GEAR WIZZARD, INC v. USA
Filing
61
Order granting 60 Motion to Redact; PUBLISHED OPINION on 60 Unopposed MOTION to Redact 58 Order on Motion for Judgment on the Record, Order on Motion to Dismiss - Rule 12(b)(1), Order on Motion for Judgment on the Admin. Record,, Order on Motio n to Dismiss - Rule 12(b)(1),Unopposed MOTION to Redact 58 Order on Motion for Judgment on the Record, Order on Motion to Dismiss - Rule 12(b)(1), Order on Motion for Judgment on the Admin. Record,, Order on Motion to Dismiss - Rule 12(b)(1), filed by USA. Signed by Chief Judge Emily C. Hewitt. (ce) Copy to parties.
In the United States Court of Federal Claims
No. 11-007 C
(E-Filed Under Seal: June 10, 2011)1
(E-Filed with Redaction: June 16, 2011)
________________________________________
)
)
GEAR WIZZARD, INC.,
)
) Whether the Cancellation of
) Solicitations Designated as a
Plaintiff,
) Small Business Set-Aside was
v.
) Proper; Whether the Agency’s
) Decision to Solicit Offers on an
THE UNITED STATES OF AMERICA,
) Unrestricted Basis was Proper
)
Defendant.
)
)
________________________________________ )
Charles E. Raley, Hilton Head Island, SC, for plaintiff.
Douglas Glenn Edelschick, with whom were Tony West, Assistant Attorney General,
Jeanne E. Davidson, Director, and Donald E. Kinner, Assistant Director, Commercial
Litigation Branch, United States Department of Justice, Washington, DC, for defendant.
OPINION AND ORDER
HEWITT, Chief Judge
This pre- and post-award bid protest is before the court after oral argument held on
Wednesday, May 26, 2011 at 3:00 p.m. Eastern Daylight Time.2 Plaintiff (Gear Wizzard
1
This Opinion and Order was filed under seal on June 10, 2011, Docket Number (Dkt. No.) 58.
The court instructed the parties to file any requests for the redaction of protected material on or
before Wednesday June 22, 2011 at 12:00 noon Eastern Daylight Time. In response to the
court’s directive of June 10, 2011, defendant filed an unopposed motion to redact. Def.’s
Unopposed Mot. to Redact Opinion (Motion), Dkt. No. 60, filed June 13, 2011. The Motion
is GRANTED.
1
or GWI) is a small business concern and seeks a permanent injunction to prevent the U.S.
Defense Logistics Agency (DLA), Defense Supply Center (DSCC), from proceeding with
any award or performance on certain Requests for Quotations (the RFQs) by any business
other than GWI, a declaration that the cancellation of Solicitation SPM7L3-11-Q-0043
(RFQ-0043 or the Original RFQ) was illegal, a declaration that a dissolution of the Small
Business Set Aside (SBSA) for the RFQs was illegal and a permanent injunction to
prevent DLA from dissolving the SBSA status for the RFQs. Pl.’s Mot. for J., Docket
Number (Dkt. No.) 46, at 1.
Before the court are plaintiff’s Complaint–Bid Protest [for Declaratory and
Injunctive Relief] (plaintiff’s Complaint or Pl.’s Compl.), Dkt. No. 1, filed January 4,
2011; plaintiff’s Corrected Second Amended Complaint–Bid Protest [for Declaratory and
Injunctive Relief] (plaintiff’s Amended Complaint or Pl.’s Am. Compl.), Dkt. No. 42,
filed April 21, 2011; Plaintiff’s Motion for Judgment (plaintiff’s Motion or Pl.’s Mot),
Dkt. No. 46, filed April 26, 2011; plaintiff’s Memorandum of Points and Authorities in
Support of Plaintiff’s Motion for Judgment (Pl.’s Mem.), Dkt. No. 46, filed April 26,
2011; Defendant’s Motion to Dismiss, or, in the Alternative, Motion for Judgment upon
the Administrative Record, and Defendant’s Response to Plaintiff’s Motion for Judgment
upon the Administrative Record (defendant’s Motion to Dismiss, defendant’s Motion for
Judgment on the Administrative Record or Def.’s Mot.), Dkt. No. 48, filed May 3, 2011;
Plaintiff’s Response to Defendant’s Motions to Dismiss and for Judgment and to
Defendant’s Reply to Plaintiff’s Motion for Judgment (Pl.’s Resp.), Dkt. No. 50, filed
May 10, 2011; and Defendant’s Reply in Support of Motion to Dismiss, or, in the
Alternative, Motion for Judgment upon the Administrative Record (Def.’s Reply), Dkt.
No. 52, filed May 16, 2011. Defendant filed the administrative record (AR) on January
11, 2011, Dkt. No. 16, pursuant to the court’s Order of January 5, 2011, Dkt. No. 13.
For the reasons stated below, plaintiff’s Motion is DENIED, defendant’s Motion
to Dismiss is DENIED and defendant’s Motion for Judgment on the Administrative
Record is GRANTED.
I.
Background
On October 12, 2010 defendant issued RFQ-0043 for the procurement of 533
shifter forks. AR 9-11 (RFQ-0043). Shifter forks were listed as “a critical application
item” and are part of the shifting mechanism in M939 series five-ton trucks. AR 11
(RFQ-0043); AR 254 (Apr. 1, 2011 Contracting Officer Memorandum for Record (CO
Memo)). The Original RFQ was issued as a small business set-aside, AR 9 (RFQ-0043);
the estimated value of the Original RFQ was $73,551, AR 99 (DLA memo).
2
The oral argument was recorded by the court’s Electronic Digital Recording system (EDR).
The times noted in citations to the oral argument refer to the EDR record of the oral argument.
2
Federal Acquisition Regulation (FAR) Part 13.000 applied to the Original RFQ
because its estimated value fell below the “simplified acquisition threshold” of $150,000.
FAR 13.000 (2010) (providing the scope of Part 13); see FAR 2.101 (defining
“simplified acquisition threshold”). The purpose of FAR Part 13 “is to prescribe
simplified acquisition procedures in order to--(a) Reduce administrative costs; (b)
Improve opportunities for . . . small business concerns to obtain a fair proportion of
Government contracts; (c) Promote efficiency and economy in contracting; and (d) Avoid
unnecessary burdens for agencies and contractors.” FAR 13.002. Taking into account
the administrative cost of the procurement, “[t]he contracting officer must promote
competition to the maximum extent practicable to obtain supplies and services from the
source whose offer is the most advantageous to the Government,” FAR 13.104, and,
before making an award under FAR Part 13, “the contracting officer must determine that
the proposed price is fair and reasonable,” FAR 13.106-3(a).
The Original RFQ also falls under FAR 19.502-2, which applies to acquisitions of
supplies valued between $3,000 and $150,000. FAR 19.502-2. FAR 19.502-2(a), which
is referred to as the “rule of two,” Def.’s Mot. 5, states, in relevant part:
Each acquisition of supplies . . . exceeding $3,000 . . . but not over
$150,000 . . . is automatically reserved exclusively for small business
concerns and shall be set aside for small business unless the contracting
officer determines there is not a reasonable expectation of obtaining offers
from two or more responsible small business concerns that are competitive
in terms of market prices, quality, and delivery. . . . If the contracting
officer receives only one acceptable offer from a responsible small business
concern in response to a set-aside, the contracting officer should make an
award to that firm.
FAR 19.502-2(a); see DLA Land and Maritime Acquisition Guide (DAG) 19.502-2(b),
Dkt. No. 51-1. FAR 19.502-2(c),which is referred to within both the FAR and the DAG
as the “nonmanufacturer rule,” provides, in relevant part: “For small business set-asides
other than for construction or services, any concern proposing to furnish a product that it
did not itself manufacture must furnish the product of a small business
manufacturer . . . .” 3 FAR 19.502-2(c); DAG 19.102-101(b)(1)-(2); DAG 19.5023
The United States Small Business Administration (SBA) may grant either a waiver or an
exception to the nonmanufacturer rule, FAR 19.502-2(c); however, neither is applicable here.
SBA grants exceptions to the nonmanufacturer rule “where the anticipated cost of the
procurement will not exceed $25,000.” Id.; FAR 19.102(f)(7). Because none of the RFQs in this
case anticipated the procurement cost to be below the $25,000 threshold, the exception is
inapplicable here. See Def.’s Mot. to Dismiss, or, in the Alternative, Mot. for J. upon the
Administrative R., and Def.’s Resp. to Pl.’s Mot. for J. upon the Administrative R. (Def.’s Mot.),
Dkt. No. 48, at 6 (“The SBA has not made an exception to the nonmanufacturer rule that would
apply to the acquisition of shifter forks in this case, which exceeds $25,000.”).
