Utech Products v. United States ( 2020 )

In the United States Court of Federal Claims
No. 20-315C
(Filed Under Seal: May 28, 2020)
(Reissued: June 4, 2020)
)
UTECH PRODUCTS d/b/a/ )
ENDOSOFT, LLC, )
)
Plaintiff, )
)
v. ) Post-award protest of a sole source
) procurement; justification; 41
UNITED STATES, ) U.S.C. 3304(a)(1); responsible
) sources
Defendant, )
)
and )
)
PROVATION MEDICAL, INC., )
)
Defendant-Intervenor. )
)
Alan Grayson, Alan Grayson, Esq., Windermere, Florida, for plaintiff.
John H. Roberson, Senior Trial Counsel, Commercial Litigation Branch, Civil Division,
United States Department of Justice, Washington, D.C., for defendant. With him on the briefs
were Joseph H. Hunt, Assistant Attorney General, Civil Division, and Robert E. Kirschman, Jr.,
Director, and Douglas K. Mickle, Assistant Director, Commercial Litigation Branch, Civil
Division, United States Department of Justice, Washington, D.C. Of counsel was Tyler W.
Brown, Attorney, District Contract Law National Practice Group, Department of Veteran
Affairs, Washington, D.C.
Alex P. Hontos, Dorsey & Whitney LLP, Minneapolis, Minnesota, for defendant-
intervenor.
OPINION AND ORDER1
1
Because of the protective order entered in this case, this opinion was initially filed under
seal. The parties were requested to review the decision and provide proposed redactions of any
confidential or proprietary information. Neither the government nor defendant-intervenor
proposed redactions. Plaintiff proposed redactions of information regarding the agency’s
LETTOW, Senior Judge.
Plaintiff Utech Products d/b/a EndoSoft, LLC (“EndoSoft”) protests the actions of the
Veterans Health Administration of the Department of Veteran Affairs (the “VA” or the
“government”) in awarding a sole-source contract for a gastrointestinal electronic medical record
software system to defendant-intervenor ProVation Medical, Inc. (“ProVation”). EndoSoft
alleges that the VA inappropriately awarded the contract to ProVation without soliciting other
offers and evaluating them through a competitive lens, requesting that this court declare that the
VA’s decision was arbitrary, capricious, an abuse of discretion, and not in accordance with law.
As relief, EndoSoft requests that this court enjoin the VA from taking further action on the
contract, direct that the contract be terminated for convenience, award attorney’s fees and
proposal preparation costs to EndoSoft, and grant any other relief the court deems appropriate.
See Compl. at 21, ECF No. 1.
FACTS2
The VA Health Administration is divided into twenty-three regions, referred to as
Veterans Integrated Service Networks (“VISNs” or “Regions”). Compl. ¶ 8. In September
2016, Region 6, which encompasses Virginia and North Carolina, see Compl. ¶ 8, entered into a
contract with Four Points Technology (“Four Points”), which by subcontract procured
EndoSoft’s services for a gastrointestinal electronic medical record (“GI EMR”) software
system, see AR 1-1 to 2; AR 5-49.3 As many as half of VA’s medical centers nationwide use
EndoSoft. AR 4-40. Essentially a medical recordkeeping software, GI EMR systems enable
physicians to electronically document procedures performed after providing patient care. See
AR 5-49. The 2016 contract with Four Points served to replace EndoWorks, a GI EMR system
produced by Olympus and previously used by Region 6. See AR 5-66; AR 5-71. The Four
Points contract contained an initial base one-year period of performance and four option years.
See generally AR 1. The current option year ends on May 31, 2020 and the next option year is
scheduled to begin on June 1, 2020. See AR 3-38. The VA, however, determined not to exercise
evaluation of plaintiff’s performance of the service being provided on the contract sought to be
replaced by the procurement at issue. That information is not “proprietary information” of
plaintiff that should be redacted. See National Telecommuting Inst. v. United States, 129 Fed.
Cl. 595, 598 n.1 (2015).
2
The following recitations constitute findings of fact by the court from the administrative
record of the procurement filed pursuant to Rule 52.1(a) of the Rules of the Court of Federal
Claims (“RCFC”). See Bannum, Inc. v. United States, 404 F.3d 1346, 1356 (Fed. Cir. 2005)
(specifying that bid protest proceedings “provide for trial on a paper record, allowing fact-
finding by the trial court”).
