Agency Not Required to Explain Why It Found Aspects of Proposal Merely Adequate; Logistics Health, Inc. v. United States, COFC No. 21-759

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Protest challenging agency’s evaluation and the conduct of discussions in a procurement for healthcare services is denied. The protester argued the agency failed to properly assess the size of the awardee’s healthcare network. The court found that solicitation did not require offerors to propose a specific network, and in any event, the agency had properly assessed the awardee’s ability to develop a network. Also, the protester argued that the agency disparately evaluated proposals, but the court found that the protester’s and awardee’s proposals were not substantively indistinguishable. Additionally, the protester alleged the agency failed to evaluate proposal under all the criteria. The court, however, found that the evaluation merely explained those instance where the agency assessed strengths or weaknesses. The agency was not required to explain why it found aspects of a proposal merely adequate, and the absence of such an explanation did not prove that agency had failed to apply all the criteria. The protested further asserted that the agency conducted unequal discussions. The court opined that because the agency had only identified a deficiency with the awardee’s proposal and the awardee’s price had already been disclosed, it was reasonable to only conduct discussion with the awardee.

The Army issued a solicitation seeking health readiness services—immunizations, physical examinations, lab services—for its Reserve forces. The Army received three offers, including proposals from Logistics Health, Inc. (LHI) and QTC Medical Services, Inc.

The Army selected QTC for award. LHI filed a protest with GAO. Following a GAO outcome predication conference, the Army took corrective action to reevaluate proposals. During the corrective action, the Army identified a deficiency in QTC’s proposal and determined that it had not previously notified QTC about this deficiency. Thus, the Army conducted discussions with QTC (but not other offerors) to give the company a chance to address the deficiency.

After completing the corrective action, the Army re-awarded the contract to QTC. LHI filed another GAO protest but then withdrew it and filed suit at the Court of Federal Claims. QWTC intervened, and all the parties moved for judgment on the administrative record.

LHI alleged that the Army erred in believing that QTC had a larger network of health providers than it actually possessed. LHI argued that the solicitation required offerors to propose specific healthcare networks, and that the Army had failed to adequately evaluate the size of QTC’s network.

The court found that contrary to LHI’s position, the solicitation did not require offerors to propose specific networks. Rather it only required offerors to develop networks after award. The Army did not overcount the size of QTC’s network; instead, it recognized that QTC had a pool of personnel it could draw on. Nothing in the solicitation required offerors to provide exact numbers for their network. QTC merely did what the solicitation required: it provided figures detailing the personnel it could draw from to develop a nationwide network.

LHI next argued that the Army disparately evaluated proposals regarding mobile auditory services. LHI complained that the Army awarded QTC a strength for offering audiology vans, but did not award LHI a strength for offering the same thing.

The court noted that to show a disparate evaluation, a plaintiff must demonstrate that the agency unreasonably downgraded its proposal for a features that were substantively indistinguishable or nearly identical to those in other proposals. Here, LHI had not demonstrated that its approach to audiology was substantively indistinguishable from QTC’s. Basically, the court reasoned, QTC had offered to provide mobile audiology vans. LHI offered a mobile unit option. Under LHI’s proposal if a patient did not want audio test in a mobile unit, then LHI would not provide a mobile unit. The Army reasoned that this could result in audio tests with unacceptable levels of ambient noises.

LHI further contended that the Army improperly gave QTC a strength for committing to meet a transition milestone by a certain date, when in fact QTC had stated that it would meet the milestone at a later date. The court found that the Army had not acted irrationally is assigning QTC a strength for its transition plan. While QTC’s proposal had language stating that the transition may be completed at different date, its proposal explained that the date would depend on government involvement. The Army reasonably assigned a strength because QTC communicated the role its staff would play in in preparing for transition within the first few days of the contract start date.

LHI alleged that under FAR 15.308, an award decision must be based on a comparative assessment of proposals against all source selection criteria. LHI argued the Army violated this provision by not evaluating proposals against the major requirements in the performance work statement.

