award the contract to an SDVOSB.
Count II is titled:
VA’s EVALUATION OF PROPOSALS[18] WAS NOT CONSISTENT WITH
THE TERMS OF THE SOLICITATION AND WAS THEREFORE
UNREASONABLE, LACKED A RATIONAL BASIS, WAS ARBITRARY AND
CAPRICIOUS, AND INVOLVED A VIOLATION OF REGULATION OR
PROCEDURE.
(capitalization in original). Count II alleges that the contracting officer notified protestor
that “[a]ward was not made because the price could not be determined to be fair and
reasonable and was not the best value to the Government as required by the Federal
Acquisition Regulation.” (internal quotation marks omitted). Count II also alleges that
Solicitation No. 36C24119Q0003 “incorporated Clause 52.212-2 Basis of Award,” and
contained “the full-text clause VAAR 852.219-10 Service-Disabled Veteran Owned and
Veteran Owned Small Business Evaluation Factors (July 2016)(DEVIATION).”
(capitalization and spacing in original).
Count II states that the
18 It is not clear from the amended complaint why protestor is referring to multiple
proposals under Count II. Count II appears to only discusses protestor’s proposal for
Solicitation No. 36C24119Q0003.
24
VA was to use the evaluation process of FAR 13.106-2(b) Evaluation of
quotations or offers that provides, “The contracting officer has broad
discretion in fashioning suitable evaluation procedures. The procedures
prescribed in parts 14 (bidding) and 15 (contract negotiations) are not
mandatory. At the contracting officer’s discretion, one or more, but not
necessarily all, of the evaluation procedures in part 14 or 15 may be used.”
Count II states:
This is the only outcome if the VA evaluates the proposals in accordance
with the evaluation factors and basis of award in the Solicitation. Because
the VA did not evaluate the proposals in accordance with the terms of the
Solicitation, its award determination for the revised solicitation lacked a
rational basis.
Protestor seeks the following relief in its amended complaint:
A. Issue a declaratory judgment on its protest that the VA's actions making
the procurement decisions were arbitrary, capricious, an abuse of discretion
or otherwise not in accordance with law and regulation;
B. Issue a declaratory judgement that PL 109-461 as codified in 38 USCA
[§] 8127 (d) and the Supreme Court’s decision in Kingdomware limits the
Contracting Officer’s discretion in determining that a SDVOSB’s offered
price is not at a “fair and reasonable price that offers best value to the United
States” for the purpose of canceling a solicitation after bid or proposal
submission; 38 U.S.C.A. § 8127 (West) (“the word “shall” usually connotes
a requirement.”)[;] Kingdomware Techs., Inc. v. United States, 136 S. Ct.
1969, 1977, 195 L. Ed. 2d 334 (2016)[;]
C. Issue a declaratory judgment on its protest that the VA's cancellation of
the Solicitation was in violation of applicable procurement laws and
regulations;
D. Order the VA to reverse the cancellation of the solicitation and award the
contract for White River Junction Medical Center paper destruction in
Solicitation No. 36C24119Q0003 to LSS;
E. Order the VA to pay LSS damages in the amount of its bid preparation
and proposal costs; and
F. Any other monetary and injunctive relief the Court determines is
appropriate.
Based on the schedule agreed to by the parties, protestor filed a motion for
judgment on the administrative record. Defendant then filed a combined motion to dismiss
25
the protest for failure to state a claim and for lack of subject-matter jurisdiction. Defendant
also combined with its motion to dismiss, a cross-motion for judgment on the
administrative record, arguing that the protest “fails on the merits.” Protestor responded
to defendant’s motion to dismiss and defendant’s cross-motion for judgment on the
administrative record, and also filed its reply in support of its motion for judgment on the
administrative record, following which defendant filed a reply. Oral argument on the
parties’ motions subsequently was held.
DISCUSSION
Defendant in the protest currently under review alleges that because protestor in
the above-captioned protest “did not have a substantial chance of receiving an award”
under Solicitation No. 36C241119Q0003, protestor lacks standing to pursue this protest.
Defendant argues that “Land Shark lacks standing to bring this protest because it never
had a substantial chance of being awarded the contract, as its pricing exceeds available
funding for this procurement.” Protestor argues that it has standing to bring the above-
captioned protest because “[p]rotestor was an actual bidder and he [sic] continues to
possess a direct economic interest in the outcome of this case.”
It is well established that “‘subject-matter jurisdiction, because it involves a court’s
power to hear a case, can never be forfeited or waived.’” Arbaugh v. Y & H Corp., 546
U.S. 500, 514 (2006) (quoting United States v. Cotton, 535 U.S. 625, 630 (2002)).
“[F]ederal courts have an independent obligation to ensure that they do not exceed the
scope of their jurisdiction, and therefore they must raise and decide jurisdictional
questions that the parties either overlook or elect not to press.” Henderson ex rel.
Henderson v. Shinseki, 562 U.S. 428 (2011); see also Hertz Corp. v. Friend, 559 U.S. 77,
94 (2010) (“Courts have an independent obligation to determine whether subject-matter
jurisdiction exists, even when no party challenges it.” (citing Arbaugh v. Y & H Corp., 546
U.S. at 514)); Special Devices, Inc. v. OEA, Inc., 269 F.3d 1340, 1342 (Fed. Cir. 2001)
(“[A] court has a duty to inquire into its jurisdiction to hear and decide a case.” (citing
Johannsen v. Pay Less Drug Stores N.W., Inc., 918 F.2d 160, 161 (Fed. Cir. 1990)));
View Eng'g, Inc. v. Robotic Vision Sys., Inc., 115 F.3d 962, 963 (Fed. Cir. 1997) (“[C]ourts
must always look to their jurisdiction, whether the parties raise the issue or not.”). “The
objection that a federal court lacks subject-matter jurisdiction . . . may be raised by a party,
or by a court on its own initiative, at any stage in the litigation, even after trial and the
entry of judgment.” Arbaugh v. Y & H Corp., 546 U.S. at 506; see also Hymas v. United
States, 810 F.3d 1312, 1317 (Fed. Cir. 2016) (explaining that a federal court must satisfy
itself of its jurisdiction over the subject matter before it considers the merits of a case);
Cent. Pines Land Co., L.L.C. v. United States, 697 F.3d 1360, 1364 n.1 (Fed. Cir. 2012)
(“An objection to a court's subject matter jurisdiction can be raised by any party or the
court at any stage of litigation, including after trial and the entry of judgment.” (citing
Arbaugh v. Y & H Corp., 546 U.S. at 506)); Rick’s Mushroom Serv., Inc. v. United States,
521 F.3d 1338, 1346 (Fed. Cir. 2008) (“[A]ny party may challenge, or the court may raise
sua sponte, subject matter jurisdiction at any time.” (citing Arbaugh v. Y & H Corp., 546
U.S. at 506; Folden v. United States, 379 F.3d 1344, 1354 (Fed. Cir.), reh’g and reh’g en
banc denied (Fed. Cir. 2004), cert. denied, 545 U.S. 1127 (2005); and Fanning, Phillips
26
& Molnar v. West, 160 F.3d 717, 720 (Fed. Cir. 1998))); Pikulin v. United States, 97 Fed.
