Dissatisfaction with Incumbent’s Performance Doesn’t Justify Sole-Source Award to Another Contractor; Utech Products d/b/a EndoSoft, LLC v. United States, COFC No. 20-315C


Protest challenging agency’s decision to award a sole-source contract is granted. The court found that the agency had largely based its decision on its dissatisfaction with performance under the incumbent contract. But preference for another contractor is not enough to justify a sole source award. The agency’s decision was also premised on its conclusion that the sole-source awardee was one of the few companies that possessed a migration tool needed for the agency’s software system. The court, however, found that the agency had not demonstrated that the tool was necessary. Indeed, the incumbent had been performing without the tool. What’s more, the agency had not shown that it was difficult for other contractors to obtain the tool.

The Department of Veterans Affairs contracted with Four Points Technology for a gastrointestinal electronic medical record (GI EMR) software system for its Virginia and North Carolina region. Four Points subcontracted with Utech Products, d/b/a EndoSoft to provide the actual system. EndoSoft provided a system called EndoWorks, which the company also used in other VA regions.

But the Virginia/North Carolina region experienced problems with the EndoWorkds system. In particular, the system deleted records of procedures for patients. The VA concluded that the EndoWorks program was not up to snuff and declined to exercise additional options under the Four Points contract.

The VA conducted market research to determine whether there were other vendors that could provide a GI EMR system. The VA determined that only one other vendor, ProVation Medical, Inc., could provide the system. This conclusion was based on concerns about the transferability of information. The manufacturer of EndoWorks had created a tool to enable data migration from its system to another system. The VA found that ProVation was only one of two companies that possessed this tool, and the other company was not a viable option because it was more focused on a clinical setting.

The VA prepared a Justification and Approval for a sole-source award to ProVation. The J&A identified problems with the EndoWork system and also noted that ProVation was the only qualified vendor with a data transfer tool. The VA post of notice of intent to sole-source the contract.

EndoSoft filed a protest with the Court of Federal Claims, challenging the sole-source award to ProVation. ProVation intervened. All the parties moved for judgment on the administrative record. After briefing was completed, the government notified the cour, that it had identified a third vendor that also possessed the data transfer tool for the EndoWorks system.

The court found that the decision to make a sole-source to ProVation was arbitrary. As an initial matter, the evidence indicated that the animating force behind the sole-source decision was a preference for ProVation over EndoSoft. The agency’s market research consisted almost entirely of comparisons between the EndoSoft and ProVation. Indeed, EndoSoft’s insufficient performance had served as the premise of the market research report. The determination that a new contractor can perform better than the incumbent, even if true, is insufficient to justify a sole-source award.

Additionally, the VA’s decision to sole-source relied heavily on its determination that only ProVation had the appropriate data transfer tool. But the found this conclusion problematic. The agency appeared to take it is a given that data migration was impossible without the tool. This was undermined by the fact that EndoSoft, without the tool, had already migrated historical EndoWorks data into its system. Also, given that EndoSoft already stored the data, the VA gave no convincing explanation as to why the tool was even necessary. It seemed that any new contractor could just export data from EndoSoft.

Even assuming that the data could not be transferred without the tool, nothing in the record demonstrated how difficult it was to obtain this tool from the EndoWorks manufacturer. The agency based its decision solely on a review of the manufacturer’s website. It had provided no evidence that other vendors could not obtain the tool. Indeed, the government had conceded after briefing that an entity other than ProVation possessed the tool.

The government attempted to argue that the other entity that had the tool could not provide its own GI EMR system. But the court noted that this fact should not have eliminated the other company from consideration. The notice of intent to sole-source stated that the minimum need was access to the tool; it did not state that the vendor had to be a standalone GI EMR provider. Anyone with access to the tool could conceivably contract with a GI EMR provider, like Four Points had subcontracted with EndoSoft under the incumbent contract.

The government further argued that ProVation’s system offered better integration with the VA’s academic affiliates at Duke University and Virginia Commonwealth University. But the court found that while this integration may very well have been a desirable feature of a GI EMR, it was not a minimum need and thus not enough to justify a sole-source award.

EndoSoft is represented by Alan Grayson of Alan Grayson, Esq. The intervenor, ProVation, is represented by Alex P. Hontos of Dorsey & Whitney LLP. The government is represented by John H. Roberson, Joseph H. Hunt, Robert E. Kirschman, Jr., and Douglas K. Mickle of the Department of Justice as well as Tyler W. Brown of the Department of Veterans Affairs.

COFC - Utech