Court Opinion

ID: 4650404
Source: CourtListenerOpinion
Date Created: 2021-01-11 16:00:50.863808+00
Date Added: 2024-06-11T08:01:32.903803
License: Public Domain

Case: 20-1230    Document: 61     Page: 1   Filed: 01/11/2021

        NOTE: This disposition is nonprecedential.

   United States Court of Appeals
       for the Federal Circuit
                  ______________________

           LAND SHARK SHREDDING, LLC,
                 Plaintiff-Appellant

                             v.

                    UNITED STATES,
                    Defendant-Appellee
                  ______________________

                        2020-1230
                  ______________________

    Appeal from the United States Court of Federal Claims
 in No. 1:18-cv-01568-PEC, Judge Patricia E. Campbell-
 Smith.
                  ______________________

                Decided: January 11, 2021
                 ______________________

     JOSEPH ANTHONY WHITCOMB, Whitcomb, Selinsky, PC,
 Denver, CO, argued for plaintiff-appellant. Also repre-
 sented by JOEL L. HAMNER.

     SEAN LYNDEN KING, Commercial Litigation Branch,
 Civil Division, United States Department of Justice, Wash-
 ington, DC, argued for defendant-appellee. Also repre-
 sented by JEFFREY B. CLARK, ROBERT EDWARD KIRSCHMAN,
 JR., DOUGLAS K. MICKLE; NATICA CHAPMAN NEELY, Office
Case: 20-1230     Document: 61     Page: 2    Filed: 01/11/2021

 2               LAND SHARK SHREDDING, LLC   v. UNITED STATES

 of General Counsel, United States Department of Veterans
 Affairs, Portland, OR.
                  ______________________

     Before PROST, Chief Judge, REYNA and HUGHES, Circuit
                            Judges.
 HUGHES, Circuit Judge.
     The Department of Veterans Affairs awarded a govern-
 ment contract to a party other than Appellant Land Shark
 Shredding. After Land Shark protested, the Court of Fed-
 eral Claims held that the government’s rejection of Land
 Shark’s bid was not arbitrary, capricious, or an abuse of
 discretion. Because the decision to award the solicitation
 to a contractor other than Land Shark had a rational basis
 and was not a violation of regulation or procedure, we af-
 firm.
                               I
     Land Shark Shredding, LLC is a service-disabled vet-
 eran-owned small business (SDVOSB) that bid unsuccess-
 fully on a contract for shredding and pill-bottle destruction
 services at VA facilities in Miami, Florida, and the sur-
 rounding area.
     In August 2018, the VA issued the solicitation at issue
 using the General Services Administration (GSA) Federal
 Supply Schedule (FSS) program to solicit bids. The FSS
 “provides Federal agencies with a simplified process for ob-
 taining commercial supplies and services at prices associ-
 ated with volume buying.” 48 C.F.R. § 8.402(a). Under the
 FSS, a contractor publishes an “Authorized [FSS] Pricelist”
 containing the pricing and the terms and conditions for the
 supplies or services that the contractor offers.
 48 C.F.R. § 8.402(b). The VA used the GSA’s electronic Re-
 quest for Quotation system, “eBuy,” to post requirements
 and obtain quotes on its solicitation.
Case: 20-1230    Document: 61      Page: 3      Filed: 01/11/2021

