Excelsior Ambulance Service, Inc. v. United States

In the United States Court of Federal Claims
No. 15-189C
(Filed Under Seal: December 4, 2015)
(Reissued for Publication: December 15, 2015)*
*****************************************
EXCELSIOR AMBULANCE SERVICE, INC., *
* Bid Protest; Solicitation; Department
Plaintiff, * of Veterans Affairs; RCFC 52.1;
* Cross-Motions for Judgment on the
v. * Administrative Record; SDVOSB;
* Corrective Action; Ambulance
THE UNITED STATES, * Services; FAR 52.219-14;
* FAR 15.306(a); FAR 15.306(e)(1);
Defendant. * VAAR 852.219-10
*****************************************
James E. Krause, Jacksonville, FL, for plaintiff.
Melissa L. Baker, United States Department of Justice, Washington, DC, for defendant.
OPINION AND ORDER
SWEENEY, Judge
This postaward bid protest is before the court on the parties’ cross-motions for judgment
on the administrative record pursuant to Rule 52.1(c) of the Rules of the United States Court of
Federal Claims (“RCFC”). Plaintiff, Excelsior Ambulance Service, Inc. (“Excelsior” or
“plaintiff”), challenges an award of a contract for ambulance services to LMC Med
Transportation, LLC (“LMC”) by the United States Department of Veterans Affairs (“VA”).
After plaintiff filed this protest, defendant took corrective action, and then confirmed its award to
LMC. Plaintiff challenges, inter alia, the manner in which the VA conducted the corrective
action, and the ultimate award to LMC. For the reasons set forth below, plaintiff’s motion for
judgment on the administrative record is granted, and defendant’s cross-motion for judgment on
the administrate record is denied.
*
This reissued Opinion and Order incorporates the agreed-to redactions proposed by the
parties on December 15, 2015. The redactions are indicated with bracketed ellipses (“[. . .]”).
I. BACKGROUND
A. Solicitation
On August 29, 2014, the VA issued solicitation number VA247-14-R-0828 for
ambulance services for William Jennings Bryan Dorn VA Medical Center in Columbia, South
Carolina. 1 AR 13, 119. The solicitation provided that a firm fixed-price contract would be
100% set aside for a Service-Disabled Veteran-Owned Small Business (“SDVOSB”). Id. at 13,
122, 236. The contract encompassed a one-year base period with four one-year option periods.
Id. at 236. Two amendments to the solicitation were issued. Id. at 229, 339. The second
amendment altered paragraph B.5 of the solicitation to require that: “The contractor shall be
licensed to work in the State of South Carolina.” Id. at 339. The second amendment also
extended the deadline for the submission of proposals to September 15, 2014. Id.
B. Evaluation Criteria and Methodology
In the solicitation, the VA explained that the contract would be awarded to the offeror
with the lowest priced technically acceptable proposal. Id. at 321. To accomplish this goal, the
VA would evaluate the offerors’ proposals with respect to four factors: 1) Technical Approach
and Management Capability; 2) Staff Experience and Qualifications; 3) Relevant Experience and
Past Performance; and 4) Cost/Price. Id. at 321-23. The proposals would be rated as either
“Acceptable” or “Unacceptable” for each of these factors. Id. at 323. Once proposals were
determined to be “technically acceptable,” the award would be made “based on cost/price only.”
Id.
C. Evaluation of Proposals, Agency Protest, and Award
The VA received four proposals in response to the solicitation. Id. at 1048. Of these,
two were nonresponsive because those offerors were not certified SDVOSBs. Id. The two
remaining proposals, which were submitted by plaintiff and LMC, were both deemed technically
acceptable. Id.
The VA then requested that plaintiff and LMC provide their best and final offers
regarding price. Id. at 954, 1024. Excelsior did not change its price of [. . .]. Id. at 1024, 1043.
LMC, however, reduced its original price of [. . .] to [. . .]. Id. at 994. The VA conducted a price
analysis of both final offers and determined that LMC had provided the lowest priced technically
acceptable proposal. Id. at 1047-50.
On November 3, 2014, Excelsior received an unsuccessful offeror notification, and
requested a debriefing. Id. at 1175, 1185. Excelsior then filed an agency-level protest on
November 13, 2014. Id. at 1176. After being debriefed by the VA, Excelsior amended its
agency-level protest on December 3, 2014. Id. at 1195-96. The VA dismissed in part and denied
in part Excelsior’s protest on February 19, 2015. Id. at 1224. On February 27, 2015, the VA
awarded the contract to LMC.
1
The court derives the facts from the Administrative Record (“AR”).
2
II. PROCEDURAL HISTORY
On that same date, February 27, 2015, Excelsior filed the present protest. Subsequently,
on March 20, 2015, defendant filed a notice indicating that it had elected to take corrective
action, and later filed a motion to dismiss the protest as moot. Plaintiff filed a response
requesting that the motion be denied pending final agency publication of corrective action. On
June 29, 2015, the court stayed proceedings pending defendant’s completion of the corrective
action. During the corrective action, defendant sent each offeror a letter asking it to clarify how
it intended to ensure that “at least 50 percent of the cost of personnel for contract performance”
would be expended for employees of the offeror or of other eligible SDVOSBs, as required by
section 852.219-10(c) of the VA Acquisition Regulation (“VAAR”). Id. at 1290-91. Each
offeror responded to the request for clarification. Id. at 1268-70.
