CRAIN v. USA
Filing
59
REPORTED OPINION denying 56 Motion for Bid Preparation and Proposal Costs. The Clerks Office shall ENTER final judgment on the claims in the complaint, as set forth in the courts opinion and order of January 29, 2013, as well as for defendant as to plaintiffs request for bid preparation and proposal costs. No costs to either party. Signed by Judge Lynn J. Bush. (TQ) Copy to parties.
In the United States Court of Federal Claims
No. 11-217 C
(Filed January 17, 2014)
* * * * * * * * * * * * * * *
INNOVATION DEVELOPMENT
ENTERPRISES OF AMERICA,
INC.,
Plaintiff,
v.
THE UNITED STATES,
Defendant.
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Post-Award Bid Protest; Bid
Preparation and Proposal Costs;
28 U.S.C. § 1491(b)(2) (2012);
48 C.F.R. §§ 31.201-3(a),
31.201-4(a); 31.205-18(a), (c)
(2012); Whether Bid Preparation
and Proposal Costs Can Be
Recovered When No Proposal
Was Prepared or Submitted.
* * * * * * * * * * * * * * * *
Charles H. Crain, Tulsa, OK, for plaintiff.
Katy M. Bartelma, United States Department of Justice, with whom were
Stuart F. Delery, Acting Assistant Attorney General, Jeanne E. Davidson,
Director, Deborah A. Bynum, Assistant Director, Washington, DC, for defendant.
________________________________
OPINION
________________________________
Bush, Senior Judge.
This post-award bid protest, in which Innovation Development Enterprises
of America, Inc. (IDEA) challenges a sole-source contract award by the United
States Air Force (Air Force), has been the subject of two prior opinions. An
unpublished opinion issued on January 11, 2012 resolved certain procedural issues
and dismissed Mr. Lawrence A. Crain, the sole proprietor of IDEA, as an
individual plaintiff in this suit.1 Innovation Dev. Enters. of Am., Inc. v. United
States, No. 11-217 (Fed. Cl. Jan. 11, 2012) (IDEA I). A published opinion issued
on January 29, 2013 held that IDEA had prevailed on the merits of one of its bid
protest grounds, and that IDEA had been prejudiced by the improper sole-source
award by the Air Force. Innovation Dev. Enters. of Am., Inc. v. United States, 108
Fed. Cl. 711 (2013) (IDEA II). However, plaintiff’s requests for injunctive relief
were moot because the protested sole-source bridge contract had been fully
performed, and a successor contract had been awarded as well.
After the parties’ negotiations to resolve plaintiff’s requests for bid
preparation and proposal costs, as well as plaintiff’s request for attorney fees,
failed to bear fruit, the court ordered briefing on the issue of whether, in the
circumstances of this case, IDEA could recover bid preparation and proposal costs
under 28 U.S.C. § 1491(b)(1)-(2) (2012), and, if so, in what amount. Now before
the court are Plaintiff’s Motion for the Award of Bid Preparation Costs (Pl.’s
Mot.), Defendant’s Opposition to Plaintiff’s Motion for the Award of Bid
Preparation Costs (Def.’s Opp.), and Plaintiff’s Reply Regarding Defendant’s
Opposition to Motion for the Award of Bid Preparation Costs (Pl.’s Reply). The
most fundamental question before the court is whether IDEA may recover any bid
preparation and proposal costs in circumstances where, as here, no bids were
solicited from the contracting community at large, and the protestor never prepared
a draft proposal and never submitted any proposal at all to the contracting agency.
A related inquiry is whether the bid preparation and proposal costs claimed by
IDEA are indeed properly characterized as bid preparation and proposal costs. An
additional issue is whether plaintiff’s claimed costs are reasonable. For the reasons
stated below, the court must deny IDEA’s claim for bid preparation and proposal
costs in its entirety.
BACKGROUND2
1
/ All references to Mr. Crain in this opinion are to Mr. Lawrence A. Crain, sole
proprietor of IDEA, not to his brother, Mr. Charles H. Crain, plaintiff’s counsel.
2
/ Only the background facts essential to an understanding of plaintiff’s motion for bid
preparation and proposal costs are included here. IDEA II contains a more complete history of
the procurement at issue in this suit.
2
The contract award challenged in this suit was for support services for the
Air Force’s Command Man-Day Allocation System (CMAS), a system which is
“used to place Air National Guard and Air Force Reserve Members on temporary
tours of active duty.” Administrative Record (AR) at 20. The contract services
included “software support, assessment support, database administration, and
configuration management.” Id. at 85. According to Mr. Crain, CMAS was
designed and programmed in the mid-1990’s by a team which included Mr.
Michael Fedorsak and Mr. Crain, who was then an Air Force reservist. Pl.’s Mot.
at D-2. A Request for Proposals was later prepared to hire a contractor to further
develop and operate CMAS, and Harris IT Services Corporation (Harris) won the
first CMAS contract (for one year plus four option years) in 1999. Id. IDEA
subcontracted with Harris on the contract, providing the services of Mr. Crain. Id.
Harris also won a second CMAS contract in 2004 (for one year and four option
years), and continued to subcontract with IDEA. Id. at D-3.