3
2(b)(ii)(a); see DAG 19.000-101(b) (“Generally to be eligible for award under a total
small business set-aside, a concern must offer only end items manufactured or produced
by small business concerns in the United States or its outlying areas.”). “In these cases,
set-asides are allowed when offers are expected from at least two small business concerns
offering the product of the same small business concern (for example a small
manufacturer and one of its dealers or two small dealers offering the product of the same
small manufacturer).” DAG 19.502-2(b)(ii)(a) (emphasis in original); see AR 99 (DLA
Memo) (quoting DAG 19.502-2(b)(ii)(a)).
The Original RFQ specified that only two manufacturers offered approved shifter
forks: GWI, a small business concern, and Meritor Heavy Vehicle Systems, LLC
(Meritor), a large business concern. AR 11 (RFQ-0043); see AR 254 (CO Memo)
(stating that GWI is a small business concern and that Meritor is a large business
concern); see also AR 260 (Attachment to DD Form 2579, History of NSN-8717
(Procurement History)) (stating that GWI became an approved source on July 13, 2009)).
Defendant received nineteen quotes in response to the Original RFQ; two quotes were
from large business concerns and seventeen quotes were from small business concerns.
AR 254 (CO Memo). The quotes ranged in price from [ * * * ]. AR 131 (Abstract of
Quotes); see AR 254-55 (CO Memo).
On November 29, 2010, nearly five weeks after the October 26, 2010 closing date
for offers, AR 9 (RFQ-0043), the DLA buyer of shifter forks, Elizabeth Hanlon, prepared
a “Memo for file” that sought the dissolution of the SBSA associated with the Original
RFQ, AR 99 (Hanlon Memo); AR 254-55 (CO Memo). Ms. Hanlon “reviewed the
procurement and made a determination that the solicitation should not have been setaside to begin with.” AR 254 (CO Memo). Citing DAG 19.502-2(b)(ii)(a), Ms. Hanlon
reasoned that there was not a “reasonable expectation that two or [more] small business
concerns were going to offer the product of [a] small business manufacturer.” AR 255
(CO Memo); AR 99 (Hanlon Memo); see FAR 19.502-2(a).
Ms. Hanlon’s memo was never reviewed or approved by the contracting officer,
Richard Matz (Mr. Matz).4 AR 255 (CO Memo); id. at 257 (identifying Mr. Matz as the
SBA grants waivers to the nonmanufacturer rule if it “finds that there are no small
business manufacturers.” FAR 19.502-2(c); DLA Land and Maritime Acquisition Guide (DAG)
19.102-101(b)(2). Because Gear Wizzard, Inc. (GWI) is a small business manufacturer of shifter
forks, waiver of the nonmanufacturer rule is inapplicable here. See Def.’s Mot. 6 (“The SBA has
not granted a waiver of the nonmanufacturer rule, either as a class waiver for acquisitions of
shifter forks in general, or as an individual waiver for this particular acquisition of shifter
forks.”).
4
Proper withdrawal of a small business set-aside determination requires two actions by
the contracting officer. The contracting officer must “give[] written notice to the agency
4
contracting officer). Ms. Hanlon believed, however, that the SBSA had been dissolved
and “proceeded as if the solicitation had been issued on an unrestricted basis.” AR 255
(CO Memo). On December 15, 2010 defendant awarded the contract to Science
Applications International Corporation (SAIC), a large business concern, which offered
shifter forks manufactured by AxleTech International (AxleTech). AR 254-55 (CO
Memo); see AR 133-51 (SAIC Purchase Order). At the time of the award to SAIC, the
DLA product specialist believed that AxleTech had been previously approved as a source
of shifter forks. AR 159, 165 (Dec. 20, 2010 DLA email correspondence between
Meritor and DLA); AR 183 (Dec. 21, 2010 DLA email). However, AxleTech’s shifter
forks were not acceptable because their dimensions “prevent[ed] the fork from fitting on
the transfer clutch.” AR 205 (May 21, 2009 DSCC email); AR 255 (CO Memo) (stating
that the SAIC offer of AxleTech-manufactured shifter forks “had been erroneously
determined to be [] acceptable”).
On December 16, 2010 Meritor contacted Ms. Hanlon and “advised that the award
was improper because SAIC [was] not supplying either an approved Meritor or GWI
[shifter fork].” AR 256 (CO Memo). The following day, GWI objected to the award and
requested a debriefing pursuant to FAR 15.506. AR 180 (Dec. 17, 2010 GWI email).
The court received GWI’s Complaint on January 4, 2011. See Compl. 1.
After recognizing that that the AxleTech part was “technically unacceptable,” AR
213 (Dec. 30, 2010 DLA email), defendant cancelled its award to SAIC on January 3,
2011, AR 229 (SAIC Cancellation Order); AR 216 (Jan. 3, 2011 DLA email), and
canceled the Original RFQ shortly thereafter, see AR 261 (Procurement History) (stating
that RFQ-0043 was canceled); Pl.’s Resp. 2 (stating that the AR does not indicate when
defendant cancelled RFQ-0043, “but it would seem eminently reasonable to presume that
such cancellation did not occur before the cancellation/termination” of the award on
January 3, 2011); EDR 4:27:00-14 (Mr. Edelschick) (representing that RFQ-0043 was
cancelled between January 3 and January 5, 2011).
Defendant subsequently issued, and ultimately canceled, at least three additional
shifter fork acquisition solicitations in January and March of 2011.5 See Def.’s Opp’n to
small business specialist and the SBA procurement center representative . . . stating the
reasons” for the withdrawal, FAR 19.506(a), and must “prepare a written statement
supporting any withdrawal or modification of a small business set-aside and include it in
the contract file,” FAR 19.506(c).
5
The facts pertaining to RFQ-0333, RFQ-0423 and RFQ-0606 are provided as background
information. As the court’s Order of May 20, 2011 states, “The inclusion in the record of the
publication of RFQ-0333, RFQ-0423 and RFQ-0606, as well as any notices of cancellations
associated with these RFQs, simply documents facts recognized by both parties and will not
affect the appropriate standard of review.” Order of May 20, 2011, Dkt. No. 57, at 7 (citing
Axiom Res. Mgmt., Inc. v. United States, 564 F.3d 1374, 1381 (Fed. Cir. 2009)).
5
Pl.’s Mot. to Supplement the Administrative R. (Def.’s Opp’n), Dkt. No. 49, at 2-3
(referring to RFQ-0333 as the Second RFQ, RFQ-0423 as the Third RFQ and RFQ-0606
as the Fourth RFQ). On January 11, 2011 defendant “attempted to re-procure the shifter
forks through unrestricted competition by issuing Request for Quotations SPM7L3-11-Q0333 [(RFQ-0333 or Second RFQ)].”6 Id. at 2; AR 237 (RFQ-0333) (listing January 11,
2011 as the issue date). Defendant canceled the Second RFQ ten days later after
discovering documentation problems. Def.’s Opp’n 2; Pl.’s Corrected Updated Mot. to
Supp. the R., Dkt. No. 43, Ex. 6 (Notice of Cancellation of RFQ-0333). On January 26,
2011 defendant’s automated procurement system issued SPM7L3-11-Q-0423 (RFQ-0423
or Third RFQ) in error. Def.’s Opp’n 2; Pl.’s Corrected Updated Mot. to Supp. the R.,
Ex. 7 (RFQ-0423). “Because it was not ready to proceed with a re-procurement at that
time,” Def.’s Opp’n 2, defendant canceled the Third RFQ on February 1, 2011, Def.’s
Notice, Dkt. No. 28, at 1. In late March of 2011, defendant’s automated procurement
system again issued a solicitation in error, SPM7L3-11-Q-0606 (RFQ-0606 or Fourth
RFQ), and it was canceled shortly thereafter. Def.’s Opp’n 3; see Pl.’s Corrected
Updated Mot. to Supp. the R., Ex. 9 (Apr. 5, 2011 DLA email).
On January 22, 2011 GWI emailed the Acting Associate Director of DLA’s Small
Business Programs Office, Vikki Hawthorne, to “protest any dissolution of the Small
Business Set Aside status for . . . any . . . Shifter Fork procurement.” AR 269-70 (Jan.
22, 2011 GWI email). GWI claimed that “at least two or more small businesses are
ready, willing and able to submit offers to supply Shifter Forks manufactured by GWI,”
and that GWI had received “several requests for quote[s] on its Shifter Forks.” Id. at 270.
In response, Ms. Hawthorne requested a list of these small business concerns, AR 269
(undated DLA email), “so that the contracting officer could conduct market research and
confirm the[] ability [of the small business concerns] to supply the Gear Wizzard part,”
AR 262 (Procurement History).
