Court Opinion

ID: 4164671
Source: CourtListenerOpinion
Date Created: 2017-04-28 20:06:56.853305+00
Date Added: 2024-06-11T14:38:01.885282
License: Public Domain

In the United States Court of Federal Claims
                                           No. 15-370C
                                           (Bid Protest)
                                      (Filed: April 28, 2017)1

    ************************* *
                              *                       Bid Protest; Out-Grant Lease;
    OPEN SPIRIT, LLC,         *                       Cancellation of Request for Proposals;
                              *                       28 U.S.C. § 1491(b)(1); 5 U.S.C. § 706;
              Plaintiff,      *                       10 U.S.C. § 2667; 41 U.S.C. § 111; Bad
                              *                       Faith.
              v.              *
                              *
    THE UNITED STATES,        *
                              *
              Defendant.      *
                              *
    ************************* *

      Jorge I. Hernandez, Law Offices of Jorge I. Hernandez, 823 Anchorage Place, Chula Vista,
CA 91914, for Plaintiff.

      Benjamin C. Mizer, Robert E. Kirschman, Jr., Steven J. Gillingham, and Douglas T.
Hoffman, United States Department of Justice, Civil Division, Commercial Litigation Branch, PO
Box 480, Ben Franklin Station, Washington, D.C., 20044, for Defendant.
           _________________________________________________________

                               OPINION AND ORDER
             _________________________________________________________

1
        The Court issued this Opinion and Order under seal on March 30, 2017. As Plaintiff’s
counsel is also one of three members of Open Spirit, LLC, the Court denied him access to Protected
Information. Tr. 16 (May 6, 2015). The Court directed Defendant to file any proposed redactions
to this Opinion by April 12, 2017. After Defendant filed its proposed redactions, the Court
ordered Plaintiff to review Defendant’s proposed public opinion and propose its own redactions.
Order (Apr. 19, 2017). On April 27, 2017, Plaintiff notified the Court that it had no further
redactions. Pl.’s Notice 1. The Court publishes this Opinion and Order correcting errata and
indicating redactions by asterisks “[***].”
        Plaintiff Open Spirit, LLC (“Open Spirit”) protests the Navy’s cancellation of a solicitation
for an out-grant lease (“Lease”) at the Navy Base Point Loma in San Diego, California.2 Plaintiff
raises two protest grounds arguing that the Navy 1) unreasonably canceled the solicitation and 2)
acted in bad faith by discriminating against small businesses and conducting ex parte
communications with the incumbent occupant, Lockheed Martin Corporation (“Lockheed
Martin”).

      Because the Navy had a rational basis for cancelling the solicitation and Plaintiff failed to
demonstrate that the Navy acted in bad faith, Defendant’s motion for judgment on the
Administrative Record is granted.

                                         Findings of Fact3

Lockheed Martin’s Prior Licenses and the Navy’s Decision to Compete the Lease

        The disputed Lease property is controlled by the Navy and located in the Old Town 3
Building (“OT3”) of Navy Base Point Loma. Prior to 1993, this building had been under the
custody of the United States Air Force, and Lockheed Martin’s predecessor, Martin Marietta
Technologies (“Martin”), occupied 400,000 square feet “in connection with development of the
Atlas/Centaur launch vehicles.” AR 163, 2765. In July 1993, the Navy’s Base Realignment and
Closure Commission recommended that the Navy begin using OT3 space as the “receiving
location of the Naval Electronic Systems Engineering Center.” AR 2765.

       To facilitate both the Navy’s and the Air Force’s needs, the Navy entered into its first lease
agreement with Martin in 1994, to permit Martin’s continued work on the Air Force’s launch
vehicles through United Launch Alliance (“ULA”). AR 163, 2765-66. This lease continued
through September 2005. AR 10, 165. In April 2005, the Navy sought approval for a second long-
term lease to ULA, as ULA was continuing its work on the Air Force’s Atlas/Centaur launch
vehicles. AR 2775-76. The Under Secretary of the Navy approved a second five-year lease to
ULA. AR 10, 165, 2766.

       ULA entered into another five-year lease with the Navy starting on November 1, 2010. AR
10. ULA assigned the lease to Lockheed Martin in January 2012, and Lockheed downsized the
Lease premises from 400,000 to the approximately 100,000 square feet at issue. AR 10, 165-66.

2
       An “out-grant” lease is an instrument by which the Federal Government leases
Government-owned real property to a nongovernment party. The Lease at issue covered
approximately 100,000 square feet.
3
        These findings of fact are derived from the Administrative Record (“AR”). The Court has
not corrected grammatical errors in quotations from the AR and the filings. Additional findings
of fact are in the Discussion.

                                                 2
Lockheed’s lease was subsequently extended in three-month increments through April 30, 2013,
via contract amendments. AR 165, 2768, 2825.4

         In 2013, prior to the end of Lockheed’s second lease extension, the Navy conducted a
“command inquiry” of the real estate department which uncovered “issues . . . regarding the OT3
lease.” AR 2480-81. While the results of this inquiry are not in the record, David Bixler, the
Contracting Officer overseeing the instant Lease competition, testified that the Navy determined
that this Lease had “not been advertised as often as it should have been,” and that the Navy did not
make the results of this inquiry public. AR 2481. Contracting Officer Bixler testified that he “took
over” the real estate department following the inquiry because his predecessor had been asked to
retire early. AR 2478-80.

        Although departments of the military seeking to lease Government-owned property
exceeding $100,000 in fair market value are required to use competitive procedures to select the
lessee, the Secretary of the given military department has discretion to determine whether it is in
the public interest to compete such a lease. See 10 U.S.C. § 2667(h)(2)-(4) (2012) (providing
exceptions to using “competitive procedures” for leasing government-owned property including
“if the Secretary concerned determines that (A) a public interest will be served as a result of the
lease; and (B) the use of competitive procedures for the selection of certain lessees is unobtainable
or not compatible with the public benefit served under subparagraph (A).”).

        Here, Lockheed Martin had been awarded its prior leases without competition based on its
work for the Air Force on “Production and Research and Development of Atlas, Centaur launch
vehicles and related components.” AR 2779. However, Contracting Officer Bixler testified that,
in his view, the Lease premises in OT3 “should have always been competed” and that following
the command inquiry, the real estate department was “changing . . . how [it was] doing licenses
and leases.” AR 2482, 2498.

        Where the Government chooses to competitively lease its property and annual rental value
exceeds $750,000, the Secretary of that military department must submit a report to the
Committees on Armed Services of the Senate and the House of Representatives. 10 U.S.C. §
2662(a)(1)(C), (b) (2013). On January 31, 2014, the Navy submitted its report to Congress on its
proposal to competitively lease up to 100,000 square feet of underutilized space at Naval Base
Point Loma. AR 2887-95. Following submission of the Congressional Report, Contracting
Officer Bixler asked his most experienced senior realty specialist, Jennifer Arbesu, to put together
the Request for Proposals (“RFP”) and conduct the advertisement. AR 2086, 2484-85. Ms. Arbesu
drafted the Lease in its entirety. AR 2107. Contracting Officer Bixler reviewed the RFP and Lease
prior to advertisement. AR 2495.

       As the Navy undertook efforts to compete the Lease, it entered into two one-year licenses
with Lockheed Martin, permitting Lockheed to occupy and use the Lease premises before and
while the Lease competition was conducted. The first license was in effect from May 1, 2013,
through April 30, 2014, and the second, from May 1, 2014, through April 30, 2015. AR 2826,

4
       This lease was to continue until October 31, 2015. The record does not reflect why this
lease was terminated on April 30, 2013. AR 10.

                                                 3
3031. This second license to Lockheed Martin - - set to terminate on April 30, 2015 - - overlapped
with the competing of the new Lease, as the RFP specified a Lease start date of January 1, 2015.
Compare AR 3031 with AR 219. However, the Lockheed Martin license was revocable at will by
the Navy subject to the following 180-day notice requirement:

       The LICENSEE shall have one hundred eighty (180) days to vacate the Licensed
       Property from the date LICENSOR provides LICENSEE with written notice to
       terminate during which time LICENSEE can continue to operate on the Licensed
       Property.

AR 843.

The Request for Proposals

       On May 13, 2014, the Navy issued RFP No. N6247314RP007 for an out-grant lease of a
portion of the southern side of the OT3 building on the Naval Base Point Loma. AR 215 (“RFP”
or “Solicitation”). The award process was to be conducted in accordance with 10 U.S.C. § 2667
which mandated “competitive procedures.” AR 220. Award was to be made on a technically-
acceptable highest price basis. Id.

        The Lease premises consisted of 99,531 square feet - - approximately 89,307 square feet
of ground level space and 10,224 square feet of second level space along with 34 parking spaces.
AR 219, 572. Use of the Lease premises was to be “restricted to light industrial and/or dry
laboratory with associated administrative space and for no other purpose.” AR 219, 572. The RFP
defined “dry laboratory” work to include computer modeling, testing and training that could
require accurate temperature and humidity control, dust control, and clean power. AR 219. Use
for administrative space was limited to 20% of the total square footage. AR 220. The initial term
of the lease was five years, from January 1, 2015 – December 31, 2019, with a possible extension
for one additional five-year term. AR 219.

      Offerors were to submit proposals by June 12, 2014, at 3:00 p.m. Pacific Daylight Time.
AR 215. The RFP contemplated that award would be made within 90 days:

       All offers received shall be deemed valid continuing offers from the date and time
       of receipt of offers until award by the Government, provided such award takes place
       within ninety (90) days of the Offer Due Date.

AR 221. As such, the RFP anticipated that an award would be made by September 9, 2014. Id.

       In case of cancellation, the RFP contained a “No Obligation” clause stating:

       While the Government intends to enter into an agreement with an Offeror selected
       through this RFP process, it is under no obligation to do so. The Government
       reserves the right to cancel this RFP, or to reject any and all submissions prepared
       in response hereto. The Government is not responsible for any costs incurred in
       order to participate in this RFP process, including any “bid and proposal” costs.
       The Lease will not obligate any appropriated funds.

                                                4
AR 226.

       Offers were to be evaluated according to three factors - - Past Performance, Use of
Property, and Rent Price. AR 224. Past performance was to be ranked on an acceptable,
unacceptable, or neutral basis. Id. Use of property was to be ranked on an acceptable or
unacceptable basis. AR 224-25. Rent price proposals were to be:

       evaluated to determine the reasonableness of the Offeror’s proposed annual rent
       price offer of the Leased Premises; however, only offers that are equal to or greater
       than the Fair Market Value, as discussed in 5.9 below,[5] will be considered. A
       proposal that fails to offer an annual rent price that is equal to or greater than the
       Fair Market Value will be evaluated as unacceptable.

AR 225.

Performance Bond and Rent-Splitting Terms in the Lease

       The RFP included a copy of the Lease to be executed between the Navy and the awardee.
AR 229-312. Paragraphs 4.1 through 4.1.2 of the Lease required offerors to submit a performance
bond and security deposit of $750,000:

       4.1. To secure the faithful performance of its rent and other obligations, hereunder,
       LESSEE shall provide the Government with a security deposit in the fixed amount
       of $750,000. If the Government shall at any time determine that the increase in the
       amount of security is necessary to make same commensurate with LESSEE’s
       obligations hereunder, LESSEE shall furnish such additional security promptly
       upon request. The Security Deposit provided shall be in the form of either:

       4.1.1 Performance Bond issued by a Corporate Surety and satisfactory to the
       Government in all respects.

       4.1.2 Standby Letter of Credit renewable annually in a form satisfactory to the
       Government in all respects.

AR 237.
5
       The reference to 5.9 appears to be a typographical error as section 5.9 of the RFP discusses
the RAPIDGate program used to facilitate access by non-military personnel to Naval Base Point
Loma. AR 225, 227. The RFP stated in section 5.10 that the appraisal would meet “Federal
Appraisal Standards.” AR 227.

       On August 28, 2013 - - eight months before the RFP was issued - - the Lease premises
were appraised at $720,000 to $780,000, based on a pricing range of 60 to 65 cents per square foot.
AR 85. This appraisal was not shared with offerors. The RFP stated that the appraisal was for the
sole use of the Government and was not available to prospective offerors. AR 227. Although
Lockheed Martin knew the rental rates it was paying for the property, there is no evidence that the
Government provided Lockheed with the appraisal reports.

