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No Requirement to Discuss JV Member’s Limited Past Performance Where JV Team Is Assigned an Overall Favorable Rating; GAO B-416297.2, Cyber Protection Technologies, LLC

Protest challenging the agency’s evaluation and discussions is denied, where the protester failed to demonstrate it was prejudiced by the agency’s waiver of a SAM registration requirement for the awardee, and where the agency reasonably found the protester’s limited past performance presented a risk, even though it favorably evaluated the overall past performance of the protester’s team. Because the agency rated the protester’s overall past performance favorably, and assessed no significant weaknesses or strengths, GAO concluded the agency wasn’t required to hold discussions with the protester.

Cyber Protection Technologies LLC protested the Air Force’s award of a contract for defensive cyber realization, integration, and operational support to Cyber Systems & Services Solutions LLC. CPT challenges CS3’s eligibility for the procurement as well as the reasonableness of the Air Force’s evaluation, discussions, and best value tradeoff.

First, CPT alleged the Air Force should have found CS3 technically unacceptable or otherwise ineligible for the award because CS3 did not adhere to the FAR requirement to disclose its status as a joint venture or the identity of its corporate parents in the System for Award Management. As a result of CS3’s allegedly invalid SAM registration, CPT argued it was precluded from contesting the intervenor’s size and eligibility for award.

GAO denied this protest ground, finding that CPT failed to demonstrate that it was prejudiced by the Air Force’s waiver of the SAM registration requirement. GAO also found that CPT failed to establish how the awardee had a competitive advantage based on its SAM registration and failed to explain how it would have amended its proposal had it known that the agency would not strictly enforce the SAM registration requirements.

In challenging the agency’s past performance evaluation, CPT argued that the agency unreasonably focused on subareas of past performance set forth in the RFP’s Relevancy Assessment Matrix instead of considering the cumulative performance of its team. CPT also argued that the Air Force failed to conduct meaningful discussions regarding the protester’s allegedly limited past performance.

In response, to the Air Force maintained that it reasonably assigned CPT and its team an overall cumulative past performance confidence rating of satisfactory. According to the agency, while the demonstrated experience of CPT’s team was comprehensive in all areas, CPT’s own limited experience relative to the evaluated experience areas presented risk to the government. The Air Force also noted that it did not identify any deficiencies, significant weaknesses, or adverse past performance information which would have required it to raise the matter of CPT’s relatively limited past performance, especially where the agency favorably evaluated CPT under the past performance factor.

GAO denied both protest grounds. GAO found the Air Force reasonably considered the past performance areas for the CPT team, as well as the distribution of the team’s relevant past performance compared to the anticipated division of work. GAO also agreed with the Air Force that the agency was not required to enter discussions with CTP regarding its past performance.

Cyber Protection Technologies LLC is represented by Mark H. Wilson of Whitcomb, Selinsky, McAuliffe, PC. Cyber Systems & Services Solutions LLC is represented by Katherine B. Burrows, Stephen P. Ramaley, and Christopher Denny of Miles & Stockbridge P.C. The government is represented by Alexis J. Bernstein, Lieutenant Colonel Damund E. Williams, Lieutenant Colonel Byron Shibata, and Kelvin D. Tuckett, Department of the Air Force. GAO attorneys Evan D. Wesser and Edward Goldstein participated in the preparation of the decision.

Plaintiff Adequately Presented Claim That Deteriorating Security Conditions Represented Cardinal Change to the Contract; COFC No. 17-1968C, Planate Management Group v. United States

Government’s partial motion to dismiss is denied, where the court found the plaintiff had presented to the contracting officer its claims for breach of the implied duty of good faith and fair dealing and cardinal change. The government alleged the plaintiff’s claim had not alleged the government interfered with contract performance nor that the requirements had materially changed, but the court found the claim addressed the deteriorating security conditions in Afghanistan, the military’s advice to the plaintiff to arm its personnel, and the military’s inability to provide armed escorts every time they were required.

