B i d P r o t e s t ; P o s t

- A w a r d ; J u d g m e n t o n A d ministrat i v e Record; Contract M odif ication ; 1 0 U.S.C. § 2304 ( a)(1)(A); Security Clearance; Contrac t Interpretation 

# In th e United States Court of Federal Cl aims
Nos. 15-616C, 15-617C, 15-618C, 15-619C, 15-620C (Originally

Filed: Septem

ber 9, 2015) ( Re-f iled: Septem

b er 17, 2015) 1

* * * * * * * * * * * * * * * * * * * * * * SCHOTT GOVERNMENT SERVICES, LLC,

Plaintiff
,

v.

THE UNITED STATES,

Defendant,

ORAN SAFETY GLASS, INC.,

Intervenor.

* * * * * * * * * * * * * * * * * * * * * *

Lee Dougherty
, Ty sons Corner, VA, f or plaintif f , with whom

was Katherine A. Straw , Ty sons Corner, VA, of counsel.

Devin A. W

olak , Trial Attorney
, Com m ercial Litigation Branch, Civil Division, United States Departm ent of Justice, W ashington, DC, with whom were B enjamin C. Mizer , Principal Deputy Assistant Attorney General, Robert E. Kirschman, Jr. , Director, and Martin F. Hockey, Jr. , f o r def endant.

1 This opinion was originally f iled under seal. The parties were directed to conf er and propose redactions. The court adopted the parties’ suggested redactions, rem oved the inf orm a tion, and inserted brackets to replace the redacted content. The opinion is now prepared f or release.Richard L. Moorhouse , McLean, VA, f or intervenor, with whom

were L. James D’Agostino , McLean, VA, of counsel, and Ryan Bradel
, W a shington, DC, of

counsel.

_______________
OPINION

_______________ BRUGGINK, Judge

.

This is a post-award protest of a solicitation f or transparent armor windows f

or use on M ine-Resistant Am b ush-Protected (“MRAP” ) vehicles known as MRAP All-Terrain Vehicles (“M-ATV”). Plaintif f
, Schott Governm ent Services, LLC (“Schott”) challe n g es the Def ense Logistics Agency ’s (“DLA” or “the Agency ”) award of f ive separate contracts f

or t h e supply of the windows t o t h e awardee, Oran Saf ety Glass (“OSG”). OSG intervened i n the a ction. C urren t l y b e f ore t he c ourt are the parties’

cross-m otions f

or judgm ent on the adm inistrative record (“AR”) 2 pursuant to Rule 52.1 of the Rules of the Court o f F ederal Claim s (“RCFC”). The m otions

are f ully b r ief ed, and we heard oral argum ent on Septem ber 1, 2015. For the

reasons ex p l ained below, we deny plaintif f ' s m otion f

or judgm ent o n the adm inistr a t i v e r e c o r d a

nd we grant def

endant’s and intervenor’s cross-m otions f or judgm ent on the adm inistrative record.

B ACKGROUND

The M-ATV transparent arm or was developed by t he g overnm ent prior
to this procurem ent f

or use on MRAP vehicles. Subsequent to its d evelopm ent, the transparent a rm o r was assigned a National S tock Num ber (“NSN”), which is a label u s ed b y the governm e nt to identif y an item that i s routinely p rocured, stocked, a nd u sed by the governm ent. Af ter an NSN i s assigned to a product, the governm ent seeks approved sources to m a nuf acture and supply the NSN through the Source Appro v a l R equest (“SAR”) process. Once approved,

2 The f a cts are drawn f

rom the adm inistrative record, which is presented in a unique f ashion in this case. There are 8 sections: AR 118, AR 119, AR 120, AR 121, AR 137, CT(DLA), CT(TACOM), and CT(DIS). Each section is separately paginated.

2sources can subm it b ids f or later solicitations, seeking to be awarded a specif ic contract to supply

that NSN.