In a joint status report filed on August 31, 2015, the parties informed the court that upon
taking corrective action, the VA confirmed the contract award to LMC. The VA made no
written findings nor provided any discussion or analysis explaining the basis for its decision to
confirm the contract award to LMC based on the corrective action. Plaintiff indicated in the
status report that it intended to proceed with its protest. On September 18, 2015, plaintiff
amended its complaint to include the allegation that the VA’s contract award to LMC during the
corrective action was arbitrary and capricious, without a rational basis, and contrary to the terms
of the solicitation. The parties have filed cross-motions for judgment on the administrative
record, which are fully briefed. Oral argument was conducted on November 10, 2015.
III. LEGAL STANDARDS
A. Motions for Judgment on the Administrative Record
The parties have moved for judgment on the administrative record pursuant to RCFC
52.1(c). In ruling on such motions, “the court asks whether, given all the disputed and
undisputed facts, a party has met its burden of proof based on the evidence in the record.” A &
D Fire Prot., Inc. v. United States, 72 Fed. Cl. 126, 131 (2006) (citing Bannum, Inc. v. United
States, 404 F.3d 1346, 1356 (Fed. Cir. 2005)2). Because the court makes “factual findings . . .
from the record evidence,” judgment on the administrative record “is properly understood as
intending to provide for an expedited trial on the administrative record.” Bannum, 404 F.3d at
1356.
B. Bid Protests and Corrective Action
The United States Court of Federal Claims (“Court of Federal Claims”) has “jurisdiction
to render judgment on an action by an interested party objecting to . . . 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). When resolving a motion that arises from a bid
2
The decision in Bannum was based upon then-RCFC 56.1, which was abrogated and
replaced by RCFC 52.1. RCFC 52.1 was designed to incorporate the decision in Bannum. See
RCFC 52.1, Rules Committee Note (June 20, 2006).
3
protest, the court reviews the challenged agency action pursuant to the standards set forth in 5
U.S.C. § 706. Id. § 1491(b)(4). Although section 706 contains several standards, “the proper
standard to be applied in bid protest cases is provided by 5 U.S.C. § 706(2)(A): a reviewing
court shall set aside the agency action if it is ‘arbitrary, capricious, an abuse of discretion, or
otherwise not in accordance with law.’” Banknote Corp. of Am. v. United States, 365 F.3d
1345, 1350 (Fed. Cir. 2004). Under this standard, the court “may set aside a procurement action
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)). “The arbitrary and capricious standard
applicable [in bid protests] is highly deferential.” Advanced Data Concepts, Inc. v. United
States, 216 F.3d 1054, 1058 (Fed. Cir. 2000). Thus, when a protester claims that the procuring
agency’s decision violates a statute, regulation, or procedure, it must show that the violation was
“clear and prejudicial.” Impresa, 238 F.3d at 1333 (internal quotation marks omitted).
During a procurement, an agency may elect to undertake corrective action. The United
States Court of Appeals for the Federal Circuit has held that this court possesses jurisdiction to
review an agency's corrective action. See, e.g., Centech Grp., 554 F.3d at 1037-38, 1040(finding that the Court of Federal Claims’s determination regarding the agency’s decision to take
corrective action was appropriate); Chapman Law Firm v. United States, 490 F.3d 934, 938 (Fed
Cir. 2007) (holding that the Court of Federal Claims’s inquiry into the reasonableness of the
government's proposed corrective action was proper); accord Centech Grp., Inc. v. United States,
78 Fed. Cl. 496, 506 (2007) (“this Court possesses jurisdiction to determine if the corrective
action taken by a procuring agency as a result of a bid protest was reasonable under the
circumstances”); Delaney Constr. Corp., 56 Fed. Cl. 470, 474 (2003) (finding that the plaintiff
had standing to initiate a protest challenging the propriety of a corrective action). When this
court undertakes review of a corrective action, it does so pursuant to the standards set forth in the
Administrative Procedure Act, 5 U.S.C. § 706(2)(A). Centech Grp., 554 F.3d at 1037.
“Contracting officers are provided ‘broad discretion to take corrective action where the agency
determines that such action is necessary to ensure fair and impartial competition.’” Sheridan
Corp. v. United States, 95 Fed. Cl. 141, 151 (2010) (citation omitted). Nonetheless, “the chosen
corrective action must be ‘reasonable under the circumstances. To be reasonable, the agency's
corrective action must be rationally related to the defect to be corrected.” Id. The court
“determine[s] whether the contracting agency provided a coherent and reasonable explanation of
its exercise of discretion.” Impresa, 238 F.3d at 1332 (citation and internal quotation marks
omitted).
IV. DISCUSSION
A. The Parties’ Arguments
In its motion, Excelsior raises four arguments, two of which the court finds persuasive
and that are addressed in this ruling. First, plaintiff contends that LMC’s proposal was not
technically acceptable because LMC did not possess the requisite business license to operate in
South Carolina at the time that it was awarded the contract. Pl.’s Mot. 3. Indeed, Excelsior
notes that LMC only obtained the requisite business license after this protest was filed. Id. at 16-
4
18, 21. Thus, plaintiff argues that LMC’s proposal was not technically acceptable at the time of
submission. Id. In addition, Excelsior asserts that LMC did not possess an Ambulance Service
license issued by South Carolina, nor a license for the city of Columbia, both of which are
required by the state of South Carolina, and accordingly, by the solicitation. Id. at 23. For these
reasons, Excelsior urges the court to find that the contract award to LMC violated material terms
of the solicitation. Id.
