# In the United States Court of Federal Claims

BID PROTEST

No. 15

- 1015C (Filed Under Seal : February 12 , 2016 | Reissued: February 2 5 , 2016 ) *

AvKARE , INC.

,

Plaintiff,

v.

THE UNITED STATES OF AMERICA

,

Defendant. )

) ) ) ) ) ) ) ) ) ) Keywords: Bid Protest ; Contract Disputes Act ; Requests for

Modification ; Federal Supply

Schedule ; 48 C.F.R. § 515.408 ; Commercial Sales Practices; Interpretation of Regulations ; Plain Meaning ; Lack of Good Faith ; De
Facto Debarment

.

James S. Phillips , Argus Legal, LLC, McLean, VA, for P laintiff, with whom were James
S. DelSordo , Of Counsel, and Julie M. Nichols , Of Counsel.

James W. Poirier , Trial Attorney, with whom were Benjamin C. Mizer , Principal Deputy Assistant Attorney General, Robert E. Kirschman, Jr. , Director, and Martin F. Hockey,

Jr. , Assistant Director, Commercial Litigation Branch, United States Depar tment of Justice, Washington, DC , for D efendant.

OPINION AND ORDER

KAPLAN, Judge.

This hybrid pre

- award bid protest and breach of contract action is before the Court on the parties’ cross

- motions for judgment on the administrative record. The plaintiff in the case, AvKARE, Inc., is in the business of purchasing pharmaceutical products in bulk from their manufacturers for purposes of re packag ing and s ell ing them

under the “Av KARE ” label. AvKARE currently holds a Federal Supply Schedule (FSS) contract with the Department of Veterans Affairs (VA) for the sale of such pharmaceuticals. It brought this action to challenge : 1) the VA’s refusal to grant requests
for modification of its existing FSS contract that would permit AvKARE to add certain

* This Opinion was originally issued under seal, and the parties were given the

oppo rtunity to request redactions. Neither party reques ted redactions, and the opinion is

now being reissued in full

.

### 2

drugs to the FSS ; and 2) its refusal to take further action on AvKARE’s proposal to

renew its contract

.

The VA has refused to process the RFMs or give further consideration to
AvKARE’s renewal offer because AvKARE has declined to provide the VA certain commercial sales practice (CSP) information about the suppliers of the pharmaceuticals

that AvKARE sells. According to the government, pursuant to 48 C.F.R. § 515.408 ( b ), which is incorporated into the Schedule 65 I B s olicitation, AvKARE must p rovide CSP information about its suppliers because AvKARE is a “dealer/reseller” of the pharmaceuticals. AvKARE contends, however, that it is not a “dealer/reseller.” Rather, according to AvKARE, it is the “manufacturer ” of the pharmaceuticals and

, in any event, it was not required to provide its suppliers’ CSP data because its own sales of its pharmaceutical products to the public are significant.

For the reasons set forth below, the Court concludes that it lacks jurisdiction over
AvKARE’s claims concerni ng the denial of its requests for modification because AvKARE failed to file a claim with the contracting officer as is required to invoke this Court’s jurisdiction under the Contract Disputes Act . Those claims, accordingly, are
DISMISSED

.

With respect to AvKARE’s bid protest, the Court concludes that under the applicable regulations AvKARE is not a “manufacturer” of the pharmaceutical products

it is offering for sale . Rather, it is a “dealer/reseller.” As such, the VA’s decision to give

no further consi deration to AvKARE’s offer in the face of AvKARE’s flat refusal to provide manufacturers ’ CSP data was neither arbitrary, capricious, nor contrary to law. It

further concludes that the VA acted well within its discretion when it concluded that
AvKARE’ s sal es of its products to the public were not significant. Finally, it concludes that the VA did not exhibit bad faith in considering AvKARE’s proposal and did not

effect a de facto debarment of AvKARE from future VA contracts. Therefore, the government’s moti on for judgment on the administrative record is GRANTED and
AvKARE’s cross

- motion is DENIED

. 1

BACKGROUND

I. The VA’s Pharmaceutical Procurement Process

As the operator of the nation’s largest integrated health care system, the VA is a major pur chaser of pharmaceutical s. See U.S. Gov’t Accountability Office, GAO 13

- 358, Prescription Drugs[:] Comparison of DOD and VA Direct Purchase Prices , at 4 (Apr. 2013) (stating that “[i]n fiscal year 2012, VA’s prescription drug spending totaled about $4.2 billion”). T o meet its needs and achieve economies of scale, the VA, under a delegation from the General Services Administra tion (GSA) , administers a n FSS contract
vehicle

— Schedule 65 I B

— through which it establishes firm

- fixed prices with

1 AvKARE’s second motion to supplement the administrative record is likewise

DENIED for the reasons set forth below

.

### 3

pharmaceutical supplie r s. See VA Schedule Program Overview

, U.S. Department of

Veterans Affairs (2014)

, www.va.gov/oal/docs/business/nac/fss ContractorOverviewLibrary.zip ; Schedule 65 I B Drugs, Pharmaceuticals, & Hematology

Related Products

, U.S. Department of Veterans Affairs

, ht tp://www.va.gov/oal/business/ fss/pharmaceuticals.asp (last visited February 11, 2016 )

. I ndividual V A customers (such

as VA hospitals) and other federal purchasers can then place orders directly with the supplier to meet their particular needs. See VA Schedule Program Overview

, supra , at 4

.

Several offices within the VA play a role in the pharmaceutical acquisition

pro gram

. See Doing Business with VA

, U.S. Dep’t of Veterans Affairs, at 17 (Dec. 2015)

, http://www.va.gov/osdbu/docs/doingBusinessWithVA_R eferenceGuideFULL.pdf

. At the top level, the VA’s Office of Acquisition and Logistics (OAL) oversees the contracting process and “provides comprehensive acquisition support” for all of the VA’s

healthcare services and products. Id. ; see also Office of Acqu isition and Logistics (OAL)

, U.S. Dep’t of Veterans Affairs, http://www.va.gov/oal/ (last visited February 11, 2016 ). Within OAL, the VA’s National Acquisition Center (NAC) “supports [the] health care requirements of VA and other government agencies” by aw arding and managing the variety of acquisition and delivery contracts that connect suppliers with government purchasers. Doing Business with VA

, supra , at 17; see also National Acquisition Center

, U.S. Dep’t of Veterans Affairs

, http://www.va.gov/oal/about/nac.asp (last visited February 11, 2016 ). 2 T he VA’s Federal Supply Schedule Service , in turn, manages the NAC’s multiple award schedule (or FSS) contracts, including the schedule contract for pharmaceuticals. Doing Business with VA

, supra , at 17; s ee also VA Federal Supply

Schedule Service

, U.S. Dep’t of Veterans Affairs, http://www.fss.va.gov/ (last visited February 11, 2016 )

. Finally, th e VA’s Office of the Inspector General (OIG) has a

dedicated Office of Contract Review that “provide[s] prea ward, postaward, and other

requ ested reviews of vendors’ proposals and contracts. ” See About the Office of Contract

Review

, U.S. Dep’t of Veterans Affairs, http://www.va.gov/oig/about/contract

review.asp (last visited February 11, 2016 ).

II

. The Schedule 65 I B Solicitation

The VA maintains its Schedule 65 I B solicitation on a perpetually

- op en basis

. See A dministrative R ecord (AR) Tab 1 at 5

– 8 ( “Read Me First ” document describing the

process for obtaining a contract ); id. Tab 2 at 84 (desc ribing the “Consideration of Offers Under [the] Standing Solicitation”); see also Getting on Schedule

, U.S. Dep’t of Veterans

Affairs

, http://www.va.gov/oal/business/fss/gettingOnSchedule.asp (last visited February 11, 2016 )

. 3

2 Other government agencies (such as the Department of Defense) may also place orders on contracts administered by the NAC. See National Acquisition Center

, supra ; VA Schedule Program Overview

, supra , at 4.