The court, however, found that just because the Army did not document every single part of its evaluation did not mean that it didn’t evaluate proposals against all the evaluation criteria. When an agency does not find fault or benefit with a particular approach, it is not required to explain why the approach is merely adequate. Here, the Army documented the strengths and weaknesses it found in each proposal. It was not required to go through each PWS requirement that offerors merely satisfied.

LHI asserted that the Army conducted unequal discussions by only reopening discussions with QTC during the corrective action. Citing COFC caselaw, LHI contended that if an agency reopens discussions with one offeror, it must reopen discussions with all offerors whose proposals are in the competitive range.

The court agreed that typically when discussions are reopened with one offeror, they should be reopened with all offerors. But the court noted there is an exception to this rule when (1) one offeror received inaccurate information while others received accurate information, and (2) the awardee’s price had been disclosed so other offerors can revise their proposals to undercut the awardee’s price.

The court found that both prongs were satisfied. The Army only reopened discussions with QTC because its identified evaluation error that only impacted QTC. Indeed, the Army was effectively obligated to raise this issue with QTC. An agency must inform offerors of deficiencies in their proposals. But if the Army had opened up discussions with all offerors, this would have given LHI an unfair advantage because QTC’s price had been disclosed as part of the protest. The Army did not believe there were any deficiencies in LHI’s proposal. Thus, if given another opportunity to revise its proposal, LHI would have a had a chance to undercut QTC’s price due to the Army’s error in evaluating QTC’s proposal. Under the circumstances it was reasonable for the Army to limit discussions with QTC.

LHI argued that the Army failed to properly evaluate whether QTC’s unit prices were unbalanced. LHI contended that the Army only assessed whether QTC’s top-level CLIN prices were balanced but never analyzed whether the individual unit prices underlying those CLINs were unbalanced.

The court noted agreed that under the FAR, an agency must analyze all line items and sub-line items to determine if prices are unbalanced. The problem with LHI’s argument is that the unit prices it thought the agency should have analyzed were not line items or sub-line items. The unit prices were for individual procedures. The solicitation included price levels for the procedures. But, the court noted, these procedure prices had been included in an attachment, not as an exhibit to the solicitation. The DFARS makes a distinction between an attachment and an exhibit. An attachment is document appended to a contract that does not establish a requirement for deliverables. An exhibit, on the other hand, requires deliverable. To be designated as a line item, the procedures would have had to be included in an exhibit. They were not and thus were not line items or sub-line items. The Army reasonably evaluated balance at the CLIN level.

Lastly, LHI alleged that the best value determination was flawed. LHI argued that a large portion of QTC’s price advantage was illusory because it was attributable to procedure prices in the base year of contract. But, LHI argued, it was likely that QTC would perform no procedure during the base year of the contract.

But the court found that LHI’s argument contravened the solicitation. The solicitation required the Army to consider offerors’ total evaluated prices; it did not allow for the subtraction of prices for procedures performed during the base year. The agency was not required to ignore the solicitation and perform its own “true relative cost” analysis.

What’s more, the court reasoned that LHI had waived this argument. Under Blue & Gold Fleet, L.P. v. United States, 492 F.3d 1308 (Fed. Cir. 2007), a protester that fails to object to the terms of the solicitation before the close of bidding waives the the ability to raise the argument in a post-award protest. In this case, the solicitation stated that the Army would perform the best value tradeoff based on total evaluated prices without subtracting prices for the base year. If LHI believed that this provided offerors with a loophole to propose illusory prices, it should have filed a pre-aware protest.

LHI is represented by Jason A. Carey, Kayleigh M. Scalzo, J. Hunter Bennett, Alan A. Pemberton, Andrew R. Guy, and Peter B. Terenzio III of Covington & Burling, LLP. The intervenor, QTC, is represented by Marcia Madsen, David F. Dowd, Luke Levasseru of Mayer Brown, LLP as well as James J. McCullough, Michael J. Anstett, Anayansi Rodriguez, and Christopher H. Bell of Fried, Frank, Harris, Shriver & Jacobson LLP. The government is represented by William P. Rayel, Brian M. Boynton, Robert E. Kirschman, and Douglas K. Mickle of the Department of Justice as well as Aaron K. McCartney of the Army.

COFC - Logistics Health