At the end of 2007, however, Harris stopped subcontracting with IDEA for
services to support CMAS. Id. at D-4. According to Mr. Crain, in early 2008 he
“cautiously began to explore the notion of IDEA bidding for the upcoming
CMAS” contract for 2009 through 2014. Id. In essence, plaintiff’s request for bid
preparation and proposal costs rests on the foundation of this exploration,
beginning in 2008, of the idea of competing against Harris for the next five-year
CMAS contract, and subsequent actions of Mr. Crain, ending in 2010, which
attempted to position IDEA to win the anticipated competition for CMAS services.
The Air Force, however, after extending the second CMAS contract for six
months, decided to procure CMAS services in 2010 through a sole-source bridge
contract, in order to bridge the gap between the second CMAS contract and another
five-year CMAS contract. IDEA II, 108 Fed. Cl. at 717-18 & n.5. No solicitation,
or contract action synopsis, for that matter, was issued for the sole-source bridge
contract. After the award of the bridge contract to Harris was announced on May
21, 2010, Mr. Crain attempted, pro se, to protest that award before the Air Force
and, eventually, before the Government Accountability Office (GAO). Once those
efforts proved futile, IDEA filed its bid protest in this court on April 7, 2011.3 By
that time, Harris had performed most of the services required by the sole-source
bridge contract.
3
/ Mr. Crain originally attempted to litigate IDEA’s bid protest before this court pro se.
3
IDEA eventually filed an amended complaint on February 21, 2012, by
which time the sole-source bridge contract had been fully performed.4 See AR at
182. Thus, by the time the court reached the merits of IDEA’s bid protest,
injunctive relief was not available. Although defendant argued that IDEA’s protest
was moot and should be dismissed on that ground, this court followed Pacificorp
Capital, Inc. v. United States, 852 F.2d 549, 550 (Fed. Cir. 1988), which holds that
a request for bid preparation and proposal costs presents a live controversy. IDEA
II, 108 Fed. Cl. at 725. Defendant also argued, in a footnote within its motion for
judgment on the administrative record, that IDEA’s claim for bid preparation and
proposal costs should be dismissed for failure to state a claim upon which relief
may be granted, because these costs were not substantiated. The court disagreed,
because this court has allowed plaintiffs to substantiate bid preparation and
proposal costs after a decision has been reached on the merits of their protest. Id.
at 721 n.11 (citing Impresa Construzioni Geom. Domenico Garufi v. United States,
61 Fed. Cl. 175, 177 (2004) (Impresa)).
It is perhaps important to note that the court was obliged to perform
extensive research to render a decision on the merits of plaintiff’s bid protest.
Although plaintiff prevailed as to the arbitrary and capricious nature of the
sole-source award by the Air Force, it cannot be said that the legal authority which
supported the court’s analysis was identified by plaintiff’s counsel. As the court
has considered the parties’ briefs regarding bid preparation and proposal costs, the
court has again been obliged to find relevant legal authority to supplement the
authorities relied upon by the parties. In the current dispute, those authorities do
not permit recovery on the claim IDEA has presented for the court’s review.
IDEA’s claim for bid preparation and proposal costs was originally
presented to the court in the amount of $16,378. Pl.’s Mot. at 1. All of the costs
included therein are for the labor of Mr. Crain; he asserts that he worked 169 hours
and that his hourly compensation rate should be approximately $97 per hour. Id. at
D-9. In plaintiff’s reply brief, the quantum of this claim was modified in light of
two arguments presented by defendant. First, plaintiff acknowledges that twentyone hours of labor that Mr. Crain claims to have expended after he learned of the
sole-source award to Harris are properly excluded because such costs are
4
/ Harris, by this time, had also obtained the follow-on CMAS contract, for one year and
four option years. Pl.’s Mot. at 3.
4
categorized as protest costs, not bid preparation and proposal costs. Pl.’s Reply at
19. According to the hourly rate charged by Mr. Crain in 2010 for the purposes of
IDEA’s bid preparation and proposal costs claim, this would reduce the claim from
$16,378 to $14,323.
Second, plaintiff acknowledges that the hourly rate charged by Mr. Crain
might be higher than allowable. In that regard, plaintiff appears to concede that
Mr. Crain’s labor rate includes profit which is typically excluded from bid
preparation and proposal awards. Pl.’s Reply at 21. Plaintiff therefore suggests
that an alternative hourly rate be determined by the court, after the government
discloses certain contract payments made to Harris for the labor of Mr. Crain, so
that profit can be eliminated from Mr. Crain’s hourly labor rate. Plaintiff also
suggests that a correction to reflect inflation, currently included in Mr. Crain’s
hourly rate, is a correction that plaintiff is now willing to waive. Id. It is unclear
whether plaintiff’s proposed alternative hourly rate for Mr. Crain’s labor would be
higher or lower than the hourly rate currently presented in IDEA’s bid preparation
and proposal costs claim.