In an email dated February 5, 2011, GWI responded:
At least 18 small businesses submitted offers on DSCC’s last aborted
acquisition of the subject Shifter Forks, NSN 2520-01-136-8717. Since
then, even though DSCC has rapidly and repeatedly canceled at least 4
6
Plaintiff maintains that RFQ-0333 resulted in three solicitations, “each of which were quickly
cancelled because the first did not exclude the unapproved part, the second because it was a setaside, and the third because, although the [d]efendant wanted to make it unrestricted, the SBA
had not granted approval.” Mem. of Points and Authorities in Supp. of Pl.’s Mot. for J. (Pl.’s
Mem.), Dkt. No. 46, at 1-2. Defendant characterizes RFQ-0333 as “just one RFQ that was
‘temporarily pulled’ for ‘administrative’ reasons.” Def.’s Mot. 3 n.3 (quoting AR 251 (Jan. 11,
2011 DLA email)). The court refers to RFQ-0333 as one RFQ without regard to whether, in fact,
RFQ-0333 resulted in three solicitations. The parties’ differing characterizations do not bear on
the outcome of the case.
6
Shifter Fork acquisition solicitations so fast that offeror interest was almost
prevented, many small businesses have sought quotes from GWI to supply
the Shifter Forks.
AR 268 (Feb. 5, 2011 GWI email). GWI then listed the names of twenty-seven small
businesses that could be “reasonably expected” to offer GWI’s shifter fork. Id.
Ms. Hawthorne dismissed the usefulness of this list, noting that until this list “can
be validated, the contracting officer has no basis to set-aside the requirement for small
business concerns.” AR 267 (undated DLA email). Ms. Hawthorne repeated her request
for a list of “small businesses that are ready, willing and able to submit offers to supply
the Shifter Forks manufactured by GWI.” AR 267 (undated DLA email). GWI
subsequently provided defendant with the names and addresses of three small business
concerns: Pioneer Ind., Inc. (Pioneer), JGILS, LLC (JGILS) and Kampi Components
Co., Inc. (Kampi). AR 267 (Feb. 12, 2011 GWI email).
Ms. Hanlon emailed the three small business concerns and requested answers to
the following questions:
1.) If [shifter forks are] set-aside for small business concerns are you able
to quote the Gear Wizzard part number GWI-C0107?
2.) What would be your estimated delivery timeframe?
3.) What would be your estimated price . . . ?
AR 278-79 (Feb. 15, 2011 Hanlon email to Pioneer); AR 275 (Feb. 15, 2011 Hanlon
email to JGILS); AR 273 (Feb. 17, 2011 Hanlon email to Kampi). The vice president of
Pioneer responded that he was not certain that GWI would provide a quote purely for
informational purposes. See AR 277 (Feb. 17, 2011 Pioneer email) (“I don’t know if
[GWI is] willing to provide pricing as an estimate at this time.”); id. (Feb. 15, 2011
Pioneer email) (“I don’t know if [GWI will] quote it for informational purposes . . . .”);
see also AR 278 (Feb. 15, 2011 Pioneer email) (“[GWI] can’t give us accurate pricing or
lead time without a [quantity].”). The president of JGILS responded tersely: “We cannot
quote this guy.” AR 275 (Feb. 15, 2011 JGILS email). A customer service
representative for Kampi provided the most detailed response, explaining that because
GWI quotes “direct on this item,” GWI’s quotation would “more than likely[] be more
competitive” than Kampi’s. AR 272 (Feb. 17, 2011 Kampi email). The representative
requested that the government refrain from soliciting Kampi for items that the
government “intend[s] to award to the manufacturer anyway.” Id.
Defendant also prepared a small business set-aside history and a “contract and
solicitation history” for the shifter forks (collectively, the Procurement History). AR
7
260-63 (Procurement History). According to the Procurement History, only three
solicitations were posted between July 13, 2009, when GWI became an approved source
of shifter forks, and October 12, 2010, when DLA posted RFQ-0043. Id. at 260-61. All
three solicitations were posted as total small business set-asides under FAR Part 13. Id.
at 261. Two of these three solicitations were valued between $25,000 and $150,000, and
DLA awarded GWI both procurements. Id. (discussing RFQ-0326 and RFQ-0409). The
third solicitation was valued below $25,000, which made it eligible for SBA’s exception
to the nonmanufacturer rule, see supra note 3 (discussing the exception to the
nonmanufacturer rule for solicitations valued below $25,000), and DLA awarded a small
business concern offering the product of a large business concern, AR 261 (discussing
RFQ-0233). For all solicitations up to and including RFQ-0043 for which GWI was
listed as an approved source, GWI was only the small business concern to offer the
product of a small business manufacturer. See id. In all cases, GWI offered its own
approved shifter fork. Id. at 260.
Based on its market research and the Procurement History, defendant determined
that it did not “have a reasonable expectation of obtaining offers from two or more
responsible small business concerns that are competitive in terms of market prices,
quality and delivery that will offer the approved part manufactured by Gear Wizzard.”
AR 263 (Procurement History). Defendant concluded that “the procurement should be
solicited on an unrestricted basis,” id., and a new DD Form 2579 “Small Business
Coordination Record” was prepared for the issuance of an unrestricted solicitation,7 AR
258-59 (DD Form 2579).
Defendant shared its market research and Procurement History with the United
States Small Business Administration (SBA). AR 258-79 (DD Form 2579 and
Attachment). A representative of SBA concurred in defendant’s recommendation that the
procurement be solicited on an unrestricted basis. AR 258 (DD Form 2579). On April 1,
2011 defendant issued an unrestricted Request for Quotations SPM7L3-11-Q-0780
(RFQ-0780, Fifth RFQ or New RFQ) for the procurement of 335 shifter forks (NSN8717), with a closing date for offers on May 31, 2011, AR 280-82 (RFQ-0780), with an
estimated value of $37,114.65, AR 257 (CO Memo).
In Count I of plaintiff’s Amended Complaint, containing plaintiff’s post-award
protest, plaintiff maintains that defendant “has violated and continues to violate” FAR
19.502-2(a), Am. Compl. ¶ 44, which states that “[i]f the contracting officer receives only
one acceptable offer from a responsible small business concern in response to a set-aside,
the contracting officer should make an award to that firm,” when defendant failed to
award the Original RFQ to GWI, id. (quoting FAR 19.502-2(a)) (internal quotation marks
7
The purpose of DD Form 2579 is to document the contracting officer’s set-aside decision.
DAG 19.4(1). “DD Form 2579 is required to be prepared and coordinated prior to the issuance
of the solicitation . . . .” DAG 19.4(1)(a) (emphasis omitted).
8
omitted). Plaintiff maintains that the award of the Original RFQ to SAIC “was
admittedly an illegal procurement from a large business dealer on a small business setaside for an unapproved Shifter Fork.” Id. ¶ 48. According to plaintiff,
Defendant admits that GWI was the lowest priced responsive and
responsible small business offeror on RFQ-0043 for actually approved
Shifter Forks and, therefore, was and at all time[s] has been entitled to and
required to be issued the award, inasmuch as GWI’s quote was the only
acceptable offer from a responsible small business concern to supply a
small business manufactured part and quotes from Meritor’s specified
vendor network for Government sales all exceed GWI’s quote on RFQ0043.
Id. ¶ 49.
In Count II of plaintiff’s Amended Complaint, containing plaintiff’s pre-award
protest, plaintiff argues that dissolution of the SBSA for shifter forks violates the mandate
that SBSAs are required for procurements “value[d] between $25,000 and $150,000,
where at least two small businesses are expected to make offers to supply [] Shifter Forks
manufactured by a small business (GWI).” Id. ¶ 52.8
Count III of plaintiff’s Amended Complaint argues that an unrestricted New RFQ
is illegal under FAR 19.502-2(a) because “at least two small businesses are reasonably
expected to make offers to supply Shifter Forks manufactured by GWI.” Id. ¶ 54.
Plaintiff seeks from the court a judgment that: (1) permanently enjoins any award
or performance by any business other than by GWI on the First through Fifth RFQs; (2)
declares that the cancellation of the First RFQ without an award to GWI was illegal; (3)
declares that a dissolution of the SBSA for shifter fork procurements “is unlawful,
arbitrary, capricious, and erroneous;” and (4) permanently enjoins the dissolution of the
SBSA status for shifter fork procurements. Pl.’s Mem. 2.
II.
Legal Standards
A.