Cl. 71, 76, appeal dismissed, 425 F. App’x 902 (Fed. Cir. 2011). In fact, “[s]ubject matter
jurisdiction is an inquiry that this court must raise sua sponte, even where . . . neither
party has raised this issue.” Metabolite Labs., Inc. v. Lab. Corp. of Am. Holdings, 370
F.3d 1354, 1369 (Fed. Cir.) (citing Textile Prods., Inc. v. Mead Corp., 134 F.3d 1481,
1485 (Fed. Cir.), reh’g denied and en banc suggestion declined (Fed. Cir.), cert. denied,
525 U.S. 826 (1998)), reh’g and reh’g en banc denied (Fed. Cir. 2004), cert. granted in
part sub. nom Lab. Corp. of Am. Holdings v. Metabolite Labs., Inc., 546 U.S. 975 (2005),
cert. dismissed as improvidently granted, 548 U.S. 124 (2006).
This court has jurisdiction to hear bid protests pursuant to 28 U.S.C. § 1491(b)(1)
(2018) of the Tucker Act, which provides that this court has
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); see also Weeks Marine, Inc. v. United States, 575 F.3d 1352,
1359 (Fed. Cir. 2009). The Administrative Dispute Resolution Act of 1996, codified at 28
U.S.C. § 1491(b)(1)–(4), amended the Tucker Act to establish a statutory basis for bid
protests in the United States Court of Federal Claims. See Impresa Construzioni Geom.
Domenico Garufi v. United States, 238 F.3d 1324, 1330–32 (Fed. Cir. 2001).
The Tucker Act grants the United States Court of Federal Claims “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(a)(1). In order to have
standing to sue as an “interested party” under this provision, a disappointed bidder must
show that it suffered competitive injury or was “prejudiced” by the alleged error in the
procurement process. See Todd Constr., L.P. v. United States, 656 F.3d 1306, 1315 (Fed.
Cir. 2011) (To prevail, a bid protester must first “‘show that it was prejudiced by a
significant error’ (i.e., ‘that but for the error, it would have had a substantial chance of
securing the contract).’” (quoting Labatt Food Serv., Inc. v. United States, 577 F.3d 1375,
1378, 1380 (Fed. Cir. 2009)); Blue & Gold Fleet, L.P. v. United States, 492 F.3d at 1317;
see also Sci. Applications Int’l Corp. v. United States, 108 Fed. Cl. 235, 281 (2012); Linc
Gov’t Servs., LLC v. United States, 96 Fed. Cl. 672, 693 (2010) (“In order to establish
standing to sue, the plaintiff in a bid protest has always needed to demonstrate that it
suffered competitive injury, or ‘prejudice,’ as a result of the allegedly unlawful agency
decisions.” (citing Rex Serv. Corp. v. United States, 448 F.3d at 1308; Statistica, Inc. v.
Christopher, 102 F.3d 1577, 1580–81 (Fed. Cir. 1996); Vulcan Eng’g Co. v. United States,
16 Cl. Ct. 84, 88 (1988); Morgan Bus. Assocs., Inc. v. United States, 223 Ct. Cl. 325, 332
(1980))). In order to establish what one Judge on this court has called “allegational
prejudice” for the purposes of standing, the bidder must show that there was a “substantial
chance” it would have received the contract award, but for the alleged procurement error.
27
See Linc Gov’t Servs., LLC v. United States, 96 Fed. Cl. at 675; Hyperion, Inc. v. United
States, 115 Fed. Cl. 541, 550 (2014) (“The government acknowledges that proving
prejudice for purposes of standing merely requires “allegational prejudice,” as contrasted
to prejudice on the merits . . . .”); Bannum, Inc. v. United States, 115 Fed. Cl. 148, 153
(2014); see also Bannum, Inc. v. United States, 404 F.3d 1346, 1358 (Fed. Cir. 2005);
Galen Med. Assocs., Inc. v. United States, 369 F.3d 1324, 1331 (Fed. Cir.), reh’g denied
(Fed. Cir. 2004); Info. Tech. & Applications Corp. v. United States, 316 F.3d 1312, 1319
(Fed. Cir.), reh’g and reh’g en banc denied (Fed. Cir. 2003); Statistica, Inc. v. Christopher,
102 F.3d at 1581; Archura LLC v. United States, 112 Fed. Cl. 487, 497 (2013); Lab. Corp.
of Am. v. United States, 108 Fed. Cl. 549, 557 (2012). Because standing is a jurisdictional
issue, this showing of prejudice is a threshold issue. See Corus Grp. PLC. v. Int’l Trade
Comm'n, 352 F.3d 1351, 1357 (Fed. Cir. 2003); Myers Investigative & Sec. Servs., Inc.
v. United States, 275 F.3d 1366, 1370 (Fed. Cir. 2002).
In the context of a pre-award bid protest,19 the United States Court of Appeals for
the Federal Circuit has determined that to show the requisite “direct economic interest,”
and, therefore, to be an “interested party” under the Tucker Act, the protestor has to have
suffered a “‘non-trivial competitive injury which can be redressed by judicial relief.’” See
Orion Tech., Inc. v. United States, 704 F.3d 1344, 1348 (Fed. Cir. 2013) (quoting Weeks
Marine, Inc. v. United States, 575 F.3d at 1362–63); see also COMINT Sys. Corp. v.
United States, 700 F.3d at 1383 n.7 (“[I]n Weeks Marine this court specifically held that
the ‘non-trivial competitive injury’ standard was applicable to ‘a pre-award protest.’”
(quoting Weeks Marine, Inc. v. United States, 575 F.3d at 1362)) (emphasis in original);
MVS USA, Inc. v. United States, 111 Fed. Cl. 639, 647 (2013); Miles Constr., LLC v.
United States, 108 Fed. Cl. at 797. This is a lower standard than the “substantial chance”
standard used in post-award bid protests, but still requires a “showing of some prejudice.”
Orion Tech., Inc. v. United States, 704 F.3d at 1348-49 (quoting Weeks Marine, Inc. v.
United States, 575 F.3d at 1362) (emphasis in original).
As explained by the United States Court of Federal Claims in Digitalis Education
Solutions, Inc. v. United States:
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 solicitation.” 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.
19The court notes that protestor’s bid protest complaint specifically refers to the above-
captioned protest as a pre-award bid protest. Protestor’s counsel reiterated that protestor
believes the above-captioned protest is a pre-award bid protest at oral argument.
28
Digitalis Educ. Solutions, Inc. v. United States, 664 F.3d at 1384; see also Am. Fed’n of
Gov't Emps. v. United States, 258 F.3d 1294, 1302 (Fed. Cir. 2001), cert. denied, 534
U.S. 113 (2002); Centech Grp., Inc. v. United States, 78 Fed. Cl. 496, 503-504 (2007).
As noted above, Land Shark Shredding argues that “[p]rotestor was an actual
bidder and he [sic] continues to possess a direct economic interest in the outcome of this
case.” Defendant notes that protestor “does nothing to meet its burden of showing that it
had a substantial chance of receiving an award.” According to defendant:
As reflected in the agency’s purchase request, the amount available for the
12 month base period for the purchase of shredding services was
$35,000.00. Land Shark’s quote for the twelve month base period, however,
was over four times that amount at $[redacted]. As the VA stated in its
corrective action memorandum “the VA cannot award a contract that
exceeds available funding.”