                                                 5
       Section 6 of the Lease provided for subleasing, subject to the prior written consent of the
Government. AR 239. The Lease permitted the Government to recapture 50 percent of the
sublease rental profits to the extent that the sublease rental exceeded the Lease rental:

       6.4 In the event that LESSEE requests to sublease, license, or grant an interest in
       the Lease, and the Government approves such an action, if the contract rent/value
       for the sublease, license, or other grant of interest is greater than the contract rent
       value of the lease, then the Government shall be entitled to recapture fifty percent
       (50%) of the difference in rent/value and this fifty percent (50%) difference shall
       be additional Rent under the terms of this Lease.

Id.

Environmental Condition of the OT3 Building

       In an attachment to the RFP, the Navy included an Environmental Condition of Property
Report (“ECP”) that was completed in September 2013, and a February 3, 2014 Memorandum
updating the ECP. AR 268-69, 278-332. Allison J. Cantu, the Remedial Project Manager for the
Navy’s Facilities Engineering Command Southwest prepared both reports. AR 269, 309. The
ECP stated that trichloroethene (“TCE”), a volatile organic compound (“VOC”), had migrated into
the OT3 building - - a process called vapor intrusion - - and that the indoor air of OT3 had been
sampled for VOCs on several occasions. AR 295. TCE is a known “carcinogen and a reproductive
hazard,” capable of causing dizziness, intoxication, weakness, loss of feeling or coordination,
vomiting, unconsciousness, abnormal heart rhythms, cancer, damage to the kidneys and liver,
damage to the immune, nervous, and reproductive systems, and fetal cardiac malformations. AR
308, 852.

       The RFP provided:

       5.7 ENVIRONMENTAL CONDITION OF PROPERTY
       The Navy has prepared an Environmental Condition of Property Report,
       “Environmental Condition of Property (“ECP”) for Building OT3 Competitive
       Lease Space and Naval Warfare Systems Command (“SPAWAR”), Old Town
       Campus (“OTC”), Naval Base Point Loma, San Diego, California,” dated
       September 2013, and Memorandum for the Record (“Memorandum”) update to the
       ECP dated 3 February 2014. The ECP and Memorandum set forth the existing
       environmental conditions of the Leased Premises as represented by a survey
       conducted by Government and sets forth the basis for the Government’s
       determination that the Leased Premises are suitable for leasing. With this notice,
       Offerors are made aware of the notifications contained in the ECP and the
       Memorandum. The ECP and Memorandum, included as Attachment “C” of the
       Lease, may be updated by the Navy prior to Lease execution. Lessee shall be
       required to comply with all restrictions identified in the ECP, as well as those in
       Paragraphs 8.1 through 8.2.3 of the Lease.

                                                 6
AR 226 (italics in original). The referenced ECP only pertained to the OT3 building and identified
the primary area of concern to be on the north side of the OT3 building - - not the south side where
the Lease premises are located. AR 295, 321. The source of the vapor intrusion was “the release
of metal cleaning solvent related to historical aircraft fabrication activities” that “created a plume
that has impacted soil gas and groundwater” in the area of the OT3 building. AR 295.

        Like the RFP, Paragraphs 8.1 through 8.2.3 of the Lease outlined various environmental
conditions of the OT3 building - - such as lead-based paint issues. AR 240-41. Relevant to the
instant protest is Subsection 8.2 on “Vapor Intrusion” involving VOCs, specifically TCE,
potentially contaminating the air of the OT3 building. AR 241.

       Section 8.2.2 of the Lease provided:

       8.2.2. The LESSEE is on notice that test results of the building’s indoor air have
       revealed low concentrations of VOC contaminants, including trichloroethene
       (“TCE”) in the indoor air. This is detailed in this ECP report, as are risk calculations
       based on United States Environmental Protection Agency (“EPA”) guidance.
       These calculations show a cancer and non-cancer health risk for commercial and
       industrial workers in the range that the LESSEE is required to manage.
       Management measures include, but are not limited to, measures to enhance
       ventilation of indoor air to reduce contaminant concentrations. LESSEE also is
       required to monitor air contaminant concentrations over time to ensure that
       contaminant concentrations are kept below EPA and [Occupational Safety and
       Health Administration] guidelines. This would necessitate the use of sampling
       protocols with the ability to detect chemicals at the lower EPA levels. The
       monitoring program should include contingency measures to be taken if VOCs
       exceed certain concentrations.

AR 241.

       The Lease also contained a provision which required the Lessee to comply with all
applicable environmental laws:

       14.1 Compliance with Law. LESSEE and its officers, employees, agents,
       contractors, subcontractors, and SubLessees shall comply at its sole cost and
       expense, with the Federal, state, and local laws, regulations, and standards that are
       or may become applicable to LESSEE’s activities on the Leased Premises. The
       intent of this paragraph 14 is to allocate responsibility for compliance with and cost
       of any kind of authority that could apply to the Government or the LESSEE as a
       result of LESSEE’s use and occupancy of the premises to the LESSEE. That
       responsibility is entirely allocated to the LESSEE. The Government is not
       responsible for costs arising from LESSEE’s use and occupancy of the premises.

AR 243.

                                                  7
AR 325.

          9
           Massachusetts             2                  Not stated            Women of
                                                                             child-bearing
                                                                                  age
                                    20                  Not stated          “All receptors”
           EPA [Regional            2.1                 See below             Residential
          Screeing Levels]          8.8                 See below            Occupational

AR 332.

       To mitigate TCE contamination, the ECP restricted use of the Lease premises and required
the Lessee to engage in management measures as follows:

       1. The subfloor utility vault area of the building is not part of the lease. It is not
          to be entered due to potentially hazardous concentrations of VOCs in the air
          within the vault areas.

       2. The lessee is on notice that test results of the building’s indoor air have revealed
          low concentrations of VOC contaminants, including TCE in the indoor air. This
          is detailed in this ECP report, as are risk calculations based on US EPA
          guidance. These calculations show a cancer and non-cancer health risk for
          commercial and industrial workers in the range that the lessee is required to
          manage. Management measures include, but are not limited, to measures to
          enhance ventilation of indoor air to reduce contaminant concentrations. Lessee
          also is required to monitor air contaminant concentrations over time to ensure
          that contaminant concentrations are kept below EPA and OSHA guidelines.
          This would necessitate the use of sampling protocols with the ability to detect
          chemicals at the lower EPA levels. The monitoring program should include
          contingency measures to be taken if VOCs exceed certain concentrations.

      3. The lease does not authorize use or placement of storage units or other
         temporary structures on the parking lot due to unknown potential of vapor
         intrusion into these structures.
AR 301.

        The February 3, 2014 Memorandum for the Record updating the environmental condition
of the OT3 building, attached to the RFP, stated:

       This memorandum is an update to reference [the ECP report] that was completed
       in September 2013 for the area to be leased. Enclosure (1) is an update to [the TCE
       Regulatory Alert] of [the ECP]. The TCE Provisional Short Term Actions Levels
       fact sheet within [the TCE Regulatory Alert] provided examples of short-term
       action levels for trichloroethene (TCE) across the country. Enclosure (1) contains
       a more recent example from Environmental Protection Agency (EPA) Region 9,
       which is the region that includes California. Enclosure (1) is a letter from EPA
       Region 9 that recommends TCE Indoor Air Short-Term Response Action Levels
       be set at 7 micrograms per cubic meter (µg/m3) for 10-hour work days and 9 µg/m3

                                                 11
       for 8-hour work days for commercial/industrial workers. As illustrated in Table 4
       of [the ECP], indoor air concentrations of TCE within building OT3, and its annex,
       ranged from 0.39 to 9.9 µg/m3. However, TCE concentrations within the southern
       end of building OT3, including the area to be leased, ranged from 0.39 to 1.4 µg/m3
       and are below the proposed Short-Term Response Action Levels for
       commercial/industrial workers with 8- or 10-hour workdays, contained in enclosure
       (1).

       Based upon these findings . . . it has been determined that no further action must be
       taken to document the environmental condition of the property or its suitability for
       the Navy to lease the property to an outside entity. This does not change the
       conclusions or Land Use Restrictions and Controls in the Final ECP.

AR 268-69 (emphasis added).

        The referenced “Enclosure (1)” contained the December 3, 2013 “EPA Region 9
Guidelines and Supplemental Information Needed for Vapor Intrusion Evaluations” for sites in the
San Francisco Bay Area. These guidelines included TCE Short-Term response action levels of 2
µg/m3 for residential, 9 µg/m3 for commercial/industrial for an eight-hour workday and 7 µg/m3
for a 10-hour work day. AR 270-73.

Industry Forum and Questions

        On May 22, 2014, the Navy held an industry forum for potential offerors. AR 215, 353.
During the forum, the Navy informed the offerors that it did not make its appraisal reports publicly
available. AR 360. The Navy then held a question and answer session. The AR includes Ms.
Lacey Barnhill’s8 handwritten notes reflecting this session. AR 379-82. Ms. Barnhill’s notes show
the following exchange:

       What is going on in Section 3 of the Lease Assignment & Subleasing?
       - If Lessee chooses to do sublease & Gov’t agrees – Gov’t collects 50% of sublease
       amount.

       This clause hurts small businesses. Is there any way to change that?
       - Has not seen in any other Gov’t contract. Why is this clause in there?
       - Where did it come from?
               - It is required under this lease
       - Proposer will submit question.

AR 382.

       On May 29, 2014, the Navy responded to 13 questions that Open Spirit submitted following
the industry forum. AR 564-67. The first three questions involved the availability of the
Government’s appraisal of the OT3 building space. AR 564. The Government replied to Open

8
       The AR does not provide Ms. Barnhill’s job title or role in this Lease competition.

                                                12
Spirit that it had not provided the incumbent access to appraisals and that “[t]he appraisal for the
fair market rental value was . . . not releasable” as “the Navy is prohibited from releasing the
appraisal or the contents therein” pursuant to the Navy’s Real Estate Procedure Manual. Id.

       Open Spirit asked the following question about the 50 percent rent-splitting term:

       The lease contains provisions for recapture of 50% in excess of contract value paid
       by LESSOR approved subtenants. The Government representative indicated that
       paragraph 6.4 [of the Lease] was required in the lease and could not be altered. Is
       there a law that requires this term to be included in a lease for a property that is
       approximately 100,000 square feet? Please provide reference to the appropriate
       law, regulation, or other authority that supports the need to have this provision in
       the lease.

AR 565. The Navy responded:

       No law requires this lease provision. The Navy determined this is a reasonable
       requirement for this lease, which was reviewed and approved by Navy higher level
       authority. This is a typical provision that is included in Navy leases with various
       types and sizes of tenants.

AR 566.

      With respect to the performance and security bond requirement in paragraph 4 of the Lease,
Open Spirit asked:

       The paragraph referenced above [Section 2.4 (a) 2] asks for “Evidence” of the
       Security as required under clause 4 of the lease. Bidder needs clarification of the
       term “Evidence.” Since there is no awarded contract there is no way to receive a
       letter of credit or a surety bond without first depositing $750,000 with an institution.
       This is economically unreasonable since only one bidder will be awarded the
       contract. Bidder has investors that will deposit $750,000, upon contract award, in
       a financial institution to form the surety collateral necessary to obtain a stand-by
       letter of credit. Does a certification letter from the bidder (with the above statement
       regarding investor deposit) similar to the affirmation contained in NAVFAC SW
       RES FORM #0100 – AFFIRMATIVE STATEMENTS[9] constitute sufficient
       evidence to satisfy the requirements of the RFP? If not, what does constitute
       sufficient “Evidence” of security?

AR 567 (alterations in original). The Navy responded: “Yes,” without elaboration. Id.

9
        NAVFAC SW RES FORM #0100 was attached to the Lease and required an offeror to
affirm that it “shall, post-award, diligently pursue all necessary actions and be solely responsible
for payment of any and all associated costs” and that the offeror understood and accepted “all of
the terms and conditions of the lease and its Exhibits.” AR 393.

                                                 13
Proposal Submissions

       Open Spirit’s Proposal

       On June 11, 2014, Open Sprit submitted its proposal to Navy Realty Specialist Jennifer
Arbesu. AR 392. In its proposal, Open Spirit affirmed that it had “read, underst[ood], and
accept[ed] all of the terms and conditions of the Lease and its Exhibits.” AR 393.

       For the $750,000 performance bond, Open Spirit submitted a notarized letter from Surety
Associates of Southern California, the entity that provided the bond. AR 394-95. Open Spirit did
not report any past performance. Open Spirit detailed how it would use the Lease premises and
proposed to dedicate [***] to Light Industrial Use, [***] to Dry Laboratory Use, and [***] to
Administrative Space. AR 399-407.

