Hager Development Group, LLC v. United States

In the United States Court of Federal Claims
No. 20-819
(Filed: 5 August 2020 *)
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HAGER DEVELOPMENT GROUP, LLC, *
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Plaintiff, *
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v. *
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THE UNITED STATES, *
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Defendant. *
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Meghan F. Leemon, of PilieroMazza PLLC, of Washington, DC, for plaintiff, with whom
was Jonathan T. Williams, Justin D. Haselden, both of Washington, DC, for plaintiff.
Elizabeth A. Speck, Senior Trial Counsel, Commercial Litigation Branch, Civil Division,
Department of Justice, with whom were Ethan P. Davis, Acting Assistant Attorney General,
Robert E. Kirschman, Jr., Director, Douglas K. Mickle, Assistant Director, all of Washington,
DC, for defendant. Stephen M. Hernandez, LTC, Attorney, U.S. Army, and Christopher J.
McClintock, Trial Attorney, U.S. Small Business Administration, of counsel.
OPINION AND ORDER
HOLTE, Judge.
Hager Development Group, LLC (“plaintiff”) brings this bid protest challenging the U.S.
Army’s determination of plaintiff’s nonresponsibility and U.S. Small Business Administration’s
(“SBA”) denial of a Certificate of Competency (“COC”) stemming from plaintiff’s offer under
Army Solicitation No. W9124J-20-R-0005. Pending before the Court is plaintiff’s motion to
compel completion of the administrative record by adding certain documents associated with
plaintiff’s amended complaint and addition of disparate treatment allegations to Counts I and II.
For the following reasons, the Court GRANTS plaintiff’s motion.
I. Background and Procedural History
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This opinion was originally filed under seal on 3 August 2020 pursuant to the protective order in this case. The
Court provided the parties two days to review this opinion for any proprietary, confidential, or other protected
information, and submit to the Court proposed redactions, if any, before the opinion is released for publication.
Plaintiff proposed minimal redactions. The Court accepts plaintiff’s redactions, with redacted language replaced as
follows: [XXX].
On 6 July 2020, plaintiff filed its complaint seeking injunctive relief following its
exclusion from award on financial responsibility grounds. See Compl., ECF No. 1. On 9 July
2020, the parties filed a joint status report with a proposed schedule before the initial status
conference. See Joint Proposed Schedule, ECF No. 16. In the status report, the government
agreed to voluntarily stay contract award until 10 September 2020 pending resolution of this
protest. Id. at 1. Given the limited timeframe for proceedings in this case, the parties proposed
an expedited briefing schedule, with briefing to conclude 10 August 2020. Id. at 2.
Additionally, “given the size of the record in this procurement, to facilitate the expeditious
resolution of this matter, the parties . . . agreed to limit the number of documents contained in the
administrative record” to the following documents:
(1) the record from the [SBA] regarding the Certificate of Competency
determination for [plaintiff]; (2) the solicitation and amendments, including
questions and answers; (3) [plaintiff’s] complete proposal; (4) the Army’s
evaluation of [plaintiff] (including all Determinations and Findings); (5) audits that
the Army received regarding [plaintiff]; (6) the Army’s referral of [plaintiff] to the
SBA for a Certificate of Competency determination; (7) correspondence between
the Army and [plaintiff] relating to this procurement; (8) correspondence between
the Army and the SBA regarding the referral on the Certificate of Competency
issue; (9) the volume I file for all 27 offerors addressing financial responsibility;
(10) the Financial Capability Risk Assessments that the Army received for this
procurement; (11) Determinations and Findings issued by the Army pertaining to
offerors eliminated from the competition thus far; and (12) notices to unsuccessful
offerors issued thus far.
Id. The government filed the administrative record on 13 July 2020 in accordance with the
Court’s 10 July 2020 order limiting the contents of the record. See Admin. R., ECF Nos. 20–21.
On 21 July 2020, after review of the administrative record, plaintiff filed an amended
complaint to add a disparate treatment claim. See Am. Compl., ECF No. 23. For example,
plaintiff amended its complaint to allege: “While [plaintiff] was referred to SBA based on its
ability to meet the definitive responsibility criteria in the Solicitation, a number of offerors who
included similar line of credit letters in their proposals were not. Additionally, other offerors that
did not comply with the clear terms of the Solicitation by failing to provide evidence of working
capital or a line of credit for the offeror itself were not referred to SBA.” Id. ¶ 20. Further,
regarding SBA, plaintiff alleges, for instance, “[w]hile the SBA declined to credit [plaintiff] with
the letter from its bank because it was ‘contingent,’ and denied [plaintiff’s] application for a
COC, the SBA granted a COC for another offeror with a near-identical letter and found that the
letter demonstrated that the offeror had the ability to obtain sufficient resources.” Id. ¶ 34.
