Court Opinion

ID: 9397124
Source: CourtListenerOpinion
Date Created: 2023-05-24 16:02:27.02162+00
Date Added: 2024-06-11T17:19:21.642136
License: Public Domain

In the United States Court of Federal Claims
                   Nos. 23-47C; 23-175C
                   (Filed: May 17, 2023)
                 (Re-filed: May 24, 2023) 1
**************************
STG INTERNATIONAL, INC.,

                           Plaintiff,

v.

THE UNITED STATES
                                                    Bid protest; pre-award bid
                           Defendant.               protest; phased procurement;
                                                    legal offer; FAR 52.204-7;
**************************
                                                    SAM registration; price
NORTH EAST SOUTH WEST                               analysis; past performance;
HEALTHCARE SOLUTIONS, LLC,                          discussions; injunction.

                           Plaintiff,

v.

THE UNITED STATES,

                           Defendant.
**************************

      Craig A. Holman, Washington, DC, for plaintiff, STG International,
with whom was Thomas A. Pettit, of counsel.

      Aron C. Beezley, Washington, DC, for consolidated plaintiff, North
East South West Healthcare Solutions, with whom were Gabrielle A. Sprio
and Ariella Cassell, of counsel.

1
   This opinion was originally issued under seal. We have redacted
information to protect proprietary information and the competitive process.
      Vincent D. Phillips, Senior Trial Counsel, United States Department
of Justice, Commercial Litigation Branch, with whom were Brian M.
Boynton, Principal Deputy Assistant Attorney General, Patricia M.
McCarthy, Director, and Reginald T. Blades, Jr., Assistant Director, for
defendant. Augustus Golden, United States Department of Justice, and Diane
Foose, United States Immigration and Customs Enforcement, of counsel.

                                   OPINION

       This is a consolidated pre-award bid protest of the United States
Immigration and Customs Enforcement’s (ICE) decision to exclude two
contractors from a competitive range. The matter is fully briefed, and oral
argument was held on May 9, 2023. For the reasons below, we sustain only
NESW’s protest.

                               BACKGROUND

   I. Solicitation and Evaluation Scheme

       The United States provides healthcare services to illegal immigrants
held in ICE facilities. As part of that effort, ICE issued the current solicitation
to provide medical staffing in various ICE facilities, under which it
anticipated awarding five to seven indefinite delivery, indefinite quantity
contracts on a best-value basis.

        The proposal submission and agency evaluation process proceeded in
two phases. In Phase I, contractors submitted the first half of their proposal,
which addressed the solicitation’s three most important factors: (1) corporate
experience, (2) scenario, and (3) capability. For the first two factors, the
agency conducted oral presentations where bidders first discussed a
previously completed “Corporate Experience Questionnaire.” AR 5371.
Then, after discussing corporate experience, the agency described a
hypothetical scenario in which the bidder experiences critically low staffing
at difficult to fill locations and asked the bidder to provide a corrective action
plan. For the third Phase I factor, however—which was capability—bidders
instead submitted a writing that demonstrated their ability to meet the
solicitation’s requirements.

      At the end of Phase I, the agency issued Advisory Notice Letters.
These letters, which were unique to each bidder, contained the agency’s
                                   2
evaluation of the bidder’s Phase I proposal and the agency’s recommendation
as to whether the bidder should proceed to Phase II. While a recommendation
not to proceed did not eliminate a bidder from the competition, it did mean
that the bidder was “unlikely to be a viable competitor[].” AR 5381–82.

       Phase II required contractors to submit the second half of their
proposal, which addressed three additional factors (listed in descending order
of importance): (1) plans, (2) past performance, and (3) price. First, the plans
factor involved the submission of several plans for contract management,
extended absence and backfill coverage, quality control, transition-in, and
corporate organization. Next, for past performance, offerors provided
information about three “recent and relevant contracts in which they served
as the prime contractor or subcontractor for . . . at least one . . . year in
duration.” AR 5375. And finally, each offeror provided the agency with its
pricing schedule, which the agency would evaluate for reasonableness and
completeness.