For the purposes of this opinion, the only clear dollar figure that is
calculable from plaintiff’s submissions is that of $14,323, for 148 hours of labor
performed by Mr. Crain, which represents IDEA’s claim for bid preparation and
proposal costs. The court reserves a more thorough discussion of the claim
presented by plaintiff, and of the parties’ arguments regarding that claim, for the
analysis section of this opinion. The court turns now to a discussion of the legal
authorities which guide the court in this dispute.
DISCUSSION
I.
Jurisdiction
This court “shall have jurisdiction 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). This court’s authority to award
bid preparation and proposal costs is found in § 1491(b)(2), which states in
relevant part that
5
[t]o afford relief in [a bid protest], the courts may award
any relief that the court considers proper, including
declaratory and injunctive relief except that any monetary
relief shall be limited to bid preparation and proposal
costs.
Id. The court reviews plaintiff’s claim for bid preparation and proposal costs under
§ 1491(b)(2), which is specifically referenced in plaintiff’s motion.5 Pl.’s Mot. at
3.
II.
Bid Preparation and Proposal Costs Defined
Section 1491(b)(2) does not define bid preparation and proposal costs. To
formulate a definition, the court must turn to provisions of the Federal Acquisition
Regulation (FAR) which describe bid preparation and proposal costs in an
analogous, contract accounting context. E.g., Geo-Seis Helicopters, Inc. v. United
States, 79 Fed. Cl. 74, 80 (2007) (citing Coflexip & Servs., Inc. v. United States,
961 F.2d 951, 953 (Fed. Cir. 1992)). But see Beta Analytics Int’l., Inc. v. United
States, 75 Fed. Cl. 155, 159-60 & n.4 (2007) (expressing a minority view that FAR
provisions do not define bid preparation and proposals costs that may be awarded
by this court). Both parties correctly rely on the FAR to define bid preparation and
proposal costs.
One pertinent FAR provision states in relevant part:
Bid and proposal (B&P) costs means the costs incurred in
preparing, submitting, and supporting bids and proposals
(whether or not solicited) on potential Government or
non-Government contracts.
5
/ The court need not consider whether plaintiff’s bid preparation and proposal costs
claim could be reviewed under the court’s jurisdictional grant provided by 28 U.S.C. § 1491(a)
(2012), see Castle-Rose, Inc. v. United States, 99 Fed. Cl. 517, 530-31 (2011) (noting the
divergent views of the proper jurisdictional bases for bid protests brought under § 1491(a) and/or
§ 1491(b)), because the result would be exactly the same under § 1491(a) as it is under
§ 1491(b).
6
48 C.F.R. § 31.205-18(a) (2012).6 The court notes that the text of this regulation,
which states that bid preparation and proposal costs are those that are incurred in
the preparation, submission and further support of a submitted bid, directly links
bid preparation and proposal costs with the act of submitting a bid. When, by
contrast, there has been no submitted bid, this regulation and its definition of bid
preparation and proposal costs provide no logical support for a claim for the
recovery of bid preparation and proposal costs. The court will delve further into
this issue in the analysis section of this opinion, but notes here that the FAR does
not appear to support plaintiff’s claim for bid preparation and proposal costs.
A second FAR provision that applies to bid preparation and proposal costs
states in relevant part that bid preparation and proposal costs “are allowable as
indirect expenses on contracts to the extent that those costs are allocable and
reasonable.” FAR 31.205-18(c). A third FAR provision states in relevant part that
a cost is allocable to a government contract if it is “incurred specifically for the
contract.” FAR 31.201-4(a). A fourth FAR provision states in relevant part that
[a] cost is reasonable if, in its nature and amount, it does
not exceed that which would be incurred by a prudent
person in the conduct of competitive business. . . . No
presumption of reasonableness shall be attached to the
incurrence of costs by a contractor.
FAR 31.201-3(a). The above-cited FAR provisions provide a basic conceptual
framework which aids this court’s review of claims for bid preparation and
proposal costs. See, e.g., Geo-Seis Helicopters, 79 Fed. Cl. at 80.
Although each claim for bid preparation and proposal costs differs, certain
types of costs have been identified by courts as potentially recoverable bid
preparation and proposal costs. These include “‘development of engineering data
and cost data necessary to support the contractor’s bids or proposals,’” Coflexip,
961 F.2d at 953 (quoting 41 C.F.R. § 1-15.205-3 (1983)); “researching
specifications, reviewing bid forms, examining cost factors, and preparing draft
6
/ All further references to the FAR, unless otherwise specified, are to the current version
of Title 48 of the Code of Federal Regulations, which does not appear to differ in pertinent part
from the versions in force when IDEA is alleged to have incurred bid preparation and proposal
costs.
7
and actual bids,” Lion Raisins, Inc. v. United States, 52 Fed. Cl. 629, 631 (2002)
(citations omitted); and the printing and delivery costs of submitting a proposal,
Geo-Seis Helicopters, 79 Fed. Cl. at 81; Beta Analytics, 75 Fed. Cl. at 168-70. As
can be seen from this list of bid preparation and proposal costs, such costs are
distinct and severable from general business operation costs in that bid preparation
and proposal costs are incurred in furtherance of the submission of a particular
proposal.