       Open Spirit proposed its rental rates for the five-year term:

          FIRM TERM – 5 YEARS                     RENTAL RATE PER YEAR
          Year 1 – January 1, 2015 through                  [***]
          December 31, 2015
          Year 2 – January 1, 2016 through                             [***]
          December 31, 2016
          Year 3 – January 1, 2017 through                             [***]
          December 31, 2017
          Year 4 – January 1, 2018 through                             [***]
          December 31, 2018
          Year 5 – January 1, 2019 through                             [***]
          December 31, 2019

AR 411.

       Lockheed Martin’s Bid

        The incumbent, Lockheed Martin, originally submitted its bid at 3:55 p.m. on June 11,
2014, but submitted another bid on June 12, 2014, at 12:59 p.m. AR 412, 487. Realty Specialist
Jennifer Arbesu testified that she “never opened any bid on June 11” and that she “put [the bids]
in the safe.” AR 2223. Between June 11, 2014, at 3:55 p.m., and June 12, 2014, at 12:59 p.m.,
Ms. Arbesu apparently called Lockheed Martin or its representatives three times.10 AR 2888-89.
First, on June 12, 2014, at 6:38 a.m. for a conversation that lasted one minute and 42 seconds,
second, on June 12, 2014, at 12:14 p.m. for a conversation of 42 seconds, and third on June 12,
2014 at 12:43 p.m. Id. Ms. Arbesu testified that the first call involved responding to a voicemail

10
       Based on Plaintiff’s allegation that the Navy had improper ex parte communications with
Lockheed Martin, the Court granted Plaintiff’s request for the production of Ms. Arbesu’s
telephone call log for June 11 and 12, 2014. The Court permitted Plaintiff to depose Ms. Arbesu
on “any communications with Lockheed after bids had been submitted regarding the solicitation.”
Tr. 46-47 (June 4, 2015).

                                                14
left by a Lockheed Martin representative telling Lockheed that she had “received a message from
them.” AR 2224, 2227. Ms. Arbesu testified that she had no “specific recollection” of the second
call but that at some point she “received a call from someone from Lockheed Martin stating that
they were going to drop off a second offer.” AR 2227-28. The third call occurred 16 minutes
before Lockheed submitted its second bid, and Plaintiff did not question Ms. Arbesu about this
call. Id.; AR 412, 2888-89.

       With its second proposal, Lockheed Martin submitted a cover letter dated June 12, 2014,
signed by its Contract Administrator, May Kemp, withdrawing its first submission:

       Lockheed Martin hereby withdraws referenced proposal [for RFP
       N6247314RP0007] which was submitted on 11 June 2014, with the exception of
       the contents of the white envelope labeled “Past Performance.” The white envelope
       contains 2 sealed envelopes which contain Past Performance Surveys provided in
       support of Lockheed Martin.

       The withdrawn proposal is replaced by the proposal submitted today, 12 June 2014,
       in 2 white envelopes—one labeled “Package 1,” containing the Original + 3 copies
       of the Technical Proposal and the second labeled “Package 2,” containing the
       Original + 3 copies of the Rent Price Proposal. The above referenced Past
       Performance envelope goes with Package 1 and Package 2 envelopes.

AR 486.1.

       In its offer, Lockheed Martin attached a copy of the Lease with some terms stricken through
and several new terms added. See AR 442-83. Lockheed Martin included a cover letter to its
proposal that stated:

       [T]he enclosed Technical proposal also includes a “Track Changes” copy of the
       Model Lease Agreement (first 42 pages, excluding drawings, tables, charts, etc., as
       no direct changes were made on those pages). The “Track Changes” copy provides
       insight into Lockheed Martin’s understanding of the requirements and plans for
       performing in accordance with subsequent lease, as well as include information
       and/or propose terms suited to this offer. The “Track Changes” document also
       addresses clarifications that may have arisen as a result of the interpretation of
       Statement 3 of NAVFAC SW RES Form #0100 – Affirmative Statements.

AR 417. Affirmative Statement 3 of NAVFAC SW RES Form #0100 required the offeror to state
that it “has read, understands, and accepts all of the terms and conditions of the Lease and its
Exhibits . . . .” AR 419. Lockheed Martin made this Affirmative Statement 3 and submitted a
performance and security bond. AR 419, 485-86.

       Lockheed Martin proposed to use [***] of the Lease premises for Light Industrial, [***]
for Dry Laboratory, and [***] for Administrative purposes. AR 422-26. Lockheed Martin
submitted the following rental rates which were lower than Open Spirit’s:

                                               15
          FIRM TERM – 5 YEARS                      RENTAL RATE PER YEAR
          Year 1 – January 1, 2015 through                   [***]
          December 31, 2015
          Year 2 – January 1, 2016 through                          [***]
          December 31, 2016
          Year 3 – January 1, 2017 through                          [***]
          December 31, 2017
          Year 4 – January 1, 2018 through                          [***]
          December 31, 2018
          Year 5 – January 1, 2019 through                          [***]
          December 31, 2019

AR 563.

The Source Selection Evaluation Board’s Draft Technical Evaluation

        The Source Selection Evaluation Board (“SSEB”) conducted its technical evaluation of
proposals from June 17 through June 19, 2014. AR 2248. There were three members on the SSEB
- - Senior Realty Specialist Arbesu, Community Planner Muska Laiq, and Realty Specialist Leslie
Geary. AR 2903. The SSEB found both proposals to be acceptable but noted weaknesses in both.
AR 2905, 2907, 2909.

        For Open Spirit, the SSEB determined that its proposed use of space was a weakness
because Open Spirit designated certain space to be used for “contract and sub-contract
performan[c]e to integrate info[rm]ation technologies into racks . . . ,” but Open Spirit did “not
affirmatively state what the proposed use in this space will be.” The SSEB did not believe that
this rose to the level of a deficiency. AR 2907.

        For Lockheed Martin, the SSEB was concerned with the added terms and stricken-through
terms to the Lease, stating:

           Offeror submitted the Government approved lease with “track changes” with
            its proposal. The cover letter submitted with the proposal stated that the track
            changes provided “insight into Offeror’s understanding of the requirements and
            plans for performing in accordance with subsequent lease and included
            information on proposed terms suited this offer.”

           The above submission was interpreted by the board as an ambiguity in whether
            or not the Offeror would comply with the requirements of the RFP. This
            ambiguity resulted in a weakness of the Offeror’s proposal.

AR 2909.

       The SSEB recommended award to Open Spirit, stating:

                                                16
       SSEB recommends accepting Offer I from Open Spirit LLC as this represents the
       offer that [***] and is technically acceptable.

AR 2905 (redaction in original). It is not clear from the record when this draft technical evaluation
was prepared, but it is the product of Ms. Arbesu’s notes memorializing “the consensus that was
reached by the three members” of the SSEB during the June 17-19, 2014 meetings. AR 2257,
2266. This SSEB recommendation was never finalized and was not signed by the three SSEB
members. AR 2903. Ms. Arbesu testified, however, that she “would have been surprised” if any
of the three members of the SSEB would not have recommended award to Open Spirit. AR 2266.

        Following the June 2014 meetings, the SSEB submitted questions to the Navy’s legal
department to ensure that bids from both Open Spirit and Lockheed Martin were responsive to the
RFP. AR 2901-02. Ms. Arbesu testified that the attorney assigned to this Lease competition
generally took “a long time” to respond to questions and that he “took a significant amount of time
on this case.” AR 2297-98. She further testified that she followed up with counsel multiple times
and by September 2, 2014, Navy counsel verbally informed Ms. Arbesu that both bids were
responsive to the RFP and could be considered for award. AR 2248-50, 2295-96, 2302-03.

July 9, 2014 Change in EPA Guidelines

       Meanwhile, on July 9, 2014, EPA issued a memorandum to its Region 9 Superfund
Division Staff and Management setting forth new TCE level recommendations for the entirety of
Region 9 - - the region where the Lease premises were located. AR 863. For an 8-hour work day,
the EPA Region 9 guidelines were tightened significantly, lowering the cap from 15 µg/m3 to 8
µg/m3. Compare AR 179, 210 with AR 865. The memorandum provided the following:

 EPA Region 9 Interim TCE Indoor
 Exposure Scenario               Accelerated Response Action                 Urgent Response
                                   ([Hazard Quotient]=1)                   Action Level ([HQ=3)4
 Residential *                             2 µg/m3                                6 µg/m3

 Commercial/Industrial **                           8 µg/m3                    24 µg/m3
  (8-hour workday)
 Commercial/Industrial **                           7 µg/m3                    21 µg/m3
  (10-hour workday)
 * The residential HQ=1 accelerated response action level is equivalent to the inhalation
 reference concentration (RfC) since exposure is assumed to occur continuously.
 ** The Commercial/Industrial accelerated response action levels are calculated as the time-
 weighted average from the RfC, based on the length of a workday and rounding to one
 significant digit (e.g., for an 8-hour workday: Accelerated Response Action Level = (168 hours
 per week/40 hours per week) x 2 µg/m3 = 8 µg/m3). Time-weighted adjustments can be made
 as needed for workplaces with longer work schedules.
 Note: Indoor air TCE exposures corresponding to these accelerated response action levels would
 pose cancer risks near the lower end of the Superfund target cancer risk range, considering the
 IRIS toxicity assessment; thus, the health protective risk range for both accelerated response

                                                 17
 action and long-term exposures becomes truncated to: 0.5 – 2 µg/m3 for residential exposures
 and 3-8 µg/m3 for 8-hour/day commercial/industrial exposures.

AR 865.

        In late August 2014, in view of the EPA’s July 9, 2014 guidelines, the California
Department of Toxic Substance Control (“DTSC”) issued additional TCE recommendations. AR
590. Relevant here, the California DTSC provided testing procedure recommendations to
ascertain when groundwater causes TCE air contamination:

       For sites with TCE contamination of groundwater or soil deemed to be of concern
       due to potential migration into indoor air, [California’s Human Health Risk Office]
       recommends at least two indoor air samples in both warm and cool season
       regardless of the concentration detected in the first sample. If the first sample
       detects a relatively elevated concentration a second sample should be obtained more
       quickly than delaying for a seasonal change to occur. [California’s Human Health
       Risk Office] would consider a sample result between 0.48 ug/m3 and 2.0 ug/m3
       relatively elevated . . . . [California’s Human Health Risk Office] recommends that
       a second indoor air sample be taken immediately where the first sample
       concentration is at or above 2.0 ug/m3 for a residential exposure scenario and above
       8 ug/m3 for a commercial/industrial scenario, as a reasonable precaution.

AR 590-91 (quotation marks omitted).

        As a result of these changing environmental guidelines by the EPA and California DTSC,
in August 2014, the Navy began testing the air for TCE in certain areas of the OT3 building, but
not the Lease premises. AR 860. This testing took place in the same locations as the sampling
done in 2011, as depicted in the chart above, in order to compare the changes in TCE
concentrations to prior sampling. Id. As of this time, the Navy had not made a decision on the
Lease award because the SSEB was still awaiting answers from counsel on the technical
acceptability of both Open Spirit’s and Lockheed Martin’s proposals. Therefore, no technical
evaluation had been provided to the Contracting Officer for review. AR 2249, 2519-20.
        The Navy’s Product Line Coordinator for Environmental Restoration, Derral Van
Winkle,11 told the real estate team about the new EPA guidelines on September 8, 2014, and
explained the TCE testing and its effect on the Lease in an October 23, 2014 declaration:

       As a result of the July 2014 EPA Region 9 revised guidelines, the Navy proactively
       conducted additional sampling of indoor air quality in August 2014 – in the same
       locations as the sampling done in connection with the 2011 Remedial Investigation.
       One such sample at the north end of OT3 read at 12 µg/m3. However, the previous

11
        At the time of the RFP’s cancellation, Mr. Van Winkle had been employed by the Navy
for five years. He previously spent 25 years working for environmental consulting companies
conducting environmental restoration work for the Navy, other federal organizations, and private
companies. AR 859.

                                               18
       reading at the southern end of OT3 of 9.9 µg/m3 decreased to 7.2 µg/m3. Additional
       sampling is anticipated for certain office spaces within OT3. The results of the
       additional sampling are anticipated to be available in early November 2014. At this
       time the Navy is unable to quantify the representative risk.

