Court Opinion

ID: 2959694
Source: CourtListenerOpinion
Date Created: 2015-09-17 16:02:11.841491+00
Date Added: 2024-06-11T15:25:52.098947
License: Public Domain

In the United States Court of Federal Claims
                         Nos. 15-616C, 15-617C,
                       15-618C, 15-619C, 15-620C
                   (Originally Filed: September 9, 2015)
                     (Re-filed: September 17, 2015)1

**********************
SCHOTT GOVERNMENT SERVICES, LLC,

                     Plaintiff,

v.                                         Bid Protest; Post-Award;
                                           Judgment on Administrative
                                           Record; Contract Modification;
THE UNITED STATES,                         10 U.S.C. § 2304 (a)(1)(A);
                                           Security Clearance; Contract
                                           Interpretation
                     Defendant,

ORAN SAFETY GLASS, INC.,

                     Intervenor.

**********************

      Lee Dougherty, Tysons Corner, VA, for plaintiff, with whom was
Katherine A. Straw, Tysons Corner, VA, of counsel.

       Devin A. Wolak, Trial Attorney, Commercial Litigation Branch, Civil
Division, United States Department of Justice, Washington, DC, with
whom were Benjamin C. Mizer, Principal Deputy Assistant Attorney
General, Robert E. Kirschman, Jr., Director, and Martin F. Hockey, Jr., for
defendant.

1
  This opinion was originally filed under seal. The parties were directed to
confer and propose redactions. The court adopted the parties’ suggested
redactions, removed the information, and inserted brackets to replace the
redacted content. The opinion is now prepared for release.
      Richard L. Moorhouse, McLean, VA, for intervenor, with whom
were L. James D’Agostino, McLean, VA, of counsel, and Ryan Bradel,
Washington, DC, of counsel.

                              _______________

                                 OPINION
                              _______________

BRUGGINK, Judge.

        This is a post-award protest of a solicitation for transparent armor
windows for use on Mine-Resistant Ambush-Protected (“MRAP”) vehicles
known as MRAP All-Terrain Vehicles (“M-ATV”). Plaintiff, Schott
Government Services, LLC (“Schott”) challenges the Defense Logistics
Agency’s (“DLA” or “the Agency”) award of five separate contracts for the
supply of the windows to the awardee, Oran Safety Glass (“OSG”). OSG
intervened in the action. Currently before the court are the parties’
cross-motions for judgment on the administrative record (“AR”)2 pursuant to
Rule 52.1 of the Rules of the Court of Federal Claims (“RCFC”). The motions
are fully briefed, and we heard oral argument on September 1, 2015. For the
reasons explained below, we deny plaintiff's motion for judgment on the
administrative record and we grant defendant’s and intervenor’s cross-motions
for judgment on the administrative record.

                               BACKGROUND

         The M-ATV transparent armor was developed by the government prior
to this procurement for use on MRAP vehicles. Subsequent to its development,
the transparent armor was assigned a National Stock Number (“NSN”), which
is a label used by the government to identify an item that is routinely procured,
stocked, and used by the government. After an NSN is assigned to a product,
the government seeks approved sources to manufacture and supply the NSN
through the Source Approval Request (“SAR”) process. Once approved,

2
 The facts are drawn from the administrative record, which is presented in a
unique fashion in this case. There are 8 sections: AR 118, AR 119, AR 120,
AR 121, AR 137, CT(DLA), CT(TACOM), and CT(DIS). Each section is
separately paginated.

                                       2
sources can submit bids for later solicitations, seeking to be awarded a specific
contract to supply that NSN.

         OSG submitted its initial Source Approval Request (“SAR”) in October
2011, seeking to be one of the approved sources for the NSNs sought in the
procurement at issue in this case. CT(DLA)-148. In its SAR, OSG indicated
that it followed U.S. Army TACOM Armor Transparent Purchase Description
2532 (“ATPD 2532") “for all test procedures, according to ballistic protection
class defined by classified Annex [] DTA-184044.” CT(DLA)-211; see also
CT(DLA)-302. DTA-184044 is a drawing which provides precise protection
class threat specifications. CT(DLA)-309. It is classified as SECRET, and
“[p]roof of proper authorization and security clearance shall be required to
obtain copies.” Id. Also in its SAR, OSG represented to the Agency that it
would follow a specific recipe for the composition of the windows, recipe [
  ]. CT(DLA)-147, 212; Defendant’s Appendix ¶ 8 (hereinafter Def.’s App.).
This recipe had been previously approved as satisfying ATPD 2532. Id. OSG
was subsequently approved as a source for the M-ATV transparent armor.
Schott was later added as an approved source for the transparent armor in July
2014.3

