Savantage Financial Services, Inc. v. U.S.

• Decision Date: 22 February 2010
• Docket Number: No. 2009-5076.,2009-5076.
• Citation: 595 F.3d 1282
• Parties: SAVANTAGE FINANCIAL SERVICES, INC., Plaintiff-Appellant, v. UNITED STATES, Defendant-Appellee.
• Court: U.S. Court of Appeals — Federal Circuit

595 F.3d 1282

SAVANTAGE FINANCIAL SERVICES, INC., Plaintiff-Appellant, v. UNITED STATES, Defendant-Appellee.

No. 2009-5076.

United States Court of Appeals, Federal Circuit.

February 22, 2010.

Timothy Sullivan, Thompson Coburn, LLP, of Washington, DC, argued for plaintiff-appellant.

A. Bondurant Eley, Attorney, Commercial Litigation Branch, Civil Division, United States Department of Justice, of Washington, DC, argued for defendant-appellee. With her on the brief were Tony West, Assistant Attorney General, Jeanne E. Davidson, Director, and Bryant G. Snee, Deputy Director.

Before NEWMAN, BRYSON, and PROST, Circuit Judges.

BRYSON, Circuit Judge.

In this pre-award bid protest case, Savantage Financial Services, Inc., challenges the terms of a request for proposals from the Department of Homeland Security ("DHS"). The request sought proposals to implement an agency-wide financial, acquisition, and asset management system. The request required proposers to offer a system that is integrated and currently fully operational within the federal government. Although the Court of Federal Claims had previously enjoined DHS from using an earlier solicitation, the court concluded that the requirements of the new solicitation were not unlawful. Savantage appeals, contending that the new solicitation, like the previous one, unduly restricts competition, in violation of the Competition in Contracting Act ("CICA"), 10 U.S.C. § 2304(a)(1).

I

DHS was established in 2003 through the merger of 22 federal agencies. As a result of the merger, DHS inherited five different financial management software systems and a number of different acquisition management and asset management systems. The use of different financial systems within the agency has caused logistical difficulties and has been the subject of criticism and concern from federal auditors and lawmakers. As a result, DHS has devoted considerable effort to obtaining an integrated financial, acquisition, and asset management system.

In January 2004, DHS launched its first effort to integrate its financial systems through a project entitled Electronically Managing Enterprise Resources for Government Effectiveness and Efficiency ("eMerge²"). The plan underlying the eMerge² project was to purchase commercial off-the-shelf software products and to integrate them so as to facilitate communication among all the Department's components. That project was a complete failure; in December 2005, after spending $52 million with no discernible results, the agency abandoned the eMerge² program.

DHS initiated its second effort to integrate its financial systems in 2007, through the Transformation and Systems Consolidation ("TASC") initiative. Its initial request for proposals contained a series of task orders proposing the "migration" of all DHS components to one of two integrated "shared software baselines" already in use within the agency: (1) the Oracle financial management system integrated with the Compusearch PRISM and Sunflower Assets systems, or (2) an integrated system from Systems Applications Products ("SAP"). In response, Savantage filed a pre-award bid protest with the Court of Federal Claims in January 2008. In April 2008, the court ruled in favor of Savantage, concluding that DHS's decision to require migration to the Oracle or SAP financial software systems constituted an improper sole-source procurement. See Savantage Fin. Servs., Inc. v. United States ("Savantage I"), 81 Fed.Cl. 300, 308 (2008). The court enjoined DHS from proceeding with its solicitation until it had conducted a competitive procurement. Id. at 311.

Following the court's ruling, DHS spent 10 months conducting market research regarding the integration and implementation of financial systems in an effort to develop a new solicitation. The result was a new request for proposals, issued on January 9, 2009, and amended on February 14, 2009. The new request sought a financial, acquisition, and asset management system that "will be provided as an integrated solution that is currently fully operational in the Federal government." The new TASC procurement was to be conducted as "a full and open competition" in two separate phases: (1) identification of viable offerors through submission of information to DHS; and (2) submission and demonstration of proposals by viable offerors.

