Arkray USA, Inc. v. United States

In the United States Court of Federal Claims
No. 14-233C
(Filed: June 26, 2014)
*Order originally filed under seal April 28, 2014
)
ARKRAY USA, INC., )
)
Plaintiff, )
)
v. )
)
THE UNITED STATES, )
)
Defendant, )
)
and )
)
ABBOTT DIABETES CARE )
SALES CORPORATION, )
)
Defendant-Intervenor. )
)
ORDER GRANTING-IN-PART AND DENYING-IN-PART PLAINTIFF’S
MOTION TO COMPLETE AND/OR SUPPLEMENT THE ADMINISTRATIVE
RECORD
In this post-award bid protest case, ARKRAY USA, Inc. (“plaintiff” or
“ARKRAY”), challenges the Defense Health Agency’s (“DHA” or “the agency”)
selection of Abbott Diabetes Care Sales Corporation’s (“Abbott” or “defendant-
intervenor”) self-monitoring blood glucose system (“SMBGS”) test strips (“strips”) for
the TRICARE formulary, 1 and its establishment of a blanket purchase agreement
(“BPA”) with Abbott alone for the purchase of the strips.
Plaintiff asserts that Abbott was ineligible for award because, among other things,
Abbott’s bid did not comply with the solicitation’s requirement that Abbott have in place
a process to supply, at no cost, blood glucose meters that comply with the Trade
Agreements Act (“TAA”). 2 Specifically, plaintiff contends that DHA should have
eliminated Abbott from consideration because, at the time Abbott submitted its bid,
Abbott was manufacturing its meters in China, a non-TAA country. Plaintiff asserts that,
due to DHA’s bias in favor of Abbott, DHA refused to enforce the TAA requirement
when evaluating Abbott’s bid.
Pending before the court is plaintiff’s motion to complete/supplement the
administrative record with documents that plaintiff argues address DHA’s views and
application of the TAA requirements in connection with this procurement. Specifically,
plaintiff seeks to complete the administrative record with (1) all internal agency
communications relating to the TAA or Federal Supply Schedule (“FSS”) requirements
applicable to the SMBGS BPA; 3 (2) all photographs of the meters provided by Abbott to
1
The formulary is the approved list of pharmaceutical agents that must be available to eligible
beneficiaries under the TRICARE pharmacy benefits program. Administrative Record (“AR”)
1836.
2
Where applicable, the TAA generally prohibits the federal government from procuring products
from a foreign country that has not signed a reciprocal agreement on government procurement.
See 19 U.S.C. § 2512.
3
Plaintiff’s request for additional internal communications related to FSS requirements
applicable to the SMBGS BPA is DENIED because DHA relied upon a Department of Veterans
2
the agency during any part of the evaluation process; 4 (3) notes, minutes, and/or agendas
from the June 20, 2013 industry teleforum regarding the SMBGS BPA solicitation; 5 (4) a
copy of the FSS contract for Abbott as of the date of Abbott’s submission of its proposal
for the SMBGS BPA on July 11, 2013, and any documents relating to Abbott’s
satisfaction of this BPA requirement; 6 and (5) any post-award notes, minutes, and/or
agendas from the meetings between Abbott and the Agency held on November 20, 2013
and November 25, 2013, as well as any correspondence between Abbott and the agency
regarding these meetings.
On April 14, 2014, the court set a briefing schedule for plaintiff’s motion to
complete/supplement the administrative record, and ordered the government to provide
Affairs pharmaceutical database and a contract modification, printouts of which are already
included in the record. These documents speak for themselves. See note 6.
4
In its opposition brief, the government represented that there are no photographs of meters
provided by Abbott to the government during the procurement process other than those that are
already included in the administrative record. Because the record is complete in this regard,
there is no relief available.
5
In its opposition brief, the government represented that it had inadvertently excluded notes
from the June 20, 2013 meeting from the administrative record. On April 21, 2014, the court
granted the government’s motion to amend/correct the record so as to include an additional page
of handwritten notes from that meeting. Order, ECF No. 41. Accordingly, plaintiff’s motion to
supplement the record with notes from the June 20, 2013 meeting is DENIED as moot.