Bid Protest Standard of Review
8
Plaintiff also contends that any SBSA dissolution would violate the Competition in
Contracting Act and Small Business Act, which “requires the Government to maintain full and
open competition by aiding, counseling, protecting and preserving small business in competitive
procurements.” Corrected Second Am. Compl.–Bid Protest [for Declaratory and Injunctive
Relief], Dkt. No. 42, ¶ 52. Because plaintiff failed to offer any support for these contentions, see
generally Pl.’s Mem.; Pl.’s Mot. for J., Dkt. No. 46; Pl.’s Resp. to Def.’s Mots. to Dismiss and
for J. and to Def.’s Reply to Pl.’s Mot for J. (Pl.’s Resp.), Dkt. No. 50, the court does not address
these contentions in this Opinion and Order.
9
The Tucker Act, as amended by the Administrative Dispute Resolution Act
(ADRA), 28 U.S.C. § 1491(b)(1) (2006), confers jurisdiction on this court:
to render judgment on an action by an interested party objecting to a
solicitation by a Federal agency for bids or proposals for a proposed
contract or to a proposed award or the award of a contract or any alleged
violation of statute or regulation in connection with a procurement or a
proposed procurement.
28 U.S.C. § 1491(b)(1). The court may “entertain such an action without regard to
whether suit is instituted before or after the contract is awarded.” Id.
“A bid protest proceeds in two steps.” Bannum, Inc. v. United States, 404 F.3d
1346, 1351 (Fed. Cir. 2005). The first step involves demonstrating error, that is, showing
that the agency acted in an arbitrary and capricious manner, without a rational basis or
contrary to law. Id. The second step involves determining whether the error was
prejudicial. Id.
To demonstrate prejudice in a post-award protest, the protestor “must show that
there was a ‘substantial chance’ it would have received the contract award absent the
alleged error.” Banknote Corp. of Am., Inc. United States (Banknote), 365 F.3d 1345,
1351 (Fed. Cir. 2004) (quoting Emery Worldwide Airlines, Inc. v. United States, 264
F.3d 1071, 1086 (Fed. Cir. 2001)). The post-award bid protest “substantial chance” test
“envisions a review of the contract award or bid evaluation process to determine what
might have occurred if the government had not erred.” Weeks Marine, Inc. v. United
States (Weeks Marine I), 79 Fed. Cl. 22, 35 (2007) (internal quotations omitted), aff’d in
relevant part, Weeks Marine, Inc. v. United States (Weeks Marine II), 575 F.3d 1352
(Fed. Cir. 2009). Because the development of facts at the time of the protest is more
limited in the pre-award context, see Medical Dev. Int’l, Inc. v. United States, 89 Fed. Cl.
691, 701 (2009), “it is difficult for a prospective bidder/offeror to make the showing of
prejudice that [is] required in post-award bid protest cases,” Weeks Marine II, 575 F.3d at
1361. Accordingly, to establish prejudice in the context of a pre-award bid protest, the
plaintiff must show only “that an unreasonable agency decision created a non-trivial
competitive injury which can be redressed by judicial relief.” Weeks Marine I, 79 Fed.
Cl. at 35 (internal quotations omitted).
Under the first step, the court reviews a bid protest action under the standards set
forth in the Administrative Procedure Act (APA), 5 U.S.C. § 706. 28 U.S.C. §
1491(b)(4); NVT Techs., Inc. v. United States, 370 F.3d 1153, 1159 (Fed. Cir. 2004).
According to the APA, an agency’s decision is to be set aside if it is “arbitrary,
capricious, an abuse of discretion, or otherwise not in accordance with law.” 5 U.S.C. §
706(2)(A); see Bannum, 404 F.3d at 1351; Galen Med. Assocs., Inc. v. United States, 369
F.3d 1324, 1329 (Fed. Cir. 2004); Impresa Construzioni Geom. Domenico Garufi v.
10
United States (Impresa), 238 F.3d 1324, 1332 (Fed. Cir. 2001); Advanced Data Concepts,
Inc. v. United States, 216 F.3d 1054, 1057 (Fed. Cir. 2000).
When a challenge is brought on the theory that the agency lacked a rational basis
for its decision, “the test is whether the contracting agency provided a coherent and
reasonable explanation of its exercise of discretion.” Banknote, 365 F.3d at 1351
(internal quotation omitted); see Advanced Data Concepts, 216 F.3d at 1058 (“This
standard requires a reviewing court to sustain an agency action evincing rational
reasoning and consideration of relevant factors.” (citation omitted)). The rational basis
standard of review is highly deferential, PAI Corp. v. United States, 614 F.3d 1347, 1351
(Fed. Cir. 2010), and an agency’s decision must be sustained if it has a rational basis,
Motor Vehicle Mfrs. Ass’n of the U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S.
29, 43 (1983). The reviewing court may not substitute its judgment for that of the
agency. Id. The court need not consider whether the agency is correct or whether the
court would have reached the same decision as the agency, but whether there was a
reasonable basis for the agency’s actions. Honeywell, Inc. v. United States, 870 F.2d
644, 648 (Fed. Cir. 1989) (“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.” (internal quotation omitted)).
In order to challenge a decision on the basis of a violation of a regulation or
procedure, the plaintiff “must show a clear and prejudicial violation of applicable statutes
or regulations.” Impresa, 238 F.3d at 1333 (internal quotation and citation omitted).
After demonstrating that an error occurred, under the second step of the bid protest
procedure, the plaintiff must show that the error was prejudicial. Data Gen. Corp. v.
Johnson, 78 F.3d 1556, 1562 (Fed. Cir. 1996) (citations omitted); see Alfa Laval
Separation, Inc. v. United States (Alfa Laval), 175 F.3d 1365, 1367 (Fed. Cir. 1999). If
the court fails to find error, there is no prejudice, and the government’s decision must be
left undisturbed. See Alfa Laval, 175 F.3d at 1367.
B.
Jurisdiction and Mootness
“A case is moot ‘when the issues presented are no longer live or the parties lack a
legally cognizable interest in the outcome.’” Rice Servs., Ltd. v. United States, 405 F.3d
1017, 1019 n.3 (Fed. Cir. 2005) (quoting Powell v. McCormack, 395 U.S. 486, 496
(1969)). “The mootness doctrine originates from the case or controversy requirement of
Article III of the United States Constitution.” CCL Serv. Corp. v. United States, 43 Fed.
Cl. 680, 688 (1999) (internal quotation omitted). Although the United States Court of
Federal Claims (Court of Federal Claims) is an Article I court, it “applies the same
standing requirements enforced by other federal courts created under Article III.” Weeks
11
Marine II, 575 F.3d at 1359 (quoting Anderson v. United States, 344 F.3d 1343, 1350 n.1
(Fed. Cir. 2003)) (internal quotation marks omitted).
Mootness “is a question of subject matter jurisdiction and may be raised at any
time.” CW Gov’t Travel, Inc. v. United States, 46 Fed. Cl. 554, 556 (2000) (citing North
Carolina v. Rice, 404 U.S. 244, 246 (1971)); see United States Court of Federal Claims
Rule (RCFC) 12(b)(1) (“[A] party may assert . . . by motion” the defense of “lack of
subject-matter jurisdiction.”). If the court determines that it lacks subject-matter
jurisdiction, the court must dismiss the action. RCFC 12(h)(3). The party invoking the
jurisdiction of the court bears the burden of establishing jurisdiction by a preponderance
of the evidence. Taylor v. United States, 303 F.3d 1357, 1359 (Fed. Cir. 2002).
C.
Motions for Judgment on the Administrative Record
Rule 52.1 provides for judgment on the administrative record “[w]hen proceedings
before an agency are relevant to a decision in a case” before the court. RCFC 52.1(a).
RCFC 52.1 does not address the standards and criteria the court is to apply in cases
decided pursuant to RCFC 52.1 because “[t]he standards and criteria governing the
court’s review of agency decisions vary depending upon the specific law to be applied in
particular cases.” RCFC 52.1 rules committee note (2006). Accordingly, the standards
of review and burdens of proof and persuasion are set by the terms of the applicable
substantive law--the APA as interpreted and applied in binding precedent. 28 U.S.C. §
1491(b)(4); see supra Part II.A.
D.
Standard for Permanent Injunctive Relief
With respect to bid protests, the Tucker Act permits the court to “award any relief
that the court considers proper, including . . . injunctive relief.” 28 U.S.C. § 1491(b)(2).
