Court Opinion

ID: 4383170
Source: CourtListenerOpinion
Date Created: 2019-04-02 16:00:32.864826+00
Date Added: 2024-06-11T14:22:46.737460
License: Public Domain

United States Court of Appeals
      for the Federal Circuit
                 ______________________

     VETERANS CONTRACTING GROUP, INC.,
               Plaintiff-Appellant

                            v.

                   UNITED STATES,
                   Defendant-Appellee
                 ______________________

                       2018-1409
                 ______________________

    Appeal from the United States Court of Federal Claims
in No. 2:17-cv-1015C, Judge Charles F. Lettow.
                 ______________________

                 Decided: April 2, 2019
                 ______________________

    JOSEPH ANTHONY WHITCOMB, Whitcomb, Selinsky,
McAuliffe, PC, Denver, CO, argued for plaintiff-appellant.
Also represented by ANDREW R. NEWELL.

     STEVEN MICHAEL MAGER, Commercial Litigation
Branch, Civil Division, United States Department of Jus-
tice, Washington, DC, argued for defendant-appellee. Also
represented by JOSEPH H. HUNT, ROBERT E. KIRSCHMAN,
JR., ALLISON KIDD-MILLER, KARA M. WESTERCAMP.
                 ______________________

    Before LOURIE, DYK, and HUGHES, Circuit Judges.
2             VETERANS CONTRACTING GROUP v. UNITED STATES

    Opinion for the court filed by Circuit Judge HUGHES.
       Dissenting opinion filed by Circuit Judge DYK.
HUGHES, Circuit Judge.
    Veterans Contracting Group, Inc., appeals from a deci-
sion of the United States Court of Federal Claims holding
that the Department of Veterans Affairs did not act arbi-
trarily or capriciously when it cancelled a roof replacement
solicitation set aside for service-disabled veteran-owned
small businesses. Because the contracting officer acted ra-
tionally in requesting cancellation based on the record be-
fore him, we affirm.
                             I
                            A.
    The government sets aside certain contracting oppor-
tunities for service-disabled veteran-owned small busi-
nesses (SDVOSBs). See Kingdomware Techs., Inc. v.
United States, 136 S. Ct. 1969, 1973 (2016). Two agencies
are responsible for managing procurements on SDVOSB
set-aside contracts: the Department of Veterans Affairs
(VA) and the Small Business Administration (SBA). The
VA regulates its own procurements, while the SBA regu-
lates the procurements of all other agencies. Although the
VA and the SBA systems overlap in many respects, they
are governed by different statutory provisions.        See
38 U.S.C. § 8127 (VA); 15 U.S.C. § 657f (SBA). This appeal
concerns the system run by the VA.
    Under VA regulations, a business may only compete for
SDVOSB set-aside contracts if it has registered with the
VA’s Center for Verification and Evaluation.            See
38 U.S.C. §§ 8127(e)–(f); 38 C.F.R. §§ 74.11, 74.20. If the
Center determines that a business qualifies as an
SDVOSB, it adds that business to a centralized database
called VetBiz.         See 38 U.S.C. §§ 8127(e)–(f);
48 C.F.R. § 804.1102; 38 C.F.R. §§ 74.11, 74.20. During
VETERANS CONTRACTING GROUP v. UNITED STATES               3

procurement, contracting officers can only consider bids
submitted by businesses listed on VetBiz.               See
38 U.S.C. § 8127(e); 48 C.F.R. § 804.1102. If the business
is not in the database when bidding closes, the contracting
officer cannot consider its bid. See 38 U.S.C. § 8127(e);
48 C.F.R. § 804.1102.
     A business is eligible to compete for SDVOSB contracts
if one or more veterans “unconditionally” own a majority
interest in the company. See 38 C.F.R. § 74.2(a) (VA); see
also 13 C.F.R. § 125.12 (SBA). In 2017, the VA and the
SBA applied different definitions of “unconditional” owner-
ship. 1 According to the VA, ownership was unconditional
if it was free from “arrangements causing or potentially
causing ownership benefits to go to another.”            See
38 C.F.R. § 74.3(b) (2017). The VA exempted arrange-
ments conditioned “after death or incapacity” from this lim-
itation. See id. The SBA, on the other hand, disallowed
any limitations on a veteran’s ownership interest—includ-
ing those premised on death or incapacity. See Matter of
The Wexford Grp., Int’l, Inc., SBA No. SDV-105, 2006 WL
4726737, at *6, *9–10 (June 29, 2006).
    Even after the Center makes the initial determination
that a business qualifies as an SDVOSB, eligibility contin-
ues to remain relevant. Verified businesses have an ongo-
ing obligation to maintain their status, and the Center may
remove any business which fails to comply with this obli-
gation. See 38 C.F.R. §§ 74.15(b), (e). Generally, a busi-
ness is entitled to notice and an opportunity to respond
before the Center effects removal. See id. § 74.22. The reg-
ulations existing in 2017, however, provided for one narrow