                                        *       *       *

       On September 8 and 9, 2014, I discussed with Jennifer Arbesu, Senior Realty
       Specialist . . . the recent changes to the United States Environmental Protection
       Agency (“EPA”) Region 9 guidelines related to trichloroethylene (“TCE”)
       exposure and potential health risk to users of buildings, such as OT3, including the
       proposed lease space, and I recommended that additional land use restrictions be
       included in the lease, in response to EPA’s more stringent guidelines. Specifically,
       I recommended prohibiting the prospective lessee from bringing onto the leased
       premises or using pure TCE or any mixtures that include TCE, and chlorinated
       compounds or mixtures that include chlorinated compounds. I also advised that
       until more data is collected and evaluated, the lease may need to be revised to
       require the lessee to change the HVAC system or take other measures to improve
       ventilation.

AR 859-62.

       Mr. Van Winkle’s contemporaneous emails sent to Ms. Kathryn Stewart12 and Ms. Arbesu
on September 8 and 9, 2014, corroborate his October 23, 2014 declaration. AR 610-11, 616. In
his September 8, 2014 email to Ms. Stewart sent at 6:19 p.m., Mr. Van Winkle stated:

       Angie Lind[13] and I briefed [the Navy’s Space and Naval Warfare Systems
       Command] (“SPAWAR”) facilities personnel and SPAWAR 5.0 personnel[14] this
       afternoon regarding the environmental restoration indoor air sampling at SPAWAR
       Old Town Campus Building 3. The meeting did not go well.

                                        *       *       *

       Today as Angie and I briefed the [SPAWAR] 5.0 personnel, it was the first th[at]
       they were hearing of a TCE issue with indoor air. As part of the SPAWAR
       Operations investigation into the issues within the 5.0 work space facilities last
       year, I was asked to provide a brief to Ms. [Kimberly] Kesler [in Corporate
       Operations] and staff regarding the [Remedial Investigation] site 10/11

12
       Ms. Stewart’s role in the Navy is not clear from the record.
13
       Angie Lind is a member of the Navy’s Environmental Group.
14
       SPAWAR 5.0 is the Navy component occupying space in the OT3 building.

                                               19
       investigations and findings, which I did in September 2013. EPA/DTSC guidance
       and proposed approach to indoor air has been revised significantly since that time.

       SPAWAR 5.0 personnel have requested immediate medical testing to determine
       whether they have TCE in their bodies.

                                         *      *       *

       SPAWAR 5.0 personnel pointed out that they had a pregnant woman in the affected
       office space and were going to move her out immediately. They indicated that
       historically at least one other pregnant employee may have had symptoms that
       would be consistent with EPA’s recent findings regarding health effects to an
       unborn fetus. There was some debate between 5.0 staff regarding whether the
       employee had actually been in the SPAWAR office space while pregnant.

       Actions for follow up are as follows:

   1) Restoration will provide indoor air sampling inside SPAWAR 5.0 offices as soon
      as possible. Any restoration sampling will look at turning around results as quickly
      as possible. SPAWAR Operations has also conducted recent sampling . . . and is
      going to investigate getting results as soon as possible.
   2) SPAWAR Operations will follow up with medical testing requests and coordinate
      such tests.
   3) SPAWAR Operations will provide restoration personnel maps of 5.0 indoor spaces
      and office construction to assist with sampling planning.
   4) SPAWAR Operations will work pro-actively with restoration staff to review
      HVAC system issues, and office construction to define [if] mitigation measure can
      be enacted.
   5) Restoration will provide a copy of the Draft [Record of Decision] to Rear Admiral
      Rodman.
AR 610-11.
       At 9:15 a.m., on September 9, 2014 - - the date offers were set to expire - - Mr. Van Winkle
wrote to Ms. Arbesu suggesting changes to the Lease terms:

       Below please find some language for the lease regarding use of TCE or frankly
       other chlorinated solvents. I am providing two distinct sections – one specific to
       TCE and one more broad to include use of any chlorinated solvent/compound. I
       think the preference would be to use the broader definition since all chlorinated
       compounds have some toxicity, with TCE being one of the most pertinent and
       sensitive at this time.

       The SPAWAR Old Town Campus has mixed use including industrial and office
       space within the building. The tenant shall not bring on to the premises or use pure
       TCE or any mixtures that include TCE within the building as this compound
       presents a potential risk to other building inhabitants. The tenant will provide, and

                                                20
       the Navy will inspect, a list of chemicals to be utilized within the leased space 7
       days prior to bringing the chemicals within the facility.

       The SPAWAR Old Town Campus has mixed use including industrial and office
       space in the building. The tenant shall not bring on to the premises or use pure
       chlorinated compounds or any mixtures that include chlorinated compounds within
       the building as these chemicals present a potential risk to other building inhabitants.
       The tenant will provide, and the Navy will inspect, a list of chemicals to be utilized
       within the leased space 7 days prior to bringing the chemicals within the facility.

AR 616.

       In a follow-up to the above email dated September 9, 2014, at 10:29 a.m., and addressed
to Contracting Officer Bixler and Ms. Arbesu, Mr. Van Winkle further stated:

       Recently TCE in indoor air has become a focus of EPA because of one study that
       indicated particular toxicological effects on a very sensitive population (women in
       first trimester of pregnancy). As a result, both the EPA and the [California] DTSC
       have followed up with guidance pertaining to detection of TCE in indoor air, and
       this guidance contains numbers for concentrations that are extremely low. Since
       TCE has been detected in indoor air sampling previously conducted, we are
       recommending that no additional sources should be allowed in the Old Town
       Campus Building 3 which could only exacerbate or increase what has been
       observed.

AR 627.
        The TCE testing in August 2014, in the Navy-occupied spaces showed TCE concentrations
at 12 µg/m3 and 7.3 µg/m3. AR 676. These samples either exceeded or were close to the new cap
established by the July 9, 2014 EPA Region 9 guidelines that limited TCE to 8 µg/m 3 for an 8-
hour work day and 7 µg/m3 for a 10-hour work day. Id. However, the Navy was unable to conduct
TCE testing in the Lease premises in August 2014, because Lockheed Martin lacked the necessary
sensitive equipment, and it was Lockheed’s responsibility to do what testing it wanted in its spaces.
AR 2679, 2682, 2699. Lockheed Martin provided the Navy with some internal testing results
from July and October, 2014. AR 2921; App. to Def.’s Mot. 5 (“DA”). Although the July 2014
testing results were within EPA limits for TCE air concentrations, the October 2014 testing results
- - taken one month following cancellation of the RFP - - showed TCE levels above the EPA limits
in four locations of the Lease premises with readings at 9.6 µg/m3, 8.6 µg/m3, 11 µg/m3, and 9.0
µg/m3. AR 2921; DA 5-8.
September 4, 2014 Evacuation of Personnel from the OT3 Building

       On September 4, 2014, five days before the cancellation decision, the Navy began to move
people out of the OT3 building after a fire main pipe broke causing flooding. AR 625, 627.
Evacuation of personnel continued through September 8, 2014. AR 667, 853. On September 9,
2014 - - the date offers were to expire - - Rear Admiral David Lewis, who worked for the Space
and Naval Warfare Systems Command in the northern end of the OT3 building, wrote an email to

                                                 21
Rear Admiral Patrick Lorge, Commander of Navy Region Southwest, explaining his decision to
evacuate personnel from the building:

       In the course of mitigating the water damage, your environmental folks took
       samples in IRT the existing chemical bloom under that end of the [OT3] building .
       . . for Trichloroethylene, an industrial solvent that was stored in that location for
       several years when that building was a bomber & rocket factory site (1940’s –
       1970’s?). EPA and California standards for that chemical are in the process of
       being changed (tightened), and samples taken last year, which were found to be
       safe, indicate that parts of the building would be borderline under the new
       standards. The new EPA guidelines specifically call out concerns about pregnant
       women being affected in the first trimester. Your team is also concerned that the
       water main break may have excavated contaminated soil and brought it to the
       surface, so your folks are also on tap to test the soil around and within the break
       site.

       I am concerned about returning workers, especially women of child-bearing age,
       into this area of the building.

                                         *      *       *

       Pending your guidance above, I am taking the following actions:

       1. Leaving the first floor offices in the affected end of OT3 vacant.
       2. Move women of child-bearing age to other office spaces in the SPAWAR
       Facility.
       3. Notify employees of your statement of risk and be receptive to employees who
       wish to relocate to other spaces.

AR 624-25.

       In addition to the water damage, individuals in the OT3 building had been complaining
about respiratory ailments since 2013. AR 680, 2683. Tests were performed in 2013, and it was
determined that formaldehyde in the desks, carpeting and other construction materials were
causing symptoms. AR 676. Although these items were replaced and ventilation was improved,
employees continued to experience respiratory symptoms. Id. When the Lease competition was
underway in 2014, the Agency was in the process of ordering additional air quality testing for the
OT3 building to try to determine the source of the employees’ continuing respiratory symptoms.
Id.; AR 861.

The Navy Failed to Give Lockheed Martin 180 Days Notice to Vacate the Lease Premises

       Lockheed Martin’s license to use the Lease premises was in effect from May 2014 through
April 2015, and included the Navy’s option to terminate the license so long as the Navy provided
Lockheed Martin with 180 days notice. AR 3038. However, the Lease start date was set for
January 1, 2015, and as of September 5, 2014, Lockheed Martin still occupied all the space

                                                22
included in the subject Lease. AR 219, 2352. On September 5, 2014, while starting to draft an
award letter to Open Spirit and finalize the SSEB recommendation to Contracting Officer Bixler,
Realty Specialist Jennifer Arbesu noticed that the Navy had failed to provide Lockheed Martin
notice to vacate the Lease premises by the January 1, 2015 Lease start date. AR 2351-52.

      Ms. Arbesu testified that in the course of drafting an award letter to Open Spirit on
September 5, 2014:

       I realized that I had forgotten to write a notice to [Lockheed Martin] . . . . And it
       sort of sent me on another trajectory. And I went to counsel and asked . . . if they
       could provide a legal opinion as to what I could do in terms of I had forgotten to
       provide the notice. Typically, on a license, 180 days is not required. On this
       particular license, it is - - or it was. I had forgotten about it . . . . So then I went to
       counsel. I believe it was late in the day. And they - - I wasn’t going to get an
       answer that day.

                                           *       *        *

       I recall going to counsel’s office and asking what, if anything, can be done. If my
       recollection is correct, my - - the attorney that normally helps me wasn’t available.
       He wasn’t there. So I spoke with another attorney that was familiar with this
       particular project . . . . She said that she would look into it to see if there was
       anything that could be done with regard to the termination of the license prior to
       the 180-day requirement or whether or not we could change the start date of the
       lease . . . .

       Then comes Monday [September 8, 2014]. And I’m unsure, without referring back
       to some of the record, whether it was Monday that we find - - found out about the
       environmental issue at OT3 that was brought to the attention of real estate or
       whether that was on Tuesday morning.

       So with the coming of those two issues, I did not continue to pursue getting the
       SSEB recommendation signed by all the board members because I - - there were
       other things that seemed to be taking priority.

AR 2352-53.

Cancellation Decision

        Contracting Officer Bixler was not informed of the July 9, 2014 EPA revised guidance on
TCE air concentration levels until September 8, 2014 - - the day before the cancellation of the
RFP. AR 629, 636, 2522. Contracting Officer Bixler testified that “somewhere around
[September] 8th . . . the environmental department . . . brought it to the real estate department’s
attention that recent changes in EPA guidelines for volatile organic compounds, particularly . . .
TCE in occupied buildings had just been increased.” AR 2522. The Navy’s environmental point
person, Derral Van Winkle, testified that he first informed the real estate group of the increasing

                                                   23
TCE levels on September 8, 2014. AR 616, 860-62. On the same day, Contracting Officer Bixler
was made aware of the Navy’s evacuation of personnel from the building. AR 636.

        The next day, on September 9, 2014, Contracting Officer Bixler canceled the RFP based
on “changes in Government requirements.” AR 573, 2533-34. Contracting Officer Bixler
believed that the Navy could not “continue with the RFP based on safety” and needed to “straighten
out the [Environmental Condition of Property Report], the lease, the RFP, and understand what
these new EPA guidelines entail[ed].” AR 2529. In a September 10, 2014 email contemporaneous
with his cancellation decision, Contracting Officer Bixler wrote to Captain Darius Banaji, the then-
commanding officer of Naval Facilities Engineering Command Southwest, apprising him of the
cancellation decision:

       We have canceled Request for Proposal (RFP), for the use of [Department of Navy]
       spaces at Old Town 3, due to changed requirements.

