INSIGHT SYSTEMS CORP. v. USA

Filing 75

(REDACTED)OPINION re: 74 SEALED**OPINION and ORDER denying 58 Motion for Attorney Fees; denying 59 Motion for Attorney Fees; denying 63 Motion for bid preparation and proposal costs. Signed by Judge Francis M. Allegra. (si) Copy to parties.

In the United States Court of Federal Claims
Nos. 12-863C and 12-883C
(Filed Under Seal: April 25, 2014)
Reissued: May 12, 2014 1
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INSIGHT SYSTEMS CORP., and
CENTERSCOPE TECHNOLOGIES,
INC.,

Plaintiffs,
v.
THE UNITED STATES,
Defendant.

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Bid protest case; Application for attorney’s
fees; Equal Access to Justice Act – 28 U.S.C.
§ 2412(d)(1)(A); Position of the United States
was substantially justified; Motion for bid
preparation and proposal costs; Jurisdiction
existed to award costs even after the entry of a
permanent injunction; Costs not awarded
where protestor fails to demonstrate that it
unnecessarily incurred bid preparation and
proposal costs.

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OPINION and ORDER
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Richard J. Webber, Arent Fox, LLP, Washington, D.C., for Insight Systems Corporation;
John R. Tolle, Barton, Baker, Thomas and Tolle, LLP, McLean, VA, for CenterScope
Technologies, Inc.
Matthew Paul Roche, Civil Division, United States Department of Justice, with whom
was Assistant Attorney General Stuart F. Delery, for defendant.
ALLEGRA, Judge:
Before the court, in these bid protest cases, are motions for attorney’s fees filed by both
plaintiffs, and a motion for bid preparation and proposal costs filed by plaintiff CenterScope
Technologies, Inc. (CenterScope).

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An unredacted version of this opinion was issued under seal on April 25, 2014. The
parties were given an opportunity to propose redactions, but no such proposals were made.
Nevertheless, the court has incorporated some minor changes into this opinion.

I.
On December 11, 2012, and December 14, 2012, Insight Systems Corp. (Insight) and
CenterScope filed complaints, respectively, in this court. On December 21, 2012, the court
consolidated the cases. On April 22, 2013, this court granted plaintiffs’ motions for judgment on
the administrative record and denied defendant’s cross-motion. Insight Systems Corp. v. United
States, 110 Fed. Cl. 564 (2013). The court issued a permanent injunction precluding the United
States Agency for International Development (USAID) from proceeding with the procurement at
issue absent complying with the terms of the injunction. Id. Although not provided for in this
court’s order, on April 23, 2013, the Clerk issued a judgment in both cases.
On July 12, 2013, and July 19, 2013, Insight and CenterScope moved, respectively, for
attorney’s fees, pursuant to RCFC 54(d)(2) and the Equal Access to Justice Act (EAJA), 28
U.S.C. § 2412(d)(1)(A). On August 5, 2013, USAID informed all concerned parties that it was
cancelling the procurement and intended to issue a new solicitation in 2014 “for a larger, small
business set-aside procurement that will entail a changed scope of work.” USAID also stated
that it intended to “incorporate all the present requirements of the cancelled procurement into the
new solicitation.” On September 18, 2013, CenterScope filed a motion for award of bid
preparation and proposal costs. Briefing on both motions was thereafter completed.
On December 6, 2013, this court ordered defendant to file a status report indicating the
progress of USAID’s new procurement following its cancellation of the old solicitation. On
December 19, 2013, defendant reported that USAID was proceeding with a follow-on
procurement and had posted on November 22, 2013, an expression of interest (EOI) on the
FedBizOpps.gov website for solicitation number SOL-OAA-14-000024 (Global Health Services
III). Defendant further reported that “USAID received 22 responses from small businesses,
including from Insight Systems Corp., but not from CenterScope Technologies, Inc.”
On February 26, 2014, this court ordered an additional update by defendant on the status
of the new procurement. On March 21, 2014, defendant filed a status report indicating that on
March 7, 2014, USAID issued a Request for Proposals (RFP) on the FedBizzOpps.gov website
for the Global Health Services III solicitation. That RFP stated that USAID intends to award a
cost-plus, fixed-fee term contract for a term of five years. Further, the procurement would be “a
total small business set-aside,” with proposals due by April 7, 2014. On March 24, 2014,
CenterScope responded to defendant’s status report indicating that under the North American
Industry Classification System (NAICS), it would “not be able to certify that it is small” for
purposes of the Global Health Services III RFP and thus would be unable to submit a proposal.
CenterScope provided no further facts or explanation as to why this may be the case. On April 1,
2014, defendant responded to CenterScope’s report, asserting that the contractor’s claim that it
could not submit a proposal was “unsupported” and “contradicted by CenterScope’s certification
in the Federal Government’s System for Award Management (SAM) online database,
www.SAM.gov, and by its representations to the [c]ourt.” Defendant also noted that the NAICS