   1    The VA and SBA recently aligned their regulations
regarding unconditional ownership. See Ownership and
Control of Service-Disabled Veteran-Owned Small Busi-
ness Concerns, 83 Fed. Reg. 48,908 (Oct. 1, 2018) (codified
at 13 C.F.R. § 125).
4             VETERANS CONTRACTING GROUP v. UNITED STATES

circumstance under which the VA had to immediately re-
move a business from VetBiz: upon notice from the SBA
that it has found the business ineligible to compete in its
system. See id. § 74.2(e) (2017). The regulation provided
the Center with no discretion with respect to removal in
this scenario. See id.
                              B.
     Ronald Montano, a service-disabled veteran, owns 51%
of Veterans Contracting Group, Inc. (VCG). His ownership
interest is subject to limitations in the event of his death or
incapacity. In 2013, the Center determined that VCG qual-
ified as an SDVOSB under the VA system and added VCG
to VetBiz. The Center reaffirmed VCG’s status each year
until 2017.
     On January 5, 2017, VCG learned that it was the low-
est bidder on an SDVOSB set-aside contract issued by an
agency working with the SBA. The second lowest bidder
filed a bid protest challenging VCG’s eligibility to compete
for the contract. The SBA ultimately determined that, be-
cause of the limitations on his ownership interest in the
event of his death or incapacity, Mr. Montano did not “un-
conditionally” own his interest in VCG. As a result, VCG
did not qualify as an SDVOSB under the SBA system. The
SBA informed the VA of its decision on July 18, 2017. Be-
cause VA regulations required the Center to remove any
business found ineligible in an SBA proceeding, see
38 C.F.R. § 74.2(e) (2017), the VA removed VCG from Vet-
Biz on July 21, 2017.
    Before VCG’s removal from VetBiz, the VA had issued
solicitations for bids in two SDVOSB set-aside contracts,
one for a roof replacement and one for a relocation effort.
The application deadline for the roof replacement solicita-
tion was July 28, 2017. The application deadline for the
VETERANS CONTRACTING GROUP v. UNITED STATES                5

relocation contract was August 2, 2017. 2 Realizing that
bidding might close on these solicitations before it finished
litigating its status as an SDVOSB, VCG sent the VA a let-
ter on July 26, 2017, expressing its intent to seek a prelim-
inary injunction.       Although VCG’s letter repeatedly
referenced the relocation solicitation, it failed to mention
the roof replacement solicitation. 3
    On July 28, 2017, hours before the 9:00 am deadline on
the roof replacement solicitation, VCG filed a bid protest in
the Court of Federal Claims. VCG did not request a tem-
porary restraining order or injunctive relief in its com-
plaint.
     That same day, the contracting officer opened bids for
the roof replacement solicitation. The lowest responsive
bidder had proposed a cost 30% higher than the govern-
ment’s estimate. VCG had submitted a bid closer to the
government’s projected cost, but the contracting officer
could not consider its bid because VCG was not listed in the
VetBiz database on the day bidding closed.               See
38 U.S.C. § 8127(e). Given the absence of any reasonable
bids, the contracting officer drafted an email on August 1,
2017, recommending cancellation and reposting of the so-
licitation.
    On August 5, 2017, five days after the contracting of-
ficer sought cancellation, VCG moved for a preliminary in-
junction on the roof replacement solicitation. On August
11, 2017, the VA informed the Court of Federal Claims of
its intent to cancel the solicitation pursuant to