In a suit before the Court of Federal Claims, Planate Management Group LLC argued the Army breached its contract to provide professional support services throughout Afghanistan by failing to reimburse Planate for the cost of arming its personnel with personal protection weapons. Plaintiff pled five alternative counts for relief, and sought damages of $84,864.85, attorney’s fees, costs, and prejudgment and post-judgment interest.

In this portion of proceedings, the government moved to dismiss two counts for lack of subject matter jurisdiction, and to merge two counts.

As part of contract performance, Planate personnel were embedded within military forces and were engaged in both field and office work. The military provided transportation for Planate personnel from their main work site to other locations, but Planate was expected to provide its own personal protective equipment and cell phones, and other equipment necessary to perform the services.

Prior to the start of performance, the military unit within which Planate was embedded was subject to an attack, and the chief of staff state his desire for all contractor personnel to be armed. The contracting officer’s representative recommended that Planate arm its staff, but no written agreement was signed. Further, when traveling with military personnel, Planate’s employees were required to assist with the defense of any vehicle that became disabled. Due to the continuing deterioration of safety conditions, the unit commander issued a directive requiring all personnel to travel in pairs, abide by a curfew, and limit travel. While active duty military personnel initially provided the required additional protection, Planate’s personnel did not have military escorts or other security personnel with them at all times.

At this time, Planate began discussions with the contracting officer regarding arming its in-theater staff, and when the contract’s first option year was exercised, it was modified to include authorized weapons for Planate personnel, which were to be provided by the military on an as-available basis. However, the contract modification did not include a line item for plaintiff to procure and manage weapons for its team despite Planate’s understanding that it would. The CO expressed a willingness to negotiate a weapons modification that included reimbursement for the cost of arming personnel but stated that approval from a higher authority was necessary because weapons were not within the scope of the contract.

Planate later provided guns and ancillary equipment to each of its in-theater personnel and submitted a request for equitable adjustment of $76,574.00 due to additional and unexpected costs related to personnel self-defense. Planate explained that the costs were not foreseeable because weapons were not authorized during original proposal development. However, there was no evidence the CO ever responded. A second REA followed, which was denied.

Planate submitted a formal claim, arguing that the change in the security situation represented a constructive change under the contract, as the true security risks were not understood by the government, reflected in the solicitation, nor communicated to offerors. Planate argued this constituted a mutual mistake of the parties. The CO denied the claim, explaining that Planate had not submitted its request to arm its personnel to the CO, was not so directed by any government employee with authority to do so, and had not contractual requirement or authorization to do so. The CO also argued Planate made no effort to raise the supposedly changed security arrangements nor communicate that the alleged changes compelled the company to arm its employees. According to the CO, the costs could have been avoided had Planate raised them properly when the issue was timely. This complaint followed.

In its complaint, Planate asserted five counts for relief, including an appeal of the final decision, breach of contract, breach of the covenant of good faith and fair dealing, constructive change, and cardinal change. Planate seeks $84,864.85 in damages plus attorney fees, costs, and prejudgment and postjudgment interest.

The government moved to dismiss Count III (breach of the covenant of good faith and fair dealing) and Count V (cardinal change) for lack of jurisdiction, arguing that they were not submitted to the CO. The government also moved to merge the appeal of the COFD and breach of contract claim.

The court denied the government’s motion to dismiss Counts III and V, concluding that these claims were before the contracting officer. The court noted that the implied duty of good faith and fair dealing is also referred o as the implied duty not to hinder and the implied duty to cooperate. Planate argued the government breached these duties by requiring Planate to arm its personnel and then failing to provide reimbursement. The government argued this complaint relied on a separate legal theory, as Planate did not allege to the CO that the government interfered with contract performance.

However, the court disagreed, noting that Planate’s certified claim highlighted the various force protection directives issued during contract performance and explained that because the military did not always have active duty personnel available to provide armed escorts, it was required to arm its own personnel to comply with the force protection directives. Planate’s certified claim also explicitly referred, in its certified claim the CO’s denial of its REA, as well as the contract modification in which it received authorization to arm its personnel but not the funds to do so. Therefore, the court held that Planate’s contention that defendant did not—by failure and later outright refusal—compensate plaintiff for arming its personnel was before the contracting officer.