“Establishing legal and prejudicial error does not automatically translate into injunctive
relief.” IDEA Int’l, Inc. v. United States, 74 Fed. Cl. 129, 137 (2006) (internal quotation
omitted). To obtain a permanent injunction, a plaintiff must succeed on the merits and
show by a preponderance of the evidence: “(1) that it will suffer irreparable harm if
injunctive relief is not awarded; (2) that granting the relief serves the public interest; and
(3) that the harm to be suffered by it outweighs the harm to the Government and third
parties.” United Int’l Investigative Servs., Inc. v. United States, 41 Fed. Cl. 312, 323
(1998) (citing FMC Corp. v. United States, 3 F.3d 424, 427 (Fed. Cir. 1993)); see
Acumed LLC v. Stryker Corp., 551 F.3d 1323, 1327 (Fed. Cir. 2008).
III.
Discussion
A.
Defendant’s 12(b)(1) Motion to Dismiss for Lack of Subject Matter
Jurisdiction
12
Defendant argues that “Counts I and II along with Gear Wizzard’s arguments
concerning the legality of the set-aside withdrawal, the SAIC contract award, and the
Original RFQ are all moot.” Def.’s Mot. 13. Defendant admits that the award of the
Original RFQ to SAIC was illegal. Id. at 12. That illegality is the reason DLA canceled
the award and opted to start over with a new procurement. Id. Defendant contends that
DLA’s actions “obviate any risk to plaintiff of another award based upon either the
withdrawn set-aside or the Original RFQ.” 9 Id. at 13 (citing CCL Serv. Corp., 43 Fed.
Cl. at 690 (“[C]ancellation of the solicitation prevents the reinstatement of any award to
[the awardee] under the original solicitation, so the dispute over the award is resolved and
will not reoccur.”)). Defendant argues that GWI “cannot obtain any further relief from
this [c]ourt respecting the cancelled contract[s,] and plaintiff is free to compete for an
award pursuant to the new RFQ.” Id. (citing, inter alia, CW Gov’t Travel, 46 Fed. Cl. at
559 (“There is no other injunctive or declaratory relief that this court could award under
this solicitation, precisely because it was canceled.”); Bannum, Inc. v. United States, 56
Fed. Cl. 453, 459 (2003) (“Courts have been virtually unanimous in declining to direct
the award of contracts, believing that this decision is properly left to the discretion of the
contracting agency.”)).
According to defendant, one of the reasons the contracting officer sought a new
procurement was because of DLA’s failure to properly withdraw the set-aside
requirement in accordance with FAR 19.506. Id. at 12. FAR 19.506 provides:
If, before award of a contract involving a small business set-aside, the
contracting officer considers that award would be detrimental to the public
interest (e.g., payment of more than a fair market price), the contracting
9
In its Motion, defendant claims that DLA cancelled its award to SAIC on January 3, 2011 and
that the cancellation of the award occurred prior to plaintiff’s filing of this protest. Def.’s Mot.
3. Plaintiff filed its Complaint on January 4, 2011, Compl., Dkt. No. 1, at 1, and contends that
“everything in Defendant’s Motions . . . dated after January 3, 2011[] constitutes post-litigation
allegations,” Pl.’s Resp. 2 (internal citations omitted); see id. at 3 (“[T]his protest action was
clearly brought before the [d]efendant’s proper cancellation/termination of [its award to SAIC]
and cancellation of RFQ-0043.”). Plaintiff cites to an attached letter, dated December 31, 2010,
to the Clerk of Court for the United States Court of Federal Claims from plaintiff’s attorney
referencing the enclosed Complaint for this action. Id. at 1. The Clerk of Court received and
filed plaintiff’s Complaint, which was dated December 30, 2010, on January 4, 2011. See
Compl. 4-5.
Defendant counters that plaintiff “misses the point.” Def.’s Reply in Support of Mot. to
Dismiss, or, in the Alternative, Mot. for J. upon the Administrative R. (Def.’s Reply), Dkt. No.
52, at 2. According to defendant, “The protest of the cancelled RFQs is moot because those
solicitations have, in fact, been cancelled by the agency and Gear Wizzard cannot obtain any
further relief.” Id. The court finds that, with respect to defendant’s mootness argument, whether
plaintiff initiated this protest before or after DLA’s cancellation of the award to SAIC is
irrelevant. The court may examine whether the cancellation was proper.
13
officer may withdraw the small business set-aside determination . . . . The
contracting officer shall initiate a withdrawal of an individual small
business set-aside by giving written notice to the agency small business
specialist and the SBA procurement center representative . . . stating the
reasons.
FAR 19.506(a). FAR 19.506 also requires the contracting officer to “prepare a written
statement supporting any withdrawal or modification of a small business set-aside and
include it in the contract file.” FAR 19.506(c).
On November 29, 2010 Ms. Hanlon, the buyer, prepared a memorandum seeking
the dissolution of the SBSA associated with the Original RFQ. AR 99 (Hanlon Memo).
Ms. Hanlon’s memorandum explained that the Original RFQ should not have been
solicited as an SBSA because “there was not a reasonable expectation that two or [more]
small business concerns were going to offer the product of [a] small business
manufacturer.” AR 255 (CO Memo); AR 99 (Hanlon Memo); see FAR 19.502-2(a).
Although Ms. Hanlon explained the rationale for withdrawing the set aside in her
memorandum, the contracting officer neither signed the memorandum nor gave “written
notice to the agency small business specialist and the SBA procurement center
representative . . . stating the reasons.” See FAR 19.506(a); see also FAR 19.506(c).
According to defendant, “Based on these and other errors, the contracting officer
determined it was necessary to start over with a new procurement.” Def.’s Mot. 13
(citing AR 256-57 (CO Memo)).
Defendant argues that Parcel 49C Ltd. Partnership v. United States (Parcel 49C),
31 F.3d 1147 (Fed. Cir.1994), upon which plaintiff relies for its demand that the court
declare DLA’s “conduct or decisions to be irrational, unreasonable, or unlawful and issue
an injunction to restore the status quote ante any such actions or decisions,” Pl.’s Mem.
14-15, is inapplicable here, Def.’s Mot. 14; see Def.’s Reply 2 (“Parcel 49C did not grant
as relief a directed contract award of the sort demanded by Gear Wizard here.”). In
Parcel 49C the agency cancelled the solicitation after making an award to the plaintiff.
31 F.3d at 1149. The Court of Federal Claims found that the government’s cancellation
of the solicitation “was merely a pretext for accommodating [a different agency’s]
displeasure with the selection of [plaintiff as the awardee],” id. at 1151, and issued an
injunction requiring the agency “to proceed with award of the solicitation,” id. at 1149.
The United States Court of Appeals for the Federal Circuit (Federal Circuit)
affirmed the injunction, concluding that there was no valid reason for cancelling the
procurement. Id. at 1151. The Federal Circuit explained that the Court of Federal Claims
“did not order the award of the contract to [plaintiff]. Instead, the trial court properly
enjoined the illegal action and returned the contract award process to the status quo ante
any illegality.” Id. at 1153. The Federal Circuit recognized that the award process was
incomplete and that the injunction “merely restores the posture of the process before the
14
illegal cancellation.” Id. The Federal Circuit further held that “[t]he Government
retain[ed] the power to proceed with its award process or to terminate the award process
for any legal reason.” Id. at 1154.
Defendant argues that, unlike the plaintiff in Parcel 49C, GWI is protesting DLA’s
“decision to cancel an award to SAIC and re-solicit bids from all parties who wish to
compete.” Def.’s Mot. 14; see Def.’s Reply 2 (“In Parcel 49C and the other cases cited
by Gear Wizzard, the Court enjoined cancellations of awards to the protestor; here, the
agency never awarded a contract to Gear Wizzard in the first place.”). Defendant
maintains that GWI “does not (and cannot) allege that the agency’s actions were the
product of bias against Gear Wizzard; hence, the sort of injunctive relief that the [c]ourt
awarded in Parcel 49C is not available here.” Def.’s Mot. 14-15. Defendant concludes
that plaintiff’s “protest of the cancelled RFQs is moot and Counts I and II should be
dismissed.” Id. at 15.
Plaintiff agrees that “if a case is moot to the extent that there is no longer an active
case or controversy, then it should [] be dismissed.”10 Pl.’s Resp. 7 n.1.a. Plaintiff
argues, however, that “GWI was the lowest priced responsible small business offeror to
supply [an] approved small business manufactured product on RFQ-0043, a perfectly
viable and legal small business set-aside to which GWI was therefore entitled to the
award under the law.” Id. Plaintiff explains, “An unauthorized buyer belatedly
interjected an unapproved large business manufactured product and an unlawful large
business offeror and, although, after this protest the [d]efendant cancelled he patently
unlawful award, [d]efendant also unlawfully cancelled RFQ-0043 and a maze of
subsequent solicitation cancellations.” Id. Plaintiff argues that “[d]efendant is not
permitted to cancel its way out of the consequences of its illegal actions.” Id.; see id. at 5
(“Defendant’s entire argument boils down to asserting that the [g]overnment can cancel
its way out of whatever illegal actions it has undertaken, regardless of the consequences.