OSG subm i tted i t s i n itial Source Approval Request (“SAR”) i n October 2011, seeking to b e one of the approved sou r c e s f o r the NSNs sought in the
procurem ent at issue in this case. CT(DLA)-148. In it s SAR, OSG indicated that it f ollowed U .S. Arm y T ACOM Arm or T ransparent Purchase Description 2532 (“ATPD 2532") “f

or a ll test procedures, a ccording to ballistic protection

c l ass def ined by classif

ied Annex [ ] D TA-184044.” CT(DLA)-211; see also CT(DLA)-302. D TA-184044 is a drawing which provides precise protection class threat specif

ications. CT(DLA) -309. It is c lassif ied as SECRET, and “[ p]roof o f proper authorization and security c l e a r a n c e shall be required to obtain copies.” Id. A lso in its S A R
, O S G represented to the Agency that it would f ollow a specif

ic recipe f

o r the com

position o f the windows, recipe [ ]. C T(DLA)-147, 212; Def endant’s Appendix ¶ 8 (hereinaf ter Def .’s App.). This recipe had b een previously approved as s atisf y ing ATPD 2532. Id. OSG

was subsequ e n t ly approved as a s ource f or the M-ATV transparent a rm or. Schott was later added a s an approved source f or the transparent arm or in July 2014. 3

In June 2014, DLA issued f ive Requests f

or Proposals (“RFP”) f

or the supply o f the M-ATV transparent arm or. 4 T he M-ATV Solicitations sought th e supply of t ranspa r e n t a r m or with t he s a m e N SNs f or which OSG and Schott had been approved as sources through the SAR process. The acquisition p lan specif i cally noted that “[ t]his acquisition will not be involving any classif ied docum ents or inf

orm a tion.” 5 AR 118-3-5; AR 119-3-5; AR 1 20-3-4; A R 121- 3-5; AR 137-3-5. T he procurem ents were conducted on a l im ited-source basis,

3 The original acquisition plan, created in June 2014, did not list Schott as an approved source. The plan was am e nded in July 2014 to add Schott as an additional approved source f or the M-ATV transparent arm or.

4 Nos. SPE7L3-14-R-0118, SPE7L3-14-R-0119, SPE7L3-14-R-0120, SPE7L3-14-R-0121, and SPE7L3-14-R-0137 (collectively , the “M-ATV Solicitations”).

5 The acquisition plan f

or the M-ATV Solicitations is a classif ied docum ent, which is not released to the approved sources, but the placem ent of this
statem ent in it shows that the governm e nt intended that the solicitations not involve any

classif ied m aterial or inf

orm ation.

3a s only OSG and Schott had b een previously approved through th e S A R

process as sources f

or t he NSNs sought. Proposals were evaluated according
to “Best Value” p r ocedu r e s , a n d OSG was awarded t he contracts during October 2014 and January 2015. Schott was s ubsequently n otif ied that its

o f f ers were not accepted because they were not the low price o f f ers af t e r consideration of

all the evaluation f

actors.

In January 2015, Schott contacted the A gency t o e x p r e s s its concerns that OSG had changed its recipe f or the transparent a rm or. Subsequently
, the Arm y ’s Project Manager MRAP of f ice (“PM MRAP”) contacted the Agency in February 2015 regarding these concerns, and requesting p roduction control testing, i ncluding re-certif ication of the recipe during ballistic testing. PM MRAP cited ATPD 2532 section 4.2.1, which stated that any changes m ade in the m anuf

a c t u r i n g p rocess m ay be subject to First Article Testing (“FAT”). CT(DLA)-20. Af

ter analy zing the transparent arm or m anuf actured by OSG, PM M R A P d i scovered that OSG had m anuf actured m ultiple conf

igurations, only one of w h ich had been s ubm itted t o the governm ent t hrough its SAR
process. This dis c o very sparked concerns that OSG was delivering a conf iguration that ha d n ot been approved by t he g overnm ent. PM MRAP inf orm ed t he Agency o f its f indings i n March 2015, and provided a list of inf orm ati o n t h at the Agency should request f rom OSG. CT(DLA)-144. A March 27, 2015 letter to OSG f rom the A gency advised O SG t hat the Agency had been m ade aware of its possible f ailure t o com

ply with t he contract. This letter inf orm ed O SG tha t t h e d e l i v ery of any com position other t han [ ]

was n ot authorized and would be c onsidered n on-com pliance, a nd requested that OSG provide the Agency with quality

/inspection records identif y ing the recipe that was or would be delivered pursuant to each contract.