3 The Schedule 65 I B solicitation is periodically updated , with the most recent update released on February 19, 2014

. See AR Tab 2 at 13. The solicitation has also since been amended twice (on September 30, 2014, and December 31, 2014), but neither amendment

### 4 Pursuant to the s olicitation , a fter receiving an offer, t he VA conducts an initial

review and , if necessary, “asks for clarifying or additional information.” AR Tab 1 at 8.

Once it has received any additional information, the VA “conducts a price analysis and fully evaluates the proposal” before beginning price negotiations. See id. Through this process, the VA aims to “ensure the vendor is responsible” and that “the Government is receiving a fa ir and reasonable price.” 4 Id.

According to the s olicitation, “ C ontracting Officers determine whether prices are fair and reasonable by comparing the prices/discounts that a company offers the government with the prices/discounts offered to commercial cu stomers

. ” AR Tab 1 at 3. To make this comparison, in accordance with GSA regulations that apply government

wide

, see 48 C.F.R. § 501.101

, the VA “requires offerors to furnish commercial pricelists and disclose information regarding their commercial pricing /discounting practices.” AR
Tab 1 at 3. This information is known as the offeror’s Commercial Sales Practice (CSP)

information.

Pursuant to 48 C.F.R. § 515.408, t he solicitation requires offerors to disclose several types of CSP information

. See AR Tab 5 at 197

– 204. First, the offeror must provide information about the prices it charges certain commercial customers for the same products it wishes to sell to the government. 5 Id. at 198. Second

, the offeror must

disclose the amount of its sales to the general public for the previous year and its projected annual sales to the federal government during the l ife of the contract. AR Tab 4

at 200

– 01.

F urther

, as provided by 48 C.F.R. § 515.408 (b)(5)

, the solicitation requires

additional CSP information from any offeror who is a “dealer/reseller without signific ant sales to the general public ”

— i.e., any offeror who is not a “ manufacturer ” and lacks significant commercial sales. Id. at 202. Such dealer/resellers must provide

is relevant to this case. See 65IB Drugs, Pharms. & Hematology Related Prods.

Solicitation Refreshment

- M5

- Q50A

- 03

- R7 , Federal Business Opportunities, https://www.fbo.gov/index?s=opportunity&mode=form&id=aa3281f6d159d44c0614ee6 42186758e&tab=core&_cview=1 (last visited February 11, 201 6).

4 Although the firm

- fixe d prices agreed upon in these negotiations are considered “fair and reasonable,” government purchasers may (and, in many cases, must) conduct a second round of independent price negotiations when placing orders off the schedule. See FAR 8.404(d) (“ Although GSA has already negotiated fair and reasonable pricing, [purchasers] may seek additional d iscounts before placing an order.”); id

. 8.405

- 4 (“[Purchasers] may request a price reduction at any time before placing an order

. . . . However, the [purchaser] shall seek a price reduction when the order

. . . exceeds the simplified acquisition threshold. ”).

5 Specifically, for each item the offeror wishes to sell, it must disclose the prices it charges to both the offeror’s Most Favore d Customer and also to a so

- called “tracking

customer.” See AR Tab 5 at 198.

### 5

“manufacturers’ [CSP] information

. . . for each item/SIN offered, if the manufacturers ’ sales under any resulting contract are expected to exceed $500,000.” Id. According to the solicitation, “[t]h e information is required in order to enable the Government to make a

determinat ion that the offered price is fair and reasonable.” Id.

In a separate section, the solicitation provides more guidance for dealer/resellers

on provid ing manufacturers’ CSP information. See AR Tab 12 at 491

– 505. T he se additional instructions explain that :

[O]fferors who are dealers or resellers must provide the [manufacturers ’ CSP] information

. . . when both of the following two criteria are met:

(1) When the offeror does not have “significant sales” to the general public[,] [a]nd

(2) When the total value of the manufacturer’s [sic] sales by the offeror for the proposed products is expected to exceed $500,000 for the

contract term.

Id. at 503 (emphasis in original)

. Moreover, the instructions continue , “[t]he reference to ‘significant sales’ is not defined as it is examined on a case by case basis.” Id.

In addition, and as pertinent to this case, t he solicitation includes clauses governing modifications to the contract. AR Tab 2 at 53

– 56. These clauses set forth procedures for adding and deleting products from the schedule and for requesting price increases or offering price decreases. See id. ; see also Modifying Your VA FSS Contract

, U.S. Department of Veterans Affairs

, http://www.va.gov/oal/business/fss/rfmProcess.asp (last visited February 11, 2016 )

. Th e clauses specify that all request s for modification (RFM) must be submitted to the contr acting officer (CO) for review, and that vendors requesting modifications must provide CSP information for the affected products

— including, if the vendor is a dealer/r eseller, manufacturers ’ CSP information. AR Tab 2 at

53

. The VA’s goal is “ to review all modification requests and make an award/no award decision within 60 calendar days from receipt. ” Modifying Your VA FSS Contract

, supra

.

III. AvKARE’s Existing Schedule 65 I B Contract

AvKARE’s business consists of selling a “variety of bottled and unit dose pharmaceutical products” that are “packaged and sold under the ‘AvKARE’ label.” Compl. at 1. Specifically, AvKARE obtains “bulk” pharmaceutical products from suppli ers and then “repackage[s] and re

- label[s]” them for sale “under its own private

label

. . . . . utilizing National Drug Codes (NDCs) assigned by the FDA to AvKARE and

### 6

only AvKARE.” Compl. ¶ ¶ 55

– 56; see also Transcript of Hearing at 19:18

– 20:10 (Sept. 17, 2015) (counsel for AvKARE explaining AvKARE’s business model). 6

AvKARE was first awarded a Schedule 65 I B c ontract in April 2010. Compl. ¶ 49 ; AR Tab 171 at 20950 . At that time, according to AvKARE, the co mpany lacked significant commercial sales of its products

. Compl. ¶ 49. The contract was originally slated to expire on March 31, 2015, and AvKARE submitted an offer to renew the contract on October 31, 2014. Id

. ¶ 44; s ee also AR Tabs 13

– 24. T he parties h ave since agreed to extend AvKARE’s existing contract , first through January 31, 2016 and then again through the end of February 2016 . Pl.’s Mem. in Supp. of its Mot. for J. on the Admin. R. (“Pl.’s Mem.”) at 10 , ECF No. 29

.

IV. The OIG’s Post

- Award Revie w of AvKARE’s Contract and the VA' s Denial

of AvKARE’s RFMs

B etween 2010 and 2014, AvKARE submitted numerous RFMs to add ne w drugs

to its contract. Compl. ¶ 50. According to AvKARE, these RFMs were routinely granted.

Id. Sometime in early 2014, however, the OIG began a post

- award review of AvKARE’s

contract. 7 See AR Tab 171 at 20950. On August 27, 2014, the OIG updated the CO on the status of its investigation. Id. The OIG’s “preliminary findings” included concerns that AvKARE “misrepresented tha t they had commercial sales in order to obtain their

FSS contract ” and “ misrepresented that they are a pharmaceutical manufacturer ” Id. I n light of the ongoing investigation, the OIG recommended that “any request(s) to add product(s) to the contract, betwe en now and March 31, 2015, be submitted to our office for a preaward review” and that “ no extension [of the contract] be exercised prior to our office conducting a preaward review.” Id. (emphasis in original). At this time, according

to AvKARE

, it had at l east three outstanding RFMs. Compl. ¶ 65.