Second, Excelsior argues that the VA’s decision to award the contract to LMC was
arbitrary and capricious, without a rational basis, or contrary to law because it exceeded the
scope of the corrective action that it defined. Excelsior relies on VAAR 852.219-10(a), which
defines an SDVOSB as a small business whose management and daily business operations are
controlled by one or more service-disabled veterans. Id. at 24-28, 33. According to Excelsior,
VAAR 852.219-10(c) requires SDVOSBs to perform at least 50% of a contract like the one that
is the subject of this case. Id. at 26. Excelsior asserts that because LMC’s original proposal
provided that LMC would subcontract all ambulance service requirements to other entities that
were not SDVOSBs, LMC’s proposal did not conform to the terms of the solicitation. Id.
Subsequent to plaintiff’s challenge to LMC’s purported violation of the 50% requirement, the
VA elected to take corrective action.
During corrective action, the VA directed plaintiff and LMC to clarify how they intended
to ensure that at least 50% of the cost of personnel for contract performance would be expended
for employees of eligible SDVOSBs. According to Excelsior, LMC did not merely clarify its
original proposal, but rather, rewrote it to provide that 51% of the contract would be performed
by LMC and another SDVOSB. Id. at 29. Excelsior asserts that LMC made this postaward
modification to belatedly meet the solicitation requirement that at least 50% of the contract be
performed by SDVOSBs. Id. Thus, Excelsior argues, because the corrective action was limited
to clarifying existing proposals, the VA acted in a manner that was arbitrary and capricious,
without a rational basis, or contrary to law when it permitted LMC to rewrite its original
proposal to conform to the VAAR and the requirements of the solicitation. Id. at 30. For these
reasons, Excelsior contends, the VA’s confirmation of the award to LMC was unreasonable and
cannot withstand legal scrutiny. Id.
In its cross-motion, defendant argues that because LMC initially provided the VA with its
Texas business license, along with the South Carolina business licenses of its subcontractors,
LMC satisfied the solicitation’s requirement that proposals should include business licenses.
Def.’s Cross-Mot. 15. According to defendant, the solicitation’s requirement that an offeror
provide its business license was not a criterion that determined responsiveness and eligibility for
award, but rather, a responsibility that the awardee could fulfill at any time prior to or even after
award. Id. at 20; Oral Argument of November 10, 2015, Argument of Ms. Melissa L. Baker at
2:10:20.3 The crux of defendant’s argument is that the licensing requirement relates to contract
administration, not to contract award. Def.’s Cross-Mot. 20; Oral Arg. 2:04:40, Nov. 10 (Baker).
3
The oral argument held on November 10, 2015, at 1:00 p.m. eastern standard time was
recorded using the court’s Electronic Digital Recording (“EDR”) system. The times noted in
citations to the oral argument refer to the EDR of the oral argument.
5
Defendant also contends that South Carolina law does not require that an offeror possess a state
business license at the time that the proposal is submitted. Def.’s Cross-Mot. 16.
In addition, defendant argues, the VA reasonably understood that LMC was a responsible
offeror that would comply with the requirement that at least 50% of personnel costs should be
incurred by qualified SDVOSBs. Id. LMC’s response to the VA’s request for clarification
during the corrective action only confirmed this understanding, defendant asserts. Id. If LMC
fails to comply with this requirement in the future, defendant contends, it is a matter of contract
administration, not of contract award. Id.
Finally, defendant argues that during the corrective action, the VA did indeed reevaluate
whether the offers were responsive to all solicitation requirements, thereby carrying out the type
of corrective action that it had described in its notice. Id. at 31. According to defendant, when
the VA sought clarification from the two offerors, the information that LMC provided was
straightforward, and reassured and confirmed for the contracting officer that his earlier
conclusions were correct. Id. Defendant asserts that because it was clear from LMC’s response
that it would comply with the requirement mentioned in the corrective action, there was no need
for additional explanation. Id.
B. Analysis
Upon review of the parties’ legal memoranda and representations at oral argument, the
court determines that there are two independent grounds to sustain plaintiff’s protest as discussed
in more detail below.
1. Defendant’s Decision to Award the Contract to LMC, Despite LMC’s Failure to
Provide the Business License Required by Factor One of the Solicitation, was Arbitrary
and Capricious, Without a Rational Basis, and Contrary to a Material Term of the
Solicitation
The court first examines the parties’ dispute regarding the requirement for each offeror to
provide the VA with its business license. The opening paragraph of the solicitation stated:
The purpose of this requirement is to furnish 24 hours, 7 days a week ambulance
service consisting of basic life support and advance life support transportation
services for the beneficiaries of the Veterans Administration Williams Jennings
Bryan Dorn (WJBD) VA Medical Center, Columbia, South Carolina and affiliated
community based outpatient clinics. This shall include urgent or emergent
requirements and non-emergency requirements.
AR 235. Further, paragraph B.5 of the solicitation provided that “[t]he contractor shall be
licensed to work in the State of South Carolina.” Id. at 339. Moreover, a subsection of section E
the solicitation provided:
6
EVALUATION FACTORS FOR AWARD
a. BASIS FOR CONTRACT AWARD: This acquisition will utilize Lowest Price
Technically Acceptable (LPTA) source selection procedures in accordance with
[Federal Acquisition Regulation (“FAR”)] 15.101-2, as supplemented. This is a
competitive LPTA best value source selection in which technical acceptability is the
most important factor. By submission of this offer, the Offeror accepts all solicitation
requirements, including terms and conditions, representations and certifications, and
technical requirements. All technically acceptable offerors with acceptable past
performance shall be treated equally except for their prices. Failure to meet a
requirement may result in an offer being determined technically unacceptable.