 LAND SHARK SHREDDING, LLC   v. UNITED STATES                 3

     38 U.S.C. § 8127(d) requires that the VA provide cer-
 tain preferences to veteran-owned small businesses in its
 award of contracts:
     [A] contracting officer of the Department shall
     award contracts on the basis of competition re-
     stricted to small business concerns owned and con-
     trolled by veterans or small business concerns
     owned and controlled by veterans with service-con-
     nected disabilities if the contracting officer has a
     reasonable expectation that two or more small
     business concerns owned and controlled by veter-
     ans or small business concerns owned and con-
     trolled by veterans with service-connected
     disabilities will submit offers and that the award
     can be made at a fair and reasonable price that of-
     fers best value to the United States.
     The contracting officer’s triggering determination is re-
 ferred to as the “Rule of Two” because of the requirement
 that the officer consider whether two or more businesses
 from the respective categories of veteran-owned small busi-
 nesses (VOSBs) or SDVOSBs will submit reasonable offers.
     Here, the contracting officer performed initial research
 through the FSS and identified three SDVOSBs, four
 VOSBs, thirty-seven small businesses, and seven large
 businesses that were “potentially capable” of providing con-
 tract services. J.A. 283. The contracting officer then per-
 formed further market research by publishing a formal
 request for information in the GSA system. Three busi-
 nesses responded to this request: Land Shark and two
 small businesses. J.A. 627.
     The contracting officer then issued the solicitation as
 an “[SDVOSB] set-aside with Small Business [s]et-aside
 using a tiered or cascading order of precedence.” Land
 Shark Shredding, LLC v. United States, 145 Fed. Cl. 338,
 342 (2019) (Decision). All businesses could bid on the solic-
 itation, but the solicitation instructed that offers would be
Case: 20-1230     Document: 61      Page: 4   Filed: 01/11/2021

 4               LAND SHARK SHREDDING, LLC    v. UNITED STATES

 evaluated in tier order: (1) SDVOSBs, (2) VOSBs, (3) small
 businesses, and (4) all other businesses. Id.
     Three businesses submitted bids on the solicitation:
 Land Shark, SafeGuard Document Destruction Inc. (Safe-
 Guard), which qualified as a small business, and a large
 business. Land Shark bid a total price of $2,819,101.20
 over the five years of the contract. Id. at 343. SafeGuard
 bid a total of $474,034.80 over the five years, and the large
 business bid slightly more than SafeGuard. Id. The inde-
 pendent government cost estimate (IGCE) for the contract
 was $490,000 over the five years. Id. Thus, Land Shark’s
 bid was more than five times SafeGuard’s bid and the
 IGCE.
     The VA determined that Land Shark’s bid was not rea-
 sonable and awarded the contract to SafeGuard instead.
 Id. Land Shark filed a bid protest in the Court of Federal
 Claims, arguing among other things that the contract was
 an SDVOSB set-aside that should have been awarded to
 Land Shark as the only SDVOSB that bid. The trial court
 entered judgment on the administrative record in favor of
 the United States which Land Shark now appeals.
                               II
      “Whether a party has standing to sue is a question of
 law that we review de novo.” Rex Serv. Corp. v. United
 States, 448 F.3d 1305, 1307 (Fed. Cir. 2006). A grant of
 judgment on the administrative record is a legal question
 that we review without deference. Bannum, Inc. v. United
 States, 404 F.3d 1346, 1351 (Fed. Cir. 2005). We apply “the
 Administrative Procedure Act standard of review . . . to all
 procurement protest cases in the Court of Federal Claims.”
 Impresa Construzioni Geom. Domenico Garufi v. United
 States, 238 F.3d 1324, 1332 (Fed. Cir. 2001) (quoting H.R.
 Rep. No. 104-841, at 10 (1996) (Conf. Rep.)). “[A] bid award
 may be set aside if either: (1) the procurement official’s de-
 cision lacked a rational basis; or (2) the procurement pro-
 cedure involved a violation of regulation or procedure.” Id.
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 LAND SHARK SHREDDING, LLC    v. UNITED STATES                 5