The court notes, too, that bid preparation and proposal costs are a subset, not
the entirety, of the costs a contractor may choose to invest to compete for the
award of a government contract. See, e.g., AT & T Techs., Inc. v. United States, 18
Cl. Ct. 315, 323 (1989) (AT & T Technologies) (noting that although bid
preparation and proposal costs “are inherently pre-contract costs, . . . [bid
preparation and proposal costs] are a more specific and narrow category of
pre-contract costs”). As the United States Court of Appeals for the Federal Circuit
has stated,
in a negotiated procurement, . . . costs which do not
support an initial or revised proposal are costs which a
contractor incurs in an effort to better position itself to
perform any contract it should be awarded. These latter
costs, incurred in anticipation of contract award, are not
proposal preparation costs.
Coflexip, 961 F.2d at 953. Thus, although in a contractor’s view certain
preparatory activities should be reimbursable as bid preparation and proposal costs
after prevailing in a bid protest, it is also possible that such claims will be rejected
because these costs are better characterized as costs incurred to prepare for contract
performance rather than as costs incurred to prepare a bid for submission. See,
e.g., AT & T Technologies, 18 Cl. Ct. at 322 (stating that “costs includ[ing] the
purchase of equipment . . . and various labor costs incurred in order to meet the
requirements of the anticipated contract . . . were [not] incurred for purposes of
preparing the plaintiff’s proposal but rather to place the plaintiff in a position to
perform the contract had it received the award”); Stocker & Yale, Inc., B-242568,
93-1 CPD ¶ 387, 1993 WL 181158, at *3 (Comp. Gen. May 18, 1993) (stating that
“the costs of developing and testing a product in order to qualify it for listing on a
[qualified products list] do not fall within the scope of proposal preparation costs,
and they are therefore not reimbursable”). The general rule is that costs incurred to
8
prepare for contract performance are not bid preparation and proposal costs. Lion
Raisins, 52 Fed. Cl. at 631 (“Costs incurred in anticipation of or to qualify for a
contract award are not recoverable bid preparation expenses.” (citing Coflexip, 961
F.2d at 953, and Stocker & Yale, 1993 WL 181158, at *3-4)).
III.
Costs Which Clearly Do Not Constitute Bid Preparation and Proposal
Costs
There are specific examples of claims for costs incurred by protestors which
have been rejected by this court or the GAO as not qualifying as bid preparation
and proposal costs. These examples are instructive because of the distinctions that
must be drawn between general business costs and pre-contract costs, on the one
hand, versus bid preparation and proposal costs, on the other. The examples
discussed here are illustrative rather than comprehensive. The examples of
expenditures discussed here can be divided roughly into the categories of training,
marketing/networking, and pre-contract logistics.
A.
Training Classes
Although a contractor may invest in training to learn how to compete for
government contracts and to learn how to draft a proposal, such training costs are
not bid preparation costs because they are general business costs. For example,
this court rejected a protestor’s claim for the costs of sending its consultant to a
three-day proposal writing workshop, because this cost was an “ordinary business
expense,” not a bid preparation and proposal expense. Ala. Aircraft Indus.,
Inc.-Birmingham v. United States, 85 Fed. Cl. 558, 570, rev’d on other grounds by
586 F.3d 1372 (Fed. Cir. 2009). As the GAO has explained, training to gain
expertise which will aid in preparing a proposal is a general business cost, not a bid
preparation and proposal cost:
Offerors may incur substantial costs in anticipation of, or
in the course of, competing for a contract, without those
costs thereby becoming proposal preparation costs. For
example, a manufacturer of software hoping to win a
contract to provide computer integration services might
send its employees for retraining in computer integration
to facilitate their writing of the proposal for that contract,
and the company might borrow money in order to fund
9
that retraining. As with [the protestor’s] expenses here,
the offeror could well view those costs as “integral to the
submission of [the offeror’s] bid and [its] ability to win
the contract,” but they nonetheless normally fall outside
the scope of the ordinary meaning of the term “proposal
preparation.”
Stocker & Yale, 1993 WL 181158, at *3 (alterations in original). As these
examples show, building capacity in order to produce a better proposal is distinct
from the costs incurred in preparing and delivering a proposal. Thus, the costs of
training classes are not recoverable bid preparation and proposal costs.
B.
Marketing and Networking
Potential government contractors market their services and network with
their contacts in government agencies. The cost of such activities, however, are
distinct from bid preparation and proposal costs. For example, this court has noted
that marketing and networking activities are distinct from bid preparation and
proposal costs, even though all such costs are incurred in efforts to obtain business
for the contractor:
Selling activity can include such “broad categories” as
sales, promotions, negotiations, liaison with Government
personnel, as well as bid and proposal costs. . . . The
Court of Claims . . . distinguished between selling costs,
which are those costs “directly attributable to marketing
efforts,” from [bid preparation and proposal] costs which
are incurred in “preparing bids or proposals.” Because
the selling costs at issue here are specifically
distinguishable from [bid preparation and proposal] costs,
and [bid preparation and proposal] costs are the only
damages that may be recovered [in a bid protest], the
plaintiff here may not recover its selling costs.