Offerors shall clearly identify any exception to the solicitation and conditions and
provide complete accompanying rationale.
The Government intends to select ONE contractor for award of this effort.
For the purpose of award, the Government shall evaluate offers based on the
evaluation factors described below:
Factor 1: Technical Approach and Management Capability
● Provide business license and must be classified under the NAICS code of 621910.
● Provide management and operation plan (capability statement); must specify the
ability to manage and provide service directly related to the ambulance services.
● Provide a list of all vehicles in fleet to include make, model, and age of each
vehicle. Vehicles should not be older than 2008.
● Describe how the firm will provide backup coverage for services in emergencies
and unusual situations.
● Provide copy of the Personnel Training Manual
● Offeror must be registered and verified in VetBiz.gov. Vendor Information Pages
(http://www.VetBiz.gov).
Id. at 321-22 (emphasis added).
Under the subsection entitled “Evaluation Factors for Award” and subtitled “Basis for
Contract Award,” the solicitation required that an offeror “[p]rovide [a] business license.” Id. at
321. Further, when determining whether an offeror was technically acceptable, the VA would
evaluate three factors, the first of which was “Technical Approach and Management Capability.”
Id. To assess whether an offeror met this factor, the VA examined six criteria; the requirement
to provide a business license was identified as the first of these criteria. Id. Thus, because
submitting a business license was essential to satisfying the first of the three factors, the VA
7
could not ignore this solicitation requirement when determining whether a proposal was
technically acceptable.
Other requirements under “Factor 1: Technical Approach and Management
Capability” included that an offeror must “[p]rovide [a] management and operation plan
(capability statement); must specify the ability to manage and provide service directly
related to the ambulance services,” and must “[d]escribe how the firm will provide backup
coverage for services in emergencies and unusual situations.” Id. at 322. Given these
unambiguous requirements, it would be irrational for the VA to permit an offeror to
provide its management and operation plan or describe how its firm would provide backup
emergency coverage postaward. Rather, this type of information is essential to permit the
VA to render an appropriate eligibility determination. Just as the second and third
elements of Factor 1 were mandatory for technical acceptability, so too was the first
element, the business license requirement. Accordingly, the provisions under paragraph
B.5 of the solicitation that an offeror/contractor must be licensed to work in South
Carolina, and that it must provide defendant with that business license, were requirements
pertaining to technical acceptability, and thus, in assessing eligibility for contract award.
These requirements should have been satisfied at the time of proposal submission, and
were not an administrative responsibility that an offeror could fulfill postaward, as
defendant incorrectly asserts.
Rather than providing a South Carolina business license when submitting its proposal,
LMC waited until March 4, 2015 to acquire one, well after the contract was awarded and this
protest was filed. Am. Compl., Ex. 1 at 7. Defendant admits as such. See Def.’s Cross-Mot. 5.
Consequently, LMC failed to comply with a material term of the solicitation concerning
technical acceptability, thus rendering it ineligible for contract award. The fact that LMC
provided its Texas business license, along with the South Carolina business licenses of its
subcontractors, with its proposal is unavailing. LMC failed to meet a material term of the
solicitation because the contractor, not one of its subcontractors, was required to be licensed in
South Carolina at the time of proposal submission.
Defendant cites Bailey Tool & Manufacturing Co. v. United States. 117 Fed. Cl. 457,
466 (2014) to support its view that the business license was only a matter of contract
administration. In that decision, the Court of Federal Claims noted that the Comptroller General
of the United States (“Comptroller General”) held in Integrated Protection Systems, Inc. that a
solicitation provision requiring a prospective contractor to obtain a specific license or permit
relates to the prospective contractor’s responsibility and may be satisfied at any time prior to
award. Id. (citing Integrated Prot. Sys., Inc., B-254457 et al., 1994 WL 29886, at *2 (Comp.
Gen. Jan. 19, 1994). Defendant here argues that the Comptroller General’s holding applies in
this case. That finding is inapposite here, as the solicitation in this case required that the
business license be “[p]rovide[d]” to the VA, AR 321, rather than merely “obtained,” Integrated
Prot. Sys., Inc., at *2. In other words, whereas acquiring a license in Integrated Protection
Systems, Inc. was a general responsibility that had to be fulfilled at some point prior to award,
here, providing a license was an express requirement in determining whether an offeror met the
evaluation factors for award. AR 321. Further, the decision in Integrated Protection Systems,
Inc. fails to assist defendant for yet another reason. As the Comptroller General explained in that
8
case, the license requirement “may be satisfied at any time prior to award.” Integrated Prot. Sys.,
Inc., 1994 WL 29886, at *2. Thus, applying the holding in Integrated Protection Systems, Inc.