If this is the law, then we could eliminate all of the statutes and all of the precedents
governing pre-and post-award protests and go home.”).
It appears to the court that defendant’s mootness argument requires an analysis of
the merits of plaintiff’s case. The court agrees that Parcel 49C is inapposite. In Parcel
49C, the agency erroneously cancelled a valid award made pursuant to a properly
structured solicitation. 31 F.3d at 1151. As the court discusses in detail in Part II.B.1,
below, the Original RFQ here was flawed from the outset, and the agency acted within its
discretion to terminate it.
10
Plaintiff’s Response states: “No one can argue that, if a case is moot to the extent that there is
no longer an active case or controversy, then it should not be dismissed.” Pl.’s Resp. 7 n.1.a
(emphasis added). Given that plaintiff’s briefs include numerous grammatical errors, and that
inclusion of the word “not” in the quoted sentence would render the statement inconsistent with
the principles of mootness, the court has removed the word “not” from the portion of plaintiff’s
statement quoted in the text of the opinion.
15
B.
1.
Parties’ Cross Motions for Judgment on the Administrative Record
Defendant’s Cancellation of RFQ-0043 and Subsequent RFQs
Plaintiff contends that the Original RFQ “contained no deficiency whatsoever”
and should not have been cancelled. Pl.’s Resp. 1; see Pl.’s Mem. 15 (“[T]here was
nothing improper or illegal about RFQ-0043.”). Plaintiff also argues that it “had an
absolute right to the award” of the Original RFQ. Pl.’s Mem. 15. “[A]s the lowest priced
authorized small business manufacturer or dealer offeror of an approved Shifter Fork,”
plaintiff claims that GWI was entitled to the award. Id. at 10; see Pl.’s Resp. 7 n.1.c.
(“Defendant unlawfully cancelled a fully viable and legal RFQ-0043 to which GWI was
lawfully entitled to the award.”).
As support for its argument that GWI was entitled to the award of the Original
RFQ, plaintiff cites FAR 19.502-2(a), Pl.’s Mem. 15; Pl.’s Resp. 2-3, which provides, in
part: “If the contracting officer receives only one acceptable offer from a responsible
small business concern in response to a set-aside, the contracting officer should make an
award to that firm,” FAR 19.502-2(a). Plaintiff also cites Mr. Matz’s memorandum dated
April 1, 2011, which indicates that GWI was “the only quoter eligible for award [of the
Original RFQ] because GWI was a small business concern offering as the manufacturer
of its approved part.” AR 254 (CO Memo). According to plaintiff, this provision applies
when, as was the case with RFQ-0043, offers to a solicitation are received. EDR
3:23:40-24:09 (Mr. Raley).
Plaintiff requests that the court declare DLA’s “conduct or decisions to be
irrational, unreasonable, or unlawful and issue an injunction to restore the status quo ante
any such actions or decisions.”11 Pl.’s Mem. 14-15 (citing Parcel 49C, 31 F.3d at 1153).
Plaintiff also requests that the court permanently enjoin the award of the original RFQ
and any other subsequent RFQS to anyone other than GWI. Pl.’s Mot. 4; Pl.’s Mem. 16.
The administrative record contains an April 1, 2011 memorandum in which Mr.
Matz, the contracting officer, identifies three errors associated with the award to SAIC.
Def.’s Mot. 7-8, 18 (citing AR 256-57 (CO Memo)). Defendant contends that these
errors “reasonably led [the contracting officer] to conclude that the agency should start
over with a new procurement.” Def.’s Mot. 18 (citing AR 256-57 (CO Memo)). The
memo states that on December 30, 2010, the contracting officer decided to cancel the
11
Plaintiff also alleges that the Second, Third and Fourth RFQs “were issued and quickly
cancelled with no explanation other than the apparent need to avoid a small business award to
GWI.” Pl.’s Mem. 14. Defendant counters that plaintiff fails to “advance any meaningful
arguments concerning” these RFQs. Def.’s Mot. 15. The court agrees that plaintiff’s contention
is without support in the administrative record.
16
order with SAIC because of the following errors: (1) the Original RFQ should have been
solicited as unrestricted, (2) DLA failed to properly dissolve the Original RFQs SBSA in
accordance with FAR 19.506 and (3) RFQ-0043 “should have been amended to place the
offerors on notice that the Axle[T]ech part was approved in order to afford all offerors
the opportunity to quote on the part.”12 AR 256 (CO Memo). Defendant claims that any
of these errors “could have been sufficient as a rational basis for the agency to cancel [the
Original RFQ] and start over,” and that “[w]hen these errors are considered together, it is
beyond cavil that the agency had a rational basis for starting over again.” Def.’s Mot. 1819. Although neither party has filed an objection to the use of the documentation related
to the New RFQ--such as the April 1, 2011 CO Memo--to the Original RFQ, it is far from
clear that it would proper, as defendant’s briefing suggests, for the court to rely on a posthoc rationalization for the cancellation of the SAIC award and the termination of the
Original RFQ. Cf. Axiom Res. Mgmt, Inc. v. United States, 564 F.3d 1374 (Fed. Cir.
2009).
Both parties characterize the cancellation of RFQ-0043 in terms of motive. See
EDR 3:31:39-33:45 (colloquy between the court and Mr. Raley, in which Mr. Raley
argues that, although not necessarily supported in the record, Mr. Raley can see no
explanation for DLA’s cancellation of RFQ-0043 and solicitation of the New RFQ other
than DLA’s desire to bypass small business and accept SAIC’s “lowball” offer); EDR
4:00:00-00:05 (Mr. Edelschick, arguing that the contracting officer was “motivated solely
by a good faith effort to follow the law”).
The Procurement History and the market research in the administrative record
make an adequately supported showing that RFQ-0043 should not have been issued as an
SBSA. By contrast, there is nothing in the administrative record that supports plaintiff’s
view that the cancellation of RFQ-0043 was a pretext for the ultimate dissolution of the
SBSA.
The administrative record shows that the award of the Original RFQ to SAIC
contained at least two significant errors. First, although the Original RFQ was issued as a
small business set aside, defendant nevertheless awarded the contract to a large business
concern. Second, the awardee was offering an unapproved product manufactured by
AxleTech. The administrative record indicates that it was the second defect that
prompted the contracting officer to cancel the Original RFQ. On December 30, 2010 Mr.
Matz received an email from DLA’s Senior Counsel, which states:
12
The court finds Mr. Matz’s characterization of the third error associated with the Original
RFQ puzzling, given the fact that the AxleTech part was not approved. In fact, Mr. Matz later
states that the order with SAIC “needed to be canceled because it allowed the awardee to supply
a non[-]conforming part.” AR 257 (CO Memo).
17
The problem is the AxleTech part (that we previously bought) is technically
unacceptable. See attached documents.
That is why I said that a statement similar to the following needs to be
inserted in the PID/AID/POT:13 “AxleTech Part number 3296-C-107 is not
acceptable.” Or something needs [to be] done that will prevent future
product specialists from approving this item for award as “previously
supplied[.]”
As far as what action is to be taken. SAIC’s contract needs to be canceled.
Hopefully we can get a no-cost cancellation.
The only question is whether we want [to] just cancel the requirement and
start over or make an award to the best value offeror that is providing a
technically acceptable part.
AR 217 (Dec. 30, 2010 DLA email) (emphasis added) (footnote added). On January 3,
2011 a contracting officer notified DLA’s Senior Counsel that the SAIC purchase order
was being cancelled. AR 213 (Jan. 3, 2011 DLA email).
The December 30, 2010 email from DLA’s Senior Counsel is the most relevant
and closely contemporaneous document in the AR regarding the cancellation of RFQ0043. The email proposed two options for dealing with the non-conforming AxleTech
part: start over by issuing a new RFQ or “make an award to the best value offeror that is
providing a technically acceptable part.” AR 217 (Dec. 30, 2010 DLA email). Both
options were reasonable given the AxleTech error, and it appears to the court that Mr.
Matz chose the former in order to “prevent future product specialists from approving [the
AxleTech part] for award as ‘previously supplied.’” See id. The fact that plaintiff would
have preferred Mr. Matz to have made an “award to the best value offeror that is
providing a technically acceptable part,” id., is not relevant to Mr. Matz’s decision. It
does not appear that Mr. Matz was offered an alternative justification for cancellation,
namely, that the solicitation did not properly notify offerors that the AxleTech part was
unacceptable. See id.