In mid

- September 2014, the OIG conducted an on

- site review at AvKARE’s purported production facilities. Compl. ¶ ¶ 63

– 64; see AR Tab 173 at 20954. Afterwards

, on October 6, 2014, the OIG informed the CO that it had completed a review of one of
AvKARE’s outstanding RFMs. AR Tab 173 at 20954

– 55. First, the OIG reported, AvKARE was considered a “distributor of the offered products, not the manufacturer”
because “ [ t ] he offered products are never in the posses sion of AvKARE throughout the process.” Id. at 20954. Instead, the products were “shipped in bulk containers from the

6 According to AvKARE, “[o]nce an NDC is assigned by the FDA to AvKARE for a specific product, AvKARE and only AvKARE is entitled to [sell] products

. . . on the

basis of that ND C.” Compl. ¶ 28.

7 This investigation was apparently sparked in part by an anonymous tip describing alleged violations of the contract’s CSP provisions. See AR Tab 188 at 21058.

### 7

manufacturer of the product” to a non

- AvKARE packager, packaged, and then shipped to

another non

- AvKARE entity for distribution. Id.

In addition, the OIG determined that AvKARE did not have relevant commercial sales, and thus the “manufacturer’s [sic] full CSP data is required.” Id. According to the OIG, AvKARE “expressed their disagreement with the requirement” because “there

would be no way to get CSP data that is relevant,” as “they package the product in different quantities than are commercially available from the manufacturer.” Id. The OIG “totally disagree[d] with AvKARE’s opinion,” believing that “CSP data should be required from t he manufacturer which represents the nearest commercially available package size of the products offered.” Id.

V. AvKARE’s Contract Renewal Offer

All told, AvKARE alleges that it submitted at least six more RFMs between October 2014 and September 2015. See Compl. ¶¶ 67, 69

– 70. AvKARE claims that all these RFMs either remain under review or have been rejected by the VA. See id.

As mentioned above, AvKARE submitted a contract renewal offer on October 31,

2014

. Id

. ¶ 44; see AR Tabs 13

– 24. In response to the solicitation’s “Company
Information” questionnaire

, AvKARE identified its “Type of Business” as “Manufacturer” and stated that its facilities included 57,000 square feet of manufacturing floor space. AR Tab 13 at 510.

In response to C lause AS8005 of the s olicitation

, which requests information about the “manufacturing facilities/place of performance” for each of the offeror’s products, s ee AR Tab 4 at 175

– 80

, AvKARE also represented that it was “the

manufacturer

. . . of the products offered on this s olicitation.” 8 Id. at 526. On the other

hand

, AvKARE included a purported “Letter of Supply” with its offer, AR Tab 18 at 585

, apparently in response to C lause I

- FSS

- 644 of the solicitation, which requires offerors who are “dealers and suppliers”

— i.e., off erors “other than the manufacturer”

— to produce “letter[s] of supply/commitment” from the products’ manufacturers upon the CO’s request

. AR Tab 4 at 181

. These letters must “assure the offeror of a source of supply sufficient to satisfy the Government’s requirements for the contract period.” Id.

8 The substantive purpose of Clause AS8005 is to ensure compliance with the FDA’s

C urrent Good Manufacturing Practice (CGMP) regulations

. See AR Tab 4 at 175

– 80. These regulations describe the acceptable “ methods to be used in, and the facilities or controls to be used for, the manufacture, processing, packing , or holding of a drug to assure that such drug meets the requirements of the act as to safety, and has the identity and strength and meets the quality and purity characteristics that it purports or is represented to possess. ” 21 C.F.R. § 210.1(a). Clause AS8005 specifically requests information about the “location and owner of [the] facility where [the] ingredients are measured, weighed, mixed and compounded;” the “location of facilities where intermediate containers will be fixed and labeled;” and the “lo cation of facilities where products will be packed and prepared for shipment.” AR Tab 4 at 17 8

– 80.

### 8

Th e letter AvKARE submitted

, addressed to “AvKARE,” and from “AvKARE, Inc.

, ” represented that “[i]n the event Av KARE is awarded a

. . . contract

. . . AvKARE, Inc. can assure an uninterrupted source of supply, with sufficient quantities of product, for the

duration of the

. . . contract period.” AR Tab 18 at 585.

Most relevant to this case, in responding to the sol icitation’s pricing and price evaluation provisions, AvKARE did not include CSP information about the manufacturers who supply AvKARE with the pills that it repackages and sells to the VA as would be required of a dealer/reseller without significant sales to the general public

. See AR Tab 22; see also id. Tab 23 at 601 (beginning a description of AvKARE’s sales process with the phrase “As a drug manufacturer . . . ”).

VI. VA Requests for Additional Information

On Dece mber 24, 2014, the CO contacted AvKARE to request additional

information. AR Tabs 341

– 48 . This request primarily took the form of a “ Missing

Information Checklist. ” AR Tab 344 at 21600

– 10

. “ U pon receipt of all requested items identified on the Missing Information Checklist ,” the CO explained, “ we can move forward with a continued review of your offer. ” AR Tab 341 at 21595.

First, the CO requested that AvKARE “ [ p ] lease clarify what is produced on the premises” of AvKARE’s manufacturing facility and that it clarify its basis for claiming

that i t had an estimated 57,000 square feet of manufacturing space. AR Tab 344 at 21600 (quotation omitted ). Further, the CO asked AvKARE to “specifically delineate what

AvKARE does with [its] drugs after receipt ” and to “[p]rovid e documentation that explains wh ich entities obtain title t o and possession of the product ” and “ outlin e what each entity does to the drug.” Id. at 21602.

The CO also requested that , in response to C lause I

- FSS

- 644, AvKARE “[p]lease provide requisite Letters o f Supply ” in accordance wi th that clause’s requirements for

dealers and reseller s

. I d. The CO noted that AvKARE’s letter “to itse lf

. . . from (itself) ” was “not accepted.” Id.

Next

, t he CO informed AvKARE that the CSP information it provided was not fully responsive to the solicitation’s requirements

. See id. at 21606

– 0 9

. In response to the
solicitation’s request for information regarding “sales to the general public,” the CO

noted that “[s]ales to federal entities via a wholesaler are not considered commercial

sales .” AR Tab 344 at 21606. Rather , “[t]hose sales are indirect sales to federal entities.”

Id. Accordingly, t he CO requested that AvKARE revise its submission so that “only sales to commercial end users [are] reflected.” Id.

Further (and as m ost relevant her e), the CO informed AvKARE that “[m]anufacturer information for each item/SIN offered[] is required” under the CSP provision for dealer/resellers because “AvKARE commercial sales as a percent of government sales are considered insignificant” and “expected sales under any resulting contract are expected to exceed $500,000.” Id. at 21608.

### 9

VII. AvKARE’s Response to VA Requests for Additional Information

On January 16, 2015, AvKARE responded to the CO’s request for additional

information

. See AR Tab 3 60

. AvKARE continued to maintain that it was the “manufacturer” of the products it wished to sell because it “produces and manufactures its own private label generic pharmaceuticals .” Id. at 21671; see also id. at 21672 (“AvKARE reaffirms its selection as manu facturer

. . . . . We are the manufacturer.”). To bolster this contention, AvKARE listed several definitions of “manufacturer” foun d in

various statutes and agency regulations applicable to the pharmaceutical industry

. See AR
Tab 361.

D espite its asserti on about its status as a manufacturer

, however, AvKARE also defended its inclusion of the letter of supply from itself to itself, representing that the letter was “the very same letter that has been provided for 5 years for Modifications and has been accep ted by the VA NAC under this very same procurement” and that “AvKARE is the only source of supply that can provide letters of commitment for [its products].” Id. at 21672.

AvKARE also took issue with the CO’s determination that it lacked significant

sales to the general public , stating that it “disagree[d] entirely” with the VA’s
characterization of its sales to federal end users via wholesalers as “indirect” sales to the
government. See id. at 21677. AvKARE posited that “the VA does not have the

discretio n to disregard millions of dollars of commercial sales as ‘insignificant,’” and that, in any event, “there is no requirement for any commercial sales in order to be eligible for an FSS contract.” Id. at 21678.