6
In its opposition brief, the government represented that the agency did not rely on the FSS
contract for Abbott in making its decision to select Abbott for the BPA. Specifically, the
government represents that the agency primarily relied upon a public Department of Veterans
Affairs pharmaceutical database, which reflects FSS status. The government further represents
that the agency only used Abbott’s FSS contract to verify the status of one of Abbott’s proposed
test strips, and that a printout of this verification is included in the administrative record at pages
1522-23. The court is satisfied that the government has provided the necessary materials related
to Abbott’s satisfaction of the FSS requirement. Accordingly, plaintiff’s motion to supplement
the record with a copy of the FSS contract or other FSS-related materials is DENIED.
3
the court with a copy of all documents requested in plaintiff’s motion (if in existence) to
allow for in camera review. Order, ECF No. 35. On April 18, 2014, the government
hand-delivered to the court a set of documents that it represents reflect all available
documents responsive to plaintiff’s motion. See Notice, ECF No. 37. The government
divided these documents into two categories: pre-award documents and post-award
documents. Briefing on plaintiff’s motion was completed on April 25, 2014, and the
court deems oral argument to be unnecessary. For the reasons explained below,
plaintiff’s motion is GRANTED-IN-PART and DENIED-IN-PART.
I. BACKGROUND 7
Pharmaceutical agents are selected for inclusion in the TRICARE formulary based
upon their relative clinical and cost-effectiveness, as determined by a Pharmaceutical and
Therapeutics Committee (“P&T committee”), composed of representatives of pharmacies
of the uniformed services facilities and other military healthcare providers. 10 U.S.C §
1074g(b). Before formulary decisions are made, a Beneficiary Advisory Panel (“BAP”),
including representatives of beneficiaries, contractors, and providers, has an opportunity
to comment on any proposed changes to the formulary. 10 U.S.C. § 1074g(c). The DHA
Director makes final formulary decisions, taking into account both the P&T committee’s
recommendations and the BAP’s comments. Id. §§ (a)(2)(A)-(D), (c); 32 C.F.R. §
7A brief review of the formulary approval process and history of the BPA competition is
necessary to appreciate why some of the materials sought by plaintiff are necessary to either
complete or supplement the record and allow for effective judicial review. Accordingly, this
order only recites those facts that are essential to resolving plaintiff’s motion to supplement the
administrative record.
4
199.21(g)(3). Sometime after approval of the formulary decision, an agency Contracting
Officer signs one or more BPAs with participating pharmaceutical suppliers.
On May 15, 2013, the P&T committee reviewed the relative clinical effectiveness
of over 100 brands of blood glucose test strips. See AR 1718-19, 1838. Based upon that
review, the committee recommended a number of minimum requirements, including that
“SMBGS test strips eligible for inclusion on the Uniform Formulary must be . . .
compliant with the Trade Agreements Act. Corresponding SMBGS glucometers must
also be compliant with the Trade Agreements Act. Manufacturers of SMBGS
glucometers will be required to provide DoD beneficiaries with a no-cost glucometer.”
AR 252-53, 358. Due to these recommendations, the agency decided not to include [. . .],
which manufactured meters in China (a non-TAA country), in the pool of seven potential
formulary candidates identified. 8 AR 349, 1838. On June 13, 2013, the agency posted a
solicitation for glucose test strips on its website. Under the heading “General
Requirements,” the solicitation stated:
Meters
- Manufacturer must have a process to supply meters to beneficiaries at
no cost.
- Must be Trade Agreement Act-compliant
AR 200.
On June 18, 2013, an Abbott employee e-mailed DHA with questions for an
upcoming industry teleforum regarding the SMBGS BPA solicitation. AR 1010.
Specifically, Abbott inquired as to why the glucometers must be TAA-compliant:
8
The “final candidates” included Abbott, [. . .], ARKRAY, and [. . .]. AR 403.