The court also agreed that Planate had presented its claim of cardinal change to the CO. The government argued that the certified claim did not discuss an important aspect of a cardinal change: that the change be ‘materially different’ from what was bargained for in the contract. However, the court noted Planate discussed the change in the security environment, the advice of the unit chief of staff that it should arm its personnel, and the increased costs. The court found this narrative presented the cardinal change claim to the CO.

Finally, Planate argued against the government’s motion to merge Counts I and II, but the court found the theories and factual bases were the same and, if proven, would result in the same relief.

Planate Management Group is represented by Ryan C. Berry. The government is represented by Sean L. King, Department of Justice.

Government Cannot Offset Damages for Nonrecoverable Equipment Costs 18 Months After Close of Record; ASBCA No. 59233, Appeal of 2Connect W.L.L.

The government’s request that the Armed Services Board of Contract Appeals reconsider the amount of damages owed to the appellant for nonrecoverable equipment costs is denied, where evidence created more than 18 months after the close of the record cannot be used as a basis for reconsideration and where the sale of the appellant’s assets to another firm did not include the equipment in dispute.

The Defense Information Systems Agency moved the Armed Services Board of Contract Appeals to reconsider its earlier decision as to quantum in 2Connect W.L.L.’s appeal of the contracting officer’s final decision denying its claim for nonrecoverable equipment costs. After the close of the record, 2Connect was sold and the government wished to offset the amount of damages awarded to 2Connect by the amount the appellant received for the related equipment. Because the government relied on evidence created after the record had closed and requested that the board allow post-judgment discovery, the board treated the motion as a request for post-judgment relief.

The case involved costs associated with an Irrevocable Right of Use, an exclusive, long-term lease of a specified portion of a telecommunications cable. In its earlier decision, ASBCA concluded that 2Connect had proved that it incurred $2,274,015 in nonrecoverable equipment costs resulting from the cancellation of its contract. The board concluded the costs were reasonably incurred and that the equipment had no foreseeable reuse.

More than one year after the record in this appeal closed, 2Connect’s telecommunications license was revoked and the company decided to sell its assets to another firm. 2Connect later submitted a novation agreement notifying the government of this action and assigning its successor the rights and interests to any contracts between 2Connect and the government.

The government argued that the novation agreement showed that 2Connect sold the IRU in dispute for a value that was not subtracted from the government’s liability. Because the board concluded the IRU had no foreseeable reuse, the government argued that any proceeds from the sale of the IRU should be used to reduce the damages. Further, the government argued that because of the sale, it may no longer have access to the IRU at no charge. The government requested post-judgment discovery and reconsideration of the board’s decision as to quantum.

In response, 2Connect argued that evidence created after a hearing has ended cannot serve as the basis for reconsideration. Further, the appellant argued that it did not sell the IRU at issue, because the business transfer agreement references two different IRUs.

The board agreed that evidence created nearly 18 months after the close of the record can not be used as the basis for a motion for reconsideration. Even if this evidence could be used, the board noted that the government must show that the evidence is likely to produce a different result. However, the board found the evidence did not support this contention.

First, the board found that 2Connect’s business documents did not indicate that the IRU at issue was part of the asset transfer. The disputed IRU telecommunications circuit was to connect Manama, Bahrain and Camp Lemonier, Djibouti, while the business documents indicated other locations.

The board also noted that if the government had a genuine interest in the IRU, the question of the government’s access to the IRU could and should have been addressed by the government as a matter of contract administration at the time appellant and its successor proffered the novation agreement for execution. The board explained that a motion for reconsideration does not function as a vehicle for redressing oversights in contract administration.

2Connect W.L.L. is represented by Shelly L. Ewald of Watt, Tieder, Hoffar & Fitzgerald, L.L.P. The government is represented by William E. Brazis, Jr., DISA General Counsel, and Travis L. Vaughan, Trial Attorney, Defense Information Systems Agency.