Plaintiff added allegations that the Army disparately evaluated offerors to Count I, claiming
“[t]he Army . . . erred by treating offerors with similar letters to that of the letter provided by
[plaintiff] in its proposal differently than [plaintiff]. The Army did not send all offerors with a
conditional line of credit approval to SBA for a COC.” Id. ¶ 56. Additionally, plaintiff added
allegations that SBA disparately held plaintiff to a different standard than other offerors referred
for a COC because it “approved a COC for other offerors that relied on letters of credit that were
conditioned on contract award and bank approval.” Id. ¶ 64.
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Also on 21 July 2020, plaintiff filed a motion to compel completion of the administrative
record. See Mot. to Compel Completion of the Admin. R., ECF No. 24 (“Mot. to Compel”). On
27 July 2020, the government filed its response in opposition to plaintiff’s motion. See Def.’s
Resp. to Pl.’s Mot. to Compel, ECF No. 30. Plaintiff filed its reply to the government’s response
on 29 July 2020. See Pl.’s Reply to Def.’s Resp. to Pl.’s Mot. to Compel Completion of the
Admin. R., ECF No. 34 (“Pl.’s Reply”). The Court held telephonic oral argument on plaintiff’s
motion to compel completion of the administrative record on 30 July 2020. See Order, ECF No.
31.
On 22 July 2020, plaintiff filed its motion for judgment on the administrative record. See
Pl. Hager Development Group, LLC’s Mot. for J. on the Admin. R., ECF No. 29. In response,
on 31 July 2020, the government filed a combined motion to dismiss for lack of jurisdiction and
failure to state a claim upon which relief can be granted and its cross-motion for judgment on the
administrative record and response to plaintiff’s motion for judgment on the administrative
record. See Def.’s Mot. to Dismiss, Cross-Mot. for J. on the Admin. R., & Resp. to Pl.’s Mot. on
the Admin. R., ECF No. 40. Regarding plaintiff’s added disparate treatment claims, the
government argues “[a]lthough [plaintiff] can petition the Court to review both the Army’s non-
responsibility determination of [plaintiff], and the SBA’s denial of a COC for [plaintiff], that
does not permit [plaintiff] to challenge the SBA’s COC determinations for other offerors, or for
the Court otherwise to review those determinations.” Id. at 18 (citing Sonoran Tech. & Prof’l
Servs. v. United States, 133 Fed. Cl. 401, 404 (2017)). “In addition, given the individualized
nature of financial responsibility determinations, [plaintiff] could never meet the substantively
indistinguishable standard that the Federal Circuit requires offerors to meet in order to bring
disparate treatment claims. Id.; see also Office Design Grp. v. United States, 951 F.3d 1366,
1373 (Fed. Cir. 2020) (“If a protester meets this [‘substantively indistinguishable’] threshold, a
reviewing court can then comparatively and appropriately analyze the agency’s treatment of
proposals without interfering with the agency’s broad discretion in these matters.”).
II. The Parties’ Arguments
Initially, plaintiff “agreed to a more limited [administrative record (‘AR’)],” but as
plaintiff reviewed the record, “it became clear that certain files were missing.” Mot. to Compel
at 2. Plaintiff specifically requested the government produce “the SBA financial specialist and
industrial specialist reports, as applicable, for each offeror that was referred to SBA for a COC
under the Solicitation.” Id. Plaintiff explains that the current record “shows that SBA treated
[plaintiff] disparately and applied a more stringent standard to [plaintiff] than other offerors.” Id.
at 3. For example, plaintiff points to “the letter included with [XXX] . . . proposal [which] stated
that it had a $2 million working capital line of credit and that if [XXX] is awarded the contract,
‘then it would be expected that [XXX] would look favorably upon increasing the existing LOC
to $3,000,000 to support this award.’” Id. at 4 (quoting AR at 2121). Although plaintiff
“provided a near identical letter, . . . SBA found in [plaintiff’s] instance that its line of credit
increase was ‘contingent upon unknowns’ and denied the COC. Id. (quoting AR at 4087). Next,
the SBA industrial specialist “declined to give credit for [plaintiff’s] promissory note because its
mentor was not an offeror or involvement in the procurement,” but “SBA’s decision to grant a
COC for [XXX] was based on the financial strength of a company not even mentioned in its
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proposal, [XXX], which is the owner of the [XXX].” Id. at 4 –5 (citing AR at 4080, 4105.1).