3
The government filed the administrative record pursuant to RCFC 52.1(a) on April 1,
2020, ECF No. 24. Subsequently, the government filed supplements to the record that had been
inadvertently omitted initially. See ECF Nos. 31, 37. The record is divided into nineteen tabs
and sequentially paginated. References to the record are cited by tab and page as “AR ___-___.”
2
the option, see AR 5-49, and the course of events following that decision ultimately led to this
litigation.
After implementation of the EndoSoft system under the Four Points contract, several
locations within Region 6 began to observe technical glitches in the software. On January 7,
2019, for instance, a nurse manager in Durham, North Carolina noted that a report was
apparently deleted as if never entered after the completion of a procedure. See AR 5-59 to 60.
She also reported that “patients we had checked in were systematically being deleted.” AR 5-59.
She noted that she had reported the issue to “the software company last time” and “[t]hey told
me they fixed the problem, but I don’t think it is fixed . . . because it happened again today.” AR
5-59. A nurse in Richmond, Virginia replied that there, too, they “[were] experiencing the same
problems” and that she had “a nurse assigned to monitor this and other issues on a daily basis.”
AR 5-59. The following day, VA notified Four Points and EndoSoft that “[t]he end users are
still experiencing issues with patients getting deleted after EndoSoft told us recently this issue
was resolved” and asked them to shed light on “what went wrong when the first fix was applied
and how the next fix will be tested thoroughly for ensuring this problem truly gets resolved this
time.” AR 5-57 to 58. In reply, EndoSoft acknowledged that “procedures are in fact being
cancelled by the interface.” AR 5-57 (emphasis removed). After further troubleshooting,
EndoSoft identified “a few items that need[ed] to be addressed,” including “continued deletion of
PT appointments at random” and the addition of physicians, fellows, and other staff to procedure
reports at random. AR 5-55. The record does not disclose whether these issues were ever
satisfactorily resolved or how broadly they pertained to other medical centers within Region 6,
but it does indicate that as late as April 2019 “frustration with the EndoSoft program continue[d]
to be the topic of weekly conference calls.” AR 5-79. Such technical frustrations led the VA to
conclude that the EndoSoft system “does not offer user interface functionalities [needed] to
prevent impact on patient care workflow and schedules.” AR 5-75.
In December 2018, the chief medical officer of Region 6 authorized the formation of a
workgroup to conduct a site visit to the Charleston medical center “to evaluate the ProVation GI
EMR in a VA setting for consideration as a potential replacement to the existing EndoSoft GI
EMR system.” AR 5-75. The group—which consisted of a physician, biomedical engineer, and
nurses—conducted a site visit on March 26, 2019 and issued a White Paper (“the White Paper”)
outlining their conclusions on April 17, 2019. See AR 5-75 to 79. Principally divided into two
sections, the White Paper first identified “criteria for decision making” categorized into three
areas: clinical effectiveness, patient safety, and ease of use. AR 5-76 to 77. It then proceeded to
compare the strengths and weaknesses of ProVation with EndoSoft under each of these three
categories. AR 5-77 to 79. After identifying multiple strengths of ProVation and weaknesses of
EndoSoft, each subsection concluded by noting that the “physicians and nurses that participated
in this demonstration did not have any weaknesses to report about Pro[V]ation when compared
with EndoSoft.” AR 5-77 to 79.
In a market research report dated June 20, 2019, contracting officer Cole Culley
concluded that Region 6 “requires a replacement [GI EMR] [s]ystem to replace the current
system, EndoSoft,” because it had “proven to be insufficient,” listing eight specific areas in
3
which EndoSoft had purportedly failed to meet the needs of Region 6. AR 19-1253.4 The
report then noted that searching by the keyword “GI EMR” in a database containing vendor
information, 179 different potential vendors were identified, but it “determined that the required
solution is only available from the large business manufacturer ProVation.” AR 19-1253. That
conclusion stemmed from the report’s findings about the transferability of data from the original
EndoWorks system. See AR 19-1253. Because third parties are legally restricted from accessing
the EndoWorks records database, Olympus (the original equipment manufacturer for
EndoWorks) developed and authorized an export tool to enable data migration from its system.