   II. Agency Evaluation

       Shortly after Phase I proposals were submitted on October 29, 2021,
the agency issued its advisory notice letters. Because NESW had one of the
highest rated Phase I proposals, the agency encouraged it to proceed to the
next phase. STGi’s proposal, on the other hand, was not highly rated and
therefore was not recommended to continue to Phase II. Still, both bidders
submitted Phase II proposals. After Phase II, the agency established a
competitive range of the highest rated offers. The agency’s competitive range
included NESW (who eventually received a contract award) but not STGi.

        STGi protested its exclusion from the competitive range—first
unsuccessfully at the Government Accountability Office and then at this
court. Before we resolved STGi’s protest, however, the agency announced
that it would take corrective action and rescinded the previously awarded
contracts. The agency explained that it may “allow proposal revisions,”
“conduct additional evaluation of the proposals received in Phase II,” or “use
any other measures” allowed under the Federal Acquisition Regulations
(FAR). Def.’s Notice of Corrective Action at 1, STG Int’l, Inc. v. United
States, No. 22-1340 (Fed. Cl. Oct. 3, 2022).

                                       3
       The agency’s corrective action included a re-evaluation of each
proposal, which led to the following result:

AR 20165. Based on these results, the agency established a new competitive
range, which this time excluded both STGi and NESW. Although NESW
received a contract award under the first competitive range, it was now
deemed ineligible for an award because it was not registered in the System
for Award Management (SAM) when it submitted its Phase I proposal. 2
STGi and NESW each protested their exclusion in this court, which we
consolidated into one protest.

2
 NESW was registered in SAM on November 10, 2021, which was before it
submitted its Phase II proposal.
                                    4
                                 DISCUSSION

       We review bid protests in accordance with the standards laid out in
the Administrative Procedure Act (APA). Advanced Data Concepts, Inc. v.
United States, 216 F.3d 1054, 1057 (Fed. Cir. 2000) (citing 28 U.S.C. §
1491(b)(1)). Under the APA, an agency’s actions cannot be “arbitrary,
capricious, an abuse of discretion, or otherwise not in accordance with law.”
5 U.S.C. § 706(2)(A).

    I. NESW’s Protest

           A. Legal Offer
       The FAR requires all offerors “to be registered in SAM when
submitting an offer or quotation.” FAR 52.204-7(b)(1). Based on this
provision, the agency decided that all bidders needed to be registered in SAM
by the end of Phase I, which NESW was not. 3 NESW responds that its
proposal was not an offer until its Phase II submission, and, for that reason,
did not need to be registered in SAM until that time. 4

        This protest requires us to decide when a proposal becomes an offer.
To answer that question, we look to the FAR because when a statute or
regulation “includes an explicit definition, we must follow that definition
even if it varies from a term’s ordinary meaning.” Dig. Realty Tr. v. Somers,
138 S. Ct. 767, 776 (2018). With that in mind, the FAR explains that an
“offer” is “a response to a solicitation that, if accepted, would bind the offeror
to perform the resultant contract.” FAR 2.101. That means, in other words,
that a proposal is not an offer unless the government’s acceptance of it would
create a binding contract. 5

3
  NESW does not dispute that it was not registered in SAM when it submitted
its Phase I proposal.
4
   NESW has standing to challenge its exclusion from the agency’s
competitive range because it was an actual bidder and has alleged a “non-
trivial competitive injury.” Sys. Application & Techs., Inc. v. United States,
691 F.3d 1374, 1382 (Fed. Cir. 2012).
5
 The government only confuses the issue by reading the FAR’s definition of
an “offer” to include any response to a request for proposals. The second
sentence of the FAR’s definition does not provide an alternative definition
                                    5
       The creation of a binding government contract is largely controlled by
common-law legal principles. United States v. Winstar Corp., 518 U.S. 839,
895 (1996). Under those principles, an offer can form the basis of an
enforceable contract only if it is “sufficiently definite so that the major terms
and conditions are reasonably capable of ascertainment.” Penn-Ohio Steel
Corp. v. United States, 173 Ct. Cl. 1064, 1084 (1965). While that does not
mean that an offer must have certainty as to all terms, it does require a
“meeting of the minds on [all] essential terms,” which typically includes
price. Keehn v. United States, 110 Fed. Cl. 306, 327 (2013).