    2   The government later extended this deadline be-
cause of VCG’s bid protest.
    3   Because VCG misspelled the email address of the
bid protest division of the Department of Justice, the gov-
ernment disputes receipt of this letter. See Resp. Br. 5.
6             VETERANS CONTRACTING GROUP v. UNITED STATES

48 C.F.R. § 14.404-1(c)(6), which permits cancellation
when “[a]ll otherwise acceptable bids received are at un-
reasonable prices.” The VA finalized cancellation on Au-
gust 22, 2017. Hours later, the Court of Federal Claims
granted VCG a preliminary injunction restoring it to Vet-
Biz. 4 See Veterans Contracting Grp., Inc., v. United States,
133 Fed. Cl. 613, 624 (2017) (VCG I). In its decision, the
court specifically declined to address relief related to the
roof replacement solicitation “[b]ecause the government
has stated that the roofing solicitation is in the process of
being cancelled and reissued,” thereby rendering VCG’s
“claim with respect to that solicitation . . . moot.” Id. at 624
n.11.
     The Court of Federal Claims ultimately made the in-
junction permanent. See Veterans Contracting Grp., Inc.,
v. United States, 135 Fed. Cl. 610, 619 (2017) (VCG II). The
court reasoned that, because the SBA and VA regulations
had differed at that time on whether contingencies for
death or incapacity would disqualify a business from
SDVOSB status, the VA had acted arbitrarily and capri-
ciously when it applied 38 C.F.R. § 74.2(e) in a mechanical
manner. See id. at 618–19. The court, however, rejected
VCG’s claim that the contracting officer had acted arbitrar-
ily and capriciously in cancelling the roof replacement so-
licitation. 5 See id. at 619–20. It noted that the contracting
officer had followed normal procurement procedures. Id. at

    4   The preliminary injunction only restored VCG to
VetBiz prospectively. Restoration thus did not change
VCG’s eligibility as of the July 28 application deadline for
the roof replacement solicitation.
    5    Following cancellation of the roof replacement so-
licitation, VCG amended its complaint to challenge that de-
cision.
VETERANS CONTRACTING GROUP v. UNITED STATES                  7

619. Based on the information available to him at the time,
he rationally determined that the government had not re-
ceived any reasonable bids. Id. Because he could not have
known that the Center had improperly removed VCG from
VetBiz, the court held that the contracting officer’s decision
to cancel the solicitation was not arbitrary or capricious.
See id. at 619–20.
    VCG appeals the denial of its claim that the cancella-
tion of the roof replacement solicitation was arbitrary and
capricious.     We have jurisdiction under 28 U.S.C.
§ 1295(a)(3).
                              II
     We review the legal determinations of the Court of Fed-
eral Claims de novo and any underlying factual findings for
clear error. Palladian Partners, Inc. v. United States, 783
F.3d 1243, 1252 (Fed. Cir. 2015). In a bid protest, we follow
Administrative Procedure Act § 706 and set aside agency
action “if it is arbitrary, capricious, an abuse of discretion,
or otherwise not in accordance with law.” Id. A procure-
ment decision fails under § 706 if “(1) the procurement of-
ficial’s decision lacked a rational basis; or (2) the
procurement procedure involved a violation of regulation
or procedure.” Id. (internal quotation marks omitted)
(quoting Savantage Fin. Servs. v. United States, 595 F.3d
1282, 1285–86 (Fed. Cir. 2010)).
                              A.
    We first address whether the contracting officer’s deci-
sion to cancel the roof replacement solicitation lacked any
rational basis. 6 VCG contends that the VA should have