While these examples allegedly demonstrate disparate treatment, “it is unclear without the
financial specialist and industrial specialist reports why SBA either granted or denied a COC for
other offerors.” Mot. to Compel at 4. Plaintiff therefore argues “including the financial
specialist and industrial specialist reports for all offerors . . . this will permit the Court to fully
evaluate whether [plaintiff] was treated unequally by SBA.” Id. at 3.
The government contends, on the other hand, the administrative record “is already
complete” because it “contains all of the documents that the SBA considered when it declined to
issue [plaintiff] a COC and all of the documents the Army considered germane to the evaluation
of [plaintiff’s] financial responsibility.” Def.’s Resp. to Pl.’s Mot. to Compel. at 8. The
government argues SBA’s financial specialist and industrial specialist reports for other offerors
referred for a COC are not relevant to the “challenged decision, which is the SBA’s decision in
its appeal of the Army’s determination of nonresponsibility for [plaintiff],” and are therefore not
properly part of the administrative record. Id. at 10 (emphasis omitted). The government also
argues “disparate treatment in the context of a denial of a COC is not a valid basis for a protest”
because plaintiff “cannot establish the required element of prejudice” and “the SBA’s evaluation
of other offerors that received COCs is not . . . subject to judicial review.” Id. at 12. Given the
government’s assertion the administrative record is already “complete,” the government argues
plaintiff’s motion is more appropriately characterized as a motion to supplement the
administrative record, and plaintiff fails to meet the Federal Circuit standard for
supplementation. Id. at 15–16 (citing Axiom Res. Mgmt., Inc. v. United States, 564 F.3d 1374,
1379 (Fed. Cir. 2009)). Lastly, the government maintains there is no merit to plaintiff’s
disparate treatment claim because “given the fact-intensive nature of these proceedings and
records, it is impossible, for all practical purposes, for any two COC records to be ‘substantively
indistinguishable,’” the Federal Circuit standard for a disparate treatment claim in a bid protest.
Id. at 17 (quoting Office Design Grp., 951 F.3d at 1373).
In its reply, plaintiff asserts it seeks completion of the administrative record “not because
it is challenging SBA’s issuance of COCs to other offerors, but because [the requested] agency
decision-making records go to the heart of [plaintiff’s] contention that it was treated disparately
by SBA.” Pl.’s Reply at 2. Plaintiff also clarified it is “challenging both the Army’s and SBA’s
actions as they relate to the Solicitation;” therefore, plaintiff “is merely asking for records that
were before the agency decision-maker,” in this case SBA, and those records are properly
considered part of the “complete” record. Id. at 7–8. Lastly, plaintiff reiterates it is not
challenging SBA’s decision to issue or deny COCs for other offerors; instead, plaintiff
challenges the standard SBA used to deny plaintiff’s COC, and completing the administrative
record with contemporaneous records of SBA’s decision-making would aid effective judicial
review in this case. Id. at 11.
III. Discussion
A. Applicable Law
“It is well settled that the ‘primary focus’ of the court’s review of agency decision
making ‘should be the materials that were before the agency when it made its final decision.”
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Joint Venture of Comint Sys. Corp. v. United States, 100 Fed. Cl. 159, 166 (2011) (quoting Cubic
Applications, Inc. v. United States, 37 Fed. Cl. 345, 349–50 (1997)). “[T]o perform an effective
review pursuant to the [Administrative Procedure Act (‘APA’)], the court must have a record
containing the information upon which the agency relied when it made its decision as well as any
documentation revealing the agency’s decision-making process.” Vanguard Recovery Assistance
v. United States, 99 Fed. Cl. 81, 92 (2011) (citing Citizens to Preserve Overton Park, Inc. v.
Volpe, 401 U.S. 402, 420 (1971)). Appendix C of the Rules of the Court of Federal Claims
(“RCFC”), which establishes the procedure for bid protest cases, lists examples of the possible
“relevant core documents” which should be produced in the administrative record, including, in
relevant part, “the agency’s evaluations of the protestor’s, awardee’s, or other interested parties’
offers, proposals, or other responses to the solicitation, including supporting documentation” and
“justifications, approvals, determinations, and findings, if any, prepared for the procurement by
the agency pursuant to statute or regulation.” RCFC App’x C ¶ 22(n), (t). The Court may order
the production of additional documents as part of the administrative record. Id. ¶ 24.