Awardee Demonstrates Adequate Staffing Resources And ‘Reach Back’ Capabilities to Provide Surge Support for Services Contract; GAO B-416203, Metro Productions Government Services LLC

Protest challenging agency’s evaluation and award decision is denied, where the solicitation directed offerors to propose their own mix of staffing level, labor categories, and staffing to meet the requirement, and where the agency reasonably evaluated the risk in the awardee’s lower staffing levels and found it to be only moderate.

Metro Productions Government Services LLC protested the Army’s award of a contract for communications support services to District Communications Group, arguing that the Amy misevaluated technical proposals, failed to evaluate offerors on a common basis, and made a flawed best value determination.

First, Metro argued that the Army failed to properly evaluate the risk associated with DCG’s inadequate staffing levels and that the experience proposed by DCG failed to comply with the solicitation’s minimum requirements. In response, the Army explained that the solicitation did not establish any minimum staffing levels or labor hour requirement; instead, the solicitation permitted offerors to determine the appropriate staffing levels, labor categories, and personnel. The Army further argued that it properly considered the risk associated with DCG’s proposed staffing, labor hours, and personnel. Additionally, the Army noted that DCG submitted resumes demonstrating that its proposed personnel met the solicitation’s experience requirements.

GAO sided with the agency. GAO found that DCG’s offer adequately laid our proposed labor categories, associated descriptions, experience, and labor hours. GAO also found that the Army reasonably concluded that DCG’s risk of unsuccessful performance was no worse than moderate.  As to the experience of DCG’s proposed personnel, GAO concluded that it had no basis to find that the agency should have concluded that DCG’s personnel failed to meet the solicitation’s experience requirements.

Next, Metro argued the Army permitted DCG to take exception to the solicitation’s ground rules when it accepted DCG’s proposal to meet only a subset of the work required. According to Metro, DCG proposed an inadequate number of labor hours and staff to fill certain requirements and at the same time promised to meet additional contract requirements by bringing n personnel after award. Metro alleged that DCG bid on portions of requirements that it knew and understood and then hedged against uncertainty by stating that it could bring on more resources to cover requirements not included in its bid.

However, GAO noted that the solicitation did not require offerors to propose to a common standard, and did not establish minimum staffing hours or a minimum labor hour requirement. Instead, the agency expected the contractor to determine the appropriate staffing levels, labor category, and labor mix.

GAO noted that Metro’s complaint was rooted in the differences in the offerors’ proposals. DCG bid on the portion of requirements that it knew and understood and then hedged against the uncertainty by stating that it could bring on more resources later when necessary to cover the remaining requirements that it did not include in its bid. DCG proposed to use “reach-back” capabilities to backfill staff to provide surge support depending on the volume and complexity of the Army’s needs. GAO found that any alleged differences in the Army’s evaluation of proposals were due to differences between the offers.

Metro Productions Government Services LLC is represented by Jeffery M. Chiow, Lucas T. Hanback, and Neil H. O’Donnell of Rogers Joseph O’Donnell, PC. The District Communications Group LLC is represented by H. Todd Whay of Whay Law Firm. The government is represented by Jonathan A. Hardage, Department of the Army. GAO attorneys Young S. Lee and Peter H. Tran participated in the preparation of the decision.

Requirement to Work at Government Facility Using Government-Owned Equipment Insufficient to Convert Independent Contractor to Employee; CAFC 2017-1643, Seh Ahn Lee, et al. v. United States

The Court of Appeals for the Federal Circuit affirmed the Court of Federal Claims’ dismissal of a complaint alleging the agency improperly used individual purchase order contracts to obtain personal services, finding that the plaintiffs’ contracts were not voided by the alleged improprieties, that no implied-in-fact contract existed, and that the plaintiffs had failed to demonstrate the government exercised improper control over their performance, such that it converted their status from independent contractor to employee.

Seh Ahn Lee, Irina Ryan, Ahman Nariman, and Mark Peach sued the Broadcasting Board of Governors, arguing that the services they provided to the Voice of America broadcast service should have been retained through personal services contracts, instead of individual purchase order vendor contracts. Alternatively, the plaintiffs argued they should have been appointed to positions in the civil service.