       - Changed requirements resulted from last minute information received from the
       Environmental Core team regarding recent changes in EPA guidelines which may
       impact the scope of the management required under the lease; possibly requiring
       additional language changes in the proposed new lease; ECP; and the RFP to restrict
       the use of specific chemicals on the leased premises. This new information was not
       known at the time we issued the RFP, nor prior to the receipt of bids.

       - As the [Real Estate Contracting Officer], and after full consultation with Counsel;
       Env; and the Base [Public Works Officer], I made the decision as the RECO to
       cancel the RFP out of concerns and caution for human health, as well as
       consideration of having no opportunity to receive offeror resubmissions of bids in
       time prior to expiration of the RFP solicitation period.

AR 579; see AR 81.

        Mr. Bixler testified that his decision to cancel the RFP, rather than update it, was based in
part on the lack of time to investigate the environmental condition of the property:

       We had no time at all. We had less than 48 hours to make a decision as to either
       award or bring it back in, find out what these guidelines were going to do to that
       building, get the building up to speed to the point that it could be leased out again,
       and then resubmit - - redo the ECP, redo the RFP, redo the lease, and then send it
       back out for another new RFP.

                                          *      *       *

       Cancellation decision was based upon abundance of caution. I erred on the side of
       judgment. And I did not want to read about this in the morning paper, where the
       government had leased out a facility that was obviously - - had issues with it. And
       if we’re escorting expectant mothers and other sensitive receptors out of the
       building, that was the worst thing you possibly could have ever done.

                                                 24
AR 2533, 2537.

       When asked why the RFP could not simply have been modified to extend time for bids,
Contracting Officer Bixler testified:

       We have gone out before and modified an RFP to - - to extend it, to extend the time
       for bids. But at this point, this was so voluminous and so - - so much was going to
       be involved in getting this building or - - again, we had, - - we had a situation on
       our hands where we had people that didn’t want to work in the building anymore.

       And that’s a public issue that was going to take us - - we didn’t have an idea of how
       much time it was going to take us to get people comfortable to get back in the
       building. It just doesn’t happen overnight.

AR 2542-43.

      When asked about whether he believed that the terms of the Lease sufficiently addressed
TCE to give notice to bidders, Contracting Officer Bixler testified:

       No, sir, not to the sufficiency that I felt was necessary. There was - - in addition
       to that, we had recent experience of - - of occupants in that building that had been
       relocated, the women that were of childbearing age, women that were in their first
       trimester of their pregnancy. Tech leadership had also made it known to their
       employees that even if you are comfortable with this, we will relocate you, and
       that - - those - - those actions were ongoing at that time.

                                         *      *       *

       There could have been an obvious requirement for offerors to have to go back and
       review their bids. There were - - because of the EPA guideline changes, there were
       very strong possibilities of them having to redo their bid to take in additional air
       sampling, monitoring, reporting, changes to [Heating Ventilation and Air
       Conditioning] systems, air movement. There were chemicals that were being listed
       in that new update that could not be in that building any longer.

       It would change their bid and the cost of them performing that bid or that lease that
       they need to be aware of. So that was one consideration.

AR 2523-24, 2532-33; see also AR 2566-67.

The Contracting Officer’s Memorandum to File

        Following the RFP’s cancellation, between September 9 and October 6, 2014, Contracting
Officer Bixler issued a Memorandum to File, with input from members of the NAVFAC Southwest
team, including representatives from the environmental group, counsel and Ms. Arbesu, explaining
that his cancellation decision was based on the Navy’s “concerns raised by recent changes in EPA

                                                25
guidance related to TCE exposure risk” and its “inability to honor a start lease date of January 1,
2015, because of conflicting requirements in its current lease.” AR 574, 577, 2555-56, 2991-92.15

       With respect to the TCE exposure risk, Contracting Officer Bixler stated:

       The Environmental Core team notified the Real Estate core team on Monday,
       September 8, 2014 of the July 2014 revised EPA Region 9 guidelines. As a result
       of the July 2014 EPA Region 9 revised guidelines additional sampling of indoor air
       quality was conducted in August 2014—in the same locations as sampling done in
       connection with the 2011 Remedial Investigation. One such sample at the north
       end of the building read at 12 µg/m3. However, the previous reading at the southern
       end of the building of 9.9 µg/m3 decreased to 7.2 µg/m3. Additional sampling is
       anticipated for certain office spaces within the building.

                                         *       *       *

       In addition, another tenant of the property (in the northern end of the building) . . .
       decided to remove from the building some of the more sensitive receptors,
       including pregnant women, women of child-bearing age, and others who were
       uncomfortable, until more data could be obtained. Some people had been
       experiencing symptoms, such as respiratory ailments. As a result, tests were
       performed, and it was determined that formaldehyde in the new construction
       materials, such as the desks and carpet, were causing the symptoms, which were
       replaced. In addition, ventilation was improved. However, some of the employees
       continued to experience symptoms. Thus, employees have been moved to upper
       floors of the building, or to other buildings, while additional air quality testing has
       been ordered. The current tenant [the Navy’s Space and Naval Warfare Systems
       Command] is very concerned about vapor intrusion, particularly in light of the July
       2014 EPA Region 9 revised response action levels.

       Need for [Environmental Condition of Property Report] Update and Revised Lease.
       Because previous changes in EPA Region 9 guidance triggered a Memorandum for
       the Record to update the Original ECP, which was included in the disclosures in
       the competitive process and the proposed Lease, the [Real Estate Contracting
       Officer] determined that the July 2014 EPA Region 9 guidance also triggers a need
       for an ECP update. Moreover, additional language/land use controls may be
       required to be included in the Lease clearly putting the Lessee on notice for the
       known hazardous materials that will not be allowed on the Leased Premises under
       the Lease. Further, until more data is collected and evaluated, the Lease may need
       to be revised to require the lessee to change its HVAC system or take other
       measures to improve ventilation. Thus, the Lease and the ECP may need to be
       revised (and re-advertised) to include a notice of the change in EPA guidelines,

15
     As explained below, the Court grants Plaintiff’s motion to supplement the AR with the
Memorandum to File. AR 574-77.

                                                 26
       updated air quality testing results, a revised determination of suitability to lease,
       and any updates to the Land Use Controls documented in the Lease and ECP.

       Potential Effect on Offeror Bid. These changes to the EPA Region 9 guidelines
       impact the scope of management of indoor air quality required under the Lease.
       Because EPA guidelines have become more stringent, the cost to manage indoor
       air quality (a cost to be borne by the successful offeror under the term of the Lease)
       may be greater. This change in cost could lead to claims of increased costs by the
       offeror.

AR 576-77.

       There was an additional reason for cancelling the RFP – the Navy’s failure to provide the
incumbent licensee - - Lockheed Martin - - with the requisite 180-day notice to vacate the Lease
premises by the Lease start date of January 1, 2015. AR 577. Contracting Officer Bixler
explained:

       Inability to provide 180 Day Notice to Vacate. The Lease included in the RFP
       provided a start date of January 1, 2015. However, the property is currently under
       license, with an expiration date of April 30, 2015. Normally licenses are revocable
       at will; however previous counsel negotiated with the licensee to allow time to
       vacate if terminated early. Special Provision 11(a)(i) states that “LICENSEE shall
       have one hundred eighty (180) days to vacate the Licensed Property from the date
       LICENSOR provided LICENSEE with written notice to terminate during which
       time LICENSEE can continue to operate on the Licensed Property.” Due to the
       foregoing license provision, the Navy is unable to issue the Lease with a start date
       of January 1, 2015.

Id.

Environmental Remediation Efforts

        Shortly after the cancellation of the RFP on September 9, 2014, the Navy began its
environmental remediation. AR 2726. The Navy’s Public Works Officer for Naval Base Point
Loma, Commander Chad Koster, testified that the Navy’s environmental remediation efforts are
being conducted by the Environmental Group of the Naval Facilities Engineering Command
Southwest (“NAVFAC”), and include sealing cracks in the foundation, sewer vents, and electrical
systems throughout the OT3 building, putting in place a subsurface vapor extraction system, as
well as testing to address the vapor intrusion into the OT3 building. AR 2704-07. Commander
Koster further testified that the air conditioning system had been changed since 2014, because of
the TCE contamination, and that NAVFAC instituted air sampling requirements to keep TCE
levels below EPA and OSHA guidelines. AR 2717. Commander Koster emphasized that the Navy
had to remediate the entire OT3 building, not just the areas with the highest TCE testing levels,
because “[t]here was enough unknown from the experts on the variability with which soil vapor,
gas, gets into a building that the prudent thing was to do the entire facility.” AR 2708.

                                                27
       A full scale clean-up of contaminated ground water is expected to be completed in 2018,
which involves drilling holes into the groundwater plume and putting olive oil and bacteria into
the holes. AR 848, 865, 2716-17. In December 2014, four months after Contracting Officer
Bixler’s cancellation decision, the Navy’s Space and Naval Warfare Systems Command
(“SPAWAR”) requested to use the Lease premises. AR 2711, 2724. Following the initial
remediation efforts and a renovation of the former Lockheed space, SPAWAR moved into the
Lease premises in April 2016 - - nearly a year and a half after the original Lease start date of
January 1, 2015. AR 2724. To ensure the Lease premises are safe, the NAVFAC Environmental
Group is conducting quarterly air sampling. AR 2716. The Navy has not resolicited the lease and
does not intend to resolicit the lease. Koster Decl. ¶¶ 3, 4 (Nov. 20, 2015); AR 2672-74.

                                       Procedural History

Plaintiff’s GAO Protest

        On September 19, 2014, Open Spirit filed its initial protest before the Government
Accountability Office (“GAO”), and on October 15, 2014, a supplemental protest objecting to the
cancellation of the RFP and arguing that the cancellation decision was a “pretext in order to award
the contract to Lockheed Martin.” AR 670-71, 1008. On December 15, 2014, GAO denied
Plaintiff’s protest, finding the cancellation was reasonable because “there were superseding
environmental concerns affecting OT3 that called into question the adequacy of the RFP.” AR
2012. GAO did not reach Open Spirit’s arguments that the Navy was biased in favor of Lockheed
Martin. AR 2008, 2013.

Proceedings Before this Court

        On April 13, 2015, four months after GAO issued its decision, Plaintiff filed its complaint
in the United States Court of Federal Claims. Plaintiff raised a new argument that the Navy’s
submission to GAO of its Memorandum of File constituted bad faith because the Memorandum to
File was a post hoc rationalization. Compl. ¶¶ 35, 58. Plaintiff additionally argued for the first
time that the Navy had improperly given Lockheed Martin information - - such as the appraisal
reports - - that had been withheld from Plaintiff. Id. at ¶¶ 27-28.

       Based on the record and Plaintiff’s new protest grounds of bad faith and favoritism, the
Court permitted Plaintiff to conduct limited depositions of three Navy personnel - - Real Estate
Contracting Specialist Arbesu, Contracting Officer Bixler, and Commander Koster, the Public
Works Officer for Naval Base Point Loma. Order (Nov. 12, 2015). The Court granted Plaintiff’s
request to supplement the AR with the deposition transcripts. Order (Aug. 3, 2016). Briefing
concluded on December 22, 2016.16

16
       Briefing was delayed after Plaintiff filed a motion for Rule 37 sanctions on January 25,
2016, which necessitated that the Court conduct an in camera review of documents the Navy
withheld as privileged. Following denial of this motion, Plaintiff filed a second motion for Rule
37 sanctions on April 4, 2016, which the Court denied on May 13, 2016. On that same day, May
13, 2016, Plaintiff sought to revise the briefing schedule to accommodate a third motion for
sanctions under Rule 37 and a motion for Rule 11 sanctions. ECF No. 155. The Court denied

                                                28
       In its motion for judgment on the AR, Plaintiff lodges two protest grounds:

       1. The Navy had no reasonable basis to cancel the RFP; and

       2. The Agency acted in bad faith “in shaping the solicitation in a way to preclude
       small businesses” and in conducting ex parte communications with the incumbent.

Pl.’s Mot. 20.

