691 F.3d 1374 (Fed. Cir. 2012), 2012-5004, Systems Application & Technologies, Inc. v. United States

Docket Nº:2012-5004.
Citation:691 F.3d 1374
Opinion Judge:RADER, Chief Judge.
Party Name:SYSTEMS APPLICATION & TECHNOLOGIES, INC., Plaintiff-Appellee, v. UNITED STATES, Defendant-Appellant, and Madison Research Corporation, Defendant.
Attorney:Craig A. Holman, Arnold & Porter LLP, of Washington, DC, argued for plaintiff-appellee. With him on the brief were Kara L. Daniels and Emma V. Broomfield. Franklin E. White, Jr., Assistant Director, Commercial Litigation Branch, Civil Division, United States Department of Justice, of Washington, ...
Judge Panel:Before RADER, Chief Judge, O'MALLEY and WALLACH, Circuit Judges.
Case Date:August 24, 2012
Court:United States Courts of Appeals, Court of Appeals for the Federal Circuit
 
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691 F.3d 1374 (Fed. Cir. 2012)

SYSTEMS APPLICATION & TECHNOLOGIES, INC., Plaintiff-Appellee,

v.

UNITED STATES, Defendant-Appellant,

and

Madison Research Corporation, Defendant.

No. 2012-5004.

United States Court of Appeals, Federal Circuit.

August 24, 2012

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Craig A. Holman, Arnold & Porter LLP, of Washington, DC, argued for plaintiff-appellee. With him on the brief were Kara L. Daniels and Emma V. Broomfield.

Franklin E. White, Jr., Assistant Director, Commercial Litigation Branch, Civil Division, United States Department of Justice, of Washington, DC, argued for defendant-appellant. With him on the brief were Tony West, Assistant Attorney General, Jeanne E. Davidson, Director, and Matthew F. Scarlato, Trail Attorney.

Before RADER, Chief Judge, O'MALLEY and WALLACH, Circuit Judges.

RADER, Chief Judge.

In this bid protest action, the United States Court of Federal Claims denied the U.S. Army's motion to dismiss the complaint filed by Systems Application & Technologies, Inc. (" SA-TECH" ). SA-TECH, the original contract awardee for aerial target flight and maintenance services, protested the Army's decision to engage in corrective action instead of allowing SA-TECH's award to stand. In addition to asserting subject matter jurisdiction, the Court of Federal Claims also found the Army's actions to be unreasonable and contrary to law. Sys. Application & Techs., Inc. v. United States, 100 Fed.Cl. 687, 702-710 (2011). Upon review of the record, this court affirms.

I.

The Court of Federal Claims admirably stated the relevant facts in its opinion.

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Id. at 693-702. With that in mind, this court only sets forth the facts required to assess the Army's jurisdictional arguments.

In April 2010, the Army solicited proposals for the provision of aerial target flight operations and maintenance services at numerous Army installations. The solicitation proposed a contract with one base year and four option years. At the time of the solicitation, Kratos Defense & Security Solutions (" Kratos" ) provided these services under a predecessor contract. Id. at 694.

The solicitation listed three evaluation factors: Technical/Management; Past Performance; and Price/Cost. The solicitation indicated that the Army would rate Technical/Management and Past Performance factors and sub-factors as " outstanding," " satisfactory," " marginal," or " unsatisfactory." Id. Overall, the Technical/Management and Price/Cost factors were similarly weighted, and, " taken individually, were ‘ significantly more important’ than the Past Performance factor." Id. However, the Technical/Management and Past Performance factors, when considered together, were " more important" than the Price/Cost factor. Id.

The Technical evaluation factor had three sub-factors, including Labor. The Labor sub-factor required " [e]vidence of the availability of sufficient personnel with the required skills, experience, and of the proposed labor mix to assure effective and efficient performance." J.A. 10270. The solicitation required offerors to provide " [t]he labor mix (i.e. job categories and hours assumed for each) for the SOW [Statement of Work] as a whole," " [m]inimum and proposed levels of education," " resumes for each individual proposed" for specific labor categories, and " the total number of personnel proposed to perform the requirements of the SOW." J.A. 10267.

The solicitation provided that the contract would be subject to the Service Contract Act of 1965. For such contracts, the Federal Acquisition Regulation (" FAR" ) requires that " successor contractors performing on contracts in excess of $2,500 for substantially the same services performed in the same locality must pay wages and fringe benefits (including accrued wages and benefits and prospective increases) at least equal to those contained in any bona fide collective bargaining agreement entered into under the predecessor contract." FAR 22.1002-3(a) (emphasis added). The Army later amended the solicitation to include an updated Wage Determination. The new Wage Determination contained the collective bargaining agreement between the incumbent Kratos and the International Association of Machinists and Aerospace Local Lodge 2515.

