Bid protests afford disappointed offerors the opportunity to challenge flawed procurements and award decisions that violate the rules. Bid protest procedures, at least in theory, are intended to further this purpose.
Sometimes, however, circumstances arise in which these rules and procedures are effectively suspended, such as when an agency asserts that urgent and compelling need for agency requirements justifies the award of sole source bridge contracts. Such was the case in Harmonia Holdings Group, LLC v. The United States and Dev Technology Group, Inc., (Fed. Cl., Oct. 9, 2019).
On June 11, 2018, U.S. Customs and Border Protection Agency (CBP) issued a Request for Quotation to holders of the GSA IT Schedule 70 contract. Over 10 months later, on April 23, 2019, CBP awarded a time and materials task order to Dev Tech (the “original contract”) to support CBP’s Automated Commercial Environment (ACE) system, which, as described by CBP, “is the backbone of CBP’s trade processing and risk management activities and key to implementing international trade covering truck, ocean, air and rail carriers, importers, exporters, and customs house brokers.”
On May 7, 2019, Harmonia filed a protest. Two disappointed bidders subsequently filed separate protests and, in response, CBP voluntarily stayed performance of the task order. Based on the agency’s agreement to stay, Harmonia did not file a motion for a preliminary injunction.
Below are the key events that followed:
- May 30, 2019 - CBP prepares a detailed limited source justification (LSJ) for the purpose of awarding a bridge contract to Dev Tech, which was not an incumbent.
- May 31, 2019 - CBP provides Dev Tech a draft Request for Quotation.
- June 1, 2019 - Dev Tech responds to the RFQ. Dev Tech and the CBP subsequently engage in discussions on Dev Tech’s proposal.
- June 11-12, 2019 - CBP finalizes its limited source justification for sole source bridge contract to Dev Tech.
- June 13 - CBP issues a final RFQ to Dev Tech.
- June 17, 2019 - Dev Tech provides its final proposal.
- July 2, 2019 - CBP awards Dev Tech a bridge contract with an initial period of performance of six months, with a single two-month option period. CBP estimates the value of the bridge contract, with the option period, to be $48.6 million.
- August 7, 2019 - Harmonia files a complaint in the Court of Federal Claims, alleging that CBP’s award of the bridge contract to Dev Tech was improper and an abuse of agency discretion, and seeks to enjoin or stay performance.
Harmonia, CBP, and Dev Tech as intervenor filed Motions for Judgment on the Administrative Record. The Court heard oral argument on September 19, 2019, and on October 9, 2019, issued a public decision granting judgment for CBP and Dev Tech.
Court Rejects Argument Dev Tech Lacked "Standing" to Bring Protest
Before addressing Harmonia’s protest grounds, the court first considered the argument by CBP and Dev Tech that Harmonia did not have “standing,” or the right to protest a sole source award, because Harmonia never had a “substantial chance” of receiving the award.
The court rejected this argument, explaining that, in order to have standing, Harmonia must show only that “it could compete for the contract if the bid process were made competitive,” and that it would have been a “qualified bidder.” The court noted that all parties agreed that Harmonia would have competed for the sole-source bridge contract and that Harmonia was a qualified bidder under the original contract.
This finding in the protester’s favor, though perhaps significant for future protesters, was at best a hollow victory for Harmonia.
Court Finds Agency’s Sole Source Bridge Contract Is Proper
Harmonia raised four arguments, all of which the court rejected:
First, Harmonia argued that “the Agency ignored its own voluntary stay by allowing Dev Tech to immediately begin performing under the original contract under the guise of a bridge contract,” and that “[i]n every meaningful way, the Sole Source is the Task Order.”
- The court did not agree. After noting that “Agency procurement decisions are entitled to a presumption of regularity,” the court explained that agencies have the right to award bridge contracts “to avoid [ ] a gap in service – even in a situation in which the bridge contract covers the exact same scope of work as the underlying contract.”
Second, the court dispensed with Harmonia’s argument that awarding the bridge contract violated FAR 1.102-2(c), which states that the Government should “[c]onduct business with integrity, fairness, and openness.”
- The court reasoned that “[c]autionary and informative regulations and directives provide only internal governmental direction . . . [but] provide no remedy for private parties in a judicial form.”
Third, the court rejected Harmonia’s argument that the agency violated the FAR Part 8 requirement that justification for its sole source award must be posted within 30 days after award.