AR 19-1253 to 1254. The market research report observed that “[t]he EndoWorks [e]xport [t]ool
is the only authorized tool which accurately extracts data from EndoWorks into standardized
files, so that the data can be correctly imported into the [p]referred [v]endor’s systems, retaining
data integrity.” AR 19-1253. Mr. Culley determined, however, that Olympus had authorized
only two so-called “preferred vendors” to use its data export tool: ProVation and gMed. See AR
19-1253 to 1254. This conclusion about the limited number of vendors with exclusive rights to
the EndoWorks tool appears to have come solely from statements indicating such found on the
Olympus website. See Hr’g Tr. 72:21 to 73:3 (May 14, 2020).5 Building on that finding, Mr.
Culley’s report eliminated gMed as a viable option for Region 6 because it “is more geared
toward the clinic setting,” leaving ProVation as “the only vendor that meets the requirements of
this request.” AR 19-1254. Nothing in the report, however, indicated how EndoSoft, then being
used throughout Region 6, had transferred the EndoWorks data when initially implemented as
part of the Four Points contract or whether ProVation possessed the capability to migrate data
recorded in EndoSoft since that time. The market report concluded by recommending that the
VA “sole source this requirement to” ProVation, observing that “[t]he use of another GI EMR
4
The eight deficiencies were:
(1) Physicians are not capable of generating accurate colonoscopy reports in
EndoSoft;
(2) EndoSoft must be accessed through Citrix to chart or view reports which
ca[u]ses a lag that delays patient care;
(3) EndoSoft associated printers frequently drop-off of Citrix, which creates
additional delays;
(4) Reports in EndoSoft cannot be edited;
(5) Physicians cannot search reports performed by GI Fellow Attending separately
in EndoSoft;
(6) EndoSoft offers minimal patient information within the system and contains
many errors with regards to spelling;
(7) EndoSoft reports take over ten minutes to transcribe and often contain spelling
errors; and
(8) [P]rocedure times in EndoSoft are inaccurate and must be manually inputted by
the physician.
AR 19-1253.
5
Subsequent citations to the transcript of the hearing held on May 14, 2020 will omit the
date.
4
system outside of ProVation will require the VA to purchase an entirely new line of
endoscopes,” resulting in millions of dollars of additional costs and staff retraining “[t]hat would
cause a substantial delay in patient care.” AR 19-1254 to 1255.
Shortly thereafter, Mr. Culley underwent several surgical procedures that placed him on
sick leave until August 12, 2019, and his supervisor, Keeshia Newman, assumed responsibility
for emergency matters relating to his work assignments in the interim. See Def.’s Cross-Mot. for
Judgment on the Admin. R. and Mot. to Dismiss (“Def.’s Cross-Mot.”), App. A at 2, ECF No.
39. On July 23, 2019, Ms. Newman completed a justification and approval for other than full
and open competition (“J&A”) identifying ProVation as the only source meeting the necessary
requirements. See AR 5-65 to 69. The J&A—which relied heavily on the findings of Mr.
Culley’s market research report, quoting it verbatim in places—identified the same eight
inadequacies with EndoSoft, see AR 5-66, and concluded that, under FAR § 6.302-1, no other
source could satisfy the agency’s requirements because “Olympus has given access to its
proprietary conversion software to only two companies . . . . [and t]here is no[thing] the
government can do to overcome this barrier,” AR 5-68.
On August 8, 2019, the VA posted on the federal business opportunities website—“for
information purposes only,” AR 5-64—a notice of its intent to sole-source the contract, see AR
5-49; AR 5-61 to 64. The posting listed a series of five requirements, including “capab[ility] of
migrating all data through the use of the EndoWorks [e]xport [t]ool,” and stated that because the
needed services are “highly specialized” and “only available from a single source,” the VA
“intends to award the contract with an effective date of September 1, 2019 to Pro[V]ation
Medical.” AR 5-62. The next day, EndoSoft sent an email to Ms. Newman in “strong protest”
of the sole source notice. AR 16-1241. The email emphasized that the “[r]equirement to migrate
data from EndoWorks legacy system has already been completed by EndoSoft” at all Region 6
sites and thus “does not require the use of the tool provided by Olympus.” AR 16-1241.
Asserting that “[t]his is not a unique requirement,” EndoSoft contended that it “has a proprietary
migration tool that was utilized to migrate the data” from EndoWorks and other legacy systems
in the previous two years and that it had employed that tool at 41 different VA medical centers,
including 11 medical centers within Region 6. AR 16-1241 to 1242. Countering the conclusion
that continuing with EndoSoft would require purchasing an entirely new line of scopes, the email
noted that “EndoSoft is vendor[-]neutral and is compatible with Olympus Endoscopes and is also
being currently used at all of [Region] 6 sites.” AR 16-1242.