That process was halted following the receipt of the first phase submissions, when Savantage filed the present bid protest action with the Court of Federal Claims. Savantage argued that DHS's requirements unduly restricted full and open competition, in violation of CICA, because the requirements effectively eliminated all solutions except for Oracle-based systems. Both parties moved for judgment on the administrative record.

In an April 2009 opinion, the trial court denied the protest, holding that Savantage "ha[d] not met its burden of demonstrating that the requirement of a fully integrated, currently operational system lacks a rational basis" and thus "defer[ring] to the agency's discretion in determining its own needs." Savantage Fin. Servs., Inc. v. United States ("Savantage II"), 86 Fed.Cl. 700, 706 (2009). Savantage appealed to this court.

On appeal, Savantage argues that by requiring a system that is integrated and currently operational in the federal government, the new solicitation unduly restricts competition. Savantage contends that DHS's attempts to justify those requirements are based on conclusory statements lacking factual support in the administrative record. Savantage further asserts that DHS's requirements effectively guarantee that only the Oracle financial management product (coupled with the PRISM acquisition management and the Sunflower asset management products) will qualify for selection. According to Savantage, the requirements of the new solicitation are pretextual, disguising DHS's efforts to favor Oracle—one of the solutions DHS was enjoined from selecting by specific designation in the prior solicitation.

II

In a bid protest case, an agency's action must be set aside if it is arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law. See Bannum, Inc. v. United States, 404 F.3d 1346, 1351 (Fed.Cir.2005); see also 28 U.S.C. § 1491(b)(4); 5 U.S.C. § 706(2)(A). The court's task is to determine whether "(1) the procurement official's decision lacked a rational basis; or (2) the procurement procedure involved a violation of regulation or procedure." Weeks Marine, Inc. v. United States, 575 F.3d 1352, 1358 (Fed.Cir. 2009). Savantage does not allege a procedural violation, but argues that DHS's restrictions on the solicitation lacked a rational basis and were therefore unlawful.

Contracting officers "are entitled to exercise discretion upon a broad range of issues confronting them in the procurement process." Impresa Construzioni Geom. Domenico Garufi v. United States, 238 F.3d 1324, 1332 (Fed.Cir.2001). For that reason, procurement decisions "invoke[] `highly deferential' rational basis review." CHE Consulting, Inc. v. United States, 552 F.3d 1351, 1354 (Fed.Cir.2008). Under that standard, we must sustain an agency action unless the action does not "evince[] rational reasoning and consideration of relevant factors." Advanced Data Concepts, Inc. v. United States, 216 F.3d 1054, 1058 (Fed.Cir.2000). Upon review of the record in this case, we agree with the trial court that there is a rational basis for the three contested requirements of the new solicitation: (1) that the proposed financial, acquisition, and asset management system be "integrated"; (2) that it be "currently fully operational"; and (3) that it be "currently fully operational in the Federal government."

With respect to the requirement that the system be integrated, we agree with the trial court that it is "logical that [DHS] would want to ensure its success by seeking a fully integrated system, both on the basis of its own experiences and those of other agencies and departments." Savantage II, 86 Fed.Cl. at 706. As the administrative record amply shows, the failure of DHS's own eMerge² project— largely due to the contractors' inability to provide functional integration among components—underscored the risks of building an entirely new system using separate, unintegrated, off-the-shelf components. Internal DHS documents indicate that the Department responded to that failure by rejecting a piecemeal approach and electing to acquire a core financial system pre-integrated with other key systems. As we have held, an agency "has no obligation to point to past experiences substantiating its concerns in order to survive rational basis review . . . [as CICA does not require the agency] to supply a historical record of failures to substantiate a risk." CHE Consulting, 552 F.3d at 1355. Nonetheless, DHS's prior "fifty-two million-dollar failure at integration," Savantage II, 86 Fed. Cl. at 705, provides support for its decision to obtain a pre-integrated system.

Savantage contends that there is no justification...