Veteran Shredding, LLC v. United States

• Decision Date: 18 December 2019
• Docket Number: No. 19-945C,19-945C
• Parties: VETERAN SHREDDING, LLC, Plaintiff, v. UNITED STATES, Defendant.
• Court: U.S. Claims Court

VETERAN SHREDDING, LLC, Plaintiff, v. UNITED STATES, Defendant.

No. 19-945C

United States Court of Federal Claims

Redacted Version Issued for Publication: January 14, 2020¹

December 18, 2019

Pre-Award Bid Protest; Cross-Motions for Judgment on the Administrative Record; Standing; Rule of Two Doctrine; Service-Disabled Veteran-Owned Small Business.

Joseph A. Whitcomb, Whitcomb, Selinsky, PC, Denver CO, for protestor.

Igor Helman, Trial Attorney, Commercial Litigation Branch, Civil Division, United States Department of Justice, Washington, D.C., for defendant. With him were Douglas K. Mickle, Assistant Director, Commercial Litigation Branch, Robert E. Kirschman, Jr., Director, Commercial Litigation Branch, and Joseph H. Hunt, Assistant Attorney General, Civil Division. Of counsel was Natica Chapman Neely, Staff Attorney, Department of Veterans Affairs, Office of General Counsel, District Contracting National Practice Group, Jackson, MS.

OPINION

HORN, J.

Protestor, Veteran Shredding, LLC, is a Minnesota-based limited liability company and a service-disabled veteran-owned small business (SDVOSB). Protestor filed the above-captioned pre-award bid protest² to challenge Solicitation No. 36C26319Q0276 (the '276 Solicitation) for document destruction services at the Minneapolis Veterans Affairs Healthcare System (MVAHCS) issued as a 100% small business set-aside andnot issued as an SDVOSB set-aside. Protestor alleges its "direct economic interest has been affected by the failure to award the contract to an SVDOSB [sic]" under the '276 Solicitation. According to protestor, the '276 Solicitation's designation as a 100% small business set-aside instead of as a 100% SDVOSB set-aside was arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with the law. Protestor requests this court to issue a declaratory judgment that the United States Department of Veterans Affairs' (VA) cancellation of the previous solicitation, Solicitation No. 36C26318Q0181 (the '181 Solicitation), for the services, which was issued as an SDVOSB, was "arbitrary, capricious, an abuse of discretion or otherwise not in accordance with law and regulation," and order the '276 Solicitation to "be cancelled and resolicited as a 100% SVDOSB [sic] set-aside." Protestor also requests the court to order "the VA to pay VS [Veteran Shredding, LLC] damages in the amount of its bid preparation and proposal costs."

FINDINGS OF FACT

Prior to the issuance of the '276 Solicitation, the VA issued the '181 Solicitation on February 12, 2018 for document destruction services at the Minneapolis VA Healthcare System as a 100% SDVOSB set-aside. See Veteran Shredding, LLC v. United States, 140 Fed. Cl. 759, 761 (2018). The Independent Government Cost Estimate (IGCE) for the '181 Solicitation was $[redacted] for the base and option years. See id. at 762-63. In response to the '181 Solicitation, five SDVOSBs, including protestor, submitted offers. See id. Chad L. Raterman, the contracting officer, requested revised quotes as all offers received greatly exceeded the IGCE, ranging from [redacted]% greater than the IGCE for the base and option years to protestor's quote which exceeded the IGCE by [redacted]%. After the offerors revised their quotes for the '181 Solicitation, all bids continued to exceed the IGCE, ranging from [redacted]% to [redacted]% over the IGCE for the base and option years.

 VENDOR NAME: [redacted] Veteran Shredding [redacted] [redacted] [redacted]  IGCE  CLIN PRICING         0001 (BASE YEAR)  $[redacted]  $[redacted]  $[redacted]  $[redacted]  $[redacted]   $[redacted]  1001 (OY1)  $[redacted]  $[redacted]  $[redacted]  $[redacted]  $[redacted]   $[redacted]  2001 (OY2)  $[redacted]  $[redacted]  $[redacted]  $[redacted]  $[redacted]   $[redacted]  3001 (OY3)  $[redacted]  $[redacted]  $[redacted]  $[redacted]  $[redacted]   $[redacted]  4001 (OY4)  $[redacted]  $[redacted]  $[redacted]  $[redacted]  $[redacted]   $[redacted] TOTAL  $[redacted]  $[redacted]  $[redacted]  $[redacted]  $[redacted]   $[redacted]                                   REVISED QUOTES    CLIN PRICING         0001 (BASE YEAR)  $[redacted]  $[redacted]  $[redacted]  $[redacted]  $[redacted]    1001 (OY1)  $[redacted]  $[redacted]  $[redacted]  $[redacted]  $[redacted]    2001 (OY2)  $[redacted]  $[redacted]  $[redacted]  $[redacted]  $[redacted]    3001 (OY3)  $[redacted]  $[redacted]  $[redacted]  $[redacted]  $[redacted]    4001 (OY4)  $[redacted]  $[redacted]  $[redacted]  $[redacted]  $[redacted]   TOTAL  $[redacted]  $[redacted]  $[redacted]  $[redacted]  $[redacted]    

