Framaco International, Inc. v. United States

REDACTED OPINION
In the United States Court of Federal Claims
No. 14-713C
Filed: December 5, 2014
Redacted Version Issued for Publication: February 11, 20151
* * * * * * * * * * * * * *
FRAMACO INTERNATIONAL, INC., *
* Bid Protest; Omnibus Diplomatic
Protestor, * Security and Antiterrorism Act of
* 1986; Past Project Adjustment for
v. * Inflation.
*
UNITED STATES, *
*
Defendant, *
*
v. *
*
CADDELL CONSTRUCTION *
COMPANY,
*
Defendant-Intervenor. *
* * * * * * * * * * * * * *
Jonathan D. Shaffer, Smith Pachter McWhorter PLC, Tysons Corner, Virginia,
for protestor. With him were Mark E. Hanson, Mary Pat Buckenmeyer, Daniel R.
Rounds, Smith Pachter McWhorter PLC, Tysons Corner, Virginia.
Veronica N. Onyema, Trial Attorney, Commercial Litigation Branch, Civil
Division, United States Department of Justice, Washington, D.C., for defendant. With
her were Joyce R. Branda, Acting Assistant Attorney General, Civil Division, Robert E.
Kirschman, Jr., Director, Commercial Litigation. Of counsel, John W. Cox, Office of
the Legal Adviser, United States Department of State.
Dirk Haire, Fox Rothschild LLP, Washington D.C., for intervenor. With him were
Alexa Santora and Benjamin Kussman, Fox Rothschild LLP, Washington D.C.
1
This opinion was issued under seal on December 5, 2014. The parties were asked to
propose redactions prior to public release of the opinion. This opinion is issued with the
redactions that the parties proposed in response to the court’s request. Words which
are redacted are reflected with the following notation: “[redacted].”
OPINION
HORN, J.
Protestor, Framaco International, Inc., (Framaco) filed the above captioned bid
protest in this court against the United States, acting through the United States
Department of State (DOS), Bureau of Overseas Buildings Operations (OBO) Office of
Acquisitions, Acquisition Management. Protestor is “a construction management and
procurement firm providing turnkey overseas services to the U.S. government and
global construction companies.” Protestor challenges OBO’s decision not to prequalify
Framaco to compete under the Request for Proposals (RFP) in Solicitation No.
SAQMMA-14-R0115 to design and construct a new embassy compound (NEC) in
Harare, Zimbabwe (Harare, Zimbabwe project).
Protestor claims in its bid protest complaint that the “Harare, Zimbabwe
procurement is being conducted in two phases – the first for prequalification and the
second under which prequalified offerors are allowed to submit proposals in response to
the solicitation and to participate in site visits.” Protestor notes that “[i]n order to
prequalify, offerors needed to submit documentation to allow OBO to evaluate its
capabilities” and that “[d]uring Phase I, the agency declared Framaco ineligible to
compete in Phase II.” Framaco indicates, at the time the protest was filed, the agency
had not yet issued the RFPs under Phase II. Therefore, Framaco “seeks to participate
as a prequalified offeror in this procurement for construction of the NEC in Harare,
Zimbabwe.” Specifically, Framaco seeks a declaratory judgment that defendant violated
federal procurement law and regulation, as well as the terms of the Solicitation by failing
to prequalify Framaco for the Harare, Zimbabwe project. Protestor also seeks injunctive
relief directing defendant to reinstate or otherwise prequalify Framaco to compete under
the RFP for the Harare, Zimbabwe project.
FINDINGS OF FACT
On March 10, 2014, OBO issued a “Notice of Solicitation of Submissions for
Contractor Pre-Qualification” (the Notice of Solicitation) (emphasis in original) for a
design-build contract for the United States Embassy in Harare, Zimbabwe, RFP
SAQMMA-14-R0115. The Notice of Solicitation described the project as one for “the
design and construction of a New Embassy Compound to house U.S. Diplomatic
functions.” The Notice of Solicitation stated:
The New Embassy Compound) [sic] will be constructed on a US
Government owned site located on 16.5 acres of land adjacent to the
West Gate Shopping Center near Lorraine Drive in Harare, Zimbabwe.
Anticipated work and approximate sizes includes: New Chancery (NOB),
12,668 gross square meters (gsm); Maintenance Facilities and high-bay
Warehouse, 3185 gsm; Marine Security Guard Quarters, 1015 gsm;
Recreational Facilities,261 [sic] gsm; Vehicle and Pedestrian Access
Control Facilities, 528 gsm; ; [sic] Utility Building, 1015 gsm: Other Site
2
Work including Perimeter Security, Surface Vehicle Parking, Roadways,
Landscaped and Planted Areas. The site is rectangular with roads on
three sides and is approximately 16.5 acres. This project will be required
to achieve LEED® Silver certification, as a minimum.
The Notice of Solicitation set forth an approximate design-build cost of $165 to $210
million. The Notice of Solicitation also indicated that the Solicitation was to “consist of
two phases,” the first phase for prequalification and the second phase during which the
RFP would be released to the prequalified offerors, who then would be invited to submit
proposals in response and participate in site visits. The Notice of Solicitation provided:
Phase I – Pre-Qualification of Offerors
This announcement of solicitation of pre-qualification submissions is
Phase I. DOS will evaluate the pre-qualification submissions based on the
procedure and evaluation criteria set forth below.
...
Phase II – Requests for Proposals from Pre-Qualified Offerors
Those Offerors determined to be pre-qualified in accordance with this
notice will be issued a formal Request for Proposal (RFP) for the project
and invited to submit proposed pricing in Phase II.
(emphasis in original).
The Notice of Solicitation informed offerors that, with a single submission, they
could seek prequalification for the Harare, Zimbabwe project and four other projects:
United States Embassy Pristina, Kosovo, RFP SAQMMA-13-R0118; United States
Embassy/Consulate Ashgabat, Turkmenistan, RFP SAQMMA-14-R0108; United States
Consulate Nuevo Laredo, Mexico, RFP SAQMMA-14-R0117; and United States
Consulate Erbil, Iraq, RFP SAQMMA-14-R0101. The Notice of Solicitation instructed
that multiple submissions were not required for each project and that “[o]fferors seeking
multiple project qualifications must list all projects for which qualification is sought in the
cover letter.” The Notice of Solicitation indicated that “[t]he Government would evaluate
and consider the qualification package submitted in relation to the requirements for
qualification described in each separate project Notice of Solicitation of Submission for
which qualification is requested.”
The Notice of Solicitation provided that, “[f]irms submitting information for Phase I
qualification shall address the following criteria in the proposal to provide design and
construction services.” Under section “4. Mandatory Pre-Qualification Requirements”
(emphasis in original), the Notice of Solicitation indicated that, “[t]he Offeror shall submit
sufficient documentation to allow DOS to evaluate its capabilities with respect to the
factor(s) and qualification criteria listed. Submissions that are missing the required
information or otherwise do not comply with the submission requirements may be
eliminated from consideration at the Contracting Officer’s determination.” Moreover, of
3
particular relevance to the current protest, the Notice of Solicitation instructed:
To demonstrate performance of similar construction work for Omnibus
Diplomatic Security and Antiterrorism Act of 1986 purposes, the offeror
needs to provide information demonstrating that it has successfully
completed in the United States or at a U.S. diplomatic or consular mission
a construction contract or subcontract involving work of the same general
type and complexity as the solicited project and having a contract or
subcontract value of at least $124 million.
(emphasis added). The Notice of Solicitation required that “ALL SUBMISSIONS MUST
BE RECEIVED BY 3:00 P.M. Eastern Time on April 16, 2014” (capitalization in original),
and indicated “REQUESTS FOR CLARIFICATIONS must be submitted in writing to
Jillian Savage AND David Vivian by email SavageJM@state.gov AND Alt AQM
viviandw@state.gov.” (capitalization and emphasis in original). Under section “4.A.
Omnibus Diplomatic Security and Antiterrorism Act of 1986,” the Notice of Solicitation
further explained the application of the Omnibus Diplomatic Security and Antiterrorism
Act of 1986 (Diplomatic Security Act).2 The Notice of Solicitation provided:
2
Codified at 22 U.S.C. § 4852 (2012), the Diplomatic Security Act provides:
(a) Preference for United States contractors
Notwithstanding section 302 of this title, and where adequate competition
exists, only United States persons and qualified United States joint
venture persons may—
(1) bid on a diplomatic construction or design project which has an
estimated total project value exceeding $10,000,000; and
(2) bid on a diplomatic construction or design project which involves
technical security, unless the project involves low-level technology,
as determined by the Secretary of State.
...
(c) Definitions
For the purposes of this section—
...
(2) the term “United States person” means a person which—
...
4
Firms being considered for award under this acquisition are limited to
“United States Person” bidders as defined in the Act. The Offeror must
complete and submit as part of its pre-qualification package the pamphlet
“Certifications Relevant to Public Law 99-399, Statement of Qualifications
for Purpose of Section 402 of The Omnibus Diplomatic Security and
Antiterrorism Act of 1986.” (The pamphlet is attached to this
FEDBIZOPPS announcement and may be obtained from the DOS
Contract Specialist listed at the end of this notice.) . . . This is a pass/fail
evaluated area. Submissions from Offerors who do not receive a pass
rating in this area will not be further evaluated. Sufficient information
should be provided in the Certifications and attachments thereto to
determine eligibility under Public Law 99-399, but the Department
reserves the right to consider information available from other sources, or
to obtain clarifications or additional information from the Offeror.
(emphasis in original). A pamphlet titled: “CERTIFICATIONS RELEVANT TO PUBLIC
LAW 99-399 Statement of Qualifications for Purpose of Section 402 of the Omnibus
Diplomatic Security and Antiterrorism Act of 1986 (Public Law 99-399)” (capitalization in
original), was attached to the Notice of Solicitation. The pamphlet instructed prospective
offerors to “Use this Guide for All FY 2014 Project Submissions Include a copy in each
Qualification Submission.” (emphasis in original). The pamphlet explained that:
Section 402 of the Omnibus Diplomatic and Antiterrorism Act of 1986
provides that a “United States person” must meet certain requirements,
listed in subsections 402(c)(2) and (3) of the Act, to be eligible for the
statutory preference. To assist individuals to determine whether or not
they qualify as a U.S. person . . . entitled to preference under Section 402,
guidance is provided on this pre-qualification form.
For ease of reference, the statutory language will be quoted immediately
before the definitions that apply to it. Space for the information requested
is provided immediately following definitions. The Department of State
reserves the right, in its sole discretion, to interpret and apply the
definitions to the information provided by each prospective offeror.
(D) has performed within the United States or at a United States
diplomatic or consular establishment abroad administrative and
technical, professional, or construction services similar in
complexity, type of construction, and value to the project being
bid[.]
Omnibus Diplomatic Security and Antiterrorism Act of 1986, Pub. L. No. 99-399, § 402,
100 Stat. 853, 864 (1986) (as codified and amended at 22 U.S.C. § 4852) (emphasis to
word “value” added).
5
In relevant part, the pamphlet stated:
Section 402 (c) (2) (D): “The term ‘United States person’ means a person
which—has performed within the United States, or at a United States
diplomatic or consular establishment abroad administrative and
technical, professional, or construction services similar in complexity, type
of construction, and value to the project being bid.”
(emphasis in original). Following the quoted statutory language, the pamphlet defined
certain terms, including “VALUE” (capitalization and emphasis in original), which was
defined as follows:
“VALUE”—This term refers to the total contract price of the project, not to
the profit or loss to the contractor.
(capitalization and emphasis in original). The pamphlet then provided a space for the
prospective offeror to include a certification of its similar projects, as follows:
Certification #4: List on this page and an attachment if necessary, one or
more similar projects completed by the prospective offeror. For each
project, provide the following information:
Location:___________________________________(city and state)
Type of service:_____________________________(administrative, etc.)
Complexity:________________________________(office building, etc.)
Type of construction:_________________________
Value of project:_____________________________
If the prospective offeror’s participation was as a partner or co-venturer,
indicate the percentage of the project performed by the prospective
offeror:__________.
(emphasis in original).
On April 7, 2014, approximately nine days before the prequalification submission
deadline, and as instructed in the Notice of Solicitation regarding requests for
clarifications, President of Framaco Paul Kacha sent an email to DOS employee Jillian
Savage and to DOS contracting officer David Vivian,3 seeking clarification on the value
figure provided in the Notice of Solicitation. Mr. Kacha wrote:
3
The Administrative Record is unclear as to Jillian Savage’s job title at DOS.
Correspondence from counsel for Framaco addresses Ms. Savage as a “Contracting
Officer.” It is clear from the record that Mr. Vivian was a contracting officer.
6
We reviewed the pre-qualification Notice for the new Harare post.
The below Phase I requirements calls for a $124M completed US
diplomatic mission.
Kindly advise if we can apply using a $122M completed project that was
awarded in 2009 and if needed adjusting to inflation to meet the Harare
requirement?
Mr. Kacha copied into his email to the DOS the language from the Notice of Solicitation
regarding “Mandatory Pre-Qualification Requirements” (emphasis in original),
including the language setting forth the $124 million contract value threshold, which
stated:
To demonstrate performance of similar construction work for Omnibus
Diplomatic Security and Antiterrorism Act of 1986 purposes, the offeror
needs to provide information demonstrating that it has successfully
completed in the United States or at a U.S. diplomatic or consular mission
a construction contract or subcontract involving work of the same general
type and complexity as the solicited project and having a contract or
subcontract value of at least $124 million.