                               III
      The government argues that Land Shark lacked stand-
 ing to bring a bid protest claim under the U.S. Constitution
 and under the Tucker Act, 28 U.S.C. § 1491(b)(1). The
 Court of Federal Claims is established under Article I of
 the Constitution, but it “applies the same standing require-
 ments enforced by other federal courts created under Arti-
 cle III.” Weeks Marine, Inc. v. United States, 575 F.3d 1352,
 1359 (Fed. Cir. 2009) (quoting Anderson v. United States,
 344 F.3d 1343, 1350 n.1 (Fed. Cir. 2003)).
     Article III standing requires that a plaintiff have: “(1)
 suffered an injury in fact, (2) that is fairly traceable to the
 challenged conduct of the defendant, and (3) that is likely
 to be redressed by a favorable judicial decision.” Spokeo,
 Inc. v. Robins, 136 S. Ct. 1540, 1547 (2016). Additionally,
 the plaintiff must “fall[] within the class of plaintiffs whom
 Congress has authorized to sue” under the statute.
 Lexmark Int’l, Inc. v. Static Control Components, Inc., 572
 U.S. 118, 128 (2014).
     The government argues that Land Shark cannot estab-
 lish that it has suffered an actual injury that would satisfy
 Article III and that would give the Court of Federal Claims
 jurisdiction over its bid protest claim as defined by the
 Tucker Act. The Tucker Act grants the Court of Federal
 Claims “jurisdiction to render judgment on an action by an
 interested party objecting to a solicitation by a Federal
 agency for bids or proposals for a proposed contract or to a
 proposed award or the award of a contract.” 28 U.S.C.
 § 1491(b)(1).
     “[T]o come within the Court of Federal Claims’s
 § 1491(b)(1) bid protest jurisdiction, [the plaintiff] is re-
 quired to establish that it (1) is an actual or prospective
 bidder and (2) possess[es] the requisite direct economic in-
 terest.” Weeks Marine, 575 F.3d at 1359 (quoting Rex Serv.
 Corp., 448 F.3d at 1308) (alteration in original). “[T]o prove
 a direct economic interest as a putative prospective bidder,
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 6               LAND SHARK SHREDDING, LLC    v. UNITED STATES

 [the bidder] is required to establish that it had a ‘substan-
 tial chance’ of receiving the contract.” Id. (quoting Rex
 Serv. Corp., 448 F.3d at 1308) (second alteration in origi-
 nal).
     The government argues that Land Shark did not have
 a substantial chance of winning the contract award be-
 cause Land Shark’s bid exceeded the VA’s designated fund-
 ing for the contract, and because an award to Land Shark
 would have violated the Anti-Deficiency Act provision dis-
 allowing contracting officers from authorizing expendi-
 tures that exceed appropriated amounts. See 31 U.S.C.
 § 1341(a)(1)(A).
      To counter, Land Shark argues that it had a substan-
 tial chance of winning the contract based on the Rule of
 Two. Because this contract was allegedly set aside for
 SDVOSBs under the Rule of Two, and because Land Shark
 was the only SDVOSB bidder, Land Shark argues that the
 government was required to award the contract to Land
 Shark.
      We decline to establish a bright line rule that a bid in
 excess of an agency’s targeted allocation per se fails the di-
 rect economic interest prong of § 1491(b)(1) bid protest ju-
 risdiction. While there may be scenarios in which an
 offeror’s bid is so high that the contractor lacks a substan-
 tial chance of receiving the contract, simply exceeding the
 target allocation is not enough. A contractor who bids
 above an agency’s target may nevertheless maintain a sub-
 stantial chance of receiving the contract. On the facts of
 this case, Land Shark has advanced a good-faith argument
 that it would have been awarded the contract absent errors
 in legal interpretation. Without considering the merits at
 this preliminary stage, Land Shark maintained a substan-
 tial chance of winning the contract and was therefore an
 interested party under the Tucker Act.
     Because we hold that a bid in excess of a targeted allo-
 cation does not per se mean that the bidding party lacks
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 LAND SHARK SHREDDING, LLC    v. UNITED STATES                 7