AT & T Technologies, 18 Cl. Ct. at 325 (citations omitted). Similarly, the GAO
found that a series of meetings between agency personnel and a government
contractor were in the nature of market research, not bid preparation, where the
agency was trying to determine if the contractor could provide certain services, and
10
the contractor was attempting to be “proactive” and “find out” what the agency
needed. Lockheed Martin Sys. Integration-Owego, B-287190.5, 2002 CPD ¶ 49,
2002 WL 442011, at *2-3 (Comp. Gen. Mar. 20, 2002) (Lockheed Martin). The
GAO rejected a claim for the costs of attending these meetings, because these were
“direct selling” costs, not bid preparation and proposal costs. Id. at *3 (citations
omitted). The distinction between marketing/networking and bid preparation and
proposal costs is thus well established in bid protest decisions.
As was noted in Lockheed Martin, the FAR provides useful guidance in
identifying “direct selling” activities, as contrasted with bid preparation activities.
2002 WL 442011, at *3 n.3. The relevant regulation, in pertinent part, defines
direct selling as
those acts or actions to induce particular customers to
purchase particular products or services of the contractor.
Direct selling is characterized by person-to-person
contact and includes such efforts as familiarizing a
potential customer with the contractor’s products or
services, conditions of sale, service capabilities, etc. It
also includes negotiation, liaison between customer and
contractor personnel, technical and consulting efforts,
individual demonstrations, and any other efforts having
as their purpose the application or adaptation of the
contractor’s products or services for a particular
customer’s use.
FAR 31.205-38(5). Thus, the costs of promotional materials and communications
designed to alert agency personnel to the availability and quality of a contractor’s
services constitute a separate and distinct category of costs, different from those
costs incurred when preparing a proposal for a particular competitive procurement.
Marketing and networking costs are not recoverable as bid preparation and
proposal costs.
C.
Pre-Contract Logistics
A potential bidder on a government contract may engage in pre-contract
endeavors and logistics in hopes that such investments may be recouped if awarded
a profitable contract. Such investments take a variety of forms. Contractors may
11
attempt to obtain certifications as to the acceptability of their products or their
suppliers, but the costs of these efforts are not recoverable as bid preparation and
proposal costs. See, e.g., Stocker & Yale, 1993 WL 181158, at *3 (stating that the
costs of “developing and testing a product in order to qualify it for listing on a
[qualified products list]” were not reimbursable as bid preparation and proposal
costs); Rotair Indus., Inc., B-224332, 87-1 CPD ¶ 238, 1987 WL 101552, at *4
(Comp. Gen. Mar. 3, 1987) (stating that the costs of submitting “source approval
requests” were not reimbursable as bid preparation and proposal costs). To give
another example, contractors may incur travel costs to find suitable suppliers, but
these pre-contract logistics costs do not constitute bid preparation and proposal
costs. See Stocker & Yale, 1993 WL 181158, at *4 (stating that such travel costs
“represent the ordinary cost of dong business, rather than proposal preparation
costs”). Thus, it is important to distinguish between the costs of pre-contract
logistics, i.e., the costs of activities which prepare a business for contract
performance, from bid preparation and proposal costs. See, e.g., Coflexip, 961
F.2d at 953 (“The contractor assumes the risk that it will not be awarded the
contract, and, accordingly, these contract preparation costs will not be
recoverable.”); AT & T Technologies, 18 Cl. Ct. at 322 (holding that pre-contract
equipment purchases and labor costs incurred in anticipation of the contract were
not recoverable as bid preparation and proposal costs). According to the
above-cited authorities, the costs expended by a potential bidder on pre-contract
logistics are not bid preparation and proposal costs.
IV.
Analysis of Plaintiff’s Claim for Bid Preparation and Proposal Costs
A.
No Recovery Where No Bid Was Submitted
IDEA claims approximately $14,323 for 148 hours of labor performed by
Mr. Crain, and further claims that these costs are bid preparation and proposal
costs, even though no draft proposal was ever prepared by IDEA and no proposal
was ever delivered to the agency by IDEA. As noted above, the definition of bid
preparation and proposal costs is predicated on the foundational acts of actually
preparing a draft proposal and submitting an actual proposal to a government
agency. Here, plaintiff concedes that no proposal was ever submitted to the Air
Force, and does not allege that a draft proposal was ever prepared by IDEA. Pl.’s
Reply at 6. Plaintiff’s claim is therefore both logically infirm and in fundamental
conflict with FAR 31.205-18(a).
12
Nonetheless, the court will examine plaintiff’s arguments to the contrary,
which, it must be noted, have not identified a single decision from either this court
or the GAO which permitted the recovery of bid preparation and proposal costs
when no proposal had been submitted by the claimant. First, plaintiff argues that
because the Air Force precluded IDEA from submitting a bid (by resorting to an
improper sole-source procurement instead), “IDEA is entitled to the costs which it
reasonably incurred in preparing to bid on a solicitation [that was never issued].”