(internal reference omitted).
Under the section titled: “Pricing received exceeds available funding for this
procurement,” in the March 8, 2019 internal memorandum Contracting Officer Davis
stated that “[t]he government has $35,000.00 of available funding for the 12-month base
period. Land Shark Shredding quoted $[redacted] for the base period and [redacted]
quoted $[redacted] for the base period. Both quotes received exceed available funds, and
as such, the VA cannot award a contract that exceeds available funding.” (emphasis in
original). Contracting Officer Davis concluded in the March 8, 2019 internal memorandum
by stating:
It is my determination that, based on the above analysis, the pricing offered
by [redacted] and Land Shark Shredding cannot be determined fair and
reasonable and does not represent the best value to the government.
Furthermore, both quotes exceed available funding for the base period.
Because I did not receive fair and reasonable pricing in response to
solicitation 36C24119Q0003 and because both quotes exceed available
funding, my determination remains the same that award cannot be made
and solicitation 36C24119Q0003 should be cancelled.[20]
20 In the March 8, 2019 internal memorandum Contracting Officer Davis also stated that:
[T]he anticipated total annual amount for the WRJ [White River Junction]
VAMC requirement would be $55,102.32 per year. Land Shark Shredding,
LLC’s annual price of $[redacted] exceeds this amount by $[redacted] or
[redacted]%.
Based on this comparison, the CO cannot find the pricing quoted by Land
Shark to be fair and reasonable offering best value to the agency.
29
Protestor responds that the level of funding available to the VA is irrelevant as to
whether protestor has standing to bring this protest. Under the section in protestor’s
response to defendant’s motion to dismiss titled: “Whether Land Shark lacks standing to
challenge the VA’s decision not to award a contract for the December 2018 solicitation
where its price quote exceeded available funding?” protestor states:
The government attorneys argue,”[sic] The United States’ decision to
cancel the solicitation for shredding services at the White River Junction
Department of Veterans Affairs (VA) Medical Center was reasonable where
both of the quotes that the Government received greatly exceeded available
funding and were properly determined to be unreasonable under 48 C.F.R.
§ 13.106-3.”
There is not one word or mention found in 38 U.S.C. §8127 [sic] or 8128
that the level of funding available is a determining factor in whether the Rule
of Two shall be applied which is what the Protestor’s claim is about. The
Defendant’s motion is lacking in analysis of the Rule of Two and focuses
primarily on the alleged lack of funding.
The court addresses protestor’s arguments regarding 38 U.S.C. § 8127, and the Rule of
Two below in the analysis of the defendant’s arguments regarding failure to state a claim.
As it relates to the issue of standing, if the government had the right to determine the level
of funding was $35,000.00 and Land Shark Shredding’s offer was more than four times
the funding level, Land Shark Shredding cannot demonstrate it had a substantial chance
of being awarded the contract.
As explained by a Judge of this court in First Enterprise v. United States, “[i]t is
beyond any doubt that agency officials have broad discretion in managing agency funds.”
First Enterprise v. United States, 61 Fed. Cl. 109, 119 (2004). This is consistent with the
broad discretion generally afforded an agency in making procurement decisions. See,
e.g., AgustaWestland N. Am., Inc. v. United States, 880 F.3d at 1332 (“Where, as here,
a bid protester challenges the procurement official’s decision as lacking a rational basis,
we must determine whether ‘the contracting agency provided a coherent and reasonable
explanation of its exercise of discretion,’ recognizing that ‘contracting officers are entitled
to exercise discretion upon a broad range of issues confronting them in the procurement
process.’” (quoting Impresa Construzioni Geom. Domenico Garufi v. United States, 238
F.3d at 1332-33 (internal quotation marks and citation omitted))). The First Enterprise
court also noted that “an agency has virtually a carte blanche right to decide the amount
of funding it will spend on a given project.” First Enterprise v. United States, 61 Fed. Cl.
109, (citing Sinha v. Veterans Administration, 768 F.2d 330, 332 (Fed. Cir. 1985), cert.
denied, 475 U.S. 1014 (1986)) (emphasis in original). Therefore, the Contracting Officer
was within her discretion to conclude in the March 8, 2019 internal memorandum that
“[t]he government has $35,000.00 of available funding for the 12-month base period. Land
Shark Shredding quoted $[redacted] for the base period and [redacted] quoted
$[redacted] for the base period. Both quotes received exceed available funds, and as
30
such, the VA cannot award a contract that exceeds available funding.” 21 Without
submitting a bid that was within the budgeted amount of funding, protestor did not have
a substantial chance of being awarded the contract, and protestor lacks standing to bring
the above-captioned bid protest, and its protest complaint must be dismissed. See Todd
Constr., L.P. v. United States, 656 F.3d at 1315.
Even, if protestor could establish standing, defendant seeks to dismiss protestor’s
complaint for failure to state a claim, pursuant to Rule 12(b)(6) of the United States Court
of Federal Claims Rules (2019) (RCFC). Defendant asserts that “[t]o the extent Land
Shark challenges the regulatory requirements regarding price fairness this challenge
must be brought in district court under the APA,” and should be dismissed by this court.
Defendant argues in its motion to dismiss that, “Land Shark argues that once the
requirements of 38 U.S.C. § 8127(d) have been met,” the statute that establishes the
“Rule of Two,” requires that an award must be made. According to defendant, however,
the regulation at FAR Part 13, requires “that ‘[b]efore making an award, the contracting
officer must determine that the proposed price is fair and reasonable.’ FAR 13.106-3.
Thus, Land Shark essentially argues that the regulatory provisions addressing price
fairness are in conflict with the requirements of 38 U.S.C. § 8127(d) and should not be
followed.” (internal references omitted). Defendant concludes that “[a]ccordingly, any
argument that the regulations are inconsistent with the statute must be dismissed for
failure to state a claim.”
Regarding defendant’s motion to dismiss, when examining what must be pled in
order to state a claim, a plaintiff need only state in the complaint “a short and plain
statement of the claim showing that the pleader is entitled to relief.” RCFC 8(a)(2) (2019);
see also Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). The United States
Supreme Court has stated:
While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not
need detailed factual allegations, [Conley v. Gibson, 355 U.S. 41, 47
(1957)]; Sanjuan v. American Bd. of Psychiatry and Neurology, Inc., 40 F.3d
247, 251 (7th Cir. 1994), a plaintiff’s obligation to provide the “grounds” of
his “entitle[ment] to relief” requires more than labels and conclusions, and a
formulaic recitation of the elements of a cause of action will not do, see
Papasan v. Allain, 478 U.S. 265, 286 (1986) (on a motion to dismiss, courts
“are not bound to accept as true a legal conclusion couched as a factual
allegation”). Factual allegations must be enough to raise a right to relief
above the speculative level, see 5 C. Wright & A. Miller, Federal Practice
and Procedure § 1216, pp. 235-36 (3d ed. 2004) (hereinafter Wright &
21 Defendant also correctly notes that pursuant to the Anti-Deficiency Act, the Contracting
Office cannot authorize funding beyond the amount appropriated. See 31 U.S.C.