Each of the plaintiffs entered into agreements to provide services to VOA through a series of individual purchase order vendor contracts with the Broadcasting Board of Governors. According to the plaintiffs, had their contracts been classified as personal services contracts or they had been appointed to civil service positions, the plaintiffs alleged, they would have enjoyed enhanced compensation and benefits. Previously, the Court of Federal Claims dismissed the complaint and denied a request to file a second amended complaint. On appeal, the plaintiffs raised several contract-based claims, seeking damages for the loss of the additional compensation and benefits to which they contend they were entitled.

The original action followed a report from the Department of State Office of Inspector General criticizing BBG’s use of POV contracts and concluding that BBG used such contracts in some cases to obtain personal services. The plaintiffs argued the use of POV contracts was improper and that they were entitled to be treated as federal employees.  The plaintiffs sought damages based on three theories: breach of express contract, breach of implied-in-fact contract, and quantum meruit.

COFC dismissed the first amended complaint, finding that the plaintiffs’ breach of contract claim was not based on an entitlement to money damages under these express contracts, but instead was based on an implied contract theory under which they alleged they were entitled to additional pay and benefits. COFC also held that the plaintiffs failed to make a nonfrivolous claim of an implied-in-fact contract with the government above and beyond the provisions of their express contracts. Finally, the court explained that it generally lacks jurisdiction over quantum meruit, or implied-in-law, contracts, unless an express contract had been invalidated.

COFC also denied the plaintiff’s motion to amend their complaint, finding they still failed to state a claim for breach of express contract; had not sufficiently alleged a basis for finding that their express contracts were void or that an implied-in-fact contract existed apart from their express contracts; and again failed to plausibly allege that the plaintiffs’ express contracts were void or that the plaintiffs had not been paid the contract rate in full. The plaintiffs appealed both decisions.

First, the plaintiffs argued COFC erred in dismissing the claim for breach of express contract and in denying the leave to amend. In support of the breach of express contract theory, the plaintiffs argued that the scope of their work was “materially limited” by the use of terms such as “independent contracting” and “non-personal services” in their contracts. According to the plaintiffs, the BBG “breached these limits” in its administration of the contracts.

However, the appeals court noted the first amended complaint did not allege that the government breached their contracts by requiring them to provide personal services outside the terms of the contracts. Instead, the complaint alleged BBG breached its contractual obligation to compensate them as if they were either federal employees or had been retained under personal services contracts. As relief, the plaintiffs sought back pay and other damages. The appeals court agreed with COFC that the plaintiffs ignored the fact that their contracts specifically designated them as independent contractors who were not providing personal services and set forth their compensation accordingly. The appeals court held that COFC properly found that BBG had not breached any contractual obligations on their express contracts.

Next, the plaintiffs argued the court erred in finding that its proposed second amended complaint failed to state a claim for breach of express contract, and was therefore futile. The appeals court found the amended complaint took a different approach. Instead of asserting that the contracts required the plaintiffs to perform personal services for which they were not properly compensated, the proposed second amended complaint alleged that the plaintiffs’ express contracts promised to allow them to serve as independent contractors, with a scope of work that was limited to ‘nonpersonal’ services.

The plaintiffs argued independent contractors normally have a high degree of independence in choosing the time, place, and manner of service, and have the right “to work independently of the client’s direct supervision, and to keep charge of their own schedules. According to the complaint, BBG breached the express contracts by denying the plaintiffs virtually every material right and benefit of being an independent contractor, such as working from their own preferred locations, using their own equipment, and working with other clients.

COFC found the contractual language contradicted the plaintiffs’ assertion that they were entitled to certain rights and benefits as independent contractors. The contracts expressly required the plaintiffs to perform their services on-site using government equipment; stated that the plaintiffs would be subject to regular review of their work; and asserted the government’s right to inspect, accept, or reject the work. COFC found the plaintiffs had not plausibly alleged that the government’s supervision was so pervasive that it constituted supervision or control to the extent that it breached the contract. Rather, the court concluded that the allegations fell within the scope of review and compliance commensurate with the government’s right and obligation to inspect and accept or reject contractors’ work.

