COFC Rejects GAO Precedent, Finds Agency Erred in Not Holding Discussions, and Rules Protester Was Prejudiced by Error. Why Does the Court Still Think Protester Only Won a “Pyrrhic” Victory?

In DoD procurements valued over $100 million, there is a presumption in favor of holding discussions. In this case, the Army decided not to hold discussions. The court—rejecting GAO precedent on when discussions are appropriate—found that in light of the presumption in favor of discussions, the Army had not sufficiently explained its decision to skip them. The court further found that the protester had been prejudiced by the absence of discussions. If discussions had been held, the protester may have had a chance to eliminate a deficiency assessed to its proposal. But the court was still unsure about whether to grant the protester an injunction. As the court noted, this may be one of the rare cases where a protester suffers prejudice but not irreparable harm. 

IAP Worldwide Services, Inc. v. United States, COFC No. 21-1570C

Background

The Army issued a solicitation seeking operations and maintenance services for communications systems. The estimated value of the contract was over one billion dollars. The solicitation provided the Army intended to award the contract without discussions. Nevertheless, the Army also cautioned that it reserved the right to hold discussions. 

The Army received five offerors, including proposals from the IAP Worldwide Service and Vectrus Systems Corporation. The Army found that IAP’s proposal was unacceptable under the most important Mission Support/Technical Approach factor. The Army awarded the contract to Vectrus.

IAP filed a protest with GAO, challenging the evaluation of its proposal, and alleging the Army erred in not holding discussions. GAO denied the protest, finding that evaluation appropriate and that the decision to not hold discussions reasonable. IAP then filed a protest with the Court of Federal Claims.

Legal Analysis

Evaluation Challenges

IAP raised numerous objections to the evaluation, which the court rejected.

• Deficiency – IAP  challenged a deficiency assessed to its proposal, but the court found the deficiency was deserved because IAP had not proposed adequate staffing.
• Certification Requirement – IAP alleged Vectrus had not complied with a licensing requirement. But the court noted this requirement did not apply at the time of proposal submission but only by the contract start date. Thus, this was an issue of contract administration.
• Availability of Key Personnel – IAP asserted thatVectus attempted a bait and switch by misrepresenting the availability of key personnel. The court did not believe Vectrus had made a misrepresentation or that the Army had relied on any misrepresentation. Notably, the court reaffirmed its own recent decision, which found that offerors do not have a duty to notify agencies of changes in key personnel. 
• Disparate Treatment – IAP alleged various instances of disparate treatment where IAP was penalized for flaws while other offerors were not. But the court found that in these instances, IAP’s proposal was not substantively indistinguishable from the other offerors, so no disparate treatment.

Failure to Hold Discussions

While the court found most of IAP’s arguments meritless, it did find one argument—that the Army erred in not holding discussions—compelling.

• Presumption in Favor of Discussions –   DFARS 215.306 states that for acquisitions over $100 million, contracting officers should conduct discussions. After analyzing the meaning of “may”, “should”, and “shall” and where they fail on the continuum of agency discretion, the court concluded that the “should” in DFARS 215.306 creates a presumption in favor of holding discussions.
• Army Failed to Justify Why It Skipped Discussions – Given the presumption in favor of discussions, the court found that the Army’s threadbare record had not sufficiently justified the decision to forgo discussions. The Army had not provided any facts, explanation, or analysis as to why discussions were unnecessary. The Army made. conclusory assumption that IAP could not win the award even if it held discussions. The court found that this reasoning begged the question. The Army had not overcome the presumption in favor of discussions.
• Court Rejected GAOs’ Test for Discussions – GAO has a three part test for determining whether an agency erred in not conducting discussions. The court rejected this test, reasoning that the test was based on cases that had been decided before the enactment of DFARS 215.306, and the presumption in favor of discussions.
• IAP Was Prejudiced by Failure to Conduct Discussions – The Army argued that even if it erred in not holding discussion, IAP was not prejudiced. IAP submitted a technically unacceptable proposal, thus it would not have been included in the competitive range for discussions. The problem with the argument was that the Army never made a competitive range determination. Had the Army made a competitive range determination and excluded IAP, then IAP could’ve challenged that determination. But the court would not assume that IAP could not have been included in the competitive range. And if IAP had been included in the competitive range, and the Army held discussions, then it was possible that the company could have revised its proposal to remove the deficiency.

Appropriate Remedy

Although the court had found that the Army erred and that IAP had been prejudiced by the error, the court was not sure that injunctive relief was appropriate. It was not clear whether IAP had suffered irreparable harm warranting an injunction. At most, IAP had lost the opportunity to participate in the competitive range. If the court were to require the Army to conduct discussions, the Army would likely find that the IAP was not in the competitive range and did not need to be included in discussions. The court questioned whether the Army should be forced to engage in a process that may result in a competitive range that excluded IAP. That said, the Army had not shown that the balance of harms tipped in its favor. It was not clear whether the Army would suffer any particular harm by having to go back and create a competitive range. Given the lack of clarity on harm, the court ordered the parties to provide supplemental briefing on the harm element of the injunctive relief calculus.

IAP is represented by Kara L. Daniels, Nathaniel E. Castellano, Thomas A. Pettit, and Aime JH Joo of Arnold & Porter Kaye Scholer LLP. The intervenor, Vectrus, is represented by Adam K. Lasky, Edward V. Arnold, Stephanie B. Magnell, and Bret C. Marfut of Seyfarth Shaw LLP. The government is represented by Tanya B. Koenig, Brian M. Boynton, Martin F. Hockey, Jr. and Reginald T. Blades, Jr. of the Department of Justice as well as Major Seth Ritzman of the Army.