A few days later, EndoSoft followed up on its email to inquire “regarding the acceptance
of the protest and confirmation of our filing.” AR 16-1240. Ms. Newman promptly responded,
stating that she “wasn’t aware that the email you sent was an ‘official protest[.]’ I understand
your concerns and we will be withdrawing the intent notice and proceeding with full and open
competition.” AR 16-1240. She then clarified that “[w]hen a solicitation is issued it will have
clear specifications of what the government is seeking.” AR 16-1239. But, on August 22, 2019,
Ms. Newman replied again, see AR 18-1248, attaching a short statement of facts, which
concluded that she had considered EndoSoft’s protest and “determined that it is in the
government[’]s best interest to proceed with the sole source to Pro[V]ation,” AR 17-1246. She
noted that “FAR Subpart 13.5 Simplified Acquisitions Procedures for Certain Commercial Items
procedure[] was used for this acquisition, which vests the contracting officer with additional
5
procedural discretion and flexibility that maximizes efficiency, economy, and minimizes burden
and administrative costs for both the [g]overnment and industry.” AR 17-1246.
On August 22, 2019—the same day that Ms. Newman notified EndoSoft that its protest
had been rejected—Mr. Culley, who by this time had returned from sick leave, executed a
second J&A “in order to provide additional justification that was not previously included in the
[first J&A].” AR 5-50. The second J&A stated that the procurement was “in accordance with
FAR 13.5 Simplified Procedures for Certain Commercial Items and specifically FAR [§] 13.501
Special Documentation Requirements, where acquisitions conducted under Simplified
Acquisition Procedures are exempt from the requirements of FAR Part 6, but still require a
justification using the format of FAR [§] 6.303-2.” AR 5-70. Like the first J&A, the second
J&A pointed for its statutory authority to FAR § 6.302-1, which permits other than full and open
competition when there is only one responsible source and no other supplies or services can
satisfy agency requirements. AR 5-71.
The J&A again enumerated the same eight EndoSoft inadequacies, concluding that
“failure of the EndoSoft system to assure information accuracy results in errors which places the
safety of our veterans at an unnecess[]ary and entirely avoidable risk.” AR 5-72. It also noted
that ProVation offered a unique benefit because private sector academic medical affiliates at
Duke University and Virginia Commonwealth University also use ProVation. See AR 5-71.
Were Region 6 to implement ProVation, the J&A reasoned, it “will further facilitate more
efficient care of [v]eterans since gastroenterology fellows and surgical residents rotating through
the VA gastroenterology section are likely to have already been trained on ProVation MD at the
academic affiliate.” AR 5-72. Implementing ProVation could thus prevent “inefficiencies both
in terms of training and ongoing clinical care” as well as “risk of incomplete or inaccurate
documentation in the medical record” caused by gastroenterology fellows and university
physicians who “are often unfamiliar with [EndoSoft].” AR 5-71. Finally, the J&A again
iterated that any GI EMR system Region 6 obtained must have “the capability of transferring
data through the use of the EndoWorks [e]xport [t]ool” and only ProVation, because of its nearly
exclusive authorization by Olympus, could do so. AR 5-72.
EndoSoft filed a protest with the Government Accountability Office (“GAO”) on August
23, 2019. See generally AR 4. The VA filed a response defending its decision on September 23,
2019, see generally AR 5, and ProVation submitted its response on October 3, 2019, see
generally AR 6. Without addressing the merits, “because the protester failed to file its comments
on the agency report by the due date,” GAO dismissed the protest on October 4, 2019. AR 7-86.
GAO thereafter denied EndoSoft’s request for reconsideration on October 18, 2019. See
generally AR 9. The VA awarded the contract to ProVation on January 24, 2020, see AR 13-
114, and EndoSoft filed a post-award GAO protest on January 31, 2020, see generally AR 10,
which GAO again denied on February 28, 2020 without addressing the merits, see generally AR
13.
