RHINOCORPS LTD. CO., v. USA

Filing 20

ORDER FOR SUPPLEMENTAL BRIEFING TO ADDRESS SUBJECT MATTER JURISDICTION OF THE COURT OF FEDERAL CLAIMSNotice of Compliance due by 10/28/2008. Signed by Judge Christine O.C. Miller. (sh)

R H I N O C O R P S LTD. CO., v. USA

D o c . 20

In the United States Court of Federal Claims
*************************** R H I N O C O R P S LTD. CO., P l a in tif f , v. T H E UNITED STATES, D e f e n d a n t. * * * * * N o . 08-410C (F ile d Oct. 10, 2008)

*************************** O R D E R FOR SUPPLEMENTAL BRIEFING T h is case was transferred to the undersigned pursuant to RCFC 40.1(b) by order dated S e p te m b e r 19, 2008. Briefing on defendant's motion to dismiss filed pursuant to RCFC 1 2 (b )(1 ) and 12(b)(6) was completed on August 27, 2008. This order concerns the first g ro u n d ­ subject matter jurisdiction. An important decision was issued by the United States C o u rt of Appeals for the Federal Circuit on August 28, 2008. See Distributed Solutions, Inc. v . United States, 539 F.3d 1340 (Fed. Cir. 2008). The undersigned transferee judge has re v ie w e d the briefs and determines that supplemental briefing must address questions that the briefs do not answer on the issue of subject matter jurisdiction of the United States Court o f Federal Claims. See Arctic Corner, Inc. v. United States, 845 F.2d 999, 1000 (Fed. Cir. 1 9 8 8 ) (stating that trial court has responsibility to determine its own jurisdiction sua sponte w h en ev er it appears it may be lacking). 1 . Background T h e court accepts the allegations of the complaint as setting forth the undisputed facts re la tin g to subject matter jurisdiction. R h in o c o rp s Ltd. Co. ("plaintiff"), is a small business incorporated in New Mexico. P la in tif f is suing the United States for problems stemming from an expired contract (the

Dockets.Justia.com

" A R S S contract") that plaintiff held with the United States Air Force ("the Air Force"). 1/ S e e Compl. filed June 3, 2008, ¶¶ 2-3. On May 28, 2003, plaintiff entered a contract with what is now called the 709 th A rm a m e n t System Squadron (the "ARSS"). The ARSS contract was awarded through a c o m p e titiv e small business set-aside competition. Compl. ¶ 4. The contract referenced 48 C .F .R . (FAR) § 52.219-6 (2000), which guarantees that plaintiff's ARSS contract would be a w a rd e d to a small business. Plaintiff's ARSS contract also incorporated FAR § 52.219-8, se ttin g a goal to allow small businesses the maximum opportunity to participate in p e rf o rm in g Federal contracts. Compl ¶¶ 6-7. With the highest rated technical proposal, and the lowest price, the award was made to plaintiff. Plaintiff agreed to a two-year contract term w ith three one-year option periods. The ARSS contract expired on May 29, 2008. Id. ¶ 4.

As March 29, 2008, approached, plaintiff met with the ARSS to discuss the status of th e contract. Compl. ¶15. The ARSS eventually determined that plaintiff's ARSS contract w o u ld not be recompeted, but would be "fulfilled through an ongoing, current contract out o f another Contracting Office." Id. ¶16. Specifically, the ARSS stated that due to re o rg a n iz a tio n s within the Air Force, among other things, the ARSS no longer needed p l a in tif f 's services and that services provided by government personnel and existing nons m a ll-b u s in e ss contractors make plaintiff's ARSS contract, as it existed, unnecessary. Id. ¶ ¶ 26 (b), (c). Plaintiff learned that at least one party receiving the type of work previously p e rf o rm e d under plaintiff's ARSS contract was ITT-Advanced Engineering & Sciences (" IT T -A E S " ), an other-than-small-business contractor that had been engaged in a contractual re la tio n s h ip with the ARSS prior to plaintiff's ARSS contract. Id. ¶¶ 11, 34. Plaintiff o b je c te d to defendant's decision not to solicit a follow-on contract to the expired ARSS c o n tra c t. Id. ¶ 23. After redistribution of the requirements under the original ARSS contract, the ARSS h a s expressed a current need for "highly skilled, technical expertise across a broad spectrum o n ly on an as-needed basis." Id. ¶ 26(d). To adjust for this change in requirements to be a c q u ire d from small business contractors, the ARSS conducted market research to create a n e w ARSS contract called the "Sources Sought Synopsis." Id. ¶ 26(e). Plaintiff was e n c o u ra g e d to respond to the Sources Sought Synopsis, id. ¶¶ 26 (e), (f), and plaintiff alleges th a t it "intends to submit a response," id. ¶ 28.