Later, on the morning of April 7, 2014, Mr. Vivian responded via email to Mr. Kacha’s
email, copying Ms. Savage and Michael Scott, 4 indicating: “The stated minimum is
$124. You may attempt to explain or justify why the Government should consider a
number less than the stated minimum but that is your decision and it may not be
successful.”
Protestor timely sent in a submission seeking prequalification for all five 2014
Design-Build Contracts: United States Embassy Pristina, Kosovo, RFP SAQMMA-13-
R0118; United States Embassy Harare, Zimbabwe, RFP SAQMMA-14-R0115; United
States Embassy/Consulate Ashgabat, Turkmenistan, RFP SAQMMA-14-R0108; United
States Consulate Nuevo Laredo, Mexico, RFP SAQMMA-14-R0117; and United States
Consulate Erbil, Iraq, RFP SAQMMA-14-R0101. In the cover letter to its prequalification
package, Framaco indicated “extensive experience of working successfully with the
Department of State, Bureau of Overseas Buildings Operations (DOS OBO) on several
embassy, consulate, and housing projects, often in challenging environments,” and that
it had “finished construction of the new 122M USD Design-Built [sic] US Embassy
Compound in Belgrade, Serbia successfully.”
As a reference project, Framaco submitted its contract for the Belgrade, Serbia
NEC performed by Framaco from February 2009 to October 2013. Framaco’s
prequalification package contained a section titled “Factor 4.0. Proof of Completion of
4
The Administrative Record is unclear regarding Michael Scott’s job title and
involvement in the procurement under consideration.
7
Project Approximately $120 million” (emphasis in original), in which Framaco sought
to demonstrate that it met the stated Solicitation requirements because the inflation-
adjusted contract value for the Belgrade, Serbia project exceeded $124 million.
Framaco “attached inflation adjusted calculations” and requested “OBO to take into
account the present value of Framaco’s historical work.” In its prequalification package,
Framaco stated:
With respect to the below requirement for all 5 above referenced projects:
To demonstrate performance of similar construction work for Omnibus
Diplomatic Security and Antiterrorism Act of 1986 purposes, the offeror
needs to provide information demonstrating that it has successfully
completed in the United States or at a U.S. diplomatic or consular mission
a construction contract or subcontract involving work of the same general
type and complexity as the solicited project and having a contract or
subcontract value of at least $.... million.
The magnitude of the 2014 minimum completion requirements is triggered
by an increased scope such as housing facilities. Framaco has already
successfully completed these type of facilities as part of its experience
(Ex. US$[redacted]+ [redacted] NEC, Housing Facilities).
Considering the successful completion of the Design Built US Embassy
NEC, Belgrade, Framaco would like to submit the attached inflation
adjusted calculations for your evaluation. Based on the 2009 awarded
price of $122,682,228 for the Belgrade Project and the present value of
the Serbia project would be $133,272,995 [sic]
The United States Congress and the Office of Federal Procurement Policy
have stated a clear policy preference for maximum competition through
the Competition in Contracting Act (“CICA”) and the Federal Acquisition
Regulation (“FAR”). OBO procurements remain subject to requirements of
CICA and the FAR. Accordingly, the qualification requirements of the
Omnibus Act must be interpreted in a manner that does not unduly and
impermissibly restrict competition. We understand that OBO in the past
has considered the present value of projects previously performed by a
contractor. We would appreciate OBO to take into account the present
value of Framaco’s historical work. If the Framaco projects and specifically
the NEC in Belgrade, Serbia was adjusted to reflect inflation and the
present value of money, Framaco’s project in the aggregate substantially
exceed the estimated value of the 2014 procurements. We hope that
OBO’s conclusion will be consistent with the letter or spirit of the Omnibus
Act requirements.
(emphasis and omission in original).
8
Framaco presented “Inflation Adjustment Calculations for the US Embassy
Belgrade Project” including a chart of “US Inflation per month” between February
2009 and March 2014 using inflation rates from the “US Bureau of Labor Statistics.”
(emphasis in original). Framaco also offered a timeline of events for the Belgrade,
Serbia project, which indicated Award on February 17, 2009, Substantial Completion on
March 29, 2013, Final Acceptance on October 31, 2013, and Prequalification
Submission on April 16, 2014. Framaco indicated that the “Contract Amount” at the
time of “award” was $117,137,704.00 and at the time of “s[ubstantial] completion”
was $122,682,229.00. (all emphasis in original). Framaco concluded “Average Inflation
per month between a& d” (emphasis in original) was 0.1358% and “Inflation adjust
Contract Completion Price based on the substantial completion date (61 terms)”
produced an “Inflation Adjusted Contract Value” of $133,272,995.00.5 (emphasis in
original). Also in support of Framaco’s Factor 4.0 submission, Framaco attached a
March 29, 2013 Certificate of Substantial Completion letter and an October 31, 2013
Final Acceptance letter for the Belgrade, Serbia project, both from the DOS.
In its prequalification package under a section titled “Factor 4.A. Omnibus
Diplomatic Security and Antiterrorism Act of 1986” (capitalization and emphasis in
original), Framaco also filled out and attached the pamphlet titled “CERTIFICATIONS
RELEVANT TO PUBLIC LAW 99-399 Statement of Qualifications for Purpose of
Section 402 of The Omnibus Diplomatic Security and Antiterrorism Act of 1986 (Public
Law 99-399).” (capitalization in original).
In accordance with Section 402(c)(2)(D) of the Diplomatic Security Act, and as
instructed in the pamphlet, Framaco responded to the request to comply with the term
“United States person” having “performed within the United States, or at a United
States diplomatic or consular establishment abroad administrative and technical,
professional, or construction services similar in complexity, type of construction, and
value to the project being bid.” (emphasis in original). In its submission, Framaco
indicated:
Certification #4: List on this page and an attachment if necessary, one or
more similar projects completed by the prospective offeror. For each
project, provide the following information:
Location: Please see the Attachment “Certification #4”(city and state)
Type of service:_____________________________(administrative, etc.)
Complexity:________________________________(office building, etc.)
Type of construction:_________________________
Value of project:_____________________________
If the prospective offeror’s participation was as a partner or co-venturer,
5
Framaco explained in its July 1, 2014 Agency Level Bid Protest that the chart “shows
the U.S. inflation by month for the years 2009 to 2014. Using the average inflation of
0.1358 percent, the inflation adjustment contract complete price based on the March 29,
2013 substantial completion date is $133,272,995.”
9
3) SAQMMA14R0115 NEC Harare, Zimbabwe ($165-210 million)
4) SAQMMA14R0118 NEC Pristina, Kosovo ($155-205 million)
5) SAQMMA14R0117 NCC Nuevo Laredo, Mexico ($68-95 million)
The May 12, 2014 Gallagher Memorandum provides that “[a]ll findings . . . are
based on the certifications and other prequalification materials submitted by the
prospective offerors and assume the truth of these representations unless otherwise
noted.” The May 12, 2014 Gallagher Memorandum notes:
there continues to be a good deal of uncertainty as to the application of
certain requirements of Section 402 of P.L. 99-399. In particular, there are
inconsistent decisions by the Court of Federal Claims and the Government
Accountability Office as to whether the business volume requirement may
be satisfied by cumulative business volume in 3 years of the 5 year period
prior to the solicitation exceeding the value of the project or whether
business volume in each of three years of the five year period is required.
For purposes of this review, I have applied the cumulative business
volume standard, but have notes [sic] instances in which the offeror would
not meet the standard articulated by GAO [Government Accountability
Office], in which the offeror must show business volume meeting or
exceeding the project value in each of 3 of the last five years.
The May 12, 2014 Gallagher Memorandum also states:
There has also been some uncertainty as to what project value should be
required for the construction services to be considered similar in value to
the project being solicited. To avoid uncertainty, each FedBizOpps
announcement provided that to meet the experience requirement a
potential offeror must have completed a construction contract involving
work of the same general type and complexity as the project for which it
seeks prequalification and having a contract or subcontract value
exceeding a specified amount as follows: 1) Erbil $187 million;
2) Ashgabat $135 million; 3) Harare $124 million; 4) Pristina $116 million;
5) Nuevo Laredo $51 million.
The May 12, 2014 Gallagher Memorandum proceeds to consider each of the
seventeen potential offerors7 ten of which sought to prequalify for the Harare, Zimbabwe
project. As reflected in the Administrative Record, in an undated DOS Internal Record of
Offerors, 8 eight of the ten potential offerors seeking prequalification for the Harare,
7
The May 12, 2014 Gallagher Memorandum did not fully consider Offeror #17, the offer
from the Weitz-Watts Joint Venture, because Mr. Gallagher indicated in the
memorandum that he was “unable to locate this volume” because it “either was not
submitted in the boxes for review or has been inadvertently misplaced.”
8
As reflected in the Administrative Record, the DOS Internal Record of Offerors
11
Zimbabwe project were prequalified by DOS and found eligible to bid on the Harare,
Zimbabwe project. These companies were: B.L. Harbert International, LLC; ECC
International, LLC; Caddell Construction Co., LLC, the intervenor in the protest currently
before the court, (Caddell); WATTS Constructors, Inc.; Perini Management Services;
KBR Federal Services, LLC; American International Contractors (Special Projects), Inc.;
and Pernix Group, Inc., bidding alone. 9 As reflected in the May 12, 2014 Gallagher
Memorandum and the DOS Internal Record of Offerors, two potential offerors were
found ineligible to compete and denied prequalification for the Harare, Zimbabwe
project: Framaco and ACC Construction Company, Inc. (ACC). Regarding Framaco,
also known as Offeror #2, which had sought prequalification for all five projects, the May
12, 2014 Gallagher Memorandum indicates, in relevant part:
Framaco’s reported business volume meets the COFC [United States
Court of Federal Claims] cumulative standard for all 5 projects but meets
the GAO 3 of 5 years standard only for Neuvo [sic] Laredo. Framaco’s
largest completed project is the Belgrade NEC ($122.6 million). This
meets the FedBizOpps thresholds only for Pristina and Nuevo Laredo.
Recommendation: Framaco should be deemed prequalified for Pristina
and Nuevo Laredo but not for the other three projects.
The May 12, 2014 Gallagher Memorandum does not specifically mention or discuss
Framaco’s request for DOS to utilize an inflation adjustment to reach the $124 million
threshold. Regarding the other potential offeror which was denied prequalification for
the Harare, Zimbabwe project, ACC, Offeror #15, the memorandum concluded that
ACC’s “largest projects are a [redacted] project and a [redacted] complex with contract
values of $[redacted] million and $[redacted] million respectively. This would meet the
contract value threshold only for Nuevo Laredo.” As reflected in the May 12, 2014
Gallagher Memorandum and the DOS Internal Record of Offerors, for the eight offerors
which were prequalified for the Harare, Zimbabwe project, all but Pernix Group, Offeror
#11, bidding alone, appear to have listed previous contracts that met the $124 million
contract value threshold. Regarding Pernix Group, Offeror #11, the May 12, 2014
Gallagher Memorandum recommended prequalification for the Pernix Group for the
provides the prequalification status of the potential offerors for the five projects, yet uses
some names for the companies different from those used in the May 12, 2014 Gallagher
Memorandum. For instance, the DOS Internal Record of Offerors refers to one company
as WATTS Construction, whereas the May 12, 2014 Gallagher Memorandum refers to
the company as WATTS Constructors, Inc.
9
The name Pernix appears three times in the May 12, 2014 Gallagher Memorandum:
first, as a joint venture proposer listed as Aecom/Pernix Joint Venture, Offeror #5;
second, as Pernix Group, Inc., Offeror #11; and third, as a joint venture proposer Pernix
Group/Aecom Government Services, Offeror #12. The joint venture proposers which
included Pernix, Offerors #5 and #12, sought prequalification only for the Nuevo Laredo,
Mexico project.
12
Harare, Zimbabwe project. The May 12, 2014 Gallagher Memorandum states:
Pernix lists business volumes for the three years from 2011 to 2013 that
exceeds $[redacted] million cumulatively. This would meet the COFC
cumulative business volume standard but would not meet the GAO
interpretation that the annual business volume for each of 3 years must
exceed the project value. For similar construction experience Pernix lists
one [redacted] office building construction project [redacted] whose value
is much less than the estimated value of the Harare or Pristina projects.
Pernix also lists a larger contract ($[redacted] million) for a variety of
construction work at the [redacted] that it performed as the majority
partner in a joint venture. This site is part of the [redacted] diplomatic
mission and the work at least in part appears similar in complexity and
type of construction to the Pristina and Harare projects and also meets the
contract value thresholds set for these two projects.
Recommendation: Pernix has demonstrated that it meets the
prequalification requirements for Harare and Pristina, and should be
deemed eligible to offer on those projects.