- The court reasoned that the date of award was July 2, 2019 – not June 17 as plaintiff suggested – and that CBP posted its limited sources justification on August 1, 2019. The court also noted that awards may be made with a limited sources justification “when an urgent and compelling needs” exists, and that, here, “[i]t seems clear” that such a need, in fact, existed.
Fourth, the court rejected Harmonia’s argument that the agency did not conduct sufficient market research in order to make a sole source award. In other words, Harmonia argued that CBP did not rationally consider sources other than Dev Tech for the work.
- The court explained that when an agency’s justification for issuing a sole-source award is based on urgent and compelling need, the agency need only provide a “description of the market research conducted among schedule holders and the results or a statement of the reason market research was not conducted.” FAR 8.405-6(c)(2)(vi).
- The court accepted the agency’s reason for not conducting market research: because “it performed extensive market research in 2017, 2018, and 2019 prior to awarding the original contract.” The court reasoned further:
- Specifically, the Agency indicated that the scope of work under the bridge contract mirrored that of the original contract. As a result, the Agency had extensive market research from 2017 through 2019, as well as a complete understanding of the twelve most eligible offerors, their potential proposals, and their qualifications for a bridge contract award. Thus, CBP provided “a coherent and reasonable explanation of its exercise of discretion,” such that its justification for the sole-source bridge contract was neither arbitrary not capricious.
Decision at 7-8 (internal citations omitted) (emphasis added).
On these bases, the court denied Harmonia’s request for an injunction, which would have stayed the agency’s performance, and directed the Clerk of Court to enter judgment in favor of the agency and Dev Tech.
An Equitable Outcome?
The court’s reasoning, while legally very tidy, may have missed a larger and more important point: namely, that an agency should not be allowed to sidestep competition requirements and claim the need for a sole source bridge contract when better acquisition planning could have avoided such a need.
Here, the agency awarded the original contract to Dev Tech on April 23. Harmonia filed its protest on May 7. The agency was preparing its sole source justification a mere three weeks later which is not nearly enough time to resolve a protest under the most aggressive of timelines and under the most straightforward of circumstances (consider that GAO must issue its decision no later than 100 days from the date of protest filing). This suggests that a bridge contract or some other extraordinary procurement method to satisfy the agency’s requirement was a foregone conclusion in the event of a protest.
One would think that if ACE system support was such a critical requirement, CBP would have planned its acquisition and award, including time for a protest, without potential for interruption of critical contractor services.
No doubt, at the end of the bridge contract and after at least six months of performance, Dev Tech will be well underway and have a significant competitive advantage over Harmonia (as well as the other two protesters who similarly concluded that the agency’s award of the original contract was improper). Mitigation of such advantage is why the Competition in Contracting Act affords protesters an automatic stay of award or performance for protests filed before the GAO. CICA recognizes that maintaining the status quo is a powerful means of preserving the protester’s ability to receive actual, meaningful relief in the event of a flawed procurement. Nevertheless, the court held that award of the bridge contract was within the agency’s discretion.
Contractors can count on just about every protest decision, win or lose, observing that agency procurement decisions and the agency representatives who make them are entitled to a “presumption of regularity.” Here, the court went even further, holding that an agency need not comply with the FAR’s requirement that agency procurement representatives should “[c]onduct business with integrity, fairness, and openness” – that this is merely “cautionary” and “informative.” One wonders whether the duty of good faith and fair dealing implicit in every government contract – a duty applicable to both contractors and agency procurement professionals alike – should have extended to CBP’s pre-award acquisition planning and source selection decision making.
That said, agencies are entitled to reasonable discretion in procurement decision-making, and it may be that not all of the key facts bearing upon the court’s judgment in favor of CBP were discussed in its decision. Perhaps the outcome here was in line with the underlying equities. But the absence of a clear explanation from the agency why it could not have planned its acquisition in a way to avoid the “urgent and compelling circumstances” that would effectively require a sole source bridge contract in the event of a protest – and in so doing undercut protest rights of the disappointed offerors – suggests another possibility. Either way, agencies (and especially agencies seeking CICA exception to competition requirements on multi-million dollar contracts) should be held to the intent as well as letter of the law, and to the standards requiring integrity, openness, and fairness, regardless of whether those standards may have been previously regarded as merely “cautionary” or “informative.”
We welcome your thoughts and comments.