St Net, Inc. v. United States ( 2013 )

In the United States Court of Federal Claims
No. 13-223C
(Filed: August 13, 2013)*
*Opinion originally filed under seal on July 25, 2013
* ********************
*
ST NET, INC., *
*
Plaintiff, *
*
v. * Post-award Bid Protest; Standing under 28
* U.S.C. § 1491(b)(1); Interested Party;
THE UNITED STATES, * Substantial Chance of Award;
* Clarifications; Agency Discretion to
Defendant, * Exclude Offeror for Incomplete Proposal;
* Clerical Errors
and, *
*
WILDFLOWER INTERNATIONAL, *
LTD., *
*
Defendant-Intervenor. *
*
* ********************
David B. Dempsey, Reston, VA, for plaintiff. James C. Fontana, Reston, VA, of counsel.
David A. Levitt, Civil Division, U.S. Department of Justice, Washington, DC, with whom
were Stuart F. Delery, Acting Assistant Attorney General, and Jeannne E. Davidson,
Director, Commercial Litigation Branch, for defendant. Peter Hartman, Office of
General Counsel, Department of Homeland Security, Washington, DC, of counsel.
Lars E. Anderson, Tysons Corner, VA, for defendant-intervenor. James Y. Boland and
Christina K. Kube, Tysons Corner, VA, of counsel.
OPINION
FIRESTONE, Judge
In this post-award bid-protest case, ST Net, Inc. (“the plaintiff” or “ST Net”)
alleges that the Department of Homeland Security (“DHS”) abused its discretion and
violated various provisions of the Federal Acquisition Regulation (“FAR”) by
disqualifying ST Net’s proposal from consideration for an award under the FirstSource II
Indefinite Delivery, Indefinite Quantity (“IDIQ”) solicitation.1 The plaintiff contends
that because ST Net submitted a Sample Delivery Order Pricing Matrix (“pricing
matrix”) that contained two * * * mistakes, DHS was obligated to afford ST Net an
opportunity to correct those mistakes through either clarifications or discussions prior to
disqualifying ST Net from award. The United States (“the government” or “the
defendant”) has moved to dismiss the complaint pursuant to Rules 12(b)(1) and 12(b)(6)
of the Rules of the United States Court of Federal Claims (“RCFC”) and the parties have
cross-moved for judgment on the administrative record pursuant to RCFC 52.1(c). For
the reasons that follow, the court finds that ST Net has stated a claim for relief and has
standing to challenge the government’s discretionary decision to disqualify ST Net;
therefore the government’s motion to dismiss is DENIED. However, because the court
also concludes that DHS’s decision to disqualify ST Net’s concededly incomplete
proposal was lawful and rationally supported, the government’s motion for judgment on
the administrative record is GRANTED, and the plaintiff’s cross-motion is DENIED.
1
As discussed below, this protest does not involve the award of any particular delivery order
under the FirstSource II vehicle. Rather, the plaintiff challenges its non-award of a FirstSource
II IDIQ contract. Without an IDIQ contract, ST Net cannot bid on any of the delivery orders that
DHS intends to issue under FirstSource II. On April 3, 2013, the government agreed to forbear
undertaking additional FirstSource II funding or procurement activity for those small business
categories applicable to ST Net for four months. See Scheduling Order, ECF No. 17.
2
I. BACKGROUND2
A. The FirstSource II solicitation
On December 27, 2011, DHS posted Solicitation No. HSHQDC-12-R-00005
(“FirstSource II”), which was designed as a five-year follow-on to the competitively
awarded suite of IDIQ contracts under FirstSource I. AR 2. FirstSource I, awarded in
2007, facilitated streamlined purchase, delivery, and installation of IT commodity
products and solutions by DHS. AR 12. In a similar vein, the stated objective of
FirstSource II, which has a total cost-ceiling of $3 billion, is “to establish contracts with
experienced Information Technology Value-Added Resellers to provide a variety of
commercially-available IT commodities, solutions, and value-added reseller services to
support DHS programs . . . .” AR 2, 9.
Under the solicitation, offerors sought FirstSource II IDIQ contracts in one or
more of the following small business set-aside categories: 8(a); Historically Underutilized
Business Zone (“HUBZone”); Service-Disabled, Veteran-Owned Small Business
(“SDVOSB”); (4) Economically Disadvantaged, Women-Owned Small Business
(“EDWOSB”); and (5) Small Business. AR 2. IDIQ awardees are guaranteed a
minimum of $250 and, with certain exceptions, the fair opportunity to bid on subsequent
delivery orders. AR 8, 31. Competition for each FirstSource II delivery order is to be
limited, however, to only a single small business category. AR 31. For example, should
DHS decide to limit a particular delivery order to the SDVOSB category, then only
2
Unless otherwise stated, these facts are undisputed and are taken from the complaint, exhibits
to the parties’ moving papers, and the Administrative Record (“AR”).
3
contractors who received a FirstSource II IDIQ contract in the SDVOSB category will be
eligible to compete for that delivery order. AR 31.
The FirstSource II solicitation stated that the IDIQ contracts would be awarded
under FAR Part 12 (Acquisition of Commercial Items) using the procedures of FAR Part
15 (Contracting by Negotiation). DHS planned to award IDIQ contracts in a best value
source selection to responsible offerors “whose offer(s) conforming to the solicitation
[were found to] be most advantageous to the Government, price and other factors
considered.” AR 83. DHS planned to conduct separate source selections for each small
business category, making a sufficient number of awards in each category to ensure
adequate competition at the delivery order level. The non-price factors included (1)
Corporate Experience, (2) Ability to Achieve Results, and (3) Past Performance. AR 83.
Price, which was not to be assigned an adjectival rating, was less important than the
combined non-price factors.
DHS planned to calculate a “total evaluated price” as the “total price for the items
and labor rates/hours set forth in the Sample Delivery Order Pricing Matrix.” AR 83.
