Agency’s motion to dismiss a pre-award bid protest for lack of jurisdiction and failure to state a clam is denied, where the protest raised issues different than those in a related case pending before the Court of International Trade, and where the protester’s primary contention—i.e., that the agency has misinterpreted a solicitation’s Trade Agreements clause—asserts a cognizable claim on which the court can grant relief.
Acetris Health LLC protested the decision of the Department of Veterans affairs to reject Acetris’s proposal to supply Entecavir tablets, a Hepatitis B medication.
Prior to the protest, Acetris had a contract with VA to supply Entecavir. The contract incorporated FAR 52.225-5, the Trade Agreement clause, which required Acetris to supply only U.S.-made products. During performance, VA became concerned about compliance with the Trade Agreements clause because Acetris sourced the active ingredient in Entecavir from India. VA asked Acetris obtain a determination from U.S. Customs and Border Protection on Entecavir’s origin. CBP determined that Entecavir’s country of origin was India. While Acetris manufactured the Entecavir tablets in New Jersey, CBP reasoned that the active ingredient came from India, was not “substantially transformed” by the manufacturing process, and thus the end product was still fundamentally a foreign good.
Despite CBP’s decision, Acetris asked VA to determine whether the Entecavir was a “U.S.-made end product” as defined in the Trade Agreements clause, arguing that the VA contracting officer had to make this determination, not CBP. VA declined, stating that it was agency policy to rely on CBP decisions. The agency ordered Acetris to manufacture Entecavir with US-sourced ingredients. VA further advised Acetris that a new solicitation was forthcoming for the supply of Entecavir. In the meantime, Acetris appealed CBP’s determination to the Court of International Trade.
As promised, VA issued a new solicitation for Entecavir, which like the previous contract, had a Trade Agreements clause. Still believing—regardless of CBP’s decision—that its Entecavir with Indian ingredients was a U.S.-made end product, Acetris responded to the new solicitation. But based on VA’s responses to questions from offerors, Acetris determined that the agency, like CBP, was going to strictly construe the Trade Agreements clause as prohibiting ingredients from India.
Acetris filed a pre-award bid protest with COFC, seeking injunctive and declaratory relief on the grounds VA was misinterpreting the Trade Agreement clause and improperly relying on CBP’s decision. VA moved to dismiss, contending COFC lacked jurisdiction to hear the protest due to Acetris’s appeal before the Court of International Trade. Moreover, the agency argued that Acetris’s complaint failed to state a claim upon which relief could be granted.
The court first addressed VA’s jurisdictional arguments. The agency argued that COFC lacked jurisdiction because the Court of International Trade had exclusive jurisdiction to hear CBP’s country-of-origin decisions. The court, however, reasoned that all Acetris’s claims were actually directed at VA’s actions—that is, its interpretation of the Trade Agreements clause—not the CBP’s country of origin. Thus, this was a proper subject for a pre-award protest over which COFC had jurisdiction.
Still, VA argued that the court lacked jurisdiction under 28 U.S.C. § 1500, which bars a court from considering a matter when a related action is being considered by another court. The court reasoned that a case before COFC is only related to another case if the two cases share the same operative facts—i.e., facts that establish some theory of liability in both cases. While acknowledging that the case before COFC shared many facts with the appeal before the Court of International Trade, COFC found that the two cases did not share the same operative facts. The court found that the issues before COFC—namely, whether the VA interpreted the Trade Agreements clause in accordance with the FAR and whether the agency erroneously relied on CBP—arose from the solicitation and did not depend on whether CBP’s county-of-origin analysis. Section 1500 did not preclude the court from considering Acetris’s protest.
VA also argued that Acetris’s claims in the protest were not ripe. The agency believed Acetris was using a pre-award protest to improperly obtain a determination on its eligibility to be awarded the contract before any final award decision has been made. The court dismissed VA’s ripeness argument, noting that the agency had indicated the manner it was going to interpret the solicitation in responding to offerors’ questions. Those responses were not tentative or interlocutory; rather, they were a final agency determination that was ripe for judicial review.
Finally, the court addressed VA’s arguments that Acetris’s complaint failed to state a claim. As an initial matter, VA contended that it was not, as Acetris contended, interpreting the Trade Agreements clause as prohibiting U.S.-made or domestic end products. But the court found that the agency was in fact interpreting the clause in this way. An allegation that an agency is misinterpreting the FAR falls within court’s bid protest jurisdiction and is a claim on which relief can be granted.
Additionally, VA claimed that Acetris’s contentions about improper reliance on the CBP’s determination failed to state a claim because contracting officials are permitted to rely on the determinations of other agencies. Again, the court disagreed, noting that the complaint contained allegations that only VA had authority to interpret the solicitation’s provisions. If only VA can interpret the solicitation, then VA’s decision to defer to another agency’s interpretation would be arbitrary and give rise to a cognizable claim within COFC’s bid protest jurisdiction.
The court denied the VA’s motion to dismiss and set a status conference to discuss further proceedings.
Acetris is represented by Stephen E. Ruscus. The government is represented by Daniel B. Volk.