Although $[redacted] million is less than the $124 million contract value requirement for
prequalification for the Harare, Zimbabwe project, the May 12, 2014 Gallagher
Memorandum, nonetheless, prequalified the Pernix Group, Offeror #11, and
recommended it be allowed to proceed to Phase II of the competition.10
10
Upon reviewing the Administrative Record, including the May 12, 2014 Gallagher
Memorandum and the DOS Internal Record of Offerors, the court identified the
monetary disparity regarding the prequalification of Pernix Group, Offeror #11. The
court, therefore, issued an Order asking the parties to address why Pernix Group,
bidding alone as Offeror #11, had been recommended for prequalification for the
Harare, Zimbabwe project, although it had submitted a past project having a contract
value of only $[redacted] million, which was below the $124 million contract value
threshold requirement indicated to qualify for the Harare, Zimbabwe project. In
defendant’s reply in support of its motion for judgment on the Administrative Record,
defendant conceded that “DOS misapplied the $124 million threshold when it pre-
qualified offeror Pernix Group, Inc. (Pernix Group) for the Project, although it did not
consider inflation in doing so.” Defendant indicated that “DOS has since dis-qualified
Pernix Group.” Defendant attached a declaration from Dennis Gallagher, Assistant
Legal Adviser in the Office of the Legal Adviser to DOS and author of the May 12, 2014
memorandum. In his declaration, Mr. Gallagher acknowledges “Pernix Group listed a
contract of $[redacted] million for a construction project the [redacted] as evidence of
prior, similar work.” Mr. Gallagher explained that although he had “concluded that Pernix
Group met the pre-qualification requirement,” he had “reached this conclusion in error
because the threshold requirement contained in the Notice of Solicitation required a
contract or subcontract value of at least $124 million.” Mr. Gallagher indicated that he
had not considered inflation or other adjustments in the May 12, 2014 Gallagher
13
On June 3, 2014, contracting officer David Vivian notified Framaco of its
“Successful/Unsuccessful Prequalification” for the five projects. The letter indicated
Framaco did not qualify for the Harare, Zimbabwe project and, thus, would be ineligible
to submit a proposal for the project when the agency issues the Solicitation, although
Framaco did prequalify for the Pristina, Kosovo and Nuevo Laredo, Mexico projects.
The letter stated:
Based on the information provided in the prequalification package
submitted by Framaco International Inc., Framaco International Inc. did
not meet the technical requirements for prequalification for the 2014
Design-Build Construction Service for SAQMMA-14-R0101: Erbil, Iraq,
SAQMMA-14-R0108: Ashgabat, Turkmenistan and SAQMMA-14-R0115:
Harare, Zimbabwe projects.
However based on the information provided in the prequalification
package submitted by Framaco International Inc., Framaco International
Inc., has met all the requirements for prequalification for the 2014 Design-
Build Construction Service for SAQMMA-14-R0118: Pristina, Kosovo and
SAQMMA-14-R0117: Nuevo Laredo, Mexico projects.
The letter also provided instructions and timelines for the procurement process for
prequalified bidders:
Based on the current schedule, we plan to begin issuing the Request for
Proposal (RFP) for the prequalified referenced projects in late July 2014.
Once the RFP is released, a separate letter will be issued with the ProjNet
Key Codes to access the RFP.
Project and site specific discussions will be addressed during the site visit,
which will occur after release of the Request for Proposal (RFP)
Memorandum when he previously concluded that Pernix Group met the threshold.
Mr. Gallagher also indicated that, “[d]ue to this error, I have reviewed my May 12,
2014 memorandum to determine whether I made this same error when applying the
$124 million threshold to the other prospective offerors on the Project.” Mr. Gallagher
concluded he had not done so. Mr. Gallagher also “advised AQM [the Office of
Acquisition Management] at DOS that it should amend its prior notice to Pernix Group to
indicate that Pernix Group is not pre-qualified to participate in Phase II of the Project.” In
addition, defendant submitted a letter from contracting officer David Vivian to Pernix
Group, dated September 1, 2014, informing Pernix Group of the error and indicating
that, “[b]ased on the information provided in the prequalification package submitted by
Pernix Group, Inc., Pernix Group, Inc. does not meet all the requirements for
prequalification for the 2014 Design-Build Construction Service for the SAQMMA-14-
R0115 Harare, Zimbabwe.”
14
documents. Site visits usually take place approximately two weeks after
RFP issuance.
On June 9, 2014, Framaco requested a pre-award debriefing regarding the Erbil,
Iraq; Ashgabat, Turkmenistan; and Harare, Zimbabwe projects and received an oral
debriefing from the agency on June 12, 2014. During the debriefing, Framaco requested
the agency conduct a reconsideration of the determination on contract value. On June
13, 2014, Ms. Neal sent a DOS internal memorandum to Mr. Gallagher regarding
Framaco’s “Request for reconsideration of the Statement of Qualifications
Questionnaire” for the Harare, Zimbabwe project, as well as for the Erbil, Iraq and
Ashgabat, Turkmenistan projects. Ms. Neal’s June 13, 2014 Memorandum also
attached a blank form for Mr. Gallagher’s comments. Ms. Neal explained that during the
debriefing, Framaco “advised that the combined values of the project in Belgrade and
the present value of the Serbia project should have qualified them for the remaining 3
projects for which they are seeking prequalification. This information can be located on
page 1 of 3 under Factor 4.0.” On June 16, 2014, Mr. Gallagher responded to Ms. Neal
on the completed form:
Per telecon, Framaco seems to be arguing that the $122 million contract
value for Belgrade, Serbia NEC project should be adjusted upward. There
is nothing in the FedBizOpps announcement or in the law/regulation to
support such an adjustment, and no showing that such an adjustment is
warranted. I recommend that the prequalification determinations with
respect to Framaco not be changed.
On June 24, 2014, Ms. Neal responded by letter to Mr. Kacha. The letter stated:
During the debriefing conducted on June 12, 2014 a request for
reconsideration was made of the prequalification package submitted by
Framaco International Inc. The reconsideration request is based on the
position that Framaco International Inc. states that the $122 million
contract value for Belgrade and Serbia NEC projects should be adjusted
upward.
There is nothing in the FedBizOpps announcement or in the regulation/law
to support such an adjustment, and no showing of such and [sic]
adjustment is warranted. Therefore Framaco International Inc. remain s
[sic] not meeting the technical requirements for prequalification for the
2014 Design-Build Construction Service for SAQMMA-14-R0101: Erbil,
Iraq, SAQMMA-14-R0108: Ashgabat, Turkmenistan and SAQMMA-14-
R0115: Harare, Zimbabwe projects.
On July 1, 2014, counsel for Framaco filed an agency level protest with the
contracting officer, requesting a decision at a level above the contracting officer,
pursuant to FAR § 33.103(d)(4) (2013). Framaco indicated it was “not challenging the
OBO’s determination to disqualify Framaco for the OBO Erbil, Iraq and Ashgabat,
15
Turkmenistan projects” and it “understand[s] the agency’s analysis as to those larger
projects and only challenge[s] the agency’s decision with regard to the much smaller
Harare, Zimbabwe project.” Framaco stated:
OBO’s decision to disqualify Framaco is a violation of statute and
regulation. The agency should recommend that the contracting officer
determine Framaco prequalified for the 2014 NEC Harare, Zimbabwe
project. In the alternative, the agency should recommend that the
contracting officer conduct a new prequalification determination in
accordance with the requirements of the applicable statutes and
regulations and consistent with OBO’s practices.
Framaco argued that:
OBO’s determinations are not consistent with the applicable statutes and
regulations. Framaco has met the Section 402 subsection (D)
requirement. Framaco has performed similar construction services that
exceed the threshold required here. OBO’s interpretation treats Framaco
in an inconsistent and arbitrary manner. OBO found Framaco qualified
previously under almost identical situations. Moreover, OBO’s
disqualification relies on an unreasonable and unduly restrictive
interpretation of subsection (D) contrary to Section 402 and CICA. 41
U.S.C. § 3301.
Moreover, Framaco urged that:
Nothing in the Section 402 definitions limits the agency from adjusting past
projects for inflation. This makes logical sense. If Congress had intended
to limit competition solely to those offerors who had performed at least one
project with a dollar value equal to or greater than the project being bid
without any adjustments for inflation, Congress would have so specified.
Previously, OBO interpreted subsection (D) to allow for adjustments for
inflation. In the context of CICA and the overarching competition
requirements, and given the construction services of the type being
required here, especially where there are a limited number of potential
offerors, the rules must be interpreted to allow for adjustments for inflation.
Framaco attached to its request the same inflation adjustment calculations chart that it
had included in its prequalification package and stated:
Attachment A shows the U.S. inflation by month for the years 2009 to
2014. Using the average inflation of 0.1358%, the inflation adjustment
contract complete price based on the March 29, 2013 substantial
completion date is $133,272,995. This is the figure OBO should use in
determining the value of the Belgrade, Serbia project for the present
procurement. This present value of the Belgrade, Serbia project is
16
substantially more than the $124 million needed to prequalify for the
Harare, Zimbabwe NEC.
On July 21, 2014, Mr. Vivian responded to Framaco’s request by issuing a
“CONTRACTING OFFICER’S FINAL DECISION.” (capitalization in original). Mr. Vivian
denied Framaco’s protest, as follows:
On March 10, 2014 the Department of State issued the referenced
solicitation SAQMMA14R0115 for the Prequalification for the Design/Build
contract competition of a New Embassy Compound in Harare, Zimbabwe.
The solicitation announced that “Firms being considered for award under
this acquisition are limited to “United States Person” [sic] bidders as
defined in the Act.” In response to this solicitation, Framaco submitted a
Certification Relevant to Public Law 99-399, Statement of Qualifications
for Purpose of Section 402 of the Omnibus Diplomatic Security and
Antiterrorism Act of 1986 (hereafter (“the Act”),. [sic] Part of the Act
requires offerors to demonstrate completed projects that are considered
similar in value to the project being solicited. In Harare’s case, the range
of magnitude provided in the solicitation is $165 to 210 million. The largest
project submitted by Framaco to comply with this act was the Belgrade
NEC $122.6 million dollar project; which is nearly $42.5 million dollars less
than the minimum range for the Harare NEC project.
Furthermore, the announcement expressly indicates to all interest [sic]
parties that in order “To demonstrate performance of similar construction
work for Omnibus Diplomatic Security and Antiterrorism Act of 1986
purposes, the offeror needs to provide information demonstrating that it
has successfully completed in the United States or at a U.S. diplomatic or
consular mission a construction contract or subcontract involving work of
the same general type and complexity as the solicited project and having
a contract or subcontract value of at least $124 million.” This is a specific,
definite, and unequivocal reference to a mandatory threshold for
qualification. There is no allowance in the announcement for adjustment of
the stated threshold or to the value of the project that an interested party
may offer to demonstrate that it has successfully completed performance
of similar construction work. As indicated above, the project Framaco
offers to demonstrate compliance is the Belgrade NEC valued at $122.6
million: the project value is insufficient to meet the stated threshold.
The FedBizOpps announcement and the Act do not indicate that an
inflation adjustment to the project value is authorized or warranted;
therefore, it would be improper for the Government to apply such an
adjustment to any submission by any offeror. Please also note that the
announcement and prequalification evaluation criteria has been totally
revised and more clearly defined for 2014 so any allowance that may have
17
been appropriate in previous years cannot be brought forward into this
clearer unambiguous qualification process.
Wherefore, in light of the above facts, Framaco failed to display
completion of a project similar in value to the Harare NEC project as
required by the Act and solicitation, therefore Framaco’s protest is denied.
(emphasis in original). The contracting officer’s July 21, 2014 letter also indicated that
Framaco could seek review from the agency at a higher level than the contracting
officer by appealing to the Departmental Competition Advocate, Office of the
Procurement Executive (A/OPE), Department of State.
On July 23, 2014, Framaco submitted, what it referred to as, a “joint (a) request
for reconsideration of the U.S. Department of State, Bureau of Overseas Building
Operations’ . . . July 21, 2014 ‘Final Decision’ and (b) request that the agency protest
official Daniel J. Walt consider this additional submission in support of the protest.” In
the July 23, 2014 request, Framaco argued that “[t]he agency’s July 21, 2014 letter is
inconsistent with the solicitation and recent developments known to the agency” insofar
as it “inappropriately compares Framaco’s Belgrade project to an asserted range for the
total Harare project cost estimate of $165 to $210 million to claim that Framaco’s
Belgrade project is $42 million lower than required by the solicitation” because the
Solicitation does not require offers to be within the range of $165 to $210 million. In the
next line, however, the protestor acknowledged, through its attorney, that, “[t]he only
relevant threshold for qualification is the $124 million amount provided in the
FedBizOpps (‘FBO’) posting.” Framaco argued that the agency “cannot change the
ground rules in the middle of the procurement.” Framaco further stated that “the agency
analysis ignores the actual contract value for the Belgrade project.” Moreover, Framaco
asserted that “[a]ny reasonable analysis shows that the Belgrade project exceeds the
agency’s announced $124 million requirement.” Framaco once again urged that an
inflation adjustment should be used to reach “actual” value. Protestor also argued, “[i]n
any event, the actual contract value for the Belgrade project exceeds $124 million even
without an inflation adjustment” because of “approximately $[redacted] million in
Requests for Equitable Adjustments (‘REAs’) that are outstanding on the Belgrade,
Serbia project.” Framaco requested “that the agency determine Framaco to be
prequalified for the 2014 NEC Harare, Zimbabwe project” and stated, “[i]n the
alternative, Framaco is seeking the agency to recommend that the contracting officer
conduct a new prequalification determination in accordance with the requirements of the
applicable statutes and regulations and consistent with OBO’s previous practices.”