§ 1341(a)(1) (“An officer or employee of the United States Government or of the District
of Columbia government may not- (A) make or authorize an expenditure or obligation
exceeding an amount available in an appropriation or fund for the expenditure or
obligation.”). As noted above, however, the court is unclear why the agency would only
allocated $35,000.00 in funding for the shredding contract.
31
Miller) (“[T]he pleading must contain something more . . . than . . . a
statement of facts that merely creates a suspicion [of] a legally cognizable
right of action”), on the assumption that all the allegations in the complaint
are true (even if doubtful in fact), see, e.g., Swierkiewicz v. Sorema N.A.,
534 U.S. 506, 508, n.1 (2002); Neitzke v. Williams, 490 U.S. 319, 327
(1989) (“Rule 12(b)(6) does not countenance . . . dismissals based on a
judge’s disbelief of a complaint’s factual allegations”); Scheuer v. Rhodes,
416 U.S. 232, 236 (1974) (a well-pleaded complaint may proceed even if it
appears “that a recovery is very remote and unlikely”) . . . . [W]e do not
require heightened fact pleading of specifics, but only enough facts to state
a claim to relief that is plausible on its face.
Bell Atl. Corp. v. Twombly, 550 U.S. at 555-56, 570 (footnote and other citations omitted;
omissions in original); see also Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Bell Atl.
Corp. v. Twombly, 550 U.S. at 555-57, 570); Am. Bankers Ass’n v. United States, 932
F.3d 1375, 1380 (Fed. Cir. 2019); Frankel v. United States, 842 F.3d 1246, 1249 (Fed.
Cir. 2016); A&D Auto Sales, Inc. v. United States, 748 F.3d 1142, 1157 (Fed. Cir. 2014);
Bell/Heery v. United States, 739 F.3d 1324, 1330 (Fed. Cir.), reh’g and reh’g en banc
denied (Fed. Cir. 2014); Kam-Almaz v. United States, 682 F.3d 1364, 1367 (Fed. Cir.
2012) (“The facts as alleged ‘must be enough to raise a right to relief above the
speculative level, on the assumption that all the allegations in the complaint are true (even
if doubtful in fact).’” (quoting Bell Atl. Corp. v. Twombly, 550 U.S. at 557)); Totes-Isotoner
Corp. v. United States, 594 F.3d 1346, 1354-55 (Fed. Cir.), cert. denied, 562 U.S. 830
(2010); Bank of Guam v. United States, 578 F.3d 1318, 1326 (Fed. Cir.) (“In order to avoid
dismissal for failure to state a claim, the complaint must allege facts ‘plausibly suggesting
(not merely consistent with)’ a showing of entitlement to relief.” (quoting Bell Atl. Corp. v.
Twombly, 550 U.S. at 557)), reh’g and reh’g en banc denied (Fed. Cir. 2009), cert. denied,
561 U.S. 1006 (2010); Cambridge v. United States, 558 F.3d 1331, 1335 (Fed. Cir. 2009)
(“[A] plaintiff must plead factual allegations that support a facially ‘plausible’ claim to relief
in order to avoid dismissal for failure to state a claim.” (quoting Bell Atl. Corp. v. Twombly,
550 U.S. at 570)); Cary v. United States, 552 F.3d 1373, 1376 (Fed. Cir.) (“The factual
allegations must be enough to raise a right to relief above the speculative level. This does
not require the plaintiff to set out in detail the facts upon which the claim is based, but
enough facts to state a claim to relief that is plausible on its face.” (citing Bell Atl. Corp. v.
Twombly, 550 U.S. at 555, 570)), reh’g denied (Fed. Cir.), cert. denied, 557 U.S. 937
(2009); Christen v. United States, 133 Fed. Cl. 226, 229 (2017); Christian v. United States,
131 Fed. Cl. 134, 144 (2017); Vargas v. United States, 114 Fed. Cl. 226, 232 (2014);
Fredericksburg Non-Profit Hous. Corp. v. United States, 113 Fed. Cl. 244, 253 (2013),
aff’d, 579 F. App’x 1004 (Fed. Cir. 2014); Peninsula Grp. Capital Corp. v. United States,
93 Fed. Cl. 720, 726-27 (2010), appeal dismissed, 454 F. App’x 900 (Fed. Cir. 2011);
Legal Aid Soc’y of N.Y. v. United States, 92 Fed. Cl. 285, 292, 298 n.14 (2010).
When deciding a case based on a failure to state a claim, the court “must accept
as true the factual allegations in the complaint.” Engage Learning, Inc. v. Salazar, 660
F.3d 1346, 1355 (Fed. Cir. 2011); see also Erickson v. Pardus, 551 U.S. 89, 94 (2007)
(“In addition, when ruling on a defendant’s motion to dismiss, a judge must accept as true
all of the factual allegations contained in the complaint.” (citing Bell Atl. Corp. v. Twombly,
32
550 U.S. at 555-56 (citing Swierkiewicz v. Sorema N. A., 534 U.S. at 508 n.1))); Scheuer
v. Rhodes, 416 U.S. at 236 (“Moreover, it is well established that, in passing on a motion
to dismiss, whether on the ground of lack of jurisdiction over the subject matter or for
failure to state a cause of action, the allegations of the complaint should be construed
favorably to the pleader.”), abrogated on other grounds by Harlow v. Fitzgerald, 457 U.S.
800 (1982), recognized by Davis v. Scherer, 468 U.S. 183, 190 (1984); Harris v. United
States, 868 F.3d 1376, 1379 (Fed. Cir. 2017) (citing Call Henry, Inc. v. United States, 855
F.3d 1348, 1354 (Fed. Cir. 2017)); United Pac. Ins. Co. v. United States, 464 F.3d 1325,
1327-28 (Fed. Cir. 2006); Samish Indian Nation v. United States, 419 F.3d 1355, 1364
(Fed. Cir. 2005); Boise Cascade Corp. v. United States, 296 F.3d 1339, 1343 (Fed. Cir.),
reh’g and reh’g en banc denied (Fed. Cir. 2002), cert. denied, 538 U.S. 906 (2003).
“If a bidder wishes to challenge the validity of a regulation governing a
procurement, the proper method of doing so is to bring an action in federal district court
under the Administrative Procedure Act, 5 U.S.C. § 702.” Southfork Sys., Inc. v. United
States, 141 F.3d 1124, 1135 (Fed. Cir. 1998) (holding that trial court properly dismissed
protestor’s counts which challenged the government’s promulgation of “regulations that
the Air Force followed in conducting” the procurement at issue); see also DGR Assocs.,
Inc. v. United States, 690 F.3d 1335, 1341 (Fed. Cir. 2012) (noting that “neither” the GAO
nor the United States Court of Federal Claims “has the authority to invalidate properly
promulgated regulations of an Executive Branch agency”); Precise Sys., Inc. v. United
States, 120 Fed. Cl. 586, 597 n.13 (2015) (“[C]hallenges to the validity of a regulation are
properly brought to district court.” (citing Southfork Sys., Inc. v. United States, 141 F.2d
at 1135).