       In June 2014, DLA issued five Requests for Proposals (“RFP”) for the
supply of the M-ATV transparent armor.4 The M-ATV Solicitations sought the
supply of transparent armor with the same NSNs for which OSG and Schott
had been approved as sources through the SAR process. The acquisition plan
specifically noted that “[t]his acquisition will not be involving any classified
documents or information.”5 AR 118-3-5; AR 119-3-5; AR 120-3-4; AR 121-
3-5; AR 137-3-5. The procurements were conducted on a limited-source basis,

3
 The original acquisition plan, created in June 2014, did not list Schott as
an approved source. The plan was amended in July 2014 to add Schott as an
additional approved source for the M-ATV transparent armor.
4
 Nos. SPE7L3-14-R-0118, SPE7L3-14-R-0119, SPE7L3-14-R-0120,
SPE7L3-14-R-0121, and SPE7L3-14-R-0137 (collectively, the “M-ATV
Solicitations”).
5
  The acquisition plan for the M-ATV Solicitations is a classified document,
which is not released to the approved sources, but the placement of this
statement in it shows that the government intended that the solicitations not
involve any classified material or information.

                                       3
as only OSG and Schott had been previously approved through the SAR
process as sources for the NSNs sought. Proposals were evaluated according
to “Best Value” procedures, and OSG was awarded the contracts during
October 2014 and January 2015. Schott was subsequently notified that its
offers were not accepted because they were not the low price offers after
consideration of all the evaluation factors.

        In January 2015, Schott contacted the Agency to express its concerns
that OSG had changed its recipe for the transparent armor. Subsequently, the
Army’s Project Manager MRAP office (“PM MRAP”) contacted the Agency
in February 2015 regarding these concerns, and requesting production control
testing, including re-certification of the recipe during ballistic testing. PM
MRAP cited ATPD 2532 section 4.2.1, which stated that any changes made in
the manufacturing process may be subject to First Article Testing (“FAT”).
CT(DLA)-20. After analyzing the transparent armor manufactured by OSG,
PM MRAP discovered that OSG had manufactured multiple configurations,
only one of which had been submitted to the government through its SAR
process. This discovery sparked concerns that OSG was delivering a
configuration that had not been approved by the government. PM MRAP
informed the Agency of its findings in March 2015, and provided a list of
information that the Agency should request from OSG. CT(DLA)-144. A
March 27, 2015 letter to OSG from the Agency advised OSG that the Agency
had been made aware of its possible failure to comply with the contract. This
letter informed OSG that the delivery of any composition other than [         ]
was not authorized and would be considered non-compliance, and requested
that OSG provide the Agency with quality/inspection records identifying the
recipe that was or would be delivered pursuant to each contract.

        OSG responded by letter on April 8, 2015, providing an analysis of
what it suggested was a misunderstanding between OSG and the Agency, and
citing ATPD 2532 paragraph 3.2, which provides that “[a]fter FAT approval,
no material or process changes that may affect product performance, including
ballistic integrity and environmental durability, shall be made without the
procuring activity approval.” CT(DLA)-367. According to the letter, after
performing the necessary tests, OSG concluded that the new recipe, [          ],
did not affect performance. Therefore, OSG believed that based on its
interpretation of ATPD 2532, it could substitute recipe [      ] for recipe [
  ] in its deliveries to DLA, and thus began to deliver recipe [     ]to fulfill
its contracts with the Agency. OSG suggested that it had begun to develop
recipe [      ] after developing some concerns regarding the availability and

                                       4
quality of some M-ATV raw materials. Moreover, OSG indicated that this
new recipe had been submitted on April 8, 2015, for a source approval request.