This pricing matrix consisted of a DHS-provided Microsoft Excel workbook that listed
“the types of IT commodities and services that DHS has procured in the past.” AR 300.
For supplies, the matrix listed approximately 70 types of information technology
equipment for which bidders were required to provide (1) brand/model names, (2) ceiling
prices, and (3) discount rates.3 AR 300 (sample Pricing Matrix instruction page stating
3
DHS “locked” the vast majority of the pricing matrix, thereby preventing offerors from
manipulating cells other than those calling for pricing, brand/model name, or discount rate
4
that “[a]ll items and options must be priced”); AR 317-18 (listing 70 line items). Based
on data provided by the offeror on these inputs, the spreadsheet automatically calculated
price information to be used by the evaluators.4 The completed pricing matrix constituted
an offeror’s price volume.
The instructions to the pricing matrix explained that offerors could be held to the
prices for specific items listed in their matrices when bidding on subsequent delivery
orders:
The quotes proposed by Offerors through this matrix will be designated as
ceiling prices/rates for any future orders made under the FirstSource II
vehicle. . . . The ceilings being set through the price proposals for IT items
are only in connection with the specific “Brand/Model” proposed by the
Offeror AND the exact minimum configurations being sought at this time
through Attachment 5. Once again, the prices/quotes proposed herein are
established as ceiling prices for the [specific] items proposed AND the
minimum configurations being sought. Competition at the IDIQ level will
ultimately decide the best value to the Government. . . . For supplies—the
ceiling prices are based on both the minimum requirements/specifications
in the document AND the brand/model proposed by an Offeror. (Two
things which are likely to change and vary throughout the life of the
contract) . . . . When certain specifications or proposed items (brand and
model) become obsolete, the established ceiling will carry no weight. The
IDIQ level competitions will establish a new market price.
information. DHS yellow-highlighted all of the cells for which pricing data was required in
order to aid contractors in identifying each of the items and options that were to be priced. See
AR 296.
4
In reviewing these pricing matrices, the court notes that the last worksheet in the pricing matrix,
titled “Summary,” provided anyone reviewing the matrix with a concise—and automatically
populated—list of the brand/model proposed by the offeror for each line item. See AR 317-18.
Thus, if a bidder failed to insert brand/model information into the appropriate cell, the absence of
that information would be readily apparent by a cursory review of the Summary worksheet. See
AR Tab 39 (ST Net Pricing Matrix in Native Format).
5
AR 300. The solicitation further provided that “[t]he evaluation of the information
provided in the Sample Delivery Order Pricing matrix [would] include accuracy,
completeness, and reasonableness. . . . and the Government will use all the information
provided in its evaluation.”5 AR 254.
Although DHS elected to use the acquisition procedures found in FAR Part 15,
the solicitation made clear that the government, in accordance with 48 C.F.R. § 15.306,6
intended to make its award based solely on the offerors’ proposals and did not intend to
engage in discussions. See AR 71, 82 (“The Government intends to evaluate offers and
award a contract without discussions with offerors. Therefore, the offeror’s initial offer
should contain the offeror’s best terms from a price and technical standpoint.”).
5
Under the Source Selection Plan, the Contracting Officer (“CO”) was ultimately responsible for
reviewing proposals to ensure that the evaluation documentation was complete, accurate, and
consistent. AR 364.
6
FAR 15.306 provides, in part:
(a) Clarifications and award without discussions.
(1) Clarifications are limited exchanges, between the Government and
offerors, that may occur when award without discussions is contemplated.
(2) If award will be made without conducting discussions, offerors may be
given the opportunity to clarify certain aspects of proposals (e.g., the
relevance of an offeror’s past performance information and adverse past
performance information to which the offeror has not previously had an
opportunity to respond) or to resolve minor or clerical errors.
(3) Award may be made without discussions if the solicitation states that
the Government intends to evaluate proposals and make award without
discussions. If the solicitation contains such a notice and the Government
determines it is necessary to conduct discussions, the rationale for doing
so shall be documented in the contract file . . . .
48 C.F.R. § 15.306.
6
Although the government reserved the right to “waive informalities and minor
irregularities,” AR 71, the solicitation repeatedly warned offerors that failure to conform
to the solicitation’s instructions jeopardized their chances of receiving an award. Both
the solicitation and DHS’s responses to vendor questions emphasized the importance of
providing complete and accurate information in order to be considered for award. See,
e.g., AR 3 (“DHS anticipates a significant level of competition for FirstSource II. We
strongly encourage interested companies to thoroughly read the evaluation criteria in this
RFP prior to preparing a proposal.”); AR 82 (“Each Offeror is responsible for ensuring
that the information provided is thorough, accurate, and complete.”); AR 124 (“The
instructions provided have been . . . . designed to ensure the submission of information
essential to the understanding and comprehensive validation and evaluation of proposals.
Clarity and completeness are of utmost importance to the proposal.”); AR 128 (“The
evaluation of the information provided in the Sample Delivery Order Pricing matrix will
include accuracy, completeness, and reasonableness.”); AR 226 (warning offerors that
they “are required to submit proposal responses for all of the products and services set
forth in [the pricing matrix],” in response to a vendor request to submit pricing for only
some portions of the pricing matrix).
Finally, solicitation ¶ E.2.9(2), in a section titled, “Supplemental Instructions for
Proposal Preparation,” stated:
Offerors are expected to follow the detailed proposal preparation
instructions fully and carefully. The Government will rely substantially on
the information provided by the Offerors to evaluate the proposals. It is
therefore imperative that Offerors carefully follow the instructions set forth
below and submit their proposals in the format and with the content
7
specified below, providing all requested information. Offers that simply
restate the RFP requirements or that state that the Offeror’s proposal is
compliant with the requirements of the RFP—without providing necessary
explanation or other data—are not likely to be highly evaluated, if they can
be evaluated at all. Proposals that fail to provide all required information in
the format requested may be found unacceptable and may be rejected
without further consideration if the Contracting Officer determines that a
significant revision or addendum to the Offeror’s proposal would be
required to permit further evaluation, and especially if the incompleteness
of the proposal or errant formatting of the proposal appears to be due from
a lack of diligence or competence of the Offeror.