On August 5, 2014, Eric N. Moore, the DOS Departmental Competition
Advocate, sent a letter responding to Framaco, providing, “[a]s part of the independent
review of this agency protest, we reviewed all of the above materials plus the solicitation
and all other relevant supporting documentation.” The letter concluded:
Unfortunately, the solicitation does not include inflation adjustment as an
evaluation method. As such, applying it to your response would prejudice
18
other responses on which it was not applied. The Contracting Officer
therefore is unable to apply the inflation adjustment to any of the
responses, including yours. As such, we concur with the Contracting
Officer’s decision that based on your response to the solicitation; the
Department of State is unable to prequalify you to participate further in the
procurement.
Subsequently, the protestor filed the above captioned bid protest with this court,
asserting two claims: the first for “FAILURE TO EVALUATE IN ACCORDANCE WITH
SOLICITATION TERMS” and the second for “DISPARATE TREATMENT”
(capitalization in original), and requested the court to grant preliminary injunctive relief
precluding the defendant from continued pre-award activities under the Harare,
Zimbabwe project until after the court’s ruling on the merits. Framaco also requests that
the court grant “[a] judgment declaring that Defendant violated federal procurement law,
regulation and the terms of the RFP by failing to prequalify Framaco for the Harare,
Zimbabwe procurement.” The court granted Caddell’s motion to intervene in the
proceedings. The parties cross-moved for judgment on the Administrative Record.11
DISCUSSION
In its bid protest complaint, Framaco alleges two claims: the first for failure to
evaluate in accordance with Solicitation terms and the second for disparate treatment.
Regarding the first claim, protestor argues that to meet the Solicitation requirement of a
project “involving work of the same general type and complexity as the solicited project
and having a contract or subcontract value of at least $124 million,” Framaco submitted
its Belgrade, Serbia project, which according to Framaco, met the requirement, albeit
with an inflation adjusted contract value and/or an adjusted contract value for contract
modifications based on outstanding REAs. Protestor argues that “[t]he agency’s unduly
narrow and restrictive interpretation of the solicitation is arbitrary, capricious, an abuse
of discretion and otherwise contrary to statute and regulation.” Protestor also asserts
that the agency’s actions “constitute a clear and prejudicial violation of its obligations
under applicable law and regulation.” The protestor contends that the Harare,
Zimbabwe procurement is subject to the requirements of the Competition in Contracting
Act, 41 U.S.C. § 3301 (2012) (CICA) and that the “OBO’s present interpretation is anti-
competitive and contrary to the CICA and the FAR because [it] substantially limits
competition.”
Protestor also argues that the agency engaged in disparate treatment. Protestor
states it is “axiomatic that agencies must treat offerors on a fair and consistent basis”
and indicates that agencies are barred from treating offerors on a disparate basis.
11
Because DOS indicated that it intended to proceed to Phase II of the Solicitation on a
specified date, and after careful review of all of the parties’ submissions to the court, the
court denied the protest in a telephone conference with all parties and indicated this
written opinion would follow.
19
Protestor contends that “OBO has previously used inflation-adjusted contract values or
contract values that take into account modifications, REAs and other contract
adjustments in order to evaluate prequalification submissions.” Protestor argues that
“OBO has adopted an inconsistent and discriminatory interpretation of the Omnibus Act
in a manner that materially prejudices Framaco,” and that “[w]hen an agency departs
from its prior practice in an inconsistent fashion such action is arbitrary and capricious.”
Protestor contends such “impropriety is significantly heightened where, as here, it limits
competition, resulting in higher cost to the government.” In protestor’s motion for
judgment on the Administrative Record, protestor also alleges that “OBO erred as a
matter of law in determining that an inflation adjustment was barred by the terms of the
solicitation, statute and regulation” and “OBO’s improper exclusion of Framaco violated
material terms of the solicitation, the Federal Acquisition Regulation and the
Competition in Contracting Act . . . .”
The parties filed cross-motions for judgment on the Administrative Record.12 Rule
52.1(c) of the Rules of the United States Court of Federal Claims (2014) governs
motions for judgment on the Administrative Record. The court’s inquiry is directed to
“‘whether, given all the disputed and undisputed facts, a party has met its burden of
proof based on the evidence in the record.’” Mgmt. and Training Corp. v. United States,
115 Fed. Cl. 26, 40 (2014) (quoting A & D Fire Prot., Inc. v. United States, 72 Fed. Cl.
126, 131 (2006) (citing Bannum, Inc. v. United States, 404 F.3d 1346, 1356-57 (Fed.
Cir. 2005))); see also Eco Tour Adventures, Inc. v. United States, 114 Fed. Cl. 6, 21
(2013); DMS All-Star Joint Venture v. United States, 90 Fed. Cl. 653, 661 (2010).
12
Several documents not initially in the Administrative Record were offered to the court
during its review of Framaco’s bid protest. These documents included a declaration
from contracting officer David Vivian and a declaration from Framaco’s President Paul
Kacha. The United States Court of Appeals for the Federal Circuit has emphasized that,
on a motion for judgment on the Administrative Record, “‘the focal point for judicial
review should be the administrative record already in existence, not some new record
made initially in the reviewing court.’” Axiom Res. Mgmt., Inc. v. United States, 564 F.3d
1374, 1379-80 (Fed. Cir. 2009) (quoting Camp v. Pitts, 411 U.S. 138, 142 (1973)). The
Federal Circuit explained that supplementation of the record is not completely ruled out,
however, that “the parties’ ability to supplement the administrative record is limited.” Id.
at 1379. The record only should be supplemented to include documents that were not
before the agency at the time the decision was made in “cases in which ‘the omission of
extra-record evidence precludes effective judicial review.’” Id. at 1380 (quoting
Murakami v. United States, 46 Fed. Cl. 731, 735 (2000)). In the protest currently before
the court, the Administrative Record, without the additional declarations, is sufficient to
decide the case. The protestor’s Kacha declaration generally restates the protestor’s
arguments and although the defendant’s Vivian declaration may offer further rationale
for the agency’s decision, the record, without the Vivian declaration, is sufficient to
explain the agency rationale. Neither of the additional offerings are critical to the court’s
decision.
20
The Administrative Dispute Resolution Act of 1996 (ADRA), Pub. L. No. 104-320,
§§ 12(a), 12(b), 110 Stat. 3870, 3874 (1996) (codified at 28 U.S.C. § 1491(b)(1)-(4)
(2012)), amended the Tucker Act to establish a statutory basis for bid protests in the
United States Court of Federal Claims. See Impresa Construzioni Geom. Domenico
Garufi v. United States, 238 F.3d 1324, 1330-32 (Fed. Cir. 2001). The statute provides
that protests of agency procurement decisions are to be reviewed under Administrative
Procedure Act (APA) standards, making applicable the standards outlined in Scanwell
Laboratories, Inc. v. Shaffer, 424 F.2d 859 (D.C. Cir. 1970), and the line of cases
following that decision. See, e.g., Res. Conservation Grp., LLC v. United States, 597
F.3d 1238, 1242 (Fed. Cir.) (“Following passage of the APA in 1946, the District of
Columbia Circuit in Scanwell Labs., Inc. v. Shaffer, 424 F.2d 859 (D.C. Cir. 1970), held
that challenges to awards of government contracts were reviewable in federal district
courts pursuant to the judicial review provisions of the APA.”), aff’d, 432 F. App’x 975
(Fed. Cir. 2011); Galen Med. Assocs., Inc. v. United States, 369 F.3d 1324, 1329 (Fed.
Cir.) (citing to Scanwell Laboratories, Inc. v. Shaffer, 424 F.2d at 864, 868, for its
“reasoning that suits challenging the award process are in the public interest and
disappointed bidders are the parties with an incentive to enforce the law”), reh’g denied
(Fed. Cir. 2004); Banknote Corp. of Am., Inc. v. United States, 365 F.3d 1345, 1351
(Fed. Cir. 2004) (“Under the APA standard as applied in the Scanwell line of cases, and
now in ADRA cases, ‘a bid award may be set aside if either (1) the procurement
official’s decision lacked a rational basis; or (2) the procurement procedure involved a
violation of regulation or procedure.’” (quoting Impresa Construzioni Geom. Domenico
Garufi v. United States, 238 F.3d at 1332)); Info. Tech. & Applications Corp. v. United
States, 316 F.3d 1312, 1319 (Fed. Cir.), reh’g and reh’g en banc denied (Fed. Cir.
2003). The United States Court of Appeals for the Federal Circuit has stated that the
Court of Federal Claims’ jurisdiction over “any alleged violation of statute or regulation in
connection with a procurement or a proposed procurement,” 28 U.S.C. § 1491(b)(1),
“provides a broad grant of jurisdiction because ‘[p]rocurement includes all stages of the
process of acquiring property or services, beginning with the process for determining a
need for property or services and ending with contract completion and closeout.’” Sys.
Application & Techs., Inc. v. United States, 691 F.3d 1374, 1381 (Fed. Cir. 2012)
(emphasis in original) (quoting Res. Conservation Grp., LLC v. United States, 597 F.3d
at 1244 (quoting 41 U.S.C. § 403(2))); see also Rockies Exp. Pipeline LLC v. Salazar,
730 F.3d 1330, 1336 (Fed. Cir. 2013), reh’g denied (Fed. Cir. 2014); Distrib. Solutions,
Inc. v. United States, 539 F.3d 1340, 1346 (Fed. Cir.) (“[T]he phrase, ‘in connection with
a procurement or proposed procurement,’ by definition involves a connection with any
stage of the federal contracting acquisition process, including ‘the process for
determining a need for property or services.’”), reh’g denied (Fed. Cir. 2008); RAMCOR
Servs. Grp., Inc. v. United States, 185 F.3d 1286, 1289 (Fed. Cir. 1999) (“The operative
phrase ‘in connection with’ is very sweeping in scope.”).
Agency procurement actions should be set aside when they are “arbitrary,
capricious, an abuse of discretion, or otherwise not in accordance with law,” or “without
21
observance of procedure required by law.” 5 U.S.C. § 706(2)(A), (2)(D) (2012);13 see
also Orion Tech., Inc. v. United States, 704 F.3d 1344, 1347 (Fed. Cir. 2013); COMINT
Sys. Corp. v. United States, 700 F.3d 1377, 1381 (Fed. Cir. 2012); Savantage Fin.
Servs. Inc., v. United States, 595 F.3d 1282, 1285-86 (Fed. Cir. 2010); Weeks Marine,
Inc. v. United States, 575 F.3d 1352, 1358 (Fed. Cir. 2009); Axiom Res. Mgmt., Inc. v.
United States, 564 F.3d 1374, 1381 (Fed. Cir. 2009) (noting arbitrary and capricious
standard set forth in 5 U.S.C. § 706(2)(A), and reaffirming the analysis of Impresa
Construzioni Geom. Domenico Garufi v. United States, 238 F.3d at 1332); Blue & Gold
Fleet, L.P. v. United States, 492 F.3d at 1312 (“‘[T]he inquiry is whether the
[government]’s procurement decision was “arbitrary, capricious, an abuse of discretion,
13
The language of 5 U.S.C. § 706 provides:
To the extent necessary to decision and when presented, the reviewing
court shall decide all relevant questions of law, interpret constitutional and
statutory provisions, and determine the meaning or applicability of the
terms of an agency action. The reviewing court shall—
(1) compel agency action unlawfully withheld or unreasonably delayed;
and
(2) hold unlawful and set aside agency action, findings, and
conclusions found to be—
(A) arbitrary, capricious, an abuse of discretion, or otherwise not in
accordance with law;
(B) contrary to constitutional right, power, privilege, or immunity;
(C) in excess of statutory jurisdiction, authority, or limitations, or
short of statutory right;
(D) without observance of procedure required by law;
(E) unsupported by substantial evidence in a case subject to
sections 556 and 557 of this title or otherwise reviewed on the
record of an agency hearing provided by statute; or
(F) unwarranted by the facts to the extent that the facts are subject
to trial de novo by the reviewing court.
In making the foregoing determinations, the court shall review the whole
record or those parts of it cited by a party, and due account shall be taken
of the rule of prejudicial error.
5 U.S.C. § 706.
22
or otherwise not in accordance with law.”’” (quoting Bannum, Inc. v. United States, 404
F.3d at 1351 (quoting 5 U.S.C. § 706(2)(A) (2000)))); Eco Tour Adventures, Inc. v.
United States, 114 Fed. Cl. at 22; Contracting, Consulting, Eng’g LLC v. United States,
104 Fed. Cl. at 340. “In a bid protest case, the agency’s award must be upheld unless it
is ‘arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with
law.’” Turner Constr. Co. v. United States, 645 F.3d 1377, 1383 (Fed. Cir.) (quoting PAI
Corp. v. United States, 614 F.3d 1347, 1351 (Fed. Cir. 2010)), reh’g and reh’g en banc
denied (Fed. Cir. 2011); see also Glenn Defense Marine (ASIA), PTE Ltd. v. United
States, 720 F.3d 901, 907 (Fed. Cir.), reh’g en banc denied (Fed. Cir. 2013); McVey
Co., Inc. v. United States, 111 Fed. Cl. 387, 402 (2013) (“The first step is to
demonstrate error, that is, to show that the agency acted in an arbitrary and capricious
manner, without a rational basis or contrary to law.”); PlanetSpace, Inc. v. United
States, 92 Fed. Cl. 520, 531-32 (2010) (“Stated another way, a plaintiff must show that
the agency’s decision either lacked a rational basis or was contrary to law.” (citing
Weeks Marine, Inc. v. United States, 575 F.3d at 1358)).