5
“Historically meters have been provided by SMBGS vendors at no cost to TRICARE
patients. It is also a requirement of the UF BPA Appendix as well. Why must meters
that are provided at no cost to the government . . . be TAA compliant?” Id. Two days
later, that same Abbott employee e-mailed several DHA employees involved in the
solicitation seeking a 15-minute meeting, although the e-mail refrains from stating the
purpose of the meeting. AR 1014. The record is silent as to whether that meeting
occurred or its purpose.
Ultimately, five vendors submitted quotes, including ARKRAY and Abbott. AR
1840. Abbott submitted its bid to DHA on or about July 21, 2013. AR 227. With regard
to the TAA-compliance of its meters, Abbott’s proposal stated:
1. Must be Trade Agreement Act-compliant (TAA)
Abbott Diabetes Care manufactures meters in a TAA nation. Following is the
physical address of the manufacturing location:
Flextronics Manufacturing (S) Pte Ltd
1 Kallang Place
Singapore 339211
AR 1085 (emphasis in original). Notwithstanding this statement, it is undisputed that at
the time Abbott submitted its BPA price quote, Abbott “sold meters made in China in the
U.S. market, and had not yet imported meters manufactured in Singapore for distribution
to the Agency.” Intervenor’s Opp. to Pl.’s Mot. to Supplement 6. Abbott claims,
however, that when it submitted its bid, Abbott was “in the process of manufacturing
meters in Singapore that would comply with the BPA requirement.” Id.At its August 2013 meeting, the P&T committee reviewed the cost information
provided in the offerors’ quotes and concluded that Abbott’s test strips were the most cost
6
effective. AR 570-72. Accordingly, the P&T committee recommended that Abbott’s
strips be designated as the only strips available on the formulary. Id. On September 16,
2013, Abbott and DHA participated in a teleconference in which Abbott revealed that it
was not yet producing all of its meters in a TAA compliant country. Meeting minutes
from that teleconference state as follows:
-meters- [Abbott] standing up a brand new production line for this
implementation; will be in a TAA compliant location (Singapore) -- large
undertaking for Abbott -- need fair amount of lead time, to make sure things are
done correctly – all or nothing, not a ramp up
–They will have an amount of TAA compliant meters read[y] to go in Nov,
but not [. . .]
-need things built and in place to do a successful implementation
...
-want to ensure all [patients] get TAA compliant meter; meters at MD
offices/retail outlets are currently non-TAA compliant
...
Dave question on implementation – by law have 180 days – which is May 1st
-Jeremy-asked why they told us 4-6 months, and now need 6 [months]
-Abbott-conversion for [Medical Treatment Facilities] is 6 months
...
-May 1st only an issue if dod wants Abbott to send meters to [patients]
AR 2050-51. The meeting notes further discuss Abbott’s plan to make TAA-compliant
meters.
The P&T committee’s recommendation to select Abbott as the sole test strip
provider was made public at a September 19, 2013 BAP meeting. The BAP agreed with
the recommendation that Abbott be the sole manufacturer listed on the formulary, but
recommended a longer implementation period to reduce the risk of complications while
coordinating the medical benefits with new and existing patients. AR 639-44.
7
On September 27, 2013, ARKRAY filed a protest with the Government
Accountability Office (“GAO”) in which it challenged the selection of Abbott for the
formulary. Arkray USA, Inc., 2014 CPD ¶ 90 (Comp. Gen. Mar. 5, 2014). On
September 30, 2013, ARKRAY withdrew its protest after being informed that a final
decision had not yet been made with regard to the formulary. On November 7, 2013, the
DHA Director approved the P&T committee’s recommendations (as modified by the
BAP), AR 644, and the government’s Contracting Officer signed the BPA with Abbott
on November 12, 2013, AR 692. ARKRAY re-filed its protest with the GAO on
November 25, 2013. AR 1-112. GAO denied the protest on March 5, 2014. AR 1834.