AR 76-77 (emphasis supplied).
B. ST Net’s proposal
ST Net timely submitted proposals for the general small business, EDWOSB, and
8(a) small business categories. AR 597, 754, 882. ST Net failed, however, to populate
the Brand/Model, Unit Price, or Discount Rate information for two line items: * * * and
* * *.7
***
Id. Had the missing price information been included, ST Net asserts that its total
evaluated price of approximately * * * would have increased by over * * *, to * * *. See
Pl.’s Reply 9 (citing Pl.’s Reply Ex. 7 at *13-14).
C. FirstSource II evaluation and award
By the time bidding closed in March 2012, DHS had received over 240 proposals
from more than 140 bidders across the five small business categories. AR 781.
Specifically, 47 companies submitted proposals for the 8(a) small business category, 37
7
Although the solicitation was amended four times, it is undisputed that the solicitation * * *.
8
companies submitted proposals in the EDWOSB small business category, and 105
companies submitted proposals in the general small business category.8 AR 378, 669,
781. These proposals were evaluated by a Technical Evaluation Panel (“TEP”), which
established the technical ratings for Corporate Experience, Ability to Achieve Results,
and Past Performance. Proposals were also evaluated by a separate Price Evaluation
Team (“PET”), which conducted “independent evaluations of the Offerors’ price
proposals in accordance with the information and guidance contained in the solicitation
and the [Source Selection Plan].” AR 357.
Within each small business category, multiple proposals were removed from best
value consideration because their pricing matrices did not conform to the solicitation’s
instructions. For example, of the 105 companies that submitted proposals in the general
small business category, 9 companies submitted pricing matrices that were so inadequate
that the government could not calculate a total evaluated price. AR 389. Although DHS
conducted a price evaluation for the remaining proposals, the CO nevertheless removed
an additional 39 companies from best value consideration because their pricing matrices
failed to include brand/model and/or price information for each line item. AR 645-48.9
8
Although 106 offerors submitted proposals to the general small business category, one of the
proposals was withdrawn prior to the source selection decision. AR 378, 950.
9
For the 8(a) category, the pricing matrices of 7 companies were so inadequate that the
government could not calculate a total evaluated price. AR 792. An additional 18 companies
(including ST Net) for which DHS conducted price and technical evaluations were nevertheless
found to be “fundamentally flawed” and disqualified from consideration due to incomplete
information in their pricing matrices. AR 905-06, 913. For the EDWOSB category, the pricing
matrices of two companies were so inadequate that the government could not calculate a total
evaluated price. AR 677. At least 17 additional companies for which DHS conducted price and
technical evaluations were similarly disqualified from consideration due to incomplete
9
These proposals were deemed to be “fundamentally flawed” and were eliminated from
consideration. See AR 597.
The CO prepared a best value recommendation document for each small business
category for use by the Source Selection Authority (“SSA”) in making awards. See AR
377, 668, 780. ST Net’s Technical proposal was ranked * * * in the general small
business category, * * * in the EDWOSB category, and * * * in the 8(a) category. AR
386, 676, 791. ST Net’s evaluated total price of * * * was ranked * * * in the general
small business category, * * * in the EDWOSB category, and * * * in the 8(a) category.10
AR 391, 678, 792. Nevertheless, in her Best Value Recommendation Documents, the CO
concluded that ST Net’s price proposals were fundamentally flawed because ST Net had
failed to conform to the solicitation’s requirements. See, e.g., AR 597. Specifically, the
CO wrote that ST Net’s pricing matrix “did not provide Brand Names and Models, or
quotes, for all of the supplies/items within their Sample Delivery Order Pricing Matrix as
required by Attachment 5 of the solicitation. This is a fundamental flaw of the proposal.”
Id. As a consequence, ST Net was not recommended for an award in any of the small
business categories.
On September 28, 2012, the SSA selected eight vendors for awards in the 8(a)
small business category. AR 915. On December 21, 2012 the SSA selected five vendors
information in their pricing matrices. AR 771-72 (one company, * * *, appears to have
submitted two non-conforming proposals).
10
The record does not reflect the basis for the PET’s conclusion that it was possible to calculate
total evaluated prices for some, but not all, of the offerors who submitted incomplete pricing
matrices.
10
for award in the EDWOSB category, AR 924, and fourteen vendors for award in the
general small business category. AR 932. In the Source Selection Decision Documents,
the SSA noted that multiple offerors’ price proposals had been found to be
“fundamentally flawed” because the companies had failed to conform to the solicitation’s
requirements. See, e.g., AR 917-18, 926-27, 936-37. Specifically, the SSA wrote:
These Offerors did not provide brand names, model numbers, or quotes for
some or all of the items bid. The requirement to provide brand names and
model numbers for all items bid was set forth in the Sample Delivery Order
Pricing Matrix, and the FirstSource II solicitation (Chapter E, Part 2.9)
indicated that if all required information was not provided in the requested
format, the Offeror might be found to be unacceptable and rejected without
further consideration. This issue was also addressed/emphasized in the
Government’s responses to vendor questions (page 26) on the FirstSource
II solicitation, which were posted to www.fbo.gov. . . . Offerors whose
price proposals included fundamental flaws (ST Net . . . ) did not adhere to
the terms and conditions of the solicitation, and will not be considered for
an award.