EndoSoft filed its complaint in this court on March 20, 2020. See generally Compl., ECF
No. 1. The court granted ProVation’s motion to intervene on March 24, 2020. See Order
granting Mot. to Intervene, ECF No. 15. Following submission of the administrative record on
April 1, 2020, EndoSoft filed a motion for judgment on the administrative record on April 7,
6
2020. See Mot. for Judgment on the Admin. R. (“Pl.’s Mot.”), ECF No. 25. The government
and ProVation each filed a cross-motion for judgment on the administrative record and a motion
to dismiss on April 21, 2020. See Def.’s Cross-Mot.; Def.-Intervenor’s Cross-Mot. for Judgment
on the Admin. R. and Mot. to Dismiss (“ProVation’s Cross-Mot.”), ECF No. 38. After further
briefing by the parties, see Pl.’s Reply to Def.’s Cross-Mot. and ProVation’s Cross-Mot. (“Pl.’s
Reply”), ECF No. 40; Def.’s Reply to Pl.’s Resp. (“Def.’s Reply”), ECF No. 42; Def.-
Intervenor’s Reply to Pl.’s Resp. (“ProVation’s Reply”), the court held a hearing on May 14,
2020.
After the parties had completed briefing the dispositive motions, a development relating
to Olympus’s licensing of the EndoWorks export tool to preferred vendors came to light. On
May 13, 2020, the government filed a notice of newly-discovered information inconsistent with
certain of its prior factual statements. See Notice of New Information, ECF No. 48. The
government, commendably, disclosed that a closer perusal of the Olympus website indicated
that, in addition to ProVation and gMed, a third company, Cerner Corporation (“Cerner”) also
possesses rights to the EndoWorks extract tool for data migration, contrary to the evidently
mistaken factual premise of the agency throughout the procurement process. Id. at 2-3.
STANDARDS FOR DECISION
The Tucker Act vests this court with jurisdiction “to render judgment on an action by an
interested party objecting to 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). Standards set forth in the Administrative
Procedure Act (“APA”), codified in relevant part at 5 U.S.C. § 706, govern the court’s review of
a protest of a government contract award. See 28 U.S.C. 1491(b)(4) (“In any action under this
subsection, the courts shall review the agency’s decision pursuant to the standards set forth in
section 706 of title 5.”). Under 5 U.S.C. § 706(2)(A), the court may set aside an agency’s
procurement decision that is “arbitrary, capricious, an abuse of discretion, or otherwise not in
accordance with law.” The court’s determination is subject to the traditional balancing test
applicable to a grant of equitable relief. See PGBA, LLC v. United States, 389 F.3d 1219, 1224-
28 (Fed. Cir. 2004); Hyperion, Inc. v. United States, 115 Fed. Cl. 541, 550 (2014).
The court shall not “substitute its judgment for that of the agency,” Hyperion, 115 Fed.
Cl. at 550 (quoting Keeton Corrs., Inc. v. United States, 59 Fed. Cl. 753, 755 (2004) (in turn
quoting Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 416 (1971), abrogated
on other grounds as recognized in Califano v. Sanders, 430 U.S. 99, 105 (1977))). The court
may overturn the government’s procurement decision only “if ‘(1) the procurement official’s
decision lacked a rational basis; or (2) the procurement procedure involved a violation of
regulation or procedure.’” Centech Grp., Inc. v. United States, 554 F.3d 1029, 1037 (Fed. Cir.
2009) (quoting Impresa Construzioni Geom. Domenico Garufi v. United States, 238 F.3d 1324,
1332 (Fed. Cir. 2001)). Protests alleging a violation of regulation or procedure “must show a
clear and prejudicial violation.” Axiom Res. Mgmt., Inc. v. United States, 564 F.3d at 1374, 1381
(Fed. Cir. 2009) (quoting Impresa Construzioni, 238 F.3d at 1333).
7
Designed in part “to bring the benefits of competition to government procurement,” ATA
Def. Indus., Inc. v. United States, 38 Fed. Cl. 489, 498 (1997), the Competition in Contracting
Act of 1984 (“CICA”), Pub. L. No. 98-369, Div. B, Tit. VII, 98 Stat. 1175 (codified, as
amended, in various sections of titles 10, 31, and 41 of the United States Code) establishes a
general rule that federal agencies must “obtain full and open competition through the use of
competitive procedures,” 41 U.S.C. § 3301(a)(1). That presumption is strong but not absolute;
the statute expressly allows for exceptions, permitting the use of noncompetitive procedures in
specifically enumerated contexts. One such exception applies when “the property or services
needed by the executive agency are available from only one responsible source and no other type
of property or services will satisfy the needs of the executive agency.” 41 U.S.C. § 3304(a)(1).
