Award of Sole-Source Follow-On Contract Justified by Continuity Concerns; Harmonia Holdings Group, LLC v. United States, COFC No. 19-1064C

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Protest challenging an agency decision to award a sole-source, follow-on contract to the incumbent is denied. The agency reasonably determined that the incumbent’s knowledge gained through performance of the original contract could not be transferred to another contractor without a substantial duplication of time and costs. The court further found that market research conducted before the decision to make the sole-source award was reasonable. Moreover, the court ruled, contrary to the protester’s contentions, the agency extensively evaluated the protester’s capabilities statement.

The International Trade Administration (ITA) had a contract with the MIL Corporation to modernize the agency’s IT systems. MIL Corp performed the contract in a timely manner, but by the end of the contract term, a number of critical transitions and updates were not completed. ITA conducted market research but it could not identify any company other than MIL Corp that had the institutional knowledge to step in to the ongoing transition to complete the updates. Accordingly, ITA decided that rather than hold a competition, it would award MIL Corp a sole-source contract to complete the modernization process.

ITA issued a notice of intent to issue a sole-source contract. Harmonia Holdings Group contacted ITA, objecting to the sole source award. Harmonia believed that it had the technical capabilities to finish the modernization and that it could hire incumbent staff to facilitate transition. Harmonia submitted a capabilities statement explaining its approach. ITA agreed that Harmonia had performed some outstanding work. Nevertheless, MIL Corp had extensive knowledge about the complexity of the remaining modernization work and was uniquely positioned to finish the work on time. Thus, ITA issued a limited sources justification and a sole-source award to MIL Corp.

Harmonia filed a GAO protest, challenging the sole-source award. GAO denied the protest. Thereafter, Harmonia filed a suit with COFC protesting the sole-source award. MIL Corp intervened, and all the parties moved for judgment on the administration record.

The court noted that FAR 8.405-6(a)(1)(i)(C) allows an agency to make a sole-source award when the new work is a logical follow-on to an original FSS order and doing so is in the interests of economy and efficiency.

The new award to MIL Corp was a logical follow-on to an FSS order. What’s more the sole-source served the interests of efficiency and economy. It was critically important to the agency to keep the modernization project on schedule. MIL Corp’s institutional knowledge and intellectual capital gained through performance of the original contract could not be transferred to another contractor without a substantial duplication of time and costs. The court found that the sole-source award was justified under FAR 8.405-6.

Harmonia, however, contended that the market research ITA conducted before the sole-source award was a sham in that ­the agency had made a decision to award MIL Corp the contract before even conducting market research. The court noted that this argument was really a contention that ITA did not act in good faith in awarding the contract. But government officials are presumed to act in good faith, and to overcome that presumption, a protester must provide clear and convincing evidence to the contrary. Harmonia had not provided any real evidence of bad faith.

Moreover, the court continued, even if Harmonia’s argument did not allege bad faith it would fail because the record showed that ITA did not structure its research to benefit MIL Corp. Harmonia argued that because a section of the market research report discussing the modes of market research appeared after a chronology of the market research process, ITA must have conducted market research after decided to award the contract to MIL Corp. But the court found that order of sections in the market research report had no bearing on when the research was actually performed and did not provide a basis to doubt the report.

Harmonia also claimed that the agency irrationally ignored its capabilities statement. The court disagreed. The record showed that during their initial communications, ITA actually provided Harmonia with advanced guidance as to what it would take to persuade the agency not to award a sole-source contract. Additionally, the record reflected that the agency carefully considered Harmonia’s capabilities statement and even acknowledged Harmonia’s outstanding past performance. Nevertheless, the agency reasonably found that the capabilities statement did not alleviate its concerns about the risks of transferring to a new contractor.

Harmonia is represented by W. Brad English,J. Dale Gipson, Emily J. Chancey, and Michael W. Richof Maynard, Cooper & Gale, P.C. MIL Corp is represented by Paul F. Khoury and Samantha S. Lee of Wiley Rein, LLP. The government is represented by Andrew Hunter, Deborah A. Bynum, Robert E. Kirschman, Jr., and Joseph H. Hunt of the Department of Justice as well as Jonathan S. Baker of the Department of Commerce.