OSG responded by letter on Ap r i l 8
, 2 0 15, providing a n analy sis of what it suggested was a m isunderstanding between OSG a nd the Agency
, and citing ATPD 2532 paragraph 3.2, which provides that “[ a]f ter FAT approval,

no m aterial or process changes that m ay af f ect product perf

orm ance, including ballistic i ntegrity and environm ental durability
, shall b e m ade w ithout the procuring activity approval.” CT(DLA)-367. A c c o r ding t o the letter, af ter perf orm ing t he ne c e s s a r y t e s t s , O SG concluded that t he new recipe, [ ], did not af

f ect p erf orm ance. Theref

ore, OSG believed t h a t b a s e d on its interpretation of

ATPD 2532, it could substitute recipe [ ] f or recipe [ ] in its deliveries to DLA, and thus began to deliver recipe [ ]to f ulf ill its contracts with the A gency

. OS G s u g gested that it had b egun to develop recipe [ ] af

ter deve l o p i n g s o me concerns r egarding the availability and

4quality of som e M-ATV raw m a terials. Mor eover, OSG indicated that this

new recipe had been s ubm itted on April 8, 2015, f or a source approval request.

DLA subsequently responded w i th a cure notice on April 21, 2 015. The notice inf

orm ed OSG that the governm ent c onsidered OSG’s supply of nonconf orm i ng parts as endangering contract perf orm ance, and warned t hat unl e s s the condition was cured within 10 day s af ter receipt o f the letter, the
governm e nt m ight term inate the contract f or def ault. The Agency stated t hat
any cure had to result in the supply of transparent arm or m a nuf actured using recipe [ ]
, and had t o address DLA’s ability to identif y and segregate any nonconf orm i ng parts that had already b een sent to DLA. OSG responded with

a cure plan, proposing new delivery dates f or shipm ent o f the [ ] recipe. The Agency was not satisf ied with this cur e p l a n because it did not address OSG’s ability to obtain suf f icient q uantities of t he recipe [ ] raw m a terial
to f ulf ill the rem aining deliveries required by the contracts, it did not propose consideration f

or the delivery extensions, a n d because O SG f ailed to include data o n the [ ] transparent arm or that had been p reviously delivered under the contracts. T he Agency requested t hat OSG f i x these inadequacies by M ay 4, 2015. OSG subsequently provided the r equested inf orm ation within the requisite t im e f

ram e, and the p ar t i e s began negotiating an appropriate settlem ent.

An af f idavit of the Agency ’s contracting of f icer, [ ], lists the
events that took p l ace during the negotiation process, and details the settlem ent eventually worked out by the parties. See Def .’s A pp. The af

f idavit notes a

num ber o f t he A gency ’ s concerns a bout whether or how to proceed with a settlem ent. The Agency h ad outstanding orders f r om the m ilitary f

or the windows, and a num

ber o f windows had already been delivered and accepted,

as som e of the c ontracts were well into perf orm ance. Meanwhile, on June 4, 2015, the Arm y had approved the [ ] recipe through its SAR process, thus indicating to the Agency

that the recipe was technically acceptable.

The Agency went ahead with m odif i cations rather than com plete cancellations on June 2 4
, 2015. The m odif ications required that a l l f uture deliveries be in conf

o rma n c e with the original contract, m e aning that OSG would deliver the originally approved [ ] r e c i p e , a n d r e q u ired that OSG

m ake a cash pay

m ent and an in-kind pay

m ent to cover the governm ent’s cost in hand ling and processing nonconf orm ing goods previously delivered. Additionally
, the m odif

ications allowed OSG to extend its tim e f or delivery f

or

5all outstanding deliveries due under the contract i n exchange f o r c a sh consideration. All of the cash p ay m ents required of OSG totaled [ ], and the value of the in-kind pay m ents was [ ]

. In accordance with the m odif ied contracts, f

inal delivery has occurred with respect to som e o f the contracts, and all rem aining deliveries o f the transparent a rm or are scheduled to o ccur by the end of October 2015.