        DLA subsequently responded with a cure notice on April 21, 2015. The
notice informed OSG that the government considered OSG’s supply of
nonconforming parts as endangering contract performance, and warned that
unless the condition was cured within 10 days after receipt of the letter, the
government might terminate the contract for default. The Agency stated that
any cure had to result in the supply of transparent armor manufactured using
recipe [       ], and had to address DLA’s ability to identify and segregate any
nonconforming parts that had already been sent to DLA. OSG responded with
a cure plan, proposing new delivery dates for shipment of the [          ] recipe.
The Agency was not satisfied with this cure plan because it did not address
OSG’s ability to obtain sufficient quantities of the recipe [      ] raw material
to fulfill the remaining deliveries required by the contracts, it did not propose
consideration for the delivery extensions, and because OSG failed to include
data on the [       ] transparent armor that had been previously delivered under
the contracts. The Agency requested that OSG fix these inadequacies by May
4, 2015. OSG subsequently provided the requested information within the
requisite time frame, and the parties began negotiating an appropriate
settlement.

       An affidavit of the Agency’s contracting officer, [             ], lists the
events that took place during the negotiation process, and details the settlement
eventually worked out by the parties. See Def.’s App. The affidavit notes a
number of the Agency’s concerns about whether or how to proceed with a
settlement. The Agency had outstanding orders from the military for the
windows, and a number of windows had already been delivered and accepted,
as some of the contracts were well into performance. Meanwhile, on June 4,
2015, the Army had approved the [        ] recipe through its SAR process, thus
indicating to the Agency that the recipe was technically acceptable.

       The Agency went ahead with modifications rather than complete
cancellations on June 24, 2015. The modifications required that all future
deliveries be in conformance with the original contract, meaning that OSG
would deliver the originally approved [    ] recipe, and required that OSG
make a cash payment and an in-kind payment to cover the government’s cost
in handling and processing nonconforming goods previously delivered.
Additionally, the modifications allowed OSG to extend its time for delivery for

                                        5
all outstanding deliveries due under the contract in exchange for cash
consideration. All of the cash payments required of OSG totaled [          ], and
the value of the in-kind payments was [      ]. In accordance with the modified
contracts, final delivery has occurred with respect to some of the contracts, and
all remaining deliveries of the transparent armor are scheduled to occur by the
end of October 2015.

                                 DISCUSSION

       Pursuant to the Tucker Act, this court has 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 any alleged violation of statute or regulation in connection with
a procurement or a proposed procurement.” 28 U.S.C. § 1491(b)(1) (2012).
Schott is an “interested party” because it is a prospective bidder “whose direct
economic interest would be affected by the award of the contract.” Am. Fed’n
of Gov’t Emps., ALF-CIO v. United States, 258 F.3d 1294, 1302 (Fed. Cir.
2001) (quoting 31 U.S.C. § 3551(2)(a) (2012)).

        This court’s review is limited to the existing administrative record
generated by the Agency in connection with the procurement action at issue.
See RCFC 52.1. We review the administrative record pursuant to the standards
set forth in section 706 of the Administrative Procedure Act (“APA”), 5 U.S.C.
§ 706(2)(A) (2012). Thus, we may set aside an Agency’s decision only if it is
“arbitrary, capricious, an abuse of discretion, or otherwise not in accordance
with the law.” 5 U.S.C. § 706(2)(A) (2012). The protestor bears the burden of
establishing that the Agency’s decision lacked a rational basis or was
otherwise in violation of applicable law or regulation. See Impresa
Construzioni Geom. Domenico Garufi v. United States, 238 F.3d 1324, 1332
(Fed. Cir. 2001). Additionally, plaintiff must show prejudice, meaning that had
it not been for the error in the procurement process, there is a reasonable
likelihood that the challenger would have been awarded the contract. Data
Gen. Corp. v Johnson, 78 F.3d 1556, 1562 (Fed. Cir. 1996).

        Plaintiff challenges two aspects of the procurement. Plaintiff’s primary
challenge is directed at the modifications to OSG’s contract after the Agency
discovered that OSG was delivering nonconforming windows. Plaintiff
contends that the modifications lacked a rational basis because the Agency
unreasonably accepted OSG’s contention of an alleged latent ambiguity in the
solicitation, allowing OSG to supply products that did not conform to the
required technical specifications. According to plaintiff, this decision violated

                                       6
the Competition in Contracting Act (“CICA”)6 in that it thwarted full and open
competition. Plaintiff’s second argument is that the initial award of the
contracts to OSG violated law and regulation because the Agency awarded the
contract to OSG despite its lack of a required facility clearance (“FCL”) to
supply the transparent armor.