Pl.’s Mot. at 4. Plaintiff cites no authority for this argument. Second, plaintiff
argues that because bid preparation and proposal costs may be incurred even when
the protestor’s proposal is unsolicited, IDEA’s claim must therefore be valid. Id. at
5. In support of this argument, plaintiff cites the text of FAR 31.205-18(a), which
does not distinguish between a proposal received after a solicitation has issued and
a proposal received in the absence of a solicitation. Third, plaintiff raises an
equitable argument, stating that denying IDEA any bid preparation and proposal
costs would be unjust in the circumstances of this successful bid protest. Pl.’s Mot.
at 5.
As discussed previously in this opinion, there is no support in the FAR for a
claim for bid preparation and proposal costs when no draft proposal has been
prepared and no proposal has been submitted to the agency. Furthermore, the court
has not found a single case where a successful protestor has recovered bid
preparation and proposal costs in the absence of a submitted bid. The GAO has
specifically rejected the availability of such a recovery. See Scientific Commc’ns,
Inc., B-188827, 77-2 CPD ¶ 508, 1977 WL 11688, at *2 (Comp. Gen. Dec. 28,
1977) (stating that because the protestor had “failed to submit a bid . . . , the
protester is not entitled to recover any preparation costs it may have incurred”).
While plaintiff attempts to equate “preparing to bid,” Pl.’s Mot. at 4, with bid
preparation, these concepts are not the same. Because neither the FAR, GAO
decisions nor the law in this circuit provides any authority for the recovery of bid
preparation and proposal costs when no draft proposal has been prepared and no
proposal has been submitted to the agency, IDEA’s claim must be rejected in its
entirety.
As for the “whether or not solicited” language in the definition of bid
preparation and proposal costs found in FAR 31.205-18(a), IDEA’s claim is not
saved by this text. It is clear from the regulation that an unsolicited proposal
received by a government agency may support a claim for bid preparation and
proposal costs. IDEA neither prepared a draft unsolicited proposal nor submitted
13
an unsolicited proposal to the Air Force. In the absence of these foundational acts,
no claim for bid preparation and proposal costs may succeed.7
Finally, plaintiff suggests that it is unjust for the Air Force to award an
improper sole-source contract to Harris and escape any monetary liability to IDEA.
This court’s resolution of bid preparation and proposal costs claims depends on
law, not equity. See, e.g., Coflexip, 961 F.2d at 953 (relying on the FAR, not
equitable principles, to determine the validity of a claim for bid preparation and
proposal costs); see also Martinez v. United States, 333 F.3d 1295, 1303 (Fed. Cir.
2003) (en banc) (stating that “the Court of Federal Claims does not have general
equity jurisdiction”). As this court stated in another successful bid protest, illegal
government procurement actions do not
entitle [a protestor] to an award in excess of the legally
recognized standard – proposal preparation costs.
Although the government’s conduct [in that case] was
admittedly egregious, and the plaintiff was unmistakenly
injured thereby, an award of [bid preparation and
proposal] costs does not serve any punitive function that
would entitle a plaintiff to an expanded recovery. . . .
[The fact that] the government acts illegally has no meaningful
impact on the measure of [a protestor’s] recovery.
AT & T Technologies, 18 Cl. Ct. at 323. In bid protests, monetary relief in this
forum is limited to bid preparation and proposal costs.8 28 U.S.C. § 1491(b)(2).
Here, by law, IDEA cannot recover bid preparation and proposal costs, therefore it
is entitled to no monetary relief whatsoever.
B.
No Actual Bid Preparation and Proposal Costs Claimed
7
/ Defendant argues that certain threshold criteria for unsolicited proposals have not been
met by IDEA’s actions that are described in its request for bid preparation and proposal costs.
Def.’s Opp. at 7 & n.4. Because IDEA does not allege that it presented an unsolicited proposal
to the Air Force, the court need not reach this issue.
8
/ Requests for the award of attorney fees are a different matter which will be discussed
infra.
14
Even if IDEA could recover bid preparation and proposal costs in
circumstances where no draft proposal was created and no actual proposal was
submitted to the Air Force, the labor costs claimed by IDEA cannot be
characterized as falling within the types of costs that are recoverable as bid
preparation and proposal costs. As noted earlier in this opinion, bid preparation
may include generating engineering and cost data, reviewing specifications and bid
forms, drafting and printing a proposal, and delivering the proposal to a
government agency. IDEA’s “bid preparation” narrative does not describe such
activities,9 but instead describes general small business management activities such
as business planning and looking for business opportunities. See Pl.’s Reply at 11
n.16 (summarizing IDEA’s “bid preparation” activities as including “analysis,
budgeting, scheduling, partner identification, etc.”); Pl.’s Mot. at D-7 (identifying
tasks such as checking the FedBizOpps website twice a week). Because the types
of labor expended by Mr. Crain do not fall within the types of tasks included in the
definition of bid preparation, IDEA’s claim for bid preparation and proposal costs
must fail.
The court notes, too, that the types of tasks allegedly performed by Mr.
Crain have been rejected by this court and the GAO as clearly falling outside the
narrow category of bid preparation and proposal costs. IDEA’s claim includes
labor costs incurred for attending a contractor training class, Pl.’s Mot. at D-8,
which, as noted above, are not recoverable as bid preparation and proposal costs.