Lastly, AvKARE reiterated its belief that it did not need t o comply with the CSP requirements applicable to dealer/resellers because “we are not a dealer or reseller.” Id. at
21679. Instead, AvKARE contended

, “[w]e are distributing and sellin g AvKARE’s finished end product ” and “ [the dealer/reseller] provision is not applicable to our offer.”

Id.

VIII. VA Warns AvKARE that its Renewal Offer Remains Unacceptable

On February 12, 2015, the CO informed AvKARE by letter that its renewal offer “remain[ed] unacceptable” because of “several deficiencies” in i ts response. AR Tab 367

at 21695. The CO made clear that the VA “does not consider AvKARE to be a

manufacturer ” and stated that the definitions of “manufacturer” that AvKARE attached to its response were “not a pplicable” to the solicitation. Id. at 21696. After reminding

AvKARE that “[the] CO is required to make a determination that

. . . prices are fair and reasonable before an award can be made,” t he CO provided AvKARE with a new “Missing Information Open Item Spreadsheet

, ” warning that “[a]bsent a curren t, complete, and accurate response

. . . no further action w[ould] be taken” and AvKARE’s

offer would be returned. Id.

AvKARE responded to the VA’s letter on February 18 , 2015 . AR Tab 370. It explained that while “[n]o production operations take place” at the location it had listed

### 10

on its offer

, it had “entered into a production and quality control agreement ” with a different company under which that company “ serves as the con tract manufacturer for
AvKARE.” Id. at 21706. AvKARE also wished to “put[] aside the manufact urer vs non

manufacturer debate ” and suggested that the CO could use multiple techniques to assess price reasonabl eness rather than solely relying on manufacturers’ CSP information. Id. at
21705

– 06.

Sh ortly afterwards, the CO again followed up with AvKARE. AR Tab 372. He clarified the VA’s position that AvKARE ’s letter of supply di d not “satisfy the requirements ” applicable to a “ contractor who is other than the manufacturer” set forth in

Clause I

- FSS

- 6 44

. Id. at 21712. Further, he explained that “[t]he [CO] is given wide latitude when determining if com mercial sales are insignificant. ” Id. at 21713

– 14. Finally, he explained that while AvKARE was “welcome to provide market research and other pricing info rmation to supplement the requisite CSP information,” the CSP information was still required

. Id. at 21714.

IX. AvKARE’s First Bid Protest and the VA’s Extension of the Existing Contact

After receiving the CO’s letter reiterating the VA’s demand for manuf acturers ’

CSP data , AvKARE filed a bid protest action in this Court. See Compl., AvKARE, Inc. v.
United States ( AvKARE I ) , No. 15

- cv

- 216, ECF No. 1 (March 3, 2015). The next day, AvKARE sent additional responses to the CO. AR Tab 380. Once again, AvKARE

reaffirmed its self

- designation as a “manufacturer,” stating that it “directs all faucets [sic] of the production side of the product” in the same manner as “many companies within the pharmaceutical industry.” Id. at 21732. At the same time, though, AvKARE agreed to provide copies of its agreements with its “bulk medication suppliers,” which it believed would “satisfy the requirement [of Clause I

- FSS

- 644] as evidence that AvKARE will have the component supplied for the contra ct period.” Id. at 21733. In terms of updating

its CSP information, AvKARE attached newly

- received “sales tracings” from its wholesalers, which it claimed “should prove that any wholesaler should be considered a commercial customer based on the fact they a re selling these products to their OWN
customer base.” Id. at 21734

– 35 (emphasis in original)

.

After AvKARE filed its first bid protest, t he government agreed to extend AvKARE’s contract through September 31, 2015 , and AvKARE voluntarily dismissed

that c ase. See Notice of Voluntary Dismissal, AvKARE I

, ECF No. 17. To move the

renewal proce ss forward, AvKARE indicated it would “submit[] requests to its suppliers to ascertain their willingness to supply their CSP information,” even though AvKARE

continued to believe that:

[T]his information is neither required (as AvKARE is the manufacturer of its private label products and has significant commercial sales of those products) nor relevant (we fail to see how the prices paid for bulk pharmaceuticals is useful for assessing price reasonableness for a different

deliverable

– individually packaged and labelled bottles

. . . of product )

.

### 11

AR Tab 382 at 21740. In addition, AvKARE “urge[d] the VA to formally state whether it [ wa s ] requiring AvKARE’s competitors to su bmit supplier CSP information as a pre

requis i te for either renewing their contracts or approving RFMs to add products to their
contracts.” Id. If not, AvKARE hoped that “we can agree that imposing such a requirement on AvKARE is not appropriate.” Id.

X. VA Concludes AvKARE Lacks Significant Commercial Sales and Declines to
Proceed Without Manufacturers ’ CSP Information

On April 1, 2015, the CO updated AvKARE on its deliberations, reiterating that the VA’s position on AvKARE’s status as a dealer/reseller “ has not changed.” AR Tab

386 at 22315. Moreover, the CO asserted that “we do not and cannot adapt a different or varied definition and/or version of manufacturer to individually suit a vendor” and that “any offer submitted by any company with the current d eficiencies identified in AvKare’s offer[] would have been no

- awarded.” Id. at 22316. The next day, the CO sent AvKARE explaining that the VA “require[d] assistance from [OIG] in the analysis of [AvKARE’s sales] data to identify those sales that can be att ributed to commercial customers.” AR
Tab 387 at 22318. Once that analysis was complete, the CO would “then consider whether CSP data will be required from the manufacturers.” Id.

T he OIG completed its review August 26, 2015

. AR Tab 191. At bottom, it

det ermined that AvKARE had “insufficient commercial sales from which to determine fair and reasonable pricing.” Id. at 21069. I n the OIG’s view, AvKARE’s sales to

wh olesalers were “indirect sales” rather than “commercial sales” because “all units sold
to wholesalers were in turn sold to AvKARE’s customers” instead of on the open market

. Id. at 21070

– 72

. Further, o f these indirect sales, “only 0.51 percent were sold to

customers classified as commercial in AvKAR E’s accounting system”

— a percentage that was “not deemed significant.” 9 Id. at 21072.

After receiving the OIG’s report, the CO informed AvKARE by letter on September 3, 2015, that she had “reviewed all pertinent information” and “determined

that AvKARE d oes not have sufficient commercial sales to make a fair and reasonable price determination.” AR Tab 417 at 22496. Therefore, “[i]n order to proceed with evaluation of your offer, you must provide manufacturer CSP data.” Id.

XI

. Th is Action

On September 11, 2015, AvKARE filed its complaint in this Court, along with a motion for a preliminary injunction. ECF Nos. 1, 5. Following a status conference, the government agreed to extend AvKARE’s existing contract through January 31, 2016, and

9 In addition, the OIG noted that the prices in AvKARE’s commercial price list would be revised effective as of the date the VA approved AvKARE’s renewal o ffer. AR Tab 191 at 21072. According to the OIG, “[c]ommercial entities, who sell primarily to commercial customers, would never have a catalog price that is dependent upon an
awarded FSS contract.” Id.

### 12

the Court denied Av KARE’s preliminary injunction motion as moot. See Order, ECF No.

11. T he government compiled the administrative record, which AvKARE then moved to supplement. ECF No. 21. After hearing oral argument, the Court denied AvKARE’s motion in its entirety. See Op inion and Order, ECF No. 32.

The parties then filed cross

- motions for judgment on the administrative record. ECF Nos. 28, 37. The Court held oral argument on the cross

- motions on January 13, 2016, after which the government agreed to further extend AvKAR E’s existing contract through the end of February. On January 28, AvKARE filed a second motion to supplement the administrative record. T hese motions are now ripe for decision.

DISCUSSION

I. Jurisdiction

A. The Court of Federal Claims’ Bid Protest Jurisdiction

The Court of Federal Claims’ bid protest jurisdiction is defined by 28 U.S.C. § 1491(b)(1) . That provision grants the c ourt jurisdiction to “render judgment on an action by an interested party objecting to . . . a proposed award or the award of a contract or any alleged violation of statute or regulation in connection with a procurement or a proposed procurement.”