here, because LMC obtained its South Carolina license after it was awarded the contract, it was
ineligible for contract award. Accordingly, because LMC’s proposal was technically
unacceptable and ineligible for award at an early stage of its evaluation, the VA’s subsequent
award of the contract to LMC was arbitrary and capricious, without a rational basis, and contrary
to a material term of the solicitation.4 Cf. Nilson Van & Storage, Inc., B-403009, 2010 WL
3328658, at *1-2 (Comp. Gen. Aug. 19, 2010) (finding that because the invitation for bids stated
that the “offeror shall furnish to the Government, if requested, copies of [Interstate Commerce
Commission] authorization before moving the material under any contract awarded,” an offeror
providing the authorization was not a prerequisite to receiving the award, but instead, only
applied to the winning contractor after contract award (emphasis added)); see also Centech Grp.,
554 F.3d at 1038 (“[A] proposal that fails to conform to the material terms and conditions of the
solicitation should be considered unacceptable and a contract award based on such an
unacceptable proposal violates the procurement statutes and regulations.” (citation and internal
quotation marks omitted)); Alfa Laval Separation, Inc. v. United States, 175 F.3d 1365, 1368
(Fed. Cir. 1999) (affirming the trial court’s holding that the government agency was “strictly
bound by [the] terms” of the solicitation, and that the agency violated “applicable statute and
regulation” when waiving a portion of such terms for the contract awardee); Furniture by
Thurston v. United States, 103 Fed. Cl. 505, 518 (2012) (“It is blackletter law that a procuring
agency may only accept an offer that conforms to the material terms of the solicitation.”).
2. By Permitting LMC to Rewrite Its Proposal During the Corrective Action to Conform
to the Requirements of the Solicitation, the VA Acted in a Manner That Was Arbitrary
and Capricious, Without a Rational Basis, and Contrary to Law
Next, the court turns to plaintiff’s contention that the VA improperly allowed LMC to
modify and rewrite its proposal during the corrective action, rather than merely submit
4
Defendant also argues that offerors should be allowed to obtain a business license after
contract award because otherwise, government agencies would be restricted to receiving contract
proposals only from offerors who are licensed in the pertinent state prior to contract award. Oral
Arg. 2:10:20. Defendant’s argument lacks merit. Permitting a contract awardee to obtain a
requisite business license after contract award would promote inefficiency and a potential waste
of government resources. If an offeror applied for the requisite business license after contract
award, and its license application was then denied for any reason, the procuring agency would
have to reopen the evaluation of proposals and, potentially, the procurement. In any event,
defendant’s argument is irrelevant here, because providing a South Carolina business license at
the time of proposal submission was a material requirement of the solicitation, as it was an
evaluation criterion in determining technical acceptability.
It bears noting that this procurement concerns a contract to provide ambulance services
for veterans. The vital nature of the services to be provided pursuant to this contract bolsters this
court’s finding that the business license element under Factor 1 was a requirement to be satisfied
prior to contract award, and was not merely a matter of contract administration.
9
clarifications to its proposal. Plaintiff argues that the VA thus exceeded the scope of the
corrective action, rendering its confirmation of the contract award to LMC arbitrary and
capricious, without a rational basis, or contrary to law. As described earlier, the solicitation
provided that the contract would be 100% set aside for an SDVOSB. AR 13, 122. VAAR
852.219-10(a) defines an SDVOSB:
Definition. For the Department of Veterans Affairs, “Service-disabled veteran-
owned small business concern”:
(1) Means a small business concern:
(i) Not less than 51 percent of which is owned by one or more service-disabled
veterans or, in the case of any publicly owned business, not less than 51 percent of
the stock of which is owned by one or more service-disabled veterans (or eligible
surviving spouses);
(ii) The management and daily business operations of which are controlled by one
or more service-disabled veterans . . . .
Further, FAR 52.219-14 describes requirements regarding “contracts that have been set
aside or reserved for small business concerns.” It provides:
(c) By submission of an offer and execution of a contract, the Offeror/Contractor
agrees that in performance of the contract in the case of a contract for—
(1) Services (except construction). At least 50 percent of the cost of contract
performance incurred for personnel shall be expended for employees of the
concern.
FAR 52.219-14(c). In addition, VAAR 852.219-10(c) sets forth:
A service-disabled veteran-owned small business concern agrees that in the
performance of the contract, in the case of a contract for:
(1) Services (except construction), at least 50 percent of the cost of personnel for
contract performance will be spent for employees of the concern or employees of
other eligible service-disabled veteran-owned small business concerns;
These regulations, taken together, require that for contracts performed by SDVOSBs, at least
50% of the cost of personnel must be expended for employees of an SDVOSB.
There is no dispute that LMC is an SDVOSB. AR 1268. However, LMC’s original
proposal provided:
As detailed in our management and Operation plan below, LMC Med
Transportation will be managing and performing quality assurance and control on
10
this contract. We have selected Regional Ambulance to subcontract to perform the
BLS and ALS Ambulance Service. Our backup plan is to utilize either in full or in
part Palmetto Ambulance.
Id. at 375. Thus, LMC’s original proposal made clear that it would subcontract all of its
ambulance services to an entity that was not an SDVOSB.5 Further, LMC submitted copies of
business licenses for Regional Ambulance Services, Inc. (“Regional Ambulance”), Palmetto
Ambulance, and Community Pastor Care, LLC (“CPC”). Id. at 385-92. LMC also provided a
“List of All Vehicles in Fleet,” in which it listed vehicles used by Regional Ambulance, as well
as those used by CPC. Id. at 397-98. In addition, LMC submitted a chart with a list of drivers
that worked for Regional Ambulance. Id. at 400. LMC provided no comparable licenses, list of
vehicles, or list of drivers for itself.
Subsequently, when Excelsior filed the present protest, it alleged that LMC had not
satisfied the requirement that at least 50% of the contract must be performed by an SDVOSB.
