Protest of corrective action and resulting award is granted where, as the result of a prior protest, the agency excluded the protester from competition using retroactively applied unstated evaluation criteria based on GAO’s misinterpretation of solicitation provisions.
ARxIUM Inc. protested the Defense Logistics Agency’s decision to award a contract for the supply of pharmacy automation equipment to Innovation Associates Inc., after the agency took corrective action in response to a prior protest.
DLA had initially awarded the contract to ARxIUM, but Innovation challenged that award at the Government Accountability Office. GAO sustained the protest, finding that DLA had misapplied two solicitation requirements—called the “first fill image” and “nesting station” requirements. Based on GAO’s interpretation of the “first fill image” and “nesting station” requirements, DLA took corrective action, reevaluated proposals, and consequently found that ARxIUM’s proposal was technically unacceptable. DLA awarded the contract to Innovation.
ARxIUM filed this protest with the Court of Federal Claims, arguing that DLA’s corrective action was irrational because it improperly relied on GAO’s unreasonable recommendation in the prior protest. Shortly after ARxIUM filed its complaint, Innovation intervened, and all the parties moved for judgment on the administrative record.
The court first addressed GAO’s interpretation of the “first fill image” requirement. The solicitation provided that when verifying prescriptions, offerors’ solutions had to allow a pharmacist to view the “first fill image” of the original prescription and display electronic prescription data. As part of the first protest, GAO had interpreted this provision as requiring offerors to either show they can retrieve images from the particular database or show an alternative means of creating new first fill images. However, these images were stored on a proprietary database owned by Innovation—which was the incumbent contractor. Based on GAO’s ruling, DLA determined that offerors had to demonstrate an ability to retrieve images from Innovation’s proprietary database. Because ARxIUM had not shown in its proposal that it could retrieve the images from Innovation’s database, DLA determined the proposal was unacceptable.
The problem with this, the court found, was that the solicitation had never specified that offerors would have to demonstrate the ability to retrieve images from a particular database, let alone a proprietary one. The plain text of the requirement simply did not mandate retrieval of the images from some other company’s database. Moreover, the court continued, even if this was a proper interpretation of the “first full image” requirement, the agency failed to even consider whether ARxIUM could meet this requirement through a proposal revision. In retroactively applying GAO’s definition of the requirement, the court reasoned, the agency should have reopened discussions and given ARxIUM a chance to at least address this new criterion. DLA further erred by simply assuming that these images belonged to Innovation, not even bothering to consider whether the government had rights in the images by virtue of its previous contract with Innovation.
The court next turned to GAO’s interpretation of the “nesting station” requirement. The solicitation defined a nesting station as an area on the conveyer system that has a reader attached to it that can obtain information from prescription containers. In ruling in the first protest, GAO found that a “nesting station” was an industry standard term that described a particular hardware configuration. Relying on this definition, the agency determined that the supposed industry standard for a “nesting station” was something similar to what Innovation proposed—namely, a reader than scanned chips attached to the prescription containers while holding the container in a nest or basket. The agency found that because ARxIUM had not proposed a reader that scanned chips attached to the containers, and because ARxIUM’s system did not place prescription containers in a basket while scanning them, the company had not offered anything to meet the “nesting station” requirement.
The court found the GAO’s conclusion that a nesting station is an industry standard term was not supported by the record. Innovation never claimed that a “nesting station” was an industry standard term nor had it cited evidence to support such a proposition. Additionally, the court noted, the solicitation defined a “nesting station” as an area on the conveyer and not, contrary to GAO, as a device. It appeared to the court that GAO had confused the container nest, which Innovation used as part its nesting station, with the station itself.
What makes a nesting station a nesting station, however, is the ability to read information from the container and not necessarily its ability to hold the container. Nothing in the solicitation required offerors to propose a nest or basket for holding prescription containers. By relying on GAO’s interpretation and retroactively applying it the solication, the agency had once again evaluated ARxIUM’s proposal against unstated criteria. The court found that if the agency was going to retroactively apply GAO’s definition, it should have conducted discussions with ARxIUM to inform the company that it was looking for a nest or basket.
Finally, the court considered whether ARxIUM was entitled to injunctive relief. Applying the four factor test, the court found that ARxIUM had prevailed on the merits and that the company would suffer irreparable harm—i.e. lost opportunity to compete— without injunctive relief. As to the balance of harms, the court determined that the balance tipped in favor of ARxIUM. While there were some risks to the agency due to delay, the agency had been dealing with these risks for months and could likely tolerate them for another few months. The court also found that a public interest would be served by an honest, open, and fair competition.
The court granted ARxIUM’s motion for judgment on the administrative record and denied the government’s and Innovation’s cross motions. The court enjoined DLA from making an award under the solicitation until the solicitation is amended to clarify the “first fill image” and “nesting station” requirements.
ARxIUM Inc. is represented by Fernand A. Lavalle, J. Andrew Jackson, Cherie J. Owen, Alexander M. Yabroff, Ryan P. McGovern, and Robin Overby of Jones Day. The government is represented by Sonia M. Orfield, Chad A. Readler, Robert E. Kirschman, Jr., and Reginald T. Blades, Jr. of the U.S. Department of Justice as well as Jared P. Weissberger and Gail Furman of the Defense Logistics Agency. Innovation Associates Inc. is represented by Stuart B. Nibley, Amy M. Conant, and Erica L. Bakies of K&L Gates LLP.