 standing to file a bid protest claim in the Court of Federal
 Claims, and because Land Shark had a substantial chance
 of receiving the contract as the only SDVOSB to bid on the
 solicitation, we conclude that Land Shark had standing to
 protest the award of the contract and proceed to the merits.
                               IV
     The Rule of Two requires that competition be restricted
 to SDVOSBs or VOSBs “if the contracting officer has a rea-
 sonable expectation that two or more [SDVOSBs or
 VOSBs] will submit offers and that the award can be made
 at a fair and reasonable price that offers best value to the
 United States.” 38 U.S.C. § 8127(d). If the Rule of Two was
 satisfied, § 8127(d) makes clear that the contracting officer
 should have issued the solicitation as an SDVOSB or VOSB
 set-aside. See Kingdomware Techs., Inc. v. United States,
 136 S. Ct. 1969, 1977 (2016) (“When a statute distinguishes
 between ‘may’ and ‘shall,’ it is generally clear that ‘shall’
 imposes a mandatory duty”).
      Land Shark argues that the Rule of Two was satisfied
 here. First, Land Shark argues that the contracting officer
 had a reasonable expectation that two or more SDVOSBs
 would bid on the solicitation by virtue of the contracting
 officer’s initial determination that three SDVOSBs could
 potentially bid. Second, Land Shark argues that its prices
 were fair and reasonable because they were published on
 the FSS and because 48 C.F.R. § 8.404(d) states that “GSA
 has already determined the prices of supplies and fixed-
 price services, and rates for services offered at hourly rates,
 under [FSS] contracts to be fair and reasonable.”
     We disagree with Land Shark on both counts. The con-
 tracting officer’s initial research identifying three
 SDVOSBs that could potentially bid on the solicitation did
 not create a reasonable expectation that two or more of the
 SDVOSBs would submit offers. In an effort to learn more
 about who was likely to bid, the officer published a formal
 request for information about potential bidders. Only one
Case: 20-1230     Document: 61      Page: 8    Filed: 01/11/2021

 8               LAND SHARK SHREDDING, LLC    v. UNITED STATES

 SDVOSB (Land Shark) and no VOSBs responded to this
 request. In response to this research, the contracting of-
 ficer chose to solicit bids using a tiered order of precedence,
 a “procedure used in negotiated acquisitions when market
 research is inconclusive for justifying limiting competition
 to small business concerns or sub-categories of small busi-
 ness concerns.” J.A. 352. Thus, the contracting officer ap-
 parently determined that the market research was
 inconclusive as to whether two or more SDVOSBs were
 likely to bid.
     Furthermore, nothing requires the contracting officer
 to defer to the FSS in making the determination that an
 award could be made at fair and reasonable prices that of-
 fer the best value to the United States. 48 C.F.R.
 § 8.404(d), the same section that Land Shark cites as cre-
 ating a presumption of reasonableness, states that “order-
 ing activities are not required to make a separate
 determination of fair and reasonable pricing, except for a
 price evaluation as required by 8.405-2(d).” The fact that
 a separate determination is not required does not mean
 that it cannot be performed, and in any event, such an anal-
 ysis is required here under 48 C.F.R. § 8.405-2(d). (“The
 ordering activity shall evaluate all responses received us-
 ing the evaluation criteria provided to the schedule con-
 tractors. . . . [and] [p]lace the order with the schedule
 contractor that represents the best value.”)
     We agree with the trial court that the Rule of Two was
 not met here and the solicitation was not issued as a full
 SDVOSB set-aside. The fact that the contracting officer
 chose to issue the solicitation as a tiered order of prece-
 dence solicitation does not change this and did not obligate
 the officer to choose Land Shark, particularly where Land
 Shark bid more than five times as much as the low bidder
 and the IGCE. Because the contracting officer’s actions
 were not an abuse of discretion, it was not error to award
 the contract to a party other than Land Shark.
Case: 20-1230     Document: 61      Page: 9      Filed: 01/11/2021

 LAND SHARK SHREDDING, LLC    v. UNITED STATES                 9

     Land Shark also argues that the use of a tiered order
 of precedence by the VA violated 38 U.S.C. § 8127(d). We
 agree with the trial court that Land Shark has forfeited
 this argument by not raising it at the time that the pro-
 curement was issued. See Blue & Gold Fleet, L.P. v. United
 States, 492 F.3d 1308, 1313 (Fed. Cir. 2007) (“[A] party who
 has the opportunity to object to the terms of a government
 solicitation containing a patent error and fails to do so 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.”). We also agree with the trial
 court that “[e]ven if the argument were not waived . . . the
 VA’s cascading tiers of preference scheme, as applied in
 this procurement, does not offend either Kingdomware or
 section 8127(d).” Decision, 145 Fed. Cl. at 347.
                               V
     We have considered the parties’ remaining arguments
 and find them unpersuasive. Because the procurement of-
 ficer’s decision to award the solicitation to a contractor
 other than Land Shark had a rational basis and was not a
 violation of regulation or procedure, we affirm the Court of
 Federal Claims’ decision.
                         AFFIRMED