13
The court understands PID to be an abbreviation of “procurement item description,” see
DIBBS User Manual, DLA Internet Bid Board System, Release 2.2.2b, at 85 (June 2008)
available at www.defensecastingtoolkit.com/resources/BSMDIBBSUserGuide.pdf (defining PID
under Glossary), AID to be an abbreviation for “acquisition identification description,” see id. at
81 (defining AID under Glossary); see also AR 19 (RFQ-0043) (defining AID under Section L
DLAD 52.217), and POT to be an abbreviation of “Purchase Order Text,” see Defense Logistics
Agency (DLA) Master Solicitation for Automated Simplified Acquisitions (Part 13), Revision
28, at 18 (Dec. 2008) available at
http://www.docstoc.com/docs/50970965/DLA_Automated_Master_Solicitation_Archive_28
(defining POT under DLAD 52.211-9063).
18
Plaintiff argues that it “had an absolute right to the award” of the original RFQ
under FAR 19.502-2(a). Pl.’s Mem. 15. Defendant disagrees. Def.’s Reply 4. FAR
19.502-2(a) states, in relevant part:
Each acquisition of supplies . . . is automatically reserved exclusively for
small business concerns and shall be set aside for small business unless the
contracting officer determines there is not a reasonable expectation of
obtaining offers from two or more responsible small business concerns that
are competitive in terms of market prices, quality, and delivery. . . . If the
contracting officer receives only one acceptable offer from a responsible
small business concern in response to a set-aside, the contracting officer
should make an award to that firm.
FAR 19.502-2(a).
Defendant first argues that the “snippet of language in section 19.502-2(a)” relied
upon by plaintiff does not apply if “‘the contracting officer determines there is not a
reasonable expectation of obtaining offers from two or more responsible small business
concerns that are competitive.’” Def.’s Reply 4 (quoting FAR 19.502-2(a)). According
to defendant, because DLA “‘at no time’ had such ‘a reasonable expectation’ of
competition in connection with [the Original RFQ],” Def.’s Reply 4 (quoting AR 256-57
(CO Memo)), plaintiff’s reliance on FAR 19.502-2(a) is inapposite, id. Defendant claims
that, if DLA had placed an order with GWI under the Original RFQ “at a time when the
agency already had determined that the Original RFQ was improper,” DLA “arguably
would have abused its discretion.” Def.’s Mot. 22 (citing AR 256 (CO Memo)).
Defendant also contends that:
[t]his case is unlike a situation where the agency does have a reasonable
expectation of receiving two or more quotes from small businesses offering
the product manufactured by a small business and properly sets aside the
procurement for small business, but for whatever reason, the agency only
receives one such quote from a responsible firm. Under those
circumstances, not present here, the agency normally would place an order
with the firm that submitted the quote.
Def.’s Mot. 22-23 (emphasis in original) (citing FAR 19.502-2(a)). Defendant’s position
is that here, however, DLA “did not have a reasonable expectation of receiving two or
more quotes from small businesses offering the product manufactured by a small
business, and the agency concluded that the Original RFQ was improperly set aside for
small business.” Id. at 23 (emphasis in original) (citing AR 99 (Ms. Hanlon Memo); AR
256 (CO Memo); AR 262 (Procurement History)). Defendant concludes that GWI’s
19
argument “that the agency violated the law by trying to adhere to it makes no sense.”
Id.14
Defendant argues in the alternative that FAR 19.502-2(a) “is not mandatory and
does not direct the agency to make an award to any particular firm or to make any award
at all.” Def.’s Reply 4 (citing FAR 19.502-2(a)). As defendant correctly points out, FAR
19.502-2(a) employs “should,” a permissive term that “reserves discretion to the agency.”
Def.’s Reply 4 (citing United States v. UPS Customhouse Brokerage, Inc., 575 F.3d
1376, 1382 (Fed. Cir. 2009) (comparing “will,” which is “a mandatory term, not a
discretionary one,” with “discretionary terms such as ‘should’” when interpreting a
different federal regulation)); 3 Norman J. Singer & J.D. Shambie Singer, Sutherland
Statutes and Statutory Construction § 57:3, at 30 (7th ed. 2008) (“‘Should’ generally
denotes discretion and should not be construed as ‘shall.’”); see Cybertech Grp., Inc. v.
United States, 48 Fed. Cl. 638, 649 (2001) (“[I]n everyday discourse, ‘shall’ is used to
denote an affirmative command or obligation whereas ‘should,’ by contrast, is used to
denote a request or suggestion.”). The court agrees with defendant that the regulations do
not compel the agency to make an award to GWI.15
14
Defendant attempts to show that DLA recognized that the Original RFQ should not have been
set aside at the time of the cancellation of the procurement. This effort is unpersuasive.
Although Ms. Hanlon, the DLA buyer, determined that dissolution of the Original’s
RFQ’s SBSA was proper on November 29, 2010, AR 99 (Hanlon Memo); see supra Part III.A
(discussing Hanlon Memo), the administrative record suggests that the contracting officer, Mr.
Matz, did not fully embrace this issue until after he had cancelled the Original RFQ because of
the AxleTech error. See AR 213-18 (DLA emails). In any event, defendant’s efforts are
irrelevant to the determination of the dispute.
15
Defendant also argues that GWI “does not have any legally cognizable expectation of
receiving a contract based upon its quote in response to the Original RFQ.” Def.’s Mot. 21.
Under FAR 13.004(a), see supra Part I (discussing the application of FAR Part 13 to the Original
RFQ), “[a] quotation is not an offer and, consequently, cannot be accepted by the Government to
form a binding contract. Therefore, issuance by the Government of an order in response to a
supplier’s quotation does not establish a contract.” FAR 13.004(a). Instead, “The order is an
offer by the Government to the supplier to buy certain supplies or services upon specified terms
and conditions,” and “[a] contract is established when the supplier accepts the offer.” Id.
Moreover, the government may “withdraw, amend, or cancel its offer” once it issues an order.
FAR 13.004(c).
According to defendant, “Gear Wizzard merely submitted a quotation, which is ‘not an
offer,’ and the Government did not issue an order to Gear Wizzard, which merely would have
been ‘an offer by the Government.’” Def.’s Mot. 21 (quoting FAR 13.004(a)). Defendant
maintains that “[e]ven if the Government had made an offer to Gear Wizzard by placing an
order, the Government still would have had the legal right to ‘withdraw, amend, or cancel its
20
2.
Defendant’s Dissolution of the SBSA for Shifter Fork Procurements
Plaintiff requests that the court declare that the dissolution of SBSA status for the
“subject procurements is unlawful, arbitrary, capricious, and erroneous,” and
permanently enjoin the dissolution of SBSA status for shifter fork procurements. Pl.’s
Mem. 2. Plaintiff maintains that GWI received ten requests for quotation from small
businesses to supply shifter forks for the cancelled Second RFQ. Id. at 11. Plaintiff
further argues that DLA’s sudden cancellation of the Third RFQ “again left [GWI] with
no opportunity to provide quotes in response to the Requests for Quotations from other
small businesses.” Id.
Defendant maintains that the contracting officer’s decision to issue the New RFQ
through unrestricted competition is rational. Def.’s Mot. 18. Defendant states that the
contracting officer’s decision that no reasonable expectation existed that at least two
small businesses would submit offers “was based upon a detailed analysis of the
procurement history and the results of recent market research documented in the [AR].”
Id. at 19 (citation omitted). Declaring that “‘competition is the bedrock principle of
procurement law,’” id. at 22 (quoting Tyler Constr. Grp. v. United States, 83 Fed. Cl. 94,
99 (2008), aff’d, 570 F.3d 1329 (Fed. Cir. 2009)), defendant argues that GWI’s claim that
DLA is required to set aside the subject RFQ for small business “is tantamount to
requiring a sole source contract without meaningful competition—gaming the system—in
clear derogation of Federal law,” id.
Defendant also disputes GWI’s speculation that “as many as ten or more small
business firms might compete in the future with offers of Gear Wizzard’s shifter forks,”
noting that, “to date, none of them have done so.” Id. at 20 (citing AR 262 (Procurement
History)). According to defendant, GWI declined DLA’s “request for contact
information for all but three of the firms, and those three firms indicated that they were
not likely to compete.” Id. at 20-21 (citing AR 263 (Procurement History), 266-69 (DLA
and GWI emails)). Defendant concludes, and the court agrees, that GWI fails to “point to
any ‘hard facts’ in the record that would be necessary to impeach the agency’s good faith
analysis of this fact intensive issue.” Id. at 21 (citations omitted).
offer’ without penalty at any time prior to its acceptance.” Id. at 21-22 (quoting FAR 13.004(c)).