Protestor states that “Land Shark is not arguing that 13.106-3,” the regulation in
FAR Part 13 regarding price reasonableness, “is illegal, but rather challenges the
contracting officer’s application of the regulation.” Protestor argues that the VA is
“refus[ing] to comply with” the Rule of Two doctrine contained at 38 U.S.C. § 8127 and
that the VA is looking “for excuses to exclude SDVOSBs” from contracting opportunities.
Protestor claims in its reply brief without discussing which specific regulations are at
issue, that there are “FAR and VAAR regulations that make” the Rule of Two doctrine
“impossible to achieve.” Protestor asserts that the VA is allegedly attempting to
“circumvent” the Rule of Two at 38 U.S.C. § 8127 by analyzing whether a bidder’s price
is “fair and reasonable” when evaluating proposals in a SDVOSB set-aside competition,
an analysis which protestor contends is not required under the Rule of Two. Protestor
overlooks the fact that Solicitation No. 3624119Q0003 indicated that the VA would be
conducting a price reasonableness analysis under FAR Part 13. According to Amendment
A00002, “price reasonableness shall be in accordance with FAR 13.106-3.” According to
FAR 13.106-3, codified at 48 C.F.R. § 13.106–3 (2019), “[b]efore making award, the
contracting officer must determine that the proposed price is fair and reasonable.” 48
C.F.R. § 13.106–3(a).22 As defendant notes in its reply, “the clear implication of Land
22 As previously indicated, the solicitation at issue in this protest, Solicitation No.
36C241119Q0003, required a price reasonableness analysis under FAR Part 13. The
solicitation stated that “price reasonableness shall be in accordance with FAR 13.106-3.”
33
Shark’s statements is that the regulations” for price reasonableness under FAR Part 13
“frustrate the purpose of the statute” codifying the Rule of Two doctrine at 38 U.S.C. §
8127, and, that Land Shark Shredding does appear to be challenging the legality of FAR
Part 13’s requirement for a price reasonableness analysis.
Protestor also claims that 13 C.F.R. § 125.6 “creates an exception for limitations
in subcontracting for small businesses not relying on other socioeconomic set-asides and
performing contracts under the Simplified Acquisition Threshold of $250,000.”23 Protestor
23 Section 125.6(a) of Title 13 of the Code of Federal Regulations states:
(a) General. In order to be awarded a full or partial small business set-aside
contract with a value greater than the simplified acquisition threshold (as
defined in the FAR at 48 CFR 2.101), an 8(a) contract, an SDVO SBC
contract, a HUBZone contract, a WOSB or EDWOSB contract pursuant to
part 127 of this chapter, a small business concern must agree that:
(1) In the case of a contract for services (except construction), it will not pay
more than 50% of the amount paid by the government to it to firms that are
not similarly situated. Any work that a similarly situated subcontractor further
subcontracts will count towards the 50% subcontract amount that cannot be
exceeded.
(2)(i) In the case of a contract for supplies or products (other than from a
nonmanufacturer of such supplies), it will not pay more than 50% of the
amount paid by the government to it to firms that are not similarly situated.
Any work that a similarly situated subcontractor further subcontracts will
count towards the 50% subcontract amount that cannot be exceeded. Cost
of materials are excluded and not considered to be subcontracted.
(ii) In the case of a contract for supplies from a nonmanufacturer, it will
supply the product of a domestic small business manufacturer or processor,
unless a waiver as described in § 121.406(b)(5) of this chapter is granted.
(A) For a multiple item procurement where a waiver as described in §
121.406(b)(5) of this chapter has not been granted for one or more items,
more than 50% of the value of the products to be supplied by the
nonmanufacturer must be the products of one or more domestic small
business manufacturers or processors.
(B) For a multiple item procurement where a waiver as described in §
121.406(b)(5) of this chapter is granted for one or more items, compliance
with the limitation on subcontracting requirement will not consider the value
of items subject to a waiver. As such, more than 50% of the value of the
products to be supplied by the nonmanufacturer that are not subject to a
waiver must be the products of one or more domestic small business
manufacturers or processors.
34
continues “[t]his fact alone, puts SDVOSBs at a competitive disadvantage when
compared to non-SDVOSBs and demonstrates that the contracting officer’s calculations
for ‘fair and reasonable’ pricing was prejudicial to SDVOSBs and contravenes Congress’s
intent in § 8127.” Protestor’s choice of words: “contravenes Congress’s intent,” again,
points to Land Shark Shredding arguing that the contracting officer is frustrating the
purpose of the Rule of Two doctrine at 38 U.S.C. § 8127, and appears to be challenging
the legality of FAR Part 13’s requirement for a price reasonableness analysis. Therefore,
to the extent that protestor is claiming that a price reasonableness analysis required under
FAR Part 13, which was incorporated into the solicitation at issue in this case, Solicitation
No. 36C241119Q0003, conflicts with the Rule of Two doctrine contained at 38 U.S.C.
§ 8127(d), protestor’s challenge falls outside of this court’s jurisdiction and should be
dismissed for failure to state a claim.
Additionally, regarding the Rule of Two doctrine, the court notes that in order to
promote federal government contracting with service-disabled veteran-owned small
businesses, Congress enacted the Veterans Benefits, Health Care, and Information
Technology Act of 2006, §§ 502, 503, 120 Stat. 3431–3436 (codified, as amended, at 38
U.S.C. §§ 8127, 8128 (2018)), and included the “Rule of Two” doctrine, which provides
that:
Except as provided in subsections (b) and (c), for purposes of meeting the
goals under subsection (a), and in accordance with this section, a
contracting officer of the Department [of Veterans Affairs] shall award
contracts on the basis of competition restricted to small business concerns
owned and controlled by veterans or small business concerns owned and
controlled by veterans with service-connected disabilities if the contracting
officer has a reasonable expectation that two or more small business
concerns owned and controlled by veterans or small business concerns
owned and controlled by veterans with service-connected disabilities will
submit offers and that the award can be made at a fair and reasonable price
that offers best value to the United States.
38 U.S.C. § 8127(d). The FAR sets out its Rule of Two doctrine, which provides in relevant
part that:
(a) To set aside an acquisition for competition restricted to service-disabled
veteran-owned small business concerns, the contracting officer must
have a reasonable expectation that—
(1) Offers will be received from two or more service-disabled
veteran-owned small business concerns; and
(C) For a multiple item procurement, the same small business concern may
act as both a manufacturer and a nonmanufacturer.
13 C.F.R. § 125.6(a) (2019).
35
(2) Award will be made at a fair market price.
(b) If the contracting officer receives only one acceptable offer from
a service-disabled veteran-owned small business concern in
response to a set-aside, the contracting officer should make an
award to that concern. If the contracting officer receives no
acceptable offers from service-disabled veteran-owned small
business concerns, the service-disabled veteran-owned set-
aside shall be withdrawn and the requirement, if still valid, set
aside for small business concerns, as appropriate (see [48
C.F.R. §] 19.203).