                                             Discussion

Jurisdiction and Standard of Review

        This Court has jurisdiction over bid protest actions pursuant to 28 U.S.C. § 1491(b) (2012).
The Court evaluates bid protests under the Administrative Procedure Act’s standard of review.
Bannum, Inc. v. United States, 404 F.3d 1346, 1351 (Fed. Cir. 2005) (citing Impresa Construzioni
Geom. Domenico Garufi v. United States, 238 F.3d 1324, 1332 (Fed. Cir. 2001)). Under this
standard, the Court will set aside an agency’s procurement decision if the agency abused its
discretion or acted arbitrarily, capriciously, or otherwise not in accordance with law. 5 U.S.C. §
706(2)(A) (2012); Adams & Assocs., Inc. v. United States, 741 F.3d 102, 105-06 (Fed. Cir. 2014);
Ala. Aircraft Indus., Inc. - Birmingham v. United States, 586 F.3d 1372, 1375 (Fed. Cir. 2009). If
this Court finds that the agency’s actions were contrary to law or regulation, the plaintiff must also
show that the violation was prejudicial in order to obtain relief. Bannum, 404 F.3d at 1351; Caddell
Constr. Co. v. United States, 125 Fed. Cl. 30, 51 (2016).

        The Court’s jurisdiction extends to an agency’s decision to cancel a solicitation. Madison
Servs., Inc. v. United States, 92 Fed. Cl. 120, 125-26 (2010); FFTF Restoration Co., LLC v. United
States, 86 Fed. Cl. 226, 236-37 (2009). In the context of a negotiated procurement, where a
contracting officer has discretion to cancel a solicitation, the agency’s cancellation decision
requires only “‘a coherent and reasonable explanation of its exercise of discretion.’” Madison
Servs., 92 Fed. Cl. at 126 (quoting Impresa, 238 F.3d at 1333). As such, an agency’s cancellation
decision in the course of a negotiated procurement is “reduc[ed] to nothing more than rational-
basis review.” Id.; see Coastal Corp. v. United States, 6 Cl. Ct. 337, 344 (1984) (“[T]he absence
of regulations strongly suggests that there are no constraints on the cancellation of a negotiated
procurement, other than the normal ones applicable to all agency action: that it be free from
arbitrariness, capriciousness and abuse of discretion.”); Am. Gen. Leasing, Inc. v. United States,
587 F.2d 54, 58-59 (Ct. Cl. 1978) (finding a cancellation of a solicitation to be reasonable and
stating that “[i]t is settled law that no assurance exists that [any] contractor will receive an award

Plaintiff’s request to file these motions and ordered Plaintiff to file any motion to supplement the
AR by June 14, 2016. ECF No. 157. Briefing on Plaintiff’s motion to supplement the AR was
completed on July 20, 2016, and the Court granted this motion in part on August 3, 2016. ECF
No. 161.

       Briefing on the cross-motions for judgment on the AR was further delayed by Plaintiff’s
requests for additional time. ECF Nos. 163, 168.

                                                 29
and that the Government retains, in its discretion, the right to reject all bids without liability, even
after there have been extensive negotiations with a bidder”).

        A protestor can show an agency acted in bad faith if its allegations are supported by “almost
irrefragable” proof. Galen Med. Assocs. v. United States, 369 F.3d 1324, 1330 (Fed. Cir. 2004)
(quoting Info. Tech. Applications Corp. v. United States, 316 F.3d 1312, 1323 n.2 (Fed. Cir.
2003)). “Almost irrefragable proof” amounts to “clear and convincing evidence” of some “specific
intent to injure” the protestor. Id. (quoting Am-Pro Protective Agency, Inc. v. United States, 281
F.3d 1234, 1239-40 (Fed. Cir. 2002)); Palantir USG, Inc. v. United States, 129 Fed. Cl. 218, 245
(2016), appeal docketed, No. 17-1465 (Fed. Cir. Jan. 10, 2017).

         Under Rule 52.1 of the Rules of the Court of Federal Claims, the Court makes findings of
fact as if it were conducting a trial on a paper record. See Bannum, 404 F.3d at 1354. Looking to
the AR, the Court must determine whether a protester has met its burden of proof based on the
evidence in the record. Id. at 1355 (internal citations omitted). Supplementation of the AR is
warranted if “‘the omission of extra-record evidence precludes effective judicial review.’” Axiom
Res. Mgmt., Inc. v. United States, 564 F.3d 1374, 1380 (Fed. Cir. 2009) (quoting Murakami v.
United States, 46 Fed. Cl. 731, 735 (2000), aff’d, 398 F.3d 1342 (Fed. Cir. 2005)); Impresa, 238
F.3d at 1338.

Supplementation of the Administrative Record

        Plaintiff seeks to supplement the AR with approximately 310 pages of material. Pl.’s
Second Mot. to Suppl. 2-6, ECF No. 165. “[T]he focal point of judicial review should be the
administrative record already in existence, not some new record made initially in the reviewing
court.” Axiom, 564 F.3d at 1379 (quoting Camp v. Pitts, 411 U.S. 138, 142 (1973)); AshBritt,
Inc. v. United States, 87 Fed. Cl. 344, 366 (2009). Therefore, the party seeking to supplement the
administrative record must “separately analyze each document proffered for supplementation” and
articulate why a particular document or category of documents is necessary for effective judicial
review. Axiom, 564 F.3d at 1370; L-3 Commc’ns Integrated Sys., L.P. v. United States, 98 Fed.
Cl. 45, 52 (2011); Terry v. United States, 96 Fed. Cl. 156, 162 (2010) (“[S]upplementation of the
administrative record is not automatic, and the ‘flexiblity of the court’s scope of review does not
give the parties carte blanche to supplement the record.’” (internal citations omitted)).
Alternatively, the Court may accept documents in the Court’s record that “may contain material
outside the administrative record relating to questions of prejudice and relief.” East West, Inc. v.
United States, 100 Fed. Cl. 53, 55 (2011); AshBritt, 87 Fed. Cl. at 367.17

17
        The Court agrees with the parties that the documents labeled AR 2732-41, 2872-78, 2882-
99, 2920-23, 2990-93, and Defendant’s documents labeled DA 1-8 should be included in the AR.
Plaintiff also proffers multiple documents that are already part of the current AR, making its
requested supplementation unnecessary and wasteful. These documents include the Lockheed
Martin license agreement in effect from May 1, 2014, through April 20, 2015, AR 891-902, and
the EPA Region 9 TCE Guidance dated July 9, 2014, AR 863-68.

                                                  30
          Plaintiff seeks to include five draft copies of the Memorandum to File in the AR “to show
that the [Memorandum to File] in the AR was purposely left without a date in order to back-date
the document since the earlier copies show a month and a date.” Pl.’s Second Mot. to Suppl. the
AR 574-77. These draft copies, unlike the undated copy of the Memorandum to File in the AR,
all list a date of September 2014. In response to Plaintiff’s Interrogatory No. 18, Defendant stated
that the Memorandum to File was written between September 9 and October 6, 2014. See Def.’s
Second Resp. to Pl.’s First Set of Interrogs. 2 (Sept. 4, 2015). Defendant objects to the inclusion
of these documents on the ground that Plaintiff does not reference these draft documents in its
legal argument. However, Plaintiff does argue that the undated Memorandum issued after the
cancellation decision improperly puts forth a post hoc rationale for the Navy’s actions. The Court
finds that the earlier September 2014 drafts of the Memorandum to File are necessary for effective
judicial review to assess Plaintiff’s challenge to the bona fides and timing of the Navy’s
cancellation decision. As such, the Court supplements the AR with AR 574-77, 2941-86.18

        Plaintiff seeks to add to the AR the Navy’s October 2, 2014 PowerPoint presentation on
the EPA’s new Region 9 Response Action Levels for TCE, as well as emails dated July 8, August
13, and August 29, 2014, from two Navy employees to Contracting Officer Bixler requesting a
status update on the progress of the Lease. Pl.’s Second Mot. to Suppl. 5-6; see AR 2931-40, 2912,
2924-26. However, Plaintiff has not suggested why these documents should be included in the
AR, and neither party has cited them in arguments on the merits. As such, the Court declines to
supplement the AR with AR 2931-40, 2912, 2924-26.

        Plaintiff seeks to supplement the AR with documents that address Solicitation terms. First,
Plaintiff seeks to add drafts of the Lease with a Navy employee’s comment that subleasing should
not be allowed. AR 2842-71. In a similar vein, Plaintiff seeks to supplement the AR with a
document it claims suggests that a security deposit should not have been required here - - the
Marine Corps Air Station Miramar Management Plan. AR 2994-3027. These documents would
only be relevant to Plaintiff’s challenge to the Solicitation’s inclusion of the rent-splitting
subleasing and security deposit terms. However, Plaintiff waived these arguments by not
protesting prior to the close of bidding. See COMINT Sys. Corp. v. United States, 700 F.3d 1377,
1382-83 (Fed. Cir. 2012); Blue & Gold Fleet, L.P. v. United States, 492 F.3d 1308, 1315 (Fed.
Cir. 2007). As such, the draft Lease with commentary and the Miramar Management Plan are not
necessary for effective judicial review. See Axiom, 564 F.3d at 1381.

        Plaintiff seeks to supplement the AR with internal Navy emails dated October 2013, about
preparing the Lease for review by Navy headquarters - - months before the lease package was
finalized or the RFP was issued. Plaintiff provides no explanation as to why these emails are
relevant to Plaintiff’s protest grounds, stating only that they are not part of the AR. However, a
document’s mere absence from the AR is not a legal basis for granting supplementation. E.g.,

18
       Plaintiff argued that the Navy “concealed Source Selection Documents” by asserting that
the Navy has produced “neither any final evaluations, nor any source selection decisions.” Pl.’s
Mot. 14. However, document production and three depositions confirmed that there was no final
source selection decision prior to cancellation - - only the draft indicating that the SSEB planned
to recommend award to Open Spirit. AR 2905. As such, Plaintiff’s serious accusation that
Defendant concealed source selection documents is wholly unfounded.

                                                31
Tauri Grp., LLC v. United States, 99 Fed. Cl. 475, 481 (2011) (“Of course, in a bid protest, the
administrative record need not consist of every single document related in any way to the
procurement in question, but may be reasonably limited to materials relevant to the specific
decisions being challenged.”). There is no basis to supplement the AR with these emails.

        Plaintiff seeks to supplement the AR with Ms. Arbesu’s notes taken during the SSEB’s
meetings on June 17-19, 2014, and the SSEB’s draft technical evaluation recommending awarding
the Lease to Open Spirit. Because Ms. Arbesu’s notes and the SSEB’s draft technical evaluation
are part of the Agency’s documentation leading up to its cancellation decision, they reflect what
transpired in the Lease competition, are not post hoc rationales, and are necessary for effective
judicial review of the cancellation decision as well as Plaintiff’s claims of bad faith and favoritism.
As such, the Court grants Plaintiff’s request to supplement the record with AR 2900-11.

         Plaintiff seeks to supplement the AR with a “meeting reminder” on Commander Koster’s
electronic calendar for a September 12, 2014 meeting with Mike Costello, a Lockheed Martin
employee who worked in the OT3 building. The meeting reminder contains no text aside from the
location of the meeting. Plaintiff argues that this meeting reminder “is needed to show that the
Agency was communicating with Lockheed bid personnel while OPEN SPIRIT could not get a
response to the reason for cancellation.” Pl.’s Second Mot. to Suppl. 6. Commander Koster
testified that he held this meeting with Mr. Costello to provide Lockheed Martin the “same brief
that we had provided to the Navy tenants” regarding the Navy’s knowledge of TCE and what
testing had been done at the time. AR 2685. As the meeting reminder forms a basis for Plaintiff’s
claim of bias and corroborates Commander Koster’s testimony, the Court finds that the document
is necessary for effective judicial review and grants Plaintiff’s request to add this document to the
AR.

         Plaintiff seeks to supplement the AR with the declaration of William Bowersox, a former
Lockheed Martin employee, who testified that Lockheed Martin had seen the Navy’s 2011
appraisal values of the OT3 property. Mr. Bowersox, Lockheed Martin’s former on-site
representative at the OT3 building, testified that in 2011, he “witnessed the Appraisal agents
evaluate the facility and was a party to the final Appraised value numbers as they were transmitted
to [him] through the Lease renewal documents.” AR 57, 2989. Plaintiff argues that Mr.
Bowersox’s declaration “contradicts the Agency’s assertion that the appraisals were not shown to
the incumbent” and that the incumbent “would have received an advantage in bidding when other
bidders were not provided the same information.” Pl.’s Second Mot. to Suppl. 6. Defendant
counters that the issue before the Court is not whether the incumbent had ever seen prior appraisals,
but whether the incumbent saw the appraisal that was to set the fair market value for the Lease at
issue - - a topic Mr. Bowersox does not address. Def.’s Reply 35. Although Defendant is correct
that Mr. Bowersox’s testimony only addresses earlier appraisals, Plaintiff has alleged favoritism
and bad faith due to Lockheed Martin’s access to information unavailable to other bidders. As
Plaintiff relies upon this testimony for its bad faith argument, the Court adds this testimony to the
record to permit meaningful judicial review of that allegation. Axiom, 564 F.3d at 1380. The
Court supplements the AR with Mr. Bowersox’s declaration at AR 2988-89.