II. DISCUSSION
a. Standard of review
It is well-established that “the focal point for judicial review should be the
administrative record already in existence” at the time of the agency’s decision. Axiom
Res. Mgmt., Inc. v. United States, 564 F.3d 1374, 1379 (Fed. Cir. 2009) (quoting Camp
v. Pitts, 411 U.S. 138, 142 (1973)); Optimization Consulting, Inc. v. United States, 115
Fed. Cl. 78, 90-91 (2013). A complete record is one that “contains the information relied
upon by the agency as it made its decision, as well as documentation of the agency’s
decision-making process.” Kerr Contractors, Inc. v. United States, 89 Fed. Cl. 312, 335
(2009), aff’d, 374 F. App’x 979 (Fed. Cir. 2010). This court’s rules include a non-
exhaustive list of “core documents” relevant to a bid protest. 9 Joint Venture of Comint
9
As the court explained in Allied Tech. Grp., Inc. v. United States, whether or not previously
omitted Appendix C materials should be added to the administrative record is a question left to
8
Sys. Corp. v. United States, 100 Fed. Cl. 159, 166 (2011). Among these core documents
are (1) the agency’s responses to any questions about or requests for clarification of the
solicitation; (2) correspondence between the agency and the protester, awardee, or other
interested parties relating to the procurement; (3) records of any discussions, meetings, or
telephone conferences between the agency and the protester, awardee, or other interested
parties relating to the procurement, (4) documents relating to any pre- or post-award
debriefing; and (5) documents relating to any stay, suspension, or termination of award or
performance pending resolution of the bid protest. See Rules of the United States Court
of Federal Claims (“RCFC”) Appendix C ¶ 22 (“Paragraph 22”). Documents such as
these “presumptively qualify for inclusion in the Administrative Record.” Dyncorp Int’l
LLC v. United States, 113 Fed. Cl. 298, 303 (2013).
In Axiom, the Federal Circuit clarified that supplementation of the administrative
record with materials other than those listed above “should be limited to cases in which
the omission of extra-record evidence precludes effective judicial review.” 564 F.3d at
1380 (internal quotation omitted). In this connection, a distinction must be drawn
between supplementing the administrative record and completing the record. Linc Gov’t
Servs., LLC v. United States, 95 Fed. Cl. 155, 158 (2010). Where a party seeks to add
evidence to the record that consists of materials that were generated or considered by the
agency during the procurement and decisionmaking process, such a request is properly
the sound discretion of the court. 92 Fed. Cl. 226, 230 (2010) (excluding post-award
declarations because they had first been offered by plaintiff as part of its GAO protest).
9
viewed as a request to complete—rather than supplement—the administrative record, see
Comint, 100 Fed. Cl. 159, 167, and the court will ordinarily order the agency to complete
the administrative record by adding pre-award records.
Supplementing the administrative record raises different concerns from simply
completing the record. Supplementing the record with materials not before the agency or
with documents that post-date the decision is only allowed when it is necessary for
judicial review. Axiom, 564 F.3d at 1381. Thus, courts must “exercise restraint when
considering whether or not to supplement the administrative record.” Office Depot, Inc.
v. United States, 94 Fed. Cl. 294, 296 (2010). Supplementation may be appropriate,
however, where the record raises serious questions concerning the rationality of the
award decision, Impresa Construzioni Geom. Domenico Garufi v. United States, 238
F.3d 1324, 1341 (Fed. Cir. 2001); Office Depot, 94 Fed. Cl. at 298, or where the
additional evidence is likely probative of potential agency bias or bad faith, see L-3
Commc’ns Integrated Systems, L.P. v. United States, 91 Fed. Cl. 347, 356 (2010).
Against this backdrop, the court turns to plaintiff’s motion to complete/supplement
the record.
b. The government shall complete the administrative record with the pre-
award materials submitted to the court
The pre-award documents provided by the government that are responsive to
plaintiff’s request include (1) a March 2013 e-mail between government officials
concerning contract requirements for the SMBGS BPA; (2) pre-award handwritten notes
from a May 7, 2013 government meeting; (3) pre-award handwritten notes from a May
10
14, 2013 government “pre-brief” meeting concerning the SMBGS BPA’s contract
requirements; and (4) a September 19, 2013 e-mail from an Abbott employee to the
government, which references a schedule for providing TAA-compliant meters. 10 The
government contends that even if these materials fall within the scope of Paragraph 22,
the court should exclude these materials because they are not necessary to permit
effective judicial review. For the reasons explained below, the court disagrees.