AR 917-18.11
11
On page 26 of the referenced solicitation documents, one vendor had asked: “Can [a] small
business bid on a subset of the requirements? For example, we would like to compete for the
server business?” AR 228. In response, the government replied:
No. As stated in E.2.9(2), “Proposals that fail to provide all required information
in the format requested may be found unacceptable and may be rejected without
further consideration if the Contracting Officer determines that significant
revision or [addendum] to the offeror’s proposal would be required to permit
[further] evaluation, and especially if the incompleteness of the proposal or errant
formatting of the proposal appears to be due from a lack of diligence or
competence of the Offeror[.]”
Id.11
D. The instant litigation
On January 22, 2013, ST Net filed a protest with the United States Government
Accountability Office (“GAO”).12 See Def.’s Mot. Appx. A1-A2. The protest
challenged DHS’s evaluation of ST Net’s proposals in the 8(a), EDWOSB, and general
small business categories. Id. GAO dismissed the 8(a) protest as untimely on March 4,
2013, and dismissed the remaining challenges the following day because ST Net failed to
timely file comments on the agency report. Id. at A4.
ST Net filed suit in this court on March 29, 2013, seeking, inter alia, a temporary
restraining order (“TRO”) and an injunction to prevent DHS from awarding any
FirstSource II delivery orders within the 8(a), EDWOSB, or general small business
categories until ST Net is awarded an IDIQ contract for those small business categories.
Because the government agreed to forbear undertaking additional FirstSource II funding
or procurement activity for those small business categories applicable to ST Net for four
months, in April 2013 this court denied the plaintiff’s application for a TRO. See
Scheduling Order, ECF No. 17. Following briefing from ST Net, the court granted
Wildflower International, Ltd.’s motion to intervene on April 15, 2013.13 See Order,
12
The parties dispute when DHS notified the plaintiff of the basis for concluding that ST Net’s
pricing proposal contained a “fundamental flaw.” See Pl.’s Mot. 15 n.9 (“ST Net did not know
the relevant details . . . until it received the Agency Report regarding its GAO bid protest on
February 21, 2013.”). It is not necessary for the court to resolve this dispute because, as
discussed below, the record demonstrates that it was rational for DHS to require offerors to
include all requested price information, and ST Net admitted to having failed to provide price
information for two of the 70 line items in the “Supplies” worksheet of the pricing matrix.
13
On May 8, 2013 Wildflower filed notice of concurrence with the government’s motions, and
informed the court that it declined to submit a separate motion for judgment. See Notice, ECF
No. 32.
12
ECF No. 23. Briefing on the government’s motion to dismiss and the parties’ cross-
motions for judgment on the administrative record was completed on June 26, 2013, and
oral argument was heard on July 19, 2013.
II. DISCUSSION
A. The government’s motion to dismiss under RCFC 12(b)(1)
1. Standard of review for a motion to dismiss for lack of standing
The Tucker Act vests this court with jurisdiction “to render judgment on an action
by an interested party objecting 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) (2012). Although the court will accept the
plaintiff’s well-pleaded factual allegations and draw all reasonable inferences in its favor,
the plaintiff ultimately bears the burden of establishing that it is an interested party within
the meaning of the statute. See Rex Serv. Corp. v. United States, 448 F.3d 1305, 1307-08
(Fed. Cir. 2006). The plaintiff satisfies this burden by demonstrating that it was an
“actual or prospective bidder whose direct economic interest would be affected by the
award of the contract.” Orion Tech., Inc. v. United States, 704 F.3d 1344, 1348 (Fed.
Cir. 2013). In other words, the plaintiff must show that, but for a significant and
prejudicial error in the procurement process, the plaintiff would have had a “substantial
chance” of winning the contract (i.e., it would have been in the zone of active
consideration). See id.; Comint Sys. Corp. v. United States, 700 F.3d 1377, 1383 (Fed.
Cir. 2012); Labatt Food Serv., Inc. v. United States, 577 F.3d 1375, 1378-79 (Fed. Cir.
2009); Preferred Sys. Solutions, Inc. v. United States, 110 Fed. Cl. 48, 56-58 (2013)
13
(citing cases). Although “the mere timely submission of a proposal, no matter how
defective,” does not automatically confer standing, Orion, 704 F.3d at 1349, “a bidder has
standing to challenge the lawfulness of discretionary acts that operate to exclude the
bidder from consideration in cases where the bidder’s ratings are such that had the
government acted lawfully the bidder would have had a substantial chance of winning the
contract,” G4S Tech. CW LLC v. United States, 109 Fed. Cl. 708, 719 (2013).
2. ST Net has standing to challenge its exclusion from award
consideration
The government argues that ST Net lacks standing because its proposal was
“fundamentally flawed” due to missing price and brand name information for two line
items in its pricing matrix. Viewing these omissions as material, the government asserts
that ST Net could not have cured its proposal through “clarifications” within the scope of
FAR 15.306(a)(2), but instead required discussions. The government’s standing
argument thus depends on the fact that the FirstSource II solicitation clearly stated that
the award would be made without discussions, and no discussions were ever conducted.
Def.’s Mot. 17; Def.’s Reply 5. Put simply, the government argues that ST Net is
effectively stuck with its non-conforming proposal which, being non-conforming, could
never have had a “substantial chance” of receiving an award.14 See Def.’s Mot. 14-17
(quoting dicta in Orion, 704 F.3d at 1349); Def.’s Reply 3. The government further
contends that, to the extent that ¶ E.2.9(2) of the solicitation required the CO to make a
14
The government similarly argues that the complaint must be dismissed under RCFC 12(b)(6),
on the grounds that, if the plaintiff was not eligible for award, the plaintiff cannot state a claim
for relief premised on a challenge to that award.
14
formal determination prior to rejecting an incomplete bid, ¶ E.2.9(2) did not apply
because ST Net was rejected after having been fully evaluated. Def.’s Reply 13.