        Here, the Phase I proposals were not offers because they did not
include all the essential terms necessary to establish a binding contract.
Indeed, as the government conceded at oral argument, the Phase I proposals
could neither be accepted by the government nor produce a valid contract. 6
That is because the Phase I proposals only addressed corporate experience,
scenario, and capability—but not price, which was supplied during Phase II.
Thus, because the agency’s hypothetical acceptance of NESW’s Phase I
proposal would not establish a binding contract, its Phase I submission did
not satisfy the FAR’s definition of an “offer.”

        To be sure, there are cases where price is not an essential term, as
when the contractual consideration involves an exchange of services or
goods and not money, but this is not one of those cases. In fact, under this
solicitation, price was a critical aspect of each contractor’s proposal as the
agency anticipated using firm-fixed-price contracts. A firm-fixed-price
contract is a contract that “provides for a price that is not subject to any

but simply explains that—under the definition already provided—a proposal
is a type of solicitation response that can be an offer when its acceptance
would create an enforceable contract.
6
  The government’s briefing also acknowledged the insufficiency of the
Phase I proposals. See Def.’s Reply at 4 (“[NESW’s] ‘offer’ in this case
consists of its entire proposal . . . .”); id. at 5 (“In no situation could the
government accept a proposal or bind the offeror to perform on the basis of
only Volume V.”); id. at 7 (“This shows that all of the proposal volumes are
necessary for the agency to award a contract and bind an offeror.”); id. at 8
(“NESW is correct that the agency could not have awarded a contract on the
basis of Phase I proposals only . . . .”).
                                       6
adjustment on the basis of the contractor’s cost experience in performing the
contract.” FAR 16.202-1. In other words, the contractor’s price acts as a cap
and shifts “maximum risk and full responsibility for all costs and resulting
profit or loss.” Id. In this context, then, the offer must include a price. Keehn,
110 Fed. Cl. at 327.

       The agency’s solicitation is also consistent with this understanding of
an offer. As NESW points out, the solicitation explained that a contractor’s
submission of its price resulted in the submission of a legal offer:

       [Volume V (Price)] also shall include the following:

       1) Legal Offer: Identification and Cover Letter

              Legal Offer (Identification and Cover Letter): The
              proposal shall include a cover letter that identifies all
              enclosures being transmitted as part of the proposal. The
              letter shall reference the solicitation number and
              acknowledge that it transmits an offer in response to the
              solicitation. It shall state proposal validity through at
              least 12 months after the proposal submission deadline.

       2) All signed SF 33

              Blocks 13, 14, 15, 16, and 18 of page 1 of SF 33 shall
              be completed by contractors and Block 17 shall be
              digitally signed to show that the contractor has read and
              agrees to comply with all the conditions and instructions
              provided in the solicitation document.

AR 5481.

        NESW was thus unlawfully excluded from the agency’s competitive
range. Its proposal was not an offer until its Phase II submission, at which
point it was properly registered in SAM. 7

7
  Because we agree that the agency unlawfully excluded NESW under FAR
52.204-7, we need not consider NESW’s other arguments related to SAM
registration. As for NESW’s arguments about the agency’s evaluation of its
                                    7
          B. Injunctive Relief
        NESW seeks a permanent injunction. When a party seeks injunctive
relief, the “court must balance the competing claims of injury and must
consider the effect on each party of the granting or withholding of the
requested relief.” Winter v. Nat’l Res. Def. Council, 555 U.S. 7, 24 (2008).
In doing so, courts consider four factors: (1) whether the plaintiff succeeds
on the merits; (2) whether the plaintiff will suffer irreparable harm without
injunctive relief; (3) whether the “balance of hardships” favors the plaintiff;
and (4) whether the injunction is in the public’s interest. PGBA, LLC v.
United States, 389 F.3d 1219, 1228–29 (Fed. Cir. 2004). First, we have
already established NESW’s success on the merits.

       Second, NESW will suffer irreparable harm without intervention. A
“protestor suffers irreparable harm if it is deprived of the opportunity to
compete fairly for a contract.” FCN, Inc. v. United States, 115 Fed. Cl. 335,
384 (2014). The same is also true when a protestor will lose the profits it
could have obtained through the contract. Fed. Acquisition Servs. Team, LLC
v. United States, 124 Fed. Cl. 690, 708 (2016). Here, NESW’s unlawful
exclusion means that it will lose both potential profits and the opportunity to
compete.