1/ The contract had a ceiling of over $17,000,000. It covered labor, supplies, h a rd w a re , materials, travel, and other costs associated with the Nuclear Weapons and C o u n te rp ro lif e ra tio n Agency. See Compl. ¶¶ 4-5. 2

P la in tif f predicts that the result of the new contract will be "a small business set-aside c o n tra c t that will encompass some or all of the requirements of the ARSS Contract." Id. ¶ 30. H o w e v e r , plaintiff contends that transferring duties from the original ARSS small-business c o n tra c t to a the pre-existing other-than-small business contract was an "improper transfer[] o f work from a small business set-aside program to [the] contract [with ITT-AES] . . . an o th e r- th a n small business." Id. ¶ 32(b). Plaintiff alleges that the Air Force's decision not to solicit a follow-on contract for p lain tiff 's ARSS contract is contrary to law. Compl. ¶ 37. Plaintiff's primary contention is th a t diverting the duties of the ARSS contract violates of FAR §19.502-2(b), which requires c o n tr a c tin g officers to set aside acquisitions over $100,000.00 for small business participants. Id . ¶ 37(i). Plaintiff asserts that the transfer of duties was "pretextual" and that the Air Force h a s failed to reveal a proper or adequate motivation for deciding not to issue a new s o l ic i ta t io n that covers all the services and goods under plaintiff's ARSS contract. Id. ¶¶ 3 9 (a ), (b). Plaintiff filed suit in the United States Court of Federal Claims, asserting ju ris d ic tio n under 28 U.S.C. §1491(b). Id. ¶ 1. DISCUSSION T h e United States Court of Federal Claims has jurisdiction over "an action by an in ter e ste d party objecting to a solicitation by a Federal agency for bids or proposals for a p ro p o s e d contract or to a proposed award or the award of a contract or any alleged violation o f statute or regulation in connection with a procurement or a proposed procurement." 28 U .S .C . § 1491(b)(1) (emphasis added). 1. Interested party The Federal Circuit defines "interested party" in section 1491(b)(1) as "limited to a c tu a l or prospective bidders or offerors whose direct economic interest would be affected b y the award of the contract or by failure to award the contract [by the Government]." Rex S e rv . Corp. v. United States, 448 F.3d 1305, 1307 (Fed. Cir. 2006) (internal quotation marks a n d emphasis omitted) (quoting Am. Fed'n of Gov't Emp. v. United States, 258 F.3d 1294, 1 3 0 2 (Fed. Cir. 2001) (holding that "interested party" under the Tucker Act is construed in a c c o rd a n c e with Competition in Contracting Act, 31 U.S.C. §§ 3551-3556 (2000))). This s ta tu to ry definition places a two-part burden on a plaintiff to establish standing: (1) plaintiff m u st show that it is an actual or prospective bidder, and (2) plaintiff must show that it p o s s e s s e s a direct economic interest. Rex Serv. Corp., 448 F.3d at 1307 (citing Lujan v. D e f en d e rs of Wildlife, 504 U.S. 555, 561 (1992) ("the party invoking federal jurisdiction b e a rs the burden of establishing [the] elements [of standing].")). 3