The plaintiff counters that ST Net has standing to challenge DHS’s decision to
reject ST Net’s proposals as “fundamentally flawed.” This argument is premised on the
plaintiff’s contentions that DHS’s rejection of ST Net’s proposals was contrary to (1)
FAR 1.602-2(b)15 and 15.306, which the plaintiff asserts create an affirmative duty for
DHS to allow for correction of suspected mistakes, Pl.’s Mot. 10-11, 16; and (2) the
solicitation’s purported requirement that the CO first determine, prior to rejecting an
offeror’s bid, that a significant proposal revision would be required to permit further
evaluation. Pl.’s Mot. 10.16 But for these errors, the plaintiff concludes, ST Net would
have had a “substantial chance” of being awarded IDIQ contracts in each of the three
small business categories in which it submitted proposals. Pl.’s Mot. 4.
Although the question is close, the court agrees with the plaintiff. Under the terms
of the solicitation, DHS had discretion to reject proposals that “fail[ed] to provide all
required information in the format requested,” where “the Contracting Officer
determine[d] that a significant revision or addendum to the Offeror’s proposal would be
required to permit further evaluation.” AR 76-77. In this case, DHS first exercised that
discretion when it eliminated 18 proposals (across the three relevant small business
categories) because the offerors failed to adhere to the solicitation’s requirements “to
15
Under FAR 1.602-2(b), a contracting officer is responsible for ensuring “that contractors
receive impartial, fair, and equitable treatment.” 48 C.F.R 1.602-2.
16
The plaintiff also contends that the failure to provide an adequate explanation to the
contracting file is unreasonable within the meaning of FAR 1.602-2(b). Pl.’s Mot. 10.
15
such an extent that a total evaluated price could not be calculated.” See, e.g., AR 793.
ST Net was not one of these 18 proposals—in fact, the PET calculated a total evaluated
price for ST Net despite the absence from ST Net’s pricing matrix of two of the roughly
70 line items. Only later did the CO and the SSA determine that ST Net’s incomplete
pricing matrix was fundamentally flawed.17
Where, as here, the plaintiff alleges that DHS violated the solicitation’s terms by
disqualifying ST Net’s otherwise highly-rated proposal due to omissions that did not
constitute fundamental flaws, the plaintiff has standing to challenge its disqualification as
contrary to law, arbitrary, capricious, or an abuse of discretion. See Orion, 704 F.3d at
1349 (criticality of missing information is “relevant to the reasonableness of the
[agency’s] decision-making, not to determining prejudice for standing purposes”); MVS
USA, Inc. v. United States, No. 13-246C, 2013 WL 3329004, at *6 (Fed. Cl. June 27,
2013) (protester alleging that the disqualifying flaw in its proposal was due to improper
government action had standing to challenge award); Castle-Rose, Inc. v. United States,
99 Fed. Cl. 517, 523 (2011) (protester pleading sufficient facts to raise a question as to
whether government properly deemed its proposal late had standing to challenge award).
Clearly, if DHS was obligated to allow ST Net an opportunity to address minor
irregularities through clarifications and the information missing from ST Net’s proposal
17
The court also rejects the government’s contention that solicitation ¶ E.2.9(2) “was
inapplicable because all proposals in this procurement were fully evaluated.” Def.’s Reply 13.
In explaining why ST Net’s bid was eliminated from consideration, the SSA stated that “the
FirstSource II solicitation (Chapter E, Part 2.9) indicated that if all required information was not
provided in the requested format, the Offeror might be found to be unacceptable and rejected
without further consideration.” AR 917-18. Thus, ¶ E.2.9(2) was the very basis for ST Net’s
rejection.
16
could not reasonably be characterized as “fundamental,” ST Net’s highly-rated proposal
should not have been eliminated from consideration and ST Net would have been in the
zone of active consideration for award. For this reason, the government’s motion to
dismiss under RCFC 12(b)(1) for lack of standing is DENIED.18
B. The parties’ cross-motions for judgment on the administrative record
1. Standard of review for a motion for judgment on the
administrative record
The court now turns to whether DHS’s decision to disqualify ST Net based on the
absence of price and brand/model name for two of the line items in ST Net’s pricing
matrix was contrary to law, arbitrary, capricious or an abuse of discretion. In answering
this question, the court applies the standard of review defined by the Administrative
Procedure Act (“APA”), 5 U.S.C. § 706(A) (2012). Banknote Corp. of Am. v. United
States, 365 F.3d 1345, 1350 (Fed. Cir. 2004); Impresa Construzioni Geom Domenico
Garufi v. United States, 238 F.3d 1324, 1332-33 (Fed. Cir. 2001). To prevail on a motion
for judgment on the administrative record, a plaintiff must show that either “(1) the
procurement official’s decision lacked a rational basis; or (2) the procurement procedure
involved a violation of regulation or procedure.” Axiom Res. Mgmt., Inc. v. United
States, 564 F.3d 1374, 1381 (Fed. Cir. 2009); Weeks Marine, Inc. v. United States, 575
F.3d 1352, 1358 (Fed. Cir. 2009). The court will reject a challenge premised on the first
18
It is for this same reason that the government’s motion to dismiss for failure to state a claim
must be denied. Assuming, as the court must, that DHS’s decision to eliminate ST Net from
consideration based on the alleged minor mistakes was in error, ST Net has stated a claim for
relief.