        Next, we must “consider whether the balance of hardships leans in the
plaintiff’s favor.” Id. That task is not difficult, however, as the government
has not identified any harm that it will suffer from this injunction. Thus, the
balance of hardships favors NESW.

        Finally, the court must assess the public interest. In the government
contract context, the public has an “overriding . . . interest in preserving the
integrity of the federal procurement process by requiring government
officials to follow procurement statutes and regulations.” AshBritt, Inc. v.
United States, 87 Fed. Cl. 344, 379 (2009). Because the government
unlawfully excluded NESW, an injunction is in the public interest. Thus, the
agency is enjoined from awarding any contracts until it reconsiders whether
NESW should be included in the competitive range.

proposal, we believe that it would be unnecessary to address those issues in
the context of the current protest.
                                       8
   II. STGi’s Protest

         We now turn to our other consolidated protest, in which STGi mounts
a comprehensive attack against the agency’s exclusion of its proposal from
the competitive range. First, STGi argues that the agency unlawfully
analyzed price. Second, it argues that the agency conducted a flawed past
performance evaluation. And third, it believes that the agency unequally
engaged in discussions. In all these arguments, STGi faces an uphill battle as
it received low scores in the most important factors—corporate experience,
scenario, and capability—and, on that basis, was advised at the end of Phase
I that it was unlikely to receive an award. We address each argument in turn.

              A. Price Analysis
      STGi challenges the agency’s price analysis. First, it argues that the
agency failed to consider STGi’s “massive price savings” meaningfully. Pl.’s
MJAR at 18. Instead, it claims that the agency simply ranked STGi’s price
without explaining why the benefits presented by other proposals outweighed
STGi’s price savings.

        When a protestor challenges a negotiated procurement, it carries a
high burden because “the contracting officer engages in what is inherently a
judgmental process.” Galen Med. Assocs. v. United States, 369 F.3d 1324,
1330 (Fed. Cir. 2004). That burden is even higher when, as here, the contract
will be awarded on a “best value” basis in which the contracting officer has
“substantial discretion to determine which proposal represents the best value
for the government.” E.W. Bliss Co. v. United States, 77 F.3d 445, 449 (Fed.
Cir. 1996). Because of that substantial discretion, we will not interfere with
an agency’s decision over “[m]ere disagreement.” Blackwater Lodge &
Training Ctr. v. United States, 86 Fed. Cl. 488, 514 (2009). Rather, the
agency’s decision must instead be arbitrary, which will not be the case when
the “agency documents its . . . decision and includes the rationale for any
business judgments and tradeoffs made.” Price Gordon Servs. v. United
States, 139 Fed. Cl 27, 60 (2018).

       The record demonstrates that the agency reasonably considered the
price savings offered by STGi. Indeed, when the agency evaluated STGi’s
proposal, it expressly acknowledged that STGi’s proposal presented
“possible price savings.” AR 20171. Even so, the agency reiterated that price

                                      9
was the least important evaluation factor and went on to describe STGi’s
weaknesses. Considered altogether, the agency concluded that “STGi’s
pricing [did] not overcome the weaknesses and significant weaknesses
associated with their technical approach.” Id. Because the agency
documented the tradeoffs and reasonably determined that technical
superiority presented better value than price, we will not second guess that
decision. Price Gordon, 139 Fed. Cl. at 60.

        Second, STGi complains that the agency’s method for evaluating
price reasonableness was arbitrary because it failed to use any metrics or
thresholds for determining reasonableness. We disagree. The FAR gives
agencies considerable discretion when choosing a method for evaluating
price reasonableness. FAR 15.404-1(b)(2); see also 15.404-1(b)(2)(i)–(vii).
One acceptable method available to the government is a “[c]omparison of
proposed prices received in response to the solicitation” where “adequate
price competition establishes a fair and reasonable price.” 15.404-1(b)(2)(i).
In fact, the FAR prefers this method, 15.404-1(b)(3), and so there is no merit
to STGi’s charge that the agency’s method was arbitrary.