Defendant concludes that GWI was not entitled to the award of the Original RFQ and “remains
free to compete for an award in an unrestricted competition pursuant to the New RFQ.” Id. at
22.
Because the court finds that the phrase in FAR 19.502-2(a) relied upon by plaintiff
“reserves discretion to the agency,” see Def.’s Reply 4, the court does not resolve whether GWI
has a “legally cognizable expectation of receiving a contract based upon its quote in response to
the Original RFQ,” see Def.’s Mot. 21.
21
According to the Procurement History, three previous procurements of shifter
forks had been set aside for small business. AR 261 (Procurement History) (referring to
RFQ-0326, RFQ-0409 and RFQ-0233). The first procurement issued as a SBSA
followed GWI’s approval as a source of shifter forks, so it was reasonable for DLA “to
expect that two or more of the many small business concerns that had previously supplied
the Meritor part would likely offer the newly approved Gear Wizzard part.” AR 261
(discussing RFQ-0326). The Procurement History states that the second procurement
should have been “solicitated as unrestricted, because the estimated value of the
procurement was in excess of $25,000 . . . and the prior acquisition . . . demonstrated
that there was no reasonable expectation that two or more small business concerns were
going to offer the product of [a] small business manufacturer.” Id. (discussing RFQ0409). Finally, because the value of the third procurement was estimated to be below
$25,000, it fell within the exception to the nonmanufacturer rule and was awarded to a
small business concern that offered Meritor’s part. Id. (discussing RFQ-0233) (citing
FAR 19.201(f)(7)).
Based on the Procurement History, which includes the fact that DLA has never
received two or more quotes from small businesses offering shifter forks manufactured
by a small business concern, DLA concluded that the Original RFQ should have been
solicited as unrestricted. AR 262 (discussing RFQ-0043). The court agrees that DLA
“had a rational basis for its finding that the Original RFQ erroneously had been
designated as a set aside.” Def.’s Reply 3 (citing AR 262 (Procurement History)).
Moreover, the contracting officer’s market research indicates that it was difficult
for other small businesses to compete with GWI’s price on its own product. In response
to GWI’s January 22, 2011 email protesting the dissolution of the SBSA
“for . . . any . . . Shifter Fork procurement,” AR 269-70 (Jan. 22, 2011 GWI email), the
Acting Associate Director of DLA’s Small Business Programs Office, Ms. Hawthorne,
requested a list of these small business concerns, AR 269 (undated DLA email), “so that
the contracting officer could conduct market research and confirm their ability to supply
the Gear Wizzard part,” AR 262 (Procurement History). In an email dated February 5,
2011, GWI provided Ms. Hawthorne with the names of twenty-seven small businesses
that could be “reasonably expected” to offer GWI’s part. AR 268 (Feb. 5, 2011 GWI
email). GWI also noted that “[a]t least 18 small businesses submitted offers on [DLA’s]
last aborted acquisition” of shifter forks. Id.
Apparently dissatisfied with this list of businesses, Ms. Hawthorne repeated her
request for a list of “small businesses that are ready, willing and able to submit offers to
supply the Shifter Forks manufactured by GWI.” AR 267 (undated DLA email). GWI
ultimately provided Ms. Hawthorne with the names and addresses of three small
businesses: Pioneer Ind., Inc. (Pioneer), JGILS, LLC (JGILS) and Kampi Components
Co., Inc. (Kampi). AR 267 (Feb. 12, 2011 GWI email).
22
Ms. Hanlon contacted each of these three businesses and inquired: “If [shifter
forks are] set-aside for small business concerns are you able to quote the Gear Wizzard
part number GWI-C0107?” AR 278-79 (Feb. 15, 2011 Hanlon email to Pioneer); AR
275 (Feb. 15, 2011 Hanlon email to JGILS); AR 273 (Feb. 17, 2011 Hanlon email to
Kampi). Pioneer stated that it doubted GWI would be “willing provide pricing as an
estimate at this time.” AR 277 (Feb. 17, 2011 Pioneer email). JGILS simply responded:
“We cannot quote this guy.” AR 275 (Feb. 15, 2011 JGILS email). Kampi’s response
was more detailed, explaining that GWI quotes “direct on this item,” and that, therefore,
GWI’s quote would “more than likely[] be more competitive” than Kampi’s. AR 272
(Feb. 17, 2011 Kampi email). The representative requested that the government refrain
from soliciting Kampi for items that the government “intend[s] to award to the
manufacturer anyway.” Id. Kampi’s representative further stated:
Kampi does our best to help with the needs of our government customer,
however it has become cost prohibitive to constantly submit and
subsequently update bids when the reality of the situation is that we will not
receive the award. With that being said[,] yes[,] we are interested in
quoting assuming our quotation is actually being considered. We are
unable to provide an estimated delivery or unit price until we have a
quantity.
Id.
Relying on this market research and the Procurement History, DLA determined
that it did not “have a reasonable expectation of obtaining offers from two or more
responsible small business concerns that are competitive in terms of market prices,
quality and delivery that will offer the approved part manufactured by Gear Wizzard,”
and that the new procurement should be issued as unrestricted. AR 263 (Procurement
History). Accordingly, DLA prepared a new DD Form 2579 “Small Business
Coordination Record” recommending that the procurement be solicited on an unrestricted
basis. AR 258-59 (DD Form 2579).
DLA shared its DD Form 2579, market research and the Procurement History with
the SBA.16 AR 258-79 (DD Form 2579 and Attachment). A representative of SBA
concurred in defendant’s recommendation that the procurement be solicited on an
unrestricted basis. AR 258 (DD Form 2579). On April 1, 2011 defendant issued an
unrestricted New RFQ for the procurement of 335 shifter forks (NSN-8717), with a
16
Plaintiff alleges that, although the DD Form 2579 “accurately reported the content of the
previous responses of JGILS and Pioneer, it did not completely report the content of Kampi’s
response that they were interested in quoting.” Pl.’s Mem. 13. Defendant counters that DLA
attached to the DD Form 2579, which was shared with the SBA, the full copy of Kampi’s
response. Def.’s Mot. 23. The court agrees that DLA’s disclosures to the SBA regarding the
New RFQ appear to be “complete and accurate.” Id. at 24.
23
closing date for offers on May 31, 2011. AR 280-82 (RFQ-0780). The estimated value
of the Fifth RFQ is $37,114.65. AR 257 (CO Memo).
“The decision not to set aside a solicitation for small business concerns is a matter
of business judgment within the contracting officer’s discretion and, as such, must be
upheld unless the Court finds the decision to be arbitrary, capricious, an abuse of
discretion or otherwise not in accordance with the law.” Benchmade Knife Co. v. United
States, 79 Fed. Cl. 731, 738 (2007) (internal quotation omitted); see Admiral Towing &
Barge Co., B-291849 et al., 2003 WL 22309106, at *3 (Comp. Gen. Mar. 6, 2003).
“While the use of any particular method of assessing the availability of small businesses
is not required, and measures such as prior procurement history, market surveys, and/or
advice from the agency’s small business specialist and technical personnel may all
constitute adequate grounds for a contracting officer’s decision not to set aside a
procurement, the assessment must be based on sufficient facts so as to establish its
reasonableness.” Rochester Optical Mfg. Co., B-292247 et al., 2003 WL 21884877, at *3
(Comp. Gen. Aug. 6, 2003) (internal citation omitted); see MCS Mgmt., Inc. v. United
States, 48 Fed. Cl. 506, 511, aff’d, 25 F. App’x 957 (Fed. Cir. 2001). The court finds that
the contracting officer’s decision to cancel the Original RFQ and issue the New RFQ on
an unrestricted basis was reasonable, rationally based on sufficient facts and not in
violation of law.
C.
Permanent Injunctive Relief Not Warranted
To obtain a permanent injunction, a plaintiff must succeed on the merits and show
by a preponderance of the evidence: “(1) that it will suffer irreparable harm if injunctive
relief is not awarded; (2) that granting the relief serves the public interest; and (3) that the
harm to be suffered by it outweighs the harm to the Government and third parties.”
United Int’l Investigative Servs., 41 Fed. Cl. at 323 (citing FMC Corp., 3 F.3d at 427).
Because plaintiff has not succeeded on the merits of its case, it is unnecessary for the
court to determine whether GWI has established the remaining three factors.
IV.
Conclusion
For the foregoing reasons, the court DENIES plaintiff’s Motion, DENIES
defendant’s Motion to Dismiss and GRANTS defendant’s Motion for Judgment on the
Administrative Record. The Clerk of Court is directed to ENTER JUDGMENT in favor
of defendant. No costs.
IT IS SO ORDERED.
s/ Emily C. Hewitt
Chief Judge
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