DI SCUSSI ON

Pursuant t o the Tuc k e r Act, this court has jurisdiction to “render judg me nt on an action by an interested party objecting to a solicitation by a Federal Agency f

or bids or proposals f

or a proposed c ontract o r to a proposed award

. . . or a ny a lleged violation of statute or regulation in connection with

a procurem ent or a propos e d p r o c u rem e nt.” 2 8 U .S.C. § 1491(b)(1) (2012). Schott is a n “interested party ” because it i s a prospective bidder “whose direct

econom ic i nterest would be af f ected by the award of the c ontract.” Am. Fed’n of Gov’t Emps., ALF-C

I O v

. United States
, 258 F.3d 1294, 1302 (Fed. Cir. 2001) (quoting 31 U.S.C. § 3551(2)(a) (2012)).

T his court’s r eview is lim ited to the existing adm inistrative r e c o r d generated by

the Agency

in connection with the procurem ent action at issue. See RCFC 52.1. W e review the adm inistrative r ecord pursuant to the standards
set f orth in section 706 of the Adm inistrative Procedure Act (“APA”), 5 U.S.C. § 706(2)(A) ( 2012). Thus, we m a y set aside an Agency ’ s decision only i f it is “arbitrary , capricious, an abuse of discretion, or otherwise not in accordance with the l aw.” 5 U.S.C. § 706(2)(A) (2012). The protestor b ears the burden of

e s t a b lishing that the Agency ’s decision lacked a rational basis or was othe r w i s e in violation of applicable law or regulation. See Impresa Construzioni Geom. D omenico Garufi v. United States
, 238 F.3d 1324, 1332 (Fed. Cir. 2001). A dditionally
, plaintif f m ust show prejudice, m e aning t h at had it not been f

o r t h e e r r o r in the procurem ent process, there is a r easonable likelihood that the challenger would have been a w arded the contrac t

. Data Gen. Corp. v Johnson , 78 F.3d 1556, 1562 (Fed. Cir. 1996).

Plaintif f challenges two aspects o f the procurem ent. Plaintif f ’s prim ary challenge i s directed a t the m odif ications to OSG’s contract af ter the Agency discovered t hat O S G was delivering nonconf orm ing windows. Plaintif f contends that the mo d i f

ications lacked a rational basis because the Agency unreasonably accepted OSG’s c ontention of an alleged latent am biguity in the

s o l i citation, allowing OSG to supply products that did not conf o rm t o t h e required t echnical specif

i cations. According to plaintif f
, this decision violated

6the Com p etition in C ontracting Act (“CICA”) 6 in that it thwarted f ull and open

com petition. Plaintif

f ’s second argum ent is that the initial award of the
contracts to OSG v iolated law and regulation because the Agency awarded the
contract to O S G d espite its lack of a required f acility clearance (“FCL”) to supply the transparent arm or.

Plaintif f ’s f i rst argum e nt, that the c ontract m odif ications l a c k e d a rational basis, rests on plaintif f ’s belief that O S G never intended to supply a conf orm ing product under the contracts, and that D L A’s acceptance of nonconf orm i ng products as p a

r t o f t h e m o d i fi c a t i o n s e ffectively elim inated any

com petition. In its reply brief it argues that the contract m odif ication b rought the contracts outside t he s cope of the solicitation, and theref ore, under CICA,

a n ew p rocurem e nt was r equired in order to p reserve the com petitive bidding
process. See 10 U.S.C. § 2304 (a)(1)(A) ( 2011) ( “[ T]he head of an Agency in conduct i n g a p rocurem e nt f or property or services

. . . shall obtain f ull and
open com p etition through the use of c om petitive procedures

. . . .”); CCL, Inc.

v

. United States
, 39 F ed. Cl. 780, 7 91 (1997) (explaining t hat C I C A ’ s requirem ents “cannot be avoided by using the device of contract

m odif ication”).

As support f

or its position that OSG never intended to supply conf orm ing products, plaintif

f relies on an April 15, 2015 letter f rom OSG’s President a nd CEO to DLA se t t i n g out an analy sis of the m isunderstanding between t he parties. See C T(DLA)-367-70. This letter s uggests that af ter OSG

was approved as a source, it discovered som e risks regarding the availability of M

- ATV raw m aterials, which would lead it unable to produce c om position [ ]. As a result, OSG began testing other com positions of the f

o rm ula f or the transparent a rm o r, and developed a dif f erent com position, [ ]. Plaintif

f does not acc e p t t h e truth of OSG’s responses to the Arm y , and suggests t hat OSG had alway s intended to supply com p osition [ ], in violation o f the MATV S olicitations, which specif ied the corr e c t N S N s and which explicitly disallowed substitution. Schott argues that it was unreasonable a nd p rejudicial
t o i t to allow O SG to rely on a supposed a l leged latent am biguity to delive r substitute products because it was inconsistent with the term s of t he o riginal solicitation and thus precluded Schott f rom com peting.