48 C.F.R. § 19.1405(b)-(c) (2019). In addition, the VA’s implementing regulation for the
Rule of Two doctrine, which is almost identical to the one contained in the FAR, indicates
that the contracting officer, even after setting aside a procurement opportunity for only
SDVOSBs, will make an award only if the price received is “fair and reasonable” and that
the contracting officer may cancel the solicitation if he or she receives no acceptable
proposals. The VAAR24 provides in relevant part:
(a) The contracting officer shall consider SDVOSB set-asides before
considering VOSB set-asides. Except as authorized by 813.106,
819.7007 and 819.7008,[25] the contracting officer shall set-aside an
acquisition for competition restricted to SDVOSB concerns upon a
reasonable expectation that,
(1) Offers will be received from two or more eligible SDVOSB
concerns; and
24 The “VA established the VAAR to codify and publish uniform policies and procedures
for VA’s acquisition of supplies and services, including construction,” and the “VAAR
implements and supplements the FAR.” 48 C.F.R. § 801.101 (2019). The VAAR and the
FAR apply to the above-captioned protest. See 48 C.F.R. § 801.104(a) (2019) (“Unless
otherwise specified in this chapter or excepted by statute (i.e., expenditures of the VA
Canteen Service) or other VA regulations, the FAR and VAAR apply to all VA acquisitions
(including construction) made with appropriated funds.”); see id. at § 801.104(b) (2019)
(“Use the VAAR and the FAR together. The FAR applies to VA acquisitions except as
provided in the VAAR.”).
25 The exceptions referenced in 48 C.F.R. § 819.7005 for 48 C.F.R. § 819.7007 and 48
C.F.R. § 819.7008 are for sole source SDVOSB concerns and sole source VOSB
concerns, respectively, See 48 C.F.R. §§ 819.7007, 819.7008 (2019). The exception
referenced in 48 C.F.R. § 819.7005 for 48 C.F.R. § 813.106 reflects that “Contracting
officers may use other than competitive procedures to enter into a contract with a
SDVOSB or VOSB when the amount exceeds the micro-purchase threshold up to $5
million.” See 48 C.F.R. § 813.106(a) (2019).
36
(2) Award will be made at a fair and reasonable price
....
(c) If the contracting officer receives only one acceptable offer at a fair and
reasonable price from an eligible SDVOSB concern in response to a
SDVOSB set-aside, the contracting officer should make an award to that
concern. If the contracting officer receives no acceptable offers from eligible
SDVOSB concerns, the set-aside shall be withdrawn and the requirement,
if still valid, set aside for VOSB competition, if appropriate.
48 C.F.R. § 819.7005 (2019).
Thus, pursuant to the FAR and the VAAR, even after a procurement process has
been set aside pursuant to the Rule of Two, the contracting officer must still evaluate
proposals to determine if the proposals received are “acceptable,” and recognize that a
contracting officer may potentially not make an award when no acceptable proposals are
received. See 48 C.F.R. § 819.7005(b); 48 C.F.R. § 19.1405(c). In Veterans Contracting
Group, Inc. v. United States, 920 F.3d 801, 807 (Fed. Cir. 2019), a case brought by the
same counsel representing the protestor in the above-captioned bid protest, the United
States Court of Appeals for the Federal Circuit found that the VA rationally cancelled a
SDVOSB set-aside contract due to unreasonable pricing contained in the proposals and
was not required to make an award. See id. In the trial court case which led to the Federal
Circuit opinion, a Judge of this court found that the decision by the Center for Verification
and Evaluation (CVE), an office within the VA, to cancel the solicitation for the SDVOSB
set-aside contract was not arbitrary and capricious because the contracting officer
rationally concluded that there were no “responsive” bids with a “fair and reasonable”
price. See Veterans Contracting Grp., Inc. v. United States, 135 Fed. Cl. 610, 616, 619-
20 (2017), aff’d, 920 F.3d 801 (Fed. Cir. 2019) (internal quotation marks omitted).26 The
trial court judge noted that the contracting officer rationally concluded that protestor’s bid
was not “responsive,” despite protestor’s lower price, because the contracting officer
[l]ooked only to the fact that CVE had removed Veterans from the VIP
database and could not have known that CVE had acted arbitrarily. He
followed the normal procedures for handling the procurement. Because
Veterans did not meet the requirements of a solicitation [that it be listed in
the VIP database at the time it submitted its bid], it was ineligible to compete
for the contract.
Id. at 619. The trial court judge in Veterans Contracting Group explained that because the
price of the “remaining responsive bids were sufficiently above the IGE [independent
26 The Judge in Veterans Contracting Group also found that that the CVE’s decision to
remove protestor from the VetBiz VIP database was arbitrary and capricious and entered
a permanent injunction to restore protestor to the database, making protestor once again
eligible to compete for SDVOSB set-aside contracts. See Veterans Contracting Grp., Inc.
v. United States, 135 Fed. Cl. at 619.
37
government estimate] that the officer had discretion to cancel and resubmit the
solicitation.” Id. The court, therefore, concluded that it would not “overturn” the VA’s
cancellation of the solicitation. See id. at 620. The United States Court of Appeals for the
Federal Circuit in Veterans Contracting Group affirmed the United States Court of Federal
Claims’ finding that the agency’s cancellation of the SDVOSB set-aside contract was
proper. See Veterans Contracting Grp., Inc. v. United States, 920 F.3d at 806-07. The
Federal Circuit noted that the protestor had “not shown that the contracting officer lacked
any rational basis for cancelling” the solicitation. See id. at 806. The Federal Circuit also
explained that “[t]he only two acceptable bids” received by the VA “proposed costs
significantly higher than the government’s estimate for the project. Thus, the contracting
officer rationally determined that these prices were unreasonable. Under the
circumstances, he had a compelling reason to request cancellation.” Id. at 807.
The solicitation at issue in this protest, Solicitation No. 36C241119Q0003, required
a price reasonableness analysis under FAR Part 13. The solicitation stated that “Quotes
shall be evaluated under FAR Part 13.106-2(b) -- Evaluation of Quotations or Offers,” and
that “[t]he Contracting Officer will conduct a comparative evaluation of quotes in
accordance with FAR 13.106-2 (b).” Further, in response to protestor’s request for
clarification whether its prices proposed under other VA contracts would be “considered
inherently fair and reasonable,” the VA stated in Amendment A00002 to Solicitation No.
36C241119Q0003, that “[n]o, this is an open market solicitation; price reasonableness
shall be in accordance with FAR 13.106-3.” The solicitation’s requirement that the
contracting officer conduct a price reasonableness analysis pursuant to FAR Part 13 does
not conflict with, nor was it prohibited by, the Rule of Two doctrine set out in 38 U.S.C.
§ 8127(d), which as discussed above, requires the VA to set-aside procurement
opportunities for SDVOSB contractors, not that the VA make an award to a SDVOSB
contractor without any consideration of the contractor’s proposed price.
Protestor also believes that the United States Supreme Court’s decision in
Kingdomware Technologies, Inc. v. United States, 136 St. Ct. 1969 (2016) “Mandate[s]
Award to Land Shark.” (capitalization in original). Protestor argues in its reply brief:
Here’s what the US Supreme Court said in Kingdomware:
“Congress’ use of the word ‘shall’ demonstrates that 38 U.S.C.A. § 8127(d)
mandates the use of the Rule of Two in all contracting before using
competitive procedures. Unlike the word ‘may,’ which implies discretion, the
word “shall” usually connotes a requirement. Compare Lexecon Inc. v.