Having reviewed each of the documents in camera, the court finds that all of these
materials were either generated or considered by the agency during the procurement and
decisionmaking process, and that they are necessary to complete the administrative
record. 11 Comint, 100 Fed. Cl. at 167. Moreover, these documents are relevant to the
key issue in this case: the agency’s understanding and application of the TAA
requirement. For example, notes from the May 14, 2013 “pre-brief” meeting include the
following notations:
David Hunt -Can’t buy non-TAA meter even if disguised as a gift
-will we buy [. . .] strips in [indecipherable]
Shana -Would [. . .] win a protest if they protest?
-David says no
(emphasis in original). These statements go to the agency’s understanding and
application of the TAA-requirement, and could be viewed as corroborating plaintiff’s
10
Given that the DHA Director did not approve Abbott’s selection until November 7, 2013, the
court assumes that the government inadvertently labeled the September 19, 2013 e-mail as a
post-award document.
11
Indeed, the court is puzzled why the government would contest the inclusion of the September
19, 2013 e-mail, which plainly constitutes “correspondence between the agency . . . and the
awardee concerning the procurement.” Appendix C ¶ 22. The e-mail is presumptively part of a
complete record in a bid protest.
11
allegations concerning whether DHA enforced the solicitation’s requirements in a biased
fashion. Accordingly, the court ORDERS the government to add all of the pre-award
materials to the administrative record.
c. The government shall complete the administrative record with the post-
award materials that it submitted to the court
The post-award documents provided by the government that are responsive to
plaintiff’s motion include (1) an agenda for a post-award November 20, 2013 meeting
with Abbott; 12 (2) a different version of the same agenda for the post-award November
20, 2013 meeting, which includes handwritten notes; (3) six pages of handwritten notes
from the November 20, 2013 meeting with Abbott; 13 and (4) a November 27, 2013 e-mail
from an Abbott employee to the government. The government argues that these materials
should be excluded as either unnecessary for judicial review or on the grounds that they
were not before the agency at the time of the decision. For the reasons explained below,
the court disagrees.
As noted, under RCFC Appendix C ¶ 22(s), “documents relating to any stay,
suspension, or termination of award or performance pending resolution of the bid protest”
are presumptively included as part of a complete administrative record. Dyncorp Int’l,
12
The agenda includes the following disclaimer:
DoD just cannot issue orders under the BPA while under protest. This does not
[i]nhibit the actions of Abbott and there is nothing wrong with Abbott being
prepared as long as you understand that it is at your risk as we do not know if the
protests will be sustained or denied. Providing the PEC with updates during the
protest period is acceptable and is in the best interest of the Government.
13
These notes include the following notation: “[Patient] letters => wait until [indecipherable]
protest is resolved.”
12
113 Fed. Cl. at 303. The court begins by observing that all of the post-award documents
relate to the November 20, 2013 meeting at which Abbott and the government planned to
discuss—and did discuss—the topic of Abbott’s performance during the protest period.
Although ARKRAY did not refile its GAO protest until November 25, 2013, the court
holds that a protester that diligently pursues its protest should not be denied access to
Paragraph 22 materials simply because the government and awardee happened to
communicate during the brief period between the date of award and the protester’s timely
refiling of its protest. 14 These materials provide factual information related to Abbott’s
compliance with the TAA requirement, and there is no rational reason to exclude them
when they complete the record. Accordingly, the court finds that these documents should
be included in the record along with the pre-award documents.
Moreover, even if the court were to conclude that the post-award materials were
not “core documents,” the court would nevertheless order the government to supplement
the administrative record on the grounds that these documents are needed to conduct
effective judicial review. As noted, plaintiff seeks to add documents to the administrative
record in order to corroborate its allegation that due to DHA failed to enforce the TAA
requirement when evaluating Abbott’s bid. In support, ARKRAY has marshaled
considerable evidence related to Abbott’s potential non-compliance with the TAA at the
14
With one exception, all of the post-award materials provided by the government were created
during the brief period between the September 30, 2013 withdrawal of ARKRAY’s untimely
protest and the November 25, 2013 re-filing of that protest. That one exception—the November
27, 2013 e-mail from Abbott to the government—plainly constitutes a document concerning
performance during a protest, and is presumptively included as part of a complete administrative
record.