The appeals court found no error in this reasoning. On appeal, the plaintiffs failed to identify any specific provision of the contracts that was breached, but instead relied on general allegations regarding the rights normally enjoyed by independent contractors. Those allegations, however, were not tied to the rights and obligations of the parties defined by the contracts.

Next, the plaintiffs appealed COFC’s rejection of their argument that they served under implied-in-fact contracts and that BBG was liable to them under the implied-in-fact contract theory of quantum meruit for the value of the personal services they provided. In the proposed second amended complaint, the plaintiffs set out their breach of implied contract and quantum meruit theories as separate claims. They alleged that the contracts violated a legal prohibition on acquiring personal services by contract, and that the contracts were therefore void or voidable. Under their implied-in-fact and quantum meruit theories of relief, the plaintiffs alleged that in place of the void contracts the court should provide implied terms, including a term that would compensate them for the fair market value of their services.

The plaintiffs also alleged that at various points one of the plaintiffs’ contracts would lapse before a subsequent contract was executed, and that the plaintiffs should be compensated under an implied-in-fact contract theory or in quantum meruit for services they provided during those gap periods between contracts.

COFC concluded that the implied contract and quantum meruit claims could not survive a motion to dismiss. The court ruled that the express contracts between the parties were not void, and that the terms of the express contracts covered the same subject matter as the alleged implied-in-fact contracts. The court therefore concluded that the respective rights of the parties were defined not by any implied-in-fact contracts or the principles of quantum meruit, but by the terms of their express contracts. The court also held that the terms of the express contracts continued to control during the gap periods.

Again, the appeals court agreed, finding that the alleged implied-in-fact contracts were not separate from and unrelated to the valid express contracts. Because the plaintiffs had express contracts with the government to provide the services they rendered, and because the plaintiffs have not alleged that they performed additional work entirely unrelated to their express contracts, there is no force to their theory that they had implied-in-fact contracts to perform the same work that was the subject of their express POV contracts. Further, the plaintiffs did not show their express contracts were void.

The plaintiffs insisted that their express contracts were illegal because they were contracts to provide personal services, in violation of the FAR, but both courts disagreed. The appeals court explained that the principal ground on which a contract will be found to be a personal services contract is the degree of supervision to which the contracting employees were subject under the contract. According to the plaintiffs, they were subject to close supervision by government employees under their POV contracts, but the court found the express terms of the contract did not provide for such close supervision, but placed the responsibility for performance on the plaintiffs.

While the plaintiffs complain that the nature and degree of supervision to which they were subjected exceeded what was provided for in the contracts, the court explained that contention goes to whether the express contracts were breached, not to whether those contracts were valid.

The plaintiffs also complained that they were required to work at government-designated sites and use government-supplied equipment, but the court found those factors were not definitive. For example, the court noted that a contractor retained to complete building repairs would by necessity be required to work at the government’s site, but this factor would not be sufficient to convert the contractor into an employee. The appeals court found the plaintiffs’ arguments likewise failed. Further, the court noted the FAR does not require a contract to be voided simply because the degree of government supervision has blurred the line between employee and independent contractor. The fact that a contract may be inconsistent with a statutory or regulatory requirement does not ipso facto render the contract void.

Further, the court noted the plaintiffs have each contracted with the government over several years, through multiple contracts and contract renewals, most of which have been fully performed and fully paid at the contract rate. This factor also weighed against invalidation of the plaintiffs’ express contracts and precludes recovery under an implied-in-fact contract theory.

Seh Ahn Lee, Irina Ryan, Ahman Nariman, and Mark Peach are represented by David Leo Engelhardt of Themis PLLC, with whom were John Pierce and Michael Cone. The government is represented by Hillary Stern, Commercial Litigation Branch, Civil Division, Department of Justice, with whom were Chad A. Readler, Robert E. Kirschman Jr., and Reginald T. Blades Jr.

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