    6   VCG also argues that the contracting officer vio-
lated procurement procedures when he requested cancella-
tion. The only support it offers, however, is that the
contracting officer “should never have opened the bids in the
8            VETERANS CONTRACTING GROUP v. UNITED STATES

held the solicitation open pending resolution of its suit be-
cause it was the lowest bidder. It argues that cancellation
was irrational and subverted the government’s statutory
duty to award contracts to SDVOSBs. In response, the gov-
ernment asserts that the contracting officer rationally can-
celled the solicitation based on the compelling reason that
he had received no reasonable responsive and responsible
bids.
     The government has a duty to conduct fair procure-
ments. See Parcel 49C Ltd. P’ship v. United States, 31 F.3d
1147, 1152 (Fed. Cir. 1994). An agency violates this duty
“if its consideration of offers is found to be ‘arbitrary and
capricious toward the bidder-claimant.’” Cent. Ark. Maint.,
Inc. v. United States, 68 F.3d 1338, 1341 (Fed. Cir. 1995)
(quoting Keco Indus., Inc. v. United States, 492 F.2d 1200,
1203 (Ct. Cl. 1974)). A bidder-claimant carries the burden
of demonstrating that an agency acted arbitrarily and ca-
priciously during procurement. See Parcel 49C, 31 F.3d at
1153. To meet this burden, a bidder-claimant generally
must show that the procurement decision lacked a “proper
legal basis.” See id. at 1154.
     In Parcel 49C, for example, Parcel 49C met its burden
of proof by showing that the government had “no rational
basis” for cancelling a solicitation. Id. at 1153. It intro-
duced overwhelming evidence that the rationale offered by
the agency for cancellation was “merely a pretext for ac-
commodating FCC’s displeasure with the selection of Par-
cel 49C.” Id. at 1151. The record showed that the agency’s
actual motivation was the hope of avoiding “a move to the
less desirable southwest quadrant of Washington, D.C.”
Id. at 1153. Because the government cannot cancel a

first place.” Pet. Br. 14–15 (emphasis in original). Because
VCG has waived the bid opening issue on appeal, see infra
Part II B., we do not address this challenge.
VETERANS CONTRACTING GROUP v. UNITED STATES                 9

solicitation solely to satisfy an agency’s whim, we held that
the cancellation was arbitrary and capricious. Id. at 1153–
54.
    Unlike the plaintiff in Parcel 49C, VCG has not shown
that the contracting officer lacked any rational basis for
cancelling the roof replacement solicitation. First, the rec-
ord discloses a reasonable motivation for cancellation.
While cancellation after bids have been opened is generally
disfavored, a solicitation may be cancelled if “there is a
compelling reason to reject all bids and cancel the invita-
tion.” 48 C.F.R. § 14.404-1(a)(1). A compelling reason may
exist when “[a]ll otherwise acceptable bids received are at
unreasonable prices.” Id. § 14.404-1(c)(6). VCG’s bid was
not acceptable because VCG was not listed in the VetBiz
database when bidding closed. See 38 U.S.C. § 8127(e).
The only two acceptable bids proposed costs significantly
higher than the government’s estimate for the project.
Thus, the contracting officer rationally determined that
these prices were unreasonable. Under the circumstances,
he had a compelling reason to request cancellation.
     Second, there is no indication that this reason was a
mere pretext to cover an improper motivation. Although
VCG alleges that the contracting officer intended to sub-
vert the government’s statutory duties to SDVOSBs, it has
offered no evidence that the contracting officer knew the
Center had wrongfully removed VCG from VetBiz when he
requested cancellation of the solicitation. VCG’s July 26
letter to the VA only referred to the relocation solicitation
and did not mention the roof replacement solicitation. It
thus could not provide notice of VCG’s intent to seek in-
junctive relief with respect to roof replacement solicitation.
While the act of filing a bid protest on July 28 may have
given the contracting officer some indication that VCG dis-
puted its status, VCG’s initial complaint requested no form
of injunctive relief. VCG only moved for a preliminary in-
junction on August 5—eight days after bidding on the so-
licitation had closed and four days after the contracting
10           VETERANS CONTRACTING GROUP v. UNITED STATES