13
time when bidding closed. Specifically, plaintiff has shown that (1) DHA excluded [. . .],
another strip manufacturer, from further consideration in May 2013 because its meters
were being manufactured in China; (2) shortly after DHA posted the solicitation, which
included the TAA requirement, Abbott sought clarification from DHA as to the need for
TAA compliant meters; (3) although Abbott certified that its meters were TAA-
compliant, DHA knew, prior to award, that Abbott was still manufacturing meters in
China and still in the process of standing up a brand new production line in a TAA-
compliant country; (4) DHA officials questioned Abbott’s ability to achieve delivery
targets, and Abbott confirmed that it would be difficult to achieve a May 1, 2014 delivery
date if the agency wanted Abbott to send meters to all patients; and (5) notwithstanding
all of this information, the DHA Director selected Abbott as the sole test strip provider on
November 7, 2013, and the Contracting Officer issued the BPA on November 12, 2013.
Assuming that plaintiff is correct that the solicitation required offerors to possess a
process to supply TAA-compliant meters as of the close of bidding, the aforementioned
evidence suggests that there were questions involving Abbott’s TAA-compliance that
should have led to further inquiry by the government before award.
After reviewing the post-award materials provided by the government in camera,
the court is satisfied that all of them are probative as to the agency’s understanding and
application of the TAA requirement. 15 For example, the notes from the November 20,
15
In this connection, the court rejects the government’s argument that these materials must be
excluded because they constitute “deliberative discussions.” Gov. Mot. 14 (citing Tafas v.
Dudas, 530 F. Supp. 2d 786, 794 (E.D. Va. 2008)). These documents are typical of the
documents the government already included in the record with regard to other potential offerors
14
2013 meeting clearly reference Abbott’s strategy to comply with the TAA requirement.
Specifically, the handwritten meeting notes include the following notations:
OCONUS Meters
-will ship non-TAA compliant meters?
...
Meter Voucher => Is it OK?
...
-Right now: [. . .] meters TAA compliant
...
Abbott
-Don’t want 1-800 # on the letter b/c of lack of TAA meters. That is the purpose
of the voucher coupon
Including such materials in the record does not, as the government and defendant-
intervenor contend, risk “convert[ing] the ‘arbitrary and capricious’ standard into
effectively de novo review.” Axiom, 564 F.3d at 1380 (quoting Murakami v. United
States, 46 Fed. Cl. 731, 735 (2000)). Rather, given that that questions regarding TAA-
compliance had been raised during the bid-evaluation process, these documents are
necessary for the court to understand whether Abbott’s bid satisfied the TAA
requirement. Accordingly, even if these materials fell outside of Paragraph 22 “core
documents,” the court finds it is necessary to supplement the record with them to allow
for effective judicial review.
and are necessary for effective judicial review. Moreover, the government has not satisfied any
of the procedural requirements for properly invoking the deliberative process privilege: neither
an agency head nor an authorized delegate has asserted the privilege, the agency has not stated
with particularity what information is to be excluded, and the agency has not provided the court
with precise or certain reasons for maintaining the confidentiality. See Marriott Int’l Resorts,
L.P. v. United States, 437 F.3d 1302, 1307 (Fed. Cir. 2006); Sikorsky Aircraft Corp. v. United
States, 106 Fed. Cl. 571, 577 (2012); Walsky Const. Co. v. United States, 20 Cl. Ct. 317, 320
(1990).
15
III. CONCLUSION
For the foregoing reasons, plaintiff’s motion to supplement the administrative
record is GRANTED-IN-PART and DENIED-IN-PART.
IT IS SO ORDERED.
s/Nancy B. Firestone
NANCY B. FIRESTONE
Judge
16