In keeping with this statutory grant, only an “interested party” has standing to

invoke the C ourt of Federal Claims’ bid protest j urisdiction. CGI Fed. Inc. v. United

States , 779 F.3d 1346, 1348 (Fed. Cir. 2015); Myers Investigative and Sec. Servs., Inc. v.

United States , 275 F.3d 1366, 1369 (Fed. Cir. 2002)

. A s the Federal Circuit has explained , an “interested party” is “ an actual o r prospective bidder . . . whose direct economic interest would be affected by the award of the contract.” CGI Fed. , 779 F.3d at 1348 (quoting Am. Fed’n of Gov’t Employees, AFL

- CIO v. United States , 258 F.3d 1294, 1299 (Fed. Cir. 2001); see also Info. Tech . & Applications Corp. v. United States

, 316 F.3d 1312, 1319 (Fed. Cir. 2003).

In a pre

- award protest challenging an agency’s evaluation of a proposal, a plaintiff has a direct economic interest if it has a “substantial chance” of winning the

contract bu t for the alleged er ror in the evaluation. Orion Tech., Inc. v. United States , 704 F.3d 1344, 1348

– 49 (Fed. Cir. 2013); see also Tinton Falls Lodging Realty, LLC v.

United States , 800 F.3d 1353, 1358 (Fed. Cir. 2015); Bannum, Inc. v. United States , 404

F.3 d 1346, 1358 (Fed. Cir. 2005). That is , the protestor’s chance of se curing the award “must not [ be ] insubstantial

. ” Info. Tech. , 316 F.3d at 1319. P ut differently, the protester must have been “prejudiced” by the al leged error. Tinton Falls , 800 F.3d at 13 58.

B. The Court of Federal Claims’ Jurisdiction Over Contract Claims

This Court’s jurisdiction over contract claims is set forth in 28 U.S.C. § 1491(a)

. That provision grants the court jurisdiction over claims “founded

. . . upon

. . . any express or implied contract with the United States

, ” including “ any claim by or against, or dispute with, a contractor arising under [the Contract Disputes Act], including a

### 13

dispute concerning termina tion of a contract, rights in tangible or intangible property, compliance with cost accounting standards, and other nonmonetary disputes on which a decision of the contracting officer has been issued under

. . . that Act

. ” I d. § 1491(a) (1)

– (2).

Claims “a rising under” the CDA include claims based on “ any express or implied contract . . . made by an executive agency for

. . . the procurement of property, other than real property in being.” 41 U.S.C. § 7102(a). Under the CDA, “procurement” means “the acquisi tion by purchase, lease or barter, of property or services for the direct benefit or
use of the Federal Government.” New Era Constr. v. United States , 890 F.2d 1152, 1157 (Fed. Cir. 1989) (quotation and emphasis omitted). Importantly, a contractor may not bring an action governed by the CDA in federal court before the “ receipt of a contracting
officer’s decision ” on its claim. 41 U.S.C. § 7104(b) (3); s ee M. Maropakis Carpentry

, Inc. v. United States , 609 F.3d 1323, 1327

– 28 (Fed. Cir. 2010)

. Thus, the Court of Federal Claims does not possess jurisdiction over claims arising under the CDA unless

the contractor has submitted a valid claim to the contracting officer and received the contracting officer’s final decision on that claim. M. Maropakis Carpentry , 609 F.3d at

1327

– 28; see also Dalton v. Sherwood Van Lines, Inc. v. United States , 50 F.3d 1014, 1017 (Fed. Cir. 1995) (“W hen the Contract Disputes Act applies, it provides the exclusive mechanism for dispute resolution; the Contract Disputes Act was not desig ned to serve as an alternative administrative remedy, available at the contractor ’ s option.” ).

T he definition of “claim” for purposes of the CDA derives from the Federal Acquisition Regulations (FAR)

. See M. Maropakis Carpentry , 609 F.3d at 1327

– 28

. As

pe rtinent here, FAR 2.101 defines “claim” as “a written demand or written assertion by one of the contracting parties seeking, as a matter of right, the payment of money in a sum certain, the adjustment or interpretation of contract terms, or other relief ar ising under or relating to the contract.” Id. ; see also FAR 52.233

- 1 (setting forth, in a standard contract clause, the same definition of “claim” as in FAR 2.101).

C. Application of Jurisdictional Provisions to AvKARE’s Claims in this
Case

AvKARE’s first claim is that the VA misinterpreted and misapplied the solicitation’s CSP provision when it characterized AvKARE as a “dealer/reseller” rather than a “manufacturer,” and, as a consequence, refused to further evaluate its renewal offer unless it provided i ts suppliers’ CSP information. AvKARE further contends that the VA was motivated by animus toward AvKARE when it demanded this CSP information, and that it did so in bad faith to prevent AvKARE from obtaining a new

contract.

These claims fall within the Court’s bid protest jurisdiction under

section 1491(b)(1) because they concern alleged errors or violations of law in the evaluation of AvKARE’s proposal. Further, AvKARE has standing as an “interested party” to press its chall enges to the VA’s actions. It is an incumbent contractor, it submitted an actual offer, and it has alleged that its offered prices are lower than the prices for similar items already on the schedule. Thus, AvKARE has a substantial chance

### 14

of securing the co ntract if its offer in fact conforms to the solicitation’s requirements. Accordingly, the Court has jurisdiction over AvKARE’s first claim.

AvKARE’s second claim relates to the VA’s refusal to grant RFMs on its existing

contract. AvKARE contends that thi s refusal was based on a misinterpretation of the contract and applicable regulations, and on the VA’s animus toward AvKARE. The government argues that the Court lacks jurisdiction over AvKARE’s RFM claims because those claims are subject to the CDA and Av KARE has not submitted “claims” within the meaning of the CDA to the CO. Def.’s Cross

- Mot. for J. on the Admin. R. (Def.’s Cross

- Mot) at 25, EFC No. 37; Def.’s Reply at 1

– 4, ECF No. 40. AvKARE disagrees. In its view, its RFM claims properly fall under the Court’s bid protest jurisdiction, rather than its contract jurisdiction, because “the RFM process is akin to a new offer for [an] award of items within the scope of the FSS solicitation.” Pl.’s Reply at

5

– 6, ECF No. 38.

AvKARE’s position lacks merit. The Federal Circuit has made clear that contract modifications within the scope of an existing contract do not constitute “procurements”

under section 1491(b)(1). See Distrib. Sols., Inc. v. United States , 539 F.3d 1340, 1346 (Fed. Cir. 2008); see also AT&T Co mms., Inc. v. Wiltel, Inc. , 1 F.3d 1201, 1204

– 05 (Fed. Cir. 1993). AvKARE’s RFMs were clearly within the scope of the contract; indeed (as discussed above) the solicitation includes a contract modification provision, which AvKARE followed in submitting its RFMs. And the CDA’s broad definition of “claim” clearly encompasses non

- monetary relief of the type AvKARE seeks. See FAR 2.101 (defining “claim” to include “a written demand

. . . seeking

. . . the payment of money in a sum certain, the adjustment or interpretation of contract terms

, or other relief arising under or relating to the contract ” ) (emphasis added). It follows that AvKARE’s claims related to its RFMs are governed by section 1491(a) and, by extension, the CDA. Accordingly, because AvKARE has not alleged that it submitted claims under the CDA to the CO or received any final determinations, the Court lacks jurisdiction over
AvKARE’s RFM

- related claims in this case.

