Information Technology & Applications v. U.S.

• Decision Date: 10 January 2003
• Docket Number: No. 02-5048.,02-5048.
• Citation: 316 F.3d 1312
• Parties: INFORMATION TECHNOLOGY & APPLICATIONS CORPORATION, Plaintiff-Appellant, v. UNITED STATES, Defendant-Appellee, and RS Information Systems, Inc., Defendant.
• Court: U.S. Court of Appeals — Federal Circuit

316 F.3d 1312

INFORMATION TECHNOLOGY & APPLICATIONS CORPORATION, Plaintiff-Appellant, v. UNITED STATES, Defendant-Appellee, and RS Information Systems, Inc., Defendant.

No. 02-5048.

United States Court of Appeals, Federal Circuit.

DECIDED: January 10, 2003.

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Jed L. Babbin, O'Connor & Hannan, LLP, of Washington, DC, argued for plaintiff-appellant. With him on the brief was Sharon L. Babbin.

Mark L. Josephs, Attorney, Commercial Litigation Branch, Civil Division, Department of Justice, of Washington, DC, argued for defendant-appellee The United States. On the brief were Robert D. McCallum, Jr., Assistant Attorney General; David M. Cohen, Director; Mark A. Melnick, Assistant Director; and Michael F. Kiely, Trial Attorney.

Before NEWMAN, DYK and PROST, Circuit Judges.

DYK, Circuit Judge.

This case involves the distinction between "clarifications" and "discussions" under the 1997 revision to Subpart 15.3 of the Federal Acquisition Regulations. 48 C.F.R. §§ 15.300-08 (2002). Information Technology and Applications Corporation ("ITAC") appeals the decision of the United States Court of Federal Claims denying its bid protest and granting the United States motion for summary judgment on the administrative record. Info. Tech. & Applications Corp. v. United States, 51 Fed.Cl. 340 (Fed.Cl.2001). Because we have determined that the Air Force's contacts with appellee RS Information Systems, Inc. ("RSIS") were allowable requests for "clarification" of its proposal and did not constitute "discussions," and because the appellant's other asserted grounds for reversing the decision of the Court of Federal Claims are without merit, we affirm.

BACKGROUND

On March 19, 2001, the Air Force issued Solicitation and Request for Proposals No. FA2550-01-R-0001 ("RFP") to obtain a contract for professional services in support of its Space Warfare Center. The winning contractor was to examine, assess and develop means of integrating national intelligence assets with the Department of Defense space systems, in order to enhance combat and research and development capabilities at the Space Warfare Center. The Air Force intended to make an award to one lead contractor, which would perform overall program management and integration, operations support, systems engineering and analysis, and other work related to the Space Warfare Center. The term of performance was to be twelve months, beginning on October 1, 2001, with seven one-year options.

Under the RFP, the contract was to be awarded "to an offeror who gives the Government the greatest confidence that it will best meet [the] requirements affordably." RFP at 81. In accordance with 10 U.S.C. § 2305(a)(2)(A) and 41 U.S.C. § 253a(b)(1), the RFP also disclosed "all the significant factors and significant subfactors" that the agency "reasonably expect[ed] to consider," and their relative importance. 10 U.S.C. § 2305(a)(2)(A) (2000); 41 U.S.C. § 253a(b)(1) (2000); RFP at 81-85.

ITAC, RSIS and a third offeror submitted timely proposals in response to the RFP. All three proposals anticipated that some of the work would be performed by subcontractors. RSIS's proposal relied heavily on the role of its subcontractors, which were to perform at least 75% of the work on the contract.

The Air Force sent various "evaluation notices" ("ENs") to all three offerors. These evaluation notices were brief letters to the offerors requesting additional information regarding their proposals. The Air Force sent three ENs to ITAC, five ENs to RSIS, and three ENs to the third offeror. At issue in this case are ENs Nos. 0001, 0002 and 0002a, which the Air Force sent to RSIS after the offerors had submitted "past performance" information, but before the due date for the other parts of the proposals. The ENs at issue sought "additional information ... to verify relevant past performance for [the] lead and support roles" of at least ten subcontractors that RSIS listed in its proposal. EN No. 0002. The Air Force sent ENs to the other bidders requesting additional information on their subcontractors as well.¹ The disputed ENs were labeled "FAR 15.306(a) Clarification[s]" and included the notice, "Please note that this clarification does not constitute oral discussions with the offeror." EN 0002, referring to 48 C.F.R. § 15.306(a).

RSIS responded to the ENs on May 1, 2001, explaining which parts of the project each subcontractor would support and detailing the subcontractors' relevant experience with regard to those tasks. For example, in response to EN 0002, RSIS responded, "[subcontractor] Aerojet has developed and integrated the CTPP/ALERT and the JTAGS IR missile warning processing systems into the tactical missile warning C2 operational architecture, (Similarities to [contract] Requirements, V-57, and V-59)." (RSIS Response to Evaluation Notice.)