Milberg Weiss Bershad Hynes & Lerach, 523 U.S. 26, 35, 118 S. Ct. 956,
140 L. Ed. 2d 62 (1998) (recognizing that ‘shall’ is ‘mandatory’ and ‘normally
creates an obligation impervious to judicial discretion’), with United States
v. Rodgers, 461 U.S. 677, 706, 103 S. Ct. 2132, 76 L. Ed. 2d 236 (1983)
(explaining that ‘[t]he word “may,” when used in a statute, usually implies
some degree of discretion’). Accordingly, the Department shall (or must)
prefer veteran-owned small businesses when the Rule of Two is satisfied.”
38
(quoting Kingdomware Techs., Inc. v. United States, 136 S. Ct. at 1976). Protestor does
not provide much elaboration for why the Supreme Court’s language quoted in the
protestor’s reply brief mandates award to Land Shark. Defendant argues that
“Kingdomware and the Federal Supply Schedule do not mandate an award to Land
Shark,” and that “Land Shark never offers a clear explanation of how it gets from the rule
of two’s purpose to restrict competition to veteran concerns – the plainly stated purpose
of 38 U.S.C. § 8127(d) given in its caption -- and the notion that an award must be made
without regard to the reasonableness of the offered price.”
In Kingdomware, the issue before the United States Supreme Court was whether
the Rule of Two doctrine contained at 38 U.S.C. § 8127(d) imposed a mandatory
requirement on the VA for “restricting competition” to SDVOSB contractors when the
contracting officer “reasonably expect[s] that at least two of these businesses will submit
offers and that ‘the award can be made at a fair and reasonable price that offers best
value to the United States.’” Kingdomware Techs., Inc. v. United States, 136 S. Ct. at
1973-74 (quoting 38 U.S.C. § 8127(d)). In Kingdomware, the VA had awarded a contract
to a non-SDVOSB contractor for “Emergency Notification” services under the GSA FSS.
See id. at 1975. The Kingdomware protestor, a SDVOSB contractor, took issue with the
VA’s decision to award the contract to the non-SDVOSB “without first checking to see
whether at least two veteran-owned small businesses could perform the work at a fair
and reasonable price.” Id. at 1975. The Kingdomware protestor alleged that under the
Rule of Two Doctrine contained at 38 U.S.C. § 8127(d), the VA was required to determine
whether the procurement opportunity could be set-aside for SDVOSBs before competing
the requirement as a non-SDVOSB contract. See Kingdomware Techs., Inc. v. United
States, 136 S. Ct. at 1975. The government in Kingdomware argued that the VA had
discretion in applying the Rule of Two doctrine. See id. at 1977. The Supreme Court found
in favor of the Kingdomware protestor, concluding that the VA was required to conduct a
Rule of Two analysis before opening competition for a VA contract, including contracts
awarded under the GSA FSS, to non-SDVOSBs. See id. The Supreme Court explained:
We hold that § 8127(d) unambiguously requires the Department to use the
Rule of Two before contracting under the competitive procedures. Section
8127(d) requires that “a contracting officer of the Department shall award
contracts” to veteran-owned small businesses using restricted competition
whenever the Rule of Two is satisfied, “[e]xcept as provided in subsections
(b) and (c).” (Emphasis added.) Subsections (b) and (c) provide, in turn, that
the Department “may” use noncompetitive procedures and sole-source
contracts for lower value acquisitions. §§ 8127(b), (c). Except when the
Department uses the noncompetitive and sole-source contracting
procedures in subsections (b) and (c), § 8127(d) requires the Department
to use the Rule of Two before awarding a contract to another supplier. The
text also has no exceptions for orders from the FSS system.
Kingdomware Techs., Inc. v. United States, 136 S. Ct. at 1976-77. The Supreme Court
emphasized that VA cannot “evade the Rule of Two on the ground that it has already met
its contracting goals or on the ground that the Department has placed an order through
39
the [GSA] FSS [Federal Supply Schedule]. See id. at 1976. The Supreme Court
concluded in Kingdomware: “We therefore hold that, before contracting with a non-
veteran owned business, the Department must first apply the Rule of Two.” Id. at 1977.
Protestor’s argument that the United States Supreme Court’s decision in
Kingdomware demands an award be made to a SDVOSB contractor without any
consideration of the bidder’s price is misplaced. Contrary to protestor’s position,
Kingdomware did not address whether, or mandate that, the VA is required to make an
award to a SDVOSB once a competition has been set aside for SDVOSB contractors.
Kingdomware, as noted above, states that the VA is required to “restrict[] competition” to
SDVOSB contractors if and when certain conditions are met. See id. at 1973-74. FAR
Part 13’s requirement that a contracting officer conduct a price reasonableness analysis
does not conflict with the Rule of Two doctrine contained at 38 U.S.C. § 8127(d). Neither
the Rule of Two doctrine, nor the Kingdomware decision mandates awards to SDVOSBs
without any consideration of price, nor does either prohibit the VA from employing
competitive evaluation procedures, such as price analyses. The statute at 38 U.S.C.
§ 8127(d) states that the VA “shall award contracts on the basis of competition.” Id. As
the Federal Circuit recently explained in PDS Consultants, Inc. v. United States, 907 F.3d
1345, 1358 (Fed. Cir. 2018):
[T]he statute applies to all contracts—not only competitive contracts. The
statute requires that, when the Rule of Two is triggered—i.e., when ‘the
contracting officer has a reasonable expectation that two or more small
business concerns owned and controlled by veterans will submit offers and
that the award can be made at a fair and reasonable price that offers best
value to the United States’—the VA must apply competitive mechanisms to
determine to whom the contract should be awarded.
Id. (emphasis in original) (quoting 38 U.S.C. § 8127(d); and citing Kingdomware Techs.,
Inc. v. United States, 136 S. Ct. at 1976).
In addition, protestor’s argument that Kingdomware somehow cabins the VA’s
ability to evaluate a SDVOSB’s price has already been rejected by Judge of this court in
Land Shark Shredding, LLC v. United States, 142 Fed. Cl. 301, 308 (2019). In Land Shark
Shredding, LLC v. United States, Case No. 18-1568C, the same counsel and same
protestor as in the protest currently before the court, brought a similar, but factually
distinct, protest regarding a document shredding services contract under a different
solicitation number and for a different VA medical facility located in Miami, Florida. See
id. at 304. The protestor in Land Shark Shredding, LLC v. United States, Case No. 18-
1568C challenged the VA’s decision to compare its price with non-SDVOSBs that also
had bid on the same solicitation. See id. at 308.
There are multiple similarities between the two protests, including similar
allegations regarding the Rule of Two. The heading for Count I for Land Shark Shredding
LLC v. United States, Case No. 18-1568C states: “The CO’s determination that LSS’s
price was unreasonable, lacked a rational basis, was arbitrary and capricious, and
40
involved a violation of regulation or procedure.” Complaint Land Shark Shredding, LLC v.