In discussing the appropriate standard of review for bid protest cases, the United
States Court of Appeals for the Federal Circuit specifically addressed subsections (2)(A)
and (2)(D) of 5 U.S.C. § 706, see Impresa Construzioni Geom. Domenico Garufi v.
United States, 238 F.3d at 1332 n.5, but the Federal Circuit has focused its attention
primarily on subsection (2)(A). See COMINT Sys. Corp. v. United States, 700 F.3d at
1381 (“We evaluate agency actions according to the standards set forth in the
Administrative Procedure Act; namely, for whether they are ‘arbitrary, capricious, an
abuse of discretion, or otherwise not in accordance with law.’” (quoting 5 U.S.C.
§ 706(2)(A); Bannum, Inc. v. United States, 404 F.3d at 1351)); NVT Techs., Inc. v.
United States, 370 F.3d 1153, 1159 (Fed. Cir. 2004) (“Bid protest actions are subject to
the standard of review established under section 706 of title 5 of the Administrative
Procedure Act (‘APA’), 28 U.S.C. § 1491(b)(4) (2000), by which an agency’s decision is
to be set aside only if it is ‘arbitrary, capricious, an abuse of discretion, or otherwise not
in accordance with law,’ 5 U.S.C. § 706(2)(A) (2000).”) (citations omitted); Banknote
Corp. of Am., Inc. v. United States, 365 F.3d at 1350 (“Among the various APA
standards of review in section 706, 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.’” (quoting 5 U.S.C. § 706(2)(A) and citing Advanced Data Concepts, Inc. v.
United States, 216 F.3d 1054, 1057-58 (Fed. Cir.), reh’g denied (Fed. Cir. 2000))); Info.
Tech. & Applications Corp. v. United States, 316 F.3d at 1319 (“Consequently, our
inquiry is whether the Air Force’s procurement decision was ‘arbitrary, capricious, an
abuse of discretion, or otherwise not in accordance with law.’ 5 U.S.C. § 706(2)(A)
(2000).”).
The United States Supreme Court has identified sample grounds which can
constitute arbitrary or capricious agency action:
[W]e will not vacate an agency’s decision unless it “has relied on factors
which Congress has not intended it to consider, entirely failed to consider
23
an important aspect of the problem, offered an explanation for its decision
that runs counter to the evidence before the agency, or is so implausible
that it could not be ascribed to a difference in view or the product of
agency expertise.”
Nat’l Ass’n of Home Builders v. Defenders of Wildlife, 551 U.S. 644, 658 (2007) (quoting
Motor Vehicle Mfrs. Ass’n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983));
see also F.C.C. v. Fox Television Stations, Inc., 556 U.S. 502, 552 (2009); Ala. Aircraft
Indus., Inc.-Birmingham v. United States, 586 F.3d 1372, 1375 (Fed. Cir. 2009), reh’g
and reh’g en banc denied (Fed. Cir. 2010); In re Sang Su Lee, 277 F.3d 1338, 1342
(Fed. Cir. 2002) (“[T]he agency tribunal must present a full and reasoned explanation of
its decision. . . . The reviewing court is thus enabled to perform meaningful
review . . . .”), aff’d on subsequent appeal, 262 F. App’x 275 (Fed. Cir. 2008); Textron,
Inc. v. United States, 74 Fed. Cl. 277, 285-86 (2006), appeal dismissed sub nom.
Textron, Inc. v. Ocean Technical Servs., Inc., 222 F. App’x 996 (Fed. Cir.), and
dismissed per stipulation sub nom. Textron, Inc. v. Ocean Technical Servs., Inc., 223 F.
App’x 974 (Fed. Cir. 2007).
Moreover,
A bid protest proceeds in two steps. First . . . the trial court determines
whether the government acted without rational basis or contrary to law
when evaluating the bids and awarding the contract. Second . . . if the trial
court finds that the government’s conduct fails the APA review under 5
U.S.C. § 706(2)(A), then it proceeds to determine, as a factual matter, if
the bid protester was prejudiced by that conduct.
Bannum, Inc. v. United States, 404 F.3d at 1351; Eco Tour Adventures, Inc. v. United
States, 114 Fed. Cl. at 22; Archura LLC v. United States, 112 Fed. Cl. 487, 496 (2013).
A disappointed bidder has the burden of demonstrating the arbitrary and
capricious nature of the agency decision by a preponderance of the evidence. See
Grumman Data Sys. Corp. v. Dalton, 88 F.3d 990, 995-96 (Fed. Cir. 1996); Davis Boat
Works, Inc. v. United States, 111 Fed. Cl. 342, 349 (2013); Contracting, Consulting,
Eng’g LLC v. United States, 104 Fed. Cl. at 340. The Federal Circuit has made clear
that “[t]his court will not overturn a contracting officer’s determination unless it is
arbitrary, capricious, or otherwise contrary to law. To demonstrate that such a
determination is arbitrary or capricious, a protester must identify ‘hard facts’; a mere
inference or suspicion . . . is not enough.” PAI Corp. v. United States, 614 F.3d at 1352
(citing John C. Grimberg Co. v. United States, 185 F.3d 1297, 1300 (Fed. Cir. 1999));
see also Turner Constr. Co., Inc. v. United States, 645 F.3d at 1387; Sierra Nevada
Corp. v. United States, 107 Fed. Cl. 735, 759 (2012); Filtration Dev. Co., LLC v. United
States, 60 Fed. Cl. 371, 380 (2004).
Under an arbitrary or capricious standard, the reviewing court should not
substitute its judgment for that of the agency, but should review the basis for the agency
24
decision to determine if it was legally permissible, reasonable, and supported by the
facts. See Motor Vehicle Mfrs. Ass’n v. State Farm Mut. Auto. Ins. Co., 463 U.S. at 43(“The scope of review under the ‘arbitrary and capricious’ standard is narrow and a
court is not to substitute its judgment for that of the agency.”); see also Turner Constr.
Co., Inc. v. United States, 645 F.3d at 1383; R & W Flammann GmbH v. United States,
339 F.3d 1320, 1322 (Fed. Cir. 2003) (citing Ray v. Lehman, 55 F.3d 606, 608 (Fed.
Cir.), cert. denied, 516 U.S. 916 (1995)). “‘“If the court finds a reasonable basis for the
agency’s action, the court should stay its hand even though it might, as an original
proposition, have reached a different conclusion as to the proper administration and
application of the procurement regulations.”’” Weeks Marine, Inc. v. United States, 575
F.3d at 1371 (quoting Honeywell, Inc. v. United States, 870 F.2d 644, 648 (Fed. Cir.
1989) (quoting M. Steinthal & Co. v. Seamans, 455 F.2d 1289, 1301 (D.C. Cir. 1971)));
Jordan Pond Co., LLC v. United States, 115 Fed. Cl. 623, 631 (2014); Davis Boat
Works, Inc. v. United States, 111 Fed. Cl. at 349; Norsat Int’l [America], Inc. v. United
States, 111 Fed. Cl. 483, 493 (2013); HP Enter. Servs., LLC v. United States, 104 Fed.
Cl. 230, 238 (2012); Vanguard Recovery Assistance v. United States, 101 Fed. Cl. 765,
780 (2011).
Stated otherwise by the United States Supreme Court:
Section 706(2)(A) requires a finding that the actual choice made was not
“arbitrary, capricious, an abuse of discretion, or otherwise not in
accordance with law.” To make this finding the court must consider
whether the decision was based on a consideration of the relevant factors
and whether there has been a clear error of judgment. Although this
inquiry into the facts is to be searching and careful, the ultimate standard
of review is a narrow one. The court is not empowered to substitute its
judgment for that of the agency.
Citizens to Pres. Overton Park, Inc. v. Volpe, 401 U.S. 402, 416 (1971), abrogated on
other grounds by Califano v. Sanders, 430 U.S. 99 (1977) (internal citations omitted);
see also U.S. Postal Serv. v. Gregory, 534 U.S. 1, 6-7 (2001); Bowman Transp., Inc. v.
Arkansas-Best Freight Sys., Inc., 419 U.S. 281, 285 (1974), reh’g denied, 420 U.S. 956(1975); Co-Steel Raritan, Inc. v. Int’l Trade Comm’n, 357 F.3d 1294, 1309 (Fed. Cir.
2004) (In discussing the “arbitrary, capricious, and abuse of discretion, or otherwise not
in accordance with the law” standard, the Federal Circuit stated: “the ultimate standard
of review is a narrow one. The court is not empowered to substitute its judgment for that
of the agency.”); In re Sang Su Lee, 277 F.3d at 1342; Advanced Data Concepts, Inc. v.
United States, 216 F.3d at 1058 (“The arbitrary and capricious standard applicable here
is highly deferential. This standard requires a reviewing court to sustain an agency
action evincing rational reasoning and consideration of relevant factors.” (citing Bowman
Transp., Inc. v. Arkansas-Best Freight Sys., Inc., 419 U.S. at 285)); Lockheed Missiles
& Space Co. v. Bentsen, 4 F.3d 955, 959 (Fed. Cir. 1993); BCPeabody Constr. Servs.,
Inc. v. United States, 112 Fed. Cl. 502, 508 (2013) (“The court ‘is not empowered to
substitute its judgment for that of the agency,’ and it must uphold an agency’s decision
against a challenge if the ‘contracting agency provided a coherent and reasonable
25
explanation of its exercise of discretion.’” (quoting Keeton Corrs., Inc. v. United States,
59 Fed. Cl. 753, 755, recons. denied, 60 Fed. Cl. 251 (2004), and Axiom Res. Mgmt.,
Inc. v. United States, 564 F.3d at 1381)), appeal withdrawn, 559 F. App’x 1033 (Fed.
Cir. 2014) (internal citations omitted); Supreme Foodservice GmbH v. United States,
109 Fed. Cl. 369, 382 (2013); Alamo Travel Grp., LP v. United States, 108 Fed. Cl. 224,
231 (2012); ManTech Telecomms. & Info. Sys. Corp. v. United States, 49 Fed. Cl. 57,
63 (2001), aff’d, 30 F. App’x 995 (Fed. Cir. 2002); Ellsworth Assocs., Inc. v. United
States, 45 Fed. Cl. 388, 392 (1999) (“Courts must give great deference to agency
procurement decisions and will not lightly overturn them.” (citing Fla. Power & Light Co.
v. Lorion, 470 U.S. 729, 743-44 (1985))), appeal dismissed, 6 F. App’x 867 (Fed. Cir
2001), and superseded by regulation as recognized in MVS USA, Inc. v. United States,
111 Fed. Cl. 639 (2013).
According to the United States Court of Appeals for the Federal Circuit:
Effective contracting demands broad discretion. Burroughs Corp. v. United
States, 223 Ct. Cl. 53, 617 F.2d 590, 598 (1980); Sperry Flight Sys. Div. v.
United States, 548 F.2d 915, 921, 212 Ct. Cl. 329 (1977); see NKF Eng’g,
Inc. v. United States, 805 F.2d 372, 377 (Fed. Cir. 1986); Tidewater
Management Servs., Inc. v. United States, 573 F.2d 65, 73, 216 Ct. Cl. 69(1978); RADVA Corp. v. United States, 17 Cl. Ct. 812, 819 (1989), aff’d,
914 F.2d 271 (Fed. Cir. 1990).
Lockheed Missiles & Space Co. v. Bentsen, 4 F.3d at 958-59. Therefore, as the Federal
Circuit further has indicated:
Contracting officers “are entitled to exercise discretion upon a broad range
of issues confronting them in the procurement process.” Impresa
Construzioni Geom. Domenico Garufi v. United States, 238 F.3d 1324,
1332 (Fed. Cir. 2001) (internal quotation marks omitted). Accordingly,
procurement decisions are subject to a “highly deferential rational basis
review.” CHE Consulting, Inc. v. United States, 552 F.3d 1351, 1354 (Fed.
Cir. 2008) (internal quotation marks omitted). Applying this highly
deferential standard, the court must sustain an agency action unless the
action does not “evince[ ] rational reasoning and consideration of relevant
factors.” Advanced Data Concepts, Inc. v. United States, 216 F.3d 1054,
1058 (Fed. Cir. 2000) (alterations added).
PAI Corp. v. United States, 614 F.3d at 1351; see also Weeks Marine, Inc. v. United
States, 575 F.3d at 1368-69 (“We have stated that procurement decisions ‘invoke[ ]
“highly deferential” rational basis review.’ Under that standard, we sustain an agency
action ‘evincing rational reasoning and consideration of relevant factors.’” (quoting CHE
Consulting, Inc. v. United States, 552 F.3d at 1354 (quoting Advanced Data Concepts,
Inc. v. United States, 216 F.3d at 1058))); Cohen Fin. Servs., Inc. v. United States, 112
Fed. Cl. 153, 162 (2013); McVey Co., Inc. v. United States, 111 Fed. Cl. at 402.
