Double Your Pleasure/Double Your Fun: Modification of Requirements Contract that Doubled the Items Required Was Not a Cardinal Change; Navistar Defense, LLC v. United States, COFC Nos. 19-1268C & 19-1417C

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Protest that agency’s sole-source contract action violated the Competition in Contract Act is denied. The agency had modified an existing contract to order more than double the items initially contemplated by the contract. The protester contended this modification was a cardinal change that violated CICA. Instead of modifying the contract, the protester contended, the agency should have conducted a new competition. The COFC disagreed, reasoning that the original contract was a requirements contract and thus the agency was authorized to increase the number of items ordered without effecting a cardinal change. The protester also alleged that the agency violated CICA when it did not stay performance during a previous GAO protest. But the court found that this argument was moot because the protester had withdrawn the GAO protest.

The Army had a contract with Oshkosh Defense, LLC for the supply of tactical vehicles. The contract was originally set to expire in 2014. But the Army issued several justifications and approvals to extend the term of the contract. In 2016, the Army issued a justification and approval that extended the contract to August 2019.

The 2016 justification and approval estimated that the Army would need 1,774 vehicles. In June 2019, however, before the contract was about to end, the Army modified the contract in increase the number of vehicles required to 3,690. This increased the contract value by more than $300 million. What’s more, the Army extended the delivery period of the contract to 2012.

Navistar Defense, LLC filed a GAO protest, alleging that the Army’s modification was a sole-source contracting action that violate the Competition in Contracting Act. But Navistar withdrew the GAO protest and instead filed a protest at the COFC. In the COFC protest, in addition to its sole-source challenge, Navistar alleged that the Army violated CICA’s automatic stay by not ceasing performance of the contract during the GAO protest. Oshkosh intervened in the protest, and all the parties moved for judgment on the administrative record.

As to its first protest ground, Navistar alleged that the June 2019 modification to the contract was a cardinal change—that is, a change that was outside the scope of the contract. Navistar claimed that the change was so fundamental that instead of modifying an existing contract, the Army should have conducted a new competition. The failure to hold a competition, Navistar asserted, violated CICA.

But the court did not believe the modification was a cardinal change. The modification did not materially alter the terms of the contract because the contract was a requirements contract. The plain language of the contract authorized the Army to procure the number of tactical vehicles that it required during the contract term. Because the Army was allowed to order however many vehicles it required, the modification to order additional tactical vehicles was within the scope of the contract.

The court found that Navistar and other potential offerors were on notice of the possibility that the Army could order more vehicles. The previous modifications and J&As made it clear that offerors should have expected the Army would increase its requirements for tactical vehicles.

Additionally, the record showed that the Army appropriately justified its decision to procure additional vehicles. The 2016 J&A explained that the Army had concerns about unacceptable delay if it used normal competitive procedures. The 2016 J&A also explained that only Oshkosh could meet the Army’s requirements.

Navistar contended that the Army could not procure additional vehicles because the 2016 estimates only stated that the Army would need 1,774 vehicles. But the court noted that the Army’s estimates of its requirements is not a guarantee or warranty of the exact quantity required.

Navistar also contended that the Army did not make a good faith estimate of its vehicle requirements. The court, however, found that Navistar had failed to identify any evidence in the administrative record to show that the Army was estimating vehicle needs in bad faith.

Navistar then contended that the 2019 modification was improper because the Army had previously issued J&As before procuring additional vehicles. The court noted that while the Army had previously issued J&As before placing additional orders, there was no statute or regulation that required the Army to do so.

Navistar further contended that the modification was improper because it (1) extended the contract terms past the 10 year limit prescribed by CICA, and (2) extended the performance period beyond the 10 year limit without obtaining approval from a senor procurement executive as required by the DFARS. But the court found that neither of the allegations were valid. The contract term was set to end on August 25, 2019, which was exactly 10 years from the effective date of the original contract. Moreover, the record showed that the Army obtained approval of a procurement professional for the performance extension.

Aside from the sole-source protest, the court also found that Navistar’s claim about violation of the CICA automatic stay was not compelling. While it was true that the Army did not stay performance during the pendency of the previous GAO protest, the issue was now moot. A pending GAO protest is a prerequisite for a CICA stay. Here, Navistar had withdrawn its GAO protest. Nevertheless, Navistar wanted the court to enjoin the Army from violating the stay. But because Navistar had withdrawn the GAO protest, it was unclear what the injunction would accomplish. Without a GAO protest, there was no longer a status quo to maintain. Moreover, given that there was no GAO protest, there was no expectation that the Army’s violation of the stay would or even could be repeated.

The court denied Navistar’s motion for judgment on the administrative record and granted the government’s and Oshkosh’s cross motions.

Navistar is represented by David R. Hazelton, Kyle R. Jefcoat, and Dean W. Baxtresser of Latham & Watkins LLP. The intervenor, Oshkosh, is represented by Scott Arnold, Justin A. Chiarodo, Luke W. Meier, Stephanie M. Harden, and Michael J. Montablano of Blank Rome, LLP. The government is represented by Albert S. Iarossi, Douglas K. Mickle, and Robert E. Kirschman, Jr. of the U.S. Department of Justice as well as Eugenée M. Gray of the Army Legal Services Agency.

COFC – Navistar