       Plaintiff’s first argument, that the contract modifications lacked a
rational basis, rests on plaintiff’s belief that OSG never intended to supply a
conforming product under the contracts, and that DLA’s acceptance of
nonconforming products as part of the modifications effectively eliminated any
competition. In its reply brief it argues that the contract modification brought
the contracts outside the scope of the solicitation, and therefore, under CICA,
a new procurement was required in order to preserve the competitive bidding
process. See 10 U.S.C. § 2304 (a)(1)(A) (2011) (“[T]he head of an Agency in
conducting a procurement for property or services . . . shall obtain full and
open competition through the use of competitive procedures . . . .”); CCL, Inc.
v. United States, 39 Fed. Cl. 780, 791 (1997) (explaining that CICA’s
requirements “cannot be avoided by using the device of contract
modification”).

         As support for its position that OSG never intended to supply
conforming products, plaintiff relies on an April 15, 2015 letter from OSG’s
President and CEO to DLA setting out an analysis of the misunderstanding
between the parties. See CT(DLA)-367-70. This letter suggests that after OSG
was approved as a source, it discovered some risks regarding the availability
of M-ATV raw materials, which would lead it unable to produce composition
[      ]. As a result, OSG began testing other compositions of the formula for
the transparent armor, and developed a different composition, [       ]. Plaintiff
does not accept the truth of OSG’s responses to the Army, and suggests that
OSG had always intended to supply composition [         ], in violation of the M-
ATV Solicitations, which specified the correct NSNs and which explicitly
disallowed substitution. Schott argues that it was unreasonable and prejudicial
to it to allow OSG to rely on a supposed alleged latent ambiguity to deliver
substitute products because it was inconsistent with the terms of the original
solicitation and thus precluded Schott from competing.

     Defendant recognizes in its response that there were serious errors with
OSG’s performance under the contracts, but maintains that these issues are not

6
10 U.S.C. § 2304 (a)(1)(A) (2011).

                                        7
the proper subject for a bid protest. It argues that Schott cannot rest a bid
protest on what amounts to a matter of post-award contract performance,
something beyond the reach of the court’s bid protest jurisdiction under 28
U.S.C. § 1491(b). Relying on the affidavit of DLA’s Contracting Officer,[
     ], defendant contends that the award to OSG cannot be faulted, because
it proposed to supply the exact product. It was only after the awards were
made and well after performance had commenced that the government became
aware that OSG was providing nonconforming products.

        Defendant also argues that Schott’s argument is factually unfounded,
in that the Agency rejected OSG’s interpretation of the contract. It never
knowingly accepted non-conforming product and merely devised a solution for
a serious problem after it was discovered. Because a majority of the deliveries
had been accepted and paid for by the time DLA discovered that they were
nonconforming, the agency’s rights were governed by FAR 52.246-2(k) and
(l). This regulation stipulates that the government’s acceptance of an item
“shall be conclusive, except for latent defects, fraud, [or] gross mistakes
amounting to fraud.” FAR 52.246-2(k) (2014). The regulation further provides
that following non-conclusive acceptance, the government may elect to have
the awardee “repay such portion of the contract as is equitable under the
circumstances if the Contracting Officer elects not to require correction or
replacement,” FAR 52.246-2(l) (2014), which defendant contends is exactly
what the Agency did. We agree with defendant. The agency never endorsed the
manner in which OSG proceeded with these contracts and instead devised a
practical solution to a problem of OSG’s making. Schott’s CICA rights, in
other words, were not compromised by anything the agency did.

        We note, moreover, that in exercising jurisdiction over a bid protest,
“the courts shall give due regard to the interests of national defense and
national security and the need for expeditious resolution of the action.” 28
U.S.C. § 1491(b)(3). The [        ] affidavit makes clear the agency’s concern
that the military not be delayed in getting armored windows for its vehicle for
use in a combat zone. Returning the parties to the position they were in prior
to contracting would require pulling the M-ATV fleet out of service until
replacement transparent armor windows could be obtained through a new
procurement. Id.