       Nor do we agree that the agency’s execution of that evaluation method
was unreasonable. The agency determined that adequate price competition
existed—a conclusion that STGi does not appear to dispute—and compared
the prices received. A percentage difference matrix does not make the
agency’s comparison unreasonable. “[T]he rule is that, to be found fair and
reasonable in comparison with other proposed prices, the price being
assessed either must be consistent with those other prices or favorably
compare with those other prices.” Newimar S.A. v. United States, 160 Fed.
Cl. 97, 135 (2022) (emphasis omitted). We fail to see how a percentage
difference matrix is an irrational tool for comparing prices.

        STGi’s reliance on Fluor Intercontinental v. United States is
misplaced. 147 Fed. Cl. 309 (2020). There, even though the agency had
received a “wide range in proposed prices,” it concluded that each awardee’s
price was reasonable by only determining that the lowest priced offer was
fair and reasonable, which it then compared to the next lowest price. Id. at
335–36. That approach failed to consider the wide disparity between the
prices. Id. at 336. The contracting officer then compounded that error when
her independent analysis simply compared the percentage difference
between each offeror and the two lowest prices. Id. Thus, the court concluded
                                      10
that the agency’s “bare comparison of percentage differentials in price,
without further analysis, [was] inadequate for purposes of conducting a
meaningful price reasonableness evaluation.” Id.

      STGi’s protest is dissimilar from Fluor. Here, the agency
acknowledged the disparity in prices and attributed those differences to the

                                                 AR 20156. We accept that
explanation as reasonable and uphold the agency’s decision. See Technatomy
Corp. v. United States, 144 Fed. Cl. 388, 390 (2019) (holding that the agency
conducted a meaningful price analysis, in part, because it provided a
sufficient explanation for price variation).

              B. Past Performance
        Next, STGi challenges the agency’s past performance evaluation.
First, it contends that the agency should have disregarded a defective past
performance questionnaire, relied solely on the corresponding CPARS
report, and then reevaluated STGi’s past performance.

        Challenging an agency’s past performance evaluation is a difficult
task. Overstreet Elec. Co. v. United States, 59 Fed. Cl. 99, 117 (2003).
Indeed, when the decision “at issue is a performance evaluation, the greatest
deference possible is given to the agency—what our Court has called a ‘triple
whammy of deference.’” Commissioning Sols. Global v. United States, 97
Fed. Cl. 1, 9 (2011). In that vein, agencies possess substantial discretion to
decide what past performance data is relevant and “may give unequal weight
or no weight at all to different contracts when the contracting officer views
one as more relevant than another.” Seaborn Health Care, Inc. v. United
States, 101 Fed. Cl. 42, 51 (2011) (cleaned up). A protestor, then, must show
that the agency had no rational basis for the assigned performance rating.
Overstreet Elec., 59 Fed. Cl. at 117.

       The record demonstrates that the agency had a rational basis for its
performance evaluation. The agency acknowledged that one of STGi’s
questionnaires contained a “minor inconsistency” but clarified that the
inconsistency had “no impact on the evaluation, the [evaluation team’s]
confidence, or the overall rating of the factor.” AR 20144 n.1. Instead, the

                                     11
agency explained that “the CPARS and [past performance questionnaire]
show[ed] performance [had] been inconsistent and vacillate[d] between
satisfactory (or above) performance and marginal performance, and often
performance AQLs were clearly not met.” AR 20145. Whether or not we
agree with the agency’s conclusion, its explanation is rational. See Torres
Adv. Enter. Sols. v. United States, 133 Fed. Cl. 496, 531 (2017) (“[T]he
court’s review is limited to ensuring that the evaluation was reasonable.”).

       Second, STGi argues that the agency was required to give it an
opportunity to respond to any adverse past performance information. Under
FAR 15.306, agencies must provide offerors an opportunity to address
adverse past performance information if that “information is the determining
factor preventing them from being placed within the competitive range.”
15.306(b)(1)(i). We agree with the government that STGi’s past performance
information was not the determining factor that excluded it from the
competitive range. The most important evaluation factors were corporate
experience, scenario, and capability—all of which were evaluated during
Phase I. Based on STGi’s scores for those factors, the agency recommended
that STGi not proceed to Phase II because it was unlikely to receive a contract
award. As a result, we are unconvinced that STGi’s past performance rating
was the reason for its exclusion.

