Oracle Am., Inc. v. United States

• Decision Date: 02 September 2020
• Docket Number: 2019-2326
• Citation: 975 F.3d 1279
• Parties: ORACLE AMERICA, INC., Plaintiff-Appellant v. UNITED STATES, Amazon Web Services, Inc., Defendants-Appellees
• Court: U.S. Court of Appeals — Federal Circuit

975 F.3d 1279

ORACLE AMERICA, INC., Plaintiff-Appellant

v.UNITED STATES, Amazon Web Services, Inc., Defendants-Appellees

2019-2326

United States Court of Appeals, Federal Circuit.

Decided: September 2, 2020

Craig Holman, Arnold & Porter Kaye Scholer LLP, Washington, DC, argued for plaintiff-appellant. Also represented by Kara L. Daniels, Nathaniel Edward Castellano, Amanda J. Sherwood.

William Porter Rayel, Commercial Litigation Branch, Civil Division, United States Department of Justice, Washington, DC, argued for defendant-appellee United States. Also represented by Ethan P. Davis, Robert Edward Kirschman, Jr., Patricia M. Mccarthy.

Daniel Ruben Forman, Crowell & Moring, LLP, Washington, DC, argued for defendant-appellee Amazon Web Services, Inc. Also represented by Robert Joseph Sneckenberg, Olivia Louise Lynch, Zachary H. Schroeder; Gabrielle Trujillo, Los Angeles, Ca; Mark Andrew Perry, Gibson, Dunn & Crutcher LLP, Washington, DC.

Before Newman, Bryson, and O'Malley, Circuit Judges.

Bryson, Circuit Judge.

This is a federal contract pre-award protest case. The United States Court of Federal Claims ("the Claims Court") analyzed a number of legal challenges by Oracle America, Inc., to a large Department of Defense procurement. After a thorough treatment of all the issues presented, the Claims Court rejected Oracle's protest. Oracle Am., Inc. v. United States , 144 Fed. Cl. 88 (2019). We affirm.

I

The procurement at issue in this case, known as the Joint Enterprise Defense Infrastructure ("JEDI") Cloud procurement, is directed to the long-term provision of enterprise-wide cloud computing services to the Department of Defense. The JEDI Cloud solicitation contemplated a ten-year indefinite delivery, indefinite quantity contract. The Defense Department decided to award the contract to a single provider rather than making awards to multiple providers.

The JEDI Cloud solicitation included several "gate" provisions that prospective bidders would be required to satisfy. One of the gate provisions, referred to as Gate Criteria 1.2 or Gate 1.2, required that the contractor have at least three existing physical commercial cloud offering data centers within the United States, each separated from the others by at least 150 miles. Those data centers were required to provide certain offerings that were "FedRAMP Moderate Authorized" at the time of proposal. The Federal Risk and Authorization Management Program ("FedRAMP") is an approach to security assessment, authorization, and continuous monitoring for cloud products and services. "FedRAMP Moderate Authorized" is a designation given to systems that have successfully completed the FedRAMP Moderate authorization process. FedRAMP Moderate is the Defense Department's minimum security level for processing or storing the Department's least sensitive information. Oracle did not satisfy the FedRAMP Moderate Authorized requirement as of the time the proposals were to be submitted.

Oracle filed a pre-bid protest challenging the solicitation. Oracle's protest focused on the Department's adoption of Gate 1.2 and on the Department's decision to conduct the procurement on a single-source basis, rather than providing for multi-source contracts.

Following a hearing and briefing, the U.S. Government Accountability Office ("GAO") denied the protest. Oracle then filed suit in the Claims Court challenging the solicitation. The court analyzed Oracle's claims in detail and rejected Oracle's protest in a lengthy opinion.

The court first addressed Oracle's claim that the contracting officer and the Under Secretary of Defense violated separate provisions of 10 U.S.C. § 2304a when they each determined that it was appropriate to structure the JEDI Cloud procurement on a single-award basis rather than providing for multiple awards. Section 2304a sets out the conditions under which the Department may enter into large task and delivery order contracts with a single awardee, as opposed to awarding such contracts to two or more sources.