                                                  32
The Navy’s Decision to Cancel the RFP was Reasonable

        A contracting officer’s decision to cancel a solicitation is “inherently discretionary.”
Shields Enters., Inc. v. United States, 28 Fed. Cl. 615, 636 (1993) (citing Am. Gen. Leasing, 587
F.2d at 5859)). An agency’s need to “reassess its requirement . . . articulated at the time of the
cancellation,” can alone provide a reasonable basis for cancelling a solicitation. Shields, 28 Fed.
Cl. at 636; see Madison Servs., 92 Fed. Cl. at 126 (“[T]he regulatory standards for the cancellation
of a negotiated procurement are so extraordinarily permissive that they impose no constraints upon
a contracting officer’s discretion beyond what reasoned judgment requires.”).

         Plaintiff argues that the Navy’s decision to cancel the RFP lacked a reasonable basis
because “there was no change in the governmental requirements” that affected the Lease property
as the lessee “bore the risk for any changes in EPA requirements.” Pl.’s Mot. 24. Plaintiff contends
that the “Compliance with Law” paragraph 14.1 of the Lease placed the burden on the Lessee to
address any changes in environmental requirements.

       Paragraph 14.1 states:

       14.1 Compliance with Law. LESSEE and its officers, employees, agents,
       contractors, subcontractors, and SubLessees shall comply at its sole cost and
       expense, with the Federal, state, and local laws, regulations, and standards that are
       or may become applicable to LESSEE’s activities on the Leased Premises. The
       intent of this paragraph 14 is to allocate responsibility for compliance with and cost
       of any kind of authority that could apply to the Government or the LESSEE as a
       result of LESSEE’s use and occupancy of the premises to the LESSEE. That
       responsibility is entirely allocated to the LESSEE. The Government is not
       responsible for costs arising from LESSEE’s use and occupancy of the premises.

AR 243 (emphasis added). This Compliance with Law provision addresses the lessee’s activities
on the Lease premises and the lessee’s need to comply with environmental regulations stemming
from the lessee’s use and occupancy of the Lease premises. Paragraph 14.1 does not address pre-
existing contamination resulting from the prior use of the Lease premises, or conditions that inhere
in the Lease property unrelated to the lessee’s occupancy or activities. Here, the TCE levels and
vapor intrusion that caused the Navy’s concern were discovered and exacerbated during the Lease
competition and were present in the Lease property before the Lease became effective. The fact
that a potential lessee would have to bear the cost of future regulatory compliance did not alleviate
the Navy’s concern about the impact of changed environmental conditions on the instant Lease
competition.

        Although the RFP alerted offerors to potential environmental issues at the time it was
issued on May 13, 2014, and anticipated that award would be made by September 9, 2014, this
landscape radically changed while the Lease competition was ongoing. AR 215, 226-27. On July
9, 2014, the EPA’s guidance with respect to permissible levels of TCE air contamination was made
significantly more restrictive - - lowering acceptable levels of TCE from 15 micrograms per cubic
meter (µg/m3) for a 10-hour work day to 8 µg/m3 for an 8-hour work day for commercial and
industrial use for Region 9 where the Lease is located. Compare AR 332 with AR 865. The

                                                 33
Navy’s environmental point person on this Lease competition, Derral Van Winkle, a seasoned
veteran with 30 years of environmental restoration experience, had the unenviable task of briefing
the SPAWAR command on “the environmental restoration indoor sampling” following issuance
of the new guidelines on the day before offers were to expire. Mr. Van Winkle’s meeting with the
command “did not go well.” AR 610. Two Navy Rear Admirals were seriously concerned about
the health and safety of personnel and ordered personnel to evacuate the building. This action
stemmed not only from the heightened environmental restrictions and TCE levels but from
unfortunate flooding caused by a water main break days earlier resulting in excavation of
contaminated soil. AR 625.

         The new EPA guidance also led the Environmental Group to recommend that Contracting
Officer Bixler change the Lease to ban all chlorinated solvents from the OT3 building and institute
a protocol to inspect any chemicals brought into the building. AR 616.19 These new use
restrictions were not part of the Lease being competed. This Lease only required a lessee to
“enhance ventilation of indoor air,” “monitor air contaminant concentrations,” and “include
contingency measures to be taken if VOCs exceed certain concentrations.” AR 241. However,
given the new EPA guidelines and issues in the building, as Contracting Officer Bixler articulated,
“there were very strong possibilities of [offerors] having to redo their bids to take in additional air
sampling, monitoring, reporting, changes to HVAC systems, air movement. There [were]
chemicals that were being listed in that new update that could not be in that building any longer.”
AR 2532-33.

        The Navy was confronted with this cascade of environmental issues just after the SSEB
had completed its review of offers on September 5, 2014, and drafted its recommendation to award
to Plaintiff. Because offerors’ bids expired on September 9, 2014, Contracting Officer Bixler had
less than 48 hours to decide whether to proceed with the competition once he became fully aware
of the environmental issues on September 8, 2014. As the Public Works Officer, Commander
Koster, testified, because the Navy was not able to conduct any TCE testing in the Lease premises
at that time, the Navy was uncertain as to “the risk to people and to the Navy – from a legal
standpoint.” AR 2681. This Court finds that legitimate environmental concerns prompted the
Navy to cancel the Lease competition - - not bias against Open Spirit or favoritism toward
Lockheed Martin.

       The Navy’s environmental concerns were later found to be justified as all four TCE
samples taken in the Lease premises in October 2014 - - the month following the cancellation
decision - - exceeded the new EPA and California DTSC guidelines. See DA 5-8.20 The Navy
conducted remediation efforts to mitigate TCE vapor intrusion in the OT3 building following the
cancellation decision by sealing cracks in the foundation, sewer vents, and electrical systems,

19
        This new ban on chlorinated solvents could have affected Open Spirit’s own bid, as Open
Spirit proposed to use [***] of the Lease premises for industrial work that might involve use of
“paint, lubricants, solvents, cleaning fluids, etc.” AR 403.
20
       The October 2014 testing results - - taken one month following cancellation of the RFP
showed TCE levels above the EPA limits with readings at 9.6 µg/m3, 8.6 µg/m3, 11 µg/m3, and
9.0 µg/m3. DA 5-8.

                                                  34
putting in place a subsurface vapor extraction system, changing the air conditioning systems,
performing quarterly air sampling for TCE, and drilling into the groundwater plume to add oil and
bacteria to mitigate the formation of vapor. AR 2704-07, 2716-17.

        In sum, Contracting Officer Bixler reasonably exercised his judgment to cancel the RFP
based on documented environmental concerns and potential health and safety risks. Moreover,
the Navy’s cancellation decision was consistent with the RFP’s terms which expressly reserved
the Navy’s “right to cancel this RFP, or to reject any and all submissions prepared in response
hereto” and affirmed that the Agency has “no obligation to make an award.” AR 226; see Am.
Gen. Leasing, 587 F.2d at 58-59 (“It is settled law that no assurance exists that [any] contractor
will receive an award and that the Government retains, in its discretion, the right to reject all bids
without liability.”).

Plaintiff Failed to Demonstrate that the Cancellation Decision was Fraudulent or a Pretext
to Avoid Award to Open Spirit

       Open Spirit contends that the Navy’s Memorandum to File that documents the Navy’s
cancellation decision is a “fraudulently created after-the-fact document” because it does not list a
date while draft versions of this Memorandum were dated “September 2014.” Pl.’s Mot. 17; AR
574-77. Plaintiff argues that because the Memorandum to File was drafted between September 9,
2014, and October 6, 2014 - - after the decision to cancel the RFP - - it cannot reflect the Agency’s
contemporaneous thinking and must be fraudulent or a pretext for avoiding award to Open Spirit.
See Def.’s Second Resp. to Pl.’s First Set of Interrogs. 2 (Sept. 4, 2015).

       The Court finds no merit in Plaintiff’s argument. Contracting Officer Bixler’s notes and
emails contemporaneous with the cancellation decision, as well as the deposition testimony of
Contracting Officer Bixler, Realty Specialist Arbesu, and Public Works Officer Commander
Koster, corroborate the accuracy of the information contained in the Memorandum to File. See
AR 579, 590-93, 607-11, 616-23, 625, 633-38. For example, Ms. Arbesu’s notes from a September
9, 2014 meeting - - the day of the cancellation decision - - state:

       We were notified by [Environmental] Core on Monday, 8 Sep that EPA standards
       for vapor intrusion of TCEs have changed. As there is documented existing vapor
       intrusion of TCEs within the area proposed [f]or lease, this has triggered
       conversations on the requirement for additional language/controls in the lease, and
       our ability to move forward with award.

       Received call from CDR Koster, [Naval Base Point Loma Public Works Officer],
       this morning regarding this concern and he provided the additional that SPAWAR
       had just been notified and have decided to move certain Navy personnel out of the
       building until further testing is completed.

AR 636.

       Similarly, Contracting Officer Bixler’s September 10, 2014 email contemporaneous with
his cancellation decision corroborates the information related in the Memorandum to File:

                                                 35
       - Changed requirements resulted from last minute information received from the
       Environmental Core team regarding recent changes in EPA guidelines which may
       impact the scope of the management required under the lease; possibly requiring
       additional language changes in the proposed new lease; ECP; and the RFP to restrict
       the use of specific chemicals on the lease premises. This new information was not
       known at the time we issued the RFP, nor prior to the receipt of bids.

       - As the [Real Estate Contracting Officer], and after full consultation with Counsel;
       Env; and the Base [Public Works Officer], I made the decision as the RECO to
       cancel the RFP out of concerns and caution for human health, as well as
       consideration of having no opportunity to receive offeror resubmissions of bids in
       time prior to expiration of the RFP solicitation period.

AR 579.

        The Navy explained in an interrogatory response why the Memorandum to File was not
written immediately after the decision to cancel the RFP:

       The “Memorandum to File” was written to memorialize various concomitant
       factors that David M. Bixler, the Real Estate Contracting Officer (RECO)
       considered, in consultation with real estate and environmental personnel, and legal
       counsel, in making his expedited decision to cancel the solicitation. As
       demonstrated by the AR, the Navy’s transition from an expectation of issuing a
       final source selection decision to having to consider cancelling the solicitation
       began very shortly before the solicitation’s expiration. As such, Mr. Bixler was not
       afforded time to generate a contemporaneous document . . . . Once the time-
       sensitive decision was made, however, Mr. Bixler, in conjunction with other real-
       estate and environmental personnel, and legal counsel, generated the Memorandum
       to File in an effort to provide a near-contemporaneous presentation of the various
       concomitant factors that he considered.

AR 2991-92.

        The ample record evidence shows that the Memorandum to File accurately reflects
Contracting Officer Bixler’s thinking at the time of his decision to cancel the RFP. In sum,
Plaintiff has failed to present clear and convincing evidence that the Memorandum to File was
either “fraudulent” or “altered” or issued in bad faith in an attempt to injure Open Spirit. See Am-
Pro, 281 F.3d at 1239-40.

       In a related effort to impugn the cancellation decision, Plaintiff persists in arguing that
Contracting Officer Bixler had already made an award determination prior to cancellation and that
the Navy concocted the environmental concerns and canceled the Lease competition to avoid
making award to Open Spirit. Pl.’s Mot. 14. The record does not support this assertion. Realty
Specialist Arbesu was clear in her testimony that she had “anticipated” that an award decision
would be made on September 8, 2014. AR 2341-43. Contracting Officer Bixler affirmed that no
award decision had been made and that the technical evaluation board was required “to provide
formal results of their findings” before the Navy could make an award. AR 2596; Compare AR

                                                36
2256, 2267 with AR 2519-20. The draft SSEB award recommendation was never finalized
because of concerns about the risks of TCE vapor in the OT3 building. Finally, as Plaintiff
acknowledges, there was no executed Lease, as cancellation occurred before either party was given
a proposed Lease for signature.