The Army received three proposals, including the offers from SA-TECH and Kratos. The Army's Technical Evaluation Committee initially evaluated the proposals and included all three in the competitive range. Sys. Application & Techs., 100 Fed.Cl. at 696. Following a period of discussions, the Army requested final proposal revisions from the offerors. Id.

After a review, the Technical Evaluation Committee announced its findings in a Final Evaluation Report. While it noted potential difficulties for SA-TECH under the Labor sub-factor, it rated SA-TECH as " outstanding" for all evaluation factors. Id. at 697. Kratos also received " outstanding" ratings. Id.

The Source Selection Authority reviewed the evaluations and concluded that

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SA-TECH offered the best value for the government. Because " there were no meaningful distinctions between the non-cost portions of the proposals ...," the Source Selection Authority found the " price/cost advantages of SA-TECH's proposal" tilted the balance in its favor. Id. at 698. The Army notified the offerors of its award decision. The notification letters disclosed SA-TECH's final price and the adjectival ratings for all offerors' proposals. Id.

Kratos filed a protest with the Government Accountability Office (" GAO" ). Kratos argued the Army improperly added a new requirement to the solicitation when it issued the updated Wage Determination. Kratos also asserted that the Army's evaluation of labor mixes did not consider the offerors' compliance with the collective bargaining agreement. Finally the protest challenged SA-TECH's Technical/Management rating. Id. SA-TECH intervened in the protest. Several months later, Kratos filed a supplemental protest with the GAO. It claimed the Army's " systematic process of assigning an ‘ Outstanding’ rating to every Factor for each bidder, regardless of the evaluator's comments and plain language of the proposals," converted the best value procurement into a lower price, technically acceptable evaluation. Id. at 700. Kratos highlighted the fact that the Technical Evaluation Committee assigned an " outstanding" rating to SA-TECH's proposal under the Labor sub-factor in spite of its concerns with SA-TECH's proposal on this point. Id.

Upon receipt of Kratos' supplemental protest, the GAO attorney informed the parties that he intended " to suggest ... that, on the face of it, the protester offer[ed] a straight forward argument as to why the agency's evaluation of the technical portions of the proposals was unreasonable." Id. He asked whether " the agency [was] more inclined to continue to defend the protest or take corrective action." Id.

SA-TECH responded to Kratos' supplemental protest. Id. It requested the GAO dismiss Kratos' supplemental protest because it was untimely and speculative. Moreover, SA-TECH noted that Kratos was not next in line for the contract award. Therefore, SA-TECH questioned Kratos' showing of prejudice. Id.

The GAO attorney again notified the parties of his view that Kratos' supplemental protest had merit. He expressed his view of the technical evaluation as well the agency's treatment of SA-TECH's purported weaknesses and concluded that the GAO would " likely sustain this protest...." J.A. 11995. The GAO invited further comments, but only from the Army.

On April 22, 2011, the Army sent a letter to the GAO, Kratos, and SA-TECH which stated:

After review of the supplemental issues, the Army has determined that it is in its best interest to take corrective action. The Army intends to terminate the contract awarded to SA-TECH so that it can reopen the original solicitation. The solicitation will then be amended to explain the intention of providing Kratos' [collective bargaining agreement] in the solicitation.

Sys. Application & Techs., 100 Fed.Cl. at 702 (emphasis added). The Army also stated it would give offerors the opportunity to submit revised proposals and reserved the right to conduct further discussions. Id. The Army's letter concluded: " The Army believes that this corrective action makes the pending protest moot and

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no further purpose would be served by the GAO's review of the protest. Therefore, the Army requests that the GAO dismiss Kratos' protest." J.A. 11997. On April 25, 2011, the GAO dismissed Kratos' protest and stated: " the agency's decision to terminate the contract award and reopen the solicitation renders the protest academic." J.A. 11998.

SA-TECH filed a protest at the Court of Federal Claims that challenged the Army's decision to engage in corrective action. SA-TECH alleged the Army's decision was arbitrary, capricious, and unreasonable because it was based on an improper and unreasonable GAO statement. Sys. Application & Techs., 100 Fed.Cl. at 702. It also claimed the Army's decision to engage in corrective action independently lacked a rational basis and involved a violation of law, regulation, or procedure. Id. SA-TECH also took issue with the Army's decision to amend the solicitation. Kratos intervened. At the proper time, SA-TECH filed a motion for judgment on the administrative record. The Army and Kratos moved to dismiss the complaint for lack of subject matter jurisdiction and crossmoved for judgment on the administrative record.

The Court of Federal Claims denied the motions to dismiss, finding jurisdiction under 28 U.S.C. § 1491(b)(1). Id. at 703-10. The trial...

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