Thereafter, defendant took corrective action and sought clarification from the offerors regarding
this issue. Defendant sent identical letters to Excelsior and to LMC, explaining:
Upon review of the record, a determination has been made to take corrective action
on the reference solicitation. The corrective action requires that each offeror clarifies
[its] ability to comply with the contracting limitations as outlined in [VAAR]
852.219-10(c)(1). . . . The clarification must clearly address how the offeror intends
to insure [sic] that “at least 50 percent of the cost of personnel for contract
performance will be spent for employees of the concern or employees of other
eligible veteran-owned small business concerns.”
....
Id. at 1290-91. When LMC responded to defendant’s request for clarification, LMC stated that it
was an SDVOSB, and that “[t]hroughout the life of [the] contract, on average[,] LMC [would] be
5
In its cross-motion, defendant explains that “LMC’s proposal indicated that LMC would
subcontract many of the Ambulance Service requirements to another local SDVOSB,
Community Pastor Care, as well as to another firm, Regional Ambulance.” Def.’s Cross-Mot. at
12. Further, in its revised proposal, LMC stated that “(LMC), a[n] SDVOSB, will provide all the
vehicles, personnel, and equipment to service beneficiaries originating in Richland County . . . . .
LMC will subcontract to Community Pastor Care, LLC. (CPC) another SDVOSB, the following
areas under this contract: . . . . LMC will also subcontract the Orangeburg area to Regional
Ambulance Services, Inc., which includes the following: . . . .” AR at 1268. LMC’s rewritten
proposal concluded, “[i]n summation, LMC and CPC, both SDVOSBs will take on and perform
a minimum of 51% of the cost, labor and performance of this contract each year. On average
over the life of the contract, LMC and CPC will perform a combined average of 59.78%, while
Regional Ambulance Service will perform on average 40.22.” Id. at 1269. It is evident based on
both defendant’s and LMC’s description of LMC and CPC as SDVOSBs, and subsequent
reference to Regional Ambulance with no such qualification, that Regional Ambulance is not an
SDVOSB.
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responsible for at least 25% of the cost and personnel performance [sic].” Id. at 1268. LMC
further provided that it would “subcontract to Community Pastor Care, another SDVOSB,” such
that CPC would “be responsible for an average of 35% of the cost and personnel performance
[sic] over the life of [the] contract.” Id. In addition, LMC stated that Regional Ambulance
would be “responsible for an average of 40% of the . . . cost and personnel performance
throughout the life of [the] contract.” Id. at 1268-69. LMC then concluded:
In summation, LMC and CPC, both SDVOSBs[,] w[ould] take on and perform a
minimum of 51% of the cost, labor and performance of this contract each year. On
average over the life of [the] contract, LMC and CPC [would] perform a combined
average of 59.78%, while Regional Ambulance Service [would] perform on average
40.22% over the same five-year term.
Id. at 1269.
It is evident that there were substantial differences between LMC’s original proposal and
its response to the VA’s request for clarification during the corrective action. FAR 15.306(a)
provides that “[c]larifications” constitute “limited exchanges, between the Government and
offerors,” where “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.” LMC’s original proposal indicated that the ambulance services would
be provided by its subcontractor, Regional Ambulance, and if needed as a backup, Palmetto
Ambulance. There can be no serious dispute that LMC’s original proposal was to subcontract
100% of the ambulance services. However, when LMC later responded to the VA’s request for
clarification, LMC rewrote its original proposal to conform to the requirements of the
solicitation. Rather than attribute 100% of the costs of ambulance services to Regional
Ambulance, in its revised proposal submitted in response to the VA’s clarification request, LMC
claimed that its subcontractor would only account for 40% of the cost of personnel for contract
performance. This major change to LMC’s proposal cannot be reasonably construed as a mere
correction of a typographical error or an additional explanation to clarify an ambiguity in its
original proposal. To the contrary, the VA erred by permitting LMC to exceed the scope of
clarification and make substantial revisions to its proposal so that the proposal would satisfy the
requirements of the solicitation.
LMC’s purported clarification also explained that LMC intended to be responsible for
25% of the cost of personnel for contract performance. However, according to LMC’s original
proposal, LMC’s participation was limited to contract oversight. In addition, although LMC’s
purported clarification stated that CPC would be responsible for 35% of the cost of personnel for
contract performance, there was no mention in the original proposal of CPC providing any
services, not even as a backup. Although LMC did furnish copies of CPC’s business licenses in
the original proposal, there was no discussion of any work that it would perform under the
contract. Moreover, whereas Palmetto Ambulance was identified as a backup subcontractor in
the original proposal, it was removed from LMC’s revised proposal. Thus, LMC’s clarification
did far more than just amplify certain aspects of its original proposal or resolve minor or clerical
errors. To the contrary, LMC added itself and a new subcontractor to the rewritten proposal,
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removed a backup subcontractor from the original proposal, and reduced the amount of services
that would have been provided by the main subcontractor that it originally proposed.
Consequently, whereas the letter sent by the VA during the corrective action only requested
clarification of LMC’s original proposal, LMC responded by making major revisions to its
proposal, in violation of the terms of the request. The VA accepted LMC’s revised proposal that
was altered to conform to the solicitation, resulting in an unfair competitive advantage for LMC
that greatly prejudiced plaintiff.
By contrast, plaintiff made no changes to its proposal when responding to the VA’s
request for clarification during the corrective action. In its original proposal, plaintiff submitted
a chart that provided a breakdown of prices for ambulance services. Id. at 1009. Plaintiff stated
that its employees were “paid in accordance with the appropriate Wage Determination Schedule,
satisfying all federal contracting requirements . . . .” Id. at 1005. Further, plaintiff provided a
copy of a letter from the VA verifying that Excelsior was an SDVOSB. Id. at 1021. Plaintiff’s
original proposal also included a copy of its certificate of liability insurance. Id. at 1022.