Def endant recognizes in its response t hat there were serious errors with OSG’s perf

orm ance under the contracts, but m aintains that these issues are not

6 10 U.S.C. § 2304 (a)(1)(A) (2011).

7the proper subject f or a bid protest. It argues that Schott can n o t r e s t a bid protest on what am ounts to a matter of post-award contract perf orm ance,

som ething bey ond the reach of the court’s bid p rotest juris d i c t i on u nder 28 U.S.C. § 1491(b). R ely i ng on the af f idavit of DLA’s Contracting Of

f icer,[ ], def endant contends that the award to OSG cannot be f aulted, because i t p r oposed to supply the exact product. It was only af t er the a w ar d s w e r e

m ade and well af

ter perf orm ance had com m enced that the g overnm ent becam e aware that OSG was providing nonconf orm ing products.

Def endant also a rgues that Schott’s argum e n t is f actually unf

o unded, i n that the Agency rejected OSG’s interpretation of the contract. It ne v e r knowingly a c c e p t e d n o n

- c o n fo r m ing product and m erely devised a solution f or

a serious problem af

ter it was discovered. Because a m ajority of the d eliveries had been accepted and paid f o r by the tim e DLA d iscovered that they were nonconf orm i ng, the agency ’s rights were g overned by FAR 5 2.246-2(k) and ( l )

. T his regulation stipulates that the governm e nt’s acceptance o f an it e m “shall be c onclusive, e xcept f or latent def

ects, f raud, [ or] gross m i stakes

am ounting to f

raud.” FAR 52.246-2(k) ( 2014). The r egula t i o n f u rther provides that f ollowing non-conclusive acceptance, the governm ent m a y elect to have the awardee “repay s u ch portion of the c ontract as is equitable u nder the circum stances if the Contracting Of f icer elects not to requ i r e correction or replacem ent,” FAR 52.246-2(l) (2014), which def endant con t e n d s is exactly what the A gency did. W e agree with d ef endant. The agency n ever endorsed the

m anner i n w h i c h OSG proceeded with t hese contracts and instead d evised a practical sol ution to a problem of OSG’s m a k ing. Schott’s CICA rights, in other words, were not com prom i sed by

any t hing the agency

did.

W e note, m o reover, t h a t i n exercising jurisdiction over a bid protest, “the co u r t s shall give due regard to the interests o f national def ense and

n a t i onal security and t he n eed f or expeditious resolution of the action

. ” 2 8 U.S.C. § 1491(b)(3). The [ ] af f i davit m akes cl ear the agency ’s concern that the m ilitary not be delay ed i n getting arm o red windows f or its v ehicle f

or

use in a com

bat zone. Returning the parties to the position they were in prior
to contracting would r equire pulling the M-ATV f leet o ut of s e r v i c e until replacem ent transpare n t a r mo r windows could b e obtained through a new procurem ent. Id.

W e do n ot m ean to s uggest that circum stances could not arise i n which

a contr a c t m odif

ication m ight depart m a terially f rom the contract’s o riginal
scope so as to t rigger this court’s bi d p r otest j urisdiction. See, e.g. , Glob.

8C o m puter Enter.’s, Inc. v

. United States, 8 8 Fed. Cl. 359, 452 ( 2 0 0 9 ) ; Cardinal Maint. S

erv., Inc. v. United States
, 6 3 Fed. Cl. 9 8, 1 08 (2004). In this
case, however, given the passage of tim e, the security concerns i nvolved, and the agency ’s insistence on com pensation f

o r n on-perf

orm ance, we are persuaded that concerns ref lected in other cases are not triggered here.