United States, Case No. 18-1568C (Fed. Cl. Oct. 9, 2018). The complaint in the above-
captioned protest has the identical heading: “The CO’s determination that LSS’s price
was unreasonable, lacked a rational basis, was arbitrary and capricious, and involved a
violation of regulation or procedure.”27 The final paragraph of Count I in both complaints
is virtually identical as well, as the language in Land Shark Shredding LLC v. United
States, Case No. 18-1568C states:
The basis of the VA’s evaluation of Land Shark’s proposal was supposed
to be based on whether the proposer is a SDVOSB or VOSB or will employ
subcontractors who are SDVOSB or VOSB, technical capability, past
performance, and price. LSS is a SDVOSB, the VA found that LSS’ proposal
was technically acceptable, LSS’ past performance reviews are all positive,
and pursuant to FAR 8.404 Land Shark’s price was fair and reasonable.
Thus, the VA was required to award the contract to LSS.
Count I for the above-captioned protest states:
The basis of the VA’s evaluation of Land Shark’s proposal was supposed
to be based on whether the proposer is a SDVOSB or VOSB or will employ
subcontractors who are SDVOSB or VOSB, technical capability, past
performance, and price. LSS is an SDVOSB, the VA found that LSS’
proposal was technically acceptable, LSS’s past performance reviews are
all positive, and Land Shark’s prices have been deemed to be fair and
reasonable. Thus, the VA was required to fully evaluate the offers and
award the contract to an SDVOSB.
The court in Land Shark Shredding, LLC v. United States, Case No. 18-1568C,
summarized Land Shark’s Rule of Two argument as:
The VA also based its evaluation of LSS's bid on a comparison of LSS's
prices to the other non-SDVOSB offerors. This is not a fair and reasonable
comparison, and it totally negates the value of set-asides. It also ignores
the U.S. Supreme Court's holdings in the Kingdomware case, which is
discussed in detail below. Comparison of SDVOSB bids to non-veteran and
other than small business concerns also violates Congress’ express policy
regarding SDVOSB assistance programs. “The purpose of the Service-
Disabled Veteran-Owned Small Business Program is to provide Federal
27 Although not relevant to the court’s analysis, the court notes that the headings for Count
II in both the current protest before the court and the protest in Land Shark Shredding,
LLC v. United States, Case No. 18-1568C were also identical. Both protests state: The
VA’s evaluation of proposals was not consistent with the terms of the Solicitation and was
therefore unreasonable, lacked a rational basis, was arbitrary and capricious, and
involved a violation of regulation or procedure.”
41
contracting assistance to service-disabled veteran-owned small business
concerns.” FAR § 19.1401(b).
Land Shark Shredding, LLC v. United States, 142 Fed. Cl. at 308. The court in Land Shark
Shredding, LLC v. United States, Case No. 18-1568C, however, rejected protestor’s
argument and explained that:
Kingdomware does not address price comparisons, in general, or the
specific question of how the VA should determine that a SDVOSB's prices
are fair and reasonable. The Federal Acquisition Regulation (FAR)
provision cited by plaintiff is a policy statement that does not regulate
procedures for the price evaluation of proposals in procurements such as
this one. In sum, plaintiff objects to the price comparison conducted by the
VA here because it does not do enough, in plaintiff's view, to secure
government contracts for SDVOSBs. That is a policy argument, unmoored
from statute or regulation. Without more, that policy argument is an
insufficient ground for this court to invalidate a procurement decision of a
federal agency.
Id. (citing cases).
As noted above, the Supreme Court in Kingdomware only reached the conclusion
that the VA was required to conduct a Rule of Two analysis before opening competition
to a broader audience for a VA contract, including contracts awarded under the GSA FSS,
to non-SDVOSBs. See Kingdomware Techs., Inc. v. United States, 136 S. Ct. at 1975.
The majority of the Supreme Court’s opinion in Kingdomware is devoted to statutory
construction regarding 38 U.S.C. § 8127(d). The Supreme Court indicated:
[W]e hold that § 8127 is mandatory, not discretionary. Its text requires the
Department to apply the Rule of Two to all contracting determinations and
to award contracts to veteran-owned small businesses. The Act does not
allow the Department to evade the Rule of Two on the ground that it has
already met its contracting goals or on the ground that the Department has
placed an order through the FSS.
In statutory construction, we begin “with the language of the statute.”
Barnhart v. Sigmon Coal Co., 534 U.S. 438, 450, 122 S. Ct. 941, 151
L. Ed. 2d 908 (2002). If the statutory language is unambiguous and “the
statutory scheme is coherent and consistent”—as is the case here—“[t]he
inquiry ceases.” Ibid.
We hold that § 8127(d) unambiguously requires the Department to use the
Rule of Two before contracting under the competitive procedures. Section
8127(d) requires that “a contracting officer of the Department shall award
contracts” to veteran-owned small businesses using restricted competition
whenever the Rule of Two is satisfied, “[e]xcept as provided in subsections
(b) and (c).” (Emphasis added.) Subsections (b) and (c) provide, in turn, that
the Department “may” use noncompetitive procedures and sole-source
42
contracts for lower value acquisitions. §§ 8127(b), (c). Except when the
Department uses the noncompetitive and sole-source contracting
procedures in subsections (b) and (c), § 8127(d) requires the Department
to use the Rule of Two before awarding a contract to another supplier. The
text also has no exceptions for orders from the FSS system.
Kingdomware Techs., Inc. v. United States, 136 S. Ct. at 1976-77. The Supreme Court
found in favor of the Kingdomware protestor, concluding that the VA was required to
conduct a Rule of Two analysis before opening competition for a VA contract, including
contracts awarded under the GSA FSS, to non-SDVOSBs. See id. at 1979. Except for
describing the “Rule of Two” at 38 U.S.C. § 8127(d) and noting that 38 U.S.C.
§ 8127(d) requires contracts be awarded to veteran-owned small businesses when there
is a “reasonable expectation” that two or more such businesses will bid for the contract at
“a fair and reasonable price that offers best value to the United States,” Kingdomware
Techs., Inc. v. United States, 136 S. Ct. at 1973 (quoting 38 U.S.C. § 8127), the Supreme
Court did not indicate how the VA should evaluate and determine that a SDVOSB's prices
are fair and reasonable. Moreover, Kingdomware did not address whether, or find that,
the VA is required to make an award to a SDVOSB once a competition has been set aside
for SDVOSB contractors. Kingdomware holds that the VA is required simply to “restrict[]
competition” to SDVOSB contractors when certain conditions are met. See id. at 1973-
74. Therefore, protestor’s argument that the Kingdomware decision prohibits the VA from
conducting a price reasonableness analysis before making an award, is misplaced. To
the extent that protestor challenges the validity of FAR Part 13, protestor fails to state a
claim pursuant to RCFC 12(b)(6) and its challenge must be dismissed.
CONCLUSION
Based on the protest as filed, because protestor lacks standing to bring its protest,
and because protestor has failed to state a claim in the above-captioned protest,
defendant’s motion to dismiss is GRANTED. Protestor’s complaint is DISMISSED.
IT IS SO ORDERED.
s/Marian Blank Horn
MARIAN BLANK HORN
Judge
43