“[A]gencies ‘exercise some judgment in furnishing the court with the relevant
documents’” in the agency record for the Court to review. Joint Venture of Comint Sys. Corp.,
100 Fed. Cl. at 166 (quoting Cubic Applications, Inc., 37 Fed. Cl. at 350). “Granting agencies
the authority to retroactively create an administrative record once the adversarial process has
commenced, however, ‘may preclude the “substantial inquiry” and “thorough, probing, in-depth
review” the court must perform’ in bid protests.” Id. (quoting Mike Hooks, Inc. v. United States,
39 Fed. Cl. 147, 156 (1997)). As a result, “[i]n order to preserve a meaningful judicial review,
the parties must be able to suggest the need for other evidence . . . aimed at determining . . .
whether the record provides an adequate explanation to the protestor or the court as to the basis
of the agency action.” Cubic Applications, Inc., 37 Fed. Cl. at 350.
The Federal Circuit established a standard for supplementation of the administrative
record in Axiom Resource Management, Inc. v. United States, 564 F.3d 1374 (Fed. Cir. 2009). In
that case, the Federal Circuit explained, “[t]he purpose of limiting review to the record actually
before the agency is to guard against courts using new evidence to ‘convert the “arbitrary and
capricious” standard into effectively de novo review.’” Axiom Res. Mgmt., Inc., 564 F.3d at
1380 (quoting Murakami v. United States, 46 Fed. Cl. 731, 735 (2000), aff’d, 398 F.3d 1342(Fed. Cir. 2005)). “Thus, supplementation of the record should be limited to cases in which ‘the
omission of extra-record evidence precludes effective judicial review.’” Id. (quoting Murakami,
46 Fed. Cl. at 735) (emphasis added).
Subsequent to the Axiom Resource decision, other judges of this Court differentiated
between completion and supplementation of the administrative record. For example, in Joint
Venture of Comint Systems Corp. v. United States, after examining Axiom Resource, this Court
explained, “[a]dmission of new evidence into an agency-assembled record is a separate and
distinct issue from completing the record through incorporation of materials generated or
considered by the agency itself during the procurement process.” Joint Venture of Comint Sys.
Corp., 100 Fed. Cl. at 167 (citing NEQ, LLC v. United States, 86 Fed. Cl. 592, 593 (2009)).
Additionally, in Linc Government Services, LLC v. United States, the Court expounded: “A
procuring agency’s initial submission to the court may omit information that is properly part of
the administrative record because it served as a basis for the agency’s award decision. In such
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instances, subsequent admission of the omitted information is appropriate not to supplement the
record, but to complete it.” Linc Gov’t Servs., LLC v. United States, 95 Fed. Cl. 155, 158 (2010)
(internal citations omitted) (emphasis added).
B. Analysis
Plaintiff seeks completion of the administrative record through inclusion of certain
financial specialist and industrial specialist reports prepared in connection with SBA COC
determinations for other offerors on this multi-award procurement. Plaintiff asserts these
documents will further aid the Court’s review of the disparate treatment claim plaintiff added in
its amended complaint. The government, on the other hand, characterizes plaintiff’s request as
seeking supplementation of the administrative record, subject to the heightened Axiom Resource
standard. Reviewing plaintiff’s request, however, it appears the reports are not “extra-record
evidence” or “new evidence” that were not “actually before the agency” such that plaintiff’s
request would fall within the scope of the Axiom Resource standard. Axiom Res. Mgmt., Inc.,
564 F.3d at 1380. To the extent SBA prepared the relevant reports in connection with its COC
determinations—which form the basis of plaintiff’s disparate treatment claim—not only are they
properly considered core documents within the meaning of RCFC Appendix C, paragraph 22,
but they are also germane to the Court’s review of plaintiff’s disparate treatment claim.
Although there is some evidence in the current record to support the disparate treatment
claim, as plaintiff explained in its briefing and during the oral argument on plaintiff’s motion to
compel, the COC decision letters lacked relevant detail explaining the determinations. While the
financial specialist and industrial specialist reports were mere suggestions for the SBA Area
Office Directors’ decisions, the reports add meaningful context to SBA’s COC decision letters.
See Joint Venture of Comint Sys. Corp., 100 Fed. Cl. at 168 (“[A]n agency may not exclude
information merely on the grounds that it did not rely upon the excluded information when
reaching a final decision when there was evidence that the information was, in fact, reviewed.”).