Many hours were expended visiting contacts at Scott Air Force Base and
attempting to call and email officials responsible for the CMAS program. Id. at D8 through D-9. These labor costs, as noted above, constitute marketing,
networking and direct selling costs, not bid preparation and proposal costs. IDEA
also claims to have incurred labor costs for deciding to compete for an anticipated
9
/ Although Mr. Crain states that he invested time “drafting tentative bid paragraphs[]
and the like,” Pl.’s Mot. at D-7, the court cannot conclude that this vague attestation indicates
that any recoverable bid preparation and proposal costs were incurred. Labor expended on
crafting “tentative bid paragraphs,” when no solicitation had issued, is more appropriately
characterized as business planning than as actual bid preparation, in the court’s view. In any
event, the court must agree with defendant that IDEA has failed to segregate alleged labor hours
spent on drafting “tentative bid paragraphs” from more general tasks described in its claim, and
that this failure forecloses any recovery for such labor costs. See Def.’s Opp. at 25-26 (“Mr.
Crain’s vague reference to ‘plan/prep’ does not allow the Government or the Court to determine
what activities were conducted, why they were necessary, or how they relate to IDEA’s
purported bid, so the costs must be denied.” (citing Lion Raisins, 52 Fed. Cl. at 636 n.8)).
15
CMAS competition, planning for the infrastructure needed to perform CMAS
services, considering possible sub-contractors, gathering information about recent
developments in the CMAS program, and monitoring FedBizOpps for any
announcements regarding a procurement of CMAS services. Id. at D-4 through
D-9. As discussed above, these costs constitute general business costs and
pre-contract costs, not bid preparation and proposal costs. Even if IDEA could
recover bid preparation and proposal costs where it has not submitted a bid to the
Air Force, its claim contains no actual bid preparation and proposal costs and must
be rejected for this reason as well.10
C.
Amounts Claimed Are Excessive
Finally, the court addresses defendant’s contention that even if IDEA’s
claimed costs were recoverable in some reasonable amount, the amount of costs
claimed by IDEA is not reasonable. Defendant’s challenge to the reasonableness
of the amount claimed is multi-faceted, but only two aspects of this challenge need
be addressed by the court – the government argues both that the hourly rate
charged for Mr. Crain’s labor is too high, and that the amount of time he claims to
have expended on certain activities is excessive. The court must agree with both
contentions of the government.
Plaintiff’s claim, at least as originally presented, charged between $96.61
and $97.85 per hour for Mr. Crain’s labor. Pl.’s Mot. at D-7. Although plaintiff
acknowledges that this rate might need to be reduced, no specific alternative figure
was proposed by IDEA. Pl.’s Reply at 20-22. The government states that an
appropriate cap on hourly rates for anyone performing such services would be no
higher than $62.06. Def.’s Opp. at 13 n.5 (citations omitted). The court notes that
another figure in the record, $80.90 per hour, may represent what IDEA charged
Harris for Mr. Crain’s time in 2007. Pl.’s Mot. at D-10. Even this figure,
10
/ Defendant raises a number of general arguments against IDEA’s bid preparation and
proposal costs claim. One of the principal arguments raised by the government is that the costs
claimed by IDEA are not allocable to the sole-source CMAS procurement conducted by the Air
Force. Def.’s Opp. at 9-10. Another principal argument is that the documentation submitted by
IDEA is insufficient to show that the identified labor costs were actually incurred by IDEA. Id.
at 10. Plaintiff disagrees with both of these contentions. Because neither of these disputes is
essential to the court’s resolution of IDEA’s claim, the court declines to address them in this
opinion.
16
however, is not indicative of the proper compensation rate, for two reasons. First,
the services IDEA provided Harris are not the same as the labor expended by Mr.
Crain in his efforts to position IDEA for a potential CMAS competition. Second,
the parties appear to agree that the rate of $80.90 per hour likely includes profit,
see Pl.’s Reply at 21, in which case the $80.90 per hour rate does not reflect Mr.
Crain’s actual compensation rate, see Def.’s Opp. at 12 (citing Rocky Mountain
Trading Co.-Sys. Div., GSBCA No. 8943-C, 89-3 BCA ¶ 22110 (July 26, 1989)).
The court, based on all of the evidence in the record and the parties’
arguments, concludes that IDEA has claimed an excessive hourly rate for Mr.
Crain, and that it is impossible to discern from IDEA’s submissions the correct,
actual rate of compensation for Mr. Crain’s services. This court, the General
Services Board of Contract Appeals and the GAO have consistently rejected bid
preparation and proposal costs claims when documentation substantiating the
actual hourly compensation rate of personnel has not been provided in the claim.
E.g., Impresa, 61 Fed. Cl. at 184; Rocky Mountain, 89-3 BCA ¶ 22110; John
Peeples, B-233167, 91-2 CPD ¶ 125, 1991 WL 162540, at *2 & n.2 (Comp. Gen.