II. The Merits of AvKARE’s Bid Protest

A. T he Meaning of “Manufacturer” Under the Solicitation’s CSP
Provision

1. The Text of the Provision

The primary issue raised by AvKARE’s bid protest claim is a legal one: whether AvKARE is a “manufacturer” or is instead a “dealer/reseller” within the meaning of the CSP clause, which was inclu ded in the solicitation pursuant to the requirements of the GSA regulation codified at 48 C.F.R § 515.408. The Court begins its analysis by reviewing the “plain meaning” of the regulatory language. Lengerich v. Dep ’t of Interior

, 454 F.3d 1367, 1370 (Fed. Cir. 2013) (“We construe a regulation

. . . by ascertaining its plain meaning.” (citing Bowles v. Seminole Rock & Sand Co.

, 325 U.S. 410, 414

– 15 (1945) )) ; Lockheed Corp. v. Widnall

, 113 F.3d 1225, 1227 (Fed. Cir. 1997) (“To interpret a regulation we must l ook at its plain language and consider the terms in

### 15

accordan ce with their common meaning.”); see also Chase Bank USA, N.A. v. McCoy

, 562 U.S. 195, 204 (2011) (analysis of regulation’s meaning begins with its text).

The dictionary definition of the word “manufacture” is “[t]o make or process (a raw material) into a finished product.” 10 Am. Heritage Dict. of the English Language 1067 (4th ed. 2000). By contrast, a “dealer” is “[o]ne that is engaged in buying and selling,” id. at 467; and a “reseller” is one who “sell[s] again,” id. at 1483.

G uidance that the VA has provided to prospective offerors on its website is consistent with the dictionary definition of “reseller.” Information for Resellers

, U.S. Dep’t of Veterans Affairs , http://www.va.gov/oal/busin ess/fss/resellers.asp (last visited February 11, 2016 ). It defines a “reseller” as “a company or individual that purchases commercial goods or services with the intention of reselling them rather than consuming or using them.” Id.

In this case, the produc ts that federal agencies purchase through the FSS are pills and other pharmaceuticals. And it is AvKARE’s suppliers, not AvKARE, that assemble the raw materials needed to make the pills and other pharmaceuticals into finished products for the consumption o f patients in VA and other government medical facilities. AvKARE’s suppliers, therefore, clearly fall within the plain meaning of the term
“manufacturer” as set forth above.

AvKARE, by contrast, purchases the pills and pharmaceuticals from the

manufacture rs in bulk with the intent to resell them to buyers through the FSS. It thus falls under the dictionary definition of “reseller.” To be sure, AvKARE repackages the pills in order to resell them under its own label. Nonetheless, it is the pills and other ph armaceuticals that the schedule’s users are buying, not their packaging. AvKARE, accordingly is a “dealer/reseller” of the pills and pharmaceuticals. It is not their

manufacturer.

The Court notes that this common sense construction of the regulatory terms is also consistent with the way that the term “manufacturer” is used elsewhere in the solicitation. For example, the solicitation’s “Offeror Representations and Certification” section defines “place of manufacture” as “ the place where an end product is ass embled out of components, or otherwise made or processed from raw materials into the finished product that is to be provided to the Government. ” AR Tab 2 at 86. In this context, the act of “process[ing] from raw materials” most readily describes the functi ons of a pill

- maker, rather than a repackager.

Similarly, C lause I

- FSS

- 644 of the solicitation requires any offeror “if other than the manufacturer” to submit assurances from its suppliers confirming the offeror’s ability

10 The Federal Circuit has observed that a court “may consult dictionaries” to determine the “ordinary, established meaning” of a word or phrase. Hymas v. United States , No

2014

- 5150, 2016 WL 158470, at *6 (Fed. Cir. Jan. 14, 2016) (quoting Info

. Tech

. , 316 F.3d at 1320).

### 16

to meet the government’s purchasi ng needs. See AR Tab 4 at 181. Offerors who are manufacturers are not required to provide such additional “assurances” because they themselves have control over the production of the pills. On the other hand, an entity like AvKARE, which does not make the pills, but merely repackages them, is most logically characterized as “other than a manufacturer” for purposes of this provision because it must rely on its suppliers to enable it to satisfy the purchasers’ needs for pharmaceutical products. 11

AvKARE argu es, nonetheless, that it should be considered a manufacturer because the products it is offering to provide on the FSS are not simply pills, but pills that are properly packaged and labelled, and assigned a unique National Drug Code (NDC) that belongs excl usively to AvKARE. Pl.’s Mem. at 25

– 26; Pl.’s Reply at 10; see also Compl. ¶ 28. According to AvKARE, it is the only entity that can claim to be the “manufacturer” of the products sold under its labels.

Contrary to AvKARE’s contentions, however, unique NDCs are assigned to any entity engaged in the “manufactur ing or processing ” of drugs, including any entity that “repackage[es] or otherwise chang [es] the container, wrapper, or labeling of any drug package to further the distribution of the drug from the original place of manufacture to the person who makes final delivery or sale to the ultimate consumer .” 21 C.F.R. § 207.3(a)(8); see also id. §§ 207.20, 207.35. The assignment of a unique NDC to AvKARE does not, therefore, reveal anything one way or the ot her about whether it is the
“manufacturer” of the products it wishes to offer either for purposes of the GSA regulation or for purposes of the statute and regulations governing the assignment of

NDCs.

Accordingly, because pills and other pharmaceuticals are the relevant products, only a pill or pharmaceutical maker fits the plain meaning of “manufacturer” as used in the solicitation. And because AvKARE does not make pills or other pharmaceuticals, but rather buys them in bulk and sells them after repackag ing them, it is not a manufacturer under the solicitation, but rather a dealer/reseller.

11 As described above, notwithstandin g its insistence that it is a “manufacturer,” AvKARE’s renewal proposal included what it characterizes as a letter of supply in response to Clause I

- FSS

- 644. AR Tab 18 at 585. In the letter (as described above), the President of “AvKARE, Inc.” purported to provide assurances to the contracting officer at “AvKARE” that AvKARE Inc. would ensure a sufficient quantity of pharmaceutical products to meet the needs of government purchasers. Of course, because AvKARE was, in fact, not the manufacturer of the pills, its promise to itself to ensure an adequate supply of the product could hardly serve as the type of assurance that 

### C lause I

- FSS

- 644 contemplates. For that reason, the VA required AvKARE to go back and get letters from the manufacturers who sell their pill s and other pharmaceuticals to AvKARE.

### 17 2. Definitions of “Manufacturer” Found in Other Statutory and Regulatory Regimes that Apply to the Pharmaceutical Industry

Notwithstanding the plain meaning of the regulatory language, AvKARE emphasizes that repackagers like itself are considered “manufacturers” under other statutory and regulatory regimes that apply to the pharmaceutical industry. See Pl.’s

Mem. at 24

– 27; Pl. ’s Reply at 7

– 11. Therefore, i t contends

, the VA’s conclusion that AvKARE is not a “manufacturer” for purposes of the GSA regulations was necessarily

incorrect.

GSA has not provided any guidance concerning the interpretation of the term s “manufacturer” or “dealer/reseller

. ” But it is worth remembering that the GSA regulation distinguishing between “manufacturers” and “dealer/resellers” governs with respect to all products sold on the FSS. It seems incongruous, therefore, to apply to the GSA regulations an industry

- specific understanding of the term “manufacturer

, ” particularly

one drawn from other regulatory regimes.

In the Court’s view, the meanings ascribed to the term “manufacturer” in the statutory and regulatory regimes that AvKARE cites are not releva nt to the interpretation and application of the term “manufacturer” as it appears in the GSA regulation. To the
contrary, the import of the cited statutes and regulations is that when legislators and regulators wish to subject entities like AvKARE that rep ackage and re

- label pharmaceuticals to the same restrictions as entities that fall within the plain meaning of the term “manufacturer” set forth above, they do so explicitly.

