An Agency’s Decision to Cancel a Solicitation and Issue a New One Must Be Based on Market Research. How Extensive Must that Research Be?

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After receiving only one proposal, the Navy canceled the solicitation and issued a new one to attract another offeror. The Navy argued it was authorized to cancel the solicitation under FAR 15.206(e). The protester contended the FAR requires a cancellation decision to be supported by market research. Here, the protester argued, the record didn’t contain market research. But the court found that a not a lot of research was required. Only two offerors were capable of performing the Navy’s requirement, but only one of them submitted a proposal. The only question the Navy needed to answer was why one company didn’t submit a proposal. The Navy had properly researched this question by asking the other offeror why it didn’t submit a proposal. Nothing further was required.

BAE Systems Norfolk Ship Repair v. United States, COFC No. 22-1263C

Background

The Navy needed dry-dock maintenance for the USS Bainbridge, a guided-missile destroyer. The Navy issued a sources sought notice to assess the interest of offerors in performing the maintenance. Two companies, BAE Systems Norfolk Ship Repair and General Dynamics NASSCO-Norfolk, indicated interest.

The Navy issued a solicitation. BAE submitted a proposal, but NASSCO did not. The Navy asked NASSCO why it didn’t bid. NASCO noted that the solicitation required that the Bainbridge had to be dry-docked during the first part of its availability. NASSCO only had one dry dock and it would be occupied by another ship during the first part of the Bainbridge’s availability. NASSCO therefore could not dry-dock the Bainbridge in the time period required by the solicitation.

But the Navy wanted more than one bidder for the procurement. So the Navy canceled the initial solicitation and issued a new solicitation that relaxed the dry-docking requirement. BAE filed a protest with the Court of Federal Claims challenging the decision to cancel the initial solicitation and issue a new one with a relaxed requirement.

Analysis

FAR  15.206(e)

The Navy invoked FAR 15.206(e) to justify cancellation. That provision states that if a contracting officer determines, based on market research or otherwise, that solicitation amendment is so extensive it exceeds what prospective offerors could have expected, so that additional sources would have likely submitted offers had they known of the amendment, the contracting officer may cancel the solicitation and issue a new one. BAE contended the Navy had not satisfied a couple of elements of this FAR provision.

Market Research

FAR 15.206(e) requires that a cancellation decision be supported by market research, BAE argued that the administrative record contained no market research to support the decision.

The court, however, noted that the extent of market research will vary depending on the context. Here, not a lot of market was required. The Navy knew only two potential offerors were capable of performing the contract, but only of them submitted a proposal. This meant there was really only one market research question: Why didn’t NASSCO submit a proposal? As the court reasoned, the Navy didn’t need to hire a rocket scientist to answer this question.

The administrative record contained evidence of the market research the Navy performed to answer this question. It showed the Navy communicated with NASSCO, reviewed workload data and dry dock availability for the NASSCO and BAE, and issued a memorandum that concluded the only reason NASSCO didn’t’ submit a proposal was the dry-docking requirement. This is all the market research the Navy needed.

Substantial Amendment

FAR 15,206(e) requires that an amendment to a solicitation has to be a substantial amendment to warrant cancelation and a new solicitation. BAE argued that relaxation of the dry-docking requirement was not so substantial as to exceed what prospective offerors could have reasonably anticipated.

The court, however, begged to differ. The initial solicitation required the Bainbridge to be docked for the first part of its availability. If NASSCO had bid on the contract and won the award, it would not have not been able to dock the Bainbridge in the time period mandated by the solicitation and thus would have been in breach of the contract. Thus, the dry-docking requirement was substantial.

Moreover, the court continued, under FAR 15.206(e), an amendment must make it more likely that additional sources would have submitted an offer if they had known of the amendment. It was clear to the court that if the Navy had not relaxed the dry-docking requirement at the outset, NASSCO would have submitted a proposal. NASSCO had indicated its intent to submit a bid in reponse to the sources sought notice. Indeed, NASSCO told the Navy the dry-docking requirement was the only reason it didn’t submit a bid.

Bad Faith

The court noted that BAE was tacitly arguing that the Navy made the cancellation decision in bad faith—i.e., that FAR 15.206 was merely a pretext, and that the Navy wanted to simply ensure that BAE was not awarded the contract.

But the court saw no evidence of bad faith. While the record indicated the Navy had some concerns about BAE’s past performance, this was not evidence of bad faith. Any hint of a pretext was likely a result of the fact that only two offerors were competing for this contract, so criticizing one may look like favoring the other.

BAE is represented by Barbara Ann Duncombe Suzanne Sumner, Erin R. Davis, and Brandon E. Dobyns of Taft Stettinius and Hollister, LLP. The intervenor, NASSCO is represented by Noah B. Bleicher, Nathan E. Castellano, Scott E. Whitman, and Aime J. Joo of Jenner & Block, LLP. The government is represented Galina Fomenkova and Steven M. Mager of the Department of Justice as well as Bradley S. Garner of the Navy.

–Case summary by Craig LaChance, Senior Editor

COFC - BAE Systems Norfolk Ship Repair