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code for the new procurement is 541990, which is the same code under which CenterScope
claimed small-business eligibility in its SAM certification.
Argument on the pending motions is deemed unnecessary.
II.
The court turns first to plaintiffs’ motions for attorney’s fees. As a threshold matter, this
court must determine whether the position of the United States in this case was substantially
justified. The Equal Access to Justice Act (EAJA), 28 U.S.C. § 2412(d)(1)(A), states, in
pertinent part, that “a court shall award to a prevailing party other than the United States fees and
other expenses, . . . unless the court finds that the position of the United States was substantially
justified or that special circumstances make an award unjust.” Defendant bears the burden of
proving that its position was substantially justified. See Helfer v. West, 174 F.3d 1332, 1336
(Fed. Cir. 1999); Doty v. United States, 71 F.3d 384, 385 (Fed. Cir. 1995); Abramson v. United
States, 45 Fed. Cl. 149, 152 (1999). It must show that its position throughout the dispute was
“‘justified in substance or in the main’ – that is, justified to a degree that could satisfy a
reasonable person.” Pierce v. Underwood, 487 U.S. 552, 565 (1988); see also Chiu v. United
States, 948 F.2d 711, 715 (Fed. Cir. 1991). Such an inquiry focuses not only on the position
taken by the Justice Department before this court, but also on the agency’s prelitigation conduct.
See Comm’r of I.N.S. v. Jean, 496 U.S. 154, 159 (1990); Hubbard v. United States, 480 F.3d
1327, 1332 (Fed. Cir. 2007); Smith v. Principi, 343 F.3d 1358, 1361-62 (Fed. Cir. 2003).
The Supreme Court has instructed that the Government’s “position can be justified even
though it is not correct,” requiring that that position have a “reasonable basis in law and fact.”
Pierce, 487 U.S. 566 n.2; see also Norris v. S.E.C., 695 F.3d 1261, 1265 (Fed. Cir. 2012). The
courts have been particularly hesitant to impose attorney’s fees in matters of first impression.
See White v. Nicholson, 412 F.3d 1314, 1316 (Fed. Cir. 2005); Luciano Pisoni Fabbrica
Accessori Instrumenti Musicali v. United States, 837 F.2d 465, 467 (Fed. Cir. 1988); Gava v.
United States, 699 F.2d 1367, 1371 (Fed. Cir. 1983); see also Marcus v. Shalala, 17 F.3d 1033,
1037 (7th Cir. 1994). Indeed, the legislative history of EAJA makes clear that the governing
standard allows defendant to advance “‘in good faith . . . novel but credible . . . interpretations of
the law.’” Russell v. Nat’l Mediation Bd., 775 F.2d 1284, 1290 (5th Cir. 1985) (quoting H.R.
Rep. No. 80-1418 at 11 (1980)); see also Renee v. Duncan, 686 F.3d 1002, 1017 (9th Cir. 2012).
The instant case presented a matter of first impression to this court. The factual situation
here was somewhat unique, requiring the court, inter alia, to order defendant to file, as part of
the administrative record, the contracts and procedures governing its mail servers. Although this
court found that the agency’s actions were contrary to the Federal Acquisition Regulations, and
arbitrary and capricious, there was little decisional guidance that previously would have signaled
this conclusion. Defendant advanced arguments in support of the actions taken below that relied
on prior decisions of this court and the General Accountability Office. See, e.g., ConscoopConsorzia v. United States, 62 Fed. Cl. 219, 239-40 (2004); Sea Box, Inc., 2002 C.P.D. ¶ 181
(2002). Although the court concluded that, based upon the language of the regulations, those
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decisions were wrong (or in the case of Conscoop-Consorzia at least distinguishable), it cannot
say that defendant’s reliance on these prior opinions was not substantially justified. See Devine
v. Sutermeister, 733 F.2d 892, 895 (Fed. Cir. 1984) (“[T]he justification for the government’s
litigating position must be measured against the law as it existed . . . , and not against the new
law enunciated by the court in its opinion.”); see also Watterson Constr. Co. v. United States,
106 Fed. Cl. 609, 618 (2012). In these circumstances, the court concludes that the position of the
United States in this litigation was substantially justified and that an award of attorney’s fees is,
therefore, inappropriate.
III.
Only CenterScope seeks bid preparation and proposal costs.
Following the court’s April 22, 2013, order, the Clerk entered judgment pursuant to
RCFC 58. Defendant argues that this case is now “closed” and asserts that the court does not
have jurisdiction under 28 U.S.C. § 1491(b)(2) to determine whether CenterScope is entitled to
monetary relief. Contrary to defendant’s claims, the entry of a permanent injunction in a case,
whether succeeded vel non by the Clerk’s filing of a judgment under RCFC 58, does not deprive