For instance, AvKARE cites 38 U.S.C. § 8126 . Pl.’s Mem. at 27. Th at statute

requ ires all “manufacturers” of covered drugs to enter agreement s with the Secretary of the VA to make those drugs available for procurement on the FSS at capped prices. The drugs subject to the requirement are single

- source drugs

— i.e., drugs that remain under patent protection. See 38 U.S.C. § 8126(a) . For purposes of section 8126, Congress specified that the term “manufacturer” would include not only those entities that most naturally fall within the plain meaning of that term (such as those engaged in “ the

p roduction, preparation, propagation, compounding, conversion, or processing of prescription drug products ”), but also those entities engaged “ in the packaging, repackaging, labeling, relabeling, or distribution of prescription drug products. ” 38

U.S.C. § 8 126(h)(4)

.

The fact that Congress found it necessary to explicitly define the term “manufacturer” to include repackagers, relabelers, and distributors in section 8126(h)(4) suggests to the Court that such entities would not otherwise be considered “manufacturers” of drug products in light of that term’s ordinary meaning . Further, there are unique policies underlying section 8126(h)(4) that justify including entities other than the pharmaceutical makers themselves within the definition of “manufacturer.” By defining “manufacturer” to include repackagers in section 8126, Congress advanced the statute’s underlying policies by ensuring that the government would have an adequate supply of the covered drugs at capped prices regardless of whet her the pharmaceuticals

### 18

are purchased directly from their makers or from other entities like AvKARE that repackage and relabel them.

Similarly, when statutes and regulations enforced by the FDA make repackagers subject to the same rules as pill manufactu rers, they do so by explicitly defining “manufacture” or “manufacturer” to include repackagers. See, e.g. , 21 U.S.C. § 802(15) (specifying that, for purposes of the Controlled Substances Act, “[t] he term

‘ manufacture ’ means the production, preparation, pro pagation, compounding, or processing of a drug or other substance, either directly or indirectly

. . . and includes any packaging or repackaging of such substance or labeling or relabeling of its container ”); 21 U.S.C. § 360 (specifying that, for purposes of the FDA’s registration requirements,
“the term ‘ manufacture, preparation, propagation, compounding, or processing ’ shall include repackaging or otherwise changing the container, wrapper, or labeling of any drug package or device package in furtherance o f the distribution of the drug or device ”)



### .

As was the case with the expanded definition of “manufacturer” contained in

section 8126(h)(4) , there are specific policy reasons underlying these statutes and regulations that justify extending the restrictions that apply to manufacturers to entities like AvKARE that repackage and relabel drugs. For example, the Controlled Substances Act is designed to, among other things, avoid the diversion of certain pharmaceutical products to illegal markets. See 21 U.S.C. § 823. In that context, it requires the “manufacturers” of such products to register with the Attorney General, and defines manufacturer broadly to include entities like AvKARE that are also in the chain of

distribution. Id. Similarly, under 2 1 U.S.C. § 360 , AvKARE is subject to registration requirements that are part of a statutory and regulatory scheme intended to prevent the adulteration or misbranding of drugs; in that context, there exists a policy reason for subjecting repackagers and relabelers to the same restrictions as manufacturers.

Further, as AvKARE acknowledges, other FDA regulations define manufacturer more narrowly. See 21 C.F.R. § 201.1(b) (defining “manufacturer” for purposes of certain FDA labeling requirements as “ the person who performs all of the following operations that are required to produce the product: (1) Mixing, (2) granulating, (3) milling, (4) molding, (5) lyophilizing, (6) tableting, (7) encapsulating, (8) coating, (9) sterilizing, and (10) filling sterile, aerosol, or gaseous drugs into dispensing containers ”); Pl.’s Mem. at 25 n.8. This variance shows that even within the regulatory regime applicable to the pharmaceutical industry, the term “manufacturer” does not always include repackagers like AvKARE.

In short, the Court is not persuaded by AvKARE’s reliance upon other statutory and regulatory applications of the term “manufacturer.” For that reason, and the others discussed above, the Court holds that AvKARE is not a manufacturer under the solicitation’s CSP provision ; it is a dealer/reseller

.

### 19 B. The CO’s Determination that AvKARE Lacked Significant
Commercial Sales

Under the solicitation, a dealer/reseller like AvKARE must produce manufacturers’ CSP information only if it also lacks significant commercial sales. See

AR Tab 5 at 202; id. Tab 12 at 503. And, as the solicitation makes clear, whether a dealer/reseller has significant commercial sales is “examined on a case by case basis.” Id.

Tab 12 at 503.

It is axiomatic that the Court will not interfere with an agency’s procurement decision unless the decision was “arbitrary, capricious, an abuse of discretion, or
otherwise not in accordance with law.” E.g.

, Bannum, Inc. , 404 F.3d at 1351 (citing 5

U.S.C. § 706(2)(A)). Under this “highly deferential” standard, Advanced Data Concepts,

Inc. v. United States , 216 F.3d 1054, 1058 (Fed. Cir. 2000) (citing Bowman Transp., Inc.
v. Arkansas

- Best Freight Sys., Inc. , 419 U.S. 281, 285 (1974)), the Court will not dist urb the agency’s decision unless it “lacked a rational basis” or “involved a violation of regulation or procedure,” Impresa Construzioni Geom. Domenico Garufi v. United

States , 238 F.3d 1324, 1332

– 33 (Fed. Cir. 2001). The plaintiff thus “bears a heavy

burd en” in attempting to show that a procuring agency’s decision lacked a rational basis.

Id. (quoting Saratoga Dev. Corp. v. United States , 21 F.3d 445, 456 (D.C. Cir. 1994)). Indeed, such a challenge may succeed only if the agency “entirely failed to conside r an important aspect of the problem, offered an explanation for its decision that runs counter to the evidence before the agency, or [if] the decision is so implausible that it could not be ascribed to a difference in view or the product of agency experti se.” Ala. Aircraft Indus., Inc.

– Birmingham v. United States , 586 F.3d 1372, 1375 (Fed. Cir. 2009) (quoting
Motor Vehicle Mfrs. Ass’n v. State Farm Mut. Auto Ins. Co. , 463 U.S. 29, 43 (1983) (internal quotations omitted).

Here, in determining that AvKARE lacked significant commercial sales, the CO relied on an analysis conducted by the OIG

. See AR Tab 191 at 21070

– 73; AR Tab 417 at 22496. The OIG assessed AvKARE’s sales data and determined that nearly all of AvKARE’s sales were indirect sales to government entities via commercial wholesalers.
AR Tab 191 at 20170

– 71. The OIG also explained why it did not consider these sales to

be commercial sales. Id. at 21070. T he CO’s reliance on th e OIG’s analysis thus was not unreasonable. Therefore, the CO’s ultimate d etermination that AvKARE lacked significant commercial sales also had a rational basis.

AvKARE challenges the CO’s decision on several other grounds, but these attacks also fail. Its first argument

— that the VA refuses to award contracts to any offeror

wit hout significant commercial sales

— knocks down a straw man, for the VA has not taken that position. See Pl.’s Mem. at 29; Pl.’s Reply at 15

– 16. Rather, the VA requires that dealer/resellers without significant commercial sales provide manufacturers’ CSP

inf ormation before conducting a price reasonableness analysis, after which it may award

a contract.

AvKARE next argues that it “possesses significant commercial sales by virtue of the $9 million in such sales disclosed in its renewal offer.” Pl.’s Mem. 30. But despite

### 20

this bald assertion, AvKARE offers no basis to question the OIG’s analysis of these sales, which ultimately determined that the $9 million in sales did not , in fact, constitute significant commercial sales. Finally (and as discussed in more det ail below), AvKARE contends that by relying on the OIG’s analysis, the CO abdicated her responsibility to apply independent judgment. Pl.’s Mem. at 38; Pl.’s Reply at 15 n.6, 18

– 19. But because AvKARE has offered no concrete reason to question the OIG’s an alysis, it is difficult for the Court to discern how the CO’s reliance on it could be cause for concern; and the

record does not otherwise bear out this accusation.

Accordingly, the Court concludes that the CO’s determination that AvKARE lacked significa nt commercial sales was not arbitrary, capricious, or contrary to law.