26
For example, “agencies ‘are entrusted with a good deal of discretion in
determining which bid is the most advantageous to the Government.’” Lockheed
Missiles & Space Co. v. Bentsen, 4 F.3d at 958-59 (quoting Tidewater Management
Servs., 573 F.2d at 73, 216 Ct. Cl. 69); see also Res-Care, Inc. v. United States, 735
F.3d 1384, 1390 (Fed. Cir.) (“DOL [Department of Labor], as a federal procurement
entity, has ‘broad discretion to determine what particular method of procurement will be
in the best interests of the United States in a particular situation.’” (quoting Tyler Constr.
Grp. v. United States, 570 F.3d 1329, 1334 (Fed. Cir. 2009))), reh’g en banc denied
(Fed. Cir. 2014); Grumman Data Sys. Corp. v. Dalton, 88 F.3d at 995; Kingdomware
Techs., Inc. v. United States, 107 Fed. Cl. 226, 231 (2012) (“‘Federal procurement
entities have “broad discretion to determine what particular method of procurement will
be in the best interests of the United States in a particular situation.”’” (quoting K-Lak
Corp. v. United States, 98 Fed. Cl. 1, 8 (2011) (quoting Tyler Constr. Grp. v. United
States, 570 F.3d at 1334)), aff’d, 754 F.3d 923 (Fed. Cir.), reh’g en banc denied (Fed.
Cir. 2014).
In addition, the court “assume[s] that the government acts in good faith while
contracting.” Galen Med. Assocs., Inc. v. United States, 56 Fed. Cl. 104, 108 (2003),
aff’d, 369 F.3d 1324 (Fed. Cir.), reh’g denied (Fed. Cir. 2004); Madison Servs., Inc. v.
United States, 92 Fed. Cl. 120, 129 (“The court’s review is thus guided by the ‘well-
established principle that contracting officials are presumed to act in good faith when
executing their procurement functions.’” (quoting Aero Corp. v. United States, 38 Fed.
Cl. 408, 413 (1997))), relief from judgment denied, 94 Fed. Cl. 501 (2010). A protestor
must show “‘well-nigh irrefragable proof’ that the government had an intent to injure it to
overcome this presumption.” Galen Med. Assocs., Inc. v. United States, 56 Fed. Cl. at
108 (quoting Knotts v. United States, 128 Ct. Cl. 489, 492, 121 F. Supp. 630, 631
(1954)); see also Caldwell & Santmyer, Inc. v. Glickman, 55 F.3d 1578, 1581 (Fed. Cir.
1995) (“We assume the government acts in good faith when contracting. Torncello [v.
United States], 681 F.2d [756,] 770 [(1982)]; Librach v. United States, 147 Ct. Cl. 605,
1959 WL 7633 (1959). A contractor can overcome this presumption only if it shows
through ‘well-nigh irrefragable proof’ that the government had a specific intent to injure
it. Torncello, 681 F.2d at 770.”); Madison Servs., Inc. v. United States, 92 Fed. Cl. at
129.
In the above captioned bid protest, Framaco states, “[s]ince the solicitation did
not preclude use of an inflation adjustment and the agency had regularly used inflation
adjustments in the past, Framaco reasonably assumed that an inflation adjustment
could and would be used here.” Framaco characterizes the agency decision not to apply
an inflation adjustment to its prequalification submission of the Belgrade, Serbia project
as “fundamental error of law” because, according to the protestor, the agency “believed
that it was legally prohibited from making an inflation adjustment.” During oral argument,
protestor focused heavily on a statement in the contracting officer’s July 21, 2014 final
decision in response to Framaco’s agency level protest, which stated: “The FedBizOpps
announcement and the Act do not indicate that an inflation adjustment to the project
value is authorized or warranted; therefore, it would be improper for the Government to
apply such an adjustment to any submission by any offeror.” Therefore, the protestor
27
asks this court to review the agency’s determination under a de novo standard of
review. Protestor alleges that the issue in the above captioned protest “is not one of
agency business judgment or a complex technical matter; it is a straightforward
question of law” and protestor “only challenges OBO’s legal error.” The Administrative
Record does not support protestor’s characterization that the agency acted because it
believed it was legally barred from using an inflation index, rather the agency chose not
to use an inflation adjustment for this solicitation, and the solicitation did not include any
indication that an inflation adjustment would be used.
Several documents in the Administrative Record bear on the discussion. First, a
handwritten note from DOS attorney Dennis Gallagher to DOS employee Donna Neal
states: “There is nothing in the FedBizOpps announcement or in the law/regulation to
support such an adjustment, and no showing that such an adjustment is warranted.” In
a June 24, 2014 letter to Framaco, signed by Ms. Neal as “Contracting Officer,” a nearly
identical statement appears: “There is nothing in the FedBizOpps announcement or in
the regulation/law to support such an adjustment, and no showing of such and [sic]
adjustment is warranted.” In response to Framaco’s agency level protest, an August 5,
2014 letter from DOS Departmental Competition Advocate Eric Moore, states: “the
solicitation does not include inflation adjustment as an evaluation method. As such,
applying it to your response would prejudice other responses on which it was not
applied. The Contracting Officer therefore is unable to apply the inflation adjustment to
any of the responses, including yours.”
Nothing in the Notice of Solicitation or the Diplomatic Security Act required the
agency evaluation and prequalification process to adjust for inflation or indicated that an
inflation adjustment would be applied when reviewing proposers’ evidence of prior,
similar work. The Notice of Solicitation did not include any indication that the
prequalification process would utilize an inflation adjustment, rather, the Notice of
Solicitation includes a clear, specific, and unequivocal statement that a $124 million
minimum qualification threshold would be utilized by the agency to review and
prequalify the proposals. Moreover, DOS did not use an inflation adjustment when
reviewing any of the submissions, and indicated in the August 5, 2014 letter to Framaco
that to apply an inflation index just for Framaco would result in prejudice to other
offerors. Defendant and the intervenor also correctly argue that Congress did not
include any reference to inflation adjustments in the Diplomatic Security Act and that the
implementing regulations likewise make no reference to an inflation adjustment. See
Diplomatic Security Act, § 402; 22 U.S.C. § 4852; 48 C.F.R. § 636.104-71 (2013); 48
C.F.R. § 652.236-72 (2013). In fact, the language of the Diplomatic Security Act and its
implementing regulations are silent on the subject, and neither preclude, nor require,
OBO to apply an inflation adjustment. Just because OBO used an inflation adjustment
when evaluating solicitations covered by the Diplomatic Security Act in the past, does
not alter the clear words of the solicitation currently under review and the clear $124
million contract value threshold stated in that solicitation.
Trying to turn the void to its advantage, protestor suggests that “nothing in the
Section 402 definitions [of the Diplomatic Security Act] limits the agency from adjusting
28
past projects for inflation, nor has the agency cited to any provision in support.”
Protestor contends that no regulation bars an inflation adjustment. (citing Caddell
Constr. Co., Inc., B-298949.2, 2007 WL 1893209, at *7-8 (Comp. Gen. June 15, 2007)).
Protestor, however cites only to general language noting overall guiding principles, for
example, that “[t]he agency’s position appears to be that, since the agency rules did not
address an inflation adjustment, it was barred.” Protestor argues this position is contrary
to the FAR § 1.102(d) (2013), Statement of guiding principles for the Federal Acquisition
System, which states: “In exercising initiative, Government members of the Acquisition
Team may assume if a specific strategy, practice, policy or procedure is in the best
interests of the Government and is not addressed in the FAR nor prohibited by law
(statute or case law), Executive order or other regulation, that the strategy, practice,
policy or procedure is a permissible exercise of authority.” FAR § 1.102(d).
The Notice of Solicitation at Section 4.A makes clear that the Diplomatic Security
Act applies to the procurement of the Harare, Zimbabwe project:
Firms being considered for award under this acquisition are limited to
“United States Person” bidders as defined in the Act.[14] The Offeror must
complete and submit as part of its pre-qualification package the pamphlet
“Certifications Relevant to Public Law 99-399, Statement of Qualifications
for Purpose of Section 402 of The Omnibus Diplomatic Security and
Antiterrorism Act of 1986.”
(emphasis in original). Under the Diplomatic Security Act, only “United States persons”
could bid on diplomatic design and construction work with an estimated total project
value exceeding $10,000,000.00 or more. See 22 U.S.C. § 4852(a)(1). As the total
project value for the Harare, Zimbabwe project is estimated between $165 million and
$210 million, the Diplomatic Security Act applies to the Harare, Zimbabwe project.
Therefore, the statute and implementing regulations do not preclude or require OBO to
apply an inflation adjustment when evaluating the solicitation at issue, and leaves the
decision as to whether to apply such an inflation adjustment within the agency’s
discretion.
The regulation at FAR § 1.102(d) also is silent on the possible application of an
inflation adjustment, and further supports the agency’s discretion to choose whether or
14
To be a United States person, a potential offeror must show, among other
requirements, that it “has performed within the United States or at a United States
diplomatic or consular establishment abroad administrative and technical, professional,
or construction services similar in complexity, type of construction, and value to the
project being bid.” 22 U.S.C. § 4852(c)(2)(D). The implementing regulations to the
Diplomatic Security Act define “value” as “mean[ing] the total contract price of the
project, not to the profit or loss to the bidder/offeror.” 48 C.F.R. § 652.236-72. There are
no allegations that Framaco was not a United States person for purposes of the
Diplomatic Security Act.
29
not to apply an inflation factor based on the best interests of the government. See FAR
§ 1.102(d) (“In exercising initiative, Government members of the Acquisition Team may
assume if a specific strategy, practice, policy or procedure is in the best interests of the
Government and is not addressed in the FAR nor prohibited by law (statute or case law),
Executive order or other regulation, that the strategy, practice, policy or procedure is a
permissible exercise of authority.”); see also Tyler Constr. Grp. v. United States, 570
F.3d at 1333 (“In other words, government officers are authorized, indeed, encouraged,
in exercising personal initiative in procurement matters, to assume that ‘a specific
strategy, practice, policy or procedure’ that is not ‘addressed in the FAR nor prohibited
by law (statute or case law), Executive order or other regulation’ and that ‘is in the best
interests of the Government,’ ‘is a permissible exercise of authority.’ . . . The Corps, like
other federal procurement entities, has broad discretion to determine what particular
method of procurement will be in the best interests of the United States in a particular
situation.” (quoting FAR § 1.102(d))); SEK Solutions, LLC v. United States, 117 Fed. Cl.
43, 49 (2014) (“In the absence of a violation of law, FAR 1.102(d) provides the agency
with a degree of flexibility in crafting its procurement.” (citing Tyler Constr. Grp. v. United
States, 570 F.3d at 1333)); FirstLine Transp. Sec., Inc. v. United States, 107 Fed. Cl.
189, 203-04 (2012) (An agency’s stated goal of 40 percent small business participation,
as measured by total contract price, was lawful when “nothing in the FAR affirmatively
prohibits an agency from establishing such goals in terms of total contract value” and
“FAR 1.102(d) expressly provides that contracting officers ‘may assume if a specific
strategy, practice, policy or procedure . . . is not addressed in the FAR, nor prohibited by
law (statute or case law), Executive order or other regulation, that the strategy, practice,
policy or procedure is a permissible exercise of authority.’” (quoting FAR § 1.102(d)))
(omission in original). The choice of whether or not to apply an inflation adjustment in
the protest currently before the court properly was left to the agency’s discretion.
As noted above, protestor relies on Caddell Construction Co., Inc., B-298949.2,
2007 WL 1893209, at *7-8 as “endors[ing] an agency evaluation under which the
agency adjusted an offeror’s previous work to reflect inflation under Section 402(d).”
Defendant also relies on Caddell Construction Co., but for the GAO’s finding that it
knew “‘of no statute or regulation that was violated by the agency’s decision to adjust for
inflation the price of the earlier project to determine its approximate current value,’” and
that as a result, the agency action was a proper exercise of discretion. (quoting Caddell
Constr. Co., B-298949.2, 2007 WL 1893209, at *7). Intervenor similarly argues,
“[n]othing in Caddell Construction provides that OBO is required to apply inflation
adjustments regardless of the Government’s best interests or language of the
solicitation documents” and states Caddell instead “merely provides that the
[Diplomatic] Security Act is silent regarding inflation adjustments and the decision of
whether or not to apply an adjustment ‘seems to fall within the reasonable exercise of
the agency’s discretion.’” (quoting Caddell Constr. Co., B-298949.2, 2007 WL 1893209,
at *8).
In Caddell, the GAO addressed a bid protest challenging an award under an RFP
issued by OBO for design and construction of a new United States embassy compound
pursuant to the Diplomatic Security Act. In Caddell, the awardee met the requirements
30
of the Diplomatic Security Act, in part, because for that procurement, “[t]he agency
determined that the value of the [awardee’s reference] project as adjusted for inflation
was $55 million and thus within the $50–$60 million estimate the government originally
prepared for the current . . . project.” Id. at *6. The GAO indicated “[o]n the question of
similar value, we know of no statute or regulation that was violated by the agency’s
decision to adjust for inflation the price of the earlier project to determine its
approximate current value.” Id. at *7. The GAO continued, “[i]n fact, the approach of
calculating such an adjustment for the purposes of determining a current value for the
earlier project seems to fall within the reasonable exercise of the agency’s discretion.”
Id. (citing OMNI Gov’t Servs., LP, B-297420.2 et al., 2006 WL 744276, at *2 (Comp.