       We do not mean to suggest that circumstances could not arise in which
a contract modification might depart materially from the contract’s original
scope so as to trigger this court’s bid protest jurisdiction. See, e.g., Glob.

                                      8
Computer Enter.’s, Inc. v. United States, 88 Fed. Cl. 359, 452 (2009);
Cardinal Maint. Serv., Inc. v. United States, 63 Fed. Cl. 98, 108 (2004). In this
case, however, given the passage of time, the security concerns involved, and
the agency’s insistence on compensation for non-performance, we are
persuaded that concerns reflected in other cases are not triggered here.

        In a separate argument, plaintiff alleges that the initial awards to OSG
violated law and regulation because OSG did not have the facilities clearance
to access the classified performance specifications required to ensure ballistic
qualification during First Article Testing (“FAT”) and Production Control
Testing (“PCT”). Although nothing in the solicitations at bar makes reference
to the need for any security clearances, plaintiff puts together its argument by
drawing from general regulatory requirements (award can only be made to
bidders who are capable of performing the contract, FAR 9.103) and from
requirements associated with SAR approval. According to plaintiff, because
the ballistic protection level for the transparent armor is classified as SECRET,
plaintiffs should have had an FCL to access it during SAR approval. See DoD
5220.22-M, 2-100 (“[T]he contractor will not be afforded access to classified
information until the FCL has been granted.”). Plaintiff notes that nowhere in
the record is there an indication that the Agency confirmed that OSG held an
FCL.

       Defendant does not dispute that OSG lacks an FCL, but contends that
an FCL was not required for award of this contract. Defendant’s position is
that these contracts were simply part-number buys for the supply of
previously-approved products. These parts were approved in 2011 to be
manufactured to composition [      ] after approval of OSG’s SAR. Moreover,
defendant contends that to the extent plaintiff asks the court to review OSG’s
access to classified material during the SAR process, such matters are
nonjusticiable and reserved to the executive.

        Because we do not construe plaintiff’s argument as requiring review of
a decision to award or deny access to classified information, we see no need
to entertain the government’s nonjusticiability argument. Defendant is correct,
however, that an FCL was not required for award of these contracts. Nowhere
in the record is there any indication that the M-ATV Solicitations required an
FCL. In fact, the Federal Acquisition Regulations require that in the event a
solicitation involves classified information, the contracting officer must
include a security requirements clause in the solicitation. FAR 4.403, 4.404,
52.204-2 (2014). There were none here. Plaintiff may be correct that

                                       9
participation in the MRAP M-ATV program and becoming an approved source
through the SAR process required a facilities security clearance, but the award
of the parts contracts themselves do not,7 so the issue is outside the bid protest
jurisdiction of this court.

        As for the parties’ remaining arguments, we do not find them relevant
to our decision. Defendant’s laches argument is unpersuasive. Laches serves
to bar a claim when plaintiff has delayed filing suit for an inexcusable amount
of time so as to result in prejudice to the defendant. Vita-Mix Corp. v. Basic
Holding, Inc., 581 F.3d 1317, 1333 (Fed. Cir. 2009). However, the record does
not show that plaintiff’s delay in filing this claim was inexcusable. Plaintiff did
not sit on its rights; starting in January 2015 it was active in seeking
information from the Agency regarding OSG’s delivery of nonconforming
products, and was not given information adequate to support its claim until
well into 2015. See CT(TACOM)-1-35. Moreover, because we do not find
that the Agency’s decisions to award the contracts to OSG and to modify the
contracts were unreasonable or violated law or regulation, we do not need to
assess whether plaintiff was prejudiced, and need not consider the merits of
plaintiff’s claim for injunctive relief.

                                CONCLUSION

       We conclude that the agency exercised reasonable judgment both in
awarding the contracts to OSG and in entering into contract modifications
upon its discovery of OSG’s delivery of nonconforming parts. We therefore
deny plaintiff’s motion for judgment on the administrative record and grant
defendant and intervenor’s cross-motions. The Clerk is directed to enter
judgment accordingly. No costs.

                                                    s/ Eric G. Bruggink
                                                    ERIC G. BRUGGINK
                                                    Judge

7
 Although it would not have been available to the bidders, the source
acquisition plan explicitly states that security clearances are not required
under the solicitations.

                                        10