The regulations implementing these provisions explain that the exception may be appropriate
“[w]hen there is a reasonable basis to conclude that the agency’s minimum needs can only be
satisfied by[] [u]nique supplies or services available from only one source or only one supplier
with unique capabilities.” 48 C.F.R. § 6.302-1(b)(1)(i). To properly invoke this exception, the
statute requires the contracting officer to execute, and obtain approval of, a written justification
that includes certain elements specified in the statute. See 41 U.S.C. § 3304(e)(1)-(2). At issue
here is whether the agency adequately justified its invocation of the exception.
To restate the pertinent legal criteria, agencies may procure their needs from sole sources,
“us[ing] procedures other than competitive procedures only when . . . the property or services
needed by the executive agency are available from only one responsible source and no other type
of property or services will satisfy the needs of the executive agency.” 41 U.S.C. § 3304(a)(1);
see also 48 C.F.R. § 6.302-1(a)(2) (“When the supplies or services required by the agency are
available from only one responsible source . . . and no other type of supplies or services will
satisfy agency requirements, full and open competition need not be provided for.”). “Identical
review standards apply under the APA in the context of a sole-source award.” Emery Worldwide
Airlines, Inc. v. United States, 264 F.3d 1071, 1086 (Fed. Cir. 2001) (citing Myers Investigative
and Sec. Servs., Inc. v. United States, 47 Fed. Cl. 605) (2000)) (additional citation omitted).
“When a party contends that the procurement procedure in a sole-source case involved a
violation of a statute, regulation, or procedure, it must establish prejudice by showing that it
would have had a substantial chance of receiving the award.” Id. (citation omitted). It can show
prejudice in two ways, either by showing: “(1) proceeding without the violation would have
made the procurement official’s decision to make a sole-source award rather than to conduct a
competitive bidding process irrational, and in a competitive bidding process, the complaining
party would have a substantial chance of receiving the award; or (2) proceeding without the
violation, the complaining party would have a substantial chance of receiving the sole-source
award.” Id. (citations omitted).
ANALYSIS
This dispute hinges on whether the VA’s decision to disregard the requirements of
competitive procurement by making a sole-source award to ProVation “involved a violation of a
statute, regulation, or procedure.” Emery Worldwide, 264 F.3d at 1086. The court finds that it
did.
8
The government and ProVation proffer several reasons to support their contention that
ProVation was and is the only source capable of satisfying the agency’s minimum needs. They
assert that the VA’s comparison of EndoSoft’s and ProVation’s merits throughout this process
did not constitute “engaging in the evaluation of technical superiority that happens during
competitive procurements” but rather sought to explain why EndoSoft “could not be an
alternative source for [the VA’s] specific requirement.” ProVation’s Cross-Mot. at 14 (citations
omitted) (emphasis removed). “The agency was not conducting a relative weighing of
proposals,” ProVation emphasizes, “it was articulating why EndoSoft was not a viable
alternative source.” Id. at 15 (citations omitted). The evidence throughout the record, however,
belies that conclusion, indicating that the animating force driving the VA’s decision to seek a
new GI EMR system was a preference for ProVation over EndoSoft. To begin, the White Paper
consisted almost entirely of a comparison of the strengths and weaknesses of the two systems.
See AR 5-77 to 79. Likewise, EndoSoft’s “insufficient” performance in VA’s Region 6 served
as the premise of the market research report, and the eight performance-focused shortcomings
that the report identified found their way into both subsequent justification-and-approval reports.
See AR 19-1253; AR 5-66; AR 5-71 to 72.
The determination that a new contractor could perform better the same functions an
incumbent contractor currently performs is insufficient, even if true, to justify a sole-source
award. See Aero Corp. v. Department of the Navy, 540 F. Supp. 180, 208 (D.D.C. 1982)
(Oberdorfer, J.) (“[T]he technical and administrative superiority of a given firm over all other
possible sources has never been accepted as a justification for sole-source procurement from that
firm.”). Even assuming the incumbent contractor’s performance fails to perfectly satisfy the
agency’s expectations, that circumstance alone would not justify circumventing the competitive
process and awarding the contract without soliciting bids. Thus, in this context, EndoSoft’s
purported poor performance did not and could not justify abandoning standard competitive
procedures when seeking a replacement.