T h e Federal Circuit has prescribed the factual showing that will qualify a protestor as a n interested party. A plaintiff, seeking to establish status as an actual bidder, actually must h a v e bid or made an offer. Rex Serv. Corp., 448 F.3d at 1307. Alternatively, a plaintiff must " b e expecting to submit an offer prior to the closing date of the solicitation." Id. at 1308 (q u o tin g MCI Telecom. Corp. v. United States, 878 F.2d 362, 365 (Fed. Cir. 1989) (emphasis in original and internal citations omitted)). The opportunity to establish status as an actual o r prospective bidder ceases when the proposal period ends. Id. T h e award of plaintiff's ARSS contract demonstrates plaintiff's direct economic in te re st in that ARSS contract and the duties described therein. Had there been a solicitation f o r the work that was relegated to the other-than-small-business entity, plaintiff would have b e e n a bidder. In fact, plaintiff will bid on the remaining contract proposed in the form of th e Sources Sought Synopsis. Because plaintiff has a direct economic interest in the subject m a tte r of the work diverted and is a prospective bidder on any contract for the balance of the w o rk , whether plaintiff qualifies as an interested party in connection with a procurement or a proposed procurement becomes pivotal. 2 . In connection with a procurement or a proposed procurement. A n interested party in § 1491(b) must be "objecting to . . . any alleged violation of sta tu te or regulation in connection with a procurement or a proposed procurement." 28 U .S .C . § 1491(b)(1) (emphasis added). Plaintiff asserts that the ARSS has violated FAR § 1 9 .5 0 2 -2 (b ), which designates certain awards as small-business set asides. However, FAR § 19.502-2(b) must qualify as a statute or regulation in connection with a procurement or a p r o p o s e d procurement, under § 1491(b)(1). Case law from the Federal Circuit defines "in c o n n e ctio n with" and "a procurement or a proposed procurement." The phrase "in connection with" in section 1491(b)(1) was explicated in Ramcor S e rv . Group, Inc. v. United States 185 F.3d 1286 (Fed. Cir. 1999). The Federal Circuit held th a t an allegedly violated statute is "in connection" with a procurement, or a proposed p r o c u r e m e n t, "[a]s long as [the] statute has a connection to a procurement proposal." R a m c o r, 185 F.3d at 1289. This self-denominated "very sweeping" scope reaches to s i tu a t io n s where "an agency's actions under a statute so clearly affect the award and p e rf o rm a n c e of a contract" that, even when there is no contract directly at issue, the requisite " c o n n ec tio n with a procurement" required by § 1491(b) exists. Ramcor, 185 F.3d at 1289. T h e Federal Circuit opinion in Distributed Solutions, 539 F.3d at 1345, recently c la rif ie d the terms "procurement or a proposed procurement" and incorporates the holding in Ramcor. The definition of "procurement" in 41 U.S.C. § 403(2), "a subsection of the 4

s ta tu to ry provisions related to the establishment of the office of Federal Procurement Pollicy in the Office of Management and Budget," Distributed Solutions, 539 F.3d at 1345, is iden tica l to "procurement" as employed in section §1491(b)(1): § 403(2) states " `procurement' includes all stages of the process of acquiring p ro p e rty or services, beginning with the process for determining a need for p ro p e rty of services and ending with contract completion and closeout." § 4 0 3 (2 ) (emphasis added). We conclude that it is appropriate to adopt this d e f in itio n to determine whether a "procurement" has occurred pursuant to § 1 4 9 1 (b ). . . . We note that §1491(b) includes both actual procurements and p r o p o s e d procurements. Id. at 1345-46. Consequently, the sweeping scope espoused in the Ramcor decision appears to embrace contemplated proposed procurements. The court's exclusion in Distributed S o lu tio n s , 539 F.3d at 1346 of "adding work to an existing contract" from the ambit of p roc u rem en t actions in AT&T Commc'ns, Inc. v. Wiltel, Inc., 1 F.3d 1201 (Fed. Cir. 1993), h o w e v e r, deserves the parties' attention. Further briefing is necessary to rule on whether plaintiff's complaint comes within the c o u rt's subject matter jurisdiction and whether plaintiff has correlative standing. Both parties s h o u l d use Ramcor, Distributed Solutions, and AT&T Communications, as guideposts for a d d re ss in g subject matter jurisdiction answering the following question: (1) whether the A R S S ' s actions are "in connection with a procurement" under section 1491(b). Assuming th a t subject matter jurisdiction is lacking over the cause of action pleaded, the parties also s h a ll address: 2) whether transfer to the United States District Court for the District of C o lu m b ia is appropriate under 28 U.S.C. § 1631 (2000), for a claim under the Administrative P r o c e d u re Act, 5 U.S.C. § 702 (2000), that the agency decision constitutes final agency a c tio n that is arbitrary, unreasonable, or contrary to law. See Tex. Peanut Farmers v. United S tate s, 409 F.3d 1370, 1374-75 (Fed. Cir. 2005) (adopting rule that, when subject matter is fo u n d lacking, trial court should consider propriety of transfer without request).

5

C O N C L U SIO N A c c o rd in g ly, based on the foregoing, I T IS ORDERED, as follows: B y October 28, 2008, the parties shall file simultaneous supplemental briefs, not to e x c e e d ten pages.

s/ Christine O.C. Miller ______________________________ C h r is tin e Odell Cook Miller Judge

6