C. AvKARE’s Claim that the VA Acted in Bad Faith

More broadly, AvKARE contends that the VA failed to evaluate its renewal offer and conduct negotiations in good faith. See Pl.’s Mem. At 38

– 39; Pl.’s Reply at 19. In AvKARE’s view, the OIG developed “animus” toward AvKARE, and the CO then colluded with the OIG in rejecting AvKARE’s proposal, thereby abdicating her responsibility to apply independent judgment. Pl.’s Mem. at 38; Pl.’s Rep ly at 19.

Agency decisionmaking, however, is entitled to the presumption of regularity. See

Info. Tech. , 316 F.3d at 1323 n.2 . And the record here offers no basis for finding that presumption rebutted . Instead, it shows that the VA communicated regularly with AvKARE about AvKARE’s proposal, and that the VA repeatedly explained to AvKARE why the proposal remained deficient. See AR Tab 344 at 21600

– 10; AR Tab 367 at

21695

– 97; AR Tab 386 at 22315

– 17. More over, the VA’s internal communications exhibit no predisposition to spurn AvKARE’s offer; rather, they reflect a consistent position that AvKARE’s proposal was not complete because AvKARE was not a manufacturer, lacked significant commercial sales, and had not supplied manufacturers’

CSP information. See AR Tab 174 at 20957; AR Tab 188 at 21059

– 61; AR Tab 191 at 21069, 21073; AR Tab 436 at 22534.

AvKARE also appears to assert that the government acted in bad faith by declining to use an alternate method of price analysis

— i.e., one that did not depend on securing and reviewing its suppliers’ CSP information. See Pl.’s Reply at 16 & n.7. At oral argument, for example, AvKARE claimed that the VA should have employed

alternative methods because the pill supplie rs (i.e., the manufacturers) do not sell what AvKARE sells (i.e., pills packaged in bottles for individual consumption) so that there was no relevant manufacturers’ CSP information to be obtained from AvKARE suppliers

. Tr. of Oral Arg. at 10:10

– 11:11, ECF No. 42.

Counsel for the government was not able to specif y at oral argument the precise nature of the manufacturers’ CSP information that the VA is seeking. Id. at 48:6

– 51:16. But it is certainly conceivable that the VA may wish to consider, for example

, information about the prices AvKARE’s suppliers charge repackagers or other entities for pills purchased in bulk that will ultimately be sold to the general public.

### 21 In any event, it is premature on the present record to address AvKARE’s
apparent content ion that the VA has no use for any CSP information that AvKARE might be able to secure from its suppliers. T he government has confirmed that if relevant
manufacturers’ CSP information w as demonstrably unobtainable by AvKARE, through

no fault of its own

, t hen the VA w as willing (and , the Court assumes, remains willing) to employ a different method of price analysis to evaluate AvKARE’s proposal. See Def’s Opp’n to Pl.’s 2d Mot. to Suppl. the Admin. R. at 4, ECF No. 45. 12

But AvKARE made no attempt before t he VA to substantiate the position it is taking before the Court that relevant information about its suppliers’ commercial sales practices cannot be obtained . Rather, it consistently took the position that it was not legally obligated to provide any such information at all, even if it did exist, because

AVKARE is not a dealer/reseller and/or because its suppliers’ commercial sales practices could not possibly be relevant to a determination of whether AvKARE’s prices

were fair and reasonable

. See AR Tab 3 60 at 21679 (asserting that AvKARE need not provide manufacturers’ CSP information because “we are not a dealer or reseller” and “[the dealer/reseller] provision is not applicable to our offer”); AR Tab 382 at 21740 (asserting AvKARE’s belief that manufact urers ’ CSP information “is neither required (as AvKARE is the manufacturer of its private label products and has significant commercial sales of those products) nor relevant”). Thus, the record provides no basis to conclude that the VA has in bad faith req uested information that it knows does not exist as

AvKARE claims. 13

12 Indeed, at least one document in the record contemplates just this outcome. See AR Tab 436 at 22534 (email from the VA’s FSS director stating that “[i]f CSP data is not received, AvKare must prove that CSP data is not available from their manufacturers,” and that “[if] CO verified CSP data is not available from manufacturer, then proceed to reliance solely on price analysis”).

13 AvKARE’s second motion to supplement the administrative r ecord relates to this portion of its claim. In it, AvKARE seeks to supplement the AR with a transcript of a deposition of the GSA’s current director of FSS programs, which was taken in connection with a parallel proceeding before the Civilian Board of Cont ract Appeals. See Pl.’s Mem. in Supp. of its 2d Mot. to Suppl. the Admin. R. (“Pl.’s 2d Mot. to Suppl.”) at 2

– 4, ECF No. 44. In the transcript, the director describes the GSA’s policies and practices for obtaining CSP information and for assessing price re asonableness

, and he recalls discussions he had about those policies and procedures with the VA’s FSS program

director. Id. at 4

– 9.

According to AvKARE, this testimony shows that the GSA told the VA that CSP
information was “ not an absolute necessity” and “could [not] be required when [it] w[as] not available from downstream suppliers.” Id. at 12. As discussed above, the existing record reflects that this is the VA’s understanding. See AR Tab 436 at 22534 (email outlining how to handle AvKARE proposal if “v erified CSP data is not available from

### 22 D. AvKARE’s De Facto Debarment Claim

Finally, AvKARE claims that the VA’s refusal to further evaluate its renewal proposal amounts to a de facto debarment without due process of law. A de facto debarment occurs when there is “a systematic effort by the procuring agency to reject all
of the bidder’s contract bids.” TLT Const. Corp. v. United States , 50 Fed. Cl. 212, 215

– 16 (2001) (quoting Stapp Towing, Inc. v. United States , 34 Fed. Cl. 300 , 312 (1995)). To

establish a de facto debarment, a contractor must show that the agency has either stated or engaged in conduct demonstrating that it will not award the contractor future contracts.

Id. (citing CRC Marine Serv., Inc. v. United States , 41 F ed. Cl. 66, 84 (1998)).

AvKARE’s de facto debarment claim fails for largely the same reasons as its bad

faith treatment claim

— namely, that the record reflects no systematic intent to refuse to award AvKARE future contracts. In fact, just the opposite is t rue: documents in the record show that the VA has consistently told AvKARE that it w ould move forward with reviewing AvKARE’s proposal if AvKARE supplie d the required manufacturers’ CSP information. In contrapose, AvKARE has consistently maintained that th e solicitation does not require it to provide the information the VA seeks. This disagreement about a legal issue is at the root of all of the controvers ies in this case, and its existence (without more) does not demonstrate any “systematic effort” to deny awards to AvKARE. See TLT Const. Corp. , 50 Fed. Cl. at 215

– 16. Accordingly, AvKARE’s de facto debarment

claim must fail.

CONCLUSION

For the reasons discussed above, AvKARE’s motion for judgment on the

administrative record is DENIED and the government’s motion is GRANTED

. Accordingly, AvKARE’s claims related to its RFMs are hereby DISMISSED without prejudice , and i ts bid protest claims are hereby DISMISSED with prejudice. AvKARE’s second motion to supplement the administrative record is also hereby DENIED

. The Clerk is directed to enter judgment accordingly. The parties shall bear their own costs.

[the] manufacturer[s]” ). It also reflects that AvKARE has maintained that it is not legally obligated to provide the VA with manufacturers’ CSP information, even if it does exist

and is obtainable

. The deposition test imony thus is not necessary to “permit meaningful
review” in this case. See Axiom Res. Mgmt., Inc. v. United States , 564 F.3d 1374, 1380 (Fed. Cir. 2009). Accordingly, AvKARE’s second motion to supplement the record is hereby DENIED

.

### 23 IT IS SO ORDERED

.

/ s/ Elaine D. Kaplan

ELAINE D. KAPLAN Judge