The agency’s justification for its decision also relied heavily on its determination that
only ProVation had authorization to use the Olympus data export tool, a capability the agency
considers a requirement. See AR 5-62; AR 5-72 to 73. But this position is problematic. First,
the agency takes as a given that data migration is impossible without access to the EndoWorks
export tool, and it labels the tool a minimum need only ProVation could satisfy because of that
assumption. But, undermining the agency’s reasoning, EndoSoft, apparently without access to
the tool, had already imported the historical EndoWorks data. That EndoSoft had successfully
done so belies the agency’s basic premise that data migration could not be done without the tool.
Likewise, given that EndoSoft already stores the historical data, the agency offers no convincing
explanation why a potential replacement would even require compatibility with the legacy
EndoWorks system; it would seem that capability to export data from EndoSoft would achieve
the same objective. In response, the government posits that EndoSoft’s import of patient data
from EndoWorks was, in fact, the problem rendering EndoSoft insufficient in the first place. See
Def.’s Reply at 3-4 (noting that “the VA has experienced the inadequacy in EndoSoft’s
importation . . . of patient data from EndoWorks, to the degree that the EndoWorks data w[ere]
actually imported into EndoSoft’s GI EMR system.”). Nothing in the record, however, supports
this contention. While the record is relatively sparse about the specific complaints users had
with EndoSoft, the particular complaints which are included have no apparent relation to
9
historical data imported from the legacy EndoWorks system; instead, the documented complaints
relate to ongoing new inputs to the EndoSoft system. See, e.g., AR 5-59 (documenting a user
complaining about the deletion of a report of a procedure that had been entered that same day).
Second, while asserting that the export tool for migrating historical data from EndoWorks
is a minimum need, the agency simply disregards that ProVation’s system is incompatible with
that of EndoSoft, meaning that ProVation has no means to import any of the existing data input
into the EndoSoft system over the past several years. See Hr’g Tr. 42:21 to 43:19. The agency
concedes that using ProVation will thus produce a gap in patient records but contends that it can
manually input that data from EndoSoft into ProVation. See id. In sum, the agency cannot
persuasively explain why it must have a special tool to import data from before the
implementation of EndoSoft, yet it does not require such a vehicle to import the more recent data
accumulated in EndoSoft since that time.
Third, even assuming the data cannot be migrated without the EndoWorks export tool,
that justification is not without serious shortcomings. As a preliminary matter, nothing in the
record shows how difficult it is to obtain licensure from Olympus. The agency prevented every
other potential GI EMR provider from competing for the contract because it determined,
apparently relying solely on an internet search, see Hr’g Tr. 72:21 to 73:3, that only one supplier
possessed a specific license, but it has provided no evidence suggesting that other providers
could not obtain that authorization to compete under ordinary competitive procedures. More
significantly, another entity has already obtained such rights, undermining the major premise of
the agency’s decision to forego competitive procedures. Counsel for the government laudably
disclosed after briefing that closer examination of the Olympus website revealed that a third
company, Cerner, also possessed authorization to use the export tool. See Notice of New
Information at 3. The supposed exclusivity of ProVation’s access to the export tool served as a
factual premise woven throughout the agency’s justification for abandoning standard competitive
procedures.
At the hearing on the merits, the government suggested that Cerner might not be relevant
because it might not be a potential provider of a GI EMR system. See Hr’g Tr. 34:10-21.
Subsequently, the contracting officer sought further information from Cerner about its
capabilities to export EndoWorks data using the export tool. See Declaration of Cole Culley,
ECF No. 53. In response to Mr. Culley’s queries, Cerner informed him that it “does have the
ability to u[se] the EndoWorks [e]xport [t]ool for data migration,” but, because Cerner does not
offer its own GI EMR system, its “solution must be leveraged . . . and is not deployable on its
own.” Id. at 3 (quotation omitted). On this basis, the contracting officer concluded that “while
Cerner does have access to the EndoWorks [e]xport [t]ool, they do not offer a standalone GI
EMR system and therefore would not have been a prospective offeror had [a] solicitation . . .