Gen. Mar. 22, 2006)). Although not prohibiting use of an inflation adjustment, the
Caddell decision does not mandate its use and, instead, reemphasizes the discretionary
nature of whether or not to apply an inflation adjustment.
Nor is OBO’s decision not to apply inflation adjustments in the above captioned
protest inconsistent with the requirements in the CICA and part 6 of the FAR, that
agencies maximize competition. Protestor encourages the court to “take into account
the requirements of CICA and the FAR that agencies maximize competition,” and
argues that the CICA allows only a limited number of exceptions. Protestor requests the
court to “interpret the relevant statutory and regulatory provisions and case law in a
liberal manner that effectuates competition.” According to the protestor, “neither CICA,
nor the FAR . . . prohibit an inflation adjustment” and both “call for competition to the
maximum extent practicable.” Therefore, protestor argues that what it perceives to be
OBO’s interpretation that an inflation adjustment was precluded by the solicitation and
regulation “is anti-competitive and contrary to CICA and the FAR because OBO’s
interpretation substantially limits competition.” Protestor urges that “[i]nflation
adjustments are congruent with the policy and intent of CICA and the FAR competition
requirements,” and notes that the FAR encourages contracting officers to adopt liberal
interpretations, and such action is consistent with the mandates of the CICA to
maximize competition. Protestor indicates that “allowing an inflation adjustment is
reasonable given the construction services of the type being required here, especially
where there are a limited number of potential offerors.” Protestor indicates it is “not
asking OBO to remove the prequalification requirement, rather Framaco is asking that
OBO conduct its evaluation in accordance with the CICA requirements and on a non-
disparate basis,” so that the agency does not “unduly” restrict competition.
Intervenor asserts that OBO’s decision “does not impermissibly limit competition
under the Competition in Contracting Act, 41 U.S.C. § 3301 et seq.” Citing to the
Diplomatic Security Act and corresponding legislative history, intervenor argues that
“Congress, in its judgment and authority, found that some limit to competition is
necessary to protect the Government’s interests in diplomatic construction work.”
Specifically, regarding the Diplomatic Security Act, intervenor contends, “Congress
provided that an offeror’s performance of similarly valued work ‘will help ensure that a
firm is technically capable to carry out a given project.’” (quoting H.R. Rep. No. 99-494,
at 17 (1986), reprinted in 1986 U.S.C.C.A.N. 1865, 1883). Intervenor further argues,
“[t]his is a Congressionally-authorized protocol to prevent unqualified firms from
31
receiving contracts key to United States’ diplomacy and security – not an impermissible
restriction on competition.” Defendant adds that “[e]ach prospective offer was subject to
the same objective threshold of $124 million” and “as a result, each was provided an
equal opportunity to compete.” Defendant notes that the “CICA affords agencies the
discretion to ‘use the competitive procedure or combination of competitive procedures
that is best suited under the circumstances of the procurement.’” (citing 41 U.S.C.
§ 3301) (emphasis in original).
Although protestor may be correct that, in the past, on various solicitations for
DOS building contracts under the Diplomatic Security Act, the agency applied inflation
adjustments to calculate the value of projects previously performed, the decision in the
solicitation currently before the court to set a fixed contract value threshold at $124
million, or 75 percent of the minimum projected value of the contemplated project,
without considering an inflation index was permissible and there is no evidence that the
decision was unduly restrictive or applied in a disparate manner. As portrayed below in
chart form, the May 12, 2014, internal Gallagher Memorandum presented contract value
thresholds for each of the five projects that each represents 75 percent of the minimum
projected value of that project, rounded to the nearest million.
Project Name Minimum 75% of Minimum Contract Value
Approximate Approximate Threshold
Design-Build Cost Design-Build
of Project Cost
SAQMMA14R0101 $250 million $187.5 million $187 million
NCC Erbil, Iraq
SAQMMA14R0108 $180 million $135 million $135 million
NEC Ashgabat,
Turkmenistan
SAQMMA14R0115 $165 million $123.75 million $124 million
NEC Harare,
Zimbabwe
SAQMMA14R0118 $155 million $116.25 million $116 million
NEC Pristina,
Kosovo
SAQMMA14R0117 $68 million $51 million $51 million
NCC Nuevo
Laredo, Mexico
The decision to choose the 75 percent figure has not been demonstrated as arbitrary or
capricious. Moreover, the Administrative Record reflects that the agency’s use of a
specific contract value threshold in this solicitation sought to remove uncertainty from
the procurement prequalification process. The May 12, 2014 Gallagher Memorandum
explained:
There has also been some uncertainty as to what project value should be
required for the construction services to be considered similar in value to
32
the project being solicited. To avoid uncertainty, each FedBizOpps
announcement provided that to meet the experience requirement a
potential offeror must have completed a construction contract involving
work of the same general type and complexity as the project for which it
seeks prequalification and having a contract or subcontract value
exceeding a specified amount as follows: 1) Erbil $187 million;
2) Ashgabat $135 million; 3) Harare $124 million; 4) Pristina $116 million;
5) Nuevo Laredo $51 million.
The July 21, 2014 final decision issued by the contracting officer also explained
that the contract value threshold of $124 million was “a specific, definite, and
unequivocal reference to a mandatory threshold for qualification.” The contracting officer
further indicated: “Please also note that the announcement and prequalification
evaluation criteria has been totally revised and more clearly defined for 2014 so any
allowance that may have been appropriate in previous years cannot be brought forward
into this clearer unambiguous qualification process.” The August 5, 2014 letter from
DOS Departmental Competition Advocate Eric Moore also indicated to Framaco,
“[u]nfortunately, the solicitation does not include inflation adjustment as an evaluation
method. As such, applying it to your response would prejudice other responses on
which it was not applied. The Contracting Officer therefore is unable to apply the
inflation adjustment to any of the responses, including yours.”
Defendant and intervenor agree that, as stated by defendant, “[t]he Notice of
Solicitation expressly states that prospective offerors must demonstrate similar work as
evidence[d] by a ‘contract or subcontract value of at least $124 million.’” (emphasis in
original). Defendant further provides that OBO defines “value” as “the total contract
price of the project.” The contracting officer and DOS Departmental Competition
Advocate reference this amount as a “specific, definite, and unequivocal . . . mandatory
threshold for qualification.” The agency evaluated protestor’s prequalification
submission pursuant to the terms of the Notice of Solicitation.
The email exchange with the contracting officer for clarification also did not
obligate the agency to use an inflation index. Although suggesting to Framaco that it
could “attempt to explain or justify why the Government should consider a number less
than the stated minimum,” the email, in fact, gives notice to Framaco that the
explanation or justification “may not be successful.” (emphasis added). Moreover,
Framaco’s email to DOS and receipt of the contracting officer’s response demonstrate
that Framaco either understood or should have understood in advance of submitting its
proposal that the Notice of Solicitation did not contain any assurance that an inflation
adjustment would be utilized and that OBO had made no commitments to apply an
inflation adjustment when evaluating the prequalification submissions of proposers.
Moreover, intervenor points out that “Framaco does not allege that its prior experience
with OBO includes circumstances, such as here, where a minimum threshold (less than
the expected cost of the project being bid) was included in the Notice of Solicitation.”
Intervenor also states, “[a]s such, Framaco was put on notice that OBO’s prior practices
in applying inflation adjustments would be inapplicable here.”
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Defendant further points out that “Framaco’s understanding of DOS’s prior
practices, as well as its expectations for this Project, are irrelevant to the issue here,
i.e., what the contracting officer considered or should have considered in evaluating
Framaco’s Pre-Qualification Submission for this Project.” (emphasis in original).
Defendant highlights that, “[n]otably, Framaco does not point to the language itself in
asserting that the Notice of Solicitation is ambiguous.” Moreover, Defendant argues
that, “Framaco’s contention that the contracting officer agreed to consider inflation is
factually inaccurate” and instead “Framaco was put on notice that it was taking a risk in
submitting evidence of prior work that was below the stated minimum threshold of $124
million.”
The agency’s decision not to apply an inflation or other adjustment to Framaco’s
prequalification submission was based on a rational interpretation and application of the
terms of the Notice of Solicitation. The May 12, 2014 Gallagher Memorandum, the
contracting officer’s final decision, and the DOS Departmental Competition Advocate’s
denial of Framaco’s request for reconsideration all reviewed and reiterated that the
$124 million figure was a clear and specific threshold for prequalification. Even protestor
concedes that “the solicitation was silent as to whether an inflation adjustment would be
used here,” and that “[t]he solicitation does not address whether contract value would
be adjusted for inflation to reflect the actual value of the project in 2014 dollars.” The
Notice of Solicitation clearly instructed that:
To demonstrate performance of similar construction work for Omnibus
Diplomatic Security and Antiterrorism Act of 1986 purposes, the offeror
needs to provide information demonstrating that it has successfully
completed in the United States or at a U.S. diplomatic or consular mission
a construction contract or subcontract involving work of the same general
type and complexity as the solicited project and having a contract or
subcontract value of at least $124 million.
(emphasis added). As noted above, nothing in the language of the Notice of Solicitation
requires the agency to apply an inflation adjustment. Under section “4. Mandatory Pre-
Qualification Requirements” (emphasis in original), the Notice of Solicitation provided:
“[t]he Offeror shall submit sufficient documentation to allow DOS to evaluate its
capabilities with respect to the factor(s) and qualification criteria listed. Submissions that
are missing the required information or otherwise do not comply with the submission
requirements may be eliminated from consideration at the Contracting Officer’s
determination.” The Notice of Solicitation required potential offerors to “complete and
submit as part of its pre-qualification package the pamphlet ‘Certifications Relevant to
Public Law 99-399, Statement of Qualifications for Purpose of Section 402 of The
Omnibus Diplomatic Security and Antiterrorism Act of 1986.’”
The pamphlet instructed prospective offerors to “Use this Guide for All FY 2014
Project Submissions Include a copy in each Qualification Submission.” (emphasis in
original). The pamphlet defined the term “VALUE” (capitalization in original) as follows:
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“‘VALUE’—This term refers to the total contract price of the project, not to the profit or
loss to the contractor.” (capitalization and emphasis in original). Notably, the pamphlet
clearly and explicitly stated:
Section 402 of the Omnibus Diplomatic and Antiterrorism Act of 1986
provides that a “United States person” must meet certain requirements,
listed in subsections 402(c)(2) and (3) of the Act, to be eligible for the
statutory preference. To assist individuals to determine whether or not
they qualify as a U.S. person . . . entitled to preference under Section 402,
guidance is provided on this pre-qualification form.
For ease of reference, the statutory language will be quoted immediately
before the definitions that apply to it. Space for the information requested
is provided immediately following definitions. The Department of State
reserves the right, in its sole discretion, to interpret and apply the
definitions to the information provided by each prospective offeror.
(emphasis added).
Framaco’s inquiry by email to the contracting officer, Mr. Vivian, and also to Ms.
Savage, stated:
We reviewed the pre-qualification Notice for the new Harare post.
The below Phase I requirements calls for a $124M completed US
diplomatic mission.
Kindly advise if we can apply using a $122M completed project that was
awarded in 2009 and if needed adjusting to inflation to meet the Harare
requirement?
Based on the correspondence, protestor argues that “[t]he agency invited Framaco to
submit a response as to why an inflation adjustment was warranted but summarily
rejected that explanation in an arbitrary and capricious fashion, based on an erroneous
conclusion of law, and without any reasonable or consistent analysis.” Framaco argues
that, “[i]n accordance with CO’s [contracting officer’s] pre-proposal email, Framaco’s
prequalification proposal included a statement explaining why an inflation adjustment
was warranted,” but “OBO summarily rejected the inflation adjustment based on
erroneous conclusions of law.” (internal citation omitted).
The contracting officer’s April 7, 2014 response stated: “The stated minimum is
$124. You may attempt to explain or justify why the Government should consider a
number less than the stated minimum but that is your decision and it may not be
successful.” Although Framaco relies on this correspondence to argue “the agency
indicated that an adjustment would be considered” and that this “provided no indication
that an inflation adjustment was barred in any way by the solicitation or anything else,” it
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is not correct for protestor to suggest that the DOS official’s indication that an
adjustment would be considered is equivalent to assuming that an inflation adjustment
would be applied. Although the contracting officer’s April 7, 2014 email provided that
Framaco “may” attempt to explain or justify an inflation adjustment, the email does not
bind OBO to apply an inflation adjustment or to consider Framaco’s proposal if a project
not meeting the $124 million threshold was offered by Framaco in its prequalification
submission. As the email plainly states, any attempts to “explain or justify” an amount
below $124 million “is your decision and it may not be successful.” The April 7, 2014
email correspondence between Framaco and the DOS did not alter the solicitation
requirements. The court finds the agency’s decision not to apply an inflation adjustment
to Framaco’s prequalification submission is in accordance with the terms of the Notice
of Solicitation. From the Notice of Solicitation, Framaco was put on notice and was
aware that, to prequalify, its proposal was required to demonstrate previous work having
a contract value of at least $124 million.