Aug. 5, 1991); W.S. Spotswood & Sons, Inc., B-236713, 90-2 CPD ¶ 50, 1990 WL
293706, at *2 (Comp. Gen. July 19, 1990). Accordingly, even if IDEA’s bid
preparation and proposal costs claim were otherwise recoverable, the failure to
substantiate Mr. Crain’s hourly compensation rate dooms the entire claim.
Turning now to defendant’s contention that the hours of labor claimed for
certain of Mr. Crain’s tasks are not reasonable, the court must again agree. The
hours charged for visits to Scott Air Force Base, for phone calls to various Air
Force officials, for composing and sending email messages, and for monitoring the
FedBizOpps website all appear to the court to be excessive for the specific tasks
identified by plaintiff.11 In its reply brief, plaintiff argues that the hours expended
by Mr. Crain, when averaged, represent a reasonable weekly effort for the tasks
identified in IDEA’s claim. Pl.’s Reply at 10. This argument, in the court’s view,
is inapposite – plaintiff’s burden is to show, in adequately detailed documentation,
that a reasonable number of hours were spent on specifically identified tasks. See,
e.g., Impresa, 61 Fed. Cl. at 184 (requiring “specific documentary evidence” to
11
/ As defendant notes, the aggregation and imprecise description of multiple tasks in
line-items of charged labor renders the analysis of the reasonableness of these labor hours
extremely difficult. Def.’s Opp. at 17.
17
support a bid preparation and proposal costs claim); Lion Raisins, 52 Fed. Cl. at
636 (“It is axiomatic that in order to meet its burden of proof, a claimant must
provide document[ation] sufficiently detailed so as to allow the court to determine
the reasonableness of the costs claimed.”) (citations omitted); Stocker & Yale, 1993
WL 181158, at *7 (refusing to award costs “which appear to be excessive or
otherwise unreasonable”) (citation omitted). Because the documentation provided
by IDEA shows that certain specific charges for labor hours are excessive for the
tasks described, plaintiff’s claim for bid preparation and proposal costs is not
reasonable.
Plaintiff attempts to refute defendant’s pointed criticism of IDEA’s
excessive labor charges, arguing that some entries in IDEA’s bid preparation and
proposal costs claim have been misconstrued by the government as excessive. For
example, according to plaintiff, labor charges for networking visits should be read
to include travel time, Pl.’s Reply at 13; a seven-hour labor charge for a telephone
call should be read to include both the seven-minute phone call and several hours
of post-call analytical tasks performed by Mr. Crain, id. at 16; and aggregate
amounts of time for planning, preparation, and website monitoring, in monthly
line-item blocks as large as 11.5 hours, should be read as having been
appropriately divided, each week of that month, between these activities, id. at 17.
Having considered all of the parties’ arguments, the court must conclude that the
aggregated accounting of Mr. Crain’s labor, even as further explained in plaintiff’s
reply brief, presents excessive labor charges for the activities identified in IDEA’s
bid preparation and proposal costs claim. The accounting presented to the court
does not meet plaintiff’s burden to show that its claimed costs are reasonable.
Thus, even if plaintiff’s costs claim were otherwise recoverable, a significant
portion of that claim would be rejected as unreasonable and excessive.
V.
Attorney Fees
The court notes that the complaint’s prayer for relief contains a request for
attorney fees. Compl. ¶ 81(F). The court has not permitted briefing of this issue to
date, for two reasons. First, a request for attorney fees is not ripe until final
judgment has been entered in an action. See Rule 54 of the Rules of the United
States Court of Federal Claims. Second, the disposition of plaintiff’s claim for bid
preparation and proposal costs would provide a crucial indicator of the measure of
IDEA’s success in this suit. For example, if a bid protestor such as IDEA obtained
no monetary relief for bid preparation and proposal costs, after having being
18
denied injunctive relief because its claims for injunctive relief were moot, there is
binding precedent which holds that such a plaintiff would not be a prevailing party
entitled to recover any attorney fees. See, e.g., Farrar v. Hobby, 506 U.S. 103, 111
(1992) (holding that “a plaintiff ‘prevails’ when actual relief on the merits of his
claim materially alters the legal relationship between the parties by modifying the
defendant’s behavior in a way that directly benefits the plaintiff”); Singer v. Office
of Senate Sergeant at Arms, 173 F.3d 837, 841 (Fed. Cir. 1999) (same). While this
court does not presume to know exactly what legal arguments counsel might
present, the court observes that because IDEA received neither injunctive nor
monetary relief in this suit, the court would be obliged to apply and to follow this
binding precedent in ruling on a motion for the award of attorney fees, should such
a motion be filed.
CONCLUSION
IDEA has not shown that it is entitled to any bid preparation and proposal
costs in this bid protest. All claims in this case have now been resolved and final
judgment must be entered. Accordingly, it is hereby ORDERED that
(1)
Plaintiff’s Motion for the Award of Bid Preparation Costs, filed May
10, 2013, is DENIED;
(2)
The Clerk’s Office shall ENTER final judgment on the claims in the
complaint, as set forth in the court’s opinion and order of January 29,
2013, as well as for defendant as to plaintiff’s request for bid
preparation and proposal costs; and
(3)
No costs to either party.
/s/Lynn J. Bush
LYNN J. BUSH
Senior Judge
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