In a separate argum ent, plaintif f alleges that the initial awards to OSG violated l aw and r egulation because O SG d id not have t he f acilities clearance
to access the classif

ied perf orm ance specif

ications required to e nsure ballistic qualif ication during First Article Testing (“FAT”) and P r o duction Control Testing (“PCT”). Although nothing in the solicitations at bar m akes ref erence to the need f

or any security clearances, plaintif f puts together its argum ent by drawing f rom ge n e r a l regulatory requirem ents (award c an only be m ade to b i d d e r s w h o a re c apable of perf orm ing the contract, FAR 9.103) and f rom requirem ents a ssociated w ith SAR approval. According to p laintif f
, because the ballistic protection level f or the transparent arm or is classif ied as SECRET, plaintif f s should have had a n FCL to access it during SAR approval. See DoD 5220.22-M, 2 -100 (“[ T]he contractor will not be af f orded access to classif

ied inf orm ation u ntil t he FCL has been granted.”). Plaintif f notes that nowhere in the record is there an indication that the Agency conf i rm ed t hat OSG held an FCL.

Def

endant does not dispute that OSG lacks an F CL, but contends t hat

an FCL was not required f or award of this contract. D ef endant’s position is that these c ontracts w ere sim ply part-num

ber buy s f

o r t h e supply of previously

- approved p roducts. These parts w e re approved in 2011 to be

m anuf actured t o com

position [ ] af

ter approval of OSG’s SAR. Moreover, def endant c ontends that to the extent plaintif f asks the court t o r eview O SG’s

access t o c l assif

i ed m aterial during the SAR process, such m a t ters are nonjusticiable and reserved to the executive.

Because we do not construe plaintif f ’s a rgum ent as requiring review of

a decision to award or deny access to classif i ed inf orm a t ion, we see no nee d
to e ntertain the governm e nt’s nonjusticiability argum ent

. Def endant is correct, however, that an FCL was not required f o r award of these contracts. Nowhere in t he record is t here any indication that the M-ATV S olicitations required an FCL. In f act, the F ederal Acquisition Regulations r e q u i re that in t he event a solicitation involves classif ied inf orm ation, the c o n t racting of f icer m ust i n c l u d e a security requirem ents clause in the solicitation. FAR 4.403, 4 .404
, 52.204-2 (2014)

. T h e r e w e re none here. Plaintif f m ay be correct t hat

9participation in the MRAP M-ATV p rogram a n d b e c o m i n g a

n a pproved source through the SAR process required a f acilities security clearance, but the award of the p arts contracts them selves do not, 7 so the i ssue is outside the bid p rotest jurisdiction of

this court.

As f or the parties’ rem aining argum ents, we do not f ind them relevant
to our decision. Def

endant’s laches argum ent is unpersuasive. Laches s erves to bar a claim when plaintif f has delay ed f

iling suit f

or an inexcusable am ount of tim e so as to result in prejudice t o t he def endant

. V i t a

- M i x Corp. v. Basic Holding, Inc.
, 581 F.3d 1317, 1333 (Fed. Cir. 2009). However, the record does
not show that plaintif

f ’s delay in f

iling this claim was inexcusable. Plaintif f did
not sit on its rights; starting in January 2015 it w as acti v e in seeking inf orm ation f

r om the Agency regard i n g OSG’s delivery of nonconf orm ing products, and was n ot given inf orm ation ad e q u a t e to s upport its claim until well into 2015

. S

e e C T (TACOM)-1-35

. Moreover, because we do not f ind that the Agency ’s decisions to award the contracts to OSG and to m odif y the contracts were unreasonable or violated law or regulation, we do not need to

assess whether plaintif

f was prejudiced, and need not c onsider the m erits of plaintif f ’s claim f o r injunctive relief

.

CONCLUSION

We c onclude that t he agency exercised reasonable judgm ent both i n awarding t he c ontract s to OSG and i n entering i nto contract m odif i cations
upo n i t s discovery of OSG’s delivery of nonconf orm ing parts. W e theref

ore den y p l aintif

f ’s m otion f

or judgm ent on the adm inistrative record and grant def endant and i ntervenor’s cross-m otions

. T he Clerk is d irected to enter judgm ent accordingly . No costs.

s/ Eric G. Bruggink ERIC G. BRUGGINK Judge

7 Although it would not have been available to the bidders, the source acquisition plan explicitly states that security clearances are not required under the solicitations.

10