officer had first requested cancellation. In other words,
when the contracting officer requested cancellation, he had
no reason to expect the court would impose any limitations
on his exercise of discretion. Moreover, because the Court
of Federal Claims did not grant VCG’s motion until after
the solicitation had been fully cancelled, see VCG I, 133
Fed. Cl. at 624, nothing prevented the contracting officer
from continuing to pursue cancellation once VCG moved for
a preliminary injunction.
     We also find it significant that, until the Court of Fed-
eral Claims granted judgment on the administrative record
on December 15, 2017, the government had not conceded
that the Center had acted arbitrarily and capriciously in
removing VCG from VetBiz. Instead, it maintained that
the Center had acted rationally given applicable regulatory
guidelines. See 38 C.F.R. § 74.2(e) (2017). A contracting
officer must act in consideration of circumstances as they
exist at the time of his decision. See Bowman Transp., Inc.
v. Ark.-Best Freight Sys., Inc., 419 U.S. 281, 285 (1974) (ex-
plaining that “[t]he agency must articulate a ‘rational con-
nection between the facts found and the choice made’”
(emphasis added) (quoting Burlington Truck Lines v.
United States, 371 U.S. 156, 168 (1962))). At the time of
his decision, the contracting officer was bound by the gov-
ernment’s position on this issue and had to presume the
Center had acted lawfully. That the Court of Federal
Claims determined four months after cancellation that the
Center had not acted lawfully thus does not retroactively
render his actions irrational. 7

     7  The dissent contends that accounting for whether
the contracting officer knew the Center had unlawfully ex-
cluded VCG from the database “effectively limits our re-
view to whether the contracting officer acted in bad faith.”
Dissent at 3. We disagree. Rather than broadly holding
VETERANS CONTRACTING GROUP v. UNITED STATES                11

    In sum, we find that the contracting officer had a ra-
tional basis to cancel the roof replacement solicitation. See
Palladian, 783 F.3d at 1252. We therefore conclude that
the contracting officer’s decision to cancel the roof replace-
ment solicitation was not arbitrary or capricious.
                             B.

that any agency action “based on an earlier, unlawful act
is rational unless the agency official making the decision
knew the earlier action was unlawful,” Dissent at 3, our
decision simply acknowledges that a contracting officer can
only act within the scope of his authority and that, here,
the contracting officer had no authority to consider VCG’s
bid. See 38 U.S.C. § 8127(e) (prohibiting the contracting of-
ficer from considering bids submitted by businesses not
listed on VetBiz); Liberty Ammunition, Inc. v. United
States, 835 F.3d 1388, 1401–02 (Fed. Cir. 2016) (noting
that “[a] Government agent must have actual authority to
bind the Government to a contract” and that a contracting
officer “has only that authority actually conferred upon him
by statute or regulation” (internal quotation marks omit-
ted) (quoting CACI, Inc. v. Stone, 990 F.2d 1233, 1236 (Fed.
Cir. 1993))). While we can say in hindsight that the “VA
would likely have awarded the contract to VCG had it not
erroneously removed VCG from the database,” see Dissent
at 5, it does not change the fact that, at the time the con-
tracting officer cancelled the solicitation, VCG was not
listed on VetBiz. It would run contrary to precedent and
fairness to find that subsequent, unanticipated circum-
stances retroactively rendered cancellation irrational when
the contracting officer had no authority to consider VCG’s
bid, let alone award the contract to VCG, at the time he
acted.
12           VETERANS CONTRACTING GROUP v. UNITED STATES

     We next consider whether the contracting officer’s de-
cision to open bids on the roof replacement solicitation was
arbitrary, capricious, an abuse of discretion, or otherwise
not in accordance with the law. VCG contends that the VA
should never open bids once it receives a pre-award protest
because such an action is contrary to procurement policy.
VCG has failed to establish, however, that it raised the is-
sue of bid opening before the Court of Federal Claims. It
has accordingly waived this challenge on appeal. See
Nacchio v. United States, 824 F.3d 1370, 1382 (Fed. Cir.
2016) (“We generally do not consider issues that were not
clearly raised in the proceeding below.”).
     Even if VCG had preserved this argument, we still
would find it meritless. VCG did not request injunctive re-
lief until well after bids were opened. Because the contract-
ing officer had no notice of any reason to postpone opening
bids for the roof replacement solicitation, his decision to
open bids on July 28, 2017, was not arbitrary or capricious.
                             III
     We have considered the parties’ remaining arguments
and find them unpersuasive. We conclude that the con-
tracting officer’s decision to cancel the roof replacement so-
licitation was not arbitrary, capricious, an abuse of
discretion, or otherwise not in accordance with the law. For
these reasons, we affirm the decision of the Court of Fed-
eral Claims.
                        AFFIRMED
No costs.
  United States Court of Appeals
      for the Federal Circuit
                 ______________________

     VETERANS CONTRACTING GROUP, INC.,
               Plaintiff-Appellant

                            v.