              C. Discussions
       Finally, STGi argues that the agency unequally engaged in
discussions. In its view, the agency asked questions during some offerors’
Phase I oral presentations that gave those offerors a chance to address
weaknesses and omissions in their proposals. As a result, STGi believes that
those conversations amounted to discussions. The government responds,
however, that these conversations were nothing more than clarifications.

       Discussions are an exchange between the government and an offeror
that typically “allow[] the offer to revise its proposal.” 15.306(d). While the
“scope and extent of discussions are a matter of contracting officer
judgment,” their ultimate purpose it to “maximize the government’s ability
to obtain the [best] value.” 15.306(d)(2)–(3). When an agency uses
discussions, it must engage in them “with each offeror in the competitive
range.” 15.306(d)(1). To not do so would give an “unfair advantage” to any
offeror who had the opportunity to participate in discussions. Info. Tech. &
                                      12
Applications Corp. v. United States, 316 F.3d 1312, 1320 (Fed. Cir. 2003)
(ITAC).

       Clarifications, on the other hand, are “limited exchanges” that only
allow offerors to “clarify certain aspects of proposals.” 15.306(a)(1)–(2).
Those aspects include “the relevance of an offeror’s past performance
information and adverse past performance information to which the offeror
has not previously had an opportunity to respond.” 15.306(a)(2). They can
also be used to correct “minor or clerical errors.” Id. Most important, though,
at least for our purposes, is that, “unlike discussions, the government is
permitted to engage in clarifications with fewer than all offers.” ENGlobal
Gov’t Servs. v. United States, 159 Fed. Cl. 744, 765 (2022).

       The line that distinguishes between discussions and clarifications—or
the “acid test,” as this court has also called it—is whether “an agency
afforded an offeror the opportunity to revise or modify its proposal.” Id. A
proposal revision, however, is not simply an exchange of relevant or even
“essential” information, as any “meaningful clarification would require the
provision of information.” ITAC, 316 F.3d at 1323. Instead, the change to the
proposal must be substantive. See Galen Med. Assocs. v. United States, 369
F.3d 1324, 1332 (Fed. Cir. 2004). And in close cases, we must defer to “an
agency’s reasonable interpretation” of the challenged exchange. ENGlobal,
159 Fed. Cl. at 766.

       Here, the agency’s communications did not allow offerors to
substantively revise their proposals. For example, STGi points to the
following exchange between the agency and      :

       Ian Somppi:

       Can you – I may have missed it – but can you guys clarify your
       experience with collaborative practice agreements?

                                      13
       ...

       Ian Somppi:

       Great, thank you.

AR 9738–39 (transcript edited for readability). Nothing in this dialogue—or
any other—allowed the bidder to revise its proposal. Thus, the agency did
not conduct discussions during the Phase I oral presentations.

       We have considered STGi’s remaining arguments, and we are
unpersuaded by them. Because STGi has not succeeded on the merits of its
claim, we need not discuss whether it is entitled to injunctive relief.

                              CONCLUSION

        In sum, NESW has shown that it was properly registered in SAM
when it submitted its Phase II proposal and was therefore unlawfully
excluded from the agency’s competitive range. Because that ground is
sufficient to sustain its protest, we do not address its remaining arguments.
Conversely, STGi has not demonstrated that the agency’s evaluation of its
proposal was arbitrary, capricious, or otherwise not in accordance with law.
We order the following:

       1. NESW’s motion for judgment on the administrative record is
          granted (Case No. 23-175).

       2. STGi’s motion for judgment on the administrative record is denied
          (Case No. 23-47).

       3. The government’s motion for judgment on the administrative
          record as to NESW is denied.

                                     14
4. The government’s motion for judgment on the administrative
   record as to STGi is granted.

5. The agency is enjoined from awarding any contracts until it
   considers whether NESW should be included in the competitive
   range.

6. The Clerk of Court shall enter judgment in each case accordingly.

                                  s/Eric G. Bruggink
                                  ERIC G. BRUGGINK
                                  Senior Judge

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