The Air Force gave both ITAC and RSIS an "overall exceptional rating" for their "past performance" experience. (Proposal Analysis Report for RFP # FA2550-01-R-0001, July 11, 2001). The Air Force determined that prior contracts of RSIS and its subcontractors were relevant to their ability to perform the Space Warfare Center contract.

The Air Force performed an independent "Most Probable Cost analysis" on the proposals submitted by RSIS and the third bidder. The "Most Probable Cost analysis" was an independent analysis of the bidder's estimated cost for "reasonableness" and "realism." RFP at 85. The Air Force "assess[ed] the compatibility of the overall proposed costs with the scope of effort to be performed." Id. The Air Force did not perform a "Most Probable Cost analysis" on ITAC's proposal, because its evaluation team found that ITAC's proposed hours were so minimal and unrealistic that it was infeasible to perform an adequate analysis. (Source Selection Decision Document at 4.) As a result of this independent analysis performed with respect to RSIS and the third bidder, the Air Force increased the estimated labor hours for RSIS and the third bidder, after determining "that additional hours were required in each labor category to successfully perform the effort." Info. Tech. & Applications Corp. v. United States, No. 01-637 C, slip op. at 9 n. 15 (Fed.Cl. Dec. 7, 2001). There is no suggestion that these adjustments resulted from RSIS's responses to the disputed ENs.

On July 23, 2001, the Air Force announced its decision to award the contract to RSIS. In its Source Selection Decision Document, the Air Force explained that all three proposals were rated equally for "Program Management and Integration" and for "Past Performance" (which was the subject of the disputed ENs), and that these were not, therefore, "discriminating factors." (Source Selection Decision Document at 2.) The Air Force determined that although "[a]ll Offerors provided proposals which met minimum contract requirements," and "all proposals were fundamentally sound," "key discriminators were made in Mission Capability ..., Proposal Risk, and Cost/Price." Id. at 1. RSIS performed higher than ITAC in the categories of "Mission Capability" and "Proposal Risk." Id. at 2-4. In the area of "Cost/Price," the Air Force found, "RSIS provided the lowest overall price for the written Task Order and provided the best overall price to the Government." Id. at 5. The Air Force concluded:

In summary, RSIS offered an excellent proposal with lower risk and several innovative approaches to improve efficiency of SWC operations that were deemed to be beneficial to the Government. As a result, the RSIS proposal provided the overall best value to the Government. Based on my integrated assessment that the RSIS proposal provided a better technical and lower risk offer, I direct the award to RS Information Systems.

Id. Because "Cost/Price" was one of the categories in which RSIS scored higher than ITAC, the refusal of the Air Force to conduct a "Most Probable Cost analysis" of ITAC's proposal or make a similar adjustment to its labor hours to make them more realistic is alleged to have been a significant factor in ITAC's not winning the contract.

On August 6, 2001, ITAC filed a bid protest with the General Accounting Office ("GAO"). The GAO denied the bid protest and the Air Force awarded the contract to RSIS on November 7, 2001.

On November 13, 2001, ITAC filed this post-award bid protest in the Court of Federal Claims. Among the grounds for the bid protest was ITAC's contention that the Air Force conducted "discussions" with RSIS by virtue of the ENs it sent to RSIS, but failed to conduct "discussions" with ITAC, in violation of 41 U.S.C. § 253b and 48 C.F.R. § 15.306. ITAC argued that it was impermissible for the Air Force "to engage in discussions with RSIS regarding the weaknesses and deficiencies in RSIS's past performance part of its proposal, and then hide [sic] from ITAC the perceived weakness and deficiencies in" its cost proposal (resulting in the Air Force's declining to conduct a "Most Probable Cost analysis" with respect to ITAC). 51 Fed.Cl. at 353 (quoting Plaintiff's Consolidated Reply of Nov. 29, 2001). ITAC contended that the Air Force thereby improperly opened "discussions" with RSIS without holding "discussions" with all bidders. The theory was that if discussions had been opened, ITAC would have had the opportunity to cure the weaknesses in its proposal.

The ability of the contracting officer to conduct "discussions" is governed by both statute and regulation. Under 41 U.S.C. § 253b(d) and 10 U.S.C. § 2305(b)(4)(A), an agency may award a contract "after discussions with the offerors" or "based on proposals received and without discussions with the offerors." 41 U.S.C. § 253b(d) (2000); 10 U.S.C. § 2305(b)(4)(A) (2000). If the agency decides to hold discussions, however, it first must establish a "competitive range comprised of all the most highly rated proposals." 48 C.F.R. § 15.306(c)(1) (2002). In order to determine the competitive...