        In sum, this Court’s finding that Contracting Officer Bixler reasonably canceled the
Solicitation is not undermined by Plaintiff’s unsupported allegations that cancellation was a pretext
for avoiding award to Open Spirit.

Plaintiff Has Not Shown that the Navy Acted in Bad Faith

        Plaintiff argues that the Navy acted in bad faith by favoring the incumbent, Lockheed
Martin, prior to and throughout the Lease competition. Specifically, Plaintiff argues that the Navy
acted in bad faith by refusing to disclose appraisal reports that Lockheed Martin had received, by
conducting ex parte communications with Lockheed Martin before bids were due and by providing
Lockheed Martin with favorable licenses prior to issuing the RFP.21 Plaintiff further asserts that
the RFP’s terms requiring that the lessee deposit a $750,000 performance bond and split sublessee
rent payments with the Navy, imposed “inherently unfair” provisions on small businesses. Pl.’s
Mot. 28. The Court addresses each of Plaintiff’s arguments in turn.

       Appraisal Reports

        Plaintiff argues that the Navy “provided copies of the appraisals” of the Lease premises to
Lockheed Martin and its predecessor which resulted in Lockheed having an unfair advantage in
the instant Lease competition because it knew the amount of the current rent and previous
appraisals. Plaintiff relies on a declaration from William Bowersox, a former building/facility
manager for Lockheed Martin, whom Plaintiff planned to hire if Open Spirit were awarded the
Lease. AR 400, 2988. Mr. Bowersox, the former on-site representative for Lockheed Martin at
the OT3 building, testified that in 2011:

       I witnessed the Appraisal agents evaluate the facility and was a party to the final
       Appraised value numbers as they were transmitted to me through the Lease renewal
       documents.

       I was informed by [Lockheed Martin] management and Navy personnel that it was
       a matter of law that the Lease cost must equal the fair market value as dictated by

21
        In its opening motion, Plaintiff makes a passing assertion that the Navy acted in violation
of 41 U.S.C. § 253b(a) by treating bidders unequally because the Lease at issue here was required
to contain the same terms as prior leases and licenses held by Lockheed Martin. Pl.’s Mot. 1, 28.
However, the original Lockheed leases and licenses were made to obtain services related to the
Air Force’s Atlas/Centaur launch vehicle program and were for nearly 400,000 square feet of
space. AR 2765. Plaintiff has failed to demonstrate that the Lease contemplated here was
equivalent in purpose or scope to Lockheed Martin’s prior lease agreements or licenses or that the
Lease sub judice was required to have identical terms.

                                                 37
       the most recent appraisal thus the numbers I witnessed on the 2011 Lease renewal
       paperwork were certified to be the official appraisal numbers . . . .

AR 57, 2989.

        While Mr. Bowersox assumes that the rent Lockheed Martin paid the Navy must have
equaled the fair market value, his testimony is speculative. The only basis for his assumption was
lease renewal documents that reflected actual rental payments - - information any incumbent would
possess. Mr. Bowersox’s testimony does not establish that the Navy provided Lockheed Martin
with access to the 2013 updated appraisal report, the report that determined the fair market value
for the instant Lease. AR 2988-89.

       The record as a whole demonstrates that the Navy did not provide Lockheed Martin with
the 2013 updated appraisal report for the Lease premises. AR 564. Indeed, when Open Spirit
submitted a question to the Navy, asking if Lockheed had “during any time of [its] occupancy,
been provided access to any previous appraisals of the OT3 property described in [the] RFP,” the
Navy responded “No.” Id. The Navy elaborated that it does not release appraisal reports but
permitted potential offerors to conduct their own appraisals. AR 360, 564.

        The record does not reflect whether Open Sprit engaged an appraiser. In any event, Open
Spirit submitted a proposal that exceeded the appraised fair market value, and the Navy accepted
Plaintiff’s bid. Because Open Spirit’s proposed pricing was competitively superior to Lockheed
Martin’s proposal in this highest-priced technically acceptable competition, Plaintiff was the
recommended awardee and suffered no prejudice due to the Navy’s alleged favoritism of Lockheed
Martin. Compare AR 411 with AR 563; AR 2905.

       Alleged Ex Parte Communications

        Plaintiff contends that the Navy had unlawful ex parte communications with Lockheed
Martin that gave Lockheed a competitive advantage, citing an email dated prior to the RFP’s
issuance and telephone conversations immediately before bids were due. Pl.’s Mot. 29. At the
outset, the Court notes that Plaintiff did not demonstrate that Lockheed Martin had a competitive
advantage here. Plaintiff, not Lockheed Martin, was the SSEB’s recommended awardee, and
Lockheed Martin did not gain anything from the cancellation - - as the Navy has determined to use
the premises itself and not conduct another Lease competition.

        Nor do these alleged communications taint the Navy’s cancellation decision. Plaintiff
relies upon an email from Lockheed Martin to the Navy dated almost nine months before the RFP
was issued. This August 27, 2013 email from Mr. Michael Costello, a Lockheed employee, to
Realty Specialist Arbesu, stated that Lockheed Martin was “very interested in moving into a long
term lease arrangement” and that Lockheed Martin wanted to have a meeting with the real estate

                                               38
group to possibly “establish[] the time frame to begin working on the lease agreement,
identification of any issues that may exist, and the path ahead.” AR 2839.22

       The Navy denied Mr. Costello’s request for a meeting. Realty Specialist Arbesu told Mr.
Costello that she could not discuss the Lease, as reflected in a September 12, 2013 email between
Ms. Arbesu and Contracting Officer Bixler:

        Per our previous discussion, I have been contacted several times by a representative
        of Lockheed Martin Corporation, Mr. Michael Costello. He has requested a
        meeting with Navy personnel to discuss the way ahead for a new lease for the space
        LMC occupies under license in a portion of Old Town Campus Building 3. I
        confirmed with counsel and conveyed to Mr. Costello on 4 September 13 that it is
        inappropriate for Navy personnel to discuss the Lease with him, but if LM has any
        issues with the license, I could be of help.

DA 1.

        Plaintiff further argues that Lockheed Martin improperly communicated with the Navy
immediately before bids were submitted. According to Ms. Arbesu’s call log, she had three phone
calls with Lockheed Martin - - at 6:38 a.m., 12:14 p.m., and 12:43 p.m. on June 12, 2014, the day
bids were due, after Lockheed Martin submitted its initial bid on June 11, 2014, but before
Lockheed Martin submitted its second bid on June 12, 2014. AR 2898-99. Plaintiff posits that
Lockheed Martin had revised its “bid after the phone calls were made” and that Lockheed Martin’s
“original bid was believed to be non-conforming and would have clearly made Open Spirit the
only responsive bidder and therefore the winning bidder.” Pl.’s Mot. 29; Pl.’s Resp. 19. This
allegation is not supported by the record. In a May 27, 2015 declaration, Ms. Arbesu testified:

        Lockheed Martin Corporation (“LMC”) submitted its proposal on June 11, 2014.
        On or about June 12, 2014, a woman from LMC called me to tell me that a second
        proposal had been dropped off because they felt that the first proposal did not meet
        the RFP’s specifications because it was not sealed and not put into two separate
        packages (package number 1 was supposed to be the technical proposal, and
        package number 2 was supposed to the be rent price proposal, i.e., “bid”).
        However, both “packages” were put into one binder (with one original and three
        copies actually submitted). I asked if they had included a letter to tell me to
        disregard the first proposal. The woman said, “No”. I told the woman that she
        would not be able to substitute one for the other unless written instruction to do so
        was provided. Before 3pm that same day, a letter arrived instructing me to ignore
        the first proposal.

22
       Mr. Costello worked in the OT3 building as a Technical Director at Lockheed Martin’s
Technology Collaboration Center, and his role in the subsequent Lease competition is unclear. AR
2838. The record reflects that Charlie Hardie was Lockheed Martin’s real estate representative,
and May Kemp was Lockheed Martin’s Contract Administrator who signed its proposal. AR 418,
2444, 2841.

                                                 39
Arbesu Decl. ¶ 6 (May 27, 2015).

      The June 12, 2014 letter referenced in Ms. Arbesu’s declaration is from May Kemp,
Lockheed Martin’s Contract Administrator, and stated:

       Lockheed Martin hereby withdraws referenced proposal [for RFP
       N6247314RP0007] which was submitted on 11 June 2014, with the exception of
       the contents of the white envelope labeled “Past Performance.” The white envelope
       contains 2 sealed envelopes which contain Past Performance Surveys provided in
       support of Lockheed Martin.

AR 486.1. This letter corroborates Ms. Arbesu’s May 27, 2015 declaration and deposition
testimony and comports with the Solicitation terms that permit modification of proposals prior to
the RFP closing date. Id.; AR 221. What Plaintiff claims was Lockheed Martin’s proposal revision
prompted by an improper ex parte communication was nothing more than a repackaging of the
proposal that was permitted by the RFP. The RFP expressly provided that “[o]fferors may submit
modifications to their proposals at any time before the RFP closing date and time” and that
modifications could be submitted after the RFP closing time “to correct a mistake at any time
before award.” AR 221.

        Plaintiff further argues that Lockheed Martin’s bid should have been rejected outright as
nonresponsive to the RFP because it contained modifications to the proposed lease. Plaintiff’s
argument is of no moment. AR 2905. The responsiveness vel non of Lockheed Martin’s bid had
no bearing on the challenged decision to cancel the RFP, and Lockheed Martin’s continued
participation in this competition did not prejudice Open Spirit because Open Spirit, not Lockheed
Martin, was the recommended awardee.

        Plaintiff has not come close to showing that the Navy’s decision to cancel the Lease
competition was influenced by ex parte communications with Lockheed Martin. Rather, the record
establishes that the Navy canceled the RFP due to valid concerns about the environmental
condition of the Lease premises that came to light in the days just before offers were set to expire.
Because the Navy has reevaluated its needs and determined not to lease the OT3 space in the
future, neither Plaintiff nor Lockheed Martin will have an opportunity to compete for this Lease
award - - hardly a situation in which the Navy can be said to have favored Lockheed Martin. See
Koster Decl. ¶¶ 3, 4 (Nov. 20, 2015).23

23
         Open Spirit also contends that the five-month overlap between the Lease start date of
January 1, 2015, and Lockheed Martin’s license end date of April 30, 2015, is evidence that the
Navy only intended to make award to Lockheed Martin. Pl.’s Mot. 29. The record does not
support any such “intention” as it is clear that the SSEB planned to recommend award to Open
Spirit, not Lockheed Martin.

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        Performance Bond and Subleasing Terms

       Lastly, Plaintiff argues that inclusion of the performance bond and rent-splitting subleasing
terms in the RFP are “significant barriers to small companies while simultaneously being no
obstacle at all for a larger company. . . .” Pl.’s Reply 13.

        In Blue & Gold Fleet, the Federal Circuit held that a party that fails to “object to the terms
of a government solicitation . . . prior to the close of the bidding process waives its ability to raise
the same objection subsequently in a bid protest action in the Court of Federal Claims.” 492 F.3d
at 1313; Bannum, Inc. v. United States, 779 F.3d 1376, 1380-81 (Fed. Cir. 2015). By submitting
its bid in compliance with the performance and security bond and rent splitting terms, Plaintiff
accepted these Lease terms and waived its right to challenge these terms. AR 393; Blue & Gold,
492 F.3d at 1313-14 (holding that protestors “cannot sit on their rights to challenge what they
believe is an unfair solicitation, roll the dice and see if they receive award and then, if unsuccessful,
claim the solicitation was infirm” (quoting Argencord Mach. & Equip., Inc. v. United States, 68
Fed. Cl. 167, 175 n.14 (2005))).

                                              Conclusion

       Plaintiff’s motion to supplement the AR is GRANTED in part, and Defendant’s motion to
supplement the AR is GRANTED. The Court supplements the AR with AR 574-77, 2732-41,
2872-78, 2882-2899, 2900-11, 2920-23, 2990-93, 2941-86, 2987, 2988-89 and DA 1-8.

        Defendant’s cross-motion for judgment on the AR is GRANTED.

       Plaintiff’s motion for judgment on the AR is DENIED. Plaintiff’s request for bid and
proposal costs is DENIED.

                                                        s/Mary Ellen Coster Williams
                                                        MARY ELLEN COSTER WILLIAMS
                                                        Judge

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