As reflected in the chart above, protestor's revised offer was [redacted]% above the IGCE for the base and option years. The Contracting Officer concluded that all the revised quotes received were too high and subsequently cancelled the '181 Solicitation on March 1, 2018. See id. at 763-64. Protestor filed a pre-award bid protest challenging the cancellation of the '181 Solicitation at the United States Government Accountability Office (GAO) and then at the United States Court of Federal Claims. The GAO dismissed protestor's pre-award bid protest of the '181 Solicitation as untimely and the Court ofFederal Claims dismissed protestor's bid protest of the '181 Solicitation for lack of standing. See Veteran Shredding, LLC v. United States, 140 Fed. Cl. at 763-65.³

Following the cancellation of the '181 Solicitation, the Contracting Officer conducted market research on March 6, 2018 to evaluate if veteran-owned small businesses (VOSB) were available and capable to provide document destruction services for the MVAHCS. The Contracting Officer stated:

[T]here are four (4) VOSB vendors listed in VIP [Vendor Information Pages] utilizing NAICS [North American Industry Classification System] 561990 [representing the NAICS code for All Other Support Services] with keyword "shredding." In addition, GSA [General Services Administration] eLibrary under [S]IN [Special Item Number] 51 507, Destruction Services, provided only 1 VOSB listing. All vendors identified were contacted via phone calls to determine their capability.

After contacting the five VOSBs, the Contracting Officer found:

1. [redacted] stated they would only be able to provide shredding services if the VA would ship the material for them to destruct. It is therefore determined they do not have the capability to provide the service required.

2. [redacted] stated they do not have the capability to perform the service in the required location.

3. [redacted] could not be reached with numerous attempts to contact.

4. [redacted] stated they would be interested in the requirement but would have to subcontract as they are not located in the required location. They stated they do not believe there is an SDVOSB or VOSB vendor in the local area in which they could partner/subcontract with.

5. [redacted] stated they are not able to provide the services in the location of the requirement therefore could not perform these services.

Consequently, the contracting specialist, Shane Galles, concluded in a June 26, 2018 memorandum:

[T]he VA Rule of Two cannot be met with respect to VOSB concerns. The Contracting Officer does not have a reasonable expectation that two or more capable and verified VOSB offerors will submit quotes and that award can be made at a fair and reasonable price offering best value to the United States.

Concurrent with the market research into VOSBs, the Contracting Officer searched for small businesses that could potentially fulfill the document destruction services contract for the MVAHCS. The Administrative Record includes a search of the GSA eLibrary filtered to small businesses with a Special Item Number (SIN) code of 51 507 forDestruction Services resulting in 38 vendors identified. The Administrative Record also includes the results of a search within the System for Award Management database limited to the Minneapolis, Minnesota region for vendors matching North American Industry Classification System (NAICS) code 561990 for All Other Support Services and Product Service Code R614 for Paper Shredding Services that generated 17 results.

To supplement the March 6, 2018 market research, the Contracting Officer issued a Sources Sought notice on June 6, 2018 asking for information from vendors interested in the MVAHCS document destruction services contract to submit information related to the vendor size and type, capabilities, and resources. In response to the Sources Sought notice, four vendors submitted information: [redacted], an SDVOSB, protestor Veteran Shredding, LLC, an SDVOSB, [redacted], a small business, and [redacted], a small business. From the responses, the Contracting Specialist concluded in a June 26, 2018 memorandum that "it is evident there are sufficient small businesses available to support competition for which the requirement should be solicited through GPE [government point-of-entry] as a SB [small business] set-aside."

In a January 7, 2019 memorandum, the Contracting Officer indicated that "additional market research was conducted to determine if there were changes in the market conditions since the time initial research was performed" following this court's dismissal of protestor's pre-award bid protest for the cancellation of the '181 Solicitation on November 26, 2018. See Veteran Shredding, LLC v. United States, 140 Fed. Cl. 759. The memorandum also stated "[t]he IGCE was re-evaluated and updated as a result" on January 7, 2019.⁴ The updated IGCE stated a base year estimate of $[redacted] and a total estimate for the base and options years of $[redacted], representing an increase of $[redacted] from the IGCE used for the '181 Solicitation. The IGCE indicated that past contract pricing, the GSA Federal Supply Schedule Published Prices, and informal vendor quotes were utilized in forming the IGCE.⁵

The IGCE contained a breakdown of the base year figure of $[redacted]: $[redacted] per week per personal sized container for...