Opinion ID: 4538247
Heading Depth: 2
Heading Rank: 3

Heading: Scrutiny of Within-Deviation Labor Rates

Text: Agile contends that DISA’s cost realism analysis “violated the express terms of the [Encore III solicitation].” Appellant Br. 18. In support, it argues that while the solicitation required DISA to review and evaluate an offeror’s supporting documentation for Below-Deviation Labor Rates, it prohibited expanded scrutiny of an offeror’s Within-Deviation Labor Rates. According to Agile, it would have been selected for a contract award had DISA “adhered to the Solicitation’s express terms and found [its WithinCase: 19-1954 Document: 48 Page: 8 Filed: 06/02/2020 8 AGILE DEFENSE, INC. v. UNITED STATES Deviation Labor Rates] realistic by virtue of being within one standard deviation of the average.” Id. at 40–41.  We do not find this argument persuasive. The Encore III solicitation required DISA to assess each offeror’s proposed CR rates “using one or more techniques defined in FAR 15.404” in order to determine whether those rates were “complete, reasonable, and realistic.” A. 1279. It also instructed the agency to calculate, based upon an examination of all completed proposals in each suite of offerors, the average proposed labor rate for each LCAT. A. 1280. Next, the agency was directed to use statistical analysis to divide each offeror’s estimated CR labor rates into two groups: Below-Deviation Labor Rates, i.e., rates that were more than one standard deviation below the average rates, and Within-Deviation Labor Rates, i.e., rates that fell within  “A bidder that challenges the terms of a solicitation in the Court of Federal Claims generally must demonstrate that it objected to those terms prior to the close of the bidding process.” Bannum, Inc. v. United States, 779 F.3d 1376, 1380 (Fed. Cir. 2015) (citation and internal quotation marks omitted). Here, the government makes a cursory argument that Agile waived its right to argue that DISA was prohibited, under the terms of the solicitation, from analyzing the supporting documentation for its Within-Deviation Labor Rates because it failed to seek clarification on that issue prior to the submission of the last round of proposals. See Appellee Br. 27. Because the government fails to adequately develop this argument, however, we decline to consider it on appeal. See SmithKline Beecham Corp. v. Apotex Corp., 439 F.3d 1312, 1320 (Fed. Cir. 2006) (concluding that an insufficiently developed argument was waived); see also Kao Corp. v. Unilever U.S., Inc., 441 F.3d 963, 973 n.4 (Fed. Cir. 2006) (concluding that a litigant waived an argument by failing to adequately address it in the “argument section” of its brief). Case: 19-1954 Document: 48 Page: 9 Filed: 06/02/2020 AGILE DEFENSE, INC. v. UNITED STATES 9 one standard deviation of the average rates. A. 1280. The solicitation further stated that DISA was required to “review the submitted supporting documentation” for each Below-Deviation Labor Rate and, if the documentation provided “inadequate or no justification . . . for any component of that rate,” the agency was directed to make adjustments to that rate when calculating the “Most Probable Cost” for each offeror. A. 1280. Contrary to Agile’s assertions, however, nothing in the Encore III solicitation prohibited DISA from evaluating an offeror’s supporting documentation for Within-Deviation Labor Rates. Agile’s argument that the agency was barred from conducting an expanded cost realism analysis on its Within-Deviation Labor Rates hinges on the following solicitation provision: “The Government considers a rate that is 1 standard deviation below the average to be a realistic rate, subject to cost analysis techniques in accordance with FAR 15.404.” A. 1280. According to Agile, this statement means that DISA was required to accept all Within-Deviation Labor Rates as “realistic” and was therefore prohibited from performing any further cost realism analysis on those rates. Agile’s truncated reading falls flat. The solicitation does not state that Within-Deviation Labor Rates must be deemed “realistic,” but rather that those rates will be considered “realistic . . . subject to cost analysis techniques in accordance with FAR 15.404.” A. 1280 (emphasis added). In other words, Within-Deviation Labor Rates are not per se realistic, but instead may undergo additional cost realism scrutiny pursuant to the various cost analysis methods and procedures sanctioned by the FAR. See Federal Claims Decision, 143 Fed. Cl. at 18–19 (“[T]he language in the Solicitation was not so limited as to prevent the Agency from performing cost realism analysis on labor rates that fell within one standard deviation of the average.”). Case: 19-1954 Document: 48 Page: 10 Filed: 06/02/2020 10 AGILE DEFENSE, INC. v. UNITED STATES In this regard, the Encore III solicitation specifically states that DISA was required to assess the “[CR] portion” of each offeror’s proposal to determine whether it was “realistic.” A. 1279. Agile points to nothing in the language of the solicitation—or in the FAR—that limited DISA’s authority to thoroughly assess the cost realism of the entire “[CR] portion” of its proposal, including its Within-Deviation Labor Rates. Agile contends that because the solicitation explicitly required DISA to review the supporting documentation for Below-Deviation Labor Rates, it implicitly precluded the agency from extending that review to other proposed rates. See Appellant Br. 18–20, 26–29. We disagree. As we have repeatedly recognized, “[c]ontracting officers are entitled to exercise discretion upon a broad range of issues confronting them in the procurement process.” Impresa, 238 F.3d at 1332 (citation and internal quotation marks omitted); see also Tinton Falls Lodging Realty, LLC v. United States, 800 F.3d 1353, 1358 (Fed. Cir. 2015); Savantage Fin. Servs., Inc. v. United States, 595 F.3d 1282, 1286 (Fed. Cir. 2010). Agile cites to no authority suggesting that a solicitation, by instructing a contracting agency to perform a rigorous cost analysis on certain proposed rates, thereby strips it of the power to conduct an expanded cost realism analysis on other proposed rates. To the contrary, such a rule would unduly circumscribe a contracting officer’s discretion and hamstring a contracting agency’s efforts to ensure that the “estimated proposed cost elements are realistic for the work to be performed,” 48 C.F.R. § 15.404- 1(d)(1). The regular view of the Court of Federal Claims, which we approve, is that contracting agencies enjoy wide latitude in conducting the cost realism analysis. See, e.g., Mission1st Grp., Inc. v. United States, 144 Fed. Cl. 200, 211 (2019) (“It is well established that contracting agencies have broad discretion regarding the nature and extent of a cost realism analysis, unless the agency commits itself to a Case: 19-1954 Document: 48 Page: 11 Filed: 06/02/2020 AGILE DEFENSE, INC. v. UNITED STATES 11 particular methodology in a solicitation.” (citation and internal quotation marks omitted)); Dellew Corp. v. United States, 128 Fed. Cl. 187, 194 (2016) (“The Agency has demonstrated that it considered the information available and did not make irrational assumptions or critical miscalculations. To require more would be infringing on the Agency’s discretion in analyzing proposals for cost realism.” (citation and internal quotation marks omitted)); United Payors & United Providers Health Servs., Inc. v. United States, 55 Fed. Cl. 323, 329 (2003) (emphasizing that the procuring “agency is in the best position to make [the] cost realism determination” (citation and internal quotation marks omitted)). Such an approach comports with the FAR, which provides examples of cost analysis techniques, but does not mandate the use of any specific methodology. See 48 C.F.R. § 15.404-1(c). Instead, it instructs that “[t]he Government may use various cost analysis techniques and procedures to ensure a fair and reasonable price, given the circumstances of the acquisition.” Id. § 15.404-1(c)(2); see also id. § 15.404-1(d)(2)(i) (explaining that a cost realism analysis “should reflect the Government’s best estimate of the cost of any contract that is most likely to result from the offeror’s proposal”).