                   UNITED STATES,
                   Defendant-Appellee
                 ______________________

                       2018-1409
                 ______________________

    Appeal from the United States Court of Federal Claims
in No. 1:17-cv-01015-CFL, Judge Charles F. Lettow.
                 ______________________

DYK, Circuit Judge, dissenting.
                             I
     In my view this is a simple case. Veterans Contracting
Group, Inc. (“VCG”) bid on a Department of Veterans Af-
fairs (“VA”) contract. As the government now concedes,
VCG was improperly excluded from the database of eligible
bidders. The VA contracting officer, acting pursuant to 38
U.S.C. § 8127(e), refused to award the contract to VCG,
which had submitted an otherwise responsive (and lowest)
bid, because VCG was not listed in the database. The ma-
jority agrees that the contract would likely have been
awarded to VCG but for the VA’s error in removing VCG
from the database.
2             VETERANS CONTRACTING GROUP v. UNITED STATES

    Nonetheless, the majority affirms. That result, deny-
ing a contract to a preference-eligible contractor, can only
be achieved by treating the contracting officer and the pre-
parer of the database as though they were separate enti-
ties. They were not. Both were part of the VA and acted
as agents of the VA. See 38 U.S.C. § 8127(d) (providing that
“a contracting officer of the Department shall award con-
tracts” to small business concerns owned and controlled by
veterans (emphasis added)); id. § 8127(f)(1) (providing that
“the Secretary shall maintain a database of small business
concerns owned and controlled by veterans”); see also Lib-
erty Ammunition, Inc. v. United States, 835 F.3d 1388,
1401–02 (Fed. Cir. 2016) (“It is a well recognized principle
of procurement law that the contracting officer, as agent of
the executive department, has only that authority actually
conferred upon him by statute or regulation.” (quoting
CACI, Inc. v. Stone, 990 F.2d 1233, 1236 (Fed. Cir. 1993))).
     According to the majority, whether the VA’s rejection
of VCG’s bid was arbitrary depends on who within the VA
is responsible for the error: the contracting officer or the
preparer of the database. If VCG had been in the database
and the contracting officer rejected VCG’s bid by ignoring
its listing in the database, rejecting VCG’s bid presumably
would have been arbitrary. But here, since the contracting
officer did not prepare the database, rejecting the bid was
not arbitrary—even though the result is precisely the
same. It should make no difference which individual
within the VA committed the error.
     The majority reasons that the contracting officer’s de-
cision to reject VCG’s bid and cancel the solicitation was
rational because there is “no evidence that the contracting
officer knew the [VA] had wrongfully removed VCG from
[the database] when he requested cancellation.” Majority
Op. at 9. “At the time of his decision, the contracting officer
was bound by the government’s position . . . and had to pre-
sume [the VA] had acted lawfully” in removing VCG from
the database. Id. at 10. In other words, the majority holds
VETERANS CONTRACTING GROUP v. UNITED STATES                 3