this court of further jurisdiction over the case. The continuing responsibility of this court over its
decrees “is a necessary concomitant of the prospective operation of equitable relief,” 11A
Charles Alan Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice and Procedure, §
2961 (2014), and has its roots in the power of courts to modify decrees “as events may shape the
need.” United States v. Swift & Co., 286 U.S. 106, 114 (1932). In the court’s view, nothing
about the Clerk’s pro forma entry of a judgment under RCFC 58, prevents this court from
revisiting its decree in a bid protest case to address subsequent events. See RCFC 60, 65; see
also CNA Corp. v. United States, 83 Fed. Cl. 1, 5-6 (2008) (discussing this court’s ability to
award bid preparation and proposal costs after the entry of a judgment under RCFC 58). A
contrary ruling might encourage an agency to play a procurement version of thimblerig –
indicating that a new procurement was anticipated, only to proceed otherwise after the time for
bid preparation and proposal costs has run.
The problem with CenterScope’s request for costs is not jurisdictional, then, but rather
the fact that CenterScope has not met its evidentiary burden. “Bid preparation and proposal costs
can be awarded by courts as an appropriate way to try to compensate, at least in part, a victim of
unjust government action during the procurement process.” CNA Corp., 83 Fed. Cl. at 11.
Those costs are recoverable only if three conditions are satisfied: (i) the agency has committed a
prejudicial error in conducting the procurement; (ii) that error caused the protester to incur
unnecessarily bid preparation and proposal costs; and (iii) the costs to be recovered are both
reasonable and allocable, i.e., incurred specifically for the contract in question. Reema
Consulting Servs., Inc. v. United States, 107 Fed. Cl. 519, 532 (2012) (citing cases); see also
Caddell Constr. Co., Inc. v. United States, 111 Fed. Cl. 49, 119 (2013). The second prong of this
analysis, with its causation requirement, does not permit a protester to recover compensation if
the costs wasted on the initial procurement become necessary in a second procurement. See
Reema, 107 Fed. Cl. at 532; CNA, 107 Fed. Cl. at 11.
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In the case sub judice, CenterScope initially claimed that it was entitled to bid preparation
and proposal costs because USAID decided to cancel the first procurement. In its motion, it
indicated that “[i]f the Agency would not have cancelled the procurement, [CenterScope’s] bid
preparation and proposal costs would not have been unnecessarily incurred.” However, plaintiff
continued to seek those costs even after the agency, as it had previously indicated it would do,
initiated a second procurement covering essentially the same subject matter as the first (enjoined)
procurement. CenterScope claimed that it could not submit a proposal in response to this second
RFP because it could not certify that it was a small business under the NAICS code that is the
subject of the procurement. However, it provided no factual support for this claim – and
defendant supplied evidence to refute this claim.
Because CenterScope has failed to show that it could not participate in the second
procurement, the court finds that it has not shown that the error previously documented caused it
to incur unnecessarily bid preparation and proposal costs. Rather, it would appear that
CenterScope, had it chosen, could have used materials prepared for the first procurement in the
second. Accordingly, those costs were not rendered unnecessary by the agency’s prior error. At
the least, CenterScope has not shown otherwise. As such, the court finds that CenterScope is not
entitled to recover bid preparation and proposals costs in this action. Compare Bannum, Inc. v.
United States, 56 Fed. Cl. 453, 462 (2003) (“If plaintiff becomes a disappointed offeror because
another vendor is awarded the contract or if the solicitation is cancelled, it could be entitled to
bid preparation costs if it could show in those circumstances that the government action was
illegal and that it was prejudiced by the illegality.”).
Based on the foregoing, the court hereby DENIES plaintiffs’ motions for attorney’s fees
and DENIES CenterScope’s motion for bid preparation and proposal costs. 2
IT IS SO ORDERED.

s/Francis M. Allegra
Francis M. Allegra
Judge

2

This opinion and order shall be published, as issued, after May 9, 2014, unless the
parties identify protected and/or privileged materials subject to redaction prior to that date. Any
such materials shall be identified with specificity, both in terms of the language to be redacted
and the reasons for each redaction (including appropriate citations to authority).

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