The interests of due process necessitate a complete record upon which the parties and Court can
analyze the claims. See id. (“The court’s review function is undermined when an agency
assembles a record that consists solely of materials that insulate portions of its decision from
scrutiny or that it deems relevant to specific allegations raised by a protestor.”). Since the reports
were prepared as part of SBA’s analysis of other offerors’ financial responsibility for the same
solicitation as plaintiff, they fall within the “core documents” prescribed by RCFC Appendix C,
paragraph 22. See RCFC App’x C, ¶ 22(n), (t) (suggesting the “core documents” of an
administrative record may include “the agency’s evaluations of . . . other interested parties’
offers, proposals, or other responses to the solicitation, including supporting documentation” and
“justifications, approvals, determinations, and findings, if any, prepared for the procurement by
the agency pursuant to statute or regulation”). As other judges of this Court have determined,
“incorporation of materials generated or considered by the agency itself during the procurement
process” completes the administrative record. Joint Venture of Comint Sys. Corp., 100 Fed. Cl.
at 167. To the extent inclusion of the financial specialist and industrial specialist reports is a
supplementation of the administrative record, the Court finds that proceeding with the reports
will clarify the standard to which SBA held other offerors’ COC applications and allow
“effective judicial review” of plaintiff’s disparate treatment claims. Axiom Res. Mgmt., Inc., 564
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F.3d at 1380 (internal quotation marks omitted) (quoting Murakami, 46 Fed. Cl. at 735). The
Court therefore GRANTS plaintiff’s motion to compel completion of the administrative record.
The government filed a motion to dismiss plaintiff’s disparate treatment claims in
conjunction with its cross-motion for judgment on the administrative record. A full review of the
motion to dismiss requires the Court to consider whether plaintiff’s amended complaint
“contain[s] sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible
on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly,
550 U.S. 544, 570 (2007)). Briefing has not concluded on the motion to dismiss or cross-
motions for judgment on the administrative record. Given the lack of Federal Circuit case law
addressing disparate treatment claim standards in a bid protest challenging SBA decisions, the
expedited briefing schedule for cross-motions for judgment on the administrative record, and the
limited voluntary stay of contract award until only 10 September 2020, at this stage of the
proceedings the Court finds it necessary to resolve the motion to compel completion of the
administrative record before briefing on the cross-motions for judgment on the administrative
record concludes to allow the parties to fully address the completed record. See Beatrice Foods
Co. v. New England Printing & Lithographing Co., 899 F.2d 1171, 1177 (Fed. Cir. 1990) (“A
trial court has broad discretionary authority in managing the litigation before it . . . .”). The
Court will resolve the government’s motion to dismiss when it resolves the cross-motions for
judgment on the administrative record.
C. Completion of the Administrative Record
Although the government moved to dismiss plaintiff’s disparate treatment claims, given
the expedited timeline for proceedings in this matter, the Court finds, in its discretion, effective
judicial review would benefit from the administrative-record-addition brokered between the
parties during the 30 July 2020 oral argument. While plaintiff initially sought production of the
financial specialist and industrial specialist reports for all offerors referred to SBA for a COC,
during oral argument, plaintiff agreed to narrow the request to only reports for the seven offerors
which SBA issued a COC. Tr. at 44:19–23. The government represented during oral argument
it would be able to produce the requested documents by 7 August 2020 if the Court decided the
issue by 3 August 2020. Id. at 46:24–47:2. The government also noted a proper record of the
meeting minutes associated with the reports might not exist, but to the extent possible, it would
produce the minutes. See id. at 42:8–12; 45:20–23 (“[T]he minutes may not be there. If they are
there, we will produce them, but they may not be there in every case, as here they were not for
[plaintiff].”).
IV. Conclusion
For the foregoing reasons, the Court finds production of the relevant SBA documents
pertaining to seven offerors’ COC determinations would aid effective judicial review of
plaintiff’s disparate treatment claims. Therefore, on or before 7 August 2020 at 12:00 p.m.
EDT, the government shall file a completed administrative record including the financial
specialist and industrial specialist reports for the seven offerors who were issued COCs, in
addition to relevant meeting minutes, where applicable and available. Since the production of
these documents may occur after plaintiff files its response and reply in accordance with the
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Court’s 10 July 2020 scheduling order, plaintiff shall have until 10 August 2020 at 5:00 p.m.
EDT to file a supplemental brief addressing the additions to the corrected administrative record.
The government shall have until 13 August 2020 at 5:00 p.m. EDT to file a response to
plaintiff’s supplemental brief.
IT IS SO ORDERED.
s/ Ryan T. Holte
RYAN T. HOLTE
Judge
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