Framaco offers an additional argument in a footnote in its motion for judgment on
the Administrative Record that:
In addition, the true contract value for the Belgrade project exceeds $124
million even without an inflation adjustment. The agency has failed to take
into account the approximately $[redacted] million in REAs that are
outstanding on the Belgrade, Serbia project. The Belgrade project is not
subject to any liquidated damage assessment and any reasonable
analysis shows that the contract value exceeds $124 million. Even if only
a portion of the outstanding REAs are recognized by OBO, the total
project cost certainly exceeds the threshold and establishes that Framaco
meets this qualification requirement.
(internal citations omitted). In protestor’s reply brief, Framaco tries to rely on case law
that states: “Some information is too close at hand for the agency to ignore.” (citing
Wells v. United States, 46 Fed. Cl. 178, 182 (2000)). During oral argument, protestor
also indicated that the agency has formally acknowledged protestor is owed something
on the Belgrade, Serbia project. Framaco notes that although it claims a far greater
entitlement on the Belgrade, Serbia project REAs, the government had offered to settle
Framaco’s REAs in the amount of $[redacted] million. Even adding $[redacted] million to
$122.6 million, the total value is still shy of the $124 million contract value threshold.
Regardless, at the time of the prequalification evaluation, the parties all acknowledge
that the REA settlement was not yet final and, therefore, could not be considered as
part of the contract value of the Belgrade, Serbia project for the prequalification
evaluation.
Intervenor points out that under the implementing regulations for the Diplomatic
Security Act, value of a contract is defined as “the total contract price of the project . . .”
48 C.F.R. § 652.236-72, and that “the price of a contract is not increased until and
unless the Government grants a pending REA.” (emphasis in original). Intervenor also
notes that Framaco’s prequalification submission package listed the value of the
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Belgrade, Serbia project as $122.6 million in value, made no mention of pending REAs,
and did not request OBO to take REAs into account. Moreover, because OBO did not
consider pending REAs for other prospective offerors for this solicitation, it would not
have been appropriate to do so when evaluating Framaco’s prequalification submission.
Therefore, the agency decision not to adjust for inflation or take into account
pending REAs was reasonable, not arbitrary or capricious, or a violation of the law.
OBO exercised its discretion reasonably and in accordance with the stated terms of the
Notice of Solicitation when it refused to apply unstated criteria to evaluate Framaco’s, or
any other offeror’s, submission. “It is hornbook law that agencies must evaluate
proposals and make awards based on the criteria stated in the solicitation . . . . It thus is
beyond peradventure that the government may not rely upon undisclosed evaluation
criteria in evaluating proposals . . . .” Banknote Corp. of Am., Inc. v. United States, 56
Fed. Cl. 377, 386 (2003), aff’d, 365 F.3d 1345 (Fed. Cir. 2004) (internal citations
omitted); see also PlanetSpace, Inc. v. United States, 92 Fed. Cl. at 536-37; NEQ, LLC
v. United States, 88 Fed. Cl. 38, 47-48 (2009). The $124 million figure included in the
Notice of Solicitation, which was approximately 75 percent of the minimum of the range
of the approximate design-build cost for the Harare, Zimbabwe project, provided a
definite threshold for determining compliance with the Diplomatic Security Act. Thus,
offerors which might not meet the minimum of the range for the approximate design-
build cost for the Harare, Zimbabwe project, nonetheless, could compete. Whether or
not OBO applied inflation adjustments in the past, but chose not to do so regarding the
solicitation at issue, is not controlling, given the clarity of the Notice of Solicitation, the
apparent uniformity by DOS not to apply an inflation adjustment to any offeror, and the
uniform enforcement of the $124 million prequalification threshold, once the Pernix
Group error was corrected.
Protestor also adds a claim of disparate treatment. Stating the obvious, protestor
contends it is “axiomatic that agencies must treat offerors on a fair and consistent basis”
and indicates that agencies are barred from treating offerors on a disparate basis.
Protestor tries to extend this axiom to its protest by stating: “OBO has previously used
inflation-adjusted contract values or contract values that take into account modifications,
REAs and other contract adjustments in order to evaluate prequalification submissions.”
Protestor argues that “OBO has adopted an inconsistent and discriminatory
interpretation of the Omnibus Act [Diplomatic Security Act] in a manner that materially
prejudices Framaco,” and that, “[w]hen an agency departs from its prior practice in an
inconsistent fashion such action is arbitrary and capricious.” Protestor also states that
defendant “has acted in an unfair and disparate manner by failing to prequalify Framaco
under the circumstances addressed here” and “has acted in an anti-competitive and
unlawful manner by excluding Framaco from the Harare competition based on an
unduly restrictive interpretation of the solicitation that is inconsistent with OBO’s past
actions and governing law.” According to the protestor, with the procurement for the
Harare, Zimbabwe project, OBO “dramatically shifted” its method and changed its
procurement practice regarding its interpretation of contract value by failing to allow for
application of an inflation factor. The protestor states:
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OBO has previously used inflation-adjusted contract values to determine
whether an offeror is eligible for OBO procurements, including
procurements subject to the Omnibus Diplomatic Security and Anti-
Terrorism Act of 1986 (the ‘Omnibus Act’) (Public Law No. 99-399,
codified at 22 U.S.C. § 4852), the Percy Amendment and similar
thresholds involving past performance considerations.
Protestor points out that under previous solicitations, Framaco submitted projects to
OBO which OBO adjusted for inflation. Protestor provides two examples. Framaco
alleges it used a [redacted] construction project for prequalification on a 2008
solicitation and the OBO adjusted for inflation, in part, due to the increase in the price of
construction materials over four years. Framaco’s other example notes that OBO
prequalified Framaco in [redacted] for a project with an estimated design-build cost of
US$175 to $200 million, higher than the range established for the Harare, Zimbabwe
project, and for which Framaco assumed that the prequalification determination was
based in part on inflation adjustments. In support, protestor again points to the GAO
protest in Caddell Construction Company, Inc., B-298949.2, 2007 WL 1893209, to
suggest that the practice of applying adjustments was not limited to Framaco. Moreover,
protestor also asserts that “OBO’s previous interpretation is premised in and consistent
with OBO’s own recognition of the rising costs of construction” and protestor provides
examples of that recognition.
Protestor relies heavily on Redland Genstar, Inc. v. United States, 39 Fed. Cl.
220 (1997) and cites a number of other cases, contending that, under Redland “‘“an
agency action is arbitrary when the agency offer[s] insufficient reasons for treating
similar situations differently”’” and the agency must provide a rational basis for departing
from its previous procurement practice, even if those practices were based on non-
binding guidance. (quoting Redland Genstar, Inc. v. United States, 39 Fed. Cl. at 234-
35 (quoting Transactive Corp. v. United States, 91 F.3d 232, 237 (D.C. Cir. 1996))).
Protestor concludes “OBO has not and cannot provide a rational explanation for
refusing to consider inflation in this procurement” and for abandoning its previous
approach.
The protestor’s disparate treatment arguments fail under protestor’s own legal
standard. In Redland Genstar, Inc. v. United States, the United States Army Corps of
Engineer (Corps) issued a solicitation for the construction of a stone dike. See id. at
222. In Redland, a Judge of this court concluded that “some rational basis is needed to
explain the Corps’ decision to apply different abrasion tests” to one project and not the
project at issue in the protest, given the similarities of the two. See id. at 234 (citing
Transactive Corp. v. United States, 91 F.3d at 237). The court noted that the Corps in
the specific procurement at issue had departed from construction guidance in EM 1110–
2–2302, the Corps’ engineering manual for “Construction With Large Stone” that the
Corps had previously followed. See id. at 223, 227. The court in Redland found that
“[t]he Corps is certainly entitled to depart from previous practice and the nonbinding
engineering guidance contained in EM 1110–2–2302, but it must provide a rational
basis for doing so.” Id. at 234 (citing Motor Vehicle Mfrs. Ass’n v. State Farm Mut. Auto.
38
Ins. Co., 463 U.S. at 57). Ultimately, the Redland court found that the agency had failed
to provide a rational connection between the agency decision and the facts associated
with the project, even though defendant was given an opportunity to present someone
at the agency involved with the project to “explain to the court and to plaintiff why the
conditions at Poplar Island provide a reasonable basis for the Corps’ choice of abrasion
tests” and the “[d]efendant declined to take this opportunity.” Id. at 233. In the above
captioned protest, protestor’s claim would fail even under Redland because, as the
Redland court stated, an agency is entitled to depart from previous practice if a rational
basis is provided. In the first place, no internal agency guidance previously governed
DOS procedures regarding whether or not to apply an inflation adjustment. Moreover,
the Administrative Record in the current protest under review reflects a rational basis for
the agency’s decision not to apply an inflation index, namely, to avoid uncertainty
regarding the requirements of the solicitation, changing the procurement method
announced in the Notice of Solicitation for the Harare, Zimbabwe project, as well as for
the other four projects referenced in the Notice of Solicitation.
Both defendant and intervenor contend that protestor’s disparate treatment
allegation must fail, and both note that nowhere in its complaint does Framaco allege
that OBO considered inflation or other adjustments for other prospective offerors for the
same procurement and declined to do so for Framaco. According to defendant and
intervenor, each procurement stands on its own and OBO’s potential consideration of
inflation and other adjustments in prior, unrelated procurements is not relevant to the
procurement in the above captioned protest. According to defendant, “[c]ase law makes
clear that an agency is not bound to act consistently across procurements” but is “free
to establish new methods for conducting their procurements.” (citing Griffy’s Landscape
Maint. LLC, v. United States, 51 Fed. Cl. 667, 671 (2001); Renic Corp., Gov’t Sys. Div.,
B-248100, 1992 WL 189192, at *3 (Comp. Gen. July 29, 1992)). Defendant also argues
that in accordance with G4S Technology CW LLC v. United States, 109 Fed. Cl. 708(2013), an agency is afforded discretion to change its mind during the course of an
evaluation, and that if an agency can switch course mid-evaluation, it can certainly
change course between separate solicitations, conducted years apart. Intervenor states,
“‘“[e]ach procurement stands alone, and a selection decision made under another
procurement does not govern the selection under a different procurement.”’” (quoting
SDS Int’l, Inc. v. United States, 48 Fed. Cl. 759, 772 (2001) (quoting Renic Corp., Gov’t
Sys. Div., B-248100, 1992 WL 189192, at *3)).
As explained in the record before the court, including the May 12, 2014 Gallagher
Memorandum, the July 21, 2014 final decision letter from contracting officer David
Vivian to Framaco, and the August 5, 2014 letter from DOS Departmental Competition
Advocate Eric Moore to Framaco, OBO offered a rational explanation for the choice it
made regarding application of an inflation adjustment even though it had applied an
inflation adjustment in the past, and did not allow the practice for the Harare, Zimbabwe
project and the other four projects referenced in the Notice of Solicitation. As indicated
above, the May 12, 2014 Gallagher Memorandum indicated that a strict, minimum
contract value that was approximately 75 percent of the minimum design-build cost of
the project was set for each of the five different projects, including the Harare,
39
Zimbabwe project, to better avoid uncertainty regarding the solicitation requirements.
As intervenor and defendant identify, protestor did not at first argue that the
agency treated protestor’s prequalification submission disparately from other potential
offerors in the procurement at issue here, and such an allegation was not included in
Framaco’s bid protest complaint. Only after the court identified a potential issue with
prequalification of the Pernix Group, as recorded in the May 12, 2014 Gallagher
Memorandum, and requested the parties to address the prequalification of Pernix
Group, did protestor argue that OBO’s treatment of Pernix Group “is the hallmark of
disparate and unfair treatment contrary to CICA and the FAR.” Defendant responded to
the court that OBO’s conclusion to prequalify Pernix Group was in error and indicated
that OBO has since amended its decision and sent notice to Pernix Group that it is not
prequalified to bid on the Harare, Zimbabwe project. Defendant also stated that OBO
did not consider inflation or other adjustments in initially concluding that Pernix Group
met the threshold. Defendant further indicated that “[a]fter learning that this error was
made, Mr. Gallagher ‘reviewed [his] May 12, 2014 memorandum to determine whether
[he] made this same error when applying the $124 million threshold to the other
prospective offerors on the Project’” and determined he did not. (alterations in original).
Such a clear error, identified easily by the court upon review of the May 12, 2014
Gallagher Memorandum, causes the court to question the care with which Mr. Gallagher
arrived at his recommendations. There is no basis, however, given the record currently
before the court, that other prequalification errors occurred during the evaluation by
those who received the May 12, 2014 Gallagher Memorandum and the contracting
officer, who signed the final decision which denied Framaco prequalification for the
Harare, Zimbabwe project, nor has the protestor specifically so alleged or provided
evidence to suggest additional errors. Moreover, during oral argument, protestor
conceded that there was no disparate treatment within the boundaries of the particular
solicitation at issue in the above captioned protest because the agency has since
excluded Pernix Group.
CONCLUSION
The court concludes that the agency’s determination not to apply adjustments for
inflation and not to consider the yet unresolved REAs when deciding not to prequalify
Framaco for the Harare, Zimbabwe project complied with the terms of the solicitation,
applicable law, regulation, and was not arbitrary or capricious. Protestor’s motion for
judgment on the Administrative Record is DENIED. Defendant’s and intervenor’s cross-
motions for judgment on the Administrative Record are GRANTED. Protestor’s
complaint is DISMISSED. The Clerk of Court shall enter JUDGMENT consistent with
this opinion.
IT IS SO ORDERED.
s/Marian Blank Horn
MARIAN BLANK HORN
Judge
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