In its response to defendant’s request for clarification, plaintiff stated that it was a
certified SDVOSB, in accordance with the verification that it had provided originally. Id. at
1270. Further, Excelsior explained that it would be “self-performing 100% of the contract with
[its] employees being paid at the required wages set by the Wage Determination and [with]
Excelsior owned equipment.” Id. Plaintiff also indicated that “[i]f at some point the volume of
calls to a particular outlying area is very small, [it] might consider subcontracting that small
percentage of the business to another local ambulance company with other work in that area,
with VA approval, but that would generally be less than 5% of the contract.” Id.
In plaintiff’s original proposal, it confirmed that its employees were paid according to the
appropriate Wage Determination Schedule, and it repeated this description in its subsequent
response letter. Moreover, plaintiff provided a chart with a list of service prices in its original
proposal. Thus, when plaintiff later explained that all services would be performed by its
employees, and that, if necessary, five percent of the services could be carried out by a
subcontractor, it was a statement that clarified and elaborated on the chart that plaintiff
previously had provided with its original proposal.
Finally, plaintiff explained in its clarification that it had an established office in
Columbia, South Carolina, and that it would provide an Excelsior manager as the primary
contact person for the VA from that office. Id. In doing so, Excelsior supplied the VA with
further details about the nature of the contract performance that it had originally proposed.
Indeed, all of the information that plaintiff included in its response to the VA’s request for
clarification did just that, namely, provide clarification; plaintiff did not modify its original
proposal in any way.
LMC’s responses to the VA’s request for clarification far exceeded the scope of the VA’s
clarification request because they modified LMC’s original proposal to make it compliant with
the terms of the solicitation. The VA should have determined that LMC’s original proposal was
noncompliant. When the VA later accepted LMC’s revised proposal that complied with the
solicitation, the VA gave LMC an unfair competitive advantage because only plaintiff’s proposal
13
was technically acceptable when originally submitted. The VA thus failed to “ensure that [the
offerors] received impartial, fair, and equitable treatment,” as required of contracting officers by
federal regulation. FAR 1.602–2(b). Indeed, “[g]overnment personnel involved in [an]
acquisition” like this one “shall not engage in conduct that . . . [f]avors one offeror over another.”
FAR 15.306(e)(1). The VA’s corrective action was therefore conducted in a manner that was
unreasonable. Although the VA’s request for clarification was reasonable, it acted in a manner
that was arbitrary and capricious by allowing LMC to rewrite its proposal so that it would
conform to the requirements of the solicitation. Moreover, the administrative record contains no
documentation of the contracting officer’s rationale for determining that it was reasonable to
award the contract to LMC after the corrective action. Defendant admits that such
documentation is “simply not there.” AR at 20; Oral Arg. 2:02:13, Nov. 10 (Baker). The lack of
any documentation explaining the method by which the VA re-evaluated the proposals, including
any comparative analysis that it undertook based on the solicitation’s requirements, precludes a
finding that the VA’s confirmation of the contract award to LMC had a rational basis.
Accordingly, the VA conducted the corrective action in a manner that was arbitrary and
capricious, without a rational basis, and contrary to law. See FAR 15.303(b)(3) (“The source
selection authority shall . . . [e]nsure consistency among the solicitation requirements, notices to
offerors, proposal preparation instructions, evaluation factors and subfactors, solicitation
provisions or contract clauses, and data requirements . . . .”).
3. Excelsior Was Prejudiced
Because the VA’s decision to award the contract to LMC was arbitrary and capricious,
without a rational basis, and contrary to law, it constituted a significant error in the procurement
process. The court’s next inquiry, therefore, is whether Excelsior was prejudiced by the VA’s
error.
If a protester demonstrates that there was “a significant error in the procurement process,”
it must then show “that the error prejudiced it.” Data Gen. Corp. v. Johnson, 78 F.3d 1556, 1562
(1996); see also Bannum, 404 F.3d at 1351 (holding that if the procuring agency’s decision
lacked a rational basis or was made in violation of the applicable statutes, regulations, or
procedures, the court must then “determine, as a factual matter, if the bid protester was
prejudiced by that conduct”). In order to establish that it was prejudiced, a party must “show that
it had a substantial chance of being awarded the contract but for the alleged violation of the
procurement statute or regulation.” CW Gov’t Travel, Inc. v. United States, 110 Fed. Cl. 462,
494 (2013); see also Data Gen. Corp., 78 F.3d at 1562 (“[T]o establish prejudice, a protester
must show that, had it not been for the alleged error in the procurement process, there was a
reasonable likelihood that the protester would have been awarded the contract.”).
In this case, there were only two offerors that the VA considered technically acceptable—
plaintiff and LMC. If LMC’s proposal had been properly disqualified as technically
unacceptable, then Excelsior would have remained as the sole eligible offeror and been awarded
the contract. In addition, the VA misused the clarification process to permit LMC to rewrite its
proposal so that it would conform to the terms of the solicitation. Excelsior thus had a
substantial chance of being awarded the contract if not for the VA’s errors. Consequently,
plaintiff was prejudiced by the VA’s erroneous award of the contract to LMC. See Alfa Laval
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Separation, Inc., 175 F.3d at 1367-68 (holding that when the government agency erred in
awarding the contract to an offeror whose proposal was not technically compliant with the
solicitation, the unsuccessful offeror was prejudiced because it had a substantial chance of
receiving the award, as it was the only other proposal being considered).
