The court found that a successful protester was entitled to bid preparation costs. As part of its claim for costs, the protester sought lost opportunity costs. These opportunity costs represented income the protester’s employees could have generated if they had not been working on the proposal. The court ruled that opportunity costs cannot be recovered as a subset of bid preparation costs. Opportunity costs are inherently subjective. Moreover, it’s not clear that losing an opportunity is the same as the liabilities assumed by an offeror in drafting a proposal.
ARxIUM, Inc. v. United States, COFC No. 17-1407C
Background
ARxIUM filed a bid protest with the Court of Federal Claims. ARxIUM claimed it had been arbitrarily excluded from the competitive range of a Defense Logistics Agency (DLA) procurement. The court sustained the protest, enjoining the award.
Following the injunction, DLA amended the solicitation. ARxIUM complained this amendment prevented it from competing. Again, the court sided with ARxIUM, finding ARxIUM had been unfairly induced to enter a competition it could not win. The court concluded ARxIUM was entitled to bid preparation and proposal costs.
ARxIUM claimed it was entitled to over $80,000 in costs. The government objected to $60,000 of the claim.
Analysis
Employee Costs
ARxIUM sought about $23,000 for the time spent by its employees preparing the bid. The government objected to $2,500 of this sum. The government alleged these $2,500 in costs were incurred after the court enjoined the award, and after the government amended the solicitation. The government alleged the post-injunction work never resulted in an actual revised proposal, so ARxIUM could not recover proposal costs.
The court thought the government had a point. A claimant can’t recover proposal costs if there is no proposal. At best, the work performed after the injunction was an attempt to prepare a proposal. But absent an actual proposal those costs cannot be recovered.
Attorney Costs
ARxIUM also sought over $11,000 in attorneys costs. ARxIUM had used outside counsel on its proposal. The government argued that legal fees are only recoverable under the Equal Access to Judgment Act; they could not be awarded as bid preparation costs.
The court was not convinced that attorneys’ fees incurred as bid preparation costs could not be recovered. But ARxIUM’s problems was that the attorneys costs were also incurred after the injunction when ARxIUM attempted, but did not complete, a revised proposal. Again, costs incurred in attempting to draft a proposal are not recoverable.
Opportunity Costs
Finally, ARXIUM sought over $40,000 in lost opportunity costs. ARxIUM alleged its employees would have generated this $40,000 in income if they had not been working on the proposal.
The court, however, reasoned that just because opportunity costs are “costs”, doesn’t mean they’re recoverable as a subset of bid preparation costs. The court noted that opportunity costs are inherently subjective. Also, it wasn’t clear to the court that loss of opportunity or profits is the same thing as the liabilities assumed in creating a proposal. And anyway, since ARxIUM was getting reimbursed for the time its employees spent on the proposal, the opportunity to put them back to work earning fees had been restored by the award.
ARxIUM is represented by Fernand A. Lavallee of Jones Day. The intervenor, Innovation Associates, is represented by David Y. Yang of K&L Gates, LLP. The government is represented by Michael D. Austin of the Department of Justice.
–Case summary by Craig LaChance, Senior Editor