10
been comp[l]eted.” Id.6 Mr. Culley’s additional information, however, does not eliminate
Cerner—under the agency’s own stated criteria—as a potential alternative source. The agency’s
stated minimum need was access to the export tool, not access to the tool and status as a
standalone GI EMR provider. Anyone with access to the tool could meet the stated minimum
need so long as they could leverage the tool with an adequate GI EMR system. For example, the
contract that resulted in Region 6 implementing EndoSoft in the first place employed a
subcontractor mechanism—the VA contracted with Four Points, not EndoSoft, to obtain the
EndoSoft GI EMR system. Likewise, Cerner need not offer its own GI EMR system to meet the
agency’s stated minimum needs and still qualify as a prospective offeror in a competitive
process.
That Cerner likewise possesses the same or similar authorization as ProVation exposes a
flaw in the agency’s position, indicating that the already questionable basis for the sole-source
award—that ProVation was the only responsible source capable of satisfying a minimum need—
was in fact unfounded. In sum, if both Cerner and ProVation possess similar access to the export
tool, then at least one other potentially responsible source can satisfy the agency’s stated
minimum need, and therefore, without something more, the sole-source award to ProVation
cannot be justified under the one responsible source exception permitted by Paragraph
3304(a)(1).
Finally, the government and ProVation contend that ProVation’s system offers a “unique
qualification[]” in that it could “foster an overall facility level of integration which is presently
non-existent between the VISN facilities and [the VA’s] healthcare partners in the private
sector.” Def.’s Cross-Mot. at 14 (citation and quotation omitted). They emphasize that because
the VA’s academic affiliates (namely, Duke University and Virginia Commonwealth University)
utilize ProVation’s system for their endoscopy units, “[i]f the VA were to acquire a different
software system, it would introduce inefficiencies both in terms of training and ongoing clinical
care” due to the regular rotation of medical personnel between the VA and its academic
affiliates. Id. (citation and quotation omitted); see also ProVation’s Reply at 9-10 (noting that
within Region 6 “at least one [medical center] has 14 gastroenterology fellows and 16 attendings
rotating between the academic affiliate and the VA[,] and another has 2 nurses, 2 techs, and 5
physicians who rotate”). But this justification is also unavailing. First, EndoSoft convincingly
draws into question the agency’s rationale by observing that it made no attempt to explain “why
it would be preferable to retrain every [VA] medical professional in [Region] 6 on a new system,
rather than cross-training visiting staff on the existing EndoSoft system.” Pl.’s Reply at 8-9
(emphasis omitted). Furthermore, the court recognizes that mutual system interface familiarity
for rotating medical professionals may very well be a desirable feature to increase efficiency, but
a preference for efficiency is not the same as a minimum need, and as such is not enough to
justify departing from standard competitive procedures. See McAfee, Inc. v. United States, 111
6
Cerner evidently is well-known to the VA. At the hearing, counsel for the government
advised the court that “Cerner was given a large $10 billion contract from the VA in May of
2018 to replace the VA’s legacy electronic health records system.” Hr’g Tr. 34:13-15; see also
Pl.’s Resp. to Decl. of Contracting Officer Cole J. Culley at 4, ECF No. 56 (“Cerner [is] in the
midst of implementing the VA’s $16 billion Electronic Health Record Modernization Program
. . . nationwide.”).
11
Fed. Cl. 696, 711-12 (2013) (holding that an agency’s goals of standardization and sole-source
procurement were not proper justifications for a non-competitive award); Savantage Fin. Servs.,
Inc. v. United States, 81 Fed. Cl. 300, 308 (2008) (noting that an agency “cannot merely select
certain software systems because it feels they are most cost-effective” because “so long as there
is more than one source competent to perform the contract, [the agency] must evaluate the merit
of each offeror’s product through the competitive lens”).
CONCLUSION
For the reasons stated, the court finds the VA’s decision to forego the requirements of
competitive procurement by making a sole-source award to ProVation to be unwarranted.
Consequently, EndoSoft’s motion for judgment on the administrative record is GRANTED IN
PART, and the government’s and ProVation’s cross-motions for judgment on the administrative
record and to dismiss are DENIED.7 The court ENJOINS the VA from implementing the
ProVation contract and orders that it be set aside. The clerk is directed to enter judgment
accordingly.
No costs.
It is so ORDERED.
s/ Charles F. Lettow
Charles F. Lettow
Senior Judge
7
Additionally, EndoSoft’s pending motions to supplement the administrative record, see
ECF Nos. 26, 41, are DENIED, and EndoSoft’s motion for preliminary injunction, see ECF No.
9, is DENIED as moot.
12