17
ground if “the contracting agency provided a coherent and reasonable explanation of its
exercise of discretion.” Axiom, 564 F.3d at 1381. Such decisions must be upheld even
if, as an original proposition, the court might have exercised discretion in a manner
different from the agency. See Weeks Marine, 575 F.3d at 1371. This deferential
standard reflects the substantial latitude afforded to agency officials “to determine which
proposal represents the best value for the government.” E.W. Bliss Co. v. United States,
77 F.3d 445, 449 (Fed. Cir. 1996); see also Glenn Def. Marine (ASIA), PTE Ltd. v.
United States, No. 2012-5125, 2013 WL 3185536, at *4, 7 (Fed. Cir. June 25, 2013). A
challenge brought on the second ground must be denied unless the plaintiff shows “a
clear and prejudicial violation of applicable statutes or regulations.” Impresa
Construzioni, 238 F.3d at 1333. Finally, to the extent that there are disputed issues of
material fact, the court may, under RCFC 52.1, make factual findings “from the record
evidence as if it were conducting a trial on the record.” Bannum, Inc. v. United States,
404 F.3d 1346, 1354, 1357 (Fed. Cir. 2005).
2. DHS’s decision to exclude ST Net from consideration was not
arbitrary, capricious, an abuse of discretion, or contrary to law
Although ST Net makes several arguments contending that it was improper for
DHS to disqualify ST Net from a FirstSource II IDIQ contract award on the grounds that
it was “fundamentally flawed,” this case can be distilled to just two issues: Whether DHS
violated FAR 1.602-2(b) and 15.30619 and abused its discretion by (1) declining to
19
See supra note 6 (FAR 15.306(a)(2) grants discretion to agencies to allow offerors to clarify
proposals or “resolve minor or clerical errors”).
18
provide the plaintiff with notice and an opportunity to cure the omitted information in its
pricing matrix prior to disqualifying ST Net’s proposals, and (2) failing to adequately
document the basis for disqualifying ST Net’s proposal.
i. DHS’s decision not to seek a clarification was not arbitrary,
capricious, an abuse of discretion or otherwise not in
accordance with law
The plaintiff first contends that, because of the obvious and “minor” nature of the
omissions or mistakes in ST Net’s pricing proposal, coupled with what ST Net believes
was the ability to address those mistakes “without prejudice to any offeror and to the
government’s benefit,” DHS had an affirmative duty to communicate with ST Net and
provide an opportunity to revise its bid prior to disqualification. See Pl.’s Reply 6-9. In
support of this proposition, the plaintiff relies chiefly on FAR 1.602-2(b) (contracting
officers have a duty to act fairly with offerors) and 15.306(a)(2) (permitting clarifications
to address minor or clerical errors prior to establishment of a competitive range or award
without creation of a competitive range). ST Net also cites several cases in which courts
have found that the government has a duty to notify bidders of potential mistakes when
the agency knows or should know about the error. See Pl.’s Mot. 17; Pl.’s Reply 6 n.8.
In response, the government characterizes the plaintiff’s argument as an attack on
DHS’s decision to reject all incomplete proposals, which the government contends is not
reviewable. Def.’s Reply 12-13 (quoting E.W. Bliss, 77 F.3d at 449). The government
further notes that the cases on which ST Net relies are inapposite because all of them
involve a contracting officer’s duty to seek clarification of conforming bids. Def.’s Mot.
22-23.
19
The court finds for the reasons that follow that DHS did not have an affirmative
duty to provide ST Net with an opportunity to correct or revise its bid through
clarifications prior to disqualification and that DHS’s decision not to seek any
clarifications was not arbitrary, capricious or an abuse of discretion. As discussed above,
it is undisputed that ST Net failed to fill in the price and brand/model information for two
line items. Instead, ST Net listed the brand/model name for both items as * * *,” which
ST Net acknowledges was an error. ST Net included a price and discount rate for both
items at * * *, which was also an error. ST Net concedes that if DHS had provided an
opportunity for the plaintiff to remedy its proposal, ST Net’s total evaluated price would
have been increased by over * * *, from * * * to * * *.
The court cannot say, based on this record, that ST Net’s errors were minor or
clerical such that DHS’s failure to seek a clarification can be characterized as arbitrary,
capricious, an abuse of discretion or otherwise not in accordance with law. Importantly,
the price, brand/model information, and discount rates were not simply estimating tools,
but were actually binding on the offerors—at least until “certain specifications or
proposed items (brand and model) [became] obsolete.” AR 5. By its own estimate, ST
Net’s errors would have amounted to a roughly 7% increase in ST Net’s total evaluated
price. Moreover, ST Net’s contention that the government might have ascertained the
missing brand information from elsewhere in ST Net’s proposal is severely undermined
by the plaintiff’s concession that multiple bidders offered different brand items for the
20
line items at issue in this case.20 Pl.’s Mot. 16 (estimating that “approximately * * * % of
the offerors whose price matrices the Government provided in the Administrative Record
* * * offered the same item for Line Items * * *. Indeed, this court has held that an
agency is not required to sift through a proposal in order to identify information that the
offeror failed to include in the correct place. See IBM Corp. v. United States, 101 Fed.
Cl. 746, 758-59 (2011). In light of the undisputed facts, the court rejects ST Net’s
contention that ST Net’s omissions were simply minor or clerical, or that it was improper
for DHS to abstain from requesting that ST Net address these errors through
clarifications.
The court has examined the cases on which the plaintiff relies and finds that none
address the issue in the case at bar: Whether an agency, when conducting a negotiated
procurement under FAR Part 15 that expressly contemplates making an award(s) without
discussions or creation of a competitive range, is under an affirmative duty to allow an
offeror to cure a material omission in its proposal. Indeed, most of the plaintiff’s cited
cases rely on a “duty to inquire” found in FAR Part 14, which applies to sealed bidding,
rather than negotiated procurements. See Hunt Constr. Co. v. United States, 281 F.3d
1369, 1374-75 (Fed. Cir. 2002) (discussing duty to verify bids under FAR Part 14);
Giesler v. United States, 232 F.3d 864, 869 (Fed. Cir. 2000) (recognizing duty to examine
under FAR Part 14); Ruggierio v. United States, 190 Ct. Cl. 327, 329, 334-39, (1970)
20
Essentially, ST Net argues that DHS should have inferred the identity of the missing
brand/model information for line items * * *.