that an agency’s decision based on an earlier, unlawful ac-
tion is rational unless the agency official making the deci-
sion knew the earlier action was unlawful. Under this
approach, any agency decision based on an unlawful regu-
lation would presumably be lawful, if, at the time, the
agency official was unaware of the illegality. There is no
support for the majority’s approach, which would insulate
much agency action from effective review.
    By holding that the VA’s actions were lawful because
the contracting officer did not know of the unlawful error
and thus lacked any “improper motivation,” Majority Op.
at 9, the majority effectively limits our review to whether
the contracting officer acted in bad faith. But we have pre-
viously explained that “the APA standard of review . . . is
not limited to fraud or bad faith by the contracting officer.”
Impresa Construzioni Geom. Domenico Garufi v. United
States, 238 F.3d 1324, 1333 (Fed. Cir. 2001). The VA re-
jected VCG’s bid only because it wrongfully removed VCG
from the database. That the contracting officer had no
knowledge of that error or acted in good faith does not ex-
cuse the error.
     The majority responds that “a contracting officer can
only act within the scope of his authority” and that “[i]t
would run contrary to precedent and fairness to find that
subsequent, unanticipated circumstances retroactively
rendered cancellation irrational.” Majority Op. at 10–11
n.2. But VCG’s erroneous removal was not a subsequent,
unanticipated circumstance. The Claims Court’s decision
is not what made VCG’s removal unlawful; it was unlawful
from the beginning. The Claims Court’s decision merely
recognized the illegality. We have ordered a remedy for
unlawful action even where the agency lacked knowledge
of the illegality at the time. For example, in Dodson v.
United States Government, 988 F.2d 1199 (Fed. Cir. 1993),
the Promotion Selection Board concluded that an Army
staff sergeant should be discharged and barred from reen-
listing due in part to low scores on his annual enlisted
4            VETERANS CONTRACTING GROUP v. UNITED STATES

evaluation reports. See id. at 1201–03. Among those eval-
uations was an incorrect, low score that a substitute rater
had mistakenly placed in the sergeant’s personnel file for
Board review. See id. at 1201. We held that the Army
acted unlawfully in discharging the sergeant and barring
him from reenlistment. See id. at 1205–06. That was so
even though the Board that made the decision did not place
the erroneous score in his file, and the incorrect score was
invalidated and deleted from the sergeant’s file only after
the Board decision. See id.
                              II
     When an agency acts arbitrarily, as the VA did here by
excluding VCG from the database, the agency’s resulting
action—rejecting the bid—must be set aside. See Parcel
49C Ltd. P’ship v. United States, 31 F.3d 1147, 1154 (Fed.
Cir. 1994) (affirming an injunction that “restore[d] the pos-
ture of the Government and [the bidder] before the illegal
cancellation” because it would “remove the taint of illegal-
ity from this procurement process”); CACI, Inc.–Fed. v.
United States, 719 F.2d 1567, 1575 (Fed. Cir. 1983) (noting
that where a bidder has been deprived of “the opportunity
to have its bid considered solely on its merits,” “[a]n in-
junction barring the award would correct this alleged in-
jury since it would require the government . . . to repeat the
bidding process under circumstances that would eliminate
the alleged taint of the prior proceedings”); Delta Data Sys.
Corp. v. Webster, 744 F.2d 197, 203 (D.C. Cir. 1984) (hold-
ing that because the FBI unlawfully awarded a contract,
the disappointed bidder had a right to require the FBI to
reselect a contractor based on the best final offers previ-
ously submitted, even though “[c]onsiderable performance
ha[d] already taken place under the [] contract”). Thus,
where the agency commits an error that denies a bidder the
opportunity to have its bid considered solely on the merits,
the appropriate remedy must give the bidder that oppor-
tunity, placing it in the position it would have occupied but
for the agency’s error.
VETERANS CONTRACTING GROUP v. UNITED STATES                 5

     Our decision in Marshall v. Department of Health and
Human Services, 587 F.3d 1310 (Fed. Cir. 2009), is also in-
structive. There, the Department of Health and Human
Services admitted that it acted unlawfully when it hired a
non-veteran instead of the plaintiff and conceded “that it
would have selected [the plaintiff] for the position had it
not erroneously removed his name from the list of candi-
dates.” Id. at 1311. On appeal, the question concerned the
proper remedy. We held that “the appropriate remedy is
for [the plaintiff] to be awarded this position. The fact that
the agency filled the position with another employee in vi-
olation of the [Veterans Employment Opportunities Act]
preferences is not an adequate reason to force the ag-
grieved veteran into a different position.” Id. at 1317.
    The underlying logic of these cases applies here: The
VA would likely have awarded the contract to VCG had it
not erroneously removed VCG from the database. The ap-
propriate remedy is to place VCG in the situation it would
have occupied had the VA not acted improperly.
    I respectfully dissent.