Section 2304a(d)(3) generally prohibits the award of a task or delivery order contract in excess of $100 million¹ to a single vendor unless the head of the agency determines in writing that one of four exceptions to that general prohibition applies. The exceptions are:

(i) the task or delivery orders expected under the contract are so integrally related that only a single source can efficiently perform the work;

(ii) the contract provides only for firm, fixed price task orders or delivery orders for—

(I) products for which unit prices are established in the contract; or

(II) services for which prices are established in the contract for the specific tasks to be performed;

(iii) only one source is qualified and capable of performing the work at a reasonable price to the government; or

(iv) because of exceptional circumstances, it is necessary in the public interest to award the contract to a single source.

10 U.S.C. § 2304a(d)(3)(A).

In addition to that provision, section 2304a(d)(4) requires that regulations implementing section 2304a(d) "establish a preference for awarding, to the maximum extent practicable, multiple task or delivery order contracts for the same or similar services," and that they "establish criteria for determining when award of multiple task or delivery order contracts would not be in the best interest of the Federal Government." 10 U.S.C. § 2304a(d)(4). Pursuant to that directive, the Federal Acquisition Regulation ("FAR") provides that, except for indefinite-quantity contracts for advisory and assistance services, "the contracting officer must, to the maximum extent practicable, give preference to making multiple awards of indefinite-quantity contracts under a single solicitation for the same or similar supplies or services to two or more sources." 48 C.F.R. § 16.504(c)(1)(i) (" FAR 16.504(c)(1)(i)"). The FAR further provides, however, that the contracting officer must not elect to use a multiple-contract award if one or more of several conditions applies:

(1) Only one contractor is capable of providing performance at the level of quality required because the supplies or services are unique or highly specialized;

(2) Based on the contracting officer's knowledge of the market, more favorable terms and conditions, including pricing, will be provided if a single award is made;

(3) The expected cost of administration of multiple contracts outweighs the expected benefits of making multiple awards;

(4) The projected orders are so integrally related that only a single contractor can reasonably perform the work;

(5) The total estimated value of the contract is less than the simplified acquisition threshold; or

(6) Multiple awards would not be in the best interests of the Government.

FAR 16.504(c)(1)(ii)(B).²

The head of the agency—in this case, Under Secretary of Defense Ellen Lord—made a finding under section 2304a(d)(3)(B)(ii) that a single-source contract was permissible because the solicitation provides exclusively for firm, fixed price task orders, or delivery orders for services for which prices are established in the contract for the specific tasks to be performed. For her part, the contracting officer found that three of the reasons set forth in FAR 16.504(c)(1)(ii)(B) prohibited the use of the multiple-award approach for the JEDI Cloud procurement: (1) more favorable terms and conditions, including pricing, would be provided in the case of a single award; (2) the expected cost of administering multiple contracts outweighed the expected benefits of making multiple awards; and (3) multiple awards would not be in the best interests of the government.

Before the Claims Court, Oracle challenged the determinations of both the contracting officer and Under Secretary Lord. As to the contracting officer, Oracle argued that she failed to properly balance the multiple-award preference against a single-award approach. As to Under Secretary Lord, Oracle argued that the JEDI Cloud solicitation contained provisions for future services that were not specifically defined and for which specific prices were not given. For that reason, Oracle contended, the contract did not qualify as one providing only for firm, fixed prices for services for which prices are established in the contract for the specific tasks to be performed.

The Claims Court held that the contracting officer's determination complied with the requirements of section 2304a(d)(4) and FAR 16.504(c). The court concluded that the contracting officer, based on her knowledge of the market, "drew the reasonable conclusion that a single award was more likely to result in favorable terms, including price." Oracle , 144 Fed. Cl. at 113. In addition, the court found that it was "completely reasonable" for the contracting officer to find that a multisource award would be more expensive to administer and that a single cloud services provider would be best positioned to provide the necessary security for the agency's data. Id. The court concluded that Oracle had pointed to no reason to disturb the contracting officer's determination that multiple awards should not be employed.

With respect to section 2304a(d)(3), however, the Claims Court reached a different conclusion. The court held that the solicitation did not qualify for a single-source award under the exception relied on by Under Secretary Lord to the statutory prohibition against awarding large task order contracts to a single vendor. Specifically, the court found that the solicitation contemplated that during the life of the contract, services not envisioned at the time of the initial award would likely be needed. New services would likely have to be added to the contract in light of the fact that cloud computing technology was constantly evolving. The solicitation provided that if at some point during the pendency of the contract the cloud services provider created a new service, it would be required to offer that service to the Department at a price no higher than the price...