21
(contracting officer erred by accepting bids that he should have known were mistaken
prior to acceptance)).21
In addition, the plaintiff’s reliance on Griffy’s Landscape Maint. LLC v. United
States, 46 Fed. Cl. 257, 259-60 (2000) (duty to seek clarification for clerical errors
applies in both sealed and negotiated procurements), which did involve a FAR Part 15
procurement, is misplaced. Unlike the instant case, in which the plaintiff omitted
material terms in the form of price and brand/model name, the plaintiff in Griffy’s made
only a clerical error by neglecting to include the point of contact information for the
company’s insurer. Id. Even putting aside the subsequent criticism of its holding, see,
e.g., C.W. Over & Sons, Inc. v. United States, 54 Fed. Cl. 514, 521 n.10 (“Since the
contract at hand was the result of a negotiated procurement process, its administration is
governed only by the provisions in part 15.”), Griffy’s simply does not stand for the
21
The plaintiff also relies heavily on Matter of CH2M Hill Antarctic Support, Inc., B-406325,
2012 CPD ¶ 142 (Comp. Gen. April 18, 2012), for the proposition that an agency may allow for
the correction of a mistake through clarifications, rather than discussions. Pl.’s Mot. 5 n.1; Pl.’s
Reply 9-10. The agency in CH2M had requested, prior to awarding the contract, that the
eventual awardee confirm the accuracy of the agency’s resolution of a discrepancy in the number
of hours that the offeror proposed in two different sections of its price volume. See CH2M, B-
406325, at *2, 8. Over the protester’s objection, the Comptroller General found that the
communication constituted a clarification, rather than a discussion. Id.Although the court recognizes that decisions of the Comptroller General are instructive, CH2M
is distinguishable from the present case. Unlike the offeror in CH2M, ST Net never proposed
any price or brand name information for the two line items at issue in this case. Curing ST Net’s
proposal likely would have required supplementing its proposal with new and essential terms
that had never formed a part of ST Net’s original proposal. This reality is not changed merely
because the plaintiff has alleged that the agency might have inferred the intended price or brand
name data based on information that the plaintiff submitted for different line items elsewhere in
its pricing matrix. As discussed, it was not arbitrary, capricious, an abuse of discretion, or
contrary to law for DHS to have declined to make such inferences, and to have instead concluded
that the absence of this information constituted a fundamental flaw.
22
proposition that in the absence of discussions, a contracting officer is under an
affirmative duty to provide a bidder in a negotiated procurement with notice and an
opportunity to correct material omissions in their proposals.22
To hold that DHS could not disqualify ST Net without first allowing ST Net to
correct its mistake and revise its proposal would significantly limit the discretion afforded
to contracting officers in negotiated procurements under Section 15.306, which provides
that “[c]larifications . . . may occur when award without discussions is contemplated.” 48
C.F.R. § 15.306 (emphasis added). This court has repeatedly recognized the permissive
nature of this regulation in the context of negotiated procurements. See, e.g., Mil-Mar
Century Corp. v. United States, No. 13-131C, 2013 WL 2631733, at *20 (Fed. Cl. May
23, 2013) (agency has discretion to engage in clarifications with just one offeror); Linc
Gov’t Servs., LLC v. United States, 96 Fed. Cl. 672, 715 (2010); Chenega Mgmt., LLC
v. United States, 96 Fed. Cl. 556, 586 (2010) (ease with which proposal could have been
corrected did not render agency’s decision to forgo clarifications unreasonable); cf.
Allied Tech. Grp., Inc. v. United States, 649 F.3d 1320, 1327-29 (Fed. Cir. 2011)
(declining to construe similar solicitation language as limiting contracting officer’s
discretion to forgo discussions when an offeror(s) failed to comply with solicitation’s
requirements). Although the plaintiff is correct that, in other contexts, an agency may
22
The plaintiff also relies on PHT Supply Corp., which is distinguishable because, unlike the
case at bar, the agency in that case actually engaged in discussions with the offerors. See PHT
Supply Corp. v. United States, 71 Fed. Cl. 1, 8, 21-22 (2006) (“Although the duty to raise
mistakes in an offeror’s proposal is no longer set forth explicitly in the regulations governing
negotiated procurements, that duty undoubtedly still exists. There is no question that when, as
here, an agency engages in discussions with offerors, it must make those discussions
‘meaningful.’”).
23
abuse its discretion when it “unreasonably withholds from undertaking a discretionary
act,” Appeals of Jim Smith Contracting Co., ENGBCA No. 5883, 94-2 BCA ¶ 26,879(1994), at *19, aff’d sub nom Jim Smith Contracting Co., v. West, 61 F.3d 918 (Fed. Cir.
1995), it is also well-settled that “the mere non-exercise of discretion is not per se
unreasonable.” Id.23
In sum, DHS’s decision to find ST Net’s proposal “fundamentally flawed” without
first seeking a clarification from ST Net and allowing it to correct and revise its proposal
was lawful and reasonable. ST Net understood from the express terms of the solicitation
that it would be bound by its proposal. The solicitation repeatedly informed offerors of
the importance of providing complete and correct information in their proposals.
Offerors were told that DHS would be evaluating them on “completeness,” and that
clarity and completeness in preparing their proposals was of the “utmost importance.”
Given the clear importance DHS placed on offerors carefully and properly providing the
required information, the court cannot say that DHS was obligated under FAR 1.602-2(b)
and 15.306(a) to seek clarifications where information was missing or wrong, or that
DHS’s decision to forgo clarifications was arbitrary, capricious or an abuse of discretion.
23
In reaching this conclusion, the court is mindful of the fact that the FirstSource II solicitation
prompted the submission of over 240 proposals from more than 140 bidders. DHS anticipated
this “significant level of competition,” AR 3, and repeatedly warned offerors of the importance
of submitting complete and accurate information. In this context, DHS’s decision to reject all
proposals that failed to include essential price or brand name information—rather than engage in
communications—is consistent with the FAR’s general goal of conducting acquisitions in an
efficient manner. See FAR 1.102-2.