V. INJUNCTIVE RELIEF
Excelsior has demonstrated that the VA’s award of the contract to LMC constituted a
significant, prejudicial procurement error and that it is therefore entitled to a judgment in its
favor. The court now turns to Excelsior’s request for injunctive relief. Such equitable remedies
are available to successful protesters under the Tucker Act. See 28 U.S.C. § 1491(b)(2)
(permitting the Court of Federal Claims to “award any relief that the court considers proper,
including declaratory and injunctive relief except that any monetary relief shall be limited to bid
preparation and proposal costs”). “Injunctive relief is appropriate if it ‘enjoin[s] the illegal
action and return[s] the contract award process to the status quo ante.’” Turner Constr. Co., Inc.
v. United States, 645 F.3d 1377, 1388 (Fed. Cir. 2011) (quoting Parcel 49C Ltd. P’ship v. United
States, 31 F.3d 1147, 1153 (Fed. Cir. 1994)). In entertaining a request for permanent injunctive
relief, a court must review the procuring agency’s action and determine whether (1) the protester
has succeeded on the merits; (2) the protester will suffer irreparable harm if the court withholds
injunctive relief; (3) the balance of hardships favors the grant of injunctive relief; and (4) it is in
the public interest to grant injunctive relief. Centech Grp., 554 F.3d at 1029 (citing PGBA, LLC
v. United States, 389 F.3d 1219, 1228-29 (Fed. Cir. 2004)).
By demonstrating that the VA’s award of the contract to LMC constituted a significant,
prejudicial error in the procurement process, Excelsior has succeeded on the merits. The court
next examines whether irreparable harm occurred. Because Excelsior has established that it was
prejudiced by the VA’s decision to award the contract to LMC, the court presumes that Excelsior
has suffered irreparable harm. See Reebok Int’l Ltd. v. J. Baker, Inc., 32 F.3d 1552, 1556 (Fed.
Cir. 1994) (“A movant that clearly establishes likelihood of success on the merits receives the
benefit of a presumption of irreparable harm.”). Indeed, the “denial of a fair opportunity to
compete and loss of financial benefit from a lawful procurement process constitute[s] irreparable
harm.” BCPeabody Constr. Serv., Inc. v. United States, 112 Fed. Cl. 502, 514 (2013). Because
Excelsior was prevented from enjoying an equitable opportunity to compete, and incurred a
monetary loss, it suffered irreparable harm.
In addition, the balance of hardships weighs in Excelsior’s favor. Excelsior would suffer
economic hardship through lost profits if LMC were to perform the contract. By contrast,
defendant has not articulated any special consequences in terminating the contract awarded to
LMC. The contract is currently stayed, and the services at issue are currently being provided by
the incumbent contractor. Def’s Cross-Mot. 34-35; AR at 20; Oral Arg. 1:44:09, Nov. 10
(Baker). Although the VA would incur a higher cost in awarding the contract to plaintiff than it
would to LMC, that consideration carries little weight here because the VA failed to adhere to
the terms of its solicitation and the requirements of the FAR and VAAR. Had defendant
conducted the procurement fairly, it would have disqualified LMC and awarded the contract to
Excelsior. Accordingly, defendant cannot demonstrate that the balance of hardships weighs in
its favor. A desire for a lower-priced proposal can never justify ignoring the terms of a
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solicitation and the procurement regulations promulgated in the FAR and VAAR. Moreover,
“[i]f both the protester and the government stand to suffer harm in the absence of an injunction,
then it makes good sense to issue the injunction.” Sys. Application & Tech., Inc. v. United
States, 100 Fed. Cl. 687, 721 (2011).
Finally, the public interest is served by enjoining the VA from awarding the contract to
LMC. “It is well established that the public interest is well-served by ensuring that the
government procurement process is fair and even-handed.” BCPeabody Constr. Serv., 112 Fed.
Cl. at 514; accord Bona Fide Conglomerate, Inc. v. United States, 96 Fed. Cl. 233, 242 (2010);
PGBA, LLC, 57 Fed. Cl. at 663. The VA’s award of the contract to LMC would be unfair to
Excelsior because it complied with the requirements of the solicitation when submitting its
proposal, whereas LMC modified its proposal postaward to conform to the terms of the
solicitation. The court thus finds that it would be in the public interest to provide injunctive
relief. 6
VI. CONCLUSION
In sum, the court finds that injunctive relief is appropriate in this case. Accordingly, it is
ORDERED that:
• Plaintiff’s motion for judgment on the administrative record is GRANTED.
• Defendant’s cross-motion for judgment on the administrative record is
DENIED.
• The VA is ENJOINED from awarding the contract to LMC.
• The VA’s decision to award the contract to LMC is VACATED and this
matter is remanded to the agency to take action consistent with this opinion,
including reevaluating proposals within the technically acceptable range.
• The court has filed this opinion under seal. The parties shall confer to
determine proposed redactions agreeable to both parties. Then, by no later
than Thursday, December 17, 2015, the parties shall file a joint status report
indicating their agreement with the proposed redactions, attaching a copy of
those pages of the court’s opinion containing proposed redactions, with
all proposed redactions clearly indicated.
6
In light of this decision, the court need not reach other arguments that plaintiff raises in
its motion for judgment on the administrative record.
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No costs. The clerk is directed to enter judgment accordingly.
s/ Margaret M. Sweeney
MARGARET M. SWEENEY
Judge
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