24
ii. DHS complied with the procedures outlined in solicitation ¶
E.2.9(2)
The plaintiff next argues that DHS’s decision to disqualify ST Net is not supported
because DHS failed to comply with ¶ E.2.9(2) of the solicitation. Specifically, ST Net
argues that DHS improperly disqualified ST Net without having made a sufficient written
determination that the mistake in ST Net’s pricing matrix required a significant revision
or addendum. Pl.’s Mot. 9-10; Pl.’s Reply 7-8. Although the plaintiff acknowledges that
the agency deemed the omission of price and brand/model name to be a fundamental
flaw, the plaintiff complains that “[n]o explanation whatsoever exists which explains why
. . . any such omission is a ‘fundamental flaw’ nor whether such an omission could or
would require a ‘significant revision’ which, if made, would permit further evaluation.”
Pl.’s Mot. 10. In response, the government contends that, by its terms, ¶ E.2.9(2) did not
require a discussion of each rejection decision, and that, even if it did, ST Net’s proposal
was fully evaluated.
The court finds that DHS adequately documented its rationale for rejecting ST
Net’s proposal. Indeed, the Source Selection Decision Document provided the following
rationale for disqualifying ST Net:
The Offeror’s proposed total price is * * *; however, the total evaluated
price did not fully meet the requirements per the provisions outlined in
Chapter E, Part 3.4, of the solicitation. Specifically, the Offeror did not
provide Brand Names and Models, or quotes, for all of the supplies/items
within their Sample Delivery Order Pricing Matrix, as required by
Attachment 5 of the solicitation. This is a fundamental flaw of the
proposal.
25
AR 597.24 As noted above, the solicitation made clear that offerors would be held to
exacting standards when completing their pricing matrices. Given DHS’s stated intention
to rely on—and hold offerors accountable to—the data provided in their pricing matrices,
the plaintiff’s argument concerning the adequacy of DHS’s documented explanation must
be rejected. The court will not second guess what the term “fundamentally flawed”
implies: That DHS had concluded that ST Net would have needed to submit a
“significant” revision in order for its proposal to have been complete. The conclusion
that the flaw was “fundamental” in such circumstances must be upheld.
C. The plaintiff’s remaining contentions are not proper bases for relief
The court has considered, and deems meritless, the plaintiff’s additional
contentions that (1) DHS did not conduct a proper price evaluation, and instead only
evaluated the pricing matrices based on completeness; (2) DHS created a “de facto”
competitive range that might have obligated DHS to engage in communications with ST
Net; and (3) DHS treated ST Net differently from three IDIQ winners who ST Net alleges
submitted untimely proposals or who submitted incomplete pricing matrices. These
arguments are addressed in turn.
First, the plaintiff has failed to carry its burden to show that DHS failed to conduct
a proper price evaluation. The plaintiff offers no evidence—let alone the “almost
irrefragable” proof necessary to overcome the presumption of regularity—that DHS
officials failed to act in good faith in evaluating offerors’ price proposals. See Galen
24
Section 3.4 of the solicitation explains that the pricing matrix will be the basis for calculating
each offeror’s total evaluated price. AR 85.
26
Med. Assocs., Inc. v. United States, 369 F.3d 1324, 1330 (Fed. Cir. 2004) (quoting Info.
Tech. Applications Corp. v. United States, 316 F.3d 1312, 1323 n.2 (Fed. Cir. 2003)).
The plaintiff has also failed to demonstrate that DHS did, in fact, create a
competitive range excluding ST Net from consideration prior to fully evaluating ST Net’s
proposal. It is not disputed that DHS announced in the solicitation that it would make
awards without discussions and thus without creating a competitive range. This court has
observed that a basic element of a competitive range is that “it excludes certain offerors
from further consideration,” Serco Inc. v. United States, 81 Fed. Cl. 463, 490 n.41
(2008), and nothing in the record suggests that ST Net’s proposal was excluded from
consideration up until the point when the SSA made its best value determinations, see id.
at 473-74, 490 n.41 (de facto competitive range not created where agency fully evaluated
62 conforming proposals and recognized “presumptive award group” consisting of
bidders falling above the “natural break” between the 27th and 28th ranked bidders).
Finally, the plaintiff has failed to show that ST Net is entitled to relief due to
unequal treatment. The record supports, and the plaintiff does not challenge, the
government’s assertion that none of the IDIQ winners submitted untimely proposals.
During oral argument the plaintiff also raised—for the first time—the argument that
DHS’s award of an IDIQ contract to an offeror that had also failed to include brand name
information in its pricing matrix constituted unequal treatment. Because it was raised for
the first time at oral argument, the court deems this new basis for relief to have been
waived. See Raytheon Co. v. United States, 96 Fed. Cl. 548, 555 n.2 (2011) (citing
cases). Moreover, even if the court were to consider this new argument, counsel for ST
27
Net conceded that, notwithstanding the alleged absence of brand/model name
information, all of the IDIQ awardees provided DHS with complete price information for
each item in their pricing matrices. The plaintiff’s arguments related to unequal treatment
must, therefore, be rejected.
III. CONCLUSION
For the foregoing reasons, the government’s motion to dismiss under RCFC
12(b)(1) and 12(b)(6) are DENIED. The government’s motion for judgment on the
administrative record is GRANTED, and the plaintiff’s cross-motion is DENIED.25
Each party shall bear its own costs. The Clerk is directed to enter judgment accordingly.
IT IS SO ORDERED.
s/Nancy B. Firestone
NANCY B. FIRESTONE
Judge
25
Because the court finds that it was not arbitrary, capricious, an abuse of discretion, or contrary
to law for DHS to disqualify ST Net, the court has no occasion to reach the government’s
alternative argument concerning this court’s authority to grant the specific injunctive relief
sought by the plaintiff. Similarly, the court